<PAGE>
As filed with the Securities and Exchange Commission on March 10,
1998
Registration No. 333-43225
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CDW HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5063 25-1723345
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
----------------
COMMERCE COURT, SUITE 700
FOUR STATION SQUARE
PITTSBURGH, PENNSYLVANIA 15219
(412) 454-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JEFFREY B. KRAMP, ESQ.
COMMERCE COURT, SUITE 700
FOUR STATION SQUARE
PITTSBURGH, PENNSYLVANIA 15219
(412) 454-2200
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
GEORGE E.B. MAGUIRE, ESQ. VALERIE FORD JACOB, ESQ.
DEBEVOISE & PLIMPTON FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
875 THIRD AVENUE ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10004
(212) 909-6000 (212) 859-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Class A Common Stock, par
value $0.01 per share...... $300,000,000 $88,500(3)
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</TABLE>
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(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
(2) Includes shares subject to the Underwriters' over-allotment options.
(3) Previously paid on December 24, 1997.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent international offering outside
the United States and Canada (the "International Prospectus"). The U.S.
Prospectus and the International Prospectus are identical in all respects
except that they contain different front, inside front and back cover pages
and different descriptions of the plan of distribution (contained under the
caption "Underwriting" in both the U.S. Prospectus and the International
Prospectus). Pages of the International Prospectus are separately designated.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 10, 1998
PROSPECTUS
SHARES
CDW HOLDING CORPORATION
CLASS A COMMON STOCK
-----------
All of the shares of Class A Common Stock of CDW Holding Corporation
offered hereby are being sold by certain stockholders (the "Selling
Stockholders") of CDW Holding Corporation. Of the shares of Class A Common
Stock offered hereby, shares are being offered for sale initially in the
United States and Canada by the U.S. Underwriters and shares are being
offered for sale initially in a concurrent offering outside the United States
and Canada by the International Managers. The initial public offering price and
the underwriting discount per share will be identical for both Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $ and $ per share. For a discussion relating to factors
to be considered in determining the initial public offering price, see
"Underwriting."
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) SELLING STOCKHOLDERS (2)
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Per Share....................... $ $ $
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Total (3)....................... $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) The Company has agreed to pay the expenses of the Offerings (other than the
Underwriting Discount) estimated at $ .
(3) The Selling Stockholders have granted to the U.S. Underwriters and the
International Managers options to purchase up to an additional and
shares of Class A Common Stock, respectively, solely to cover over-
allotments, if any. If such options are exercised in full, the total Price
to Public, Underwriting Discount and Proceeds to Selling Stockholders will
be $ , $ and $ , respectively. See "Underwriting."
-----------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will be made in
New York, New York on or about , 1998.
-----------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
-----------
The date of this Prospectus is , 1998.
<PAGE>
[COLOR PICTURES]
----------------
Certain persons participating in the Offerings may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A Common
Stock. Such transactions may include stabilizing, the purchase of Class A
Common Stock to cover syndicate short positions and the imposition of penalty
bids. For a description of these activities, see "Underwriting."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
related notes appearing elsewhere in this Prospectus. CDW Holding Corporation
("CDW") is a Delaware corporation that has as its only significant asset all
the outstanding common stock of WESCO Distribution, Inc., a Delaware
corporation (together with its subsidiaries, "WESCO"). Hereinafter, "the
Company" will refer to CDW and its subsidiaries. References herein to a
"fiscal" year refer, in the case of the Company, to the year ended December 31
in the year indicated. Unless otherwise indicated, all information set forth in
this Prospectus (i) gives effect to a to 1 split of CDW's Class A Common
Stock, par value $0.01 per share ("Class A Common Stock"), and of the CDW's
Class B Common Stock, par value $0.01 per share ("Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), to be effected
immediately prior to the effective date of the Registration Statement of which
this Prospectus forms a part, (ii) assumes an initial public offering price of
$ per share and (iii) assumes no exercise of the over-allotment options to be
granted to the Underwriters by the Selling Stockholders.
THE COMPANY
WESCO is a leading full-line provider of products and related services in the
electrical wholesale distribution industry with sales of $2.6 billion in 1997,
an increase of more than $1 billion since 1993. With its blend of national
capabilities and extensive local geographic coverage, WESCO specializes in
developing combined product and service solutions tailored to meet the specific
needs of each of its customers. WESCO is the second largest electrical
wholesale distributor in North America and a leading consolidator in this
highly fragmented, $67 billion industry. Through a network of approximately 330
branches located in 48 states and nine Canadian provinces, supported by five
regional distribution centers, WESCO is able to serve virtually the entire U.S.
and Canadian market. WESCO is particularly well positioned to meet the complex
procurement needs of multi-site customers seeking total supply chain cost
reduction through preferred alliances with fewer suppliers.
WESCO offers a broad range of electrical, industrial and data communications
products and services to a large and diversified customer base including (1)
industrial companies from numerous manufacturing and process industries and
original equipment manufacturers ("OEMs"), including manufacturers of factory-
built homes and other modular structures, (2) contractors for industrial,
commercial and residential projects, (3) investor-owned utilities, municipal
power authorities and rural electric cooperatives and (4) commercial,
institutional and governmental customers. WESCO maintains over 130,000 active
customer accounts, and stocks and distributes over 210,000 products, sourced
from over 6,000 suppliers, ranging from basic wire to advanced automation and
control products. WESCO complements its product offerings with a range of
services and procurement solutions, including integrated supply, where it
manages all aspects of the customer's supply processes, and electronic
commerce, where it employs technology to streamline business transactions.
Since CDW acquired WESCO in 1994, management has realigned operations to
achieve substantial growth in sales and profitability. Under its new
leadership, WESCO (1) reconfigured its branch network to focus on key customer
markets, (2) significantly expanded its National Accounts marketing program,
(3) launched the industry's most active acquisition program and (4) implemented
a new incentive system for branch managers and sales personnel. As a result of
these actions, sales have increased to $2.6 billion in 1997 from $1.6 billion
in 1993, a compound annual growth rate of 13.4%, and operating income has
increased to $80.1 million in 1997 from a loss of $11.0 million in 1993. Since
August 1995, WESCO has completed 13 acquisitions adding more than $650 million
in annualized sales.
3
<PAGE>
The electrical wholesale distribution industry in the United States is large,
growing and highly fragmented. Industry sources estimate total electrical
wholesale distributor sales at $67.3 billion for 1997, which represents a 10.2%
compound annual growth rate over 1993 sales of $45.6 billion. The four largest
wholesale distributors, including WESCO, control only 14% of total industry
sales. No single distributor accounts for more than 5% of industry sales, and
57% of such sales are generated by distributors with less than $21 million in
annual sales. In the United States, electrical distribution is still in the
early stages of consolidation, unlike many other wholesale distribution
industries which have undergone substantial consolidation in the past two
decades.
Customers now expect distributors to provide a broader package of products
and services as they seek to outsource non-core functions and achieve
measurable cost savings in purchasing, inventory and supply chain management.
By virtue of its national and local capabilities, financial resources and
focused acquisition strategy, WESCO believes that it has the opportunity to
lead industry consolidation and capitalize on the growing customer demand for
value-added services and procurement outsourcing.
BUSINESS STRATEGY
WESCO's mission is to become the preeminent wholesale distributor of
electrical and other products in each of its chosen markets by tailoring its
product and service offerings to meet the differing requirements of its
targeted customers. WESCO's fundamental business goal is to achieve growth in
sales and profitability that is consistently above the industry average,
through marketing and acquisition initiatives, leveraging its fixed cost
structure and purchasing power, and improving working capital management. To
achieve that goal, WESCO's business strategy emphasizes six elements:
. LEVERAGE NATIONAL COORDINATION AND SCALE. WESCO, with its national
branch network in both the U.S. and Canada and the scale such network
affords, has several competitive advantages, including (1) the ability
to offer multi-site agreements with the scope required by National
Accounts--major customers who seek to coordinate their maintenance,
repair and operating ("MRO") supplies purchasing activity across
multiple locations, (2) the ability to enter into favorable preferred
supplier agreements which provide for improved payment terms, volume
rebates, marketing programs and geographic franchises, (3) specialized
and technical sales forces to meet specific customer needs in National
Accounts, data communications, automation and control, energy
management, integrated supply and major construction projects and (4)
five regional distribution centers which allow same-day shipments of a
broad range of products to branches and direct to customers.
. ENCOURAGE LOCAL ENTREPRENEURSHIP AND FLEXIBILITY. A distributor's
reputation is often determined at the local level, where timely supply
and customer service are critical. Accordingly, WESCO grants its branch
managers substantial autonomy in directing the branch sales force,
configuring inventories, selecting markets served and developing local
service options. WESCO's incentive system strongly encourages growth and
profitability at the branch level, with a significant portion of the
branch manager's compensation incentive based. While WESCO grants its
branches a high degree of independence, they directly support and
participate in national initiatives such as National Account sales,
expansion of data communications product sales and marketing promotions
with select manufacturers.
. DELIVER VALUE-ADDED SERVICES. WESCO offers a comprehensive portfolio of
supply management services designed to create measurable value for its
customers, including (1) the assignment of on-site support personnel,
(2) outsourcing of the entire MRO purchasing process, (3) inventory
optimization programs, (4) participation in joint cost savings teams,
(5) energy-efficient product upgrades, (6) safety and product training
for customer employees and (7) process improvements using automation
solutions.
. FOCUS ON MARKETS WHERE WESCO HAS DEVELOPED DISTINCTIVE
COMPETENCIES. WESCO has developed distinctive competencies in several
markets by aligning its branch network by principal market served--
industrial/construction, utilities and manufactured structures. Business
strategies,
4
<PAGE>
specialized personnel and locally tailored inventories are designed to
match each market's requirements. WESCO targets customers with large,
complex service and supply requirements in all markets where specialized
sourcing, project management and logistical support are needed. To serve
such customers effectively, WESCO leverages its national capabilities,
extensive local penetration and breadth of products and services
offered.
. DRIVE CONTINUOUS IMPROVEMENT IN PRODUCTIVITY AND PROFITABILITY. WESCO
believes a successful business strategy must include a commitment to
continuous improvement in productivity and profitability. WESCO is
emphasizing the widespread use of innovative and disciplined approaches
to managing its business processes, employee productivity and capital
efficiency. These continuous improvement initiatives include (1) regular
"zero based" re-evaluations of all facets of its business, (2) activity-
based costing to more accurately measure and enhance profitability by
customer, supplier and other categories, (3) enhanced coordination of
inventory management among suppliers, branches and regional distribution
centers, (4) benchmarking, using competitive analysis and world-class
best practices to set appropriate standards for expense management,
working capital and employee and overall productivity, (5) increased
investment in targeted areas such as sales force management and company-
wide training and development and (6) application of technology to
enhance information and decision support systems.
. LEAD INDUSTRY CONSOLIDATION. WESCO actively pursues acquisitions that
complement its existing business. WESCO's acquisition strategy has been
to (1) accelerate expansion into key growth markets, (2) add important
new customers, (3) enhance sales of acquired branches by immediately
broadening the product and service mix, (4) expand local presence to
better serve existing customers, (5) increase scale and breadth of
relationships with manufacturers and (6) leverage existing
infrastructure. WESCO considers strategic acquisitions on a continuous
basis. Since August 1995, WESCO has completed 13 acquisitions with 89
branch locations and annualized sales of more than $650 million.
Furthermore, as a result of these acquisitions, WESCO has added major
supplier relationships with Allen-Bradley, General Electric and Square
D.
STRATEGY FOR CONTINUED GROWTH
WESCO has increased sales by more than $1 billion since year-end 1993, a
compound annual growth rate in excess of 13%. WESCO's plans for continued
growth are as follows:
. EXPAND PRODUCT AND SERVICE OFFERINGS. WESCO intends to build on its
demonstrated ability to introduce new products and services to meet
customer demands and market opportunities. For example, WESCO plans to
expand its presence in the fast-growing data communications market. In
the past two years, WESCO has significantly increased its focus on this
market, generating sales of $83 million in 1997. Led by its dedicated
data communications sales team of approximately 70 people, and
leveraging its general sales force, WESCO intends to expand sales to new
and existing customers, as well as broaden its offering into other data
communications product lines, such as outdoor wiring systems, active
components and processors. In addition, WESCO plans to expand the number
of integrated supply programs with new and existing accounts. Given the
success of its integrated supply initiatives to date and the rapid
growth in the demand for such services anticipated by industry sources,
WESCO sees a major opportunity to develop additional customer
relationships by leveraging its comprehensive service and supply
expertise.
. GROW NATIONAL PROGRAMS. WESCO has well-established National Account
relationships with approximately 300 companies. National Accounts
provide ongoing revenue through strategic multi-year agreements. WESCO
believes that it can expand revenue generated by its National Accounts
5
<PAGE>
program by (1) increasing its penetration of existing National Accounts,
(2) shortening ramp-up time to full implementation, (3) adding new
products to existing MRO agreements, (4) expanding agreements to include
capital projects and (5) extending the program to new customers. In
addition, through its Major Projects Group, WESCO plans to intensify its
focus on large construction projects, such as new stadiums, industrial
sites, wastewater treatment plants, airport expansions, healthcare
facilities and prisons. WESCO intends to secure new contracts through
(1) aggressive national marketing of its demonstrated project management
capabilities, (2) further development of relationships with leading
construction and engineering firms and (3) close coordination with
National Account customers on their renovations and new construction
projects.
. GAIN SHARE IN KEY LOCAL MARKETS. WESCO has identified key geographic
markets with a substantial base of potential customers and will use a
combination of acquisitions, new branch openings and heightened sales
and marketing efforts to gain market share. WESCO's executive marketing
team, together with local branch managers, will work to expand WESCO's
program of detailed market analysis and opportunity identification on a
branch-by-branch and product line basis. In addition, WESCO intends to
leverage relationships with preferred suppliers to increase sales of
their products in local markets through various initiatives, including
(1) sales promotions, (2) cooperative marketing efforts, (3) direct
participation in National Accounts implementation, (4) dedicated sales
forces and (5) product exclusivity.
. EXECUTE ACQUISITION STRATEGY. WESCO intends to lead consolidation in the
fragmented electrical wholesale distribution industry. Since adopting
its acquisition strategy in August 1995, WESCO has been successful in
adding more than $650 million in annualized sales, and will continue to
evaluate acquisition opportunities to achieve the strategic objectives
outlined under "Business Strategy." After the Offerings, the ability,
where appropriate, to use its shares to finance acquisitions should give
WESCO access to an expanded range of possible acquisitions. WESCO seeks
acquisitions that will be accretive to earnings and will significantly
complement the organic growth of the business. The 13 acquisitions
completed by WESCO to date have collectively been accretive to its
earnings.
. ACCESS INTERNATIONAL OPPORTUNITIES. WESCO believes in a pragmatic and
profitable expansion of sales outside the United States and Canada.
WESCO intends to limit risk and maximize profit opportunities
principally by following its National Account customers and key
suppliers into their non-U.S. markets. For example, WESCO has opened a
branch in Mexico City, where many current customers have plant
operations and where WESCO has been granted the highly regarded Allen-
Bradley franchise. Other opportunities to grow international sales
include expanding the network of independent export sales
representatives outside of North America, increasing the number of North
American-based export sales offices and building closer relationships
with global engineering, procurement and construction firms.
6
<PAGE>
BACKGROUND
CDW was formed by Clayton, Dubilier & Rice, Inc., a private investment firm
("CD&R"), in connection with the acquisition (the "Acquisition") from
Westinghouse Electric Corporation, now known as CBS Corporation
("Westinghouse"), of its Westinghouse Electric Supply Company division, WESCO's
predecessor (the "Predecessor"). The Acquisition was completed in February
1994. Upon completion of the Offerings, the Clayton & Dubilier Private Equity
Fund IV Limited Partnership ("Fund IV"), a private investment fund managed by
CD&R, will own approximately % of the then-outstanding Common Stock ( %
assuming exercise of the Underwriters' overallotment options).
The Predecessor was founded as a division of Westinghouse in 1922 for the
purpose of selling and distributing Westinghouse electrical products and
supplies. Since the Acquisition, WESCO has made a successful transition from
being a division within a large corporation to an independent company. The
Company's principal executive offices are located at Commerce Court, Suite 700,
Four Station Square, Pittsburgh, Pennsylvania 15219, and its telephone number
is (412) 454-2200.
THE OFFERINGS
The offering of shares of Class A Common Stock initially being offered in
the United States and Canada (the "U.S. Offering") and the offering of
shares of Class A Common Stock initially being offered outside the United
States and Canada (the "International Offering") are referred to herein
collectively as the "Offerings." The closing of the International Offering and
of the U.S. Offering are each conditioned on the other.
<TABLE>
<C> <S>
Class A Common Stock offered
By Selling Stockholders:
U.S. Offering....................... shares
International Offering.............. shares
Total........................... shares
Class A Common Stock to be outstanding
after the Offerings (1)............. shares
Proposed NYSE Symbol.......................
Use of proceeds............................ CDW will not receive any proceeds
from the sale of shares by the
Selling Stockholders. See "Use of
Proceeds" and "Selling
Stockholders."
</TABLE>
- --------
(1) Based upon shares outstanding at , 1998, after giving effect to the
stock split described herein and the issuance of shares of Class A
Common Stock issuable upon the conversion of certain convertible notes
issued in connection with prior acquisitions, which by their terms will
mandatorily convert into shares of Class A Common Stock at the initial
public offering price upon consummation of the Offerings. See "Description
of Certain Indebtedness--Acquisition Notes." Does not include shares of
Class A Common Stock issuable upon the exercise of outstanding stock
options, of which options for shares are currently exercisable and
options for shares become exercisable over the next five years. See
"Management--Stock Option Plan" and "Management--Long-Term Incentive Plan."
CDW also has authorized Class B Common Stock, which is identical to the
Class A Common Stock except that it has no voting rights (other than as
required by law). None of the Class B Common Stock is currently issued.
Certain existing holders of Class A Common Stock have the right to convert
certain of their shares to Class B Common Stock. See "Description of
Capital Stock."
RISK FACTORS
Prospective purchasers of the Class A Common Stock should consider carefully
the specific investment considerations set forth under "Risk Factors" and the
other information set forth in this Prospectus, prior to making an investment
decision.
7
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY
THE PREDECESSOR (1) (2) THE COMPANY (2)
------------------------- ------------ ------------ --------------------------------
ADJUSTED
TWO MONTHS TEN MONTHS COMBINED
YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------ --------------------------------
1993 1994 1994 1994 (3) 1995 1996 1997
------------ ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales, net.............. $1,570.8 $ 237.3 $1,398.5 $1,635.8 $ 1,857.0 $ 2,274.6 $ 2,594.8
Gross profit............ 238.1 32.5 230.0 262.5 321.0 405.0 463.9
Selling, general and
administrative
expenses............... 241.2 34.9 197.7 232.6 258.0 326.0 372.5
Depreciation and 7.9 1.2 7.5 8.7 7.3 10.8 11.3
amortization........... -------- ------- -------- -------- ---------- ---------- ----------
Income (loss) from
operations............. (11.0) (3.6) 24.8 21.2 55.7 68.2 80.1
Other income and
expense, net........... 1.7 -- -- -- -- -- --
Interest expense, net 14.2 2.4 17.6 20.0 15.8 17.4 20.1
(4).................... -------- ------- -------- -------- ---------- ---------- ----------
Income (loss) before
income taxes........... (23.5) (6.0) 7.2 1.2 39.9 50.8 60.0
Income (loss) before
cumulative
effect and
extraordinary charge,
net of taxes........... (13.8) (4.1) 3.6 (0.5) 25.1 32.5 36.2
Cumulative effect of
change in
accounting, net of
taxes (5).............. 1.6 -- -- -- -- -- --
Extraordinary charge, -- -- -- -- 8.1 -- --
net of taxes (6)....... -------- ------- -------- -------- ---------- ---------- ----------
Net income (loss) (7)... $ (15.4) $ (4.1) $ 3.6 $ (0.5) $ 17.0 $ 32.5 $36.2
======== ======= ======== ======== ========== ========== ==========
EARNINGS PER SHARE DATA:
(8)
Basic earnings per
common share before
extraordinary charge,
net of taxes........... -- -- $ 3.71 -- $ 25.11 $ 31.97 $ 35.48
Basic earnings per
common share........... -- -- 3.71 -- 17.05 31.97 35.48
Shares used in basic per
share calculation...... -- -- 970,637 -- 1,000,735 1,015,238 1,021,271
Diluted earnings per
common share before
extraordinary charge,
net of taxes........... -- -- $ 3.68 -- $ 23.86 $ 29.47 $31.53
Diluted earnings per
common share........... -- -- 3.68 -- 16.20 29.47 31.53
Shares used in diluted
per share calculation.. -- -- 979,165 -- 1,053,344 1,101,573 1,149,199
<CAPTION>
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ --------------------------------
1993 1994 1994 1995 1996 1997
------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Adjusted working capital
(9).................... $ 224.8 $ 228.7 $ 196.5 $ 222.5 $ 291.6 $ 338.8
Total assets............ 521.0 504.5 533.7 581.3 773.5 870.9
Total long-term debt.... -- -- 180.6 172.0 260.6 294.3
Redeemable common stock
(10)................... -- -- 5.5 7.7 8.9 9.0
Stockholders' equity.... -- -- 99.5 116.4 148.7 184.5
</TABLE>
- -------
(1) Presents consolidated financial data of the Predecessor for the periods
prior to the Company's acquisition of substantially all of the assets and
certain liabilities of the Predecessor, effective February 28, 1994. See
"Certain Transactions and Relationships--Westinghouse." Consolidated
financial data of the Predecessor have been derived from the Predecessor's
consolidated financial statements, which have been audited by the
Predecessor's accountants. The Securities and Exchange Commission (the
"Commission"), in Staff Accounting Bulletin Number 55 (SAB 55), requires
that historical financial statements of a subsidiary, division or lesser
business component of another entity include certain expenses incurred by
the parent on its behalf. These expenses include officer and employee
salaries; rent; depreciation; advertising; accounting and legal services;
other selling, general and administrative expenses; and other such
expenses. The financial statements of the Predecessor include such
adjustments, estimates or allocations as the management of the
Predecessor's parent company believed necessary to reflect these expenses.
Because of
(footnotes continued on following page)
8
<PAGE>
such items, certain aspects of the consolidated results of operations for
periods prior to the period beginning February 28, 1994 are not comparable
with those for subsequent periods.
(2) Consolidated financial data as of and for the years ended December 31,
1995, 1996 and 1997 have been derived from the Company's consolidated
financial statements, which have been audited by Coopers & Lybrand L.L.P.
(3) Presents adjusted combined results of operations of the Predecessor for
the two months ended February 28, 1994 and of the Company for the ten
months ended December 31, 1994. The adjusted combined operations data
does not purport to represent what the Company's consolidated results of
operations would have been if the Acquisition had actually occurred on
January 1, 1994.
(4) The Predecessor received a charge from its parent company in the form of
interest expense for the portion of the parent company investment that,
for internal reporting purposes, represented debt. For the year ended
1993 and the two months ended February 28, 1994, approximately 40% of the
average parent company investment was considered to be debt for internal
reporting purposes. The effective annual interest rate for all periods
was approximately 10%. This method of reporting interest expense for
internal reporting purposes is not necessarily indicative of the interest
expense that would have been incurred had the Predecessor operated as a
separate stand-alone entity.
(5) Represents a charge, net of deferred taxes, for the cumulative effect of
a change in accounting for postemployment benefits at January 1, 1993.
(6) Represents a charge, net of taxes, relating to the write-off of
unamortized debt issuance and other costs associated with the early
termination of debt.
(7) The Predecessor's results of domestic operations were included in the
consolidated U.S. federal income tax return of its parent. The
Predecessor's results of operations in Puerto Rico and certain operations
in Canada were also included with other operations of the Predecessor's
parent in the tax returns in those jurisdictions. For operations that did
not pay their own income tax, the Predecessor's parent internally
allocated income tax expense at the statutory rate after adjustment for
state income taxes and several other items. The income tax expense and
other tax-related information in the Predecessor's consolidated financial
statements were calculated as if the Predecessor had not been eligible to
be included in the consolidated tax returns of its parent (i.e., on a
"stand-alone" basis). The calculation of tax provisions and deferred
taxes necessarily required certain assumptions, allocations and estimates
that the Predecessor's management believed were reasonable to accurately
reflect the tax reporting for the Predecessor as if a stand-alone
taxpayer.
(8) For a description of the calculations of basic and diluted earnings per
common share, see Note 2 to the consolidated financial statements
included elsewhere in this Prospectus.
(9) Defined as trade accounts receivable plus inventories less accounts
payable.
(10) Represents Redeemable Class A Common Stock as described in Note 9 to the
consolidated financial statements. Under certain conditions, the holders
thereof have the right to require the Company to repurchase all of the
redeemable shares. As a result of this redemption feature, the Company
has provided for a reduction in stockholders' equity to record the
initial repurchase obligation. These repurchase rights terminate upon
consummation of an initial public offering. The $9.0 million at December
31, 1997 will be reclassified upon consummation of the Offerings to
increase paid-in capital.
9
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements regarding the
business of the Company. When used in this Prospectus, the words "anticipates,"
"plans," "believes," "estimates," "intends," "expects" and similar expressions
are intended to identify forward-looking statements. Such statements,
including, but not limited to, the Company's statements regarding its business
strategy, growth strategy, growth trends in the industry and various markets,
acquisitions, international expansion, productivity and profitability
enhancement, new product and service introductions and liquidity and capital
resources are based on management's beliefs, as well as on assumptions made by,
and information currently available to, management, and involve various risks
and uncertainties, certain of which are beyond the Company's control. The
Company's actual results could differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company. In light of
these risks and uncertainties there can be no assurance that the forward-
looking information will in fact transpire. Factors that might cause actual
results to differ from such forward-looking statements include, but are not
limited to, those discussed in "Risk Factors." The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
----------------
Market and market share data for the electrical wholesale industry are from
Electrical Wholesaling magazine or Distributor Information Services
Corporation, unless otherwise indicated. Except where specified, market share
and market data do not include Canada. The Company believes such market share
data are inherently imprecise, but are generally indicative of its relative
market share.
10
<PAGE>
RISK FACTORS
Prospective purchasers of the Class A Common Stock should consider carefully
the following factors relating to the Company and the Offerings, together with
the other information and financial data set forth elsewhere in this
Prospectus, prior to making an investment decision.
GENERAL ECONOMIC CONDITIONS
The electrical wholesale distribution industry is affected by changes in
economic conditions, including national, regional and local slowdowns in
construction and industrial activity, which are outside the control of the
Company. The Company's operating results may also be adversely affected by
increases in interest rates that may lead to a decline in economic activity,
particularly in the construction market, while simultaneously resulting in
higher interest payments by WESCO under its credit facilities. In addition,
during periods of economic slowdowns WESCO's credit losses could increase
significantly. There can be no assurance that economic slowdowns or adverse
economic conditions or cyclical trends in certain customer markets will not
have a material adverse effect on the Company's operating results and
financial condition.
COMPETITION
The electrical wholesale distribution industry is highly competitive. In the
United States, the industry is fragmented, while the much smaller Canadian
market has achieved a high degree of concentration. WESCO competes directly
with national and regional broad-based distributors, niche distributors
carrying only specialized products, and small, local distributors with one or
a few locations. Another source of competition in the wholesale channel is
buying groups formed by smaller distributors to increase purchasing power and
provide some limited cooperative marketing capability. The two largest of
these are Affiliated Distributors, representing an estimated $5 billion of
annual electrical wholesale distribution sales, and IMARK, representing an
estimated $3 billion of annual sales, based on industry sources. While
increased buying power may improve the competitive position of buying groups
locally, the Company does not believe these groups have been able to compete
effectively for National Account customers, due to the difficulty in
coordinating a diverse ownership group. Outside the wholesale channel,
manufacturers employ, and may increase the use of, direct sales
representatives. In addition, some manufacturers with sufficient size,
geographic scope and financial and marketing resources may be in a position to
offer customers national account services. Finally, the development of
alternative distribution channels, such as Internet-based catalogs, do-it-
yourself ("DIY") retail outlets or a shift to direct sales and service by
manufacturers, could have a material adverse effect on the wholesale
distribution market and, as a result, the Company's performance.
Some of WESCO's existing competitors have, and new market entrants may have,
greater financial and marketing resources than WESCO. To the extent existing
or future competitors seek to gain or retain market share by reducing prices,
WESCO may be required to lower its prices, thereby adversely affecting
financial results. Existing or future competitors also may seek to compete
with WESCO for acquisitions, which could have the effect of increasing the
price and reducing the number of suitable acquisitions, and may also compete
with WESCO for start-up locations, thereby limiting the number of attractive
locations for expansion. In addition, it is possible that competitive
pressures resulting from the industry trend toward consolidation could affect
growth and profit margins. See "Business--Competition."
ABILITY TO IMPLEMENT AND MANAGE GROWTH STRATEGY; CAPITAL NEEDS FOR
ACQUISITIONS
A principal component of WESCO's strategy is to continue to expand through
additional acquisitions and development of start-up locations that complement
WESCO's operations in new or existing markets. The success of this strategy
will depend upon WESCO's ability to identify, acquire and integrate a
sufficient number of businesses. There can be no assurance that WESCO will be
able to identify and acquire appropriate businesses on satisfactory terms or
that future acquisitions will not have a material adverse effect on the
Company's operating results, particularly during periods in which the
operations of acquired businesses are being integrated into WESCO's
operations. As part of its growth strategy, WESCO intends to build its
international presence.
11
<PAGE>
Significant expansion into international markets could involve risks relating
to currency exchange rates, new and different legal, tax, accounting and
regulatory requirements, difficulties in staffing and managing foreign
operations, operating difficulties and other factors. In addition, profit
margin and competitive position associated with sales transacted in foreign
currency, such as sales in WESCO's Canadian operations, may be materially
adversely affected by foreign exchange rates. See "Business--Growth Strategy."
In order to implement its acquisition strategy, WESCO is likely to require
additional funding. Future acquisitions could be financed by incurring
additional indebtedness, including increased borrowing under WESCO's existing
credit facilities, or by the issuance by CDW of additional equity securities.
There can be no assurance, however, that adequate funding will be available on
terms satisfactory to WESCO. As of December 31, 1997 the Company had total
long-term debt of $294.3 million. An increase in the level of indebtedness of
the Company could have important consequences for the holders of Class A
Common Stock, including (1) increasing the portion of the Company's cash flow
from operations being dedicated to the payment of principal and interest on
indebtedness and unavailable for other purposes, (2) impairing WESCO's ability
to obtain financing for working capital needs and general corporate purposes
and (3) reducing WESCO's flexibility in responding to changes in business and
economic conditions and competitive pressures. The issuance by CDW of
additional equity securities may result in dilution to earnings to holders of
the Class A Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business--Acquisitions" and "Description of Certain
Indebtedness--Credit Facilities."
DEPENDENCE ON KEY PERSONNEL
WESCO is dependent upon the skills, experience and efforts of its Chief
Executive Officer and other executive officers. Loss of the services of the
Chief Executive Officer or one or more of the other executive officers could
have a material adverse effect on WESCO's business and development. WESCO has
no written employment contracts with any of its executive officers other than
an employment agreement with its Executive Vice President, Industry Affairs.
WESCO intends to enter into, prior to the Offerings, a three-year employment
agreement with Roy W. Haley, its Chief Executive Officer and President, and a
two-year employment agreement with David F. McAnally, its Chief Operating
Officer, Chief Financial Officer and Treasurer. See "Management--Employment
Agreements." WESCO's continued growth also depends in part on its continuing
ability to attract and retain qualified managers, sales persons and other key
employees and on its executive officers' ability to manage growth
successfully. No assurance can be given that WESCO will be able to attract and
retain such employees. WESCO has relied primarily upon CDW's stock option plan
and other elements of compensation to retain key employees. WESCO intends,
prior to the Offerings, to establish a long-term incentive plan for executives
and other key management employees. See "Management--Stock Option Plan" and
"Management--Long-Term Incentive Plan."
KEY SUPPLIERS; MAINTENANCE OF SUPPLY; INTERRUPTION OF DISTRIBUTION CENTER
OPERATIONS
Consistent with industry practice, most of WESCO's agreements with suppliers
(including both distribution agreements and preferred supplier agreements) are
terminable by either party on no more than 60 days notice. WESCO's ten largest
suppliers in 1997 accounted for 45% of WESCO's purchases for the period. The
largest supplier was Eaton Corporation, through its Cutler-Hammer division,
successor to the Distribution and Control Business Unit of Westinghouse,
accounting for 18% of WESCO's purchases. The loss of, or a substantial
decrease in the availability of, products from any of these suppliers, or the
loss of key preferred supplier agreements, could have a material adverse
effect on WESCO's business. In addition, supply interruptions could arise from
shortages of raw materials, labor disputes or weather conditions affecting
products or shipments, or other reasons beyond WESCO's control. An
interruption of operations at any of WESCO's five distribution centers could
have a material adverse effect on the operations of branches served by the
affected distribution center. Further, there can be no assurance that
particular products, or product lines, will be available to WESCO, or
available in quantities sufficient to meet customer demand. Such limited
product access could put WESCO at a competitive disadvantage. See "Business--
Suppliers and Purchasing" and "Business--Distribution Network."
12
<PAGE>
DEPENDENCE ON INFORMATION SYSTEMS
The Company believes that WESCO's computer systems are an integral part of
its business and growth strategies. WESCO depends on its information systems
to process orders, manage inventory and accounts receivable collections,
purchase products, ship products among its branches on a timely basis,
maintain cost-effective operations and provide superior service to its
customers. Although the Company believes WESCO has the appropriate disaster
recovery plans in place, there can be no assurance that a serious disruption
in the operation of WESCO's information systems will not occur. Any such
disruption could have a material adverse effect on the Company's business and
results of operations. See "Business--Management Information Systems."
CERTAIN INVENTORY RISKS
The obsolescence of a significant amount of inventory due to changes in
customer preferences or technological improvements could have a material
adverse effect on the Company's business and results of operations. WESCO
believes that this risk is confined principally to data communications
products, which are the most likely to be subject to obsolescence resulting
from rapid technological change. At December 31, 1997, these products
constituted less than 6% of inventory.
ENVIRONMENTAL RISKS
The Company's facilities and operations are subject to federal, state and
local laws and regulations relating to environmental protection
("Environmental Laws") and health and human safety. Certain of these laws and
regulations may impose strict, joint and several liability on certain persons
for the cost of investigation or remediation of contaminated properties,
meaning that a person could be liable for more than its pro rata share of such
costs regardless of fault. These persons may include present or future owners
and operators of properties, and persons that arranged for the disposal of
hazardous substances. In addition, the disposal of certain products
distributed by WESCO, such as ballasts, fluorescent lighting and batteries,
must comply with Environmental Laws. In connection with the Acquisition,
Westinghouse agreed to indemnify the Company for certain liabilities under
Environmental Laws resulting from conditions at the Predecessor's branch
locations and other real property at the time of the Acquisition. By the terms
of this indemnity, the Company is not entitled to indemnification for claims
made under the indemnity after February 27, 1996. Based on its due diligence
investigation, including environmental assessments, CDW made a claim under
this indemnity in the amount of approximately $1.5 million, which Westinghouse
is disputing. In connection with its acquisition program, WESCO acquires new
branch locations, including owned and leased real property which may carry
with it certain liabilities under Environmental Laws. It is WESCO's practice
to conduct due diligence investigations in connection with such acquisitions,
including environmental assessments, and, where appropriate, to provide for
contractual indemnities. However, no assurance can be given that the Company
will not become subject to liabilities for environmental matters, including
with respect to conditions at its properties, that such liabilities will not
be material or that, where negotiated, contractual indemnities will be
sufficient to cover such liabilities.
RESTRICTIONS IMPOSED BY LENDERS
WESCO's existing credit facilities and certain mortgage notes issued to
Westinghouse in connection with the Acquisition (the "Mortgage Notes") contain
covenants that limit WESCO with respect to certain business matters. Such
covenants include, among other things, limitations on the acquisition of new
subsidiaries, the sale of assets, the incurrence of additional debt and the
payment of dividends. In addition, WESCO's senior credit facility requires
WESCO to meet certain financial tests based on net worth, a funded
indebtedness to consolidated EBITDA ratio and a fixed charge coverage ratio.
See "Description of Certain Indebtedness."
PRINCIPAL STOCKHOLDER
Upon completion of the Offerings, Fund IV will own approximately % of the
then outstanding Common Stock of CDW and will retain the power to control the
Company's corporate policies, the election of
13
<PAGE>
persons constituting its management and Board of Directors, and the outcome of
corporate actions requiring stockholder approval. Immediately after the
Offerings, three of the Company's nine directors will be principals of CD&R.
In addition, following the Offerings, Fund IV will continue to have a
contractual right to appoint an observer to attend meetings of the Board of
Directors of the Company. See "Management--Directors and Executive Officers,"
"--Compensation Committee Interlocks and Insider Participation," "Certain
Transactions and Relationships" and "Security Ownership by Management and
Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, shares of Class A Common Stock will be
issued and outstanding and shares of Class A Common Stock will be issuable
upon the exercise of outstanding stock options. After the expiration of a 180-
day "lock-up" period to which substantially all of CDW's current stockholders
and option holders are subject, such holders will in general be entitled to
dispose of their shares (including the shares underlying such options),
although the shares of Class A Common Stock held by Fund IV and other
affiliates of CDW will continue to be subject to the volume and other
restrictions of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Sales of substantial amounts of Class A Common Stock, or
the perception that such sales could occur at the expiration of such 180-day
period, may materially adversely affect the market price of the Class A Common
Stock prevailing from time to time. In addition, under the Registration and
Participation Agreement, dated as of February 28, 1994 (the "Registration and
Participation Agreement"), among CDW, Fund IV and the existing stockholders of
CDW, CDW's existing stockholders and option holders have certain demand
registration rights and "piggy-back" registration rights in connection with
future offerings of Class A Common Stock. See "Shares Eligible for Future
Sale" and "Underwriting."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock. Although CDW will make an application for listing the Class A
Common Stock on the New York Stock Exchange, no assurance can be given that an
active trading market will be created or sustained. The initial public
offering price will be determined by negotiations among CDW, the Selling
Stockholders and representatives of the Underwriters based on several factors
and will not necessarily reflect the market price of the Class A Common Stock
following the Offerings. Due to the absence of any prior public market for the
shares of Class A Common Stock, there can be no assurance that the initial
public offering price will correspond to the price at which the shares of
Class A Common Stock will trade in the public market subsequent to the
Offerings. See "Underwriting."
The market price for shares of the Class A Common Stock may be volatile and
may fluctuate based upon a number of factors including, but not limited to,
the Company's operating performance, news announcements or changes in general
economic and market conditions. In addition, the stock market in recent years
has experienced extreme price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These
fluctuations may materially adversely affect the market price of the Class A
Common Stock.
DILUTION
Purchasers of Class A Common Stock in the Offerings will experience
immediate and substantial dilution in the net tangible book value of their
Class A Common Stock. At an initial public offering price of $ per share,
purchasers of shares in the Offerings will experience dilution in net tangible
book value of $ per share. See "Dilution."
14
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders. At the time of the Acquisition, the Company agreed to
assume the costs of the Offerings (other than the underwriting discount) and
to pay certain fees and expenses in connection with the sale of shares by the
Selling Stockholders. See "Selling Stockholders."
DIVIDEND POLICY
CDW has never declared or paid any dividends on the Class A Common Stock and
has no current plans to pay dividends on the Class A Common Stock. The Company
presently intends to retain earnings to support the growth of its business.
The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and capital requirements, restrictions in
financing agreements, business conditions, certain corporate law requirements
and other factors.
CDW is a holding company and thus its ability to pay dividends on the Class
A Common Stock depends on its subsidiaries' ability to pay dividends to CDW.
The Company's financing agreements generally restrict the payment of dividends
by CDW's subsidiaries to CDW or by CDW to its shareholders. See "Description
of Certain Indebtedness."
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997. This table should be read in conjunction with
the consolidated financial statements and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------
HISTORICAL PRO FORMA (1)
---------- -----------------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C>
NOTES PAYABLE........................... $ 0.9 $ 0.4
---------------- ----------------
LONG-TERM DEBT: (2)
Borrowings under Credit Facilities..... 226.2 226.2
Mortgage Notes......................... 65.3 65.3
Other.................................. 2.8 1.1
---------------- ----------------
Total long-term debt.................. 294.3 292.6
---------------- ----------------
REDEEMABLE CLASS A COMMON STOCK, $.01
par value, 89,306 shares issued and
outstanding............................ 9.0 --
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.01 par value,
2,000,000 shares authorized, 933,280
issued and outstanding (3)............ -- --
Class B Common Stock, $.01 par value,
2,000,000 shares authorized, none
issued and outstanding................ -- --
Additional paid-in capital............. 93.3 104.5
Other stockholders' equity............. 1.8 1.8
Retained earnings...................... 89.4 89.4
---------------- ----------------
Total stockholders' equity............ 184.5 195.7
---------------- ----------------
Total capitalization................ $ 488.7 $ 488.7
================ ================
</TABLE>
- --------
(1)Reflects the pro forma capitalization of the Company at December 31, 1997,
after giving effect to (a) the termination of the redemption feature of
certain common shares upon the consummation of the Offerings and (b) the
issuance of shares of Class A Common Stock upon the conversion of
certain convertible notes issued in connection with prior acquisitions,
which by their terms will mandatorily convert into shares of Class A Common
Stock at the initial public offering price upon consummation of the
Offerings. See "Description of Certain Indebtedness--Acquisition Notes."
(2)Does not include $59.5 million of debt incurred to consummate the Avon and
Brown acquisitions in January 1998, of which up to $5.0 million may be
converted to Shares of Class A Common Stock at the initial public offering
price.
(3)Does not include shares of Class A Common Stock issuable upon the
exercise of stock options outstanding at December 31, 1997. See
"Management--Stock Option Plan."
16
<PAGE>
DILUTION
As of December 31, 1997 CDW's pro forma net tangible book value was $ or
$ per share, after giving effect to (i) the termination of the redemption
feature of certain common shares upon the consummation of the Offerings and
(ii) the issuance of shares of Class A Common Stock upon the conversion of
certain convertible notes issued in connection with prior acquisitions, which
by their terms will mandatorily convert into shares of Class A Common Stock at
the initial public offering price upon consummation of the Offerings (the
"Acquisition Notes"). After giving effect to estimated expenses of $
million payable by the Company in connection with the Offerings, pro forma net
tangible book value of CDW at December 31, 1997 would have been $ million
or $ per share of Common Stock. Assuming an initial public offering price
of $ per share of Class A Common Stock, there would have been an immediate
dilution of $ per share to purchasers of the shares of Class A Common Stock
in the Offerings ("New Investors"). Dilution is determined by subtracting
adjusted net tangible book value per share after the Offerings from the amount
of cash paid by a New Investor for one share of Class A Common Stock. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share........................... $
Pro forma net tangible book value per share before the Offerings
(1).............................................................. $
Decrease in net tangible book value per share attributable to the
Offerings........................................................
---
Pro forma net tangible book value per share after the Offerings...
---
Dilution per share to New Investors............................... $
</TABLE>
- --------
(1) Net tangible book value per share as of a specified date represents net
tangible assets (total tangible assets less total liabilities) divided by
the number of shares of Class A Common Stock assumed to be then
outstanding.
The following table summarizes on a pro forma basis as of December 31, 1997,
after giving effect to the issuance of Class A Common Stock upon conversion of
the Acquisition Notes in connection with the Offerings, the differences
between the existing stockholders and the New Investors with respect to the
number of shares of Class A Common Stock purchased, the total consideration
paid and the average price paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE
-------- -------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... % % $
New Investors...........
-------- -------- --------- ---------
Total.................. % $ %
======== ======== ========= =========
</TABLE>
As of December 31, 1997, an aggregate of shares of Class A Common Stock
were issuable upon the exercise of outstanding options at a weighted-average
exercise price of $ per share. If all options outstanding at December 31,
1997 were exercised or converted, the pro forma net tangible book value per
share immediately after completion of the Offerings would be $ . This
would represent an immediate dilution of $ per share to New Investors. See
"Management--Stock Option Plan," "--Stock Option Plan for Branch Employees"
and "Description of Certain Indebtedness--Acquisition Notes."
17
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth (i) selected historical consolidated
financial data of the Predecessor as of and for the year ended December 31,
1993 and as of and for the two months ended February 28, 1994 and (ii)
selected historical consolidated financial data of the Company as of and for
the ten months ended December 31, 1994, as of and for the years ended December
31, 1995, 1996 and 1997, which have been derived from audited financial
statements. The selected historical consolidated financial data of the
Predecessor have been derived from the Predecessor's financial statements,
which have been audited by the Predecessor's accountants. The selected
historical consolidated financial data of the Company as of and for the years
ended December 31, 1995, 1996 and 1997 have been derived from the Company's
consolidated financial statements, which have been audited by Coopers &
Lybrand L.L.P. The adjusted combined selected data for 1994 combines the
audited results of operations of the Predecessor for the two months ended
February 28, 1994 and of the Company for the ten months ended December 31,
1994. The adjusted combined selected data for the year ended December 31, 1994
does not purport to represent what the Company's consolidated results of
operations would have been if the Acquisition had actually occurred on January
1, 1994. See the Consolidated Financial Statements of the Company and the
accompanying notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
18
<PAGE>
SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THE PREDECESSOR (1) THE COMPANY THE COMPANY
------------------------- ------------ -------------------------------
ADJUSTED
TWO MONTHS TEN MONTHS COMBINED
YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ ------------ -------------------------------
1993 1994 1994 1994 (2) 1995 1996 1997
------------ ------------ ------------ ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Sales, net...... $1,570.8 $ 237.3 $1,398.5 $1,635.8 $ 1,857.0 $ 2,274.6 $ 2,594.8
Gross profit.... 238.1 32.5 230.0 262.5 321.0 405.0 463.9
Selling, general
and
administrative
expenses....... 241.2 34.9 197.7 232.6 258.0 326.0 372.5
Depreciation and 7.9 1.2 7.5 8.7 7.3 10.8 11.3
amortization... -------- ------- -------- -------- ---------- --------- ----------
Income (loss)
from
operations..... (11.0) (3.6) 24.8 21.2 55.7 68.2 80.1
Other income and
expense, net... 1.7 -- -- -- -- -- --
Interest
expense, net 14.2 2.4 17.6 20.0 15.8 17.4 20.1
(3)............ -------- ------- -------- -------- ---------- --------- ----------
Income (loss)
before income
taxes.......... (23.5) (6.0) 7.2 1.2 39.9 50.8 60.0
Income (loss)
before
cumulative
effect and
extraordinary
charge, net of
taxes.......... (13.8) (4.1) 3.6 (0.5) 25.1 32.5 36.2
Cumulative
effect of
change in
accounting, net
of taxes (4)... 1.6 -- -- -- -- -- --
Extraordinary
charge, net of -- -- -- -- 8.1 -- --
taxes (5)...... -------- ------- -------- -------- ---------- --------- ----------
Net income $ (15.4) $ (4.1) $ 3.6 $ (0.5) $ 17.0 $ 32.5 $ 36.2
(loss) (6)..... ======== ======= ======== ======== ========== ========= ==========
EARNINGS PER
SHARE DATA: (7)
Basic earnings
per common
share before
extraordinary
charge, net of
taxes.......... -- -- $ 3.71 -- $ 25.11 $ 31.97 $ 35.48
Basic earnings
per common
share.......... -- -- 3.71 -- 17.05 31.97 35.48
Shares used in
basic per share
calculation.... -- -- 970,637 -- 1,000,735 1,015,238 1,021,271
Diluted earnings
per common
share before
extraordinary
charge, net of
taxes.......... -- -- $ 3.68 -- $ 23.86 $ 29.47 $ 31.53
Diluted earnings
per common
share.......... -- -- 3.68 -- 16.20 29.47 31.53
Shares used in
diluted per
share
calculation.... -- -- 979,165 -- 1,053,344 1,101,573 1,149,199
<CAPTION>
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------ -------------------------------
1993 1994 1994 1995 1996 1997
------------ ------------ ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Adjusted working
capital (8).... $ 224.8 $ 228.7 $ 196.5 $ 222.5 $ 291.6 $ 338.8
Total assets.... 521.0 504.5 533.7 581.3 773.5 870.9
Total long-term
debt........... -- -- 180.6 172.0 260.6 294.3
Redeemable
common stock
(9)............ -- -- 5.5 7.7 8.9 9.0
Stockholders'
equity......... -- -- 99.5 116.4 148.7 184.5
</TABLE>
- -------
(1) Presents consolidated financial data of the Predecessor for the periods
prior to the Company's acquisition of substantially all of the assets and
certain liabilities of the Predecessor, effective February 28, 1994. See
"Certain Transactions and Relationships--Westinghouse." Consolidated
financial data of the Predecessor have been derived from the Predecessor's
consolidated financial statements, which have been audited by the
Predecessor's accountants. The Commission, in Staff Accounting Bulletin
Number 55 (SAB 55), requires that historical financial statements of a
subsidiary, division or lesser business component of another entity
include certain expenses incurred by the parent on its behalf. These
expenses include officer and employee salaries; rent; depreciation;
advertising; accounting and legal services; other selling, general and
administrative expenses; and other such expenses. The financial statements
of the Predecessor include such adjustments, estimates or allocations as
the management of the Predecessor's parent company believed necessary to
reflect these expenses. Because of such items, certain aspects of the
consolidated results of operations for periods prior to the period
beginning February 28, 1994 are not comparable with those for subsequent
periods.
(footnotes continued on following page)
19
<PAGE>
(2) Presents adjusted combined results of operations of the Predecessor for
the two months ended February 28, 1994 and of the Company for the ten
months ended December 31, 1994. The adjusted combined operations data
does not purport to represent what the Company's consolidated results of
operations would have been if the Acquisition had actually occurred on
January 1, 1994.
(3) The Predecessor received a charge from its parent company in the form of
interest expense for the portion of the parent company investment that,
for internal reporting purposes, represented debt. For the year ended
1993 and the two months ended February 28, 1994, approximately 40% of the
average parent company investment was considered to be debt for internal
reporting purposes. The effective annual interest rates for all periods
was approximately 10%. This method of reporting interest expense for
internal reporting purposes is not necessarily indicative of interest
expense that would have been incurred had the Predecessor operated as a
separate stand-alone entity.
(4) Represents a charge, net of deferred taxes, for the cumulative effect of
a change in accounting for postemployment benefits at January 1, 1993.
(5) Represents a charge, net of taxes, relating to the write-off of
unamortized debt issuance and other costs associated with the early
termination of debt.
(6) The Predecessor's results of domestic operations were included in the
consolidated U.S. federal income tax return of its parent. The
Predecessor's results of operations in Puerto Rico and certain operations
in Canada were also included with other operations of the Predecessor's
parent in the tax returns in those jurisdictions. For operations that did
not pay their own income tax, the Predecessor's parent internally
allocated income tax expense at the statutory rate after adjustment for
state income taxes and several other items. The income tax expense and
other tax-related information in the Predecessor's consolidated financial
statements were calculated as if the Predecessor had not been eligible to
be included in the consolidated tax returns of its parent (i.e., on a
"stand-alone" basis). The calculation of tax provisions and deferred
taxes necessarily required certain assumptions, allocations and estimates
that the Predecessor's management believed were reasonable to accurately
reflect the tax reporting for the Predecessor as if a stand-alone
taxpayer.
(7) For a description of the calculations of basic and diluted earnings per
common share, see Note 2 to the consolidated financial statements
included elsewhere in this Prospectus.
(8) Defined as trade accounts receivable plus inventories less accounts
payable.
(9) Represents Redeemable Class A Common Stock as described in Note 9 to the
consolidated financial statements. Under certain conditions, the holders
thereof have the right to require the Company to repurchase all of the
redeemable shares. As a result of this redemption feature, the Company
has provided for a reduction in stockholders' equity to record the
initial repurchase obligation. These repurchase rights terminate upon
consummation of an initial public offering. The $9.0 million at December
31, 1997 will be reclassified upon consummation of the Offerings to
increase paid-in capital.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
WESCO is the second largest electrical wholesale distributor in North
America with approximately 330 branches located in 48 states and nine Canadian
provinces. The Company sells over 210,000 products, sourced from over 6,000
suppliers, to more than 130,000 active customers. WESCO complements its
product offerings with a range of services and procurement solutions. Growth
in revenue is dependent upon several factors, including industry trends,
general economic conditions and the ability of the Company to grow market
share and consummate acquisitions. From 1993 to 1997 the Company's sales rose
by 13.4% on a compound annual basis, while industry sales grew at a compound
annual rate of 10.2% during the same period. The Company's ability to outpace
the growth in the industry has resulted primarily from the launching of an
aggressive acquisition program, which has added more than $650 million in
annualized sales since August 1995. The majority of these acquisitions
occurred during and after 1996 and, as such, have had a greater effect on
periods beginning with 1996.
The Company's sales can be categorized as stock sales, special orders or
direct shipments. Stock sales are filled directly from branch inventory and
over the past three years represented 40% to 50% of total sales. Direct ship
orders are shipped to the customer by the manufacturer since generally they
involve large orders or products that are too bulky to be easily handled and
over the past three years represented 35% to 45% of total sales. Special
orders are for products that are not ordinarily stocked in branch inventories
and are ordered from the manufacturer pursuant to a customer's request.
Special orders represent the remainder of total sales. Gross profit margins on
stock and special order sales are approximately 50% higher than those on
direct ship sales. Although direct ship margins are lower, operating profits
are comparable since the inventory and handling costs associated with direct
shipments are lower.
The Company pays its sales force commissions based on a standard percent of
billing margin dollars. Since stock and special order sales are typically at
higher gross profit margins than direct ship sales, the commissions paid are
also higher as a percent of sales.
Since CDW acquired WESCO in early 1994, the Company has experienced a
significant improvement in its income from operations, which has more than
doubled from 1.3% of sales in 1994 to 3.1% of sales in 1997. This margin
improvement has resulted primarily from (1) better leveraging of the Company's
existing infrastructure due to growth in sales, (2) focusing on higher margin
products and services such as National Accounts and (3) acquisitions of
companies with average operating margins in excess of that for WESCO's
existing business.
At December 31, 1997, the Company's net adjusted working capital investment
was $338.8 million, composed of $351.2 million in accounts receivable and
$299.4 million in inventory, offset by $311.8 million in accounts payable. The
Company is implementing a number of initiatives designed to improve its
working capital performance, primarily in the area of inventory management.
Such initiatives include (1) coordinating purchasing and inventory investment
activities among groups of branches or "districts," (2) upgrading the logic of
the automated stock replenishment programs used to supply branches from the
distribution centers, (3) negotiating improved inventory return and
consignment arrangements with important suppliers, (4) increasing the use of
preferred suppliers and (5) shortening and stabilizing lead times between
order and delivery from suppliers.
The Company has historically financed its acquisitions, new branch openings,
working capital needs and capital expenditures through internally generated
cash flow and borrowings under its credit facilities. During the initial phase
of an acquisition or new branch opening, the Company typically incurs expenses
related to installing or converting information systems, training employees
and other initial operating activities. In some acquisitions, the Company may
incur expenses in connection with the closure of any of its own redundant
branches. Historically, the costs associated with opening new branches, and
closing branches in connection with certain acquisitions, have not been
material. The Company has accounted for its acquisitions under the purchase
method of accounting.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net sales of
certain items in the Company's Statement of Income for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Sales, net...................................... 100.0% 100.0% 100.0%
Gross profit.................................... 17.3 17.8 17.9
Selling, general and administrative expenses.... 14.3 14.8 14.8
------- ------- -------
Income from operations.......................... 3.0 3.0 3.1
Interest expense................................ 0.9 0.8 0.8
------- ------- -------
Income before income taxes...................... 2.1 2.2 2.3
Income taxes.................................... 0.8 0.8 0.9
------- ------- -------
Income before extraordinary charge.............. 1.3 1.4 1.4
Extraordinary charge, net of taxes.............. 0.4 -- --
------- ------- -------
Net income...................................... 0.9% 1.4% 1.4%
======= ======= =======
</TABLE>
1997 COMPARED TO 1996
NET SALES. Sales for the year ended December 31, 1997 were $2,594.8 million,
compared with $2,274.6 million for the year ended December 31, 1996. This
represented an increase of $320.2 million, or 14.1%. Sales of comparable
branches (those open throughout both periods) rose 7.0%, with branches in the
United States and Canada increasing 7.1% and 5.9%, respectively. Within the
United States, the branches with a high volume of sales to utility customers
experienced a somewhat higher level of comparable branch sales. In addition to
growth in sales of comparable branches, the remaining sales increase resulted
primarily from the nine companies acquired since the beginning of 1996. Sales
of product from stock rose 21%, as compared to the prior period, increasing
the mix of stock sales three percentage points to 48% of total sales. This was
a result of several ongoing initiatives designed to increase stock sales, such
as the continued emphasis on growing National Account sales, and, to a lesser
extent, the impact of acquired company sales, which have tended to have a
higher mix of stock sales. Direct ship sales rose 4% over the prior period.
This sales increase was below that experienced by the Company in other areas
and was primarily due to the slower growth in the non-residential construction
market for commercial and industrial projects, which constitutes the majority
of direct ship sales.
GROSS PROFIT. Gross profit for the year ended December 31, 1997 was $463.9
million, compared with $405.0 million for 1996. The increase of $58.9 million,
or 14.5%, was primarily due to the higher sales volume in 1997 from both
acquisitions and comparable branch operations. Gross profit as a percentage of
sales increased to 17.9% in 1997 from 17.8% in 1996. In 1996, approximately
$9.3 million of gross profit was recorded in connection with a one-time
international construction project with a gross profit margin that was higher
than the Company's usual margins on large construction projects due to service
requirements and risk considerations associated with the order. Without this
international order, the Company's gross profit margin would have been 17.6%
in 1996, compared to 17.9% for 1997. The increase in the gross profit margin
was primarily due to the increase in the mix of higher margin stock sales,
including sales associated with acquired companies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (INCLUDING DEPRECIATION AND
AMORTIZATION). Selling, general and administrative ("SG&A") expenses for the
year ended December 31, 1997 were $383.8 million, compared with $336.8 million
in 1996. This increase of $47.0 million, or 14.0%, was primarily due to
expenses associated with the companies acquired in 1997 and 1996. SG&A
expenses as a percentage of sales remained unchanged at 14.8%. Acquisitions
with higher SG&A expense rates were offset by cost containment in the
Company's core business, as well as cost reductions in the acquired companies.
Depreciation and amortization increased by $0.5 million as a result of recent
acquisitions.
INTEREST EXPENSE. Interest expense increased by $2.7 million primarily due
to the higher levels of borrowings outstanding associated with the
acquisitions made since the beginning of 1996, partially offset by lower
interest rates during 1997.
22
<PAGE>
INCOME TAXES AND NET INCOME. The effective tax rate was 39.6% for the year
ended December 31, 1997 compared to 36.1% for the same period in 1996. The
increase in the effective tax rate was primarily due to the reduction of a
valuation allowance for deferred tax assets in 1995 and 1996, which had the
effect of reducing the income tax rate during those periods. The Company began
its operations as a stand-alone entity in early 1994 with no history of
generating taxable income. Accordingly, a valuation allowance was established
for the net deferred tax assets that were generated during 1994. In 1995 and
1996, as the Company subsequently demonstrated an ability to utilize such
deferred tax assets, the valuation allowance was reduced and had the effect of
reducing the effective tax rate for both 1995 and 1996. Since the valuation
allowance was reduced to zero during 1996, there was no similar effect on the
1997 tax rate. Net income in 1997 increased $3.7 million, or 11.4%, to $36.2
million from $32.5 million in 1996, primarily as a result of the increase in
gross profit, partially offset by the increase in operating expenses and a
higher effective tax rate.
1996 COMPARED TO 1995
NET SALES. Sales for the year ended December 31, 1996 were $2,274.6 million,
an increase of $417.6 million, or 22.5%, from $1,857.0 million for the year
ended December 31, 1995. Approximately 74% of the sales increase was
attributable to the seven acquisitions made during 1996 as well as the full-
year effect of the two acquisitions made in the second half of 1995. The
balance of the sales increase was due to the continued growth in the base of
the existing business, with no significant differences in the growth rates of
the various markets. Comparable branch sales increased 3.8% during the period,
with branches in the United States increasing at a 5.1% rate and Canada
declining at a 3.0% rate, reflecting a decline in the Canadian market overall,
particularly for the construction project business.
GROSS PROFIT. Gross profit for 1996 of $405.0 million increased 26.2%, or
$84.0 million, over the $321.0 million recorded in 1995. The increase in gross
profit was primarily due to the increase in sales discussed above. As a
percent of sales, gross profit increased to 17.8% in 1996 from 17.3% in 1995.
The one-time international construction project discussed above increased the
gross profit margin by 0.2 percentage points. Without this project, the
Company's gross profit margin would have been 17.6% in 1996. The remainder of
this increase in the gross profit margin was attributable to the higher mix of
stock sales in the acquired companies, which sales typically have higher
margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (INCLUDING DEPRECIATION AND
AMORTIZATION). SG&A expenses increased $71.5 million, or 27.0%, to $336.8
million in 1996 from $265.3 million in 1995. This increase was primarily due
to the expenses associated with the acquisitions discussed above, including
$1.7 million of additional amortization of goodwill. As a percent of sales,
SG&A expenses increased to 14.8% in 1996 from 14.3%. This increase was
primarily due to the higher expense rate of the acquired companies, typically
associated with their higher stock sales mix.
INTEREST EXPENSE. Interest expense increased $1.6 million in 1996 to $17.4
million from $15.8 million in 1995 primarily due to the increased level of
borrowings outstanding as a result of the nine companies acquired in 1995 and
1996, partially offset by lower interest rates during 1996.
INCOME TAXES AND INCOME BEFORE EXTRAORDINARY CHARGE. The effective tax rate
was 36.1% for 1996, compared to 37.0% for 1995. Income before extraordinary
charge increased $7.4 million, or 29.5%, to $32.5 million in 1996 from $25.1
million in 1995. This increase was due to the higher sales and gross profit
partially offset by the higher selling, general and administrative expenses
discussed above.
EXTRAORDINARY CHARGE. During 1996, the Company refinanced its revolving
credit facilities and, as a result, wrote off $8.1 million, representing
unamortized debt issuance costs net of applicable taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from seasonal working capital
requirements, capital expenditures, interest and principal payment obligations
and acquisitions. The Company has historically met its liquidity and capital
investment needs with internally generated funds and borrowings under its
existing credit facilities.
23
<PAGE>
For the year ended December 31, 1997, cash used for operating activities was
$11.1 million compared to cash provided by operating activities of $15.2
million for the year ended December 31, 1996. The cash used for operating
activities was primarily due to the $54.6 million increase in certain
components of net working capital offset by the $36.2 million in net income.
The $32.6 million increase in receivables was, for the most part, due to the
increased level of sales. The $31.7 million increase in inventories was due,
in part, to the increased sales and to the increase in the mix of stock sales.
Also, the Company increased its inventory investment in its five regional
distribution centers by $13.8 million during 1997, primarily in connection
with the addition of certain supplier lines historically purchased directly by
the branches. This initial increase will be offset as the Company reduces its
existing investment in those supplier lines at the branch locations.
Net cash used in investing activities was $22.4 million for the year ended
December 31, 1997, compared to $111.0 million for the year ended December 31,
1996. The primary reason for the cash used in investing activities for the
periods presented was acquisitions. The Company used $13.9 million and $103.9
million for acquisitions in the periods ended December 31, 1997 and 1996,
respectively. The decrease was due to the reduced number of completed
acquisitions in 1997 versus 1996.
The Company's capital expenditures, excluding acquisitions, for the year
ended December 31, 1997 were $12.4 million as compared to $9.4 million for the
year ended December 31, 1996. Such capital expenditures were primarily for
branch and distribution center facility improvements, forklifts and delivery
vehicles and computer equipment and software. The increase in such
expenditures reflects the necessary investments in fixed assets to position
the Company for its growth plans. Capital expenditures for fiscal 1998 are
expected to total approximately $14.0 million.
The Company is in the process of modifying, upgrading or replacing its
computer software applications and systems to accommodate the "Year 2000"
changes required for correct recording of dates in the year 2000 and beyond.
The Company does not expect that the cost of its Year 2000 compliance program
will be material to its financial condition or results of operations. The
Company believes that it will be able to achieve compliance by early 1999, and
does not currently anticipate any material disruption in its operations. The
Company does not currently have any information concerning the compliance
status of its suppliers and customers. In the event that any of the Company's
significant suppliers or customers do not successfully achieve Year 2000
compliance, the Company's business or operations could be adversely affected.
Cash provided by financing activities decreased $46.1 million to $41.1
million for the year ended December 31, 1997 compared to $87.2 million for the
year ended December 31, 1996. The decrease was due to reduced borrowings as a
result of fewer completed acquisitions.
At December 31, 1997, the Company had total long-term debt of $294.3
million. This indebtedness consisted of $226.2 million under existing credit
facilities, $65.3 million associated with two mortgage notes issued to
Westinghouse in connection with the Acquisition, and $2.8 million of notes in
connection with certain acquisitions. The weighted average interest rate on
the credit facilities at December 31, 1997 was 6.7%. This rate fluctuates with
the LIBOR, Bankers Acceptance and Prime based lending rates. The Company
funded the $59.5 million aggregate purchase price of two acquisitions that
closed in January 1998 through $45.0 million of borrowings under its credit
facilities and the issuance of $14.5 million of its unsecured notes, maturing
by mid-1999. The mortgage notes mature in February 2001 with interest at
approximately 8% per annum, which is computed semi-annually and added to the
principal amount of the mortgage notes.
In February 1998, the Company amended certain terms and conditions of its
existing credit facilities. The amendment included provisions that permit the
Company to borrow up to a maximum of $445 million and release all previously
required collateral. The existing credit facilities expire in February 2001
and have no principal payment requirements prior to that date.
Management believes that the Company has adequate resources and liquidity to
meet its borrowing obligations, fund all required capital expenditures and
pursue its business strategy for existing operations for the foreseeable
future. However, the Company may require additional funding in order to pursue
significant acquisition opportunities. Such acquisitions may be financed by
bank borrowings, public offerings or private
24
<PAGE>
placements of equity or debt securities or a combination of the foregoing and
may require the consent of the Company's existing lenders. There can be no
assurance that the Company will be able to obtain such funds to finance
significant future acquisitions.
INFLATION
The rate of inflation, as measured by changes in the consumer price index,
did not have a material effect on the sales or operating results of the
Company during the periods presented. However, inflation in the future could
affect the Company's operating costs. Price changes from suppliers have
historically been consistent with inflation and have had little impact on the
Company's profitability.
SEASONALITY
The Company's operating results are affected by certain seasonal factors.
Sales are typically at their lowest during the first quarter due to a reduced
level of construction activity during the winter months. Sales increase during
the warmer months beginning in March and continuing through November. Sales
drop again slightly in December as the weather cools and also as a result of
reduced level of activity during the holiday season. As a result, the Company
reports sales and earnings in the first quarter that are generally lower than
that of the remaining quarters.
QUARTERLY INFORMATION
The following table presents unaudited quarterly operating results for each
of the Company's last eight quarters as well as the percentage of the
Company's sales represented by each item. This information has been prepared
by the Company on a basis consistent with the Company's audited financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of
the data. These quarterly results are not necessarily indicative of future
results of operations. This information should be read in conjunction with the
Company's consolidated financial statements and Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996:
Sales, net.............. $477.1 100.0% $584.6 100.0% $606.6 100.0% $606.3 100.0%
Gross profit............ 89.3 18.7 102.4 17.5 104.0 17.1 109.3 18.0
Income from operations.. 15.2 3.2 16.9 2.9 16.6 2.7 19.5 3.2
Net income.............. 7.4 1.6 7.7 1.3 7.7 1.3 9.7 1.6
1997:
Sales, net.............. $576.7 100.0% $659.4 100.0% $680.0 100.0% $678.7 100.0%
Gross profit............ 104.4 18.1 114.7 17.4 120.9 17.8 123.9 18.3
Income from operations.. 14.9 2.6 20.8 3.2 23.4 3.4 21.0 3.1
Net income.............. 6.1 1.1 9.5 1.4 11.0 1.6 9.6 1.4
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financing Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." This Statement, which is effective for the 1997 financial statements,
establishes standards for computing and presenting earnings per share ("EPS")
and requires restatement of all prior period EPS data presented. The
provisions of SFAS No. 128 have been adopted and the effects are included in
the financial statements included elsewhere in this Prospectus.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying
comprehensive income and its components. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income
25
<PAGE>
be reported in a financial statement that is displayed with the same
prominence as other financial statements. Additionally, the FASB issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and related disclosures about products and services, geographic
areas and major customers. These statements are effective for financial
statements for fiscal years beginning after December 15, 1997. Management is
currently evaluating the implications of these statements.
26
<PAGE>
BUSINESS
THE COMPANY
WESCO is a leading full-line provider of products and related services in
the electrical wholesale distribution industry with sales of $2.6 billion in
1997, an increase of more than $1 billion since 1993. With its blend of
national capabilities and extensive local geographic coverage, WESCO
specializes in developing combined product and service solutions tailored to
meet the specific needs of each of its customers. WESCO is the second largest
electrical wholesale distributor in North America and a leading consolidator
in this highly fragmented, $67 billion industry. Through a network of
approximately 330 branches located in 48 states and nine Canadian provinces,
supported by five regional distribution centers, WESCO is able to serve
virtually the entire U.S. and Canadian market. WESCO is particularly well
positioned to meet the complex procurement needs of multi-site customers
seeking total supply chain cost reduction through preferred alliances with
fewer suppliers.
WESCO offers a broad range of electrical, industrial and data communications
products and services to a large and diversified customer base including (1)
industrial companies from numerous manufacturing and process industries and
original equipment manufacturers ("OEMs"), including manufacturers of factory-
built homes and other modular structures, (2) contractors for industrial,
commercial and residential projects, (3) investor-owned utilities, municipal
power authorities and rural electric cooperatives and (4) commercial,
institutional and governmental customers. WESCO maintains over 130,000 active
customer accounts, and stocks and distributes over 210,000 products, sourced
from over 6,000 suppliers, ranging from basic wire to advanced automation and
control products. WESCO complements its product offerings with a range of
services and procurement solutions, including integrated supply, where it
manages all aspects of the customer's supply process, and electronic commerce,
where it employs technology to streamline business transactions.
Since CDW acquired WESCO in 1994, management has realigned operations to
achieve substantial growth in sales and profitability. Under its new
leadership, WESCO (1) reconfigured its branch network to focus on key customer
markets, (2) significantly expanded its National Accounts marketing program,
(3) launched the industry's most active acquisition program and (4)
implemented a new incentive system for branch managers and sales personnel. As
a result of these actions, sales have increased to $2.6 billion in 1997 from
$1.6 billion in 1993, a compound annual growth rate of 13.4%, and operating
income has increased to $80.1 million in 1997 from a loss of $11.0 million in
1993. Since August 1995, WESCO has completed 13 acquisitions adding more than
$650 million in annualized sales. In addition, for information about the
Company by geographic area, see Note 17 to the company's consolidated
financial statements.
INDUSTRY OVERVIEW
The electrical wholesale distribution industry serves customers in the
industrial, commercial, construction and utility markets. Electrical
wholesalers provide logistical and technical services for customers by
bundling together a wide range of products typically required for the
construction and maintenance of electrical supply networks, including wire,
lighting, distribution and control equipment and a wide variety of electrical
supplies. The wholesale channel enables customers to efficiently access a
broad range of products and has the capacity to deliver value-added services.
Customers now expect distributors to provide a broader and more complex
package of services as they seek to outsource non-core functions and achieve
measurable cost savings in purchasing, inventory and supply chain management.
As a result, electrical wholesalers have approximately doubled their share of
total electrical products sold in the United States during the period 1972 to
1997, and sales by electrical wholesalers now represent approximately 60% of
the U.S. electrical market.
The electrical wholesale distribution industry in the United States is
large, growing and highly fragmented. Industry sources estimate total
electrical wholesale distributor sales at $67.3 billion for 1997, which
represents a 10.2% compound annual growth rate over 1993 sales of $45.6
billion. The four largest wholesale distributors in the United States,
including WESCO, control only 14% of total industry sales. No single
distributor accounts for more than 5% of industry sales, and 57% of such sales
are generated by distributors with less than $21 million
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in annual sales. In contrast, the much smaller Canadian market has achieved a
high degree of concentration, with the top four distributors, including
WESCO's Canadian branches, representing approximately 64% of the market. In
the United States, electrical distribution is still in the early stages of
consolidation, unlike many other wholesale distribution industries which have
undergone substantial consolidation in the past two decades, including
electronics, pharmaceuticals, laboratory and medical products, foodservice and
grocery supply.
WESCO, by virtue of its national and local capabilities, financial resources
and focused acquisition strategy, has the opportunity to lead industry
consolidation and capitalize on customer demand for value-added services and
procurement outsourcing.
BUSINESS STRATEGY
WESCO's mission is to become the preeminent wholesale distributor of
electrical and other products in each of its chosen markets by tailoring its
product and service offerings to meet the differing requirements of its
targeted customers. WESCO's fundamental business goal is to achieve growth in
sales and profitability that is consistently above the industry average,
through marketing and acquisition initiatives, leveraging its fixed cost
structure and purchasing power, and improving working capital management. To
achieve that goal, WESCO's business strategy emphasizes six elements:
.LEVERAGE NATIONAL COORDINATION AND SCALE
WESCO, with its national branch network in both the United States and Canada
and the scale such network affords, has several competitive advantages:
NATIONAL ACCOUNTS. WESCO offers multi-site agreements with the scope
required by National Accounts--major customers such as Fortune 500 industrials
and large utilities, who seek to coordinate their MRO supplies purchasing
activity across multiple locations. National Accounts generated over $395
million in sales in 1997, representing a compound annual growth rate of 25%
since 1995.
PREFERRED SUPPLIER AGREEMENTS. WESCO enters into favorable preferred
supplier agreements which provide for improved payment terms, volume rebates,
marketing programs and geographic franchises.
SPECIALIZED SALES FORCES. WESCO has specialized and technical sales forces
to meet specific customer needs in National Accounts, data communications,
automation and control, energy management, integrated supply and major
construction projects. These sales forces are deployed and coordinated
nationally to support marketing initiatives, program management and value-
added services at the local branch level.
REGIONAL DISTRIBUTION CENTERS. WESCO provides same-day shipment of a broad
range of products to branches and direct to customers from five regional
distribution centers, offering opportunities for economies in logistics and
inventory management.
.ENCOURAGE LOCAL ENTREPRENEURSHIP AND FLEXIBILITY
A distributor's reputation is often determined at the local level, where
timely supply and customer service are critical. Accordingly, WESCO grants its
branch managers substantial autonomy in directing the branch sales force,
configuring inventories, selecting markets served and developing local service
options. Branches operate as separate profit and loss centers. WESCO's
incentive system strongly encourages growth and profitability at the branch
level, with a significant portion of the branch manager's compensation
incentive based.
While WESCO grants its branches a high degree of independence, they directly
support and participate in national initiatives such as National Account
sales, expansion of data communications product sales and marketing promotions
with select manufacturers. Branches also benefit from standardized computer
systems, preferred supplier agreements negotiated at the national level and a
WESCO-sponsored quality initiative that has led to ISO 9002 certification for
85 branches. ISO 9002 certification is a quality measurement system based on
standards set by an international federation composed of national bodies from
approximately 100 countries. Almost every manufacturing, distribution and
service organization is eligible to apply for ISO certification. WESCO
believes it has more separately certified ISO 9002 locations than any other
electrical distributor in North America.
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.DELIVER VALUE-ADDED SERVICES
WESCO offers a comprehensive portfolio of supply management services
designed to create measurable value for its customers, including (1)
assignment of on-site support personnel, (2) outsourcing of the entire MRO
purchasing process, (3) inventory optimization programs, (4) participation in
joint cost savings teams, (5) energy-efficient product upgrades, (6) safety
and product training for customer employees and (7) process improvements using
automation solutions. Such services are in increasing demand from industrial
and utility customers seeking to improve asset utilization and reduce
operating costs.
In addition, WESCO is able to add accuracy and efficiency to its customer
transactions by incorporating technologies such as electronic data interchange
("EDI"), electronic cataloging (such as CD-ROM and Internet ordering), on-line
order entry and barcoded inventory replenishment.
.FOCUS ON MARKETS WHERE WESCO HAS DEVELOPED DISTINCTIVE COMPETENCIES
WESCO has developed distinctive competencies in several markets by aligning
its branch network by principal market served. Business strategies,
specialized personnel and locally tailored inventories are designed to match
each market's requirements. WESCO targets customers with large, complex
service and supply requirements in all markets where sophisticated sourcing,
project management and logistical support are needed. To serve such customers
effectively, WESCO leverages its national capabilities, extensive local
penetration and breadth of products and services offered.
In the industrial market, WESCO has created a large National Accounts
organization and networks of branch managers who share best practices for
automotive, pulp and paper, petrochemical, steel, mining and food processing
customers. In the construction market, WESCO enjoys a strong reputation for
supporting customers on larger commercial and industrial projects with design
assistance, cost estimating, sourcing and project management.
In the utility market, cost and competitive pressures caused by industry
deregulation have created an opportunity for WESCO to provide both MRO
supplies and specialized electrical transmission and distribution products to
large utilities, who expect wholesalers to supply both outsourced services and
the distinctive products needed for maintenance of the electrical network.
Large investor-owned utilities, who have traditionally bought directly from
manufacturers, are under pressure to reduce their asset base and are shifting
purchases to distributors such as WESCO, who can help optimize inventory
levels and reduce costs. The Company believes that it is the leading
electrical wholesaler in this market.
WESCO is a leading electrical wholesaler in the manufactured structures
market, with a dedicated 17-branch network that provides just-in-time supply
of both electrical and non-electrical products.
.DRIVE CONTINUOUS IMPROVEMENT IN PRODUCTIVITY AND PROFITABILITY
WESCO believes a successful business strategy must include a commitment to
continuous improvement in productivity and profitability. WESCO Company is
emphasizing the widespread use of innovative and disciplined approaches to
managing its business processes, employee productivity and capital efficiency.
These continuous improvement initiatives include (1) regular "zero based" re-
evaluations of all facets of its business infrastructure, (2) activity-based
costing to more accurately measure and enhance profitability by customer,
supplier and other categories, (3) enhanced coordination of inventory
management among suppliers, branches and regional distribution centers, (4)
benchmarking, using competitive analysis and world-class best practices to set
appropriate standards for expense management, working capital and employee and
overall productivity, (5) increased investment in targeted areas such as sales
force management and company-wide training and development and (6) application
of technology to enhance information and decision support systems.
.LEAD INDUSTRY CONSOLIDATION
WESCO actively pursues acquisitions that complement its existing business.
WESCO's acquisition strategy has been to (1) accelerate expansion into key
growth markets, (2) add important new customers, (3) enhance sales of acquired
branches by immediately broadening the product and service mix, (4) expand
local
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<PAGE>
presence to better serve existing customers, (5) increase scale and breadth of
relationships with manufacturers and (6) leverage existing infrastructure.
WESCO considers strategic acquisitions on a continuous basis. Since August
1995, WESCO has completed 13 acquisitions with 89 branch locations and
annualized sales of more than $650 million. Furthermore, as a result of these
acquisitions, WESCO has added major supplier relationships with Allen-Bradley,
General Electric and Square D.
STRATEGY FOR CONTINUED GROWTH
WESCO has increased sales by more than $1 billion since year-end 1993, a
compound annual growth rate in excess of 13%. WESCO's plans for continued
growth are as follows:
.EXPAND PRODUCT AND SERVICE OFFERINGS
WESCO intends to build on its demonstrated ability to introduce new products
and services to meet customer demands and market opportunities. For example,
WESCO plans to expand its presence in the data communications market. The
premise wiring systems market, a product category of the total data
communications market, is large and growing, with estimated 1997 U.S. sales of
$2.6 billion, representing a compound annual growth rate since 1993 of
approximately 14%. In the past two years, WESCO has significantly increased
its focus on this market, generating sales of $83 million in 1997. Led by its
dedicated data communications sales team of approximately 70 people, and
leveraging its general sales force, WESCO intends to expand sales to new and
existing customers, as well as broaden its offerings into other data
communications product lines, such as outdoor wiring systems, active
components and processors.
In addition, WESCO plans to expand the number of integrated supply programs
with new and existing accounts. Given the success of its integrated supply
initiatives to date and the rapid growth in the demand for such services
anticipated by industry sources, WESCO sees a major opportunity to develop
additional customer relationships by leveraging its comprehensive service and
supply expertise.
.GROW NATIONAL PROGRAMS
WESCO has well-established National Account relationships with approximately
300 companies. National Accounts provide ongoing revenue through strategic
multi-year agreements. WESCO believes that it can expand revenue generated by
its National Accounts program by (1) increasing its penetration of existing
National Accounts, (2) shortening ramp-up time to full implementation, (3)
adding new products to existing MRO agreements, (4) expanding agreements to
include capital projects and (5) extending the program to new customers.
In addition, through its Major Projects Group, WESCO plans to intensify its
focus on large construction projects, such as new stadiums, industrial sites,
wastewater treatment plants, airport expansions, healthcare facilities and
prisons. WESCO intends to secure new contracts through (1) aggressive national
marketing of WESCO's demonstrated project management capabilities, (2) further
development of relationships with leading construction and engineering firms
and (3) close coordination with National Account customers on their
renovations and new construction projects.
.GAIN SHARE IN KEY LOCAL MARKETS
WESCO has identified key geographic markets with a substantial base of
potential customers and will use a combination of acquisitions, new branch
openings and heightened sales and marketing efforts to gain market share.
WESCO's executive marketing team, together with local branch managers, will
work to expand WESCO's program of detailed market analysis and opportunity
identification on a branch-by-branch and product line basis. In addition,
WESCO intends to leverage relationships with preferred suppliers to increase
sales of their products in local markets through various initiatives including
(1) sales promotions, (2) cooperative marketing efforts, (3) direct
participation in National Accounts implementation, (4) dedicated sales forces
and (5) product exclusivity.
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<PAGE>
.EXECUTE ACQUISITION STRATEGY
WESCO intends to lead consolidation in the fragmented electrical wholesale
distribution industry. Since adopting its acquisition strategy in August 1995,
WESCO has been successful in adding more than $650 million in annualized
sales, and will continue to evaluate acquisition opportunities to achieve the
strategic objectives outlined under "--Business Strategy." After the
Offerings, the ability, where appropriate, to use its shares to finance
acquisitions should give WESCO access to an expanded range of possible
acquisitions. WESCO seeks acquisitions that will be accretive to earnings and
will significantly complement the organic growth of the business. The 13
acquisitions completed by WESCO to date have collectively been accretive to
its earnings.
. ACCESS INTERNATIONAL OPPORTUNITIES
WESCO believes in a pragmatic and profitable expansion of sales outside the
United States and Canada. WESCO intends to limit risk and maximize profit
opportunities, principally by following its National Account customers and key
suppliers into their non-U.S. markets. For example, WESCO has opened a branch
in Mexico City, where many current customers have plant operations and where
WESCO has been granted the highly regarded Allen-Bradley franchise. Other
opportunities to grow international sales include expanding the network of
independent export sales representatives outside of North America, increasing
the number of North American-based export sales offices and building closer
relationships with global engineering, procurement and constructions firms.
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<PAGE>
ACQUISITIONS
In mid-1995 WESCO launched its program to make acquisitions that complement
its existing business. See "--Business Strategy." Since August 1995, WESCO has
completed 13 acquisitions, with 89 branch locations and annualized sales of
over $650 million. These acquisitions and the key rationale for each are
summarized below.
<TABLE>
<CAPTION>
NUMBER
OF ANNUAL
YEAR COMPANY HEADQUARTERS BRANCHES SALES (1) KEY RATIONALE
---- ------------------------ ---------------- -------- ---------- --------------------------------------------------
(MILLIONS)
<C> <S> <C> <C> <C> <C>
1995 Fife Electric Detroit, MI 1 $ 42 Capitalized on strong relationships with auto
manufacturers and introduced Square D franchise.
Manufactured Housing Monroe, NC 1 5 Expanded product offering for
Supply Manufactured Structures customers.
1996 Murco, Inc. Monroe, LA 3 14 Leveraged systems integration capabilities
with paper and wastewater customers.
Standard Electric Bangor, ME 9 25 Improved coverage of pulp and paper
Company, Inc. National Accounts.
EESCO, Inc. Chicago, IL 36 288 Increased Midwest industrial presence and
introduced Allen-Bradley franchises.
Hamby-Young Aurora, OH 2 22 Introduced turn-key substation capabilities
into WESCO's branch network.
Nevada Electric Supply Las Vegas, NV 1 5 Expanded into growing Las Vegas market.
Power Supply, Inc. Houston, TX 5 20 Enhanced utility market share in Texas.
Ace Electric Jacksonville, FL 11 44 Expanded Allen-Bradley franchise in the Southeast.
1997 Diversified Electric Little Rock, AR 2 28 Further consolidated utility leadership in
Southeast.
Maydwell & Hartzell Brisbane, CA 7 24 Built utility leadership in West.
1998 Avon Electrical Hauppauge, NY 2 80 Expanded presence in metropolitan
Supplies, Inc. New York.
Brown Wholesale Electric Sun Valley, CA 9 70 Expanded industrial/construction market
Company share in Southwest.
--- ----
TOTAL 89 $667
=== ====
</TABLE>
- --------
(1) Represents WESCO's estimate of annual sales volume at the time of
acquisition, based on WESCO's review of internal and/or audited statements
of the acquired business.
The largest acquisition completed to date was EESCO, Inc. ("EESCO"), the
eighth largest electrical wholesale distributor in the United States at the
time it was acquired by WESCO in April 1996. As a result of the EESCO
acquisition, WESCO increased coverage in the key Chicago and Minneapolis
markets, developed important new supplier relationships (Allen-Bradley and
General Electric), increased scale and realized cost savings through the
consolidation of branches and the reduction of selling, general and
administrative expenses. WESCO has substantially increased the sales and
profitability of EESCO by (1) increasing investment capital for new and
existing EESCO branches, (2) expanding EESCO's technical support group and (3)
including EESCO branches in National Account programs and preferred supplier
agreements. Since its acquisition, EESCO's annual net sales have increased to
$341 million for 1997 from $288 million for 1995.
In January 1998, WESCO acquired the electrical distribution businesses of
Avon Electrical Supplies, Inc., and its affiliates ("Avon Electrical") and
Brown Wholesale Electric Company ("Brown Wholesale"). Avon Electrical,
operating at two branch locations, is a leading distributor in the New York
metropolitan area. Brown Wholesale operates from seven branch locations in
California and Hawaii and two in Arizona, where it is the leader in the high-
growth Phoenix market. These acquisitions will add approximately $150 million
in annualized
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sales. WESCO funded the aggregate purchase price of approximately
$59.5 million through $45.0 million in borrowings under its existing credit
facilities, and issuing $14.5 million aggregate principal amount of its
unsecured notes, maturing by mid-1999. Up to $5 million of such notes may be
converted to shares of Class A Common Stock at the initial public offering
price at the election of the holder, which election is required to be made
prior to the Offerings. In connection with the Avon Electrical acquisition,
two principals of the seller purchased an aggregate 1,992 shares of Class A
Common Stock at a purchase price of $250.97 per share.
PRODUCTS AND SERVICES
WESCO's network of branches and distribution centers contains approximately
210,000 unique product stock keeping units ("SKUs"), and the average branch
routinely maintains in its warehouse stock approximately 4,000 to 8,000 SKUs.
The six major product groups currently distributed are (1) supplies, including
fuses, terminals, connectors, boxes, fittings, tools, lugs and tapes, (2)
distribution equipment, including circuit breakers, transformers,
switchboards, panelboards and busway, (3) lighting, including lamps, fixtures
and ballasts, (4) wire and conduit, including wire, cable, steel conduit and
PVC conduit, (5) control, automation and motors, including motor control
centers, drives, programmable logic controllers, pushbuttons and operator
interfaces, and (6) data communications, including premise wiring, patch
panels, terminals, connectors, hubs and routers. WESCO's sales mix by product
group for 1997 was as follows:
<TABLE>
<CAPTION>
PRODUCT PERCENT OF 1997 SALES
------- ---------------------
<S> <C>
Supplies............................................ 25%
Distribution Equipment.............................. 23
Wire & Conduit...................................... 22
Lighting............................................ 19
Control, Automation & Motors........................ 8
Data Communications................................. 3
</TABLE>
In conjunction with product sales, WESCO offers customers a menu of services
and procurement solutions that draws on its product and supply management
expertise and systems capabilities. These services range from multi-site
National Account programs to on-site integrated supply.
NATIONAL ACCOUNTS. WESCO's national platform, strong branch network and
product breadth give it the capacity to offer multi-site agreements with the
scope required by National Accounts--major customers such as Fortune 500
industrials and large utilities. The typical National Account customer seeks
total supply chain cost reductions by coordinating purchasing activity for MRO
supplies across multiple locations. Through rigorous selection processes,
these customers dramatically reduce their electrical supply base--often from
several hundred suppliers to just one--with expectations for measurable cost
reductions, high levels of service and consistent product and pricing across
all locations.
As a result of its implementation processes, WESCO is able to consistently
document double-digit savings within the first year of program launch.
Comprehensive roll-out plans establish jointly-managed implementation teams at
the local and national level to prioritize activities, track progress against
objectives, and identify key performance measures. WESCO is increasingly
involving its preferred suppliers early in the implementation process, where
they can contribute expertise and product knowledge to accelerate program
ramp-up and the capture of savings. In the first year of its relationship with
a 17-location National Account customer in the pulp and paper industry, for
example, WESCO documented savings of more than 17% over 12 savings categories,
including unit price reductions, inventory reductions, energy savings and
application engineering.
In another instance, WESCO's sales to a National Account customer in the
petrochemical industry have grown steadily from $4.4 million in 1994 to $14
million in 1997. WESCO documented total cost savings of $1.4 million as a
result of its initiatives at the customer's ten major refineries. During 1997,
WESCO delivered
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additional savings through a variety of continuous improvement initiatives,
including remote electronic updates of contract pricing in the customer's
computer system and product standardization for high-volume commodities.
WESCO's performance has led to international supply opportunities with this
customer.
INTEGRATED SUPPLY PROGRAMS. WESCO's integrated supply programs offer
customers a variety of services to support their objectives for improved
supply chain management. WESCO integrates its personnel, product and
distribution expertise, electronic technologies and service capabilities with
the customer's own internal resources to meet particular service requirements.
Each integrated supply program is uniquely configured to deliver a significant
reduction in the number of MRO suppliers, reduce total procurement costs,
improve operating controls and lower administrative expenses.
WESCO can act as the customer's "integrator," responsible for selecting and
managing suppliers of a wide range of MRO and OEM products. WESCO may also
develop a customer's integrated supply program in collaboration with one or
more distributors of complementary product lines. Major national distributors
have joined with WESCO in both formal and informal "alliances" to generate
cross-sales opportunities, share market expertise and execute integrated
supply agreements. In one case, a petrochemical customer directed WESCO, which
was already furnishing electrical and related supplies to its West Coast
refinery, to work with a safety distributor and a pipe, valve, and fitting
distributor to jointly design and operate an "integrated supply warehouse."
Three on-site specialists, one from each company, now manage the customer's
inventory, make daily deliveries to over 100 use points, and replenish parts
bins throughout the refinery.
ELECTRONIC COMMERCE. WESCO enhances its ability to service customers
accurately and efficiently by incorporating technologies such as EDI,
electronic mail, electronic cataloging (such as CD-ROM and Internet ordering),
direct order entry and barcoded bin labelling to streamline inventory
replenishment. WESCO also employs technological and logistical innovations in
its internal operating processes to improve customer service, including
paperless warehousing, cross-docking, barcoding and automatic stock
replenishment.
SUPPLIERS AND PURCHASING
WESCO's supplier relationships are strategically important to WESCO,
providing access to a wide range of products, technical training and sales and
marketing support. Manufacturers often take an active role in marketing
products to the customer by deploying their own sales force and/or independent
manufacturers' representatives to work together with wholesalers. WESCO's
rapid growth, size, geographic scope and marketing initiatives with large,
high profile customers make it an attractive partner for manufacturers. As a
result, WESCO has been able to negotiate broad access to most product lines,
including preferred arrangements with regard to volume discounts, payment
terms, marketing support and logistics.
WESCO purchases products from a diverse group of over 6,000 suppliers.
Through December 31, 1997, ten suppliers accounted for 45% of the Company's
purchases, with 200 suppliers accounting for 85% of purchases. The largest of
these was Eaton Corporation, through its Cutler-Hammer division, successor to
the Distribution and Control Business Unit of Westinghouse, accounting for 18%
of total purchases. No other supplier accounted for more than 2%. WESCO's ten
largest suppliers, based on 1997 purchases through December 31, 1997, and
their principal product lines are as follows:
<TABLE>
<CAPTION>
SUPPLIER PRODUCT LINE
-------- ------------------------
<S> <C>
Cutler-Hammer Distribution and Control
Allen-Bradley Control and Automation
Asea Brown Boveri Transformers
Philips Lighting Lamps
Southwire Company Wire and Cable
Cooper Lighting Lighting Fixtures
Thomas & Betts Supplies
Lithonia Lighting Lighting Fixtures
Crouse Hinds Fittings
General Electric Lamps
</TABLE>
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<PAGE>
WESCO has preferred supplier agreements with approximately 150 of its
suppliers, and purchases approximately 60% of its stock inventories from
suppliers pursuant to these agreements. Consistent with industry practice,
most of WESCO's agreements with suppliers, including both distribution
agreements and preferred supplier agreements, are terminable by either party
on no more than 60 days notice. See "Risk Factors--Key Suppliers; Maintenance
of Supply; Interruption of Distribution Center Operations."
In order to capitalize on its buying power as a national network, WESCO has
increasingly centralized buying by moving a larger proportion of branch stock
through its five regional distribution centers. To preserve local flexibility
in tailoring their inventories to meet local customer requirements, branches
are offered the option of purchasing a choice of competing lines from the
distribution centers.
WESCO has a product management group to manage key supplier relationships,
including negotiating preferred supplier agreements, managing cooperative
marketing funds, organizing product training, developing joint marketing plans
with suppliers, evaluating supplier performance and driving continuous
improvement programs.
MARKETS AND CUSTOMERS
WESCO has a large customer base diversified across its principal markets,
and maintains current credit files on approximately 130,000 accounts. With no
customer accounting for more than 2% of sales, WESCO is not dependent on any
single customer. WESCO's broad customer base includes (1) industrial companies
from numerous manufacturing and process industries, and OEMs, including
manufacturers of factory-built homes and other modular structures, (2)
contractors for industrial, commercial and residential projects, (3) investor-
owned utilities, municipal power authorities and rural electric cooperatives
and (4) commercial, institutional and governmental ("CIG") customers.
INDUSTRIAL--MRO CUSTOMERS. Sales to industrial MRO customers accounted for
approximately 16% of the electrical wholesale market and, together with
original equipment manufacturers, 40% of the Company's sales in 1997.
Electrical products are needed to maintain and upgrade the electrical network
at all industrial sites. Expenditures are greatest in the heavy process
industries, such as pulp and paper and petrochemical. Typically, electrical
MRO is the first or second ranked product category by purchase value for MRO.
Other MRO product categories might also include, among other things,
lubricants; pipe, valves and fittings; fasteners; and power transmission
products. MRO activity has been difficult for industrial users to manage, as
it is characterized by a fragmented supply base, a high volume of low dollar
transactions, poor usage and cost information and relatively high inventory
levels. For example, it would not be unusual for a customer to inventory as
many as 10,000 MRO SKUs. Furthermore, customers are sensitive to supply
reliability, since a lack of critical spares could cause an entire
manufacturing process to shut down.
WESCO is responding aggressively to the needs of this market, particularly
for the high-use customers in heavy process industries. To more efficiently
manage the MRO process on behalf of its customers, WESCO offers a menu of
supply management services, including (1) inventory optimization programs,
such as product standardization and substitution, (2) joint cost savings
teams, (3) outsourcing of the entire MRO purchasing process, (4) energy-
efficient product upgrades, (5) product and safety training for customer
employees and (6) assignment of on-site support personnel. WESCO's most
distinctive service is its National Accounts program, with the ability to
offer multi-site agreements to large industrial customers to ensure local
supply with nationwide consistency in product and pricing.
INDUSTRIAL--OEM CUSTOMERS. Sales to industrial OEM customers accounted for
approximately 9% of the electrical wholesale market in 1997. These customers
incorporate electrical assemblies and components into their own products and
typically require a reliable, high-volume supply of a narrow range of
electrical items. The wholesale channel generally serves the smaller and
medium-sized OEMs, while the larger OEMs typically purchase directly from
manufacturers. Customers in this segment are price and service sensitive due
to the
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<PAGE>
volume and the critical nature of the product used. OEMs also expect value-
added services such as design and technical support, just-in-time supply and
electronic commerce. While prices tend to be lower in this market due to usage
volume, long-term relationships are typical, which leads to an efficient
supply process and stable, high volume.
WESCO addresses this market by (1) providing experienced, technically-
oriented sales specialists who assist in product specification and selection,
prototype development and supplier coordination, (2) offering supply
management services similar to those provided to industrial MRO customers, (3)
securing access to product lines that are commonly specified by OEMs, (4)
working with suppliers on product application development and (5) offering
specialized packaging or kitting services that bring efficiencies to the
customer's manufacturing process.
WESCO is the leading electrical wholesaler in the manufactured structures
market, a particular type of OEM. For the past several years WESCO has been
expanding its service to these customers by offering non-electrical products
such as structural components, air conditioning units, plumbing fixtures,
cabinets and kitchen ventilation equipment.
ELECTRICAL CONTRACTORS. Sales to electrical contractors accounted for
approximately 40% of the electrical wholesale market and approximately 38% of
WESCO's sales in 1997. These customers range from large contractors for major
industrial and commercial projects, the customer types which WESCO principally
serves, to small residential contractors who represent a small portion of
WESCO's sales. Electrical products purchased by contractors typically account
for approximately 40% to 50% of the total installed cost, and therefore
accurate cost estimates and competitive material costs are critical to a
contractor's success in winning projects at a profit. Contractors choose
wholesale suppliers on the basis of price, availability and various support
services such as design assistance, bill of material development, credit
policies and inventory management.
WESCO is one of the industry leaders in serving the complex needs of large
commercial and industrial contractors, and has established a Major Projects
Group to focus some of its most experienced personnel on serving the needs of
the top 50 U.S. electrical contractors on a multi-regional basis. WESCO also
offers a comprehensive range of services to meet the needs of contractors,
including commodity blanket purchase agreements, on-line ordering, CD-ROM
catalogs, on-site trailers, lighting and distribution equipment lay-outs and
access to low voltage products, especially data communications. WESCO has also
worked to strengthen its relationships with independent manufacturers'
representatives who provide additional sales coverage, technical assistance
and training on behalf of manufacturers.
UTILITIES. Sales to utilities accounted for approximately 4% of the
electrical wholesale market and approximately 14% of WESCO's sales in 1997.
These customers include large investor-owned utilities, smaller rural electric
cooperatives and municipal power authorities. Traditionally, investor-owned
utilities have purchased product directly from manufacturers, while smaller
rural electric cooperatives and municipal power authorities have been supplied
by electrical wholesalers, including WESCO. Both large and small utility
customers require relatively high dollar volumes of specialized product to
maintain the electrical network. Access to these specialized utility products
is limited by geographic franchises granted by manufacturers. These products
are, therefore, not generally available to all electrical wholesalers at the
pricing required by utility customers.
Recent trends in the utility industry favor utility-oriented electrical
wholesalers, such as WESCO. The Company believes that it is the leading
electrical wholesaler to this market, with approximately a 13% share. The most
important trend is the deregulation of utility power generation, which has
forced large utilities to seek better asset utilization and cost savings in
all aspects of their operations, including purchasing and supply management.
Investor-owned utilities, in focusing on their core business, have moved to
outsource certain supply functions to wholesalers in order to reduce costs and
enhance cash flow. For example, WESCO has been selected for supply management
agreements with ComEd, PECO Energy and Wisconsin Electric Power Company. These
agreements generally have terms of 2 to 3 years and an annual contract value
of $2 million to $10 million.
COMMERCIAL, INSTITUTIONAL AND GOVERNMENTAL CUSTOMERS. Sales to CIG customers
accounted for approximately 21% of the electrical wholesale market and
approximately 7% of WESCO's sales in 1997. This is a fragmented market which
includes schools, hospitals, property management firms, retailers (not for
resale) and government agencies of all types. These customers typically have
less complex product and service needs than
36
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large contractors or industrial and utility customers. WESCO's locally
oriented and entrepreneurial branch operations are well positioned to serve
these customers. WESCO's National Accounts strategy also extends to multi-site
financial institutions, department stores and amusement parks. National retail
or service chains tend to favor distributors such as WESCO who can meet their
recurring needs at dozens or hundreds of store or office locations.
OTHER ELECTRICAL CUSTOMERS. Sales to other electrical customers accounted
for approximately 10% of the electrical wholesale market and less than 1% of
WESCO's sales in 1997. These customers include the general public, retailers
(for resale), farmers and other wholesalers.
DATA COMMUNICATIONS CUSTOMERS. The growing market for data communications
products includes (1) all aspects of facilities and premise wiring for data
networks and (2) electronic devices and processors that transmit and manage
the data flowing through a network. Because of the convergence of voice, data,
and video applications, the data communications market consists of a wide
range of new products and manufacturers that are not included in the estimates
for the electrical industry. The premise wiring component of the data
communications market is estimated by industry sources to grow to
approximately $5 billion in total sales by the year 2001, with as much as $3
billion of this sales potential falling outside the usual projections for the
electrical industry.
DISTRIBUTION NETWORK
BRANCH NETWORK. WESCO operates a system of approximately 330 branches, of
which approximately 275 are located in the United States, approximately 50 are
located in Canada and the remainder are located in Puerto Rico, Mexico and
Guam. WESCO also has sales offices in four other international locations and
operates a network of branches under management contract in Saudi Arabia.
Approximately 30% of branches are owned facilities, and the remainder leased
facilities. WESCO's branches were initially opened in markets with a minimum
population of 50,000 or in close proximity to major customers. Over the last
two years WESCO has opened approximately 15 branches per year, principally to
service National Account customers.
The size of individual branches within WESCO's nationwide network varies
broadly. In 1997, WESCO's branches had annual sales as high as $66 million,
with an average of approximately $8 million. A representative branch employs
10 to 15 people and typically stocks a product mix of 4,000 to 8,000 SKUs,
tailored to its local customer base. Customers can place orders at the
branches through facsimile, telephone, mail, EDI, on-line order entry or
counter appearances.
WESCO grants its branch managers substantial autonomy in directing the
branch sales force, configuring inventories, selecting markets served and
developing local service options. Branches operate as separate profit and loss
centers. A key aspect of WESCO's growth strategy is to encourage higher levels
of productivity by creating appropriate economic incentives for branch
managers through a mix of bonuses and stock options tied to the branch's
growth and profit improvement. Since the Acquisition and the implementation of
this incentive system, WESCO's average compensation for branch managers has
increased by approximately 60%. See "Management--Stock Option Plan for Branch
Employees."
DISTRIBUTION CENTERS. To support its branch network, WESCO has a system of
five regional distribution centers ("DCs") which supply approximately 20% of
total purchases (45% of stock purchases). The following is a summary
description of the DCs:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET REGIONS SERVED LEASED/OWNED
-------- ----------- -------------------------- ----------------
<S> <C> <C> <C>
Warrendale, PA 252,699 Eastern United States Owned and Leased
Sparks, NV 195,800 Western United States Leased
Byhalia, MS 148,000 Southeastern United States Owned
Dorval, QE 97,000 Eastern and Central Canada Leased
Burnaby, BC 34,341 Western Canada Owned
</TABLE>
37
<PAGE>
The DCs add value to customers in the following ways: (1) shorter lead times
for product supply; (2) better product availability due to the breadth and
depth of stock; (3) same day shipments for orders received up to 8:30 p.m.;
and (4) central order handling and fulfillment for certain multi-site
customers. In addition to creating value for customers, the DCs improve
WESCO's supply chain management through: (1) automatic replenishment of branch
stock; (2) on-line ordering for branches; (3) redeployment of slow-moving
branch stock; (4) automation of branch purchasing administration; (5) bulk
purchasing to achieve order discounts; and (6) advanced distribution
techniques such as paperless picking, flow racking, barcoding, weight
verification, electronic freight management and cross-docking. Suppliers also
benefit from the DCs due to larger order sizes and lower transportation costs.
DCs ship to branches every day, for same-day orders or orders previously
generated through WESCO's computerized automated stock replenishment system.
TRANSPORTATION AND LOGISTICS. WESCO offers its customers a variety of
delivery methods, including: (1) direct shipment from the manufacturer, which
is employed for many large orders and engineered products; (2) branch
shipment, which is used for the large majority of stock and special order
sales; (3) branch pick-up, which is used by some customers, particularly
contractors, for their day-to-day business; and (4) shipment from a DC on an
exception or emergency basis, since DCs are primarily used to replenish branch
stock.
Typically, manufacturers pay freight charges for inbound shipments to DCs,
branches or customers. In some instances, prepaid freight terms are contingent
upon WESCO meeting certain minimum order requirements. For some suppliers and
where it results in lower overall transportation costs, WESCO has negotiated
pick-up allowances in lieu of prepaid freight.
SALES ORGANIZATION
GENERAL SALES FORCE. WESCO's general sales force is based at the local
branches, and comprises approximately 2,000 sales personnel, split equally
between outside sales representatives and inside sales personnel. Outside
sales representatives, who have an average of more than eight years of
experience at WESCO, are paid under a compensation structure which is heavily
weighted towards commissions. They are responsible for making direct customer
calls, performing on-site technical support, generating new customer relations
and developing existing territories. The inside sales force is the support
organization for the outside sales force and is a key point of contact for
responding to routine customer inquiries such as price and availability
requests and for entering and tracking orders.
NATIONAL ACCOUNTS. WESCO has what management believes to be the largest
National Account sales force in the industry, led by an experienced group of
sales executives who negotiate and administer contracts, coordinate branch
participation, identify sales and service opportunities. National Accounts
managers' efforts are aligned by targeted customer industries, including
automotive, pulp and paper, petrochemical, steel, mining and food processing.
DATA COMMUNICATIONS. Data communications products are supported by a
dedicated sales force of approximately 70 inside and outside representatives
who focus primarily on the premise wiring systems market. This team is
supported by additional resources in purchasing, inventory management, product
training, product management and regional sales management. WESCO also
operates a training facility where customers and the general sales force can
receive industry-recognized certification in product installation.
INDUSTRIAL AUTOMATION SPECIALISTS. According to industry estimates, sales of
automation and control products are growing faster than the overall industry
average as technology advances and industrial firms of all types seek more
productive processes. The service hallmark of WESCO's EESCO Division is its
specialization in automation and control products. Its general sales staff is
highly trained in assisting customers with process control applications, and a
separate staff of 58 technical support and automation specialists provides
sales assistance for analysis, design, specification and implementation. In
addition, other WESCO branches which primarily serve industrial MRO and OEM
customers draw on a dedicated staff of technically trained industrial
automation specialists, who are strategically located in selected high-
potential market areas and provide support and assistance to multiple
branches. Overall, a total of approximately 90 automation and control
specialists are currently employed throughout WESCO.
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<PAGE>
MAJOR PROJECTS GROUP. In 1995, WESCO established a group of highly
experienced sales managers to target, on a national basis, the market for
large construction projects with electrical material valued in excess of $1
million. WESCO's approach distinguishes it from almost all of its competitors,
who typically handle even the largest construction projects on a local basis.
Through the Major Projects organization, WESCO can meet the needs of
contractors for complex construction projects such as new stadiums, industrial
sites, wastewater treatment plants, airport expansions, healthcare facilities
and prisons.
CANADA
To serve the Canadian market, WESCO operates a network of approximately 50
branches in nine provinces. Branch operations are supported by two
distribution centers located near Montreal and Vancouver. With sales of
approximately US$280 million, Canada represented 11% of total WESCO sales in
1997. The Canadian market for electrical wholesale is considerably smaller
than the U.S. market, with roughly US$2.4 billion in total sales according to
industry sources. The Canadian market is also far more concentrated than the
U.S. market, based on estimated market data, with Westburne (33% share),
Guillevin, owned by Consolidated Electrical Distributors (12% share), WESCO's
Canadian branches (11% share) and Sonepar (8% share) collectively representing
approximately 64% of the market, compared to approximately 14% for the top
four U.S. wholesalers.
WESCO's Canadian operations have a strong reputation for serving the needs
of medium and large contractors, which in 1997 represented 61% of WESCO's
Canadian sales. More recently, WESCO has been successful in growing sales with
industrial customers, through marketing of control products and the
development and expansion of instrumentation product sales. National Account
programs are also being successfully applied to this market, building on
WESCO's U.S. experience with industrial customers. Data communications product
sales have grown rapidly in Canada from a negligible amount in 1993 to
approximately 8% of total Canadian sales in 1997.
INTERNATIONAL
WESCO is continuing to build its international presence outside of the
United States and Canada, principally by following its National Account
customers and key suppliers into their high-growth markets, thereby limiting
start-up risk and maximizing profit opportunity. Other opportunities to grow
international sales include expanding and improving the quality of the network
of independent export sales representatives outside of North America,
increasing the number of North American-based export sales offices and
building closer relationships with global engineering, procurement and
construction firms. With sales of approximately US$64 million, international
sales (excluding Canada) represented 2% of total WESCO sales in 1997. WESCO
channels its international sales principally through 13 sales offices, six of
which are located within North America (export offices) and seven of which are
in international locations, and through sales representatives in 22 foreign
countries.
WESCO plans to open additional branches in the Mexico City area, where WESCO
has the highly regarded Allen-Bradley franchise for the Federal District and
three surrounding states. WESCO estimates that the Mexico City market area
represents 40% of total purchases in the $1.5 to $2.0 billion Mexican market.
A sales contact database of the foreign locations of WESCO's National
Account customers is under development. It is estimated that over 1,000 plant
sites outside of North America will eventually be covered by a direct sales
and telemarketing program.
MANAGEMENT INFORMATION SYSTEMS
WESCO's corporate information system, WESCOM, provides low-cost, highly
functional processing of business transactions. WESCOM performs services
necessary to support the full range of business operations, such as customer
service, inventory and logistics management, accounting and administrative
support. The system has been upgraded with decision support, executive
information system analysis and retrieval capabilities to provide detailed
income statement and balance sheet variance and trend reporting at the branch
level. The
39
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system also provides activity based costing capabilities for analyzing
profitability by customer, supplier, sales representative and shipment type.
Sales and margin trends and variances can be easily analyzed by branch,
customer, product category, supplier, or account representative.
The WESCOM system is fully distributed, so every branch (other than EESCO
branches, which are in the preliminary stages of being integrated) has its own
computer system to support local business activities, on a real time basis,
from sales quotation to delivery of products to customers. Telecommunication
links through a central system in Pittsburgh give each branch access to
information on inventory status in WESCO's distribution centers as well as
other branches and an increasing number of on-line suppliers.
WESCO conducts a portion of its business through EDI transactions, typically
exchanging in excess of 65,000 EDI transactions per month with its trading
partners. WESCO's electronic commerce strategy calls for tighter linkages to
both customers and suppliers through greater use of technological advances,
including Internet and CD-ROM catalogs, barcoding, enhanced EDI, electronic
funds transfer and other innovative improvements.
WESCO is in the process of modifying, upgrading or replacing its computer
software applications and systems to accommodate the "Year 2000" changes
required for correct recording of dates for the year 2000 and beyond. WESCO
does not expect that the cost of its Year 2000 compliance program will be
material to its financial condition or results of operations. WESCO believes
that it will be able to achieve compliance by the end of 1999, and does not
currently anticipate any material disruption in its operations. WESCO does not
currently have any information concerning the compliance status of its
suppliers and customers. In the event that any of WESCO's significant
suppliers or customers do not successfully achieve Year 2000 compliance,
WESCO's business or operations could be adversely affected.
BACKLOG
WESCO measures and monitors backlog for large construction project orders by
reassessing the status of all direct shipment orders at the end of each month.
The vast majority of backlog orders will ship within one year. At December 31,
1997, such backlog orders were approximately $309 million as compared to $287
million at December 31, 1996, representing an increase of $22 million, or 8%.
Since backlog orders reflect varying ship dates based on customer needs or
production schedules, WESCO does not believe changes in the backlog
necessarily correlate to the level of future monthly sales. In addition,
backlog orders at December 31, 1996 do not reflect backlog orders of branches
acquired since that date.
COMPETITION
The electrical wholesale distribution market is highly fragmented and
competitive. In the United States, there are currently an estimated 8,000
electrical wholesale distributors with over 16,000 outlets. The four largest
distributors, including WESCO, control only 14% of total industry sales. No
single distributor accounts for more than 5% of industry sales, and
approximately 57% of such sales are generated by distributors with less than
$21 million in annual sales. In contrast, the top four distributors in Canada
account for 64% of the market. See "Risk Factors--Competition."
WESCO competes directly with national, regional and local distributors.
Certain large competitors, distributors such as Graybar Electric Company,
Inc., Consolidated Electrical Distributors and GE Supply Company, compete
nationally, and offer a broad base of products. Large regional companies in
the United States and Canada, such as Rexel, Inc., Crescent Electric Supply
Company, Cameron & Barkley Company, Platt Electric Supply Inc., Sonepar and
Westburne Inc., are strong competitors within their regions. Certain other
competitors, such as W.W. Grainger Inc., which focuses primarily on industrial
supplies distribution, overlap with electrical wholesale distributors in some
product lines. Distinct from these full-line distributors are niche
distributors that carry only certain products such as wire, lighting products,
or data communications equipment.
Competition among electrical wholesale distributors is primarily focused on
the local service area, and is generally based on product line breadth,
product availability and price. WESCO believes that it has certain
40
<PAGE>
competitive advantages over certain of its local competitors, which are not
able to carry the range of products stocked by WESCO or achieve purchasing
economies of scale. However, some of WESCO's competitors are larger and have
access to greater financial and marketing resources than WESCO. Another source
of competition is buying groups formed by smaller distributors to increase
purchasing power and provide some limited cooperative marketing capability.
The two largest of these are Affiliated Distributors, representing an
estimated $5 billion of annual electrical wholesale distribution sales, and
IMARK, representing an estimated $3 billion of annual sales, based on industry
sources. While increased buying power may improve the competitive position of
buying groups locally, WESCO does not believe these groups have been able to
compete effectively with WESCO for National Account customers due to the
difficulty in coordinating a diverse ownership group.
Outside of the wholesale distribution channel, manufacturers employ, and may
increase the use of, direct sales and/or independent manufacturers
representatives. Some manufacturers with sufficient size, geographic scope and
financial and marketing resources may be in a position to offer customers
National Account services. Consumer channels such as hardware stores, DIY
retail outlets (such as Home Depot), mass merchants and grocery stores also
compete for certain customers. Some retail chains, with nationwide purchasing
advantages, can in certain product categories offer prices comparable to those
of the wholesale distributors, although with a much narrower product offering
overall. These channels attract smaller residential contractors who work on
projects generally requiring basic electrical supplies. Such contractors
represent a small portion of WESCO's sales. WESCO's customers typically
require a broader range of products and services than those provided by these
retail channels.
EMPLOYEES
As of December 31, 1997, WESCO had approximately 4,700 employees worldwide,
of which approximately 4,000 are located in the United States and
approximately 700 in Canada and WESCO's other foreign locations. Less than 5%
of WESCO's employees are represented by unions. WESCO believes its labor
relations to be generally good.
PROPERTIES
In addition to its five regional distribution centers, WESCO leases its
60,389 square foot headquarters in Pittsburgh, Pennsylvania. For a description
of the distribution centers, see "--Distribution Network--Distribution
Centers." WESCO does not regard the real property associated with any single
branch location as material to its operations. WESCO believes its facilities
are in good operating condition. WESCO's owned real property, including its
three owned distribution centers, serves as collateral for certain mortgage
notes issued to Westinghouse in connection with the Acquisition. See
"Description of Certain Indebtedness--Mortgage Notes."
INTELLECTUAL PROPERTY
WESCO's trade and service mark, composed of the words "WESCO the extra
effort people(R)," together with the running man design, is registered in the
United States Patent and Trademark Office, the Canadian Trademark Office and
the Mexican Instituto de la Propriedad Industrial. WESCO considers this mark
to be material to its businesses.
ENVIRONMENTAL MATTERS
WESCO believes that it is in substantial compliance with applicable
Environmental Laws. There are no significant capital expenditures for
environmental control matters either estimated in the current year or expected
in the near future. See "Risk Factors--Environmental Risks."
LEGAL PROCEEDINGS
WESCO is party to routine litigation incidental to WESCO's business. WESCO
does not believe that any legal proceedings to which it is a party or to which
any of its property is subject, will have a material adverse effect on WESCO's
financial position or results of operations.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of CDW and WESCO and their respective
ages, positions and years of service with the Company (and the Predecessor)
are set forth below.
<TABLE>
<CAPTION>
YEARS WITH THE COMPANY
NAME AGE POSITION AND WITH THE PREDECESSOR
---- --- -------- ------------------------
<S> <C> <C> <C>
B. Charles Ames......... 72 Chairman of the Board 4
Roy W. Haley............ 51 President and Chief Executive Officer; Director 4
David F. McAnally....... 42 Executive Vice President, Chief Operating Officer, *
Chief Financial Officer and Treasurer
Stanley C. Weiss........ 68 Executive Vice President, Industry Affairs 1
Steven A. Burleson...... 38 Vice President, Corporate Controller 3
John R. Burke........... 49 Vice President, Operations 1
William M. Goodwin...... 52 Vice President, Operations 20
James H. Mehta.......... 42 Vice President, Business Development 2
James V. Piraino........ 38 Vice President, Marketing 1
Patrick M. Swed......... 54 Vice President, Operations 19
Donald H. Thimjon....... 54 Vice President, Operations 31
Robert E. Vanderhoff.... 42 Vice President, Operations 13
Jeffrey B. Kramp........ 38 Corporate Secretary and General Counsel 4
William A. Barbe........ 39 Director 4
Wiley N. Caldwell....... 70 Director 4
Alberto Cribiore........ 52 Director 4
J. Trevor Eyton......... 63 Director 4
Leon J. Hendrix, Jr..... 56 Director 4
Benson P. Shapiro....... 56 Director 4
Martin D. Walker........ 65 Director 4
</TABLE>
- --------
* Tenure with the Company is less than one year.
Messrs. Ames, Barbe, Caldwell, Cribiore, Eyton, Haley, Hendrix, Kramp,
McAnally, Shapiro and Walker hold the same positions with both CDW and WESCO.
Messrs. Weiss, Burleson, Burke, Goodwin, Mehta, Piraino, Swed, Thimjon and
Vanderhoff hold these positions with WESCO only.
Mr. McAnally is Treasurer of CDW and WESCO, and Executive Vice President,
Chief Operating Officer and Chief Financial Officer of WESCO only.
Set forth below is biographical information for the executive officers and
directors of CDW and WESCO listed above.
B. CHARLES AMES has been Chairman of CDW and WESCO since February 1994. Mr.
Ames is a principal of CD&R and a general partner of Clayton & Dubilier
Associates IV Limited Partnership ("Associates IV"), the general partner of
Fund IV. From January 1988 to May 1990, Mr. Ames served as Chairman and Chief
Executive Officer of The Uniroyal Goodrich Tire Company. From July 1983 to
October 1987, Mr. Ames served as Chairman of the Board, President and Chief
Executive Officer of Acme-Cleveland Corporation, a manufacturer of machine
tools, telecommunication equipment and electrical and electronic controls. Mr.
Ames is a director of M. A. Hanna Company, and the Progressive Corporation.
Mr. Ames is also a Director of Lexmark International, Inc. and its parent
Lexmark International Group, Inc., and Riverwood International Corporation and
its parent, Riverwood Holding, Inc., companies in which investment funds
managed by CD&R have investments.
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<PAGE>
ROY W. HALEY has been President and Chief Executive Officer of CDW and WESCO
since February 1994. Prior to joining the Company, from 1988 to 1993, Mr.
Haley was an executive at American General Corporation, a diversified
financial services company, where he served as Chief Operating Officer and as
President and Director. Between 1989 and 1991, Mr. Haley was President and
Chief Executive Officer of American General Finance, Inc., a consumer finance
company. Previously Mr. Haley was a partner with Arthur Andersen & Co.,
working as a management consultant principally for manufacturing and
distribution clients.
DAVID F. MCANALLY has been Executive Vice President, Chief Operating Officer
and Chief Financial Officer of WESCO and Treasurer of CDW and WESCO since
December 1997. Prior to joining WESCO, from 1996 to November 1997, Mr.
McAnally was Senior Vice President, Chief Financial Officer of Rykoff-Sexton,
Inc., a foodservice distribution company. Between 1992 and 1996, Mr. McAnally
was Senior Vice President and Chief Financial Officer of U.S. Foodservice,
Inc., also a foodservice distribution company.
STANLEY C. WEISS has been Executive Vice President Industry Affairs since
April 1996. From 1956 to April 1996, Mr. Weiss held a number of senior
executive positions at EESCO, most recently Chairman of the Board and Chief
Executive Officer.
STEVEN A. BURLESON joined WESCO in January 1995 as Corporate Controller and
became Vice President and Corporate Controller in 1997. From 1990 to 1995, Mr.
Burleson was Vice President and Treasurer of The Bon-Ton Stores, Inc. in York,
Pennsylvania.
JOHN R. BURKE has been Vice President, General Manager of WESCO's EESCO
Division since April 1996. Prior to joining WESCO, Mr. Burke was a Vice
President of EESCO, an electrical distributor acquired by the Company in April
1996. Prior to joining EESCO in 1986, Mr. Burke occupied various positions
with General Electric Corporation, where he began his career in 1973.
WILLIAM M. GOODWIN has been Vice President, International Group of WESCO
since March 1984. Since 1977, Mr. Goodwin has served as a branch, district and
region manager for WESCO in various locations and also served as Managing
Director of WESCOSA, a former Westinghouse manufacturing and distribution
business in Saudi Arabia.
JAMES H. MEHTA has been Vice President, Business Development of WESCO since
November 1995. Prior to joining WESCO, from 1993 to 1995 Mr. Mehta was a
principal with Schroder Ventures, a private equity investment firm based in
London, England. From 1991 to 1993 he was managing private family investments.
From 1988 to 1990 Mr. Mehta was Vice President, Corporate Development with the
Uniroyal Goodrich Tire Company, and from 1990 to 1991 he was a consultant to
CD&R.
JAMES V. PIRAINO has been Vice President, Marketing since joining WESCO in
August 1996. From 1995 to 1996, Mr. Piraino was a Vice President of
AlliedSignal Corp. From 1989 to 1995, Mr. Piraino occupied marketing and sales
management positions with W.W. Grainger, Inc. Prior to joining W.W. Grainger,
Inc., Mr. Piraino worked in product and sales management with General Electric
Corporation, where he began his career in 1981.
PATRICK M. SWED has been Vice President, Industrial Group of WESCO since
March 1994. Prior to joining WESCO, Mr. Swed had been Vice President of Branch
Operations for the Predecessor from 1991 to 1994. Mr. Swed joined Westinghouse
as a sales engineer in 1966 and first moved to the Predecessor in 1978 as a
division marketing manager.
DONALD H. THIMJON has been Vice President, Utility Group of WESCO since
March 1994. Prior to joining WESCO, Mr. Thimjon served as Vice President,
Utility Group for the Predecessor from 1991 to 1994 and as Regional Manager
from 1980 to 1991.
ROBERT E. VANDERHOFF has been Vice President, Manufactured Structures Group
since March 1994. Prior to joining WESCO, Mr. Vanderhoff had been Vice
President of the Predecessor since April 1993. Prior to 1993, Mr. Vanderhoff
acted as District Manager from 1990 to 1993, Branch Manager from March to June
1990 and Account Executive from 1986 to 1990 of the Predecessor.
JEFFREY B. KRAMP has been Corporate Secretary and General Counsel of CDW and
WESCO since March 1994. From 1987 to February 1994 Mr. Kramp served as
Assistant General Counsel at Westinghouse, with WESCO as his primary legal
responsibility during this time period.
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<PAGE>
WILLIAM A. BARBE has been a Director of CDW and WESCO since February 1994.
Mr. Barbe is a principal of CD&R, which he joined in November 1992. Mr. Barbe
is also a general partner of Associates IV, the general partner of Fund IV and
a director of Kinko's, Inc., a company in which an investment fund managed by
CD&R has investments. Mr. Barbe was a Vice President, Corporate Finance
Department of Smith Barney, Harris Upham & Co., an investment banking firm
from 1990 to 1992. Prior to 1990, Mr. Barbe was a Vice President, Corporate
Finance Department, of Drexel Burnham Lambert, Incorporated.
WILEY N. CALDWELL has been a Director of CDW and WESCO since December 1994.
Mr. Caldwell is the retired former President of W.W. Grainger, Inc. Prior to
his 15 year tenure with W.W. Grainger, Inc., Mr. Caldwell held senior U.S. and
international marketing and operations positions with American Hospital Supply
Corporation. He serves as a Director of APS Holdings, Inc., Consolidated
Papers, Inc. and Kewaunee Scientific Corporation.
ALBERTO CRIBIORE has been a Director of CDW and WESCO since March 1994. Mr.
Cribiore was a principal of CD&R from 1985 to March 1997 and a co-President of
CD&R from 1995 to March 1997. Mr. Cribiore recently formed Brera Capital
Partners LLC, a private equity investment firm in New York, and serves as its
Managing Principal. Mr. Cribiore is also the Chairman and a Director of MCM
Group, Inc. and its wholly-owned subsidiary, McCarthy, Crisanti & Maffei,
Inc., and also serves as a Director of Riverwood International Corporation and
its parent Riverwood Holding, Inc., a company in which an investment fund
managed by CD&R has investments.
J. TREVOR EYTON, a member of the Canadian Senate, has been a Director of CDW
and WESCO since July 1994. Senator Eyton has been a senior officer in the
EdperBrascan Corporation and its predecessor corporations since September
1979, most recently as Chairman of Brascan Ltd. from May 1991 to September
1997, and since that time as Senior Chairman. Senator Eyton has also served as
a member of the Canadian Senate since September 1990, and is a director of
Brookfield Ltd. and M.A. Hanna Company.
LEON J. HENDRIX, JR. has been a Director of WESCO since March 1994 and of
CDW since May 1994. He is a general partner of Associates IV, the general
partner of Fund IV and a principal of CD&R, which he joined in November 1993.
Mr. Hendrix is the Chief Executive Officer and a Director of Remington Arms
Company, Inc., and its parent RACI Holding, Inc., a company in which an
investment fund managed by CD&R has an investment. Mr. Hendrix was Chief
Operating Officer of Reliance Electric Company from 1992 to 1993, Executive
Vice President of Reliance Electric Company from 1989 to 1992 and Vice
President, Corporate Development of Reliance Electric Company from 1986 to
1989. Mr. Hendrix also serves as a Director of Keithley Instruments, Inc.,
National City Bank of Cleveland, NACCO Industries Inc., Cambrex Corporation
and Riverwood International Corporation and its parent Riverwood Holding,
Inc., a company in which an investment fund managed by CD&R has investments.
Mr. Hendrix is a member of the Board of Trustees of Clemson University.
BENSON P. SHAPIRO has been a Director of CDW and WESCO since July 1994. Mr.
Shapiro has been an independent management consultant since July 1997. He
previously served as the Malcolm P. McNair Professor of Marketing at the
Harvard Business School where he was a professor from July 1970 to June 1997.
Mr. Shapiro is an authority on marketing strategy and sales management with
particular interests in marketing organization, product line planning,
pricing, and national account sales strategies. He is the author, co-author or
editor of 12 books and 19 Harvard Business Review articles. He performs
research on product line planning, pricing, interfunctional coordination, and
strategic account selection and management. Mr. Shapiro is also a member of
the Board of Directors of United Stationers, Inc.
MARTIN D. WALKER has been a Director of CDW and WESCO since March 1994. He
retired in 1997 from M.A. Hanna Company, where he had been Chairman and Chief
Executive Officer since 1986. Mr. Walker is also a Director of Comerica, Inc.,
The Goodyear Tire & Rubber Company, M.A. Hanna Company, LifeStyle Furnishings
International Ltd., Meritor Automotive, Inc., The Reynolds & Reynolds Company,
Textron Inc., The Timken Company, and Lexmark International, Inc., a company
in which Fund IV has an investment.
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COMPOSITION OF BOARD AND COMMITTEES
The Board of Directors of CDW and WESCO (the "Board") has three standing
committees: an Executive Committee, an Audit Committee and a Compensation
Committee.
The Executive Committee consists of Messrs. Ames, Caldwell, Haley and
Hendrix, with Mr. Ames serving as Chairman. It is responsible for overseeing
the management of the affairs and business of the Company and has been
delegated authority to exercise the powers of the Board during intervals
between Board meetings.
The Audit Committee consists of Messrs. Barbe, Caldwell, Hendrix and Walker,
with Mr. Caldwell serving as Chairman. It is responsible for recommending the
firm to be appointed as independent accountants to audit the Company's
financial statements and to perform services related to the audit; reviewing
the scope and results of the audit with the independent accountants; reviewing
with the management and the independent accountants the Company's year-end
operating results; considering the adequacy of the internal accounting and
control procedures of the Company; reviewing the non-audit services to be
performed by the independent accountants, if any, and considering the effect
of such performance on the accountants' independence.
The Compensation Committee consists of Messrs. Ames, Barbe, Hendrix and
Walker, with Mr. Walker serving as Chairman. It is responsible for the review,
recommendation and approval of compensation arrangements for directors and
executive officers, for the approval of such arrangements for other senior
level employees, and for the administration of certain benefit and
compensation plans and arrangements of the Company.
COMPENSATION OF DIRECTORS
CDW's policy is not to pay compensation to those directors who are also
employees of CDW or any of its subsidiaries or affiliated with CD&R or any
principal stockholder of CDW. All directors are, however, reimbursed for
expenses incurred in attending Board and committee meetings.
The non-employee directors of the Company who are not affiliated with CD&R
or any principal stockholder of CDW receive an annual retainer of $20,000 and
additional fees of $1,000 per meeting for attendance at Board meetings and
$500 per meeting for attendance at committee meetings. Any such non-employee
director who serves as a chairperson of a committee also receives an annual
retainer of $2,500.
EXECUTIVE COMPENSATION
The information set forth below describes the components of the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company, based on 1997 salary and
bonuses (the "Named Executives"). The principal components of such
individuals' current cash compensation are the annual base salary and bonus
included in the Summary Compensation Table. Also described below is other
compensation such individuals can receive under the Company's stock and option
programs.
The following table sets forth the compensation earned by the Named
Executives for all services rendered to the Company during the year ended
December 31, 1997.
45
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Roy W. Haley,............................ 1997 $466,667 $425,000 $52,300
President & CEO
Stanley C. Weiss,........................ 1997 300,000 150,000 62,010(2)
Executive Vice President,
Industry Affairs
James H. Mehta,.......................... 1997 258,339 115,000 13,325
Vice President,
Business Development
Patrick M. Swed,......................... 1997 200,000 130,000 33,000
Vice President,
Industrial/Construction
James V. Piraino,........................ 1997 165,000 110,000 14,463
Vice President,
Marketing
</TABLE>
- --------
(1) (A) Includes contributions by WESCO under the WESCO Distribution, Inc.
Retirement Savings Plan in the amounts of $9,550, $13,700, $7,675,
$15,950, and $7,543 for Messrs. Haley, Weiss, Mehta, Swed and Piraino,
respectively.
(B) Includes contributions by the Company under the WESCO Distribution, Inc.
Deferred Compensation Plan in the amounts of $42,750, $31,900, $5,650,
$17,050 and $6,920 for Messrs. Haley, Weiss, Mehta, Swed and Piraino,
respectively.
(2) Includes life insurance premiums in the amount of $16,410.
EMPLOYMENT AGREEMENTS
In connection with WESCO's acquisition of EESCO, WESCO entered into an
employment agreement with Mr. Weiss (the "Weiss Agreement"), pursuant to which
WESCO agreed to employ Mr. Weiss during the period commencing on the date of
the acquisition and ending on December 31, 1998, subject to WESCO's right to
terminate Mr. Weiss' employment prior to such date for "cause" (as defined in
the Weiss Agreement) without any continuing liability. During the employment
term under the Weiss Agreement, Mr. Weiss is entitled to an annual base salary
of $300,000 and, provided WESCO attains annual performance objectives
established from year to year by WESCO, an annual incentive bonus equal to a
percentage of his annual base salary, not to exceed 75%. In the event of the
termination of Mr. Weiss' employment with WESCO by Mr. Weiss for "good reason"
(as defined in the Weiss Agreement), Mr. Weiss will continue to receive
payments of his annual base salary for the remainder of the employment term.
The Weiss Agreement also contains customary covenants regarding nondisclosure
of confidential information and non-competition and non-solicitation
restrictions.
WESCO intends to enter into an employment agreement with Mr. Haley (the
"Haley Agreement") providing for a rolling employment term of three years.
Pursuant to the proposed Haley Agreement, Mr. Haley will be entitled to an
annual base salary of $500,000 and an annual incentive bonus equal to a
percentage of his annual base salary ranging from 0% to 200%. The actual
amount of Mr. Haley's annual incentive bonus will be determined based upon the
financial performance of WESCO as compared to the annual performance
objectives established by CDW for the relevant fiscal year. Under the proposed
terms of the Haley Agreement, if Mr. Haley's employment with CDW and WESCO is
terminated by CDW and WESCO without "cause" (as defined in the Haley
Agreement), by Mr. Haley for "good reason" (as so defined) or as a result of
Mr. Haley's death or disability (any such termination, a "Qualifying
Termination"), Mr. Haley (or, in the event of his death,
46
<PAGE>
Mr. Haley's spouse) is entitled to continued payments of his average annual
base salary and his average annual incentive bonus (reduced by any disability
payments, if applicable) for the three-year period, or in the case of a
termination due to Mr. Haley's death or disability, the two-year period,
following such termination, and continued welfare benefit coverage for the
two-year period following such termination. In addition, in the event of any
such Qualifying Termination, all outstanding options held by Mr. Haley will
become fully vested. The Haley Agreement further provides that, in the event
of the termination of Mr. Haley's employment by CDW and WESCO without cause or
by Mr. Haley for good reason, in either such case, within the two-year period
following a "change in control" of CDW or WESCO (as defined in such agreement)
(such termination, a "Qualifying CIC Termination"), in addition to the
termination benefits described above, Mr. Haley will be entitled to receive
continued welfare benefit coverage and payments in lieu of additional
contributions to WESCO's Retirement Savings Plan and Deferred Compensation
Plan for the three year period following such Qualifying CIC Termination,
provided that if the aggregate payments to Mr. Haley would exceed the limits
on the deductibility of certain parachute payments under the United States
Internal Revenue Code of 1986, as amended, such payments will be reduced as
necessary to ensure deductibility. In addition, following a change in control,
Mr. Haley is entitled to a minimum annual bonus equal to 50% of his base
salary and the definition of "good reason" is modified to include certain
additional events. The proposed Haley Agreement also contains customary
covenants regarding nondisclosure of confidential information and non-
competition and non-solicitation restrictions.
CDW and WESCO also intend to enter in an employment agreement with David
McAnally (the "McAnally Agreement"), the Executive Vice President, Chief
Operating Officer and Chief Financial Officer of WESCO and Treasurer of each
of CDW and WESCO, providing for an employment term of two years, subject to
automatic renewal at the end of each year for an additional year. Pursuant to
the proposed terms of the McAnally Agreement, Mr. McAnally will be entitled to
an annual base salary of $300,000 and, depending upon the extent, if any, to
which WESCO achieves the performance objectives established for an applicable
fiscal year, an annual incentive bonus ranging from 0 to 100% of his annual
base salary; provided that Mr. McAnally is entitled to a minimum annual bonus
for 1998 of $150,000. In addition, under the proposed terms of the McAnally
Agreement, Mr. McAnally will purchase up to 2,500 shares of Class A Common
Stock at the initial public offering price and, pursuant to the existing Stock
Option Plan, will be granted options to purchase 17,500 shares of Class A
Common Stock at an option exercise price per share equal to the initial public
offering price. The options generally become vested in five equal annual
installments on each of the first five anniversaries thereof subject to Mr.
McAnally's continued employment. See "--Long-Term Incentive Plan." The
proposed terms of the McAnally Agreement provide that in the event of a
Qualifying Termination of Mr. McAnally's employment, Mr. McAnally (or, in the
event of his death, his spouse) will be entitled to continued payments of his
average annual base salary and average annual incentive bonus (reduced by any
disability payments, if applicable) and to continued welfare benefit coverage,
in each such case, for a period ending on the later of (1) the date of the
expiration of the then current employment term and (2) the first anniversary
of the date of such Qualifying Termination, provided that if such Qualifying
Termination occurs prior to the second anniversary of Mr. McAnally's
commencement of employment with WESCO, such payments and benefit coverage will
be provided for a period of one year following such termination. In addition,
in the event of a Qualifying Termination of Mr. McAnally's employment
following the second anniversary of the commencement of his employment, 50% of
any outstanding options granted to Mr. McAnally will become vested. It is
expected that the McAnally Agreement will contain provisions similar to the
provisions of the Haley Agreement concerning a "change in control" of CDW or
WESCO, except that in the event of a Qualifying CIC Termination, Mr. McAnally
will be entitled to continued payments of his average annual base salary and
average bonus and continued welfare benefit coverage for up to two years
following such termination and Mr. McAnally will be entitled to receive a
cash-out payment in respect of his options if (i) he does not resign from
employment without "good reason" (as defined in the McAnally Agreement), or
(ii) he is terminated without "cause" (as defined in the McAnally Agreement)
by a successor, prior to the first anniversary of the change in control. The
McAnally Agreement also contains customary covenants regarding nondisclosure
of confidential information and non-competition and non-solicitation
restrictions.
47
<PAGE>
STOCK PURCHASE PLAN AND ADDITIONAL MANAGEMENT SHARES
Under the CDW Holding Corporation Stock Purchase Plan (the "Stock Purchase
Plan"), the Compensation Committee, which is responsible for administering the
Stock Purchase Plan, may offer to certain executives, officers, and other key
employees of the Company (the "Purchase Plan Participants") the opportunity to
purchase up to an aggregate of 55,000 shares of Class A Common Stock (the
"Purchase Plan Shares"). Purchase Plan Participants are selected by reason of
their expected contribution to the growth and success of CDW and WESCO. The
Board may at any time amend or terminate the Stock Purchase Plan, but may not
adversely affect the rights of any Purchase Plan Participant with respect to
Purchase Plan Shares purchased prior to such action, unless the Purchase Plan
Participant consents. As of December 31, 1997, 30,014 shares were issued and
outstanding, and 24,986 shares remained available for sale, under the Stock
Purchase Plan. In addition, as of December 31, 1997, CDW has sold 54,150
shares of Class A Common Stock (the "Additional Management Shares") to key
management employees (including Named Executives), non-employee directors and
other investors otherwise than pursuant to the Stock Purchase Plan. The
outstanding Purchase Plan Shares and the Additional Management Shares were
sold at a price per share equal to the estimated fair market value (as defined
in the related stock subscription agreements described below) per share on the
date of sale as determined by the Board. In conjunction with the purchase of
the Purchase Plan Shares and the Additional Management Shares, CDW has granted
to the purchasers pursuant to the CDW Holding Corporation Stock Option Plan
options to purchase shares of Class A Common Stock equal to approximately one
and one-third times the number of Purchase Plan Shares or Additional
Management Shares purchased. See "--Stock Option Plan." None of the Named
Executives currently participates in the Stock Purchase Plan, and no
Additional Management Shares were sold to any of the Named Executives during
1997.
STOCK SUBSCRIPTION AGREEMENTS
Each Purchase Plan Participant is required to enter into a stock
subscription agreement (a "Stock Subscription Agreement") specifying the
purchase price for the Purchase Plan Shares being purchased and such other
terms consistent with the Stock Purchase Plan as the Compensation Committee
determines. Unless the Compensation Committee otherwise determines, each Stock
Subscription Agreement provides that the Purchase Plan Participant is entitled
to the benefits of, and bound by the obligations in, the Registration and
Participation Agreement, including certain demand and "piggyback" registration
rights thereunder. See "Shares Eligible for Future Sale--Registration and
Participation Agreement." The Stock Subscription Agreements also contain
certain transfer restrictions, take-along rights in favor of Fund IV and
repurchase rights and obligations of CDW, all of which will terminate upon
consummation of the Offerings. The Additional Management Shares have been
issued pursuant to Stock Subscription Agreements containing substantially
similar provisions.
STOCK OPTION PLAN
Under the CDW Holding Corporation Stock Option Plan (the "Stock Option
Plan"), the Compensation Committee, which is responsible for administering the
Stock Option Plan, may grant to certain executives, officers, and other key
employees of the Company (the "Option Plan Participants") up to an aggregate
181,000 options to purchase one share, subject to adjustment, of Class A
Common Stock (the "Options"). Options that are canceled, terminated or
forfeited without exercise will again be available for grant. Option Plan
Participants are selected by reason of their expected contribution to the
growth of CDW and WESCO. The Board may at any time amend or terminate the
Stock Option Plan, but may not adversely affect the rights of any Option Plan
Participant with respect to Options granted prior to such action, unless the
Option Plan Participant consents. As of December 31, 1997, 103,310 Options had
been granted, of which (1) 5,142 Options had been exercised, (2) 3,424 Options
had been canceled without exercise, (3) 94,744 Options with a weighted average
exercise price of $108.75 per share remained outstanding, (4) 33,848 Options
with a weighted average exercise price of $103.06 were exercisable. After
giving effect to the foregoing, 81,114 Options remained available for grant
under the Stock Option Plan. The outstanding Options were granted with an
exercise price per share equal to the estimated fair market value (as defined
in the related stock option agreements described below) per share on the date
of grant as determined by the Board. The foregoing does not include (a)
options to acquire 25,100 shares
48
<PAGE>
of Class A Common Stock outstanding, and options to acquire 24,900 shares of
Class A Common Stock available for grant, under the CDW Holding Corporation
Stock Option Plan for Branch Employees, (b) options to acquire 100,000 shares
of Class A Common Stock granted to Westinghouse in connection with the
Acquisition or (c) options to acquire 120,000 shares of Class A Common Stock
to be available for grant under the contemplated LTIP, approximately 60,000 of
which will be awarded to executives and key management personnel at the time
of the Offerings. Upon establishment of the LTIP, CDW intends to reduce the
number of Options available for grant under the Stock Option Plan to
approximately 31,000. See "--Stock Option Plan for Branch Employees," "Certain
Transactions and Relationships--Westinghouse" and "--Long-Term Incentive
Plan." In addition, in connection with the Avon Electrical acquisition, two
principals of the seller purchased 1,992 shares of Class A Common Stock at a
price per share of $250.97. See "Business--Acquisitions."
CHANGE IN CONTROL PROVISIONS
In the event of a "change in control" (as defined in the Stock Option Plan),
outstanding Options, whether or not exercisable, will be canceled in exchange
for a cash payment with respect to each share of Class A Common Stock subject
to such Options equal to the excess of (1) the value per share of the Class A
Common Stock in the transaction giving rise to the change in control over (2)
the per share exercise price, unless the Compensation Committee determines in
good faith, prior to the change in control, that the outstanding Options will
be honored or assumed by the successor in a manner that provides the Option
Participants with rights at least as favorable as those prevailing immediately
prior to the change in control. The Offerings will not result in a change in
control.
STOCK OPTION AGREEMENTS
Each Option Plan Participant is required to enter into a stock option
agreement (a "Plan Option Agreement") specifying the exercise price and
duration of the Options being granted and such other terms consistent with the
Stock Option Plan as the Compensation Committee determines. Certain other
terms of the Plan Option Agreement are summarized below.
EXERCISE OF OPTIONS. Unless the Compensation Committee otherwise determines,
Options become exercisable in one-third installments on each of the third,
fourth and fifth anniversary of the date of grant. The Compensation Committee
has granted Options to certain Named Executives and other senior executives
that become exercisable in one-fifth installments on each of the first five
anniversaries of the date of grant. Upon exercise of an Option, the Option
Plan Participant is required to enter into a stock subscription agreement in
substantially the form required under the Stock Purchase Plan. See "--Stock
Purchase Plan." The exercise price of any Option may not be less than the fair
market value (as defined in the Stock Option Plan) per share of Class A Common
Stock as of the date of grant.
TERMINATION OF OPTIONS. All Options terminate on the tenth anniversary of
the date of grant, unless terminated earlier as described below. Upon
termination of an Option Plan Participant's employment with the Company,
unless otherwise determined by the Compensation Committee, (1) any
unexercisable Options held by such Option Plan Participant will terminate and
will not be exercisable, (2) in the case of termination other than for "cause"
(as defined in the Stock Option Plan), then exercisable Options will terminate
within certain specified periods depending upon the circumstances of the
termination of employment, and (3) in the case of termination for cause, all
Options held by such Option Plan Participant, whether or not then exercisable,
will terminate immediately.
TRANSFERABILITY OF OPTIONS; REPURCHASE OF OPTIONS. The Options will not be
transferable or assignable other than by will or by the laws of descent, and
an Option can be exercised only by the Option Plan Participant to whom it is
granted or by the Option Plan Participant's estate or designated beneficiary
upon such Option Plan
49
<PAGE>
Participant's death. Unless the Compensation Committee otherwise determines,
each Plan Option Agreement provides that the Option Plan Participant, in
respect of shares purchased upon the exercise of any Option, is entitled to
the benefits of, and bound by the obligations in, the Registration and
Participation Agreement, including certain demand and "piggyback" registration
rights thereunder. See "Shares Eligible for Future Sale--Registration and
Participation Agreement." The Plan Option Agreements also contain certain
repurchase rights and obligations of the Company, which will terminate upon
the consummation of the Offerings.
STOCK OPTION PLAN FOR BRANCH EMPLOYEES
Under the CDW Holding Corporation Stock Option Plan for Branch Employees
(the "Branch Option Plan"), the Compensation Committee, which is responsible
for administering the Branch Option Plan, may grant to branch managers and
other key employees of WESCO employed at a branch or contributing
significantly to growth and profitability of a branch (the "Branch
Participants") up to 50,000 options, each to purchase one share, subject to
adjustment, of Class A Common Stock (the "Branch Options"). Options that are
canceled, terminated or forfeited without exercise will again be available for
grant. The Board may at any time amend or terminate the Branch Option Plan,
but may not adversely affect the rights of any Branch Participant with respect
to Branch Options granted prior to such action, unless the Branch Participant
consents. As of December 31, 1997, 25,250 Branch Options had been granted, of
which (1) 150 Branch Options had been cancelled without exercise, (2) 25,100
Branch Options with a weighted average exercise price of $195.40 per share
were outstanding, and (3) none were exercisable. After giving effect to the
foregoing, 24,900 Branch Options remained available for grant under the Branch
Option Plan. The outstanding Branch Options were granted with an exercise
price per share determined by the Board to represent the estimated fair market
value (as defined in the related Branch Option Agreements described below) per
share on the date of grant. None of the Named Executives currently participate
in the Branch Option Plan.
Options are granted to Branch Participants as soon as practicable following
the end of each performance period under the Branch Option Plan. The first
such performance period commenced on February 28, 1994 and ended on December
31, 1996, and the second such performance period commenced on January 1, 1997
and is scheduled to end on December 31, 1999. Branch Options are allocated to
branch or division employees by the Compensation Committee based primarily on
the attainment by such branch or division of performance objectives during
each performance period.
CHANGE IN CONTROL PROVISIONS
In the event of a "change in control" (as defined in the Branch Option
Plan), outstanding Branch Options, whether or not exercisable, will be
canceled in exchange for a cash payment with respect to each share of Class A
Common Stock subject to such Branch Options equal to the excess of (1) the
value per share of the Class A Common Stock in the transaction giving rise to
the change in control over (2) the per share exercise price, unless the
Compensation Committee determines in good faith, prior to the change in
control, that the outstanding Branch Options will be honored or assumed by the
successor in a manner that provides the Branch Participants with rights at
least as favorable as those prevailing immediately prior to the change in
control. The Offerings will not result in a change in control.
BRANCH OPTION AGREEMENTS
Each Branch Participant is required to enter into a stock option agreement
(a "Branch Option Agreement") specifying the exercise price and duration of
the Branch Options being granted and such other terms consistent with the
Branch Option Plan as the Compensation Committee determines. Certain other
terms of the Branch Option Agreement are summarized below.
EXERCISE OF BRANCH OPTIONS; EXERCISE PRICE. Except as otherwise determined
by the Compensation Committee or in connection with a change in control,
Branch Options become exercisable in one-third
50
<PAGE>
installments on each of the first, third and fifth anniversaries of the date
of grant. Upon exercise of a Branch Option, the Branch Plan Participant is
required to enter into a stock subscription agreement in substantially the
form required under the Stock Purchase Plan. See "--Stock Purchase Plan." The
per share exercise price of any Branch Option may not be less than the
greatest of (1) the fair market value (as defined in the Branch Option Plan)
per share of Class A Common Stock as of the end of the related performance
period, (2) such fair market value as of the date of grant and (3) $100.
TERMINATION OF BRANCH OPTIONS. All Branch Options terminate on the tenth
anniversary of the date of grant, unless terminated earlier as described
below. Upon termination of a Branch Participant's employment with WESCO,
unless otherwise determined by the Compensation Committee, (1) any
unexercisable Branch Options held by such Branch Participant will terminate
and will not be exercisable, (2) in the case of termination other than for
"cause" (as defined in the Branch Option Plan), then exercisable Branch
Options will terminate within certain specified periods depending upon the
circumstances of the termination of employment, and (3) in the case of
termination for cause (as defined in Branch Option Plan), all Branch Options
held by such Branch Participant, whether or not then exercisable, will
terminate immediately.
TRANSFERABILITY OF BRANCH OPTIONS; REPURCHASE OF BRANCH OPTIONS. The Branch
Options will not be transferable or assignable other than by will or by the
laws of descent, and a Branch Option can be exercised only by the Branch
Participant to whom it is granted or by the Branch Participant's estate or
designated beneficiary upon such Branch Participant's death. Unless the
Compensation Committee otherwise determines, each Branch Option Agreement
provides that the Branch Plan Participant, in respect of shares purchased upon
the exercise of any Branch Option, is entitled to the benefits of, and bound
by the obligations in, the Registration and Participation Agreement, including
certain demand and "piggyback" registration rights thereunder. See "Shares
Eligible for Future Sale--Registration and Participation Agreement." The
Branch Option Agreements also contain certain repurchase rights and
obligations of CDW and WESCO, which will terminate upon the consummation of
the Offerings.
LONG-TERM INCENTIVE PLAN
In connection with the Offerings, the Company intends to establish a Long
Term Incentive Plan (the "LTIP") under which selected management employees of
the Company will be eligible to receive grants of equity awards with respect
to the Class A Common Stock. Under the terms of the LTIP, an aggregate of
120,000 shares of Class A Common Stock will be authorized for award. Pursuant
to the terms of the LTIP, the Compensation Committee will be authorized to
grant awards in the form of stock options, stock appreciation rights,
restricted stock, performance shares and deferred stock units. In connection
with the Offerings, options to purchase approximately 60,000 shares of Class A
Common Stock (the "Initial Options") will be awarded to executives and other
key management employees selected by the Board. The Initial Options will have
a ten year term and an exercise price equal to the Offering price. Subject to
the option holder's continued employment, one-half of the Initial Options will
generally become vested if the average market value of the Class A Common
Stock over a two month period equals or exceeds 150% of the Offering price and
the remaining one-half of the Initial Options will generally become vested if
the average market value of the Class A Common Stock over a two month period
equals or exceeds 200% of the Offering price, provided that all of the Initial
Options will become vested as of the eighth anniversary of the date of grant
without regard to the then market value of the Class A Common Stock. The LTIP
will provide that in the event of a change in control of CDW or WESCO (as
defined in the LTIP), all then outstanding awards will become fully vested and
all restrictions on transfer applicable to any such award will lapse, unless
the individual award agreement evidencing any such award provides otherwise.
51
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information for each Named Executive with
regard to the aggregate stock options held at December 31, 1997. No stock
options were granted to, or exercised by, any of the Named Executives during
1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) AT FY-END ($)(1)
NAME (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- -------------------------------- ---------------------------
<S> <C> <C>
Roy W. Haley............ 13,368 / 8,912
Stanley C. Weiss........ -- --
James H. Mehta.......... 3,428 / 5,142
Patrick M. Swed......... 3,426 / 2,284
James V. Piraino........ 286 / 1,144
</TABLE>
- --------
(1) Based on a price per share of Class A Common Stock of $ . This price
reflects the estimated fair market value as of December 31, 1997, as
determined by the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996 and 1997, Messrs. Ames, Barbe, Hendrix and Walker served on the
Compensation Committee.
Messrs. Ames, Barbe and Hendrix are each principals of CD&R. The Company
paid CD&R fees of $400,000 for advisory, management consulting and monitoring
services rendered during 1997. The Company has agreed to indemnify certain
members of the Board and CD&R against liabilities incurred under securities
laws, including in connection with the Offerings, or with respect to their
services for the Company. See "Certain Transactions and Relationships--CD&R
and Fund IV."
52
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CERTAIN TRANSACTIONS AND RELATIONSHIPS
CD&R AND FUND IV
Fund IV, which is CDW's largest stockholder, is a private investment fund
managed by CD&R. Amounts contributed to Fund IV by its limited partners are
invested at the discretion of the general partner, in equity or equity-related
securities of entities formed to effect leveraged buy-out transactions, and in
the equity of corporations where the infusion of capital coupled with the
provision of managerial assistance by CD&R can be expected to generate returns
on investments comparable to returns historically achieved in leveraged buy-
out transactions. The general partner of Fund IV is Associates IV. Each of B.
Charles Ames, William A. Barbe and Leon J. Hendrix, Jr. is a principal of
CD&R, a general partner of Associates IV and a director of the Company. See
"Management--Directors and Executive Officers." CDW was formed by CD&R to
effect the Acquisition. In connection with the Acquisition, Fund IV acquired
833,280 shares of Class A Common Stock at a purchase price of $100.00 per
share, of which shares are being offered hereby. See "Security Ownership by
Management and Principal Stockholders" and "Selling Stockholders."
Beginning in March 1994, the Company has paid CD&R monthly fees of $33,333
plus related out-of-pocket expenses, for advisory, management consulting and
monitoring services, and it is expected that such fees will continue in the
future. Under the terms of WESCO's lending arrangements, such fees must be
determined by arms length negotiation and must be reasonable. Under the
Registration and Participation Agreement, such fees may not exceed $1 million
during any fiscal year. In connection with the Acquisition and arranging the
financing thereof, the Company paid CD&R a fee of approximately $4.2 million
and reimbursed CD&R for its out-of-pocket expenses of $47,227. None of the
principals of CD&R who serve as directors of the Company receive directors'
fees.
The Company has entered into an indemnification agreement with CD&R and Fund
IV pursuant to which the Company has agreed, subject to certain exceptions, to
indemnify the members of its boards of directors, as well as CD&R, Fund IV and
certain of their associates and affiliates (the "Indemnitees"), to the fullest
extent allowable under applicable Delaware law and to indemnify the
Indemnitees against any suits, claims, damages or expenses which may be made
against or incurred by them under applicable securities laws in connection
with offerings of securities of CDW, including the Offerings, liabilities to
third parties arising out of any action or failure to act by the Company, and,
except in cases of gross negligence or intentional misconduct, the provision
by CD&R of advisory, management consulting and monitoring services.
MANAGEMENT LOANS
From time to time following the Acquisition, executive officers have
purchased shares of Class A Common Stock from CDW. A portion of the purchase
price paid for the Class A Common Stock purchased by such executive officers
has been financed by full-recourse bank loans guaranteed by WESCO. Since
February 28, 1994, Messrs. Burke, Burleson, Goodwin, Haley, Kramp, Mehta,
Piraino, Swed, Thimjon and Vanderhoff have had outstanding loans guaranteed by
WESCO. The largest aggregate amount of guaranteed indebtedness outstanding on
such loans at any time since February 28, 1994 for Messrs. Burke, Burleson,
Goodwin, Haley, Kramp, Mehta, Piraino, Swed, Thimjon and Vanderhoff was
$167,262, $68,800, $161,200, $1,377,956, $68,700, $587,959, $167,262,
$343,200, $155,000 and $34,400, respectively. As of December 31, 1997, Messrs.
Burke, Burleson, Goodwin, Haley, Kramp, Mehta, Piraino, Swed, Thimjon and
Vanderhoff owed $167,262, $68,800, $161,200, $1,377,956, $68,700, $587,959,
$167,262, $343,200, $155,000 and $34,400, respectively, on such loans.
WESTINGHOUSE
On February 28, 1994, CDW completed the acquisition of all of the assets and
certain liabilities of the Westinghouse Electric Supply Company division of
Westinghouse, WESCO's Predecessor. In connection with the Acquisition,
Westinghouse acquired certain securities of, and entered into certain
agreements with, CDW as
53
<PAGE>
described below. Since the Acquisition, WESCO has continued to purchase
products and services from, and sell products and provide services to,
Westinghouse. See Note 13 to the consolidated financial statements.
SHARES, OPTIONS AND MORTGAGE NOTES. In connection with the Acquisition,
Westinghouse acquired 100,000 shares of Class A Common Stock (the
"Westinghouse Shares") and an option to purchase an additional 100,000 shares
of Class A Common Stock, subject to adjustment, at an exercise price of $100
per share (the "Westinghouse Option"). The Westinghouse Option is exercisable
any time prior to termination on February 28, 1999. The Westinghouse Shares,
the Westinghouse Option and any shares issuable on exercise of the
Westinghouse Option are subject to a right of first refusal in favor of CDW
and Fund IV, which first refusal right will terminate upon the consummation of
the Offerings. Westinghouse is a party to the Registration and Participation
Agreement, pursuant to which it has, among other rights, certain demand and
"piggy-back" registration rights. See "Shares Eligible for Future Sales--
Registration and Participation Agreement." After giving effect to the
Offerings, Westinghouse will hold shares of Class A Common Stock and options
to purchase an additional shares, representing in the aggregate % of the
Class A Common Stock on a fully diluted basis. Westinghouse also acquired in
connection with the Acquisition, the Mortgage Notes, which are secured by
liens on all of the Company's owned real property. See "Description of Certain
Indebtedness--Mortgage Notes."
OTHER AGREEMENTS. Also in connection with the Acquisition, Westinghouse
entered into various agreements with the Company including a five-year non-
competition agreement which remains in effect through February 28, 1999; a
transitional services agreement which is no longer in effect; and an agreement
(the "Letter Agreement") pursuant to which, among other things, Fund IV and
CDW agreed to vote for, or cause to be voted for, one Westinghouse nominee to
the Boards of Directors of CDW and each of its subsidiaries. Westinghouse has
not exercised its rights to nominate such directors. In addition, WESCO
purchases products and services from and sells products to Westinghouse in the
ordinary course of business. WESCO purchases of products and services from
Westinghouse amounted to $27,481,000, $19,115,000 and $15,498,000 in 1995,
1996 and 1997, respectively, and WESCO sales to Westinghouse amounted to
$27,311,000, $21,192,000 and $21,666,000 in 1995, 1996 and 1997, respectively.
See Note 13 to consolidated financial statements. The Letter Agreement, and
Westinghouse's rights thereunder, will terminate upon consummation of the
Offerings. In addition, Westinghouse agreed to indemnify the Company with
respect to certain matters in connection with the Acquisition, including
certain liabilities arising under Environmental Laws. CDW has made a claim
under this indemnity for certain environmental liabilities in the amount of
$1.5 million, which Westinghouse is disputing.
54
<PAGE>
SECURITY OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table furnishes certain information, to the best knowledge of
the Company, as of March , 1998 and as adjusted to reflect the sale of the
Class A Common Stock offered hereby, as to the shares of Class A Common Stock
beneficially owned by (1) each director of the Company, (2) each Named
Executive, (3) by all directors and executive officers of the Company as a
group and (4) by each person owning beneficially more than 5% of the
outstanding shares of such class. See "Description of Capital Stock."
<TABLE>
<CAPTION>
PRIOR TO THE OFFERINGS AFTER THE OFFERINGS
-------------------------------- ----------------------------
AMOUNT AND
AMOUNT AND NATURE OF
NATURE OF BENEFICIAL PERCENTAGE BENEFICIAL OWNER- PERCENTAGE
BENEFICIAL OWNER OWNERSHIP(2) OF CLASS(3) SHIP OF CLASS
---------------- -------------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
NAME AND ADDRESS
The Clayton & Dubilier
Private
Equity Fund IV Limited
Partnership
270 Greenwich Avenue
Greenwich, CT 06830
(1)(4)................ 833,280 % %
B. Charles Ames (1)(5).. 833,280
William A. Barbe (1)(5). 833,280
Donald J. Gogel (1)(5).. 833,280
Leon J. Hendrix, Jr.
(1)(5)................. 833,280
Hubbard C. Howe (1)(5).. 833,280
Andrall E. Pearson
(1)(5)................. 833,280
Joseph L. Rice, III
(1)(5)................. 833,280
CBS Corporation, for-
merly known as Westing-
house Electric Corpora-
tion (6)
51 West 52nd Street
New York, NY 10019..... 200,000
Roy W. Haley (6)........ 30,088
James H. Mehta (6)...... 9,858
Stanley C. Weiss........ --
Wiley N. Caldwell....... 1,000
Alberto Cribiore........ --
J. Trevor Eyton......... 500
Benson P. Shapiro....... 1,000
Martin D. Walker........ 1,000
All directors and execu-
tive officers as a
group
(20 persons) (6) (7)... 902,080
</TABLE>
- --------
(1) Assumes the Underwriters' over-allotment options are not exercised. If
such options are exercised, each such person would have shares,
representing % of the outstanding shares of Class A Common Stock.
(2) Does not reflect the stock split to be effected prior to the consummation
of the Offerings.
(3) For the purposes of this table, the percent of the issued and outstanding
shares of Class A Common Stock of CDW held by each individual or group has
been calculated on the basis of shares which includes (i) shares of
Class A Common Stock issued and outstanding on March , 1998, (ii)
shares of Class A Common Stock subject to stock options exercisable within
60 days of March , 1998 only with respect to respective named
stockholders and (iii) shares of Class A Common Stock which will be
issued in exchange for the Acquisition Notes upon consummation of the
Offerings. See "Management--Stock Option Plan," "Description of Capital
Stock" and "Description of Certain Indebtedness--Acquisition Notes."
(footnotes continued on following page)
55
<PAGE>
(4) Fund IV is an investment partnership, the general partner of which is
Associates IV. The general partners of Associates IV are Messrs. Ames,
Barbe, Gogel, Hendrix, Howe, Pearson and Rice, who share investment
discretion with respect to the securities held by Fund IV. Messrs. Gogel
and Rice own all of the outstanding stock of CD&R.
(5) Consists solely of shares owned by Fund IV. Messrs. Ames, Barbe, Gogel,
Hendrix, Howe, Pearson and Rice may be deemed to share beneficial
ownership of the shares owned of record by Fund IV by virtue of their
status as general partners of Associates IV, but each expressly disclaims
such beneficial ownership of the shares owned by Fund IV. Messrs. Ames,
Barbe, Gogel, Hendrix, Howe, Pearson and Rice share investment and voting
power with respect to securities owned by Fund IV. The business address
for each of them is c/o Clayton, Dubilier & Rice, Inc., 375 Park Avenue,
18th Floor, New York, New York 10152.
(6) Includes shares issuable upon the exercise of currently exercisable
options or options exercisable within 60 days of the date of this
Prospectus.
(7) Includes 833,280 shares owned of record by Fund IV with respect to which
Messrs. Ames, Barbe and Hendrix may be deemed to share beneficial
ownership by virtue of their status as general partners of Associates IV.
Each of Messrs. Ames, Barbe and Hendrix expressly disclaims beneficial
ownership of such shares.
56
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders acquired their shares of Class A Common Stock in
connection with the Acquisition. The transferability of the shares held by the
Selling Stockholders is restricted by federal and state securities laws and by
the Registration and Participation Agreement, and by the stock subscription
agreement pursuant to which such shares were issued. Under the Registration
and Participation Agreement, the Selling Stockholders have certain rights to
require CDW to register shares of Class A Common Stock under the federal
securities laws, and to register or qualify such shares for resale under state
securities laws. All the shares of Class A Common Stock offered by the Selling
Stockholders hereby are being registered pursuant to such registration rights.
The Registration and Participation Agreement requires CDW to pay all expenses
incurred by the Selling Stockholders with respect to the Offerings, other than
underwriting discounts and commissions, transfer taxes applicable to the Class
A Common Stock to be sold by the Selling Stockholders and certain legal fees.
As required under the Registration and Participation Agreement, CDW has agreed
to pay the fees and expenses of one law firm to represent certain Selling
Stockholders in connection with the Offerings. The Company has agreed to
indemnify the Selling Stockholders and the Underwriters, and the Selling
Stockholders have agreed to indemnify the Company, its directors, controlling
persons and officers who have signed the Registration Statement of which this
Prospectus is a part and the Underwriters as to certain matters relating to
the Class A Common Stock to be sold by the Selling Stockholders. Upon
registration and sale, such shares of Class A Common Stock will be free of the
restrictions noted above other than restrictions under the Securities Act with
respect to persons who may be deemed to be affiliates of CDW for purposes of
the Securities Act.
The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of the Class A Common
Stock as of December 31, 1997 and as adjusted to reflect the sale of the Class
A Common Stock offered by the Selling Stockholders hereby. For information
with respect to positions, offices or other material relationships of the
Selling Stockholders with CDW or any predecessor or affiliate thereof, other
than as a stockholder thereof, during the past three years between CDW, Fund
IV and Westinghouse, see "Certain Transactions and Relationships." Each
Selling Stockholder named has sole voting and dispositive power with respect
to its shares.
All information with respect to beneficial ownership has been furnished by
the respective Selling Stockholders.
The information presented in the preceding discussion and in the following
table assumes that the Underwriters' over-allotment options are not exercised
in full.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERINGS NUMBER OF AFTER OFFERINGS
NAME AND ADDRESS ------------------- SHARES ------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------- ----------- ------- --------- ------------------
<S> <C> <C> <C> <C> <C>
The Clayton & Dubilier
Private
Equity Fund IV Limited
Partnership............. 833,280
270 Greenwich Avenue
Greenwich, CT 06830
Richard J. Marshuetz(1).. 13,286(/2/) *
4739 Bayard Street
Pittsburgh, PA 15213
</TABLE>
- --------
* Less than 1% of class.
- --------
(1) Former executive of the Company.
(2) Includes currently exercisable options to purchase 6,856 shares at an
exercise price of $100 per share.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of CDW's capital stock does not purport to be
complete and is qualified in its entirety by reference to applicable Delaware
law and to the provisions of CDW's Certificate of Incorporation and By-laws.
Copies of the forms of Certificate of Incorporation and By-laws have been
filed as exhibits to the Registration Statement of which this Prospectus forms
a part.
CDW's authorized capital stock consists of 2,000,000 shares of Class A
Common Stock, par value $.01 per share, and 2,000,000 shares of Class B Common
Stock, par value $.01 per share. As of March , , CDW had outstanding
shares of Class A Common Stock, no shares of Class B Common Stock, options
to purchase shares of Class A Common Stock, of which options for shares
were exercisable and options for shares became exercisable over the next
five years. As of March , there were holders of record of Class A
Common Stock.
CLASS A COMMON STOCK
VOTING RIGHTS. Each holder of shares of Class A Common Stock is entitled to
one vote per share on all matters to be voted on by stockholders. Holders of
Class A Common Stock are not entitled to cumulative votes in the election of
directors.
DIVIDEND RIGHTS. The holders of Class A Common Stock are entitled to
dividends and other distributions if, as and when declared by the Board out of
assets legally available therefor, subject to the rights of any holder of
preferred stock, restrictions set forth in the Company's credit facilities and
restrictions, if any, imposed by other indebtedness outstanding from time to
time. See "Dividend Policy" and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations--Liquidity and Capital
Resources." The holders of Class A Common Stock and Class B Common Stock are
entitled to equivalent per share dividends and distributions.
OTHER RIGHTS. Upon the liquidation, dissolution or winding up of CDW, the
holders of shares of Class A Common Stock would be entitled to share pro rata
(on an equal basis with the holders of the Class B Common Stock) in the
distribution of all of CDW's assets remaining available for distribution after
satisfaction of all its liabilities and the payment of the liquidation
preference of any outstanding preferred stock. The holders of Class A Common
Stock have no preemptive or other subscription rights to purchase shares of
CDW, nor are they entitled to the benefits of any sinking fund provisions. No
share of Class A Common Stock issued in connection with or outstanding prior
to the Offerings is subject to any further call or assessment.
EXCHANGE RIGHTS. In the event that Fund IV makes a distribution of shares of
Class A Common Stock to its limited partners and, following such distribution,
one of its limited partners would then be subject to limitations under the
Bank Holding Company Act of 1956 (the "Bank Holding Act") on its ability to
hold more than 5% of the voting stock of CDW, Fund IV is entitled to exchange
a certain number of shares of its Class A Common Stock into the same number of
shares of Class B Common Stock so as to permit it to distribute shares of
Class B Common Stock to such limited partners without exceeding the
limitations under the Bank Holding Act.
CLASS B COMMON STOCK
The Class B Common Stock is identical to the Class A Common Stock in all
respects except that the holders of Class B Common Stock will have no right to
vote, except as required by law. Shares of Class B Common Stock automatically
convert into the same number of shares of Class A Common Stock upon the sale
or transfer by the holder thereof to a non-affiliate. To the extent permitted
by law, each holder of Class B Common Stock is entitled to convert any or all
shares of Class B Common Stock held into the same number of shares of Class A
Common Stock. The Class B Common Stock was intended to meet the needs of
several limited partners in Fund IV which may be subject to limitations under
the Bank Holding Act on their ability to hold more than 5% of the
58
<PAGE>
voting stock of CDW in the event Fund IV were to distribute its shares of
Class A Common Stock to such limited partners. It is not anticipated that
additional shares of Class B Common Stock will be issued except in the event
that Fund IV distributes shares of Common Stock to such limited partners. See
"--Class A Common Stock--Exchange Rights."
Following the Offerings, Fund IV will hold shares of Class A Common Stock.
Fund IV has no present plans to make a distribution of shares of Class A
Common Stock held by it to any of its investors. Because shares of Class B
Common Stock are issuable only upon the exchange of shares of Class A Common
Stock, the issuance of shares of Class B Common Stock would not increase the
total number of shares of Common Stock outstanding on such date.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and registrar for the shares
of Common Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
After consummation of the Offerings, CDW will have unissued and unreserved
shares of Class A Common Stock. These additional shares may be utilized for a
variety of corporate purposes, including future public offerings to raise
additional capital and for facilitating corporate acquisitions. Except
pursuant to the stock option plans described herein, CDW does not currently
have any plans to issue additional shares of Common Stock. One of the effects
of unissued and unreserved shares of capital stock may be to enable the Board
to render more difficult or discourage an attempt to obtain control of CDW by
means of a merger, tender offer, proxy contest or otherwise, and thereby to
protect the continuity of CDW's management. If, for example, the Board were to
determine that a takeover proposal was not in CDW's best interests, such
shares could be issued by the Board without stockholder approval in one or
more private transactions or other transactions that might prevent or render
more difficult or costly the completion of the takeover transactions by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of the incumbent
Board, by effecting an acquisition that might complicate or preclude the
takeover, or otherwise.
59
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITIES
GENERAL. On February 13, 1998, WESCO and WESCO Distribution-Canada, Inc.
("WESCO Canada") amended their credit agreements with separate bank groups.
The amended credit agreements (the "Credit Facilities") provide for an
aggregate $445 million of revolving credit facilities. Under the agreement
with the U.S. lenders, WESCO may borrow up to $400 million including a swing
line subfacility of $10 million and a letter of credit subfacility of $35
million (as amended, the "U.S. Credit Facility"). Under the agreement with the
Canadian lenders, WESCO Canada may borrow up to Cdn$62.7 million, including a
swing line subfacility of Cdn$5 million, a letter of credit subfacility of
Cdn$5 million and an acceptance facility (as amended, the "Canadian Credit
Facility"). Borrowings may be used for general corporate purposes including
acquisitions. Borrowings are subject to certain conditions, including, if
WESCO fails to meet certain financial tests, a borrowing base requirement
based on eligible accounts and inventory. The Credit Facilities will terminate
on February 28, 2001. The obligations under the Credit Facilities and related
guarantees are unsecured.
GUARANTY. Borrowings under the U.S. Credit Facility are guaranteed by CDW;
while borrowings under the Canadian Credit Facility are guaranteed by WESCO
and (indirectly) by CDW.
INTEREST AND FEES. Interest on outstanding borrowings under the U.S. Credit
Facility accrues at a floating rate based, at WESCO's option, upon (1) LIBOR
for one, two, three or six months plus 1.00% or (2) the greater of (a) the
federal funds rate plus 0.50% or (b) the prime rate plus 0.25%. The applicable
margins over LIBOR and the prime rate are subject to reduction if WESCO meets
certain debt rating requirements or other financial tests. At December 31,
1997, the applicable margins were 0.28% and 0.00%, respectively. Borrowings
under the Canadian Credit Facility bear interest at the higher of (1) the rate
offered by certain Canadian banks for acceptances plus 0.50% and (2) the
Canadian prime rate. The margin over the Canadian prime rate is subject to
reduction if WESCO Canada meets certain financial tests. At December 31, 1997
the applicable margin was 0.50%. In addition, the Company pays a facility fee
on both the U.S. and Canadian Credit Facilities of 0.23% at December 31, 1997.
WESCO is also required to pay a letter of credit commission equal to 0.28% per
annum (subject to reduction if certain financial tests are met) on the daily
amount stated to be available from time to time under each outstanding letter
of credit.
CERTAIN COVENANTS. The U.S. Credit Facility contains various restrictive
covenants (the breach of which would also be an event of default under the
Canadian Credit Facility) that, among other things, impose (1) limitations on
the incurrence of additional indebtedness or guarantees, other than (a) $10
million to finance fixed or capital assets, (b) $10 million to finance certain
acquisitions, (c) $20 million for any corporate purposes, (d) $30 million for
any other purpose and (e) $100 million of subordinated indebtedness; (2)
limitations on the issuance of additional stock of subsidiaries; (3)
limitations on liens or negative pledges, with customary exceptions and an
exception for liens to secure up to $10 million of indebtedness to finance the
acquisition of fixed or capital assets; (4) customary limitations on
investments, loans, acquisitions or advances (although pursuant to a recent
amendment to the U.S. Credit Facility, WESCO is no longer subject to a dollar
limitation on the size of any acquisition as long as it has complied with its
other financial covenants and maintains $25 million in unused commitments);
(5) customary limitations on dividends; (6) limitations on the sale, lease or
other disposal of assets to a basket of $35 million (however, the covenant
permits securitization of assets of up to $100 million); (7) customary
limitations on transactions among affiliates which are not arms-length; and
(8) customary limitations on entering into new lines of business.
In addition, the U.S. Credit Facility imposes certain financial tests that
require WESCO to (1) maintain a consolidated net worth of at least $100
million, (2) maintain a funded indebtedness to consolidated EBITDA ratio of 5
to 1 for the quarter ended March 30, 1998, decreasing to 3.75 to 1 at March
31, 2000 and thereafter, determined on a consolidated basis and tested at the
end of each quarter for the trailing four quarters, and (3) maintain a fixed
charge coverage ratio of not less than 2 to 1, as such terms are defined in
the Credit Facilities.
60
<PAGE>
EVENTS OF DEFAULT. The U.S. Credit Facility and, by incorporation by
reference, the Canadian Credit Facility, contain various events of default,
including (1) the failure of Fund IV and its affiliates to own, directly or
indirectly, at least 30% of the outstanding voting stock of CDW, (2) an
acquisition by a third party or group of a percentage of the outstanding
voting stock of CDW greater than 30% or of the power to elect a majority of
CDW's Board of Directors and (3) CDW ceasing to own all of the outstanding
stock of WESCO or WESCO ceasing to own all of the outstanding stock of WESCO
Canada and Realco. Pursuant to certain amendments to the Credit Facilities,
the Offerings will not result in a charge of control constituting an event of
default under such Credit Facilities.
MORTGAGE NOTES
A portion of the purchase price for the Acquisition was financed through the
issuance by CDW to Westinghouse of a guaranteed first mortgage note in the
initial amount of $45 million, due February 28, 2001 (the "Buyer Note") and
the issuance by WESCO Canada of a guaranteed first mortgage note to
Westinghouse Canada in the original principal amount of Cdn$6.8 million, due
February 28, 2001 (the "Canadian Note" and, collectively with the Buyer Note,
the "Mortgage Notes"). At the closing of the Acquisition, CDW caused Realco to
assume all of its obligations under the Buyer Note. The Buyer Note is
guaranteed by CDW and WESCO. The Canadian Note is guaranteed by CDW, WESCO and
Realco. The Buyer Note and the Canadian Note are secured by a first mortgage
lien on all of the real property owned by Realco and WESCO Canada,
respectively.
The Buyer Note is a zero coupon note with a yield to maturity of 8% and the
Canadian Note bears interest at 8% per annum, accruing semi-annually. Accrued
interest payments accrete to the principal amount and are not payable in cash.
The entire aggregate principal amount of the Mortgage Notes (including
accretion for interest accruals) will mature and become payable on February
28, 2001.
The Mortgage Notes contain various covenants, including, among other things,
(1) limitations on the incurrence of additional indebtedness, (2) limitations
on making certain restricted payments, (3) limitations on transactions with
affiliates, (4) limitations on sale of assets or the consolidation with or
merger with or into another entity and (5) a restriction on the sale of the
mortgaged properties. In addition, the Mortgage Notes contain customary events
of default, including for failure to make payments on the Mortgage Notes,
failure to perform covenants, defaulting on the payment of other indebtedness
in an aggregate principal amount exceeding $35 million, and the insolvency or
bankruptcy of the Company. Finally, the Mortgage Notes provide that CDW shall
offer to prepay them upon a Change of Control, which is defined to include (1)
prior to the consummation of an initial public offering after which the public
owns more of the outstanding common stock of CDW than does Westinghouse (a
"Specified Public Offering"), Fund IV and its affiliates ceasing to have the
power to elect a majority of the members of the Board of Directors; (2) after
the consummation of a Specified Public Offering, any person or group (other
than Fund IV and its affiliates or Westinghouse) owning more than 30% of the
total voting stock of CDW and more than the total voting stock of CDW owned by
Fund IV and its affiliates; (3) CDW owning less than all of the outstanding
equity securities of WESCO or Realco; (4) WESCO owning less than all the
outstanding equity securities of Realco or WESCO Canada; or (5) during any
two-year period, individuals who at the beginning of such period constituted
the Board of Directors together with any new directors elected by the
directors then still in office who were directors at the beginning of such
period ceasing for any reason to constitute a majority of the Board of
Directors.
ACQUISITION NOTES
In connection with certain acquisitions, WESCO has issued $2.2 million
principal amount of senior convertible notes (the "Acquisition Notes"). By
their terms, concurrent with the consummation of the Offerings each of the
Acquisition Notes will be mandatorily converted into shares of Class A Common
Stock at a price per share equal to the offering price in the Offerings.
Assuming a closing date for the Offerings of , 1998 and an offering price of
$ per share (the midpoint of the range), an aggregate shares of Class A
Common Stock would be issued upon conversion of the Acquisition Notes. WESCO
funded a portion of the purchase price of the two acquisitions that closed in
January 1998 with $15 million aggregate principal amount of its unsecured
notes, maturing by mid-1999, up to $5 million of which may be converted to
shares of Class A Common Stock at the Offering price at the election of the
holder, which election is required to be made prior to the Offerings. See
"Business--Acquisitions."
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After completion of the Offerings, CDW will have shares of Class A Common
Stock outstanding, and shares of Class A Common Stock subject to
outstanding stock options and no shares of Class B Common Stock outstanding.
Of these shares, the shares of Class A Common Stock sold in the Offerings
(and the shares of Class B Common Stock for which such shares of Class A
Common Stock will be convertible) will be freely tradeable without restriction
under the Securities Act, except by persons who may be deemed to be
"affiliates" of CDW, as that term is defined in Rule 144 under the Securities
Act. All the remaining shares of Class A Common Stock (including any shares
issued upon exercise of such stock options) and any shares of Class B Common
Stock for which any such shares of Class A Common Stock are exchanged
("Restricted Shares") may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration,
including an exemption contained in Rule 144 under the Securities Act.
In general, under Rule 144, if one year has elapsed since the Restricted
Shares have been acquired from the issuer or from an affiliate of the issuer
(whichever is later), the holder of such Restricted Shares, including for this
purpose persons who may be deemed "affiliates" of CDW whether or not they hold
Restricted Shares, would be entitled to sell, within any three-month period,
up to a number of Restricted Shares that does not exceed the greater of (1) 1%
of the then outstanding shares of Class A Common Stock (approximately
shares immediately after the Offerings assuming that the Underwriters'
over-allotment options are exercised in full) and (2) the average weekly
trading volume of the Class A Common Stock on the New York Stock Exchange
during the four calendar weeks preceding the date on which notice of the sale
is filed with the Commission. Sales under Rule 144 are subject to certain
restrictions relating to manner of sale, notice and the availability of
current public information about CDW and may be effected only through
unsolicited brokers' transactions. A person who is not deemed an "affiliate"
of CDW at any time during the 90 days preceding a sale would (but for the
"lock-up" arrangements described below) be entitled to sell such Restricted
Shares immediately after the Offerings under Rule 144 without regard to the
volume or other limitations described above, provided that two years have
elapsed since such Restricted Shares were acquired from CDW or an affiliate of
CDW. Substantially all of the Restricted Shares have been held for more than
two years by the holders thereof, of which shares are held by persons who
may be deemed to be "affiliates" of CDW. Accordingly, all of the remaining
Restricted Shares may be sold publicly following the expiration of the 180-day
"lock-up" arrangements described below.
"LOCK-UP" ARRANGEMENTS
CDW, the Selling Stockholders and the directors and substantially all of the
employees of the Company who own Class A Common Stock have each agreed not to
enter into any agreement providing for, or to effect, any public sale,
distribution or other disposition of any shares of Common Stock, including
sales pursuant to Rule 144 or Rule 144A under the Securities Act, or grant any
public option for any such sale, or otherwise cause CDW to register any
securities of CDW, for a period of 180 days after the date of the Offerings
without the prior written consent of Merrill Lynch & Co. on behalf of the
Underwriters, except for the shares of Class A Common Stock offered in
connection with the Offerings. After the expiration of such 180-day period,
such stockholders (other than "affiliates" of CDW) will, in general, be
entitled to dispose of their shares without regard to volume or other
restrictions of Rule 144 under the Securities Act.
REGISTRATION AND PARTICIPATION AGREEMENT
Pursuant to the terms of the Registration and Participation Agreement,
existing stockholders of CDW who will collectively own shares of Class A
Common Stock (including shares issuable upon the exercise of outstanding stock
options) after the Offerings have certain registration rights with respect to
their shares of Common Stock (subject to the "lock-up" arrangements described
above). After the completion of the
62
<PAGE>
Offerings and the expiration of the 180-day "lock-up" period described above,
the holders (other than Westinghouse) of at least 20% of CDW's Registrable
Securities (as defined in the Registration and Participation Agreement), may
request that CDW register some or all of their Registrable Securities. Any
time after February 28, 1999 Westinghouse shall have the right upon two
occasions to request that CDW register some or all of the Registrable
Securities it holds. In addition, if CDW decides to register additional shares
of Common Stock (other than, among other limitations, shares of Common Stock
to be issued pursuant to employee benefit or option plans), all holders of
CDW's Registrable Securities (including Westinghouse) are entitled to
participate in such registration, subject to certain cutback provisions.
Prior to the Offerings, there has been no public market for the Class A
Common Stock and no prediction can be made as to the effect, if any, that
market sales of Restricted Shares, the availability of such Restricted Shares
for such sales, or the existing stockholders' registration rights will have on
the market price of the Class A Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Class A Common Stock and could impair CDW's future
ability to raise capital through an offering of its equity securities. See
"Risk Factors--Shares Eligible for Future Sale."
63
<PAGE>
UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS
The following is a summary of certain United States federal income and
estate tax consequences of the ownership and disposition of Class A Common
Stock by non-U.S. holders. As used herein, "non-U.S. holder" means any person
or entity that is a beneficial owner of Class A Common Stock, other than (1) a
citizen or resident of the United States, (2) a corporation, partnership or
other entity created or organized in the United States or under the laws of
the United States or of any state of the United States, (3) an estate whose
income is includable in gross income for U.S. federal income tax purposes
regardless of its source or (4) a trust if (x) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (y) at least one U.S. person has authority to control all
substantial decisions of the trust. Recently enacted legislation authorizes
the issuance of Treasury Regulations that, under certain circumstances, could
reclassify as a non-U.S. partnership a partnership that would otherwise be
treated as a U.S. partnership, or could reclassify as a U.S. partnership a
partnership that would otherwise be treated as a non-U.S. partnership. Such
regulations would apply only to partnerships created or organized after the
date that proposed Treasury Regulations are filed with the Federal Register
(or, if earlier, the date of issuance of a notice substantially describing the
expected contents of the regulations).
This summary is based on provisions of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed Treasury regulations
promulgated thereunder (the "Treasury Regulations") and administrative and
judicial interpretations thereof, all as of the date hereof and all of which
are subject to change, possibly on a retroactive basis.
This summary is for general information only. It does not address aspects of
United States taxation other than federal income and estate taxation and does
not address all aspects of income and estate taxation or any aspects of state,
local or non-United States taxation. In addition, this summary does not
consider any specific facts or circumstances that may apply to a particular
non-U.S. Holder (including U.S. expatriates, and the fact that in the case of
a non-U.S. Holder that is a partnership, the U.S. tax consequences of holding
and disposing of shares of Class A Common Stock may be affected by certain
determinations made at the partner level), nor does it consider the tax
consequences to any person who is a shareholder, partner or beneficiary of a
holder of Class A Common Stock.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF THE OWNERSHIP AND DISPOSITION OF CLASS A COMMON STOCK, AS WELL AS THE
TAX CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER U.S. FEDERAL TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
INCOME TAX
DIVIDENDS. Generally, dividends paid on Class A Common Stock to a non-U.S.
holder will be subject to U.S. federal income tax. Except for dividends that
are effectively connected with a non-U.S. holder's conduct of a trade or
business within the United States, this tax is imposed and collected by
withholding at the rate of 30% of the amount of the dividend, unless reduced
by an applicable income tax treaty. Under current regulations, dividends paid
to an address in a country other than the United States are presumed, absent
knowledge to the contrary, to be paid to a resident of such country in
determining the applicability of a treaty for such purposes.
However, under recently finalized Treasury Regulations relating to
withholding of tax on payments to non-U.S. persons, which by their terms apply
to dividend and other payments made after December 31, 1998 (the "Final
Withholding Regulations"), a non-U.S. holder who is the beneficial owner
(within the meaning of the Final Withholding Regulations) of dividends paid on
Class A Common Stock and who wishes to claim the benefit of an applicable
treaty is generally required to satisfy certain certification and
documentation requirements. Certain special rules apply to claims for treaty
benefits made by non-U.S. persons that are entities rather than individuals
and to beneficial owners (within the meaning of the Final Withholding
Regulations) of dividends paid to entities in which such beneficial owners are
interest holders.
64
<PAGE>
Except as may be otherwise provided in an applicable income tax treaty,
dividends paid on Class A Common Stock to a non-U.S. holder that are
effectively connected with the holder's conduct of a trade or business within
the United States are subject to tax at ordinary U.S. federal income tax
rates, which tax is not collected by withholding (except as described below
under "--Backup Withholding and Information Reporting"). All or part of any
effectively connected dividends received by a non-U.S. corporation may also,
under certain circumstances, be subject to an additional "branch profits" tax
at a 30% rate, or such lower rate as may be specified by an applicable income
tax treaty. A non-U.S. holder who wishes to claim an exemption from
withholding for effectively connected dividends is generally required to
satisfy certain certification and documentation requirements.
A non-U.S. holder that is eligible for a reduced rate of U.S. withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the U.S. Internal
Revenue Service (the "I.R.S.").
DISPOSITION OF CLASS A COMMON STOCK. Generally, non-U.S. holders will not be
subject to U.S. federal income tax (or withholding thereof) in respect of gain
recognized on a disposition of Class A Common Stock unless (1) the gain is
effectively connected with the holder's conduct of a trade or business within
the United States (in which case the "branch profits" tax described above may
also apply if the holder is a non-U.S. corporation); (2) in the case of a
holder who is a nonresident alien individual and holds Class A Common Stock as
a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of the sale and certain other conditions are met; or
(3) the Company is or has been a "United States real property holding
corporation" for U.S. federal income tax purposes (which the Company does not
believe it has been or is currently, and does not anticipate becoming) and the
holder has held directly or constructively more than 5% of the outstanding
Class A Common Stock within the five-year period ending on the date of the
disposition.
ESTATE TAX
If an individual non-U.S. holder owns, or is treated as owning, Class A
Common Stock at the time of his or her death, such stock would be subject to
U.S. federal estate tax imposed on the estates of nonresident aliens, in the
absence of a contrary provision contained in an applicable tax treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under certain circumstances, the I.R.S. requires certain information
reporting and "backup withholding" at a rate of 31% with respect to certain
payments on Class A Common Stock.
DIVIDENDS. Under current law, dividends paid on Class A Common Stock to a
non-U.S. holder at an address outside the United States are generally exempt
from backup withholding tax and U.S. information reporting requirements (but
not from regular withholding tax, as discussed above). Under the Final
Withholding Regulations, for dividends paid after December 31, 1998, a non-
U.S. person must generally provide proper documentation indicating non-U.S.
status to a withholding agent in order to avoid backup withholding tax;
however, dividends paid to certain exempt recipients (not including
individuals) will not be subject to backup withholding even if such
documentation is not provided if the withholding agent is allowed to rely on
certain regulatory presumptions concerning the recipient's non-U.S. status
(including payment to an address outside the United States).
BROKER SALES. Payments of proceeds from the sale of Class A Common Stock by
a non-U.S. holder made to or through a U.S. office of a broker are generally
subject to both information reporting and backup withholding unless the holder
certifies its non-U.S. status under penalties of perjury or otherwise
establishes entitlement to an exemption. Payments of proceeds from the sale of
Class A Common Stock by a non-U.S. holder made to or through a non-U.S. office
of a broker generally will not be subject to information reporting or backup
withholding. However, payments made to or through certain non-U.S. offices,
including the non-U.S. offices of a U.S. broker, are generally subject to
information reporting (but not backup withholding) unless the holder certifies
its non-U.S. status under penalties of perjury or otherwise establishes
entitlement to an exemption.
A non-U.S. holder may obtain a refund of any excess amounts withheld under
the backup withholding rules by filing an appropriate claim for refund with
the I.R.S.
65
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Goldman, Sachs & Co., Bear, Stearns & Co. Inc. and Smith Barney Inc. are
acting as representatives (the "U.S. Representatives") of each of the
Underwriters named below (the "U.S. Underwriters"). Subject to the terms and
conditions set forth in a U.S. purchase agreement (the "U.S. Purchase
Agreement") among the Selling Stockholders, the Company and the U.S.
Underwriters, and concurrently with the sale of shares of Class A Common
Stock to the International Managers (as defined below), the Selling
Stockholders have agreed to sell to the U.S. Underwriters, and each of the
U.S. Underwriters severally and not jointly has agreed to purchase from the
Selling Stockholders, the number of shares of Class A Common Stock set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
Goldman, Sachs & Co. .........................................
Bear, Stearns & Co. Inc.......................................
Smith Barney Inc..............................................
---
Total....................................................
===
</TABLE>
The Company and the Selling Stockholders have also entered into an
international purchase agreement (the "International Purchase Agreement") with
certain underwriters outside the United States and Canada (the "International
Managers" and, together with the U.S. Underwriters, the "Underwriters") for
whom Merrill Lynch International, Goldman Sachs International, Bear, Stearns
International Limited and Smith Barney Inc. are acting as lead managers (the
"Lead Managers"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of shares
of Class A Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Selling Stockholders have agreed to sell to the International
Managers, and the International Managers severally and not jointly have agreed
to purchase from the Selling Stockholders, an aggregate of shares of Class
A Common Stock. The initial public offering price per share and the
underwriting discount per share of Class A Common Stock will be identical
under the U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such agreement if any of the shares of Class A Common Stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, under the U.S. Purchase Agreement and the International
Purchase Agreement, the commitments of non-defaulting Underwriters may be
increased. The closings with respect to the sale of shares of Class A Common
Stock to be purchased by the U.S. Underwriters and the International Managers
are conditioned upon one another.
The U.S. Representatives have advised the Selling Stockholders and the
Company that the U.S. Underwriters propose initially to offer the shares of
Class A Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Class A Common
Stock. The U.S. Underwriters may allow, and such dealers may reallow, a
discount not in excess of $ per share of Class A Common Stock on sales to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Selling Stockholders have granted an option to the U.S. Underwriters,
exercisable for 30 days after the date of this Prospectus, to purchase up to
an aggregate of additional shares of Class A Common Stock at the initial
public offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The U.S. Underwriters may exercise these options solely
to cover over-allotments, if any, made on the sale of the
66
<PAGE>
Class A Common Stock offered hereby. To the extent that the U.S. Underwriters
exercise these options, each U.S. Underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares of Class A
Common Stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. The Selling Stockholders have also granted an option
to the International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of additional shares of Class A
Common Stock to cover over-allotments, if any, on terms similar to those
granted to the U.S. Underwriters.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price up to of the shares of Class A Common
Stock offered hereby to be sold to certain employees of the Company and
certain other persons. The number of shares of Class A Common Stock available
for sale to the general public will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares which are not orally
confirmed for purchase within one day of the pricing of the Offerings will be
offered by the Underwriters to the general public on the same terms as the
other shares offered hereby.
The Selling Stockholders, the Company's executive officers and directors,
and certain other stockholders have agreed, subject to certain exceptions, not
to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or
transfer any shares of Class A Common Stock or securities convertible into or
exchangeable or exercisable for Class A Common Stock, whether now owned or
thereafter acquired by the person or entity executing the agreement or with
respect to which the person or entity executing the agreement thereafter
acquires the power of disposition, or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement that transfers, in whole or in part, the economic consequence
of ownership of the Class A Common Stock whether any such swap or transaction
is to be settled by delivery of Class A Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers are permitted
to sell shares of Class A Common Stock to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Class A Common Stock
will not offer to sell or sell shares of Class A Common Stock to persons who
are non-U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell shares of Class A
Common Stock will not offer to sell or sell shares of Class A Common Stock to
U.S. persons or to Canadian persons or to persons they believe intend to
resell to U.S. or Canadian persons, except in the case of transactions
pursuant to the Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Class A
Common Stock of CDW. The initial public offering price will be determined
through negotiations among the Company, the Selling Stockholders, the U.S.
Representatives and the Lead Managers. The factors to be considered in
determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the U.S. Representatives and Lead Managers believe to be comparable to the
Company, certain financial information of the Company, the history of, and the
prospects for, the Company and the industry in which it competes, and an
assessment of the Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the present
state of the Company's development and the above factors in relation to market
values and various valuation measures of other companies engaged in activities
similar to the Company. There can be no assurance given that an active trading
market will develop for the Class A Common Stock or that the Class A Common
Stock will trade in the public market subsequent to the Offerings at or above
the initial public offering price.
67
<PAGE>
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol " ." In order to meet the requirements for
listing of the Class A Common Stock on the New York Stock Exchange, the U.S.
Underwriters and International Managers have undertaken to sell lots of 100 or
more shares to a minimum of 2,000 beneficial owners.
The Underwriters and International Managers do not intend to confirm sales
of the Class A Common Stock offered hereby to any accounts over which they
exercise discretionary authority.
CDW and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including certain liabilities under the Securities Act, or to contribute to
payments which the U.S. Underwriters and International Managers may be
required to make in respect thereof.
Until the distribution of the Class A Common Stock is completed, rules of
the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Class A Common Stock. As an
exception to these rules, the U.S. Representatives are permitted to engage in
certain transactions that stabilize the price of the Class A Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Offerings, i.e., if they sell more shares of Class A
Common Stock than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The U.S. Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Class A Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the Class
A Common Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might have been in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of the Class A Common Stock
to the extent that it discourages resales of the Class A Common Stock.
None of the Company, the Selling Stockholders or any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
Class A Common Stock. In addition, none of the Company, the Selling
Stockholders or any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
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<PAGE>
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for CDW and the Selling Stockholders by Debevoise & Plimpton, New
York, New York. Certain legal matters will be passed upon for the Underwriters
by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York. Debevoise & Plimpton also acts
and may hereafter act as counsel to CD&R and its affiliates and to CDW and its
affiliates. Franci J. Blassberg, Esq., a member of Debevoise & Plimpton, is
married to Joseph L. Rice, III, a general partner of Associates IV, the
general partner of Fund IV.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1997 and the consolidated statements of income, stockholders' equity and cash
flows of the Company for each of the three years in the period ended December
31, 1997 included in this Prospectus have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A registration statement (the "Registration Statement") on Form S-1 under
the Securities Act has been filed with the Commission with respect to the
shares of Class A Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and
exhibits and schedules thereto, certain portions having been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Class A Common Stock
offered hereby, reference is hereby made to the Registration Statement and
such exhibits thereto and the financial statements, notes and schedules filed
as part thereof, which may be inspected, without charge, at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 75 Park Place, New York, New York 10007 and Northwestern
Atrium Center, 500 W. Madison Street, 14th Floor, Chicago, Illinois 60611.
Copies of all or any portion of the Registration Statement may be obtained
from the Public Reference Section of the Commission upon payment of prescribed
fees. The Commission also maintains a worldwide web site at http://www.sec.gov
which contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Statements made in this Prospectus concerning the provisions of any document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of the document included as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by this reference.
CDW intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and with quarterly reports for the
first three quarters of each fiscal year containing unaudited consolidated
summary financial information.
69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997............... F-3
Consolidated Statements of Income for the years ended December 31, 1995,
1996 and 1997............................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997.......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997....................................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
CDW Holding Corporation:
We have audited the accompanying consolidated balance sheets of CDW Holding
Corporation and subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the three years in the period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of CDW Holding Corporation and subsidiaries as of December 31, 1996 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
February 6, 1998, except for Note 18,
as to which the date is February 13, 1998.
F-2
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ -- $ 7,620
Trade accounts receivable, net of allowance for doubtful
accounts of $10,075 and $10,814 in 1996 and 1997,
respectively............................................ $311,896 351,170
Other accounts receivable................................ 19,040 17,261
Inventories.............................................. 263,107 299,406
Income tax receivable.................................... -- 3,405
Prepaid expenses and other current assets................ 1,998 3,699
Deferred income taxes (Note 7)........................... 12,731 14,277
-------- --------
Total current assets................................... 608,772 696,838
Property, buildings and equipment, net (Note 4)............ 93,951 95,082
Trademarks, net of accumulated amortization of $453 and
$586 in 1996 and 1997, respectively....................... 3,541 3,408
Goodwill, net of accumulated amortization of $1,887 and
$4,522 in 1996 and 1997, respectively (Note 16)........... 62,553 65,923
Other assets (Note 5)...................................... 4,670 9,609
-------- --------
Total assets........................................... $773,487 $870,860
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $283,434 $311,796
Accrued payroll and benefit costs........................ 25,597 27,694
Restructuring reserve.................................... 4,541 3,982
Income taxes payable..................................... 4,972 --
Other current liabilities (Note 6)....................... 17,160 17,063
-------- --------
Total current liabilities.............................. 335,704 360,535
Long-term debt (Notes 8 and 18)............................ 260,635 294,275
Other noncurrent liabilities............................... 6,311 5,875
Deferred income taxes (Note 7)............................. 13,161 16,662
-------- --------
Total liabilities...................................... 615,811 677,347
Commitments and contingencies (Note 14)
Redeemable Class A common stock, $.01 par value, 88,082 and
89,306 shares issued and outstanding in 1996 and 1997,
respectively (Note 9)..................................... 8,930 8,978
Stockholders' equity (Note 9):
Class A common stock, $.01 par value, 2,000,000
authorized, 933,280, shares issued and outstanding in
1996 and 1997........................................... 9 9
Class B nonvoting convertible common stock, $.01 par
value, 2,000,000 shares authorized...................... -- --
Additional paid-in capital............................... 93,319 93,319
Retained earnings........................................ 53,129 89,366
Common stock to be issued under option................... 2,500 2,500
Foreign currency translation adjustment.................. (211) (659)
-------- --------
Total stockholders' equity............................. 148,746 184,535
-------- --------
Total liabilities and stockholders' equity............. $773,487 $870,860
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Sales, net.................................... $1,857,042 $2,274,622 $2,594,819
Cost of goods sold (exclusive of depreciation
and amortization)............................ 1,535,998 1,869,565 2,130,900
---------- ---------- ----------
Gross profit................................ 321,044 405,057 463,919
Selling, general and administrative expenses.. 257,972 326,003 372,532
Depreciation and amortization................. 7,339 10,846 11,331
---------- ---------- ----------
Income from operations...................... 55,733 68,208 80,056
Interest expense, net......................... 15,813 17,382 20,109
---------- ---------- ----------
Income before income taxes and extraordinary
charge..................................... 39,920 50,826 59,947
Provision for income taxes (Note 7)........... 14,790 18,364 23,710
---------- ---------- ----------
Income before extraordinary charge.......... 25,130 32,462 36,237
Extraordinary charge, net of applicable taxes
(Note 8)..................................... 8,068 -- --
---------- ---------- ----------
Net income.................................. $ 17,062 $ 32,462 $ 36,237
========== ========== ==========
Basic earnings per share:
Income before extraordinary change.......... $ 25.11 $ 31.97 $ 35.48
Extraordinary charge........................ 8.06 -- --
---------- ---------- ----------
Net income.................................. $ 17.05 $ 31.97 $ 35.48
========== ========== ==========
Diluted earnings per share:
Income before extraordinary change.......... $ 23.86 $ 29.47 $ 31.53
Extraordinary charge........................ 7.66 -- --
---------- ---------- ----------
Net income.................................. $ 16.20 $ 29.47 $ 31.53
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON FOREIGN
ADDITIONAL STOCK TO CURRENCY
PAID-IN RETAINED BE ISSUED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS UNDER OPTION ADJUSTMENT
------- ------ ---------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1994................... 933,280 $ 9 $93,319 $ 3,605 $2,500 $ 42
Net income............ -- -- -- 17,062 -- --
Translation
adjustment........... -- -- -- -- -- (168)
------- ---- ------- ------- ------ -----
Balances at December 31,
1995................... 933,280 9 93,319 20,667 2,500 (126)
Net income............ -- -- -- 32,462 -- --
Translation
adjustment........... -- -- -- -- -- (85)
------- ---- ------- ------- ------ -----
Balances at December 31,
1996................... 933,280 9 93,319 53,129 2,500 (211)
Net income............ -- -- -- 36,237 -- --
Translation
adjustment........... -- -- -- -- -- (448)
------- ---- ------- ------- ------ -----
Balances at December 31,
1997................... 933,280 $ 9 $93,319 $89,366 $2,500 $(659)
======= ==== ======= ======= ====== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 17,062 $ 32,462 $ 36,237
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 7,339 10,846 11,331
Amortization of debt issuance costs and
interest rate caps.......................... 1,213 531 418
Extraordinary charge, net of applicable
taxes....................................... 8,068 -- --
Charge in lieu of and deferred income taxes.. 14,222 (78) 2,837
Changes in assets and liabilities, excluding
the effects of acquisitions:
Trade and other receivables................ (26,844) (21,058) (32,641)
Inventories................................ (26,874) (24,389) (31,671)
Prepaid and other current assets........... 254 5,930 (1,120)
Other assets............................... (1,202) 700 (3,652)
Accounts payable........................... 27,118 20,323 9,690
Accrued payroll and benefit costs.......... 6,287 (1,942) 1,594
Restructuring reserve...................... (2,909) (1,636) (1,499)
Other current and noncurrent liabilities... 1,995 (6,472) (2,646)
--------- --------- ---------
Net cash (used for) provided by operating
activities.............................. 25,729 15,217 (11,122)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures......................... (6,456) (9,411) (12,446)
Proceeds from the sale of property, buildings
and equipment............................... 668 2,338 3,996
Acquisitions, net of cash acquired (Note 15). (6,181) (103,918) (13,914)
--------- --------- ---------
Net cash used for investing activities..... (11,969) (110,991) (22,364)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt................. 878,930 544,907 426,594
Repayments of long-term debt................. (893,038) (459,730) (389,613)
Outstanding checks in excess of cash
available................................... 2,292 1,489 4,249
Debt issuance costs.......................... (218) (682) (172)
Issuance and redemption of common stock and
exercise of stock options, net.............. 2,224 1,200 48
--------- --------- ---------
Net cash provided by (used for) financing
activities................................ (9,810) 87,184 41,106
--------- --------- ---------
Net change in cash and cash equivalents........ 3,950 (8,590) 7,620
Cash and cash equivalents at the beginning of
the period.................................... 4,640 8,590 --
--------- --------- ---------
Cash and cash equivalents at the end of the
period........................................ $ 8,590 $ -- $ 7,620
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. ORGANIZATION:
On February 28, 1994, CDW Holding Corporation (CDW) and its subsidiaries
(collectively, the Company) completed the acquisition of substantially all of
the assets and certain liabilities of Westinghouse Electric Supply Company
from Westinghouse Electric Corporation (Westinghouse). The Company was formed
by the Clayton & Dubilier Private Equity Fund IV Limited Partnership, managed
by Clayton, Dubilier & Rice, Inc. for the purpose of the acquisition. All of
the Company's commercial activities, which commenced February 28, 1994, are
carried out by WESCO Distribution, Inc. and its subsidiaries (WESCO). WESCO is
a wholly-owned subsidiary of CDW. WESCO, headquartered in Pittsburgh,
Pennsylvania, is a full-line distributor of electrical supplies and equipment
and currently operates branch locations in the United States, Canada, Mexico,
Puerto Rico and Guam.
The acquisition was accounted for as a purchase and, accordingly, the assets
and liabilities acquired have been recorded at their estimated fair value at
the date of acquisition, less the excess of the fair value of the assets and
liabilities acquired over the purchase price. This excess was allocated to the
noncurrent assets of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These may affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements. They may also affect the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates upon subsequent resolution of some
matters.
Revenue Recognition:
Revenues of the Company are recognized at the time of product shipment.
Cash Equivalents:
Cash equivalents are defined as highly liquid investments with original
maturities of 90 days or less when purchased.
Inventories:
Inventories primarily consist of merchandise purchased for resale and are
stated at the lower of cost or market. Cost is determined principally under
the average cost method.
Property, Buildings and Equipment:
Property, buildings and equipment are recorded at cost. Depreciation expense
is determined over the estimated useful lives of the assets using the
straight-line method. Leasehold improvements are amortized over either their
respective lease terms or their estimated lives, whichever is shorter.
Expenditures for new facilities and improvements that extend the useful life
of an asset are capitalized. Ordinary repairs and maintenance are expensed as
incurred. When property is retired or otherwise disposed of, the cost and the
related accumulated depreciation are removed from the accounts and any related
gains or losses are recorded.
F-7
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED:
Intangibles:
Goodwill and other intangibles arising from acquisitions are being amortized
on a straight-line basis over periods not exceeding 25 years. The Company
regularly reviews the individual components of the balance by evaluating the
estimated future undiscounted cash flows to determine the recoverability of
the assets and recognizes, on a current basis, any decrease in value.
Trademarks acquired are recorded at cost and are amortized on a straight-
line basis over periods not exceeding 25 years.
Income Taxes:
Deferred income taxes result primarily from temporary differences between
financial and tax reporting. A valuation allowance is provided when a portion
or all of a deferred tax asset may not be realized.
Foreign Currency Translation:
The local currency is the functional currency for the Company's operations
outside the United States. Assets and liabilities of these operations are
translated to U.S. dollars at the exchange rate in effect at each year-end.
Income statement accounts are translated at the average exchange rate
prevailing during the year. Translation adjustments arising from the use of
differing exchange rates from period to period are included as a component of
stockholders' equity. Gains and losses from foreign currency transactions are
included in net income for the period.
Environmental Expenditures:
The Company has facilities and operations which distribute certain products
that must comply with environmental regulations and laws. Expenditures for
current operations are expensed or capitalized, as appropriate. Expenditures
relating to existing conditions caused by past operations, and which do not
contribute to future revenue, are expensed. Liabilities are recorded when
remedial efforts are probable and the costs can be reasonably estimated.
Earnings Per Share:
Basic earnings per share are computed by dividing net income by the common
shares outstanding during the respective periods. Diluted earnings per share
are computed by dividing net income by the common and common equivalent shares
outstanding during the respective periods. The dilutive effect of common share
equivalents is considered in the diluted earnings per share computation using
the treasury stock method.
Reclassifications:
Certain prior year amounts have been reclassified in order to conform with
the current presentations.
New Accounting Pronouncements:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." This Statement, which is effective for the 1997 financial statements,
establishes standards for computing and presenting earnings per share and
requires restatement of all prior period earnings per share data presented.
The provisions of SFAS No. 128 have been adopted and the effects are included
in the financial statements.
F-8
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED:
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying
comprehensive income and its components. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
Additionally, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments
in annual financial statements and related disclosures about products and
services, geographic areas and major customers. These Statements are effective
for financial statements for fiscal years beginning after December 15, 1997.
Management is currently evaluating the implications of these Statements.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT SUPPLIERS:
The Company distributes its products and extends credit to a large number of
customers in the industrial, construction, utility and manufactured structures
market. In addition, one supplier accounted for approximately 20%, 18%, and
18% of the Company's purchases for the years ended December 31, 1995, 1996 and
1997, respectively.
4. PROPERTY, BUILDINGS AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Land................................................... $ 18,543 $ 17,875
Buildings and leasehold improvements................... 59,174 61,629
Furniture, fixtures and equipment...................... 27,412 30,083
-------- --------
105,129 109,587
Less: accumulated depreciation and amortization........ (14,266) (20,721)
-------- --------
90,863 88,866
Construction in progress............................... 3,088 6,216
-------- --------
$ 93,951 $ 95,082
======== ========
5. OTHER ASSETS:
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Debt issuance costs.................................... $ 1,098 $ 1,270
Software costs......................................... 5,162 6,846
Favorable lease commitments............................ 1,054 1,054
Other.................................................. 879 1,916
-------- --------
8,193 11,086
Less: accumulated amortization......................... (6,036) (7,355)
-------- --------
2,157 3,731
Restricted cash........................................ 2,513 5,878
-------- --------
$ 4,670 $ 9,609
======== ========
</TABLE>
F-9
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
5. OTHER ASSETS--CONTINUED:
Debt issuance costs are being amortized on a straight-line basis, which does
not differ significantly from the effective interest rate method, over the
term of the related debt (see Note 8).
Restricted cash represents proceeds received from the sale of properties
which collateralize the First Mortgage Notes. Such proceeds are restricted for
either repayment of the First Mortgage Notes or acquisition of additional
properties which would be issued as collateral under the First Mortgage Notes
(see Note 8).
6. OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Accrued taxes other than income........................... $ 9,782 $10,696
Accrued interest.......................................... 1,912 1,508
Notes payable............................................. 1,597 891
Other current liabilities................................. 3,869 3,968
------- -------
$17,160 $17,063
======= =======
</TABLE>
The notes payable relate to a portion of the purchase price for certain
acquisitions.
7. INCOME TAXES:
At the acquisition date, February 28, 1994, the Company had approximately
$45,000 of future tax deductions ($18,000 of tax benefits) which resulted in
the creation of certain deferred tax assets. A valuation allowance was
recorded for the full amount of the assets reflected on the opening balance
sheet since the realization of these future benefits was not considered likely
at that time. However, at December 31, 1996, all of these deductions had been
recognized. The recognition of these benefits resulted in a reduction in
noncurrent intangible assets, principally trademarks.
The charge in lieu of taxes recognized in 1995 and 1996 represents the
amount of tax expense that would have been recognized had the benefits
described above been recorded at the time of the acquisition.
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
U.S. federal................................. $ 468 $15,360 $16,689
State........................................ 100 2,872 3,067
Foreign...................................... -- 210 1,117
Deferred:
U.S. federal................................. 7,218 (1,588) 2,727
State........................................ 1,314 (267) (183)
Foreign...................................... 740 523 293
Charge in lieu of taxes...................... 4,950 1,254 --
------- ------- -------
Provision for income taxes before extraordinary
charge........................................ 14,790 18,364 23,710
Tax benefit of extraordinary charge............ (5,244) -- --
------- ------- -------
$ 9,546 $18,364 $23,710
======= ======= =======
</TABLE>
F-10
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. INCOME TAXES--CONTINUED:
The components of income before income taxes and extraordinary charge by
jurisdiction are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
United States...................................... $35,815 $49,072 $57,083
Canada............................................. 4,105 1,754 2,864
------- ------- -------
$39,920 $50,826 $59,947
======= ======= =======
</TABLE>
A reconciliation between the federal statutory income tax rate and the
effective rate is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal income taxes at the statutory rate............... 34.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit.... 5.2 4.2 3.3
Nondeductible expenses................................... 1.8 2.5 2.6
Tax on income of foreign subsidiary...................... 1.0 (0.1) 0.3
Net adjustment to valuation allowance.................... (5.0) (5.8) --
Other.................................................... -- 0.3 (1.6)
---- ---- ----
37.0% 36.1% 39.6%
==== ==== ====
</TABLE>
In 1995 and 1996, the Company determined that it was more likely than not
that it would realize the benefits of certain deferred tax assets originating
subsequent to the acquisition. As a result, the Company recognized benefits of
approximately $1,980 and $2,928 in 1995 and 1996, respectively, associated
with the realization of the post acquisition deferred tax assets through the
reversal of the associated valuation allowance.
The deferred taxes are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accounts receivable................................... $ 3,327 $ 4,236
Inventory............................................. 4,412 4,819
Restructuring reserve................................. 90 484
Other................................................. 4,902 4,738
-------- --------
12,731 14,277
-------- --------
Intangibles........................................... (320) (3,766)
Property, buildings and equipment..................... (4,429) (4,079)
Other................................................. (8,412) (8,817)
-------- --------
(13,161) (16,662)
-------- --------
$ (430) $ (2,385)
======== ========
</TABLE>
F-11
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
8. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
-------- --------
<S> <C> <C>
United States debt agreements:
Revolving Credit Loans (A)................................. $177,400 $205,900
Zero Coupon First Mortgage Note, due February 2001, net of
unamortized debt discount of $21,046 in 1996 and $16,601
in 1997 (B)............................................... 54,473 58,918
Other...................................................... 700 2,839
Canadian debt agreements (U.S. dollar equivalents):
Revolving Credit Loans (A)................................. 21,900 20,245
8% First Mortgage Note, due February 2001 (C).............. 6,162 6,373
-------- --------
$260,635 $294,275
======== ========
</TABLE>
- --------
(A) The Company has entered into credit agreements with various banks
providing for an aggregate of $360,000 ($300,000 at December 31, 1996) of
revolving credit facilities, expiring February 2000. The agreements
provide for floating rates, based on either Prime or LIBOR in the United
States and Prime or Bankers' Acceptance rates in Canada plus a fixed
margin. The interest rates for 1996 for the revolving credit loans ranged
from 6.3% to 8.3% in the United States and was 3.2% in Canada. The
interest rates for 1997 for the revolving credit loans ranged from 6.1% to
8.5% in the United States and was 4.4% to 5.3% in Canada. The weighted-
average interest rate was 6.7% and 6.0% for the years ended December 31,
1996 and 1997, respectively (see Note 18).
In 1995, the Company terminated the existing credit agreements and
refinanced the outstanding indebtedness. In connection with this
refinancing, the Company recorded an extraordinary charge of $13,312
($8,068 after-tax) relating to the write-off of unamortized debt issuance
and other costs associated with the early termination of the debt.
(B) The Company issued a Zero Coupon First Mortgage Note to Westinghouse for
the purchase of the real estate acquired in the United States. This note
has a yield to maturity of 8% and a maturity value of $75,519.
(C) The Company issued a First Mortgage Note to Westinghouse for the purchase
of the real estate acquired in Canada. All interest and principal will be
due February 2001.
The Company has two interest rate cap agreements with individual notional
amounts of $80,000 that expire in March 1998 and August 1999. The aggregate
cost of the interest rate caps of $278 is being amortized to interest expense
over the period of the agreements on a straight-line basis. The agreements
effectively provide a ceiling for interest at rates ranging from 6.8% to 7.0%.
The market value of the interest rate caps is estimated to be $42 at December
31, 1997.
The agreements contain various restrictive covenants that, among other
things, impose (i) limitations on the incurrence of additional indebtedness or
guaranties; (ii) limitations on the issuance of additional stock of
subsidiaries; (iii) limitations on liens or negative pledges; (iv) limitations
on investments, loans, acquisitions or advances; (v) limitations on dividends;
(vi) limitations on the sale, lease or other disposal of assets; (vii)
limitations on transactions among affiliates which are not arms-length; (viii)
limitations on entering into new lines of business; and (ix) limitations on
capital expenditures. In addition, the agreements require the Company to meet
certain financial tests based on net worth, a funded indebtedness to
consolidated EBITDA ratio and fixed charge coverage.
F-12
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
8. LONG-TERM DEBT--CONTINUED:
The Company is permitted to pay dividends under certain limited
circumstances. At December 31, 1997, no retained earnings were available to
pay dividends.
The Company had outstanding letters of credit in the amount $3,250 at
December 31, 1996 and 1997. These letters of credit are used as collateral for
performance and bid bonds. The value of these letters of credit approximates
contract value.
The value of assets collateralized under the aforementioned debt agreements
was approximately $651,348 and $719,533 at December 31, 1996 and 1997,
respectively.
The fair value of the Company's long-term debt is estimated to be
approximately $255,620 and $290,035 at December 31, 1996 and 1997,
respectively, based on current market interest rates and discounted cash
flows.
Future principal payments of long-term debt in excess of one year as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1999................................ $228,230
2000................................ 385
2001................................ 65,594
2002................................ 66
</TABLE>
9. CAPITAL STOCK:
Common Stock:
There are 2,000,000 shares each of Class A and Class B common stock
authorized at a par value of $.01 per share. The Class B common stock is
identical to the Class A common stock, except for voting and conversion
rights. The holders of Class B common stock have no voting rights. With
certain exceptions, Class B common stock may be converted, at the option of
the holder, into the same number of shares of Class A common stock. No Class B
common stock was outstanding at December 31, 1996 and 1997.
At December 31, 1997, shares of common stock reserved for future issuance
were as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
Stock purchase plan......... 24,986
Stock option plan........... 81,114
Stock option plan for branch
employees.................. 24,900
</TABLE>
Redeemable Class A Common Stock:
Certain employees and key management of the Company who hold Class A common
stock and options may require the Company to repurchase, under certain
conditions, all of the shares held. This repurchase right terminates upon the
consummation of an initial public offering of CDW's Class A common stock.
10. STOCK INCENTIVE PLANS:
Stock Purchase Plan:
Under the Company's stock purchase plan, certain employees of the Company
may be granted an opportunity to purchase CDW's Class A common stock. The
maximum number of shares available for purchase
F-13
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
10. STOCK INCENTIVE PLANS--CONTINUED:
may not exceed 55,000. The purchase price per share is determined by the Board
of Directors of the Company to represent fair market value, as defined by the
Stock Subscription Agreement. Should the purchase price of the stock be less
than the fair market value of the stock at the grant date, such excess will be
recorded as compensation expense in the consolidated statement of income. The
plan will continue in effect until either the earlier of June 15, 1999, or the
date on which all shares of common stock to be offered have been issued. At
December 31, 1996 and 1997, a total of 30,504 and 31,304 shares, respectively,
have been purchased under the plan. During 1995, 14,624 shares were purchased
for a weighted-average share price of $103 under the plan. During 1996, 2,610
shares were purchased for a weighted-average share price of $169 under the
plan. During 1997, 800 shares were purchased for a weighted-average share
price of $251 under the plan. In conjunction with the purchase of shares
pursuant to the plan, the Company has granted options to purchase shares of
common stock equal to approximately one and one-third of the number of shares
purchased. See the stock option plan described below for further information.
Other Stock Purchases:
In addition to the stock purchase plan, certain key management employees of
the Company, nonemployee directors and other investors were granted an
opportunity to purchase CDW's Class A common stock. The purchase price per
share was determined by the Board of Directors to represent the fair market
value, as defined by the Stock Subscription Agreement, at the date of grant.
At each of December 31, 1996 and 1997, 54,150 shares had been purchased.
During 1995, 8,140 shares were purchased at a weighted-average share price of
$111 under these additional offerings. During 1996, 2,140 shares were
purchased at a share price of $195 under an additional offering.
Stock Option Plan:
Participation in the Company's stock option plan is limited to officers and
key employees of the Company. The maximum number of Class A common stock
options (and the maximum shares of common stock subject to options) granted
under the plan may not exceed 181,000. The exercise price per share is
determined by the Board of Directors of the Company, but will not be less than
the estimated fair market value, as defined by the Stock Option Agreements, on
the grant date. Options granted to a participant will vest and will become
exercisable over five years, except in the event of a change in control. Each
option terminates on the tenth anniversary of its grant date unless terminated
sooner under certain conditions.
Stock Option Plan for Branch Employees:
The Company also has a stock option plan whose participation is limited to
branch managers and other key branch personnel. The Compensation Committee of
the Board of Directors of the Company may grant such employees up to 50,000
options. Provisions for exercise price, vesting and termination of these
options are substantially the same as the stock option plan described above.
F-14
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
10. STOCK INCENTIVE PLANS--CONTINUED:
The transactions for shares under options are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Outstanding, beginning of year
Number.............................................. 68,860 95,970 98,842
Weighted-average exercise price..................... $ 100 $ 102 $ 107
Granted
Number............................................... 27,110 6,300 26,140
Weighted-average exercise price..................... $ 106 $ 181 $ 198
Exercised
Number.............................................. -- 3,428 1,714
Weighted-average exercise price..................... -- $ 100 $ 100
Canceled
Number.............................................. -- -- 3,424
Weighted-average exercise price..................... -- -- $ 102
Outstanding, end of year
Number.............................................. 95,970 98,842 119,844
Weighted-average exercise price..................... $ 102 $ 107 $ 127
Exercisable, end of year
Number.............................................. 10,226 18,796 33,848
Weighted-average exercise price..................... $ 100 $ 101 $ 103
</TABLE>
The following summarizes certain stock options information at December 31,
1997:
Options outstanding:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICE NUMBER REMAINING LIFE EXERCISE PRICE
-------------- ------- ---------------- ----------------
<S> <C> <C> <C>
$100--$251 119,844 7.3 $127
Options exercisable:
<CAPTION>
RANGE OF WEIGHTED-AVERAGE
EXERCISE PRICE NUMBER EXERCISE PRICE
-------------- ------- ----------------
<S> <C> <C> <C>
$100--$195 33,848 $103
</TABLE>
The Westinghouse option, discussed in Note 13, has not been included in the
above data.
The stock option plans require the Company to repurchase the exercisable
portion of the options held by an employee if the employee dies, is disabled
or terminated without cause. This repurchase right terminates upon
consummation of an initial public offering of CDW's Class A common stock.
Since the triggering event requiring the repurchase is considered remote, the
Company accounts for the option as a fixed plan and accordingly no
compensation expense has been recorded.
In connection with the implementation of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has elected to continue to account for
stock-based compensation arrangements under the provisions of Accounting
Principles Board (APB) Opinion No. 25, which resulted in no compensation costs
being recorded.
F-15
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
10. STOCK INCENTIVE PLANS--CONTINUED:
If compensation costs had been determined based on the fair value at the
grant dates according to SFAS No. 123, the Company's net income and earnings
per share, would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net income:
As reported................................... $17,062 $32,462 $36,237
Pro forma..................................... 16,960 32,399 35,711
Basic earnings per share:
As reported................................... 17.05 31.97 35.48
Pro forma..................................... 16.95 31.91 34.97
Diluted earnings per share:
As reported................................... 16.20 29.47 31.53
Pro forma..................................... 16.10 29.41 31.07
The weighted-average fair value of options granted was $6.23, $16.70 and
$33.56 per share for the years ended 1995, 1996 and 1997, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Sholes based pricing model with the following assumptions:
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... 6.4% 6.5% 6.5%
Option term..................................... 7 years 7 years 7 years
</TABLE>
11. EARNINGS PER SHARE:
A reconciliation of the numerator and denominator used to calculate basic
and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Income before extraordinary charge............ $ 25,130 $ 32,462 $ 36,237
Extraordinary charge.......................... 8,068 -- --
---------- ---------- ----------
Net income.................................... $ 17,062 $ 32,462 $ 36,237
========== ========== ==========
Weighted-average common shares outstanding
used in computing basic earnings per share... 1,000,735 1,015,238 1,021,271
Common shares issuable upon exercise of
dilutive outstanding stock options........... 52,609 86,335 127,928
---------- ---------- ----------
Weighted-average common shares and common
share equivalents used in computing diluted
earnings per share........................... 1,053,344 1,101,573 1,149,199
========== ========== ==========
Basic earnings per share:
Income before extraordinary charge.......... $ 25.11 $ 31.97 $ 35.48
Extraordinary charge........................ 8.06 -- --
---------- ---------- ----------
Net income.................................. $ 17.05 $ 31.97 $ 35.48
========== ========== ==========
Diluted earnings per share:
Income before extraordinary charge.......... $ 23.86 $ 29.47 $ 31.53
Extraordinary charge........................ 7.66 -- --
---------- ---------- ----------
Net income.................................. $ 16.20 $ 29.47 $ 31.53
========== ========== ==========
</TABLE>
F-16
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
12. EMPLOYEE BENEFITS:
A majority of the Company's employees are covered by defined contribution
retirement savings plans for their service rendered subsequent to the
acquisition date. Westinghouse retains certain retiree pension and health
benefits for service rendered prior to formation. U.S. employee contributions
of not more than 6% of eligible compensation are matched 50% by the Company.
Company contributions for Canadian employees range from 1%--6% of eligible
compensation based on years of service.
In addition, employer contributions may be made at the discretion of the
Board of Directors and can be based on the Company's current year performance.
Employees are credited for service with Westinghouse in determining the
vesting of Company contributions. For the years ended December 31, 1995, 1996
and 1997, the Company contributed $7,096, $9,256 and $12,453, respectively,
which was charged to expense.
13. RELATED PARTIES:
Pursuant to an agreement, Clayton, Dubilier & Rice, Inc. provides financial
advisory and management consulting services to the Company for an annual fee
of approximately $400.
WESCO purchases products and services from and sells products to
Westinghouse. A summary of these purchases and sales is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Purchases from Westinghouse....................... $27,481 $19,115 $15,498
Sales to Westinghouse............................. 27,311 21,192 21,666
</TABLE>
The amount due from Westinghouse at December 31, 1996 and 1997, net of
amounts owed, was approximately $4,664 and $2,623, respectively.
In connection with the acquisition, the Company granted Westinghouse an
option to purchase 100,000 shares of Class A common stock at a price of $100
per share. The option is exercisable until it terminates on February 28, 1999.
The Company has a right of first refusal if Westinghouse decides to sell its
option to a third party prior to its termination. The fair value of this
option, which was recorded at the acquisition, was $2,500 and is included in
the consolidated balance sheets as Common Stock to Be Issued Under Option.
14. COMMITMENTS AND CONTINGENCIES:
Future minimum rental payments required under operating leases, primarily
for real property that have noncancelable lease terms in excess of one year as
of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998............................................................... $17,692
1999............................................................... 14,831
2000............................................................... 12,838
2001............................................................... 10,602
2002............................................................... 6,175
Thereafter......................................................... 8,593
</TABLE>
Rental expense for the years ended December 31, 1995, 1996 and 1997, was
$16,326, $22,032 and $26,371, respectively.
F-17
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
14. COMMITMENTS AND CONTINGENCIES--CONTINUED:
The Company has litigation arising from time to time in the normal course of
business. In management's opinion, any present litigation the Company is aware
of will not materially affect the Company's consolidated financial position,
results of operations or cash flows.
Westinghouse agreed to indemnify the Company for certain environmental
liabilities that existed at the time of the acquisition. The Company has made
a claim under this indemnity amounting to $1.5 million. The ultimate
resolution of this environmental compliance issue is not expected to
materially impact the Company's consolidated financial position, results of
operations or cash flows.
The Company has guaranteed $5,636 in loans to certain stockholders at
December 31, 1997.
15. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest.......................................... $12,433 $ 11,600 $15,377
Income taxes...................................... 1,062 13,756 27,523
Details of acquisitions:
Fair value of assets acquired..................... 18,455 170,583 21,498
Value of liabilities assumed...................... (6,242) (54,884) (5,334)
Restructuring reserve............................. -- (5,102) --
Notes issued to seller............................ (5,900) (2,950) (2,250)
------- -------- -------
Cash paid for acquisitions........................ 6,313 107,647 13,914
Less: cash acquired............................... 132 3,729 --
------- -------- -------
$ 6,181 $103,918 $13,914
======= ======== =======
</TABLE>
16. ACQUISITIONS:
During the three years ended December 31,1997, the Company acquired eleven
distributors with branches located across the United States for an aggregate
purchase price of $12,423 and $158,802 and $19,248, respectively. The largest
acquisition, in April 1996, was EESCO, Inc. with headquarters in Chicago,
Illinois. These acquisitions resulted in goodwill of approximately $6,146,
$59,766 and $5,913 for the years ending 1995, 1996 and 1997, respectively.
The acquisitions have been accounted for under the purchase method of
accounting for business combinations. The results of operations of these
companies are included in the consolidated financial statements from the
acquisition dates forward. Pro forma results of these acquisitions, assuming
they had been made at the beginning of each year presented, would not be
materially different from the results reported.
In December 1997, the Company entered into definitive agreements to acquire
two distribution businesses for approximately $59,500 financed principally
through 45,000 in borrowings under the Company's credit agreement and $14,500
of uncollateralized notes. Up to $5,000 of such notes may be converted to
shares of Class
F-18
<PAGE>
CDW HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
16. ACQUISITIONS--CONTINUED:
A common stock at the initial public offering price at the election of the
holder, which election is required to be made prior to the initial public
offering. Both acquisitions closed in January 1998. These acquisitions have
been accounted for under the purchase method of accounting for business
combinations.
17. GEOGRAPHIC INFORMATION:
The Company is engaged principally in one line of business--distribution of
electrical supplies--which represents more than 90% of consolidated sales. The
following table presents information about the Company by geographic area.
There were no material amounts of sales or transfers among geographic areas
and no material amounts of United States export sales:
<TABLE>
<CAPTION>
UNITED STATES CANADA TOTAL
------------- -------- ----------
<S> <C> <C> <C>
As of and for the year ended December 31,
1995
Sales, net.................................. $1,598,618 $258,424 $1,857,042
Income from operations...................... 47,910 7,823 55,733
Identifiable assets......................... 500,905 80,431 581,336
As of and for the year ended December 31,
1996
Sales, net.................................. 2,014,107 260,515 2,274,622
Income from operations...................... 63,562 4,646 68,208
Identifiable assets......................... 688,791 84,696 773,487
As of and for the year ended December 31,
1997
Sales, net.................................. 2,313,862 280,957 2,594,819
Income from operations...................... 74,774 5,282 80,056
Identifiable assets......................... 781,692 89,168 870,860
</TABLE>
18. SUBSEQUENT EVENT:
On February 13, 1998, the Company amended the revolving credit agreements
(see Note 8). The amendment allows the Company to borrow up to a maximum of
$445,000 through February 2001, releases all previously required collateral
and amends certain restrictive covenants. The loans continue to adjust for
floating rates, based on either Prime or LIBOR in the United States and Prime
or Bankers' Acceptance rates in Canada plus a fixed margin.
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE CLASS A COMMON STOCK TO WHICH IT RELATES OR
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY CLASS A COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THE PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Dilution.................................................................. 17
Selected Financial Data................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 27
Management................................................................ 42
Certain Transactions and Relationships.................................... 53
Security Ownership by Management and Principal Stockholders............... 55
Selling Stockholders...................................................... 57
Description of Capital Stock.............................................. 58
Description of Certain Indebtedness....................................... 60
Shares Eligible for Future Sale........................................... 62
United States Federal Tax Considerations For Non-U.S. Holders............. 64
Underwriting.............................................................. 66
Legal Matters............................................................. 69
Experts................................................................... 69
Additional Information.................................................... 69
Index to Consolidated Financial Statements................................ F-1
</TABLE>
----------------
UNTIL , 1998 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
CDW HOLDING CORPORATION
CLASS A COMMON STOCK
----------------
P R O S P E C T U S
----------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 10, 1998
PROSPECTUS
SHARES
CDW HOLDING CORPORATION
CLASS A COMMON STOCK
-----------
All of the shares of Class A Common Stock of CDW Holding Corporation
offered hereby are being sold by certain stockholders (the "Selling
Stockholders") of CDW Holding Corporation. Of the shares of Class A Common
Stock offered hereby, shares are being offered for sale initially outside the
United States and Canada by the International Managers and shares are being
offered for sale initially in a concurrent offering in the United States and
Canada by the U.S. Underwriters. The initial public offering price and the
underwriting discount per share will be identical for both Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $ and $ per share. For a discussion relating to factors
to be considered in determining the initial public offering price, see
"Underwriting."
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) SELLING STOCKHOLDERS (2)
- -----------------------------------------------------------------------------------------------------
Per Share....................... $ $ $
- --------------------------------------------------------------------------------
Total (3)....................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) The Company has agreed to pay the expenses of the Offerings (other than the
Underwriting Discount) estimated at $ .
(3) The Selling Stockholders have granted to the International Managers and the
U.S. Underwriters options to purchase up to an additional and shares
of Class A Common Stock, respectively, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Selling Stockholders will be $ , $
and $ , respectively. See "Underwriting."
-----------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will be made in
New York, New York on or about , 1998.
-----------
MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
SALOMON SMITH BARNEY INTERNATIONAL
-----------
The date of this Prospectus is , 1998.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Merrill Lynch International ("Merrill Lynch"), Goldman Sachs International,
Bear, Stearns International Limited and Smith Barney Inc. are acting as lead
managers (the "Lead Managers") of each of the International Managers named
below (the "International Managers"). Subject to the terms and conditions set
forth in an international purchase agreement (the "International Purchase
Agreement") among the Selling Stockholders, the Company and the International
Managers, and concurrently with the sale of shares of Class A Common Stock
to the U.S. Underwriters (as defined below), the Selling Stockholders have
agreed to sell to the International Managers, and each of the International
Managers severally and not jointly has agreed to purchase from the Selling
Stockholders, the number of shares of Class A Common Stock set forth opposite
its name below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGER SHARES
--------------------- ---------
<S> <C>
Merrill Lynch International..............................
Goldman Sachs International..............................
Bear, Stearns International Limited......................
Smith Barney Inc.........................................
---
Total.......................
===
</TABLE>
The Company and the Selling Stockholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain underwriters
in the United States and Canada (the "U.S. Underwriters" and, together with
the International Managers, the "Underwriters") for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co.
Inc. and Smith Barney Inc. are acting as representatives (the "U.S.
Representatives"). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of shares of Class A
Common Stock to the International Managers pursuant to the International
Purchase Agreement, the Selling Stockholders have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally and not jointly have agreed
to purchase from the Selling Stockholders, an aggregate of shares of Class
A Common Stock. The initial public offering price per share and the
underwriting discount per share of Class A Common Stock will be identical
under the International Purchase Agreement and the U.S. Purchase Agreement .
In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Class A Common Stock being sold
pursuant to each such agreement if any of the shares of Class A Common Stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, under the International Purchase Agreement and the U.S.
Purchase Agreement, the commitments of non-defaulting Underwriters may be
increased. The closings with respect to the sale of shares of Class A Common
Stock to be purchased by the International Underwriters and the U.S.
Underwriters are conditioned upon one another.
The International Managers have advised the Selling Stockholders and the
Company that the International Managers propose initially to offer the shares
of Class A Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share of Class A Common
Stock. The International Managers may allow, and such dealers may reallow, a
discount not in excess of $ per share of Class A Common Stock on sales to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.
The Selling Stockholders have granted an option to the International
Managers, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of additional shares of Class A Common Stock at
the initial public offering price set forth on the cover page of this
Prospectus, less the underwriting discount.
67
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
The International Managers may exercise these option solely to cover over-
allotments, if any, made on the sale of the Class A Common Stock offered
hereby. To the extent that the International Managers exercise the option,
each International Manager will be obligated, subject to certain conditions,
to purchase a number of additional shares of Class A Common Stock
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Selling Stockholders also have granted an option to the
U.S. Underwriters, exercisable for 30 days after the date of this Prospectus,
to purchase up to an aggregate of additional shares of Class A Common Stock
to cover over-allotments, if any, on terms similar to those granted to the
International Managers.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price up to of the shares of Class A Common
Stock offered hereby to be sold to certain employees of the Company and
certain other persons. The number of shares of Class A Common Stock available
for sale to the general public will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares of Class A Common Stock
which are not orally confirmed for purchase within one day of the pricing of
the Offerings will be offered by the Underwriters to the general public on the
same terms as the other shares offered hereby.
The Selling Stockholders, the Company's executive officers and directors,
and certain other stockholders have agreed, subject to certain exceptions, not
to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or
transfer any shares of Class A Common Stock or securities convertible into or
exchangeable or exercisable for Class A Common Stock, whether now owned or
thereafter acquired by the person or entity executing the agreement or with
respect to which the person or entity executing the agreement thereafter
acquires the power of disposition, or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement that transfers, in whole or in part, the economic consequence
of ownership of the Class A Common Stock whether any such swap or transaction
is to be settled by delivery of Class A Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
The International Managers and U.S. Underwriters the have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters are permitted
to sell shares of Class A Common Stock to each other for purposes of resale at
the initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Class A Common Stock
will not offer to sell or sell shares of Class A Common Stock to persons who
are non- U.S. or non-Canadian persons or to persons they believe intend to
resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell shares of Class A
Common Stock will not offer to sell or sell shares of Class A Common Stock to
U.S. persons or to Canadian persons or to persons they believe intend to
resell to U.S. or Canadian persons, except in the case of transactions
pursuant to the Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Class A
Common Stock of CDW. The initial public offering price will be determined
through negotiations among the Company, the Selling Stockholders, the Lead
Managers and the U.S. Representatives. The factors to be considered in
determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the Lead Managers and U.S. Representatives believe to be comparable to the
Company, certain financial information of the Company, the history of, and the
prospects for, the Company and the industry in which it competes, and an
assessment of the Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the present
state of the Company's development and the above factors in relation to market
values and various valuation measures of other companies engaged in
68
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
activities similar to the Company. There can be no assurance given that an
active trading market will develop for the Class A Common Stock or that the
Class A Common Stock will trade in the public market subsequent to the
Offerings at or above the initial public offering price.
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol " ." In order to meet the requirements for
listing of the Class A Common Stock on the New York Stock Exchange, the
International Managers and U.S. Underwriters have undertaken to sell lots of
100 or more shares to a minimum of 2,000 beneficial owners.
The International Managers and U.S. Underwriters do not intend to confirm
sales of the Class A Common Stock offered hereby to any accounts over which
they exercise discretionary authority.
CDW and the Selling Stockholders have agreed to indemnify the International
Managers and the U.S. Underwriters against certain liabilities, including
certain liabilities under the Securities Act, or to contribute to payments
which the International Managers and U.S. Underwriters may be required to make
in respect thereof.
Until the distribution of the Class A Common Stock is completed, rules of
the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Class A Common Stock. As an
exception to these rules, the U.S. Representatives are permitted to engage in
certain transactions that stabilize the price of the Class A Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Offerings, i.e., if they sell more shares of Class A
Common Stock than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The U.S. Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Class A Common Stock in the open market to
reduce the Underwriters' short position or to stabilize the price of the Class
A Common Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might have been in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of the Class A Common Stock
to the extent that it discourages resales of the Class A Common Stock.
None of the Company, the Selling Stockholders or any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
Class A Common Stock. In addition, none of the Company, the Selling
Stockholders or any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Each International Manager has agreed that (i) it has not offered or sold,
and, for a period of six months from the Closing Date, will not offer or sell,
to persons in the United Kingdom, other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied with and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the shares of Class A Common
Stock in,
69
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
from or otherwise involving the United Kingdom; and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of shares of Class A Common Stock
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or is a
person to whom such document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Class A
Common Stock, or the possession, circulation or distribution of this
Prospectus or any other material relating to the Company or shares of Class A
Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Class A Common Stock may not be offered or sold,
directly or indirectly, and neither this Prospectus nor any other offering
material or advertisements in connection with the shares of Class A Common
Stock may be distributed or published, in or from any country or jurisdiction
except in compliance with any applicable rules and regulations of any such
country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
70
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for CDW and the Selling Stockholders by Debevoise & Plimpton, New
York, New York. Certain legal matters will be passed upon for the Underwriters
by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York. Debevoise & Plimpton also acts
and may hereafter act as counsel to CD&R and its affiliates and to CDW and its
affiliates. Franci J. Blassberg, Esq., a member of Debevoise & Plimpton, is
married to Joseph L. Rice, III, a general partner of Associates IV, the
general partner of Fund IV.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1997 and the consolidated statements of income, stockholders' equity and cash
flows of the Company for each of the three years in the period ended December
31, 1997 included in this Prospectus have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A registration statement (the "Registration Statement") on Form S-1 under
the Securities Act has been filed with the Commission with respect to the
shares of Class A Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and
exhibits and schedules thereto, certain portions having been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Class A Common Stock
offered hereby, reference is hereby made to the Registration Statement and
such exhibits thereto and the financial statements, notes and schedules filed
as part thereof, which may be inspected, without charge, at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 75 Park Place, New York, New York 10007 and Northwestern
Atrium Center, 500 W. Madison Street, 14th Floor, Chicago, Illinois 60611.
Copies of all or any portion of the Registration Statement may be obtained
from the Public Reference Section of the Commission upon payment of prescribed
fees. The Commission also maintains a worldwide web site at http://www.sec.gov
which contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Statements made in this Prospectus concerning the provisions of any document
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of the document included as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by this reference.
CDW intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and with quarterly reports for the
first three quarters of each fiscal year containing unaudited consolidated
summary financial information.
71
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE CLASS A COMMON STOCK TO WHICH IT RELATES OR
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY CLASS A COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN ANY CHANGE IN THE FACTS SET FORTH IN THE PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
IN THE PROSPECTUS, UNLESS OTHERWISE SPECIFIED, REFERENCES TO "DOLLARS" AND "$"
ARE TO UNITED STATES DOLLARS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Dilution.................................................................. 17
Selected Financial Data................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 28
Management................................................................ 42
Certain Transactions and Relationships.................................... 53
Security Ownership by Management and Principal Stockholders............... 55
Selling Stockholders...................................................... 57
Description of Capital Stock.............................................. 58
Description of Certain Indebtedness....................................... 60
Shares Eligible for Future Sale........................................... 62
United States Federal Tax Considerations For Non-U.S. Holders............. 64
Underwriting.............................................................. 67
Legal Matters............................................................. 71
Experts................................................................... 71
Additional Information.................................................... 71
Index to Consolidated Financial Statements................................ F-1
</TABLE>
---------------
UNTIL , 1998 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
CDW HOLDING CORPORATION
CLASS A COMMON STOCK
---------------
P R O S P E C T U S
---------------
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
SALOMON SMITH BARNEY INTERNATIONAL
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses of the issuance and distribution of
the shares of Class A Common Stock being registered, including fees and
expenses previously incurred by CDW, other than any underwriting compensation.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee............................................. $88,500
National Association of Securities Dealers, Inc. filing fee...... 30,500
NYSE listing fee.................................................
Accounting fees and expenses.....................................
Legal fees and expenses..........................................
Printing and engraving...........................................
Transfer Agent's fees............................................
Blue Sky fees and expenses (including counsel fees)..............
Premium for directors and officers insurance.....................
Miscellaneous expenses...........................................
-------
Total........................................................ $
=======
</TABLE>
All of the above expenses of the Offerings will be borne by CDW as
contemplated by the Registration and Participation Agreement entered into at
the time of the Acquisition.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person was an officer or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation
or enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided that such officer or director acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation in the performance of his duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer or director actually and reasonably incurred.
Article VI of CDW's By-Laws provides for indemnification by CDW of its
directors and officers to the full extent permitted by the Delaware Law.
Pursuant to Section 145 of the Delaware Law, the Company has purchased
insurance on behalf of its present and former directors and officers against
any liability asserted against or incurred by them in such capacity or arising
out of their status as such.
Pursuant to specific authority granted by Section 102 of the Delaware Law,
Article FIFTH of CDW's Third Restated Certificate of Incorporation contains
the following provision regarding limitation of liability of directors and
officers:
"(e) No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary
duty as a director, provided that nothing contained in this Third
II-1
<PAGE>
Restated Certificate of Incorporation shall eliminate or limit the
liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which the
director derived an improper personal benefit."
CDW has entered into an Indemnification Agreement with Fund IV (together
with its respective affiliates, directors and officers, the "Indemnitees").
Pursuant to the Indemnification Agreement, CDW has agreed to indemnify the
members of its Board of Directors to the fullest extent allowable under
applicable Delaware law. In addition, CDW has agreed to indemnify the
Indemnitees against any suits, claims, damages or expenses that may be made
against or incurred by them under applicable securities laws in connection
with offerings of securities of CDW. However, CDW will not be obligated to
indemnify any Indemnitee in the event that any such suit, claim, damage or
expense is based upon an untrue statement or agreements related to such
offerings of securities in reliance upon written information furnished by such
Indemnitee specifically for use in such documents, contracts and agreements.
See "Underwriting."
Reference is hereby made to Section 2 of the Underwriting Agreement filed as
Exhibit 1 hereto, for certain indemnification arrangements.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, CDW sold or exchanged securities without
registration under the Securities Act as follows:
On March 17, 1995, CDW sold to one non-employee Director of the Company, one
senior executive of the Company, and one other investor and other key members
of management of the Company, 12,235 shares of its Class A Common Stock, for
an aggregate purchase price of $1,235,000 and granted to such persons (other
than such non-employee Director) 14,265 options to purchase shares of its
Class A Common Stock with an exercise price of $100 per share. For the
foregoing transactions, CDW relied upon exemptions from registration under
Regulation D under the Securities Act and under Rule 701 under the Securities
Act.
On December 29, 1995, CDW sold to one senior executive of the Company and
eight other key members of management of the Company, 9,884 shares of its
Class A Common Stock , for an aggregate purchase price of $1,129,741 and
granted to such persons 11,990 options to purchase shares of its Class A
Common Stock with an exercise price of $114.30 per share. For the foregoing
transactions, CDW relied upon exemptions from registration under Regulation D
under the Securities Act and under Rule 701 under the Securities Act.
On April 9, 1996, CDW sold to one key member of management of the Company,
860 shares of its Class A Common Stock, for an aggregate purchase price of
$98,298 and granted to such person 1,140 options to purchase shares of its
Class A Common Stock with an exercise price of $114.30 per share. For the
foregoing transactions, CDW relied upon exemption from registration under Rule
701 under the Securities Act.
On April 9, 1996 CDW sold to one senior executive of the Company 1,714
shares of its Class A Common Stock, for an aggregate purchase price of
$171,400. For the foregoing transactions, CDW relied upon exemption from
registration under Regulation D under the Securities Act.
On December 17, 1996, CDW sold to one senior executive of the Company 1,714
shares of its Class A Common Stock, for an aggregate purchase price of
$171,400. For the foregoing transactions, CDW relied upon exemption from
registration under Regulation D under the Securities Act.
On December 20, 1996, CDW sold to two senior executives of the Company and
three other key members of management of the Company, 3,890 shares of its
Class A Common Stock, for an aggregate purchase price of $760,106, and granted
to such persons 5,160 options to purchase shares of its Class A Common Stock
with an
II-2
<PAGE>
exercise price of $195.40 per share. For the foregoing transactions, CDW
relied upon exemptions from registration under Regulation D under the
Securities Act and Rule 701 under the Securities Act.
On January 1, 1997, CDW granted to key branch employees, 25,250 options to
purchase shares of its Class A Common Stock with an exercise price of $195.40
per share. For the foregoing transactions, CDW relied upon exemptions from
registration under Rule 701 under the Securities Act.
On October 24, 1997, CDW sold to one senior executive of the Company 1,714
shares of its Class A Common Stock, for an aggregate purchase price of
$171,400. For the foregoing transactions, CDW relied upon exemption from
registration under Section 4(2) under the Securities Act.
On November 26, 1997, CDW sold to one senior executive of the Company, 800
shares of its Class A Common Stock, for an aggregate purchase price of
$200,775, and granted to such senior executive 1,040 options to purchase
shares of its Class A Common Stock with an exercise price of $250.97 per
share. For the foregoing transactions, CDW relied upon exemption from
registration under Rule 701 under the Securities Act.
On January 31, 1998, CDW sold to each of two accredited investors in a
private placement, 996 shares of its Class A Common Stock, for an aggregate
purchase price of $499,932.24. For the foregoing transactions, CDW relied upon
exemption from registration under Section 4(2) under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<C> <S> <C>
1.1 Form of Purchase Agreement (U.S. Version).
1.2 Form of Purchase Agreement (International Version).*
3.1 Certificate of Incorporation of CDW Holding Corporation.+
3.2 By-Laws of CDW Holding Corporation.+
4.1 Amended and Restated Credit Agreement, dated as of March 14,
1997, among WESCO Distribution, Inc., the Several Lenders from
time to time parties thereto and Barclays Bank PLC, as
Administrative Agent and as Collateral Agent, as amended.
4.2 Amended and Restated Credit Agreement, dated as of March 14,
1997, among WESCO Distribution--Canada, Inc., as Borrower, the
Several Lenders from time to time parties thereto, The Bank of
Nova Scotia, as Administrative Agent, and Barclays Bank PLC, as
Collateral Agent, as amended.
4.3 Guaranteed First Mortgage Note, dated February 28, 1994, due
February 28, 2001, with CDW Realco, Inc., as Maker, and
Westinghouse Electric Corporation, as Payee.
4.4 Cash Collateral and Security Agreement, dated as of February 28,
1994, between CDW Realco, Inc., as Grantor, and Westinghouse
Electric Corporation, as Collateral Agent.
4.5 Guaranteed First Mortgage Note, dated February 28, 1994, due
February 28, 2001, with CDW Canada Acquisition Inc., as Maker,
and Westinghouse Canada Inc., as Payee.
4.6 Cash Collateral and Security Agreement, dated as of February 28,
1994, between CDW Canada Acquisition Inc., as Grantor, and
Westinghouse Canada Inc., as Collateral Agent.
4.7 Promissory Note, dated December 10, 1996, due December 10, 2001,
by WESCO Distribution, Inc., as Maker.
4.8 Promissory Note No. 1, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
4.9 Promissory Note No. 2, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
4.10 Promissory Note No. 3, dated May 6, 1997, due July 6, 2001, by
WESCO Distribution, Inc., as Maker.
4.11 Promissory Note No. 4, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
4.12 Registration and Participation Agreement, dated as of February 28, 1994
among CDW, The Clayton Dubilier Private Equity Fund IV ("Fund IV") and
the stockholders of the Company named therein.
4.13 Specimen of Class A Common Stock Certificate.*
Opinion of Debevoise & Plimpton as to the legality of the securities
5 being registered.*
10.1 CDW Holding Corporation Stock Purchase Plan.
10.2 Form of Stock Subscription Agreement.
10.3 CDW Holding Corporation Stock Option Plan.
10.4 Form of Stock Option Agreement.
10.5 CDW Holding Corporation Stock Option Plan for Branch Employees.
10.6 Form of Branch Stock Option Agreement.*
10.7 Indemnification Agreement among CDW and Fund IV.
10.8 Non-Competition Agreement, dated as of February 28, 1996, between
Westinghouse Electric Corporation, CDW Holding Corporation and WESCO
Distribution, Inc.
10.9 Employment Agreement between WESCO Distribution, Inc. and Stanley C.
Weiss.
10.10 Lease dated May 24, 1995 as amended by Amendment One dated June, 1995
and by Amendment Two dated December 24, 1995 by and between WESCO
Distribution, Inc. as Tenant and Opal Investors, L.P. and Mural GEM
Investors as Landlord.
10.11 Lease dated April 1, 1992 as renewed by Letter of Notice of Intent to
Renew dated December 13, 1996 by and between WESCO Distribution, Inc.,
successor in interest to Westinghouse Electric Supply Company, a former
division of Westinghouse Electric Corporation as Tenant and Utah State
Retirement Fund as Landlord.
10.12 Lease dated September 4, 1997 by and between WESCO Distribution, Inc. as
Tenant and The Buncher Company as Landlord.
10.13 Lease dated March, 1995 by and between WESCO Distribution-Canada, Inc.
as Tenant and Atlantic Construction, Inc. as Landlord.
21 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
23.2 Consent of Debevoise & Plimpton (included in the Opinion of Debevoise &
Plimpton filed as Exhibit 5).*
24 Powers of attorney.+
</TABLE>
- --------
* To be filed by amendment
+ Previously filed
(B) FINANCIAL STATEMENT SCHEDULES
For the ten-month period ended December 31, 1994 and the years ended December
31, 1995, 1996 and 1997.
Schedule II--Valuation and Qualifying Accounts
Financial statement schedules other than those listed above are omitted as
not required or not applicable or because the information is included in the
Financial Statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy
II-4
<PAGE>
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, State of
Pennsylvania, on March 10, 1998.
CDW Holding Corporation
/s/ Roy W. Haley
By___________________________________
Roy W. Haley
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the following
capacities and on March 10, 1998.
SIGNATURE TITLE
/s/ Roy W. Haley President and Chief Executive Officer
- ------------------------------------- (Principal Executive Officer)
ROY W. HALEY
/s/ David F. McAnally Executive Vice President, Chief
- ------------------------------------- Operating Officer, Chief Financial
DAVID F. MCANALLY Officer and Treasurer (Principal
Financial Officer)
/s/ Steven A. Burleson Vice President and Corporate
- ------------------------------------- Controller (Principal Accounting
STEVEN A. BURLESON Officer)
/s/ B. Charles Ames* Director
- -------------------------------------
(B. CHARLES AMES)
/s/ William A. Barbe* Director
- -------------------------------------
(WILLIAM A. BARBE)
/s/ Wiley N. Caldwell* Director
- -------------------------------------
(WILEY N. CALDWELL)
/s/ Alberto Cribiore* Director
- -------------------------------------
(ALBERTO CRIBIORE)
/s/ J. Trevor Eyton* Director
- -------------------------------------
(J. TREVOR EYTON)
/s/ Leon J. Hendrix* Director
- -------------------------------------
(LEON J. HENDRIX)
/s/ Benson P. Shapiro* Director
- -------------------------------------
(BENSON P. SHAPIRO)
/s/ Martin D. Walker* Director
- -------------------------------------
(MARTIN D. WALKER)
/s/ Steven A. Burleson
*By__________________________________
Steven A. Burleson
Attorney-in-Fact
II-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of
CDW Holding Corporation and subsidiaries as of December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
February 6, 1998, except for
Note 18, as to which the date is
February 13, 1998
II-7
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------ ---------- ---------- -------------- ---------- -------------
ADDITIONS
BALANCE AT -------------------------
BEGINNING CHARGED TO CHARGED TO BALANCE AT
OF PERIOD EXPENSE OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31,
1995.................. $12,710 $2,842 -- ($6,963) $ 8,589
Year ended December 31,
1996.................. 8,589 3,017 $2,961 (a) (4,492) 10,075
Year ended December 31,
1997.................. 10,075 3,274 594 (3,129) 10,814
Allowance for deferred
tax assets:
Year ended December 31,
1995.................. $12,108 -- ($5,946)(b) ($1,980) $ 4,182
Year ended December 31,
1996.................. 4,182 -- (1,254)(c) (2,928) --
Year ended December 31,
1997.................. -- -- -- -- --
</TABLE>
- --------
(a) Represents doubtful account allowances acquired in connection with certain
acquisitions consummated in 1996.
(b) Represents valuation allowances relating to new originating deferred tax
assets, net of a reversal of valuation allowances as a result of realizing
the benefits of the deferred tax assets acquired at the date of formation.
(c) Represents a reversal of valuation allowances as a result of realizing the
benefits of the deferred tax assets acquired at the date of formation.
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBITS PAGE
------ ----------------------- ----
<C> <S> <C>
1.1 Form of Purchase Agreement (U.S. Version).
1.2 Form of Purchase Agreement (International Version).*
3.1 Certificate of Incorporation of CDW Holding Corporation.+
3.2 By-Laws of CDW Holding Corporation.+
4.1 Amended and Restated Credit Agreement, dated as of March 14,
1997, among WESCO Distribution, Inc., the Several Lenders from
time to time parties thereto and Barclays Bank PLC, as
Administrative Agent and as Collateral Agent, as amended.
4.2 Amended and Restated Credit Agreement, dated as of March 14,
1997, among WESCO Distribution--Canada, Inc., as Borrower, the
Several Lenders from time to time parties thereto, The Bank of
Nova Scotia, as Administrative Agent, and Barclays Bank PLC, as
Collateral Agent, as amended.
4.3 Guaranteed First Mortgage Note, dated February 28, 1994, due
February 28, 2001, with CDW Realco, Inc., as Maker, and
Westinghouse Electric Corporation, as Payee.
4.4 Cash Collateral and Security Agreement, dated as of February 28,
1994, between CDW Realco, Inc., as Grantor, and Westinghouse
Electric Corporation, as Collateral Agent.
4.5 Guaranteed First Mortgage Note, dated February 28, 1994, due
February 28, 2001, with CDW Canada Acquisition Inc., as Maker,
and Westinghouse Canada Inc., as Payee.
4.6 Cash Collateral and Security Agreement, dated as of February 28,
1994, between CDW Canada Acquisition Inc., as Grantor, and
Westinghouse Canada Inc., as Collateral Agent.
4.7 Promissory Note, dated December 10, 1996, due December 10, 2001,
by WESCO Distribution, Inc., as Maker.
4.8 Promissory Note No. 1, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
4.9 Promissory Note No. 2, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
4.10 Promissory Note No. 3, dated May 6, 1997, due July 6, 2001, by
WESCO Distribution, Inc., as Maker.
4.11 Promissory Note No. 4, dated May 6, 1997, due November 6, 1998,
by WESCO Distribution, Inc., as Maker.
4.12 Registration and Participation Agreement, dated as of February
28, 1994 among CDW, The Clayton Dubilier Private Equity Fund IV
("Fund IV") and the stockholders of the
Company named therein.
4.13 Specimen of Class A Common Stock Certificate.*
5 Opinion of Debevoise & Plimpton as to the legality of the
securities being registered.*
10.1 CDW Holding Corporation Stock Purchase Plan.
10.2 Form of Stock Subscription Agreement.
10.3 CDW Holding Corporation Stock Option Plan.
10.4 Form of Stock Option Agreement.
</TABLE>
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<TABLE>
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NUMBER DESCRIPTION OF EXHIBITS PAGE
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10.5 CDW Holding Corporation Stock Option Plan for Branch Employees.
10.6 Form of Branch Stock Option Agreement.*
10.7 Indemnification Agreement among CDW and Fund IV.
10.8 Non-Competition Agreement, dated as of February 28, 1996,
between Westinghouse Electric Corporation, CDW Holding
Corporation and WESCO Distribution, Inc.
10.9 Employment Agreement between WESCO Distribution, Inc. and
Stanley C. Weiss.
10.10 Lease dated May 24, 1995 as amended by Amendment One dated June,
1995 and by Amendment Two dated December 24, 1995 by and between
WESCO Distribution, Inc. as Tenant and Opal Investors, L.P. and
Mural GEM Investors as Landlord.
10.11 Lease dated April 1, 1992 as renewed by Letter of Notice of
Intent to Renew dated December 13, 1996 by and between WESCO
Distribution, Inc., successor in interest to Westinghouse
Electric Supply Company, a former division of Westinghouse
Electric Corporation as Tenant and Utah State Retirement Fund as
Landlord.
10.12 Lease dated September 4, 1997 by and between WESCO Distribution,
Inc. as Tenant and The Buncher Company as Landlord.
10.13 Lease dated March, 1995 by and between WESCO Distribution-
Canada, Inc. as Tenant and Atlantic Construction, Inc. as
Landlord.
21 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
23.2 Consent of Debevoise & Plimpton (included in the Opinion of
Debevoise & Plimpton filed as Exhibit 5).*
24 Powers of attorney.+
</TABLE>
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* To be filed by amendment
+ Previously filed
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
CDW HOLDING CORPORATION
a Delaware Corporation
__________ Shares of Class A Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: ________ ___, 1998
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
U.S. PURCHASE AGREEMENT................................................... 1
SECTION 1. Representations and Warranties................................ 3
(a) Representations and Warranties by the Company...................... 3
(i) Compliance with Registration Requirements........................ 3
(ii) Independent Accountants......................................... 4
(iii) Financial Statements........................................... 5
(iv) No Material Adverse Change in Business.......................... 5
(v) Good Standing of the Company..................................... 5
(vi) Good Standing of Subsidiaries................................... 5
(vii) Capitalization................................................. 6
(viii) Authorization of Agreement.................................... 6
(ix) Authorization and Description of Securities..................... 6
(x) Absence of Defaults and Conflicts................................ 6
(xi) Absence of Labor Dispute........................................ 7
(xii) Absence of Proceedings......................................... 7
(xiii) Accuracy of Exhibits.......................................... 7
(xiv) Possession of Intellectual Property............................ 7
(xv) Absence of Further Requirements................................. 8
(xvi) Possession of Licenses and Permits............................. 8
(xvii) Title to Property............................................. 8
(xviii) Investment Company........................................... 9
(xix) Environmental Laws............................................. 9
(xx) Registration Rights............................................. 9
(xxi) Stabilization or Manipulation.................................. 9
(xxii) Accounting Controls........................................... 9
(xxiii) Tax Returns.................................................. 10
(b) Representations and Warranties by the Selling Stockholders......... 10
(i) Accurate Disclosure.............................................. 10
(ii) Authorization of Agreements..................................... 10
(iii) Valid Title.................................................... 11
(iv) Due Execution of Power of Attorney and Custody Agreement........ 11
(v) Absence of Manipulation.......................................... 11
(vi) Absence of Further Requirements................................. 12
(vii) Certificates Suitable for Transfer............................. 12
(viii) No Association with NASD...................................... 12
(ix) Power and Authority............................................. 12
(x) Lock-Up.......................................................... 12
(xi) Delivery of Forms Necessary for Underwriters' Compliance
with the U.S. Tax Laws......................................... 13
(c) Officers' Certificates............................................. 13
</TABLE>
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SECTION 2. Sale and Delivery to U.S. Underwriters; Closing............... 13
(a) Initial Securities................................................. 13
(b) Option Securities.................................................. 13
(c) Payment............................................................ 14
(d) Denominations; Registration........................................ 14
SECTION 3. Covenants of the Company...................................... 15
(a) Compliance with Securities Regulations and Commission Requests..... 15
(b) Filing of Amendments............................................... 15
(c) Delivery of Registration Statements................................ 15
(d) Delivery of Prospectuses........................................... 15
(e) Continued Compliance with Securities Laws.......................... 16
(f) Blue Sky Qualifications............................................ 16
(g) Rule 158........................................................... 16
(h) Listing............................................................ 17
(i) Restriction on Sale of Securities.................................. 17
(j) Reporting Requirements............................................. 17
(k) Compliance with NASD Rules......................................... 17
(l) Rule 463........................................................... 17
SECTION 4. Payment of Expenses........................................... 17
(a) Expenses........................................................... 17
(b) Termination of Agreement........................................... 18
SECTION 5. Conditions of U.S. Underwriters' Obligations.................. 18
(a) Effectiveness of Registration Statement............................ 18
(b) Opinion of Counsel for Company and the Selling Stockholders........ 18
(c) Opinion of Counsel for U.S. Underwriters........................... 19
(d) Officers' Certificate.............................................. 19
(e) Selling Stockholders' Certificate.................................. 19
(f) Accountants' Comfort Letters....................................... 20
(g) Bring-down Comfort Letter.......................................... 20
(h) Approval of Listing................................................ 20
(i) No Objection....................................................... 20
(j) Lock-up Agreements................................................. 20
(k) Purchase of Initial International Securities....................... 20
(l) Waiver of Registration Rights...................................... 20
(m) Conditions to Purchase of U.S. Option Securities................... 20
(n) Additional Documents............................................... 21
(o) Termination of Agreement........................................... 21
SECTION 6. Indemnification............................................... 22
(a) Indemnification of U.S. Underwriters............................... 22
(b) Indemnification of Company, Directors and Officers and Selling
Stockholders...................................................... 23
(c) Actions against Parties; Notification.............................. 23
(d) Settlement without Consent if Failure to Reimburse................. 24
</TABLE>
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<S> <C>
(e) Indemnification for Reserved Securities............................ 24
SECTION 7. Contribution.................................................. 25
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery..................................................... 26
SECTION 9. Termination Agreement......................................... 26
(a) Termination; General............................................... 26
(b) Liabilities........................................................ 26
SECTION 10. Default by One or More of the U.S. Underwriters.............. 27
SECTION 11. Notices...................................................... 27
SECTION 12. Parties...................................................... 27
SECTION 13 Governing Law and Time........................................ 28
SECTION 14 Effect of Headings............................................ 28
</TABLE>
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<PAGE>
CDW HOLDING CORPORATION
(a Delaware corporation)
__________ Shares of Class A Common Stock
(Par Value $____ Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
________ __, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Smith Barney Inc.
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Certain stockholders named in Schedule __ hereto (the "Selling
Stockholders") of CDW Holding Corporation ("CDW"), a Delaware corporation (the
"Company"), confirm their agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Goldman, Sachs & Co.
("Goldman Sachs"), Bear, Stearns & Co. Inc., Smith Barney Inc. and each of the
other U.S. Underwriters named in Schedule A hereto (collectively, the "U.S.
Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch Goldman Sachs
are acting as representatives (in such capacity, the "U.S. Representatives"),
with respect to the sale by the Selling Stockholders and the purchase by the
U.S. Underwriters, acting severally and not jointly, of the respective numbers
of shares of Class A Common Stock, par value $0.01 per share, of the Company
("Class A Common Stock") set forth in said Schedule A, and with respect to the
grant by the Selling Stockholders to the U.S. Underwriters, acting severally and
not jointly, of the option described in Section 2(b) hereof to purchase all or
any part of __________ additional shares of Class A Common Stock to cover over-
allotments, if any. The aforesaid __________ shares of Class A Common Stock
(the "Initial U.S. Securities") to be purchased by the U.S. Underwriters and all
or any part of the __________ shares of Class A Common Stock subject to the
option described in Section
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<PAGE>
2(b) hereof (the "U.S. Option Securities") are hereinafter called, collectively,
the "U.S. Securities".
It is understood that the Company and the Selling Stockholders are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the sale by the Selling
Stockholders of an aggregate of __________ shares of Class A Common Stock (the
"Initial International Securities") through arrangements with certain
underwriters outside the United States and Canada (the "International Managers")
for which Merrill Lynch International and Goldman Sachs International are acting
as lead managers (the "Lead Managers") and the grant by the Selling Stockholders
to the International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to __________ additional shares of Class A Common Stock solely to cover
overallotments, if any (the "International Option Securities" and, together with
the U.S. Option Securities, the "Option Securities"). The Initial International
Securities and the International Option Securities are hereinafter called the
"International Securities". It is understood that the Selling Stockholders are
not obligated to sell and the U.S. Underwriters are not obligated to purchase,
any Initial U.S. Securities unless all of the Initial International Securities
are contemporaneously purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company and the Selling Stockholders understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities as soon as
the U.S. Representatives deem advisable after this Agreement has been executed
and delivered.
The Company, the Selling Stockholders and the Underwriters agree that up to
____________shares of the Securities to be purchased by the Underwriters (the
"Reserved Securities") shall be reserved for sale by the Underwriters to certain
eligible employees and persons having business relationships with the Company,
as part of the distribution of the Securities by the Underwriters, subject to
the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. and all
other applicable laws, rules and regulations. To the extent that such Reserved
Securities are not orally confirmed for purchase by such eligible employees and
persons having business relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may be
offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-___) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of
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<PAGE>
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). Two forms of prospectus are to be used in connection with the offering
and sale of the Securities: one relating to the U.S. Securities (the "Form of
U.S. Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical to
the Form of U.S. Prospectus, except for the front cover and back cover pages and
the information under the caption "Underwriting" and the inclusion in the Form
of International Prospectus of a section under the caption "United States
Federal Tax Considerations for Non-U.S. Holders." The information included in
any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final Form of U.S.
Prospectus and the final Form of International Prospectus in the forms first
furnished to the Underwriters for use in connection with the offering of the
Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated January __, 1998 and preliminary
International Prospectus dated January __, 1998, respectively, each together
with the applicable Term Sheet and all references in this Agreement to the date
of such Prospectuses shall mean the date of the applicable Term Sheet. For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the U.S. Prospectus, the International Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b), hereof and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no
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<PAGE>
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, any preliminary prospectus and any
supplement thereto or prospectus wrapper prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws of
regulations of foreign jurisdictions in which the Propsectus and such
preliminary prospectus, as amended or supplemented, if applicable, are
distributed in connection with the offer of sale of Reserved Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and,
if any U.S. Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If Rule 434 is used, the Company will comply with
the requirements of Rule 434 and the Prospectuses shall not be "materially
different", as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the U.S.
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the
U.S. Representatives expressly for use in the Registration Statement or the
U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in
--------------------
the Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated
-4-
<PAGE>
Subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present fairly
in accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included in
the Prospectuses present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and the Prospectuses present fairly the information shown
therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its Subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the state of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "subsidiary" of the
-----------------------------
Company (each a "Subsidiary" and, collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each such
-5-
<PAGE>
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through
Subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive
or similar rights of any securityholder of such Subsidiary. The only
Subsidiaries of the Company are the Subsidiaries listed on Exhibit 21 to
the Registration Statement. The only "significant subsidiaries" of the
Company (as such term is defined in Rule 1-02 of Regulation S-X) are WESCO
Distribution, Inc., a Delaware Corporation, CDW Realco, Inc., a Delaware
Corporation and WESCO Distribution-Canada, Inc., an Ontario Corporation.
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or
options referred to in the Prospectuses). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(viii) Authorization of Agreement. This Agreement and the
--------------------------
International Purchase Agreement have been duly authorized, executed and
delivered by the Company.
(ix) Authorization and Description of Securities. The Securities
-------------------------------------------
to be purchased by the U.S. Underwriters and the International Managers
from the Selling Stockholders have been duly authorized for issuance and
sale to the U.S. Underwriters pursuant to this Agreement and the
International Managers pursuant to the International Purchase Agreement,
respectively, and, when delivered by the Selling Stockholders pursuant to
this Agreement and the International Purchase Agreement, respectively,
against payment of the consideration set forth herein and the International
Purchase Agreement, respectively, will have been validly issued, fully paid
and non-assessable; the Class A Common Stock conforms to all statements
relating thereto contained in the Prospectuses and such description
conforms to the rights set forth in the instruments defining the same; no
holder of the Securities will be subject to personal liability by reason of
being such a holder; and the issuance of the Securities is not subject to
the preemptive or other similar rights of any securityholder of the
Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its Subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any Subsidiary is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the International Purchase Agreement and
the consummation of the transactions contemplated in this Agreement, the
International Purchase Agreement and in the Registration Statement and
compliance
-6-
<PAGE>
by the Company with its obligations under this Agreement and the
International Purchase Agreement have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant to,
the Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or any
Subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any Subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
Subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
Subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and neither the Company nor any of its Subsidiaries
has received any notice or is otherwise
-7-
<PAGE>
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or circumstances
which would render any Intellectual Property invalid or inadequate to
protect the interest of the Company or any of its Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and state securities or blue sky laws and (ii) such as have
been obtained under the laws and regulations of jurisdictions outside the
United States in which the Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its Subsidiaries have
-----------------
good and marketable title to all real property owned by the Company and its
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectuses or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its Subsidiaries; and all of the leases and subleases material to the
business of the Company and its Subsidiaries, considered as one enterprise,
and under which the Company or any of its Subsidiaries holds properties
described in the Prospectuses, are in full force and effect, and neither
the Company nor any Subsidiary has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the Company
or any Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such Subsidiary to
the continued possession of the leased or subleased premises under any such
lease or sublease.
-8-
<PAGE>
(xviii) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, 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 (the "1940 Act").
(xix) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of its
Subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its Subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements, (C)
there are no pending or threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of its Subsidiaries and (D)
there are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action, suit
or proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its Subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xx) Registration Rights. There are no persons with registration
-------------------
rights or other similar rights to have any debt or equity securities
registered pursuant to the Registration Statement (except for rights which
have been waived by such person) or otherwise registered by the Company
under the 1933 Act (except as disclosed in the Registration Statement).
(xxi) Stabilization or Manipulation. Neither the Company nor any
-----------------------------
of its officers, directors or controlling persons has taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale of the Securities.
(xxii) Accounting Controls. The Company and its Subsidiaries
-------------------
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (C) access
to assets is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets is
compared with
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<PAGE>
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xxiii) Tax Returns. The Company and its Subsidiaries have filed
-----------
all federal, state, local and foreign tax returns that are required to have
been filed by them pursuant to applicable foreign, federal, state, local or
other law or have duly requested extensions thereof, except insofar as the
failure to file such returns or request such extensions would not
reasonably be expected to result in a Material Adverse Effect, and has paid
all taxes due pursuant to such returns or pursuant to any assessment
received by the Company and its Subsidiaries, except for such taxes or
assessments, if any, as are being contested in good faith and as to which
adequate reserves have been provided or where the failure to pay would not
reasonably be expected to result in a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company in respect of
any income and corporation tax liability of the Company and each Subsidiary
for any years not finally determined are adequate to meet any assessments
or re-assessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy that would not
reasonably be expected to result in a Material Adverse Effect.
(b) Representations and Warranties by the Selling Stockholders. Each
Selling Stockholder, severally and not jointly, represents and warrants to each
U.S. Underwriter as of the date hereof, as of the Closing Time, and, if such
Selling Stockholder is selling Option Securities on a Date of Delivery, as of
each such Date of Delivery, and agrees with each U.S. Underwriter, as follows:
(i) Accurate Disclosure. (A) The information furnished in writing by
-------------------
or on behalf of such Selling Stockholder expressly for use in the
Registration Statement and any amendments or supplements thereto including
any prospectus wrapper does not contain an untrue statement of a material
fact with respect to such Selling Stockholder or omit to state a material
fact with respect to such Selling Stockholder required to be stated therein
or necessary to make the statements regarding the Selling Stockholder
therein not misleading; (B) the information furnished in writing by or on
behalf of such Selling Stockholder expressly for use in the Prospectus does
not include an untrue statement of a material fact with respect to such
Selling Stockholder or omit to state a material fact with respect to such
Selling Stockholder necessary in order to make the statements regarding the
Selling Stockholder therein, in the light of the circumstances under which
they were made, not misleading; and (C) such Selling Stockholder is not
prompted to sell the Class A Common Stock to be sold by such Selling
Stockholder hereunder by any information concerning the Company or any
Subsidiary of the Company which is not set forth in the Prospectuses.
(ii) Authorization of Agreements. Such Selling Stockholder has the
---------------------------
full right, power and authority to enter into this Agreement and a Power of
Attorney and Custody Agreement (any of such agreements, a "Power of
Attorney and Custody Agreement") with [ ], as custodian (the
"Custodian"), and the attorneys-in-fact named therein (each, an "Attorney-
in-Fact"), and to sell, transfer and deliver the Securities to be sold by
such Selling Stockholder hereunder. The arrangements made by such Selling
Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are
irrevocable. The execution and delivery of this Agreement and the Power of
Attorney and Custody Agreement and the
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<PAGE>
sale and delivery of the Securities to be sold by such Selling Stockholder
and the consummation of the transactions contemplated herein and compliance
by such Selling Stockholder with its obligations hereunder have been duly
authorized by such Selling Stockholder and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, or result in the creation
or imposition of any tax, lien, charge or encumbrance upon the Securities
to be sold by such Selling Stockholder or any property or assets of such
Selling Stockholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder may be bound, or to which any of the property or assets
of such Selling Stockholder is subject (earnings, business affairs or
business prospects of such Selling Stockholder, whether or not arising in
the ordinary course of business), nor will such action result in any
violation of the provisions of the charter or by-laws or other
organizational instrument of such Selling Stockholder, if applicable, or
any applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Stockholder or
any of its properties.
(iii) Valid Title. Such Selling Stockholder has on the date
-----------
hereof and will at the Closing Time and on the Date of Delivery have valid
title to the Securities to be sold by such Selling Stockholder hereunder,
free and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the purchase
price therefor as herein contemplated, assuming each such Underwriter has
no notice of any adverse claim, each of the Underwriters will receive valid
title to the Securities purchased by it from such Selling Stockholder, free
and clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement. Such
--------------------------------------------------------
Selling Stockholder has duly executed and delivered a Power of Attorney and
Custody Agreement; the Custodian is authorized by the Selling Stockholder
to deliver the Securities to be sold by such Selling Stockholder hereunder
and to accept payment therefor; and each Attorney-in-Fact named in the
Power of Attorney and Custody Agreement executed by such Selling
Stockholder is authorized by such Selling Stockholder to execute and
deliver this Agreement and the certificate referred to in Section 5(e) of
this Agreement or that may be required pursuant to Sections 5(m) or 5(n) of
this Agreement on behalf of such Selling Stockholder, to sell, assign and
transfer to the U.S. Underwriters the Securities to be sold by such Selling
Stockholder hereunder, to determine the purchase price to be paid by the
U.S. Underwriters to such Selling Stockholder, as provided in Section 2(a)
hereof, to authorize the delivery of the Securities to be sold by such
Selling Stockholder hereunder, to accept payment therefor, and otherwise to
act on behalf of such Selling Stockholder in connection with this
Agreement.
(v) Absence of Manipulation. Such Selling Stockholder has not taken,
and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in stabilization or
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<PAGE>
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(vi) Absence of Further Requirements. No filing with, or consent,
-------------------------------
approval, authorization, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Selling Stockholder of its
obligations hereunder or in the Power of Attorney and Custody Agreement, or
in connection with the sale and delivery of the Securities being sold by
the Selling Stockholder hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws or under the rules of the National
Association of Securities Dealers, Inc. and (ii) such as have been obtained
under the laws and regulations of jurisdictions outside the United States
in which the Reserved Securities are offered.
(vii) Certificates Suitable for Transfer. Certificates for all of
----------------------------------
the Securities to be sold by such Selling Stockholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with irrevocable
conditional instructions to deliver such Securities to the U.S.
Underwriters pursuant to this Agreement.
(viii) No Association with NASD. Neither such Selling Stockholder nor
------------------------
any of its affiliates (within the meaning of NASD Conduct Rule
2720(b)(1)(a)) directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, or is an
associated person (within the meaning of Article I, Section 1(q) of the By-
laws of the National Association of Securities Dealers, Inc.), of, any
member firm of the National Association of Securities Dealers, Inc., other
than as described on an appendix to the Power of Attorney and Custody
Agreement to which such Selling Stockholder is a party.
(ix) Power and Authority. If such Selling Stockholder is a
-------------------
corporation, partnership or trust, such Selling Stockholder has been duly
organized or incorporated and is validly existing as a corporation,
partnership or limited partnership in good standing under the laws of its
jurisdiction of incorporation or organization, if applicable, and has the
power and authority to own its property and to conduct its business and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not result in a
material adverse change in the condition (financial or otherwise),
earnings, business affairs or business prospects of such Selling
Stockholder, whether or not arising in the ordinary course of business, or
materially impair its ability to consummate the transactions contemplated
hereby.
(x) Lock-Up. During a period beginning on the date hereof and
-------
ending of 180 days from the date of the U.S. Purchase Agreement, the
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or
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<PAGE>
otherwise dispose of or transfer any shares of the Company's Class A Common
Stock or any securities convertible into or exchangeable or exercisable for
Class A Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter
acquires the power of disposition, or file or cause to be filed or request
registration pursuant to any registration statement under the Securities
Act of 1933, as amended, with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of
ownership of the Class A Common Stock, whether any such swap or transaction
is to be settled by delivery of Class A Common Stock or other securities,
in cash or otherwise.
(xi) Delivery of Forms Necessary for Underwriters' Compliance with the
-----------------------------------------------------------------
U.S. Tax Laws. In order to document the Underwriters' compliance with the
-------------
U.S. tax laws with respect to the transactions herein contemplated, such
Selling Stockholder will deliver to you prior to or at the First Time of
Delivery (as hereinafter defined) a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof).
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its Subsidiaries delivered to the Global Coordinator, the
U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of any
Selling Stockholder as such and delivered to the U.S. Representatives or to
counsel for the U.S. Underwriters pursuant to the terms of this Agreement shall
be deemed a representation and warranty by such Selling Stockholder, as the case
may be, to the U.S. Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Selling Stockholders agree to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Selling Stockholders, at the price per share set forth in
Schedule B, the number of Initial U.S. Securities set forth in Schedule A
opposite the name of such U.S. Underwriter, plus any additional number of
Initial U.S. Securities which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Stockholders, severally and not jointly, hereby grant an
option to the U.S. Underwriters, severally and not jointly, to purchase up to an
additional amount of U.S. Option Securities set forth on Schedule A hereto at
the price per share set forth in Schedule B, less an amount per share equal to
any dividends or distributions declared by the Company and payable on the
Initial U.S. Securities but not payable on the U.S. Option Securities. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company
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<PAGE>
setting forth the number of U.S. Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment and
delivery for such U.S. Option Securities. Any such time and date of delivery for
the U.S. Option Securities (a "Date of Delivery") shall be determined by the
Global Coordinator, but shall not be later than seven full business days after
the exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
U.S. Option Securities, each of the U.S. Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of U.S. Option
Securities then being purchased which the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter bears to the
total number of Initial U.S. Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, NY 10004, or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs
after 4:30 P.M. (Eastern time) on any given day) business day after the date
hereof (unless postponed in accordance with the provisions of Section 10), or
such other time not later than ten business days after such date as shall be
agreed upon by the Global Coordinator and the Company (such time and date of
payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Global Coordinator and the Company, on each Date of Delivery as specified in the
notice from the Global Coordinator to the Company.
Payment shall be made to the Selling Stockholders by wire transfer of
immediately available funds to a bank account designated by the Selling
Stockholders, against delivery to the U.S. Representatives for the respective
accounts of the U.S. Underwriters of certificates for the U.S. Securities to be
purchased by them. It is understood that each U.S. Underwriter has authorized
the U.S. Representatives, for its account, to accept delivery of, receipt for,
and make payment of the purchase price for, the Initial U.S. Securities and the
U.S. Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the U.S. Underwriters, may (but shall
not be obligated to) make payment of the purchase price for the Initial U.S.
Securities or the U.S. Option Securities, if any, to be purchased by any U.S.
Underwriter whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such U.S. Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
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SECTION 3. Covenants of the Company. The Company covenants with each U.S.
------------------------
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Global
Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to
the Prospectuses or for additional information, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to the Prospectuses, will furnish the Global Coordinator with copies of any
such documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to
which the Global Coordinator or counsel for the U.S. Underwriters shall
object.
(c) Delivery of Registration. The Company has furnished or Statements
will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the U.S. Underwriters. The copies of the Registration
Statement and each amendment thereto furnished to the U.S. Underwriters
will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus
as such U.S. Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to each U.S. Underwriter, without charge, during
the period when the U.S. Prospectus is required to be
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<PAGE>
delivered under the 1933 Act or the Securities Exchange Act of 1934 (the
"1934 Act"), such number of copies of the U.S. Prospectus (as amended or
supplemented) as such U.S. Underwriter may reasonably request. The U.S.
Prospectus and any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with Securities Laws the 1933 Act and the 1933 Act Regulations so as
to permit the completion of the distribution of the Securities as
contemplated in this Agreement, the International Purchase Agreement and in
the Prospectuses. If at any time when a prospectus is required by the 1933
Act to be delivered in connection with sales of the Securities, any event
shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the U.S. Underwriters or for the Company, to
amend the Registration Statement or amend or supplement any Prospectus in
order that the Prospectuses will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement or the
Prospectuses comply with such requirements, and the Company will furnish to
the U.S. Underwriters such number of copies of such amendment or supplement
as the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however,
that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements
and reports as may be required by the laws of such jurisdiction to continue
such qualification in effect for a period of not less than one year from
the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
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<PAGE>
(h) Listing. The Company will use its best efforts to effect and
maintain the listing of the Class A Common Stock (including the Securities)
on the New York Stock Exchange.
(i) Restriction on Sale of Securities. During a period of 180 days
Securities from the date of the Prospectuses, the Company will not, without
the prior written consent of the Global Coordinator, (i) directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of
any share of Class A Common Stock or any securities convertible into or
exercisable or exchangeable for Class A Common Stock or file any
registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Class A Common Stock, whether
any such swap or transaction described in clause (i) or (ii) above is to be
settled by delivery of Class A Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder or under the International Purchase
Agreement, (B) any shares of Class A Common Stock issued by the Company
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and referred to in the Prospectuses or (C)
any options to purchase Class A Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectuses.
(j) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the rules and regulations of the Commission thereunder.
(k) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by
the National Association of Securities Dealers, Inc. (the "NASD") or the
NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of this Agreement. The
Underwriters will notify the Company as to which persons will need to be so
restricted. At the request of the Underwriters, the Company will direct the
transfer agent to place a stop transfer restriction upon such securities
for such period of time. Should the Company release, or seek to release,
from such restrictions any of the Reserved Securities, the Company agrees
to reimburse the Underwriters for any reasonable expenses (including,
without limitation, legal expenses) they incur in connection with such
release.
(l) Rule 463. The Company will file with the Commission such
information as may be required pursuant to Rule 463 of the 1933 Act Regulations
as provided therein.
SECTION 4. Payment of Expenses. (a) Expenses . The Company will pay all
-------------------
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as
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originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters and the transfer of the Securities between the U.S. Underwriters
and the International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus, any Term
Sheets and of the Prospectuses and any amendments or supplements thereto, (vii)
the preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities and (ix) the filing fees incident
to, and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities and (x) the fees
and expenses incurred in connection with the listing of the Securities on the
New York Stock Exchange.
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
--------------------------------------------
of the hereunder are subject to the accuracy of the representations and
warranties of the Company and the Selling Stockholders contained in Section 1
hereof or in certificates of any officer of the Company or any Subsidiary of the
Company delivered pursuant to the provisions hereof, to the performance by the
Company of its covenants and other obligations hereunder, and to the following
further conditions:
(a) Effectiveness of Registration. The Registration Statement,
Statement including any Rule 462(b) Registration Statement, has become effective
and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company and the Selling Stockholders. At
Closing Time, the U.S. Representatives shall have received the favorable
opinions, dated as of Closing Time, of (i) Debevoise & Plimpton, counsel for the
Company and (ii)
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<PAGE>
[Debevoise & Plimpton], counsel for the Selling Stockholders in form and
substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibits A and A-1 hereto and to such
further effect as counsel to the U.S. Underwriters may reasonably request. Each
of such counsel may state that, insofar as the opinion of such counsel involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company or its Subsidiaries or the Selling
Stockholders, as the case may be, and certificates of public officials.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for each
of the other U.S. Underwriters with respect to the matters set forth in clauses
(i), (ii), (v), (vi) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company), (viii) through
(x), inclusive, (xii), (xiv) (solely as to the information in the Prospectus
under "Description of Capital Stock") and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New York and the
federal law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the U.S. Representatives.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its Subsidiaries and certificates of public
officials.
(d) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
U.S. Representatives shall have received a certificate of the President or a
Vice President of the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission.
(e) Selling Stockholders' Certificate. At Closing Time, the
Representatives shall have received a certificate of each Selling Stockholder
(which may be executed on behalf of each Selling Stockholder by the Attorney-in-
Fact or the general partner or a duly authorized executive officer of such
Selling Stockholder), dated as of Closing Time, to the effect that (i) the
representations and warranties of such Selling Stockholder contained in Section
1(b) hereof are true and correct in all material respects with the same force
and effect as though expressly made at and as of the Closing Time and (ii) such
Selling
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<PAGE>
Stockholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to the
Closing Time.
(f) Accountants' Comfort Letters. At the time of the execution of
this Agreement, the U.S. Representatives shall have received from (x) Coopers &
Lybrand and (y) Price Waterhouse letters dated such date, in form and substance
satisfactory to the U.S. Representatives, together with signed or reproduced
copies of such letters for each of the other U.S. Underwriters containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectuses.
(g) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Coopers & Lybrand and Price Waterhouse letters, dated
as of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.
(h) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(j) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(k) Purchase of Initial International Securities. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities under
this Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(l) Waiver of Registration Rights. At the Closing Time, the Company
shall have received a waiver from all of the other parties to the Registration
and Participation Agreement waiving all of such parties' rights to sell
securities pursuant to the Offering in a form reasonably acceptable to the
Underwriters.
(m) Conditions to Purchase of U.S. Option Securities. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company and the Selling Stockholders
contained herein and the statements in any certificates furnished by the Company
or any Subsidiary of the Company hereunder shall be true and correct as of each
Date of Delivery and, at the relevant Date of Delivery, the U.S. Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and
of the chief financial or
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<PAGE>
chief accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(d) hereof remains true and
correct as of such Date of Delivery.
(ii) Selling Stockholder's Certificate. At the Date of Delivery, the
---------------------------------
U.S. Representatives shall have received a certificate of the
Selling Stockholders (which may be executed on behalf of each
Selling Stockholder by the general partner or a duly authorized
executive officer of such Selling Stockholder), dated as of
Date of Delivery, to the effect that (i) the representations
and warranties of such Selling Stockholder contained in Section
1(b) hereof are true and correct in all respects with the same
force and effect as though expressly made at and as of Date of
Delivery and (ii) such Selling Stockholder has complied in all
material respects with all agreements and all conditions on
their part to be performed under this Agreement at or prior to
Date of Delivery.
(iii) Opinion of Counsel for Company and the Selling Stockholders.
-----------------------------------------------------------
The favorable opinion of Debevoise & Plimpton, counsel for the
Company and the Selling Stockholders, in form and substance
satisfactory to counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable opinion
----------------------------------------
of Fried, Frank, Harris, Shriver & Jacobson, a partnership
including corporations, counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section
5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Coopers & Lybrand, in
-------------------------
form and substance satisfactory to the U.S. Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the U.S. Representatives
pursuant to Section 5(f) hereof, except that the "specified
date" in the letter furnished pursuant to this paragraph shall
be a date not more than five days prior to such Date of
Delivery.
(n) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with such
documents and opinions as they require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the U.S.
Representatives and counsel for the U.S. Underwriters.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the
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<PAGE>
case of any condition to the purchase of U.S. Option Securities on a Date
of Delivery which is after the Closing Time, the obligations of the several
U.S. Underwriters to purchase the relevant Option Securities, may be
terminated by the U.S. Representatives by notice to the Company at any time
at or prior to Closing Time or such Date of Delivery, as the case may be,
and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7 and
8 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. The Company and each of the
Selling Stockholder, jointly and severally, agree to indemnify and hold harmless
each U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in [ ] in connection with the reservation
and sale of the Reserved Securities to [eligible employees and ________ of
the Company] or the omission or alleged omission therefrom of a material
fact necessary to make the statements therein, when considered in
conjunction with the Prospectus or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based
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<PAGE>
upon any such untrue statement or omission, or any such alleged untrue
statement or omission or in connection with any violation of the nature
referred to in Section 6(a)(ii)(A) hereof, to the extent that any such
expense is not paid under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto);
provided, however, further, that with respect to each Selling Stockholder, (x)
the indemnification provision in this paragraph (a) shall be only with respect
to the information furnished in writing by or on behalf of such Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto), including Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) and (y)
such Selling Stockholder's aggregate liability under this Section 6 shall be
limited to an amount equal to the net proceeds (after deducting the underwriting
discount but before deducting expenses) received by such Selling Stockholder
from the sale of Securities pursuant to this Agreement.
(b) Indemnification of Company, Directors and Officers and Selling
Stockholders. Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each
Selling Shareholder and each person, if any, who controls any Selling
Stockholder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a)[(1)] of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company or the indemnified Selling
Stockholder, as appropriate. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the
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<PAGE>
indemnifying party shall not (except with the consent of the indemnified party)
also be counsel to the indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of certain eligible employees and persons
having business relationships with the Company to pay for and accept delivery of
Reserved Securities which, by the end of the first business day following the
date of this Agreement, were subject to a properly confirmed agreement to
purchase.
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<PAGE>
SECTION 7. Contribution. If the indemnification provided for in Section
------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the U.S. Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholders on the one hand and of the U.S. Underwriters on the other
hand in connection with the statements or omissions, or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof, which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders
on the one hand and the U.S. Underwriters on the other hand in connection with
the offering of the U.S. Securities pursuant to this Agreement shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the U.S. Securities pursuant to this Agreement (before deducting
expenses) received by the Selling Stockholders and the total underwriting
discount received by the U.S. Underwriters, in each case as set forth on the
cover of the U.S. Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public offering price
of the U.S. Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholders on the one
hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Selling Stockholders
or by the U.S. Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission
or any violation of the nature referred to in Section 6(a)(ii)(A) hereof.
The Company, the Selling Stockholders and the U.S. Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
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<PAGE>
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its Subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the U.S.
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or materially limited by the Commission or the New
York Stock Exchange, or if trading generally on the American Stock Exchange or
the New York Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
-26-
<PAGE>
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
-----------------------------------------------
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the U.S. Underwriters to purchase and of the Company to sell
the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representatives or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Gregory Wright,
with a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, attention of Valerie Ford Jacob, Esq. and notices to the
Company shall be directed to it at Commerce Court, 4 Station Square, Suite 700,
Pittsburgh, PA 15219, attention of Jeffrey B. Kramp, with a copy to Debevoise &
Plimpton, 875 Third Avenue, New York, New York 10022, attention of George E.B.
Maguire, Esq.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
-------
be binding upon the U.S. Underwriters, the Selling Stockholders and the Company
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Selling
-27-
<PAGE>
Stockholders and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters, the Selling Stockholders
and the Company and their respective successors, and said controlling persons
and officers and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of Securities
from any U.S. Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
-28-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
By _______________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
SMITH BARNEY INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By __________________________________
Authorized Signatory
By: GOLDMAN, SACHS & CO.
By __________________________________
Authorized Signatory
By: BEAR, STEARNS & CO. INC.
By __________________________________
Authorized Signatory
By: SMITH BARNEY INC.
-29-
<PAGE>
By ___________________________________
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
-30-
<PAGE>
EXHIBIT 4.1
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
among
WESCO DISTRIBUTION, INC.
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO, and
BARCLAYS BANK PLC,
as Administrative Agent and
as Collateral Agent
DATED AS OF MARCH 14, 1997
================================================================================
<PAGE>
2
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS....................................... 2
1.1 Defined Terms.................................... 2
1.2 Other Definitional Provisions.................... 46
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................... 47
2.1 Commitments...................................... 47
2.2 Revolving Credit Notes........................... 47
2.3 Procedure for Revolving Credit Borrowing......... 48
2.4 CAF Advances..................................... 48
2.5 Procedure for CAF Advance Borrowing.............. 49
2.6 CAF Advance Payments............................. 52
2.7 Evidence of Debt................................. 52
2.8 Certain Restrictions............................. 53
2.9 Termination or Reduction of Commitments;
Transfers of the Commitments and the Canadian
Commitments...................................... 53
2.10 Swing Line Commitments........................... 55
SECTION 3. LETTERS OF CREDIT................................. 58
3.1 L/C Commitment................................... 58
3.2 Procedure for Issuance of Letters of Credit...... 58
3.3 Fees, Commissions and Other Charges.............. 59
3.4 L/C Participations............................... 60
3.5 Reimbursement Obligation of the Borrower......... 61
3.6 Obligations Absolute............................. 62
3.7 Letter of Credit Payments........................ 63
3.8 Application...................................... 63
SECTION 4. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT.................... 63
4.1 Interest Rates and Payment Dates................. 63
4.2 Conversion and Continuation Options.............. 64
4.3 Minimum Amounts of Tranches...................... 65
4.4 Optional and Mandatory Prepayments............... 65
4.5 Facility Fees; Agency Fees; Other Fees........... 67
<PAGE>
3
Page
4.6 Computation of Interest and Fees................. 67
4.7 Inability to Determine Interest Rate............. 68
4.8 Pro Rata Treatment and Payments.................. 68
4.9 Borrowing Base Compliance........................ 69
4.10 Illegality....................................... 70
4.11 Requirements of Law.............................. 70
4.12 Taxes............................................ 72
4.13 Indemnity........................................ 74
4.14 Certain Rules Relating to the Payment of
Additional Amounts............................... 75
SECTION 5. REPRESENTATIONS AND WARRANTIES.................... 77
5.1 Financial Condition.............................. 77
5.2 No Change; Solvent............................... 77
5.3 Corporate Existence; Compliance with Law......... 78
5.4 Corporate Power; Authorization; Enforceable
Obligations...................................... 78
5.5 No Legal Bar..................................... 79
5.6 No Material Litigation........................... 79
5.7 No Default....................................... 80
5.8 Ownership of Property; Liens..................... 80
5.9 Intellectual Property............................ 80
5.10 No Burdensome Restrictions....................... 80
5.11 Taxes............................................ 80
5.12 Federal Regulations.............................. 81
5.13 ERISA............................................ 81
5.14 Collateral....................................... 82
5.15 Investment Company Act; Other Regulations........ 83
5.16 Subsidiaries..................................... 83
5.17 Purpose of Loans................................. 83
5.18 Environmental Matters............................ 83
5.19 Certain Documents................................ 85
5.20 Acquisition Documents; First Mortgage Note
Documents........................................ 85
5.21 Master Lease Agreement; RealCo Landlord Waiver
................................................. 86
SECTION 6. CONDITIONS PRECEDENT.............................. 87
6.1 Conditions to Effectiveness...................... 87
<PAGE>
4
Page
6.2 Conditions to Each Extension of Credit........... 88
SECTION 7. AFFIRMATIVE COVENANTS............................. 89
7.1 Financial Statements............................. 89
7.2 Certificates; Other Information.................. 91
7.3 Payment of Obligations........................... 93
7.4 Conduct of Business and Maintenance of
Existence........................................ 93
7.5 Maintenance of Property; Insurance............... 93
7.6 Inspection of Property; Books and Records;
Discussions...................................... 93
7.7 Notices.......................................... 94
7.8 Environmental Laws............................... 95
7.9 Landlord Waivers................................. 96
7.10 Loans to Cover Canadian Borrowing Base
Defaults......................................... 96
7.11 Cash Management System........................... 96
SECTION 8. NEGATIVE COVENANTS................................ 97
8.1 Financial Condition Covenants.................... 98
8.2 Limitation on Indebtedness....................... 99
8.3 Limitation on Liens..............................101
8.4 Limitation on Guarantee Obligations..............104
8.5 Limitation on Fundamental Changes................106
8.6 Limitation on Sale of Assets.....................106
8.7 Limitation on Dividends..........................107
8.8 Limitation on Optional Payments and
Modifications of Debt Instruments and other
Contractual Obligations..........................109
8.9 Limitation on Capital Expenditures...............111
8.10 Limitation on Investments, Loans and Advances....111
8.11 Limitation on Transactions with Affiliates.......113
8.12 Limitation on Sales and Leasebacks...............114
8.13 Limitations on Dispositions of Collateral........115
8.14 Limitation on Changes in Fiscal Year.............115
8.15 Limitation on Negative Pledge Clauses............115
<PAGE>
5
Page
8.16 Limitation on Lines of Business; Creation of
Subsidiaries.....................................115
SECTION 9. EVENTS OF DEFAULT.................................117
SECTION 10. THE AGENT.........................................121
10.1 Appointment......................................121
10.2 Delegation of Duties.............................122
10.3 Exculpatory Provisions...........................122
10.4 Reliance by Agent................................122
10.5 Notice of Default................................123
10.6 Non-Reliance on Agent and Other Lenders..........123
10.7 Indemnification..................................124
10.8 Agent in Its Individual Capacity.................124
10.9 Successor Agent..................................124
10.10 Swing Line Lender................................125
10.11 Co-Agents........................................125
SECTION 11. MISCELLANEOUS.....................................125
11.1 Amendments and Waivers...........................125
11.2 Notices..........................................127
11.3 No Waiver; Cumulative Remedies...................128
11.4 Survival of Representations and Warranties.......128
11.5 Payment of Expenses and Taxes....................128
11.6 Successors and Assigns; Participations and
Assignments......................................130
11.7 Adjustments; Set-off.............................133
11.8 Counterparts.....................................134
11.9 Severability.....................................134
11.10 Integration......................................134
11.11 GOVERNING LAW....................................134
11.12 Submission To Jurisdiction; Waivers..............135
11.13 Acknowledgements.................................135
11.14 WAIVERS OF JURY TRIAL............................136
11.15 Confidentiality..................................136
11.16 Amendment to Security Documents..................136
11.17 Amendment and Restatement........................137
<PAGE>
6
SCHEDULES
1 Commitments; Addresses
5.4 Consents Required
5.9 Intellectual Property Claims
5.16 Subsidiaries
6.1(j) Filing Jurisdictions
7.11 Depositary Banks
8.2(h) Existing Indebtedness
8.3(j) Existing Liens
8.4(a) Guarantee Obligations
8.10(c) Existing Investments
8.11(v) Existing Transactions with Affiliates
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Swing Line Note
B Form of U.S. Tax Compliance Certificate
C Form of Landlord's Waiver
D-1 Form of Opinion of Debevoise & Plimpton
D-2 Form of Opinion of Secretary of the Borrower
E Form of Monthly Borrowing Base Certificate
F Form of Subsidiary Guarantee
G Form of Assignment and Acceptance
H Form of CAF Advance Confirmation
I Form of CAF Advance Offer
J Form of CAF Advance Request
K Form of Fleet Resignation Letter
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 14, 1997, among
WESCO DISTRIBUTION, INC., a Delaware corporation (the "Borrower"), the several
--------
banks and other financial institutions from time to time parties to this
Agreement (the "Lenders"), BARCLAYS BANK PLC, a banking corporation organized
-------
under the laws of the United Kingdom ("Barclays"), as administrative agent for
--------
the Lenders hereunder (in such capacity, the "Administrative Agent"), and
--------------------
Barclays, as collateral agent (in such capacity, the "Collateral Agent").
----------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower is a company organized by Clayton, Dubilier & Rice,
Inc. ("CD&R");
----
WHEREAS, the Borrower is a wholly owned Subsidiary of CDW Holding
Corporation, a Delaware corporation ("Holdings") organized by CD&R;
--------
WHEREAS, the Borrower is a party to the Credit Agreement, dated as of
February 24, 1995 (as amended by the First Amendment, dated as of March 29,
1996, and the Second Amendment, dated as of August 5, 1996, the "Existing Credit
---------------
Agreement") with the banks and other financial institutions party thereto,
- ---------
Barclays, as administrative agent, and Fleet Capital Corporation (as successor
to Shawmut Capital Corporation), as collateral agent, and WESCO Distribution-
Canada, Inc., an Ontario corporation and a wholly owned Subsidiary of the
Borrower (the "Canadian Borrower"), is a party to the Canadian Credit Agreement
-----------------
(as such term is defined in the Existing Credit Agreement, the "Existing
--------
Canadian Credit Agreement");
- -------------------------
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Existing Canadian Agreement is being amended and restated (as so amended and
restated
<PAGE>
and as further amended, supplemented or otherwise modified from time to time,
the "Canadian Credit Agreement");
-------------------------
WHEREAS, the Company has requested that the Existing Credit Agreement be
amended and restated to extend the period during which loans may be made
thereunder, increase the aggregate commitments and modify the adjustments to the
interest rate margin to be charged on the loans made thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree that, effective on the Effective Date
(as hereinafter defined), the Existing Credit Agreement shall be amended and
restated to read in its entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings:
"Accounts": as defined in the Uniform Commercial Code as in effect in the
--------
State of New York; and, with respect to the Borrower or any of its Additional
Subsidiaries, all such accounts of the Borrower or such Additional Subsidiary,
whether now existing or existing in the future, including, without limitation
(i) all accounts receivable of the Borrower or such Additional Subsidiary
(whether or not specifically listed on schedules furnished to the Administrative
Agent), including, without limitation, all accounts created by or arising from
all of the Borrower's or such Additional Subsidiary's sales of goods or
rendition of services made under any of its trade names, or through any of its
divisions, (ii) all rights to any goods represented by any of the foregoing,
including returned or repossessed goods, (iii) all reserves and credit balances
held by the Borrower or such Additional Subsidiary with respect to any such
accounts receivable
2
<PAGE>
or Obligors, (iv) all letters of credit, guarantees or collateral for any of the
foregoing and (v) all insurance policies or rights relating to any of the
foregoing.
"Acquisition": the collective reference to (i) the acquisition by Holdings
-----------
of substantially all of the U.S.-based assets of WESCO, the transfer of such
assets (other than certain real property) on its behalf by Westinghouse U.S. to
the Borrower and the transfer of such real property by Westinghouse U.S. on its
behalf to RealCo, in each case pursuant to the Acquisition Agreement and certain
of the Collateral Documents (as defined in the Acquisition Agreement) and (ii)
the acquisition by the Canadian Borrower of substantially all of the Canadian-
based assets of WESCO pursuant to the Canadian Acquisition Agreement and certain
of the Collateral Documents (as defined in the Acquisition Agreement).
"Acquisition Agreement": the Acquisition Agreement, dated as of February
---------------------
15, 1994, between Holdings and Westinghouse U.S., as amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8.
"Acquisition Agreements": the collective reference to the Acquisition
----------------------
Agreement and the Canadian Acquisition Agreement.
"Acquisition Documents": the collective reference to the Acquisition
---------------------
Agreement, the Canadian Acquisition Agreement and each Collateral Agreement (as
defined in the Acquisition Agreement) that is not also a First Mortgage Note
Document.
"Acquisition Documentation": as defined in subsection 6.1(c) of the
-------------------------
Existing Credit Agreement.
3
<PAGE>
"Additional Subsidiary": each Subsidiary of the Borrower other than RealCo
---------------------
and the Canadian Borrower and its Subsidiaries.
"Adjustment Date": the first Business Day following receipt by the
---------------
Administrative Agent of (a) the financial statements required to be delivered
pursuant to subsection 7.1(a), (b) or (c), as the case may be, for the then most
recently completed fiscal period or (b) unaudited financial statements which (i)
comply with all requirements of subsection 7.1(a) (other than the requirement
that such financial statements be reported on by a certified public accountant)
and (ii) are certified by a Responsible Officer of the Borrower as being fairly
stated in all material respects.
"Administrative Agent": as defined in the preamble hereto.
--------------------
"Administrative Agents": the collective reference to the Administrative
---------------------
Agent and the Canadian Administrative Agent.
"Affiliate": as to any Person, any other Person (other than a Subsidiary)
---------
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition, "control" of
a Person means the power, directly or indirectly, either to (a) vote 20%
or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Aggregate Asset Sale Shortfall Amount": as of any date of determination,
-------------------------------------
with respect to all Mixed Asset Sales (or series of related Mixed Asset Sales)
consummated on or prior to such date, the difference
4
<PAGE>
between (i) the sum of all Asset Sale Shortfall Amounts in respect of such Mixed
Asset Sales (or series of related Mixed Asset Sales) which are determined to be
a positive number in accordance with the definition of Asset Sale Shortfall
Amount, minus (ii) the sum of the absolute value of all Asset Sale Shortfall
-----
Amounts in respect of such Mixed Asset Sales (or series of related Mixed Asset
Sales) which are determined to be a negative number in accordance with the
definition of Asset Sale Shortfall Amount.
"Aggregate Canadian Outstandings": the meaning ascribed to the term
-------------------------------
"Aggregate Outstandings" in the Canadian Credit Agreement.
"Aggregate Majority Lenders": at any time, Lenders and Canadian Lenders
--------------------------
which, in the aggregate, have Commitments (or, if the Commitments have
terminated or expired, Aggregate Outstandings) and Canadian Commitments (or, if
the Canadian Commitments have terminated or expired, Aggregate Canadian
Outstandings) aggregating at least 51% of the sum of the Commitments of all
Lenders (or, if the Commitments have terminated or expired, the Aggregate
Outstandings of all Lenders) and the U.S. Dollar equivalent (determined on the
basis of the Closing Date Exchange Rate) of the Canadian Commitments of all
Canadian Lenders (or, if the Canadian Commitments have terminated or expired,
the U.S. Dollar equivalent (determined on the basis of the Closing Date Exchange
Rate) of the Aggregate Canadian Outstandings of all Canadian Lenders), provided
--------
that at any time after the Commitments, all Letters of Credit and the Canadian
Commitments have terminated or expired and the Aggregate Outstandings and the
Aggregate Canadian Outstandings have been paid in full, Aggregate Majority
Lenders shall mean Lenders which, in the aggregate, have CAF Outstandings
aggregating at least 51% of the sum of the CAF Outstandings of all Lenders.
5
<PAGE>
"Aggregate Outstandings": as to any Lender at any time, an amount equal to
----------------------
the sum of (a) the aggregate principal amount of all Revolving Credit Loans made
by such Lender then outstanding, (b) such Lender's Commitment Percentage of the
L/C Obligations then outstanding and (c) such Lender's Commitment Percentage of
the Swing Line Loans then outstanding.
"Aggregate Supermajority Lenders": at any time, Lenders and Canadian
-------------------------------
Lenders which, in the aggregate, have Commitments (or, if the Commitments have
terminated or expired, Aggregate Outstandings) and Canadian Commitments (or, if
the Canadian Commitments have terminated or expired, Aggregate Canadian
Outstandings) aggregating at least 75% of the sum of the Commitments of all
Lenders (or, if the Commitments have terminated or expired, the Aggregate
Outstandings of all Lenders) and the U.S. Dollar equivalent (determined on the
basis of the Closing Date Exchange Rate) of the Canadian Commitments of all
Canadian Lenders (or, if the Canadian Commitments have terminated or expired,
the U.S. Dollar equivalent (determined on the basis of the Closing Date Exchange
Rate) of the Aggregate Canadian Outstandings of all Canadian Lenders), provided
--------
that at any time after the Commitments, all Letters of Credit and the Canadian
Commitments have terminated or expired and the Aggregate Outstandings and the
Aggregate Canadian Outstandings have been paid in full, Aggregate Supermajority
Lenders shall mean Lenders which, in the aggregate, have CAF Outstandings
aggregating at least 75% of the CAF Outstandings of all Lenders.
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
---------
modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum set forth
-----------------
under the relevant column heading below, less the Margin Reduction Percentage in
----
effect from time to time, provided that for Base Rate
--------
6
<PAGE>
Loans the Applicable Margin shall not be less than zero:
Base Rate Loans Eurodollar Loans
--------------- ----------------
0.25% 1.00%
"Application": an application, in such form as the Issuing Lender may specify
-----------
from time to time, requesting the Issuing Lender to open a Letter of Credit.
"Asset Sale": any sale, issuance, conveyance, transfer, lease or other
----------
disposition (any of the foregoing, a "Disposition") by the Borrower or any of
-----------
its Subsidiaries (other than the Canadian Borrower or any of its Subsidiaries),
in one or a series of related transactions, of any real or personal, tangible or
intangible, property (including, without limitation, Capital Stock, but
excluding any sale or issuance of equity securities of any Additional Subsidiary
to one or more Permitted Equity Purchasers to the extent such sale or issuance
is permitted by this Agreement) of the Borrower or any of its Subsidiaries
(other than the Canadian Borrower or any of its Subsidiaries) to any Person
other than the Borrower or an Additional Subsidiary.
"Asset Sale Shortfall Amount": with respect to any Mixed Asset Sale or series
---------------------------
of related Mixed Asset Sales, the difference between (i) the book value of all
Inventory of the Borrower or any Additional Subsidiary and all other Collateral
sold or to be sold in connection with such Mixed Asset Sale or series of related
Mixed Asset Sales (or, at the option of the Borrower in lieu of such book value,
the purchase price allocated to such Inventory and other Collateral by the
Borrower or the applicable Additional Subsidiary and the purchaser thereof in
good faith and set forth in the related purchase agreement) minus (ii) the Net
-----
Cash
7
<PAGE>
Proceeds of such Mixed Asset Sale; the Asset Sale Shortfall Amount with respect
to any Mixed Asset Sale or series of related Mixed Asset Sales may be either a
positive or a negative number.
"Assignee": as defined in subsection 11.6(c).
--------
"Available Canadian Commitment": the meaning ascribed to the term "Available
-----------------------------
Commitment" in the Canadian Credit Agreement.
"Available Commitment": as to any Lender at any time, an amount equal to the
--------------------
excess, if any, of (a) the amount of such Lender's Commitment at such time over
----
(b) the sum of (i) the aggregate unpaid principal amount at such time of all
Revolving Credit Loans made by such Lender, (ii) an amount equal to such
Lender's Commitment Percentage of the aggregate unpaid principal
amount at such time of all Swing Line Loans and CAF Advances, and (iii) an
amount equal to such Lender's Commitment Percentage of the outstanding L/C
Obligations at such time; collectively, as to all the Lenders, the "Available
---------
Commitments".
- -----------
"Barclays": as defined in the preamble hereto.
--------
"Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to
---------
the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per
----------
annum publicly announced from time to time by Barclays as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Barclays in connection
with extensions of credit to debtors); and "Federal Funds Effective Rate" shall
----------------------------
mean, for any day, the weighted average of the rates on overnight federal funds
transactions with members of
8
<PAGE>
the Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms thereof, the Base Rate shall be
determined without regard to clause (b) of the first sentence of this
definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"Base Rate Loans": Loans bearing interest at a rate based upon the Base Rate
---------------
(including, without limitation, the Swing Line Loans).
"Borrower": as defined in the preamble hereto.
--------
"Borrowers": the collective reference to the Borrower and the Canadian
---------
Borrower.
"Borrower Canadian First Mortgage Note Guarantees": the guarantees included
------------------------------------------------
on the Canadian First Mortgage Notes and made by the Borrower in favor of the
holders of the Canadian First Mortgage Notes, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
9
<PAGE>
subsection 8.8 hereof and subsection 9.6 of the Canadian Credit Agreement.
"Borrower Canadian Stock Pledge Agreement": the Stock Pledge Agreement
----------------------------------------
executed and delivered by the Borrower in favor of the Administrative Agent,
substantially in the form of Exhibit D to the Existing Credit Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Borrower Guarantee": the meaning ascribed to the term "U.S. Borrower
------------------
Guarantee" in the Canadian Credit Agreement.
"Borrower Patent Security Agreement": the Patent Security Agreement executed
----------------------------------
and delivered by the Borrower in favor of the Collateral Agent, substantially in
the form of Exhibit E to the Existing Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Borrower RealCo First Mortgage Note Guarantees": the guarantees included on
----------------------------------------------
the RealCo First Mortgage Notes and made by the Borrower in favor of the holders
of the RealCo First Mortgage Notes, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8.
"Borrower Security Agreement": the Security Agreement executed and delivered
---------------------------
by the Borrower in favor of the Collateral Agent, substantially in the form of
Exhibit F to the Existing Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Borrower Stock Pledge Agreement": the Stock Pledge Agreement executed and
-------------------------------
delivered by the Borrower in favor of the Collateral Agent, substantially in the
form of Exhibit G to the Existing Credit Agreement, as
10
<PAGE>
the same may be amended, supplemented or otherwise modified from time to time.
"Borrower Trademark Security Agreement": the Trademark Security Agreement
-------------------------------------
executed and delivered by the Borrower in favor of the Collateral Agent,
substantially in the form of Exhibit H to the Existing Credit Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"Borrowing Base": an amount, calculated on a monthly basis based upon the
--------------
most recent Monthly Borrowing Base Certificate delivered pursuant to subsection
7.2(c), equal to the sum (without duplication) of (a) 85% of Eligible Accounts
plus (b) the lesser of (1) the U.S. Inventory Sublimit Amount and (2) 60% of
- ----
Eligible Inventory; provided, however, that the Borrowing Base shall be deemed
-------- -------
to be infinite in amount at all times during any Borrowing Base Elimination
Period. All determinations in connection with the Borrowing Base shall be made
by the Borrower and certified to the Collateral Agent by a Responsible Officer
of the Borrower; provided, however, that the Collateral Agent shall have the
-------- -------
final right to review and adjust any such determination to the extent the
Collateral Agent determines, in its reasonable judgment after consultation with
the Borrower and the Administrative Agent, that such determination is not in
accordance with this Agreement. The Borrower shall from time to time provide
such assistance to the Collateral Agent as the Collateral Agent reasonably may
request for the purpose of determining compliance by the Borrower with the
Borrowing Base.
"Borrowing Base Default": any Default or Event of Default which occurs solely
----------------------
because the Total Aggregate Outstandings exceed the Borrowing Base then in
effect.
11
<PAGE>
"Borrowing Base Elimination Period": any period commencing on an Adjustment
---------------------------------
Date and ending on the Business Day immediately preceding the next succeeding
Adjustment Date, provided that (a) the Fixed Charge Coverage Ratio for the four
--------
consecutive fiscal quarters of the Borrower reflected in the financial
statements delivered by the Borrower hereunder for the period ending
immediately prior to the first such Adjustment Date is greater than or equal to
4.00:1 and (b) no Borrowing Base Elimination Period may exist so long as an
Event of Default shall have occurred and be continuing.
"Borrowing Date": any Business Day specified in a notice pursuant to
--------------
subsection 2.3, 2.5(a) or 2.10 as a date on which the Borrower requests the
Lenders to make Loans hereunder.
"Business": as defined in subsection 5.18.
--------
"Business Day": a day other than a Saturday, Sunday or other day on which
------------
commercial banks in New York City are authorized or required by law to close;
provided, that when such term is used to describe a day on which a borrowing,
- --------
payment or interest rate determination is to be made in respect of a Eurodollar
Loan or a Eurodollar Rate CAF Advance, such day shall also be a day on which
dealings in foreign currencies and exchange between banks may be carried on in
London, England.
"CAF": competitive advance facility.
---
"CAF Advance": each CAF Advance made pursuant to subsection 2.4.
-----------
"CAF Advance Availability Period": the period from and including the
-------------------------------
Effective Date to and including
12
<PAGE>
the date which is 14 days prior to the Termination Date.
"CAF Advance Confirmation": each confirmation by the Borrower of its
------------------------
acceptance of CAF Advance Offers, which confirmation shall be substantially in
the form of Exhibit H and shall be delivered to the Agent by facsimile
transmission.
"CAF Advance Interest Payment Date": as to each CAF Advance, each interest
---------------------------------
payment date specified by the Borrower for such CAF Advance in the related CAF
Advance Request.
"CAF Advance Maturity Date": as to any CAF Advance, the date specified by the
-------------------------
Borrower in its acceptance of a CAF Advance offer pursuant to subsection
2.5(d)(ii) in its acceptance of the related CAF Advance Offer.
"CAF Advance Offer": each offer by a Lender to make CAF Advances pursuant to
-----------------
a CAF Advance Request, which offer shall contain the information specified in
Exhibit I and shall be delivered to the Agent by telephone, immediately
confirmed by facsimile transmission.
"CAF Advance Request": each request by the Borrower for Lenders to submit
-------------------
bids to make CAF Advances, which request shall contain the information in
respect of such requested CAF Advances specified in Exhibit J and shall be
delivered to the Agent in writing, by facsimile transmission, or by telephone,
immediately confirmed by facsimile transmission.
"CAF Outstandings": as to any Lender at any time, an amount equal to the
----------------
aggregate then outstanding principal amount of all CAF Advances owing to such
Lender.
13
<PAGE>
"Canada-U.S. Transfer": as defined in subsection 2.4(b).
--------------------
"Canadian Accounts": the meaning ascribed to the term "Accounts" in the
-----------------
Canadian Credit Agreement.
"Canadian Acquisition Agreement": the Asset Acquisition Agreement, dated as
------------------------------
of February 28, 1994, between the Canadian Borrower and Westinghouse Canada, as
amended, supplemented or otherwise modified from time to time in accordance with
subsection 8.8.
"Canadian Administrative Agent": the Bank of Nova Scotia, a Canadian
-----------------------------
chartered bank.
"Canadian Aggregate Asset Sale Shortfall Amount": the meaning ascribed to the
----------------------------------------------
term "Aggregate Asset Sale Shortfall Amount" in the Canadian Credit Agreement.
"Canadian Asset Sale": the meaning ascribed to the term "Asset Sale" in the
-------------------
Canadian Credit Agreement.
"Canadian Borrower": as defined in the recitals hereto.
-----------------
"Canadian Borrower Security Agreement": the meaning ascribed to the term
------------------------------------
"Borrower Security Agreement" in the Canadian Credit Agreement.
"Canadian Borrowing Base": the meaning ascribed to the term "Borrowing Base"
-----------------------
in the Canadian Credit Agreement.
"Canadian Borrowing Base Default": the meaning ascribed to the term
-------------------------------
"Borrowing Base Default" in the Canadian Credit Agreement.
"Canadian Cash Collateral Agreement": the Cash Collateral and Security
----------------------------------
Agreement, dated as of February 28, 1994, between the Canadian Borrower and
14
<PAGE>
Westinghouse Canada, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with subsection 8.8 hereof and
subsection 9.6 of the Canadian Credit Agreement.
"Canadian Collateral": the meaning ascribed to the term "Collateral" in the
-------------------
Canadian Credit Agreement.
"Canadian Collateral Agent": Barclays.
-------------------------
"Canadian Collateral Covenant Agreement": the meaning ascribed to the term
--------------------------------------
"Collateral Covenant Agreement" in the Canadian Credit Agreement.
"Canadian Commitment": the meaning ascribed to the term "Commitment" under
-------------------
the Canadian Credit Agreement.
"Canadian Commitment Percentage": the meaning ascribed to the term
------------------------------
"Commitment Percentage" in the Canadian Credit Agreement.
"Canadian Credit Agreement": as defined in the recitals hereto.
-------------------------
"Canadian Dispositions": the meaning ascribed to the term "Dispositions" in
---------------------
the Canadian Credit Agreement.
"Canadian Dollar Increase Amount": as defined in subsection 2.4(b).
-------------------------------
"Canadian Dollar Reduction Amount": as defined in subsection 2.4(b).
--------------------------------
"Canadian Dollars" and "C$": dollars in the lawful currency of Canada.
---------------- --
15
<PAGE>
"Canadian Eligible Accounts": the meaning ascribed to the term "Eligible
--------------------------
Accounts" in the Canadian Credit Agreement.
"Canadian Eligible Inventory": the meaning ascribed to the term "Eligible
---------------------------
Inventory" in the Canadian Credit Agreement.
"Canadian Extensions of Credit": the meaning ascribed to the term "Extensions
-----------------------------
of Credit" in the Canadian Credit Agreement.
"Canadian First Mortgage Note Documents": the collective reference to the
--------------------------------------
Canadian First Mortgage Notes, the Canadian Mortgages, the Holdings Canadian
First Mortgage Note Guarantees, the Borrower Canadian First Mortgage Note
Guarantees, the RealCo Canadian First Mortgage Note Guarantees and the Canadian
Cash Collateral Agreement.
"Canadian First Mortgage Notes": the First Mortgage Note, dated as of
-----------------------------
February 28, 1994, originally issued by the Canadian Borrower to Westinghouse
Canada and all notes issued in exchange therefor and in exchange for such
exchanged notes, in each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8 hereof
and subsection 9.6 of the Canadian Credit Agreement.
"Canadian Inventory": the meaning ascribed to the term "Inventory" in the
------------------
Canadian Credit Agreement.
"Canadian Issuing Lender": the meaning ascribed to the term "Issuing Lender"
-----------------------
in the Canadian Credit Agreement.
"Canadian L/C Obligations": the meaning ascribed to the term "L/C
------------------------
Obligations" in the Canadian Credit Agreement.
16
<PAGE>
"Canadian Lenders": the meaning ascribed to the term "Lenders" in the
----------------
Canadian Credit Agreement.
"Canadian Letters of Credit": the meaning ascribed to the term "Letters
--------------------------
of Credit" in the Canadian Credit Agreement.
"Canadian Loans": the meaning ascribed to the term "Loans" in the Canadian
--------------
Credit Agreement.
"Canadian Loan Documents: the meaning ascribed to the term "Loan Documents"
-----------------------
in the Canadian Credit Agreement.
"Canadian Loan Parties": the meaning ascribed to the term "Loan Parties" in
---------------------
the Canadian Credit Agreement.
"Canadian Mortgaged Property": each parcel of real property owned by the
---------------------------
Canadian Borrower and encumbered by a Canadian Mortgage.
"Canadian Mortgages": the collective reference to (i) each of the fee
------------------
mortgages, each dated as of February 28, 1994, each made by the Canadian
Borrower in favor of Westinghouse Canada and (ii) any other mortgage made from
time to time by the Canadian Borrower in favor of Westinghouse Canada pursuant
to the Canadian First Mortgage Notes, each of such mortgages encumbering one of
the Canadian Mortgaged Properties with a first mortgage lien securing the
Canadian First Mortgage Notes, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8 hereof
and subsection 9.6 of the Canadian Credit Agreement.
"Canadian Net Cash Proceeds": the meaning ascribed to the term "Net Cash
--------------------------
Proceeds" in the Canadian Credit Agreement.
17
<PAGE>
"Canadian Notes": the meaning ascribed to the term "Notes" in the Canadian
--------------
Credit Agreement.
"Canadian Obligations": as of any date of determination, (i) the aggregate
--------------------
outstanding principal amount of the Canadian Loans, together with all accrued
and unpaid interest thereon, (ii) the outstanding Canadian Reimbursement
Obligations, together with all accrued and unpaid interest thereon, (iii) the
aggregate outstanding Acceptance Reimbursement Obligations (as such term is
defined in the Canadian Credit Agreement), (iv) all accrued and unpaid fees
payable pursuant to subsections 4.3 and 5.3 of the Canadian Credit Agreement and
(v) all other amounts then due and payable under Canadian Credit Agreement or
under any of the other Canadian Loan Documents.
"Canadian Secured Parties": the collective reference to the Canadian
------------------------
Administrative Agent, the Canadian Collateral Agent and the Canadian Lenders
(including, without limitation, the Canadian Issuing Lender and the Canadian
Swing Line Lender).
"Canadian Security Documents": the meaning ascribed to the term "Security
---------------------------
Documents" in the Canadian Credit Agreement.
"Canadian Subsidiary Guarantee": the meaning ascribed to the term "Subsidiary
-----------------------------
Guarantee" in the Canadian Credit Agreement.
"Canadian Swing Line Lender": the meaning ascribed to the term "Swing Line
--------------------------
Lender" in the Canadian Credit Agreement.
"Canadian Transfer Commitment Percentage": as to any Common Lender at any
---------------------------------------
time, the percentage of the aggregate Canadian Commitments of all Canadian
Lenders then constituted by the Canadian Commitment of such Common Lender (in
its capacity as a Canadian Lender
18
<PAGE>
under the Canadian Credit Agreement) or, if such Common Lender is not a Canadian
Lender, the Canadian Lender which is a subsidiary or an affiliate of such Common
Lender.
"Capital Expenditures": with respect to any Person for any period, the sum of
--------------------
the aggregate of all expenditures (whether paid in cash, capitalized as an asset
or accrued as a liability) by such Person and its consolidated Subsidiaries
during such period which, in accordance with GAAP, are or should be included in
"capital expenditures" or similar items reflected in the consolidated statement
of cash flows of such Person for such period.
"Capital Stock": any and all shares, interests, participations or other
-------------
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (i) with respect to the Borrower, each Additional
----------------
Subsidiary and RealCo, investments in U.S. Dollars consisting of (a) securities
issued or fully guaranteed or insured by the United States government or any
agency or instrumentality thereof, (b) time deposits, certificates of deposit or
bankers' acceptances of (1) any Lender or (2) any commercial bank having capital
and surplus in excess of $500,000,000 and the commercial paper of the holding
company of which is rated at least A-2 or the equivalent thereof by Standard &
Poor's Corporation ("S&P") or at least P-2 or the equivalent thereof by Moody's
---
Investors Service, Inc. ("Moody's") (or if at such time neither is issuing
-------
ratings, then a comparable rating of such other nationally recognized rating
agency as shall be approved by the Administrative Agent), and (c) commercial
paper rated at least A-2 or the equivalent
19
<PAGE>
thereof by S&P or at least P-2 or the equivalent thereof by Moody's (or if at
such time neither is issuing ratings, then a comparable rating of such other
nationally recognized rating agency as shall be approved by the Administrative
Agent), in each case provided in clauses (i)(a), (b) and (c) above, maturing
within twelve months after the date of acquisition; and (ii) with respect to the
Canadian Borrower and its Subsidiaries, investments denominated in Canadian
Dollars consisting of (a) securities issued or fully guaranteed or insured by
the government of Canada or any agency or instrumentality thereof, (b) time
deposits, certificates of deposit or bankers' acceptances of (1) any Canadian
Lender, (2) any bank listed under Schedule I to the Bank Act (Canada), (3) any
other bank having capital and surplus in excess of $500,000,000 and the
commercial paper of the holding company of which is rated at least A-2 or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's
(or if at such time neither is issuing ratings, then a comparable rating of such
other nationally recognized rating agency as shall be approved by the
Administrative Agent), or (4) any Canadian bank the short-term debt or deposit
ratings of which have been assigned an investment grade credit rating by CBRS,
Inc. or the Dominion Bond Rating Service Limited (or if at such time neither is
issuing ratings, then a comparable rating of such other nationally recognized
rating agency as shall be approved by the Administrative Agent), and (c)
commercial paper rated at least A1 or the equivalent by CBRS, Inc. and R2 (high)
or R2 (middle) by the Dominion Bond Rating Service Limited (or if at such time
neither is issuing ratings, then a comparable rating of such other nationally
recognized rating agency as shall be approved by the Administrative Agent), in
each case provided in clauses (ii)(a), (b) and (c) above, maturing within twelve
months after the date of acquisition.
20
<PAGE>
"C&D Fund IV": The Clayton & Dubilier Private Equity Fund IV Limited
-----------
Partnership, a Connecticut limited partnership.
"CD&R": as defined in the recitals hereto.
----
"Change of Control": the occurrence of any one or more of the following
-----------------
events: (i) CD&R, C&D Fund IV and the Affiliates of C&D Fund IV and CD&R shall
in the aggregate beneficially own shares of Voting Stock having less than 51% of
the total voting power of all outstanding shares of Voting Stock of Holdings; or
(ii) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the
Exchange Act) other than CD&R, C&D Fund IV and the Affiliates of C&D Fund IV and
CD&R shall have acquired (a) beneficial ownership of more than 30% of the
outstanding shares of Voting Stock of Holdings or (b) the power (whether or not
exercised) to elect a majority of Holdings' directors; or (iii) Holdings shall
cease for any reason to own beneficially and of record 100% of the Capital Stock
of the Borrower; or (iv) the Borrower shall cease for any reason to own
beneficially and of record 100% of the Capital Stock of the Canadian Borrower
and of RealCo; or (v) except as permitted by subsection 8.5 or 8.6, the
Borrower, directly or indirectly through one or more Additional Subsidiaries,
shall cease for any reason to own beneficially and of record at least 80% of the
Capital Stock of each Additional Subsidiary; (vi) except as permitted by
subsection 9.1 or 9.2 of the Canadian Credit Agreement, the Canadian Borrower,
directly or through one or more of its Subsidiaries, shall cease for any reason
to own beneficially and of record 100% of the Capital Stock of each Subsidiary
of the Canadian Borrower or (vii) during any two year period, individuals who at
the beginning of such period constituted Holdings' board of directors (together
with any new directors whose election by the board of directors of Holdings was
approved by a vote of a majority of the directors of Holdings then still in
21
<PAGE>
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the board of directors of Holdings; as used
in this paragraph, "Voting Stock" shall mean shares of Capital Stock entitled to
------------
vote generally in the election of directors.
"Closing Date": the date on which all the conditions precedent set forth in
------------
subsection 6.1 to the Existing Credit Agreement were satisfied or waived.
"Closing Date Exchange Rate": $1.00 equals C$1.39310.
--------------------------
"Co-Agents": each Lender designated as such on the signature pages hereof.
---------
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Collateral": all assets of the Loan Parties, now owned or hereinafter
----------
acquired, upon which a Lien is purported to be created by any Security Document.
"Collateral Agent": Barclays, in its capacity as collateral agent for the
----------------
Administrative Agent and the Canadian Administrative Agent under each Security
Document (other than the Borrower Canadian Stock Pledge Agreement).
"Commercial Letter of Credit": as defined in subsection 3.1.
---------------------------
"Commitment": as to any Lender, its obligation to make Revolving Credit Loans
----------
to, and/or participate in Swing Line Loans made to, and/or participate in
Letters of Credit issued on behalf of, the Borrower in an aggregate amount not
to exceed at any one time
22
<PAGE>
outstanding the amount set forth opposite such Lender's name in Schedule 1 under
the heading "Commitment", as such amount may be reduced or increased from time
to time as provided in subsection 2.9 and the other applicable provisions
hereof; collectively, as to all the Lenders, the "Commitments".
------------
"Commitment Percentage": as to any Lender at any time, the percentage of the
---------------------
aggregate Commitments then constituted by its Commitment (or, if the Commitments
have terminated or expired, the percentage which (i) the sum of (a) such
Lender's then outstanding Revolving Credit Loans plus (b) such Lender's
participating interests in the aggregate L/C Obligations and Swing Line Loans
then outstanding then constitutes of (ii) the sum of (a) the aggregate Revolving
Credit Loans of all the Lenders then outstanding plus (b) the aggregate L/C
Obligations then outstanding plus (c) the aggregate Swing Line Loans then
outstanding).
"Commitment Period": the period from and including the Closing Date to but
-----------------
not including the Termination Date, or such earlier date as the Commitments
shall terminate as provided herein.
"Common Lender": each Lender which is also a Canadian Lender or the parent or
-------------
a subsidiary or affiliate thereof.
"Commonly Controlled Entity": an entity, whether or not incorporated, which
--------------------------
is under common control with the Borrower within the meaning of Section 4001 of
ERISA or is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
"Consolidated Adjusted EBITDA": of any Person, for any period, the difference
----------------------------
between (i) Consolidated EBITDA of such Person for such period, minus (ii)
-----
Capital Expenditures (excluding any expenses incurred
23
<PAGE>
in connection with normal replacement and maintenance programs properly charged
to current operations and excluding the amount of any Net Cash Proceeds of
Dispositions of assets pursuant to subsection 8.6(g) which are reinvested in the
business of the Borrower or an Additional Subsidiary and the amount of any
Canadian Net Cash Proceeds of Canadian Dispositions of assets pursuant to
subsection 9.2(g) of the Canadian Credit Agreement which are reinvested in the
business of the Canadian Borrower or any of its Subsidiaries) paid in cash
during such period.
"Consolidated EBITDA": of any Person, for any period, the Consolidated Net
-------------------
Income of such Person for such period, adjusted to exclude the following items
of income or expense to the extent that such items are included in the
calculation of Consolidated Net Income: (a) Consolidated Interest Expense, (b)
any non-cash interest expense and any other non-cash expenses and charges, (c)
total income tax expense, (d) depreciation expense, (e) the expense associated
with amortization of intangible and other assets, (f) non-cash provisions for
reserves for discontinued operations, (g) any extraordinary, unusual or non-
recurring gains or losses or charges or credits and (h) any gains or losses
associated with the sale or write-up or write-down of assets.
"Consolidated Funded Indebtedness": of the Borrower and its consolidated
--------------------------------
Subsidiaries, at the date of determination thereof, (i) all Indebtedness of the
Borrower hereunder and of the Canadian Borrower under the Canadian Credit
Agreement (in each case, regardless of when such Indebtedness matures) and (ii)
all other Indebtedness of the Borrower and its consolidated Subsidiaries (other
than Indebtedness referred to in clause (e) of the definition thereof),
determined on a consolidated basis in accordance with GAAP, which by its terms
matures more than one year after such date, and any such Indebtedness maturing
within one year from
24
<PAGE>
such date which is renewable or extendable at the option of the obligor to a
date more than one year from such date; provided that Indebtedness of the
--------
Borrower and its consolidated Subsidiaries in respect of the First Mortgage
Notes shall be excluded from the calculation of Consolidated Funded Indebtedness
of the Borrower and its consolidated Subsidiaries.
"Consolidated Interest Expense": of any Person, for any period, cash interest
-----------------------------
expense of such Person for such period on its Indebtedness determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income": of any Person, for any period, net income of such
-----------------------
Person for such period, determined on a consolidated basis in accordance with
GAAP, provided that, for purposes of determining Consolidated Net Income of the
--------
Borrower and its consolidated Subsidiaries for any period, all Dividends for
such period shall be deducted therefrom as an expense.
"Consolidated Net Worth": of any Person, at the date of determination, the
----------------------
sum of (a) all items which in conformity with GAAP would be classified as
preferred stock (provided that such preferred stock (i) has no mandatory
--------
redemptions prior to the Termination Date and (ii) was issued and is outstanding
on terms and conditions reasonably satisfactory to the Administrative Agent),
and common stockholders' equity on a consolidated balance sheet of such Person
at such date plus (b) to the extent that such items would be deducted in the
----
calculation of Consolidated Net Income of such Person, (i) amortization of good
will and other intangible assets during the period commencing on the Closing
Date to and including the date of determination and (ii) the non-cash portion of
any write-down of Inventory during the period from the Closing Date to and
including August 31, 1995; provided that, in calculating Consolidated Net
--------
Worth, (x) the effect of
25
<PAGE>
any translation gains or losses attributable to fluctuations in currency
exchange rates and (y) the effect of any write-up in the book value of
inventory, fixed assets and intangible assets resulting from, and the
depreciation, amortization and write-off of fixed assets and intangible assets
pertaining to, adjustments required or permitted by Accounting Principles Board
Opinion Nos. 16 and 17, shall be excluded.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Credit Documents": the collective reference to the Loan Documents and the
----------------
Canadian Loan Documents.
"Credit Parties": the collective reference to the Loan Parties and the
--------------
Canadian Loan Parties.
"Current Exchange Rate": as at any date of determination, the average of the
---------------------
bid/ask spot rates specified on the WRLD screen of Reuters Information Services
Inc. at 10:00 A.M., New York City time, on such date, with respect to the
purchase and sale of Canadian Dollars for U.S. Dollars.
"DCBU Supply Agreement": the WESCO Distributor Agreement, dated as of January
---------------------
31, 1994, between Westinghouse U.S. and Eaton and assigned (with the consent of
Eaton) by Westinghouse U.S. to the Borrower on February 28, 1994, as the same
may be amended, supplemented or otherwise modified from time to time.
"Default": any of the events specified in Section 9 prior to the
-------
satisfaction of any requirement for the giving of notice, the lapse of time, or
both, or any other condition.
26
<PAGE>
"Defaulted Receivable": any Account of the Borrower or any of its Additional
--------------------
Subsidiaries which:
(i) has been or should have been charged-off as not creditworthy in
conformity with the accounting policies of the Borrower as in effect on the
Closing Date; or
(ii) is owed by an account debtor described in clause (l) of the
definition of Eligible Accounts.
"Depositary Account": as defined in subsection 7.11.
------------------
"Depositary Bank": as defined in subsection 7.11.
---------------
"Dispositions": as defined in the definition of Asset Sale.
------------
"Dividends": for any period, all dividends and other distributions paid by
---------
the Borrower to Holdings in cash during such period, other than (i) the payment
permitted by subsection 8.7(g) and (ii) dividends and other distributions
permitted by subsection 8.7(d) (but only to the extent such dividends or
distributions are made in respect of repurchases by Holdings of its common stock
or options, warrants or other rights to purchase its common stock from Permitted
Equity Purchasers referred to in clauses (i) and (ii) of the definition thereof)
which are paid by the Borrower to or on the behalf of Holdings and used by
Holdings for the purposes described in the immediately preceding parenthetical.
"Dollars", "U.S. Dollars" and "$": dollars in lawful currency of the United
------- ------------ -
States of America.
"Eaton": Eaton Corporation, an Ohio corporation.
-----
27
<PAGE>
"EECORP": EESCO Equity Corporation, a Delaware corporation and the owner of
------
the outstanding common stock of EESCO.
"EESCO": EESCO Inc., a Delaware corporation.
-----
"EESCO Acquisition": the acquisition by the Borrower of substantially all of
-----------------
the assets of EESCO relating to its electrical products distribution business
pursuant to the EESCO Acquisition Agreement.
"EESCO Acquisition Agreement": an Asset Purchase Agreement in the form
---------------------------
attached to the commitment letter, dated March 19, 1996, between the Borrower
and Stamford EEC Acquisition Corp., as in effect on March 29, 1996 without
giving effect to any amendments or other modifications thereof.
"Effective Date": as defined in subsection 6.1.
--------------
"Eligible Accounts": at any time, an amount equal to the aggregate
-----------------
outstanding balance of all Accounts of the Borrower and its Additional
Subsidiaries payable in Dollars as of such time, provided that, unless otherwise
--------
approved in writing by the Collateral Agent, no Account shall be deemed to be an
Eligible Account if:
(a) either (i) the Account is unpaid more than 60 days after the
original statement due date (including, without limitation, the aggregate credit
balance determined on an Account by Account basis more than 60 days old) or (ii)
the Account is unpaid more than 120 days after the date on which an invoice
therefor has been sent to the Obligor in respect of such Account;
(b) the Obligor has been obligated in respect of a Defaulted
Receivable at any time during the immediately preceding 12-month period,
28
<PAGE>
unless the payment of Accounts from such Obligor is secured in a manner
satisfactory to the Collateral Agent or, if the Account from such Obligor arises
subsequent to a decree or order for relief with respect to such Obligor under
any bankruptcy or insolvency laws (or other similar laws), as now or hereafter
in effect, the Collateral Agent shall have determined that the timely payment
and collection of such Account will not be impaired;
(c) it is payable by an Obligor (or any known Subsidiary or Affiliate
thereof) and 50% or more, in face amount, of all Accounts payable by such
Obligor (and its known Affiliates) are ineligible pursuant to (a) above;
(d) it is payable by an Obligor (or any known Subsidiary or Affiliate
thereof) and all Accounts payable by such Obligor (and its known Subsidiaries
and Affiliates) exceed 10% of all Eligible Accounts; provided that Accounts of
--------
such an Obligor (and its known Subsidiaries and Affiliates) shall only be deemed
ineligible pursuant to this clause (d) to the extent of such excess;
(e) it arises out of a sale or an administrative charge made by the
Borrower or any Additional Subsidiary to the Canadian Borrower or any Affiliate
(other than Westinghouse or any division, Subsidiary or Affiliate of
Westinghouse) or Subsidiary of the Borrower or the Canadian Borrower;
(f) the sale is to an Obligor located outside (i) any of the fifty
states constituting the United States of America, (ii) the District of Columbia,
(iii) Puerto Rico and (iv) Guam if the Obligor located in Guam is either the
United
29
<PAGE>
States of America (or any department, agency or instrumentality thereof) or the
Guam Power Authority (or any successor thereto);
(g) the Account is the result of a charge-back or a reinvoice of a
disputed Account, the disposition of which has not been resolved, or the Account
is a Defaulted Receivable;
(h) the Account has been or should have been charged off as not
creditworthy in conformity with the accounting policies of the Borrower as in
effect on the Closing Date;
(i) it is an Account which may be set-off or charged against any
security deposit, progress payment or other similar advance or deposit made by
or for the benefit of the applicable Obligor; provided that any Account deemed
--------
ineligible pursuant to this clause (i) shall only be ineligible to the extent of
such set-off or charge against such security deposit, progress payment or other
similar advance or deposit;
(j) the sale to the Obligor giving rise to the Account is on a
bill-and-hold basis, guaranteed sale, sale-and-return, sale on approval or
consignment basis or made pursuant to any other written agreement providing for
repurchase or return, provided, however, that no Account shall be excluded
-------- -------
pursuant to this clause (j) solely as a result of the customary quality
warranties or the general right to return goods provided by the Borrower or any
Additional Subsidiary to its customers; provided, further, that, with respect to
--------
Accounts arising from sales to an Obligor on a bill-and-hold basis, if such
Obligor has requested that the goods subject to such sales be held by the
Borrower or an Additional Subsidiary and has nonetheless agreed to make payment
on such
30
<PAGE>
Accounts, such Accounts shall not be considered ineligible pursuant to
this clause (j); provided, further, that the amount of Accounts included as
--------
Eligible Accounts pursuant to the foregoing proviso, when aggregated with the
U.S. Dollar equivalent (determined from time to time on the basis of then
Current Exchange Rates) of the Canadian Dollar amount of Canadian Accounts
included as Canadian Eligible Accounts pursuant to the corresponding proviso to
clause (j) of the definition of Eligible Accounts contained in the Canadian
Credit Agreement, shall not exceed $2,500,000;
(k) (i) the Obligor has disputed its liability on, or the Obligor has
made any claim or defense with respect to, such Account or any other account due
from such Obligor to the Borrower, the Canadian Borrower or any of their
respective Subsidiaries, which has not been resolved or (ii) the Account
otherwise is, or is reasonably expected to become, subject to any right of set-
off by the Obligor; provided that any Account deemed ineligible pursuant to
--------
this clause (k) shall only be ineligible to the extent of the amount owed by the
Borrower, the Canadian Borrower or any of their respective Subsidiaries to the
Obligor, the amount of such dispute, claim or defense, or the maximum amount at
any time of such right of set-off, as applicable; provided, further, that
-------- -------
routine adjustments to an Account common in the industry in which the Borrower,
the Canadian Borrower or any of their respective Subsidiaries conduct business
and common to such businesses, such as for volume or quantity differences or
returned goods, will be deemed not to constitute a dispute, claim, defense or
setoff;
(l) a proceeding under any bankruptcy or insolvency laws (or any similar
laws) has occurred
31
<PAGE>
and is continuing with respect to the Obligor, unless the payment of Accounts
from such Obligor is secured in a manner satisfactory to the Collateral Agent
or, if the Account from such Obligor arises subsequent to a decree or order for
relief with respect to such Obligor under any bankruptcy or insolvency laws (or
any similar laws), as now or hereafter in effect, the Collateral Agent shall
have determined that the timely payment and collection of such Account will not
be impaired;
(m) Accounts the Obligor in respect of which is the United States of
America or any department, agency or instrumentality thereof; provided that
--------
Accounts otherwise ineligible pursuant to this clause (m) shall only be
ineligible to the extent that the aggregate amount of all such Accounts is in
excess of $6,000,000; and provided further that amounts in excess of $6,000,000
-------- -------
in respect of such Accounts shall nonetheless be considered eligible to the
extent that the Borrower or the applicable Additional Subsidiary duly assigns
its rights to payment of such Accounts to the Administrative Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. (S) 3727 et seq.);
(n) (i) except to the extent set forth in the second and third provisos
to clause (j) above, the goods giving rise to such Account have not been
delivered to, and are not in-transit to, the Obligor or (ii) the services giving
rise to such Account have not been performed or (iii) the Account otherwise does
not represent a final sale or transfer of title to the Obligor;
(o) the Account (or the sale giving rise thereto) does not comply in all
material respects with all applicable legal requirements, including, where
applicable, the Federal Consumer Credit
32
<PAGE>
Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board
of Governors of the Federal Reserve System, in each case as amended;
(p) the Account is subject to any material restrictions on the transfer,
assignability or sale thereof, enforceable against the assignee, except as
described in clause (m) above;
(q) the Administrative Agent does not have a valid and perfected first
priority security interest in such Account or the Account does not otherwise
conform in all material respects to the representations and warranties contained
in this Agreement or any of the Security Documents;
(r) any portion of an Account to the extent such portion is for interest
or finance charges accrued on past due balances of any Accounts;
(s) to the extent the Account represents an amount of billed receivables
resulting from the shipping and invoicing of finished product which will not be
subsequently collected because payment has already been received on account of
progress payment billing (as such progress billings may be reduced by adjustment
thereto);
(t) to the extent an Account is to be reduced as a result of pending
price decreases relating to the agreement giving rise to such Account, such
reduction of such Account; provided that an Account otherwise ineligible
--------
pursuant to this clause (t) shall not be considered ineligible to the extent
that the pending price decrease consists of a discount for early payment which
is not then determinable or a credit for volume purchases which is not then
determinable; or
33
<PAGE>
(u) Accounts classified as "Legal Accounts" on the books of the Borrower
or an Additional Subsidiary in conformity with the accounting policies of the
Borrower as in effect of the Closing Date.
"Eligible Inventory": all Inventory of the Borrower and its Additional
------------------
Subsidiaries that consists of finished goods or spare parts available for sale
to customers to the extent not excluded pursuant to clauses (a) through (g)
below. In determining the amount to be so included, the amount of such Inventory
shall be valued at the lower of average cost or market value on a basis
consistent with the Borrower's or the relevant Additional Subsidiary's
accounting practice as in effect on the Closing Date less reserves taken, if
----
any, on account of physical inventory adjustments (in respect of aged Inventory,
excess Inventory or otherwise) as recorded in the Borrower's or the relevant
Additional Subsidiary's accounting records and goods in transit from third
parties that are not excluded pursuant to clauses (a) through (g) below. Unless
otherwise approved in writing by the Collateral Agent, no Inventory shall be
deemed Eligible Inventory of the Borrower or any of its Additional Subsidiaries
if:
(a) the Inventory is not owned solely by the Borrower or an Additional
Subsidiary or the Borrower or an Additional Subsidiary does not have good, valid
and marketable title to such Inventory;
(b) the Inventory is (i) not located at property that is owned or leased by
the Borrower, an Additional Subsidiary or RealCo and (ii) subject to a Lien
other than Liens pursuant to the Security Documents, Liens arising by operation
of law (appropriate reserves for which have been reasonably established by the
Borrower or an
34
<PAGE>
Additional Subsidiary) and Liens for normal and customary warehousing and
transportation charges (appropriate reserves for which have been reasonably
established by the Borrower or an Additional Subsidiary);
(c) the Inventory is not subject to a perfected first priority Lien in favor
of the Collateral Agent or the Administrative Agent except for Liens arising by
operation of law (appropriate reserves for which have been reasonably
established by the Borrower or an Additional Subsidiary) and, with respect to
Eligible Inventory located at sites described in clause (b) above, for Liens for
normal and customary warehousing and transportation charges (appropriate
reserves for which have been reasonably established by the Borrower or an
Additional Subsidiary);
(d) the Inventory is not located in (i) any of the fifty states constituting
the United States of America, (ii) the District of Columbia or (iii) Puerto
Rico;
(e) the Inventory does not conform in all material respects to the
representations and warranties contained in this Agreement or any of the
Security Documents;
(f) Specialized Inventory (other than New Inventory) of a particular stock
keeping unit to the extent that the number of such stock keeping units held by
the Borrower or an Additional Subsidiary on any date of determination exceeds
the number of such stock keeping units sold by WESCO, the Borrower or an
Additional Subsidiary during the 12 consecutive fiscal month period immediately
preceding such date of determination; provided that in no event shall the value
--------
of all
35
<PAGE>
Inventory included as Eligible Inventory pursuant to this clause (f), when
aggregated with the U.S. Dollar equivalent (determined from time to time on the
basis of then Current Exchange Rates) of the value of the Canadian Inventory
included as Canadian Eligible Inventory pursuant to the corresponding proviso to
clause (f) of the definition of Eligible Inventory in the Canadian Credit
Agreement, exceed at any time $5,000,000 in the aggregate; or
(g) Inventory (other than Specialized Inventory and New Inventory) of
a particular stock keeping unit to the extent that the number of such stock
keeping units held by the Borrower or an Additional Subsidiary on any date of
determination exceeds (i) for any date of determination during the period from
the Closing Date to May 31, 1995, two times, and (ii) thereafter, one times, the
----- -----
number of such stock keeping units sold by WESCO, the Borrower or an Additional
Subsidiary during the 12 consecutive fiscal month period immediately preceding
such date of determination; provided that in no event shall the value of all
--------
Inventory included as Eligible Inventory pursuant to subclause (i) of this
clause (g), when aggregated with the U.S. Dollar equivalent (determined from
time to time on the basis of then Current Exchange Rates) of the value of all
Inventory included as Canadian Eligible Inventory pursuant to subclause (i) of
clause (g) of the definition of Eligible Inventory in the Canadian Credit
Agreement, exceed in the aggregate at any time the sum of (x) $8,500,000 and (y)
the value of such Inventory (and the U.S. Dollar equivalent (determined from
time to time on the basis of then Current Exchange Rates) of the value of such
Canadian Inventory) that would have been included as Eligible Inventory (or
Canadian Eligible Inventory) pursuant to subclause (i) of this clause (g) (or
36
<PAGE>
subclause (i) of clause (g) of the definition of Eligible Inventory in the
Canadian Credit Agreement) had the references in such subclauses to the number
"two" been a reference to the number "one".
"Environmental Costs": any and all costs or expenses (including, without
-------------------
limitation, attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses), of whatever kind or
nature, known or unknown, contingent or otherwise, arising out of, or in any way
relating to any violation of, noncompliance with or liability under any
Environmental Laws or any orders, requirements, demands, or investigations of
any person related to any Environmental Laws. Environmental Costs include any
and all of the foregoing, without regard to whether they arise out of or are
related to any past, pending or threatened proceeding of any kind.
"Environmental Laws": any and all applicable foreign, Federal, state,
------------------
territorial, provincial, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of human health
or the environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from
-----
time to time.
"Equity Interest Purchase Price": with respect to any repurchase by Holdings
------------------------------
of any Westinghouse Equity Interests, an amount equal to the sum of the
aggregate consideration, whether cash, securities, property or any other
consideration paid or delivered by Holdings to Westinghouse U.S. in respect of
such repurchase.
37
<PAGE>
"Equity Investment": as defined in subsection 6.1(d).
-----------------
"Equity Investors": C&D Fund IV and certain members of the management of the
----------------
Borrower.
"Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar
---------------------------------
Loan, the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each Interest Period
--------------------
pertaining to a Eurodollar Loan, the rate per annum determined by the
Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th
of 1%) of the offered rates for U.S. dollar deposits with a term comparable to
the applicable Interest Period that appears on the Telerate British Bankers
Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00
a.m., London time, on the second full Business Day preceding the first day of
such Interest Period; provided, however, that if there shall at any time no
-------- -------
longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page,
"Eurodollar Base Rate" shall mean, with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which Barclays is offered Dollar deposits at or about 10:00 A.M., New York City
time, two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange
38
<PAGE>
operations in respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period. "Telerate
--------
British Bankers Assoc. Interest Settlement Rates Page" shall mean the display
- -----------------------------------------------------
designated as Page 3750 on the Telerate System Incorporated Service (or such
other page as may replace such page on such service for the purpose of
displaying the rates at which U.S. dollar deposits are offered by leading banks
in the London interbank deposit market).
"Eurodollar CAF Advance": any CAF Advance made pursuant to a Eurodollar Rate
----------------------
CAF Advance Request.
"Eurodollar Loans": Revolving Credit Loans the rate of interest applicable to
----------------
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
---------------
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Rate CAF Advance Request": any CAF Advance Request requesting the
-----------------------------------
Lenders to offer to make CAF Advances at an interest rate equal to the
Eurodollar Rate plus (or minus) a margin.
"Event of Default": any of the events specified in Section 9, provided that
---------------- --------
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
39
<PAGE>
"Exchange Act": the Securities Exchange Act of 1934, as amended.
------------
"Exchange Rate": with respect to an amount in a currency other than U.S.
-------------
Dollars, an amount in U.S. Dollars equivalent to such amount calculated at a
rate of exchange quoted by Barclays on the Effective Date (at the hour on the
Effective Date at which Barclays customarily makes such determination) to prime
banks in New York for the spot purchase in the New York foreign exchange market
of such other currency with U.S. Dollars.
"Existing Canadian Credit Agreement": as defined in the recitals hereto.
----------------------------------
"Existing Credit Agreement": as defined in the recitals hereto.
-------------------------
"Extension of Credit": as to any Lender, the making of a Loan by such Lender
-------------------
or the issuance of, or participation in, a Letter of Credit by such Lender.
"Facility Fee Rate": 0.50% per annum less the Margin Reduction Percentage in
----------------- ----
effect from time to time.
"Financial Statement Delivery Default": any Default which occurs solely as a
------------------------------------
result of a failure by the Borrower to deliver the financial statements required
to be delivered under subsection 7.1(a), (b) or (c) (as applicable).
"Financing Lease": any lease of property, real or personal, the obligations
---------------
of the lessee in respect of which are required in accordance with GAAP to be
capitalized on a balance sheet of the lessee.
"First Mortgage Note Documentation": as defined in subsection 6.1(d).
---------------------------------
40
<PAGE>
"First Mortgage Note Documents": the collective reference to the Canadian
-----------------------------
First Mortgage Note Documents and the RealCo First Mortgage Note Documents.
"First Mortgage Notes": the collective reference to the Canadian First
--------------------
Mortgage Notes and the RealCo First Mortgage Notes.
"Fixed Charge Coverage Ratio": for any period, the ratio of Consolidated
---------------------------
Adjusted EBITDA of the Borrower and its consolidated Subsidiaries for such
period to Consolidated Interest Expense of the Borrower and its consolidated
Subsidiaries for such period.
"Fixed Rate CAF Advance": any CAF Advance made pursuant to a Fixed Rate CAF
----------------------
Advance Request.
"Fixed Rate CAF Advance Request": any CAF Advance Request requesting the
------------------------------
Lenders to offer to make CAF Advances at a fixed rate (as opposed to a rate
composed of the Eurodollar Rate plus (or minus) a margin).
"Foreign Subsidiary": any Subsidiary of the Borrower which is not organized
------------------
under the laws of the United States or any state thereof or the District of
Columbia.
"Former Plan": any employee benefit plan in respect of which the Borrower or
-----------
a Commonly Controlled Entity could incur liability because of Section 4069 or
Section 4212(c) of ERISA.
"GAAP": with respect to the covenants contained in subsection 8.1 and all
----
defined terms relating thereto, generally accepted accounting principles in the
United States of America in effect on the date hereof and, for all other
purposes under this Agreement, generally accepted accounting principles in the
United States of America in effect from time to time.
41
<PAGE>
"Governmental Authority": any nation or government, any state, province or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantees": the collective reference to the Holdings Guarantee and each
----------
Subsidiary Guarantee.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
-------------------- -------------------
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including, without limitation, any such obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
-------- -------
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
42
<PAGE>
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Guarantor": each Person party to a Guarantee.
---------
"Holdings": as defined in the recitals hereto.
--------
"Holdings Canadian First Mortgage Note Guarantees": the guarantees included
------------------------------------------------
on the Canadian First Mortgage Notes and made by Holdings in favor of the
holders of the Canadian First Mortgage Notes, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
subsection 8.8. hereof and subsection 9.6 of the Canadian Credit Agreement.
"Holdings Guarantee": the Guarantee executed and delivered by Holdings in
------------------
favor of the Collateral Agent, substantially in the form of Exhibit I to the
Existing Credit Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.
"Holdings RealCo First Mortgage Note Guarantees": the guarantees included on
----------------------------------------------
the RealCo First Mortgage Notes and made by Holdings in favor of the holders of
the RealCo First Mortgage Notes, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8.
43
<PAGE>
"Holdings Stock Pledge Agreement": the Stock Pledge Agreement executed and
-------------------------------
delivered by Holdings in favor of the Collateral Agent, substantially in the
form of Exhibit J to the Existing Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Indebtedness": of any Person at any date, (a) all indebtedness of such
------------
Person for borrowed money or for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) all obligations of such Person in respect of
interest rate protection agreements, interest rate futures, interest rate
options, interest rate caps and any other interest rate hedge arrangements and
(f) all indebtedness or obligations of the types referred to in the preceding
clauses (a) through (e) secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof.
"Insolvency": with respect to any Multiemployer Plan, the condition that such
----------
Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": as defined in subsection 5.9.
---------------------
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of each
---------------------
March, June, September and
44
<PAGE>
December to occur while such Loan is outstanding, (b) as to any Eurodollar Loan
having an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period longer than
three months, (x) each day which is three months, or a whole multiple thereof,
after the first day of such Interest Period and (y) the last day of such
Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
---------------
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the Borrower in its notice
of borrowing or notice of conversion, as the case may be, given with respect
thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
- --------
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding Business Day;
45
<PAGE>
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(3) any Interest Period pertaining to a Eurodollar Loan that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"Interest Rate Agreement": any interest rate protection agreement, interest
-----------------------
rate future, interest rate option, interest rate cap or other interest rate
hedge arrangement with a financial institution reasonably acceptable to the
Administrative Agent, to or under which the Borrower or any Subsidiary thereof
is a party or a beneficiary on the Closing Date or becomes a party or a
beneficiary after the Closing Date.
"Interest Rate Caps": the collective reference to the following interest rate
------------------
cap transactions: (i) the interest rate cap entered into between the Borrower
and Mellon Bank, N.A. on March 28, 1994 having a notional amount of
U.S.$22,500,000, effective for a two year period commencing on March 31, 1994
and providing for quarterly payments to the Borrower in the event that interest
accrued on such notional amount at the London interbank offered rate ("Libor")
-----
exceeds interest accrued on such notional amount at 5.375% per annum, such
interest rate cap being evidenced by the Ceiling Rate Interest Credit Agreement
#1, dated as of March 28, 1994, between the Borrower and Mellon Bank, (ii) the
interest rate cap entered into between the Borrower and Mellon Bank, N.A. on
March 28, 1994 having a notional amount of U.S.$22,500,000, effective for a two
year period commencing on March 31, 1994 and providing for quarterly payments to
the Borrower in the event
46
<PAGE>
that interest accrued on such notional amount at Libor exceeds interest accrued
on such notional amount at 5.375% per annum, such interest rate cap being
evidenced by the Ceiling Rate Interest Credit Agreement #2, dated as of March
28, 1994, between the Borrower and Mellon Bank, N.A., (iii) the interest rate
cap entered into between the Borrower and Continental Bank N.A. on March 21,
1994 having a notional amount of U.S.$22,500,000, effective for a two year
period commencing on March 25, 1994 and providing for quarterly payments to the
Borrower in the event that interest accrued on such notional amount at Libor
exceeds interest accrued on such notional amount at 5.4375% per annum, such
interest rate cap being evidenced by the Rate Cap Transaction Agreement, dated
as of March 21, 1994, between the Borrower and Continental Bank N.A., together
the related Confirmation, dated as of March 21, 1994 between the Borrower and
Continental Bank N.A., (iv) the interest rate cap entered into between the
Borrower and Barclays Bank PLC on March 21, 1994 having a notional amount of
U.S.$22,500,000, effective for a two year period commencing on March 25, 1994
and providing for quarterly payments to the Borrower in the event that interest
accrued on such notional amount at Libor exceeds interest accrued on such
notional amount at 5.4375% per annum, such interest rate cap being evidenced by
the 1992 ISDA Master Agreement, dated as of March __, 1994, between the Borrower
and Barclays Bank PLC, together the related Confirmation, dated as of March 22,
1994 between the Borrower and Barclays Bank PLC and (v) the interest rate cap
entered into between the Borrower and The First National Bank of Chicago, N.B.D.
on March 1, 1996 having a notional amount of U.S.$80,000,000, effective for a
two year period commencing on March 1, 1996 and providing for quarterly payments
to the Borrower in the event that interest accrued in such notional amount at
Libor exceeds interest accrued on such notional amount at 6.7500% per annum.
47
<PAGE>
"Inventory": as defined in the Uniform Commercial Code as in effect in the
---------
State of New York; and, with respect to the Borrower or any Additional
Subsidiary, all such inventory of the Borrower or such Additional Subsidiary,
including, without limitation: (i) all finished goods, parts, components,
assemblies, supplies, labor, burden and materials used or consumed in its
business; (ii) all goods, wares and merchandise, finished or unfinished, held
for sale; and (iii) all goods returned to or repossessed by the Borrower or such
Additional Subsidiary.
"Investments": as defined in subsection 8.10.
-----------
"Issuing Lender": Barclays, in its capacity as issuer of any Letter of
--------------
Credit.
"Landlord's Waiver": a Landlord's Waiver, substantially in the form of
-----------------
Exhibit C.
"L/C Commission Rate": 1.00% per annum, less the Margin Reduction Percentage
------------------- ----
in effect from time to time.
"L/C Commitment": $35,000,000.
--------------
"L/C Fee Payment Date": with respect to any Letter of Credit, the last day of
--------------------
each March, June, September and December occurring after the date of issuance
thereof and prior to the expiration thereof.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5(a).
"L/C Participants": the collective reference to all the Lenders other than
----------------
the Issuing Lender.
48
<PAGE>
"Lender": as defined in the preamble hereto.
------
"Lending Parties": the collective reference to the Lenders and the Canadian
---------------
Lenders; individually, a "Lending Party".
-------------
"Letters of Credit": as defined in subsection 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, security deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Notes, the Applications, the Guarantees
--------------
and the Security Documents.
"Loan Parties": the Borrower, Holdings, the Canadian Borrower, RealCo and
------------
each Subsidiary of the Borrower which is or becomes a party to a Loan Document;
individually, a "Loan Party".
----------
"Loans": the collective reference to the Revolving Credit Loans, the CAF
-----
Advances and the Swing Line Loans.
"Majority Canadian Lenders": the meaning ascribed to the term "Majority
-------------------------
Lenders" in the Canadian Credit Agreement.
"Majority Lenders": at any time, Lenders which, in the aggregate, have
----------------
Commitments (or, if the Commitments have terminated or expired, Aggregate
Outstandings) aggregating at least 51% of the
49
<PAGE>
Commitments of all Lenders (or, if the Commitments have terminated or expired,
the Aggregate Outstandings of all Lenders), provided that at any time after the
--------
Commitments and all Letters of Credit have terminated or expired, and the
Aggregate Outstandings of all Lenders have been repaid, Majority Lenders shall
be Lenders which, in the aggregate, have CAF Outstandings aggregating at least
51% of the sum of the CAF Outstandings of all Lenders.
"Management Subscription Agreements": one or more stock subscription or stock
----------------------------------
option agreements which have been or may be entered into between Holdings, the
Borrower or any Additional Subsidiary and one or more Permitted Equity
Purchasers, with respect to the issuance to such Permitted Equity Purchasers of
common stock of Holdings or an Additional Subsidiary or options, warrants or
other rights in respect of common stock of Holdings or an Additional Subsidiary,
any agreements entered into from time to time with transferees of any such
stock, options, warrants or other rights in connection with the sale, transfer
or reissuance thereof, and any assumptions of any of the foregoing by third
parties.
"Margin Adjustment Period": each period commencing on an Adjustment Date and
------------------------
ending on the Business Day immediately preceding the next succeeding Adjustment
Date.
"Margin Reduction Percentage": (a) during the period from and including the
---------------------------
Closing Date to but excluding the Adjustment Date which occurs concurrently with
the delivery by the Borrower pursuant to subsection 7.1(b) or (c) (as
applicable) of its financial statements for the quarterly period ended June 30,
1995, zero and (b) during each Margin Adjustment Period which commences on or
after the Adjustment Date referred to in clause (a) above and in respect of
which the
50
<PAGE>
Fixed Charge Coverage Ratio for the four consecutive fiscal quarters of the
Borrower immediately preceding the commencement of such Margin Adjustment Period
(determined by reference to the certificates delivered pursuant to subsection
7.2(b) concurrently with the financial statements delivered under subsection
7.1(a), (b) or (c) (as applicable), or the Annual Unaudited Financial Statements
(as defined below in this definition), as the case may be, with respect to such
four consecutive fiscal quarters) is (i) less than 3.00:1, zero, (ii) less than
3.50:1 but greater than or equal to 3.00:1, 0.125% (when used in the definitions
of Applicable Margin and L/C Commission Rate) and 0.125% (when used in the
definition of Facility Fee Rate), (iii) less than 4.00:1 but greater than or
equal to 3.50:1, 0.375% (when used in the definitions of Applicable Margin and
L/C Commission Rate) and 0.125% (when used in the definition of Facility Fee
Rate), (iv) less than 4.50:1 but greater than or equal to 4.00:1, 0.5625% (when
used in the definitions of Applicable Margin and L/C Commission Rate) and
0.1875% (when used in the definition of Facility Fee Rate), (v) less than 5.00:1
but greater than or equal to 4.50:1, 0.65% (when used in the definitions of
Applicable Margin and L/C Commission Rate) and 0.25% (when used in the
definition of Facility Fee Rate), (vi) greater than or equal to 5.00:1, 0.725%
(when used in the definitions of Applicable Margin and L/C Commission Rate) and
0.275% (when used in the definition of Facility Fee Rate) provided that:
--------
(x) notwithstanding the foregoing, during any period from and including the
date on which an Event of Default has occurred to but excluding the date on
which such Event of Default is no longer continuing, the Margin Reduction
Percentage shall be zero;
51
<PAGE>
(y) if the Borrower delivers to the Administrative Agent any financial
statements referred to in clause (b) of the definition of Adjustment Date (each,
an "Annual Unaudited Financial Statement") and thereafter the financial
------------------------------------
fstatements delivered pursuant to subsection 7.1(a) in respect of the period
covered by such Annual Unaudited Financial Statement demonstrates a Fixed Charge
Coverage Ratio for such period which differs from that demonstrated by such
Annual Unaudited Financial Statement, any change in the Margin Reduction
Percentage occurring as a result of such difference shall be given retroactive
effect to the first Business Day after delivery of such Annual Unaudited
Financial Statement; and
(z) if any Financial Statement Delivery Default becomes an Event of
Default, the Margin Reduction Percentage (if greater than zero) that was in
effect for the period commencing on the date such Financial Statement Delivery
Default occurred to the date such Financial Statement Delivery Default became an
Event of Default shall be retroactively adjusted to zero for such period and
shall remain zero until the first Business Day following receipt by the
Administrative Agent of the financial statements the failure to deliver which
gave rise to such Financial Statement Delivery Default, which date shall
constitute an Adjustment Date and upon which date the Margin Adjustment
Percentage shall be determined in accordance with the other provisions of this
definition.
If payments are made hereunder on the basis of a Margin Reduction Percentage
that is retroactively adjusted as a result of the occurrence of any of the
events described in clauses (x), (y) or (z) of the proviso to the immediately
preceding sentence, the Lenders and the Borrower shall make such payments to the
Administrative
52
<PAGE>
Agent (which shall credit the account of the Borrower or allocate such payments
among the Lenders in accordance with their respective interests in the payments
theretofore made hereunder, as the case may be, on the basis of the Margin
Reduction Percentage that was so retroactively adjusted) as may be necessary to
give effect to such adjustment, such payments to be calculated by the
Administrative Agent (which shall notify the Borrower and the Lenders thereof)
and to be made as soon as practicable (but in any event no later than two
Business Days after such notice is given by the Administrative Agent) and to
include interest at the applicable Federal Funds Effective Rate for the period
from the date to which the Margin Reduction Percentage has been retroactively
adjusted to the date of the applicable payment on any amounts required to be
paid as a result of such retroactive adjustment.
"Master Lease Agreement": the Master Lease, dated as of February 28, 1994,
----------------------
between the Borrower and RealCo, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8.
"Master Lease Documentation": as defined in subsection 6.1(e).
--------------------------
"Material Adverse Effect": a material adverse effect on (a) the business,
-----------------------
operations, property or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole, (b) the validity or enforceability of (i)
this Agreement or any of the Notes or the rights and remedies of the
Administrative Agent or the Lenders hereunder or thereunder or (ii) the Canadian
Credit Agreement or the rights and remedies of the Canadian Administrative Agent
or the Canadian Lenders thereunder or (c) the validity or enforceability of any
of the other Credit Documents in the event that such material adverse effect
materially impairs the value or the benefit of the Collateral or
53
<PAGE>
Canadian Collateral or the rights and remedies of the Collateral Agent, the
Administrative Agents or the Lending Parties thereunder.
"Material Environmental Amount": any amount payable by the Borrower and/or
-----------------------------
its Subsidiaries (not subject to payment or reimbursement by Westinghouse
pursuant to the Acquisition Agreement or the Canadian Acquisition Agreement) in
respect of or under any Environmental Law for remedial costs, compliance costs,
compensatory damages, punitive damages, fines, penalties or any combination
thereof, that has a Material Adverse Effect or that is in excess of $5,000,000.
"Materials of Environmental Concern": any gasoline or petroleum (including
----------------------------------
crude oil or any fraction thereof) or petroleum products or any hazardous or
toxic substances, materials or wastes, defined or regulated as such in or under
or which may give rise to liability under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Mixed Asset Sale": any Disposition constituting a "Mixed Asset Sale" under
----------------
and as defined in the RealCo First Mortgage Notes.
"Monthly Borrowing Base Certificate": as defined in subsection 7.2(c).
----------------------------------
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": with respect to any Asset Sale (including any Asset Sale
-----------------
that constitutes a sale and leaseback transaction permitted under subsection
8.12), any sale or issuance of equity securities of
54
<PAGE>
Holdings (but excluding any sale or issuance of equity securities of Holdings to
one or more Permitted Equity Purchasers to the extent such sale or issuance is
permitted by the Holdings Guarantee) or any incurrence by Holdings or any of its
Subsidiaries (other than the Canadian Borrower or any of its Subsidiaries) of
any Indebtedness for borrowed money (including, without limitation, any
Subordinated Indebtedness permitted by subsection 8.2(i) but excluding any other
Indebtedness permitted by subsection 8.2), an amount equal to the gross cash
proceeds of such Asset Sale, issuance or incurrence, net of the following
amounts (but only to the extent such amounts are paid or incurred by Holdings,
the Borrower, an Additional Subsidiary or RealCo): (i) reasonable attorneys'
fees, accountants' fees, brokerage, consultant and other customary fees,
underwriting commissions and other reasonable fees and expenses actually
incurred in connection with such Asset Sale, issuance or incurrence, (ii) taxes
paid or reasonably estimated to be payable as a result thereof, after taking
into account all available deductions and credits in connection with such Asset
Sale, (iii) appropriate amounts to be provided by the Borrower or any of its
Subsidiaries (other than the Canadian Borrower or any of its Subsidiaries) as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Borrower or such Subsidiary, as the case may be,
after such Asset Sale, and (iv) in the case of a sale or sale and leaseback of
or involving an asset subject to a Lien securing (a) any Indebtedness (other
than the RealCo First Mortgage Notes), payments made and installment payments
required to be made to repay such Indebtedness, including payments in respect of
principal, interest and prepayment premiums and penalties or (b) the RealCo
First Mortgage Notes, the Net Proceeds Allocable to Payee and any Reserved
Amounts (as each such term is defined in the RealCo First Mortgage Notes) to the
extent such Reserved
55
<PAGE>
Amounts are not paid to the Borrower, with respect to such Asset Sale.
"New Inventory": Inventory of a particular stock keeping unit which has been
-------------
sold or offered for sale by the Borrower or any Additional Subsidiary for a
period of only fifteen months or less.
"Non-Excluded Taxes": as defined in subsection 4.12.
------------------
"Notes": the collective reference to the Revolving Credit Notes and the Swing
-----
Line Notes.
"Obligations": as of any date of determination, (i) the aggregate outstanding
-----------
principal amount of the Loans, together with all accrued and unpaid interest
thereon, (ii) the outstanding Reimbursement Obligations, together with all
accrued and unpaid interest thereon, (iii) all accrued and unpaid fees payable
pursuant to subsections 3.3 and 4.5 and (iv) all other amounts then due and
payable hereunder or under any of the other Loan Documents.
"Obligor": any purchaser of goods or services or other Person obligated to
-------
make payment to the Borrower or any Additional Subsidiary in respect of a
purchase of such goods or services.
"Participants": as defined in subsection 11.6(b).
------------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA.
"Permitted Equity Purchasers": (i) any director, officer, employee or manager
---------------------------
of, or consultant to, Holdings or any of its Subsidiaries or CD&R, (ii) any
director, senior executive or other person with similar responsibilities of a
corporation or other entity in
56
<PAGE>
which an entity managed or sponsored by CD&R has made a substantial equity
investment (or, in the case of clauses (i) and (ii) above, trusts for the
benefit of any such person and/or relatives of any such person), (iii) any
Person engaged in the same, a substantially similar or a related line of
business to that engaged in by the Borrower or any of its Subsidiaries or (iv)
any substantial customer of, supplier of goods to, or manufacturer of goods sold
by, the Borrower or any of its Subsidiaries.
"Person": an individual, partnership, corporation, business trust, joint
------
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Plan": any employee benefit plan which is covered by ERISA and in respect of
----
which the Borrower or a Commonly Controlled Entity is an "employer" as defined
in Section 3(5) of ERISA.
"Properties": as defined in subsection 5.18.
----------
"RealCo": CDW Realco, Inc., a Delaware corporation and a wholly owned
------
Subsidiary of the Borrower.
"RealCo Canadian First Mortgage Note Guarantees": the guarantees made by
----------------------------------------------
RealCo in favor of the holders of the Canadian First Mortgage Notes, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with subsection 8.8 hereof and subsection 9.6 of the Canadian Credit
Agreement.
"RealCo Cash Collateral Agreement": the Cash Collateral and Security
--------------------------------
Agreement, dated as of February 28, 1994, between RealCo and Westinghouse U.S.,
as the same may be amended, supplemented or
57
<PAGE>
otherwise modified from time to time in accordance with subsection 8.8.
"RealCo First Mortgage Notes": the First Mortgage Note, dated as of February
---------------------------
28, 1994, originally issued by Holdings to Westinghouse U.S., the obligations in
respect of which were assumed by the Borrower at the direction of Holdings and
then by RealCo at the direction of Holdings and the Borrower on February 28,
1994, and all notes issued in exchange therefor and in exchange for such
exchanged notes, in each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 8.8.
"RealCo First Mortgage Note Documents": the collective reference to the
------------------------------------
RealCo First Mortgage Notes, the RealCo Mortgages, the Holdings RealCo First
Mortgage Note Guarantees, the Borrower RealCo First Mortgage Note Guarantees,
the RealCo Cash Collateral Agreement, the Master Lease Agreement and the
landlord's waiver executed by RealCo and Westinghouse U.S. with respect to the
Master Lease Agreement.
"RealCo Landlord Waiver": the Landlord's Letter, dated as of February 24,
----------------------
1995, made by RealCo (in its capacity as lessor under the Master Lease
Agreement) and Westinghouse U.S. (on behalf of the holders of the RealCo First
Mortgage Notes) in favor of the Borrower.
"RealCo Mortgaged Property": each parcel of real property or leasehold
-------------------------
interest in real property owned or held by RealCo and encumbered by a RealCo
Mortgage.
"RealCo Mortgages": the collective reference to (i) each of the fee and
----------------
leasehold mortgages, each dated as of February 28, 1994, each made by RealCo in
favor of Westinghouse U.S. and (ii) any other mortgage made from time to time by
RealCo in favor of Westinghouse U.S. pursuant to the RealCo First Mortgage
Notes, each of such mortgages encumbering one of the RealCo
58
<PAGE>
Mortgaged Properties with a first mortgage lien securing the RealCo First
Mortgage Notes, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with subsection 8.8.
"Refunded Swing Line Loans": as defined in subsection 2.5(c).
-------------------------
"Register": as defined in subsection 11.6(d).
--------
"Regulation U": Regulation U of the Board of Governors of the Federal Reserve
------------
System as in effect from time to time.
"Reimbursement Obligations": the obligation of the Borrower to reimburse the
-------------------------
Issuing Lender pursuant to subsection 3.5(a) for amounts drawn under Letters of
Credit.
"Reorganization": with respect to any Multiemployer Plan, the condition that
--------------
such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Replacement Pension Plan": the Single Employer Plan covering the hourly-rate
------------------------
employees of Allison Engine Company, Inc., as amended from time to time.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615 or
any successor regulation thereto.
"Requirement of Law": as to any Person, the certificate of incorporation and
------------------
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or
59
<PAGE>
binding upon such Person or any of its material property or to which such Person
or any of its material property is subject.
"Responsible Officer": as to any Person, any of the following officers of
-------------------
such Person: (i) the chief executive officer or the president of such Person
and, with respect to financial matters, the chief financial officer, the
treasurer or the controller of such Person, (ii) any vice president of such
Person or, with respect to financial matters, any assistant treasurer or
assistant controller of such Person, who has been designated in writing to the
Administrative Agent as a Responsible Officer by such chief executive officer or
president of such Person or, with respect to financial matters, by such chief
financial officer of such Person and (iii) with respect to subsection 7.7 and
without limiting the foregoing, the general counsel of such Person; the Borrower
shall ensure that at least one vice president is designated to the
Administrative Agent as a Responsible Officer by the chief executive officer or
president of the Borrower pursuant to the foregoing clause (ii) from time to
time.
"Revolving Credit Loans": as defined in subsection 2.1.
----------------------
"Revolving Credit Note": as defined in subsection 2.2.
---------------------
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Security Agreements": the collective reference to the Borrower Security
-------------------
Agreement, each Subsidiary Security Agreement, the Borrower Trademark Security
Agreement, each Subsidiary Trademark Security Agreement, the Borrower Patent
Security Agreement and each Subsidiary Patent Security Agreement.
60
<PAGE>
"Security Documents": the collective reference to the Security Agreements and
------------------
the Stock Pledge Agreements.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA, but
--------------------
which is not a Multiemployer Plan.
"Solvent" and "Solvency": with respect to any Person on a particular date,
------- --------
the condition that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its existing debts as
they become absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature, and (d) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person has an unreasonably small amount of
capital.
"Specialized Inventory": Inventory not customarily offered by the Borrower or
---------------------
an Additional Subsidiary for general sale to its customers and which has been
manufactured in accordance with specifications provided to the Borrower or such
Additional Subsidiary by or on behalf of a particular customer which render such
Inventory unsuitable for general sale to customers.
"Standby Letter of Credit": as defined in subsection 3.1.
------------------------
"Stock Pledge Agreements": the collective reference to the Borrower Stock
-----------------------
Pledge Agreement, the
61
<PAGE>
Borrower Canadian Stock Pledge Agreement, the Holdings Stock Pledge Agreement
and each Subsidiary Stock Pledge Agreement.
"Subordinated Indebtedness": any unsecured Indebtedness of the Borrower or an
-------------------------
Additional Subsidiary permitted by subsection 8.2(i) or (j); provided that, with
--------
respect to any such Indebtedness permitted by subsection 8.2(i)(A), (i) no part
of the principal of such Indebtedness is required to be paid (whether by way of
mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise)
prior to the seventh anniversary of the issuance thereof or such earlier date as
may be approved in writing by the Aggregate Majority Lenders; (ii) the payment
of the principal of and interest on such Indebtedness and other obligations of
the Borrower or such Additional Subsidiary in respect of which are subordinated
to the prior payment in full of (a) the principal of and interest (including
post-petition interest) on the Notes and all other obligations and liabilities
of the Borrower to the Administrative Agent and the Lenders hereunder (or, in
the case of any such Indebtedness in respect of which an Additional Subsidiary
is the obligor, subordinated to such Additional Subsidiary's obligations under
the Subsidiary Guarantee) and (b) the Borrower's obligations under the Borrower
Guarantee, in each case on terms and conditions approved in writing by the
Aggregate Majority Lenders; (iii) the interest rate, and covenant and default
provisions applicable to such Indebtedness are approved in writing by the
Aggregate Majority Lenders and (iv) all other material terms and conditions of
such Indebtedness are reasonably satisfactory in form and substance to the
Administrative Agents (as evidenced by their prior written approval thereof).
"Subsidiary": as to any Person, a corporation, partnership or other entity of
----------
which shares of stock or other ownership interests having ordinary voting power
62
<PAGE>
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Subsidiary Guarantee": the Guarantee executed and delivered by each
--------------------
Additional Subsidiary in favor of the Collateral Agent, substantially in the
form of Exhibit G to the Existing Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary Patent Security Agreement": each Patent Security Agreement
------------------------------------
executed and delivered or to be executed and delivered by an Additional
Subsidiary in favor of the Collateral Agent, substantially in the form of the
Borrower Patent Security Agreement (with such modifications and changes thereto
as may be agreed by the Borrower and the Collateral Agent), as the same may be
amended, supplemented or otherwise modified from time to time.
"Subsidiary Pledge Agreement": each Pledge Agreement executed and delivered
---------------------------
or to be executed and delivered by any Additional Subsidiary that owns any
Capital Stock of any other Additional Subsidiary in favor of the Collateral
Agent, substantially in the form of the Borrower Pledge Agreement (with such
modifications and changes thereto as may be agreed by the Borrower and the
Collateral Agent), as the same may be amended, supplemented or otherwise
modified from time to time.
63
<PAGE>
"Subsidiary Security Agreement": each Security Agreement executed and
-----------------------------
delivered or to be executed and delivered by an Additional Subsidiary in favor
of the Collateral Agent, substantially in the form of the Borrower Security
Agreement (with such modifications and changes thereto as may be agreed by the
Borrower and the Collateral Agent), as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary Trademark Security Agreement": each Trademark Security Agreement
---------------------------------------
executed and delivered or to be executed and delivered by an Additional
Subsidiary in favor of the Collateral Agent, substantially in the form of the
Borrower Trademark Security Agreement (with such modifications and changes
thereto as may be agreed by the Borrower and the Collateral Agent), as the same
may be amended, supplemented or otherwise modified from time to time.
"Swing Line Commitment": the Swing Line Lender's obligation to make Swing
---------------------
Line Loans pursuant to subsection 2.10.
"Swing Line Lender": Barclays, in its capacity as provider of the Swing
-----------------
Line Loans.
"Swing Line Loans": as defined in subsection 2.10(a).
----------------
"Swing Line Note": as defined in subsection 2.10(b).
---------------
"Termination Date": February 28, 2000.
----------------
"Total Aggregate Outstandings": an amount equal to the sum of the Aggregate
----------------------------
Outstandings of all Lenders and the CAF Outstandings of all Lenders.
"Tranche": the collective reference to Eurodollar Loans the then current
-------
Interest Periods with respect to
64
<PAGE>
all of which begin on the same date and end on the same later date (whether or
not such Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
----------
"Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.
----
"Underfunding": an excess of all accrued benefits under a Plan (based on
------------
those assumptions used to fund such Plan), determined as of the most recent
annual valuation date, over the value of the assets of such Plan allocable to
such accrued benefits.
"Uniform Customs": the Uniform Customs and Practice for Documentary Credits
---------------
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be amended from time to time.
"U.S.-Canada Transfer": as defined in subsection 2.4(b).
--------------------
"U.S. Dollar Increase Amount": as defined in subsection 2.4(b).
---------------------------
"U.S. Dollar Reduction Amount": as defined in subsection 2.4(b).
----------------------------
"U.S. Inventory Sublimit Amount": at any date of determination, an amount
------------------------------
equal to 45% of the Commitments of all Lenders then in effect.
"U.S. Prepayment Percentage": as of any date of determination, the percentage
--------------------------
of the sum of the aggregate Commitments and the U.S. Dollar equivalent
(determined on the basis of the then Current Exchange Rate) of the aggregate
Canadian Commitments which is constituted by the aggregate Commitments.
65
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"U.S. Tax Compliance Certificate": as defined in subsection 4.12.
-------------------------------
"U.S. Transfer Commitment Percentage": as to any Common Lender or any
-----------------------------------
Canadian Lender at any time, the percentage of the aggregate Commitments of all
Common Lenders then constituted by the Commitment of (i) in the case of a Common
Lender or a Canadian Lender which is a Common Lender, such Common Lender or (ii)
in the case of a Canadian Lender which is not a Common Lender, the Common Lender
which is the parent or a subsidiary or affiliate of such Canadian Lender.
"WESCO": an unincorporated division of Westinghouse U.S. that carried on
-----
business under the names of "Westinghouse Electric Supply Company", "WESCO", and
at certain branch locations, under the names of "Caribe Industrial and Electric
Supplier", "Electra" and "Superior Electric", together with an unincorporated
division of Westinghouse Canada, that carried on business under the name of
"WESCO".
"Westinghouse": the collective reference to Westinghouse U.S. and
------------
Westinghouse Canada.
"Westinghouse Canada": Westinghouse Canada, Inc., a Canadian corporation and
-------------------
a wholly owned Subsidiary of Westinghouse U.S.
"Westinghouse Equity Interests": the collective reference to (i) the options
-----------------------------
to purchase 100,000 shares of the common stock of Holdings issued to
Westinghouse U.S. pursuant to the Stock Subscription, Stock Option and
Stockholders Agreement, dated February 28, 1994 between Holdings, Westinghouse
U.S. and The Clayton & Dubilier Private Equity Fund IV Limited Partnership, a
Connecticut limited partnership (the "Subscription Agreement") and (ii) the
----------------------
100,000 shares of common stock of Holdings purchased by Westinghouse U.S.
pursuant to the Subscription Agreement.
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"Westinghouse U.S.": Westinghouse Electric Corporation, a Pennsylvania
-----------------
corporation.
1.2 Other Definitional Provisions. Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
2. As used herein and in the Notes and any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
3. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
4. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
A. Commitments. a. Subject to the terms and conditions hereof, each
-----------
Lender severally agrees to make revolving credit loans ("Revolving Credit )
-----------------
Loans" to the Borrower from time to time during the Commitment Period in an
- -----
aggregate principal amount at any one time outstanding which, when added to such
Lender's Commitment Percentage of the sum of the then outstanding L/C
Obligations and the then outstanding Swing Line Loans and CAF Advances, does not
exceed the lesser of (i) the amount of such Lender's
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Commitment and (ii) such Lender's Commitment Percentage of the Borrowing Base
then in effect. During the Commitment Period the Borrower may use the
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with subsections
2.3 and 4.2, provided that no Revolving Credit Loan shall be made as a
--------
Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
----------------------
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (each, as amended, supplemented, replaced or otherwise modified
from time to time, a "Revolving Credit Note"), payable to the order of such
---------------------
Lender and representing the obligation of the Borrower to pay an amount equal to
the lesser of (a) the amount set forth opposite such Lender's name in Schedule 1
under the heading "Commitment" and (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by such Lender. Each Lender is hereby authorized
to record the date, Type and amount of each Revolving Credit Loan made by such
Lender, each continuation thereof, each conversion of all or a portion thereof
to another Type, the date and amount of each payment or prepayment of principal
thereof and, in the case of Eurodollar Loans, the length of each Interest Period
and Eurodollar Rate with respect thereto, on its internal books and records
and/or on the schedule annexed to and constituting a part of its Revolving
Credit Note, and any such recordation on such schedule shall constitute prima
-----
facie evidence of the accuracy of the information so recorded, provided that the
- ----- --------
failure by any Lender to make any such recordation or any error in any such
recordation
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shall not affect the obligations of the Borrower under this Agreement or the
Revolving Credit Notes. Each Revolving Credit Note shall (x) be dated the
Effective Date, (y) be stated to mature on the Termination Date and (z) provide
for the payment of interest in accordance with subsection 4.1.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow under
----------------------------------------
the Commitments during the Commitment Period on any Business Day, provided that
--------
the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to (a) 12:00 Noon, New
York City time, at least three Business Days prior to the requested Borrowing
Date, if all or any part of the requested Revolving Credit Loans are to be
initially Eurodollar Loans, or (b) 10:00 A.M., New York City time, on the
requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Commitments (other than a
borrowing made pursuant to subsection 2.9(c)) shall be in an amount equal to (x)
in the case of Base Rate Loans, except any Base Rate Loan to be used solely to
pay a like amount of outstanding Reimbursement Obligations or Swing Line Loans,
$100,000 or a whole multiple of $100,000 in excess thereof (or, if the then
Available Commitments are less than $100,000, such lesser amount) and (y) in the
case of Eurodollar Loans, $2,000,000 or a whole multiple of $500,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing of Revolving Credit Loans
--- ----
available to
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the Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in subsection 11.2 prior to 12:00 Noon, New York
City time, on the Borrowing Date requested by the Borrower in Dollars and in
funds immediately available to the Administrative Agent. Except as otherwise
provided in subsections 2.9(c) and 3.5(c), such borrowing will then be made
available to the Borrower by the Administrative Agent crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
2.4 CAF Advances. Subject to the terms and conditions of this Agreement,
------------
the Borrower may borrow CAF Advances from time to time on any Business Day
during the CAF Advance Availability Period. CAF Advances may be borrowed in
amounts such that the aggregate amount of Loans and L/C Obligations outstanding
at any time shall not exceed the aggregate amount of the Commitments at such
time. Within the limits and on the conditions hereinafter set forth with
respect to CAF Advances, the Borrower from time to time may borrow, repay and
reborrow CAF Advances.
2.5 Procedure for CAF Advance Borrowing. The Borrower shall request CAF
-----------------------------------
Advances by delivering a CAF Advance Request to the Agent, not later than 12:00
Noon (New York City time) four Business Days prior to the proposed Borrowing
Date (in the case of a Eurodollar Rate CAF Advance Request), and not later than
10:00 A.M. (New York City time) one Business Day prior to the proposed Borrowing
Date (in the case of a Fixed Rate CAF Advance Request). Each CAF Advance Request
in respect of any Borrowing Date may solicit bids for CAF Advances on such
Borrowing Date in an aggregate principal amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and having not more than three
alternative CAF Advance Maturity Dates. The CAF Advance Maturity Date for each
CAF Advance shall be the date set forth therefor in the relevant CAF Advance
Request, which date shall be (i) not less than 14 days nor more than 180 days
after the Borrowing Date therefor, in the case of a Fixed Rate CAF Advance, (ii)
one, two, three or six months after the Borrowing Date therefor, in the case of
a Eurodollar CAF Advance and (iii) not later than the Termination Date, in the
case of any CAF Advance. The Agent
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shall notify each Lender promptly by facsimile transmission of the contents of
each CAF Advance Request received by the Agent.
(b) In the case of a Eurodollar Rate CAF Advance Request, upon receipt of
notice from the Agent of the contents of such CAF Advance Request, each Lender
may elect, in its sole discretion, to offer irrevocably to make one or more CAF
Advances at the applicable Eurodollar Rate plus (or minus) a margin determined
by such Lender in its sole discretion for each such CAF Advance. Any such
irrevocable offer shall be made by delivering a CAF Advance Offer to the Agent,
before 9:30 A.M. (New York City time) on the day that is three Business Days
before the proposed Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance Maturity Date
and the aggregate maximum amount of CAF Advances for all CAF Advance Maturity
Dates which such Lender would be willing to make (which amounts may, subject to
subsection 2.4, exceed such Lender's Commitment); and
(ii) the margin above or below the applicable Eurodollar Rate at which such
Lender is willing to make each such CAF Advance.
The Agent shall advise the Borrower as promptly as practicable on the date which
is three Business Days before the proposed Borrowing Date of the contents of
each such CAF Advance Offer received by it. If the Agent, in its capacity as a
Lender, shall elect, in its sole discretion, to make any such CAF Advance Offer,
it shall advise the Borrower of the contents of its CAF Advance Offer before
9:15 A.M. (New York City time) on the date which is three Business Days before
the proposed Borrowing Date.
(c) In the case of a Fixed Rate CAF Advance Request, upon receipt of
notice from the Agent of the contents of such CAF Advance Request, each Lender
may elect,
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<PAGE>
in its sole discretion, to offer irrevocably to make one or more CAF Advances at
a rate of interest determined by such Lender in its sole discretion for each
such CAF Advance. Any such irrevocable offer shall be made by delivering a CAF
Advance Offer to the Agent before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of CAF Advances for each CAF Advance Maturity
Date, and the aggregate maximum amount for all CAF Advance Maturity Dates, which
such Lender would be willing to make (which amounts may, subject to subsection
2.4, exceed such Lender's Commitment); and
(ii) the rate of interest at which such Lender is willing to make each
such CAF Advance.
The Agent shall advise the Borrower as promptly as practicable on the proposed
Borrowing Date of the contents of each such CAF Advance Offer received by it.
If the Agent, in its capacity as a Lender, shall elect, in its sole discretion,
to make any such CAF Advance Offer, it shall advise the Borrower of the contents
of its CAF Advance Offer before 9:15 A.M. (New York City time) on the proposed
Borrowing Date.
(d) Before 11:30 A.M. (New York City time) three Business Days before
the proposed Borrowing Date (in the case of CAF Advances requested by a
Eurodollar Rate CAF Advance Request) and before 10:30 A.M. (New York City time)
on the proposed Borrowing Date (in the case of CAF Advances requested by a Fixed
Rate CAF Advance Request), the Borrower, in its absolute discretion, shall:
(i) cancel such CAF Advance Request by giving the Agent telephone notice
to that effect, or
(ii) by giving telephone notice to the Agent (immediately confirmed by
delivery to the Agent of a CAF Advance Confirmation by facsimile transmission)
(A)
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subject to the provisions of subsection 2.5(e), accept one or more of the
offers made by any Lender or Lenders pursuant to subsection 2.5(b) or subsection
2.5(c), as the case may be, and (B) reject any remaining offers made by Lenders
pursuant to subsection 2.5(b) or subsection 2.5(c), as the case may be.
(e) The Borrower's acceptance of CAF Advances in response to any CAF
Advance Offers shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each CAF Advance
Maturity Date specified by any Lender in its CAF Advance Offer shall not exceed
the maximum amount for such CAF Advance Maturity Date specified in such CAF
Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for all CAF
Advance Maturity Dates specified by any Lender in its CAF Advance Offer shall
not exceed the aggregate maximum amount specified in such CAF Advance Offer for
all such CAF Advance Maturity Dates;
(iii) the Borrower may not accept offers for CAF Advances for any CAF
Advance Maturity Date in an aggregate principal amount in excess of the maximum
principal amount requested in the related CAF Advance Request; and
(iv) if the Borrower accepts any of such offers, it must accept
offers based solely upon pricing for each relevant CAF Advance Maturity Date and
upon no other criteria whatsoever, and if two or more Lenders submit offers for
any CAF Advance Maturity Date at identical pricing and the Borrower accepts any
of such offers but does not wish to (or, by reason of the limitations set forth
in subsection 2.4, cannot) borrow the total amount offered by such Lenders with
such identical pricing, the Borrower shall accept offers from all of such
Lenders in amounts allocated among
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them pro rata according to the amounts offered by such Lenders (with appropriate
--- ----
rounding, in the sole discretion of the Borrower, to assure that each accepted
CAF Advance is an integral multiple of $1,000,000); provided that if the number
--------
of Lenders that submit offers for any CAF Advance Maturity Date at identical
pricing is such that, after the Borrower accepts such offers pro rata in
--- ----
accordance with the foregoing provisions of this paragraph, the CAF Advance to
be made by any such Lender would be less than $5,000,000 principal amount, the
number of such Lenders shall be reduced by the Agent by lot until the CAF
Advances to be made by each such remaining Lender would be in a principal amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
(f) If the Borrower notifies the Agent that a CAF Advance Request is
cancelled pursuant to subsection 2.5(d)(i), the Agent shall give prompt
telephone notice thereof to the Lenders.
(g) If the Borrower accepts pursuant to subsection 2.5(d)(ii) one or more
of the offers made by any Lender or Lenders, the Agent promptly shall notify
each Lender which has made such an offer of the aggregate amount of such CAF
Advances to be made on such Borrowing Date for each CAF Advance Maturity Date
and the acceptance or rejection of any offers to make such CAF Advances made by
such Lender. Before 12:00 Noon (New York City time) on the Borrowing Date
specified in the applicable CAF Advance Request, each Lender whose CAF Advance
Offer has been accepted shall make available to the Administrative Agent at its
office set forth in subsection 11.2 the amount of CAF Advances to be made by
such Lender, in immediately available funds. The Administrative Agent will make
such funds available to the Borrower as soon as practicable on such date at such
office of the Administrative Agent. As soon as practicable after each Borrowing
Date, the Agent shall notify each Lender of the aggregate amount of CAF Advances
advanced on such
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Borrowing Date and the respective CAF Advance Maturity Dates thereof.
2.6 CAF Advance Payments. (a) The Borrower shall pay to the Administrative
--------------------
Agent, for the account of each Lender which has made a CAF Advance, on the
applicable CAF Advance Maturity Date the then unpaid principal amount of such
CAF Advance. The Borrower shall not have the right to prepay any principal
amount of any CAF Advance without the consent of the Lender to which such CAF
Advance is owed.
(b) The Borrower shall pay interest on the unpaid principal amount of each
CAF Advance from the Borrowing Date to applicable CAF Advance Maturity Date at
the rate of interest specified in the CAF Advance Offer accepted by the Borrower
in connection with such CAF Advance (calculated on the basis of a 360-day year
for actual days elapsed), payable on each applicable CAF Advance Interest
Payment Date.
(c) If any principal of, or interest on, any CAF Advance shall not be paid
when due (whether at the stated maturity, by acceleration or otherwise), such
CAF Advance shall, without limiting any rights of any Lender under this
Agreement, bear interest from the date on which such payment was due at a rate
per annum which is 2% above the rate which would otherwise be applicable to such
CAF Advance until the stated CAF Advance Maturity Date of such CAF Advance, and
for each day thereafter at a rate per annum which is 2% above the ABR, in each
case until paid in full (as well after as before judgment). Interest accruing
pursuant to this paragraph (c) shall be payable from time to time on demand.
2.7 Evidence of Debt. The Borrower unconditionally promises to pay to the
----------------
Administrative Agent, for the account of each Lender that makes a CAF Advance,
on the CAF Advance Maturity Date with respect thereto, the principal amount of
such CAF Advance. The Borrower further unconditionally promises to pay interest
on each such CAF Advance for the
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period from and including the Borrowing Date of such CAF Advance on the unpaid
principal amount thereof from time to time outstanding at the applicable rate
per annum determined as provided in, and payable as specified in, subsection
2.6(b). Each Lender shall maintain in accordance with its usual practice
appropriate records evidencing indebtedness of the Borrower to such Lender
resulting from each CAF Advance of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time in respect of such CAF Advance. The Administrative Agent shall maintain the
Register pursuant to subsection 11.6(d), and a record therein for each Lender,
in which shall be recorded (i) the amount of each CAF Advance made by such
Lender, the CAF Advance Maturity Date thereof, the interest rate applicable
thereto and each CAF Advance Interest Payment Date applicable thereto, and (ii)
the amount of any sum received by the Administrative Agent hereunder from the
Borrower on account of such CAF Advance. The entries made in the Register and
the records of each Lender maintained pursuant to this subsection 2.7 shall, to
the extent permitted by applicable law, be prima facie evidence of the
----- -----
existence and amounts of the obligations of the Borrower therein recorded;
provided, however, that the failure of any Lender or the Administrative Agent
- -------- -------
to maintain the Register or any such record, or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with applicable
interest) the CAF Advances made by such Lender in accordance with the terms of
this Agreement.
2.8 Certain Restrictions. A CAF Advance Request may request offers for CAF
--------------------
Advances to be made on not more than one Borrowing Date and to mature on not
more than three CAF Advance Maturity Dates. No CAF Advance Request may be
submitted earlier than five Business Days after submission of any other CAF
Advance Request.
2.9 Termination or Reduction of Commitments; Transfers of the Commitments
---------------------------------------------------------------------
and the Canadian Commitments. (a) The Borrower shall have the right, upon not
- ----------------------------
less than
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three Business Days' notice to the Administrative Agent, to terminate the
Commitments or, from time to time, to reduce the amount of the Commitments;
provided that no such termination or reduction shall be permitted if, after
- --------
giving effect thereto and to any prepayments of the Loans made on the effective
date thereof, the aggregate principal amount of the Loans then outstanding, when
added to the then outstanding L/C Obligations would exceed the Commitments then
in effect. Any such reduction shall be in an amount equal to $5,000,000 or a
whole multiple of $500,000 in excess thereof and shall reduce permanently the
Commitments then in effect.
(b) From time to time prior to August 31, 1995, but on no more than two
(2) occasions, the Borrowers shall have the right, upon not less than five (5)
Business Days' prior written notice (a "Transfer Notice") to the Administrative
---------------
Agent and the Canadian Administrative Agent, to transfer (i) a portion (which
shall not exceed the aggregate Available Commitments of all Common Lenders
immediately before giving effect to the applicable transfer) of the Commitments
to the Canadian Commitments (a "U.S.-Canada Transfer") or (ii) all or a portion
--------------------
(which shall not exceed the aggregate Available Canadian Commitments of all
Canadian Lenders immediately before giving effect to the applicable transfer) of
the Canadian Commitments to the Commitments (a "Canada-U.S. Transfer"); provided
-------------------- --------
that (i) after giving effect to any U.S.-Canada Transfer, the U.S. Dollar
equivalent (determined on the basis of the Closing Date Exchange Rate) of the
aggregate Canadian Commitments of all Canadian Lenders does not exceed U.S.
$50,000,000, (ii) after giving effect to any Canada-U.S. Transfer, the U.S.
Dollar equivalent (determined on the basis of the Closing Date Exchange Rate) of
the aggregate Canadian Commitments of all Canadian Lenders does not fall below
U.S. $5,000,000 unless the entire Canadian Commitments of all Canadian Lenders
are transferred to the Commitments, in which case the rights of the Borrower
under this subsection 2.9(b) shall thereafter terminate, (iii) no Default or
Event of Default (other than a Canadian Borrowing Base Default in the case of a
U.S.-Canada Transfer or a Borrowing Base Default in the
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case of a Canada-U.S. Transfer) shall have occurred and be continuing
immediately before giving effect to any such transfer and (iv) no Default or
Event of Default shall have occurred and be continuing immediately after giving
effect to any such transfer. Each Transfer Notice shall specify (i) the
effective date of the proposed commitment transfer (the "Transfer Effective
------------------
Date"), (ii) in the case of a U.S.-Canada Transfer, the aggregate amount in U.S.
- ----
Dollars (the "U.S. Dollar Reduction Amount") to be transferred from the
Commitments to the Canadian Commitments and the Canadian Dollar equivalent
(determined on the basis of the Closing Date Exchange Rate) of such amount (the
"Canadian Dollar Increase Amount"), (iii) in the case of a Canada-U.S. Transfer,
-------------------------------
the aggregate amount in Canadian Dollars (the "Canadian Dollar Reduction
-------------------------
Amount") to be transferred from the Canadian Commitments to the Commitments and
- ------
the U.S. Dollar equivalent (determined on the basis of the Closing Date Exchange
Rate) of such amount (the "U.S. Dollar Increase Amount") and (iv) the aggregate
---------------------------
amount and Type of Loans to be borrowed from the Lenders on the Transfer
Effective Date in accordance with subsections 2.3 and 2.9(c). Upon receipt of
any Transfer Notice, the Administrative Agent shall promptly notify each Lender
thereof, which notice shall specify (i) in the case of a Common Lender, any
change in such Common Lender's Commitment which occurs pursuant to this
subsection 2.9(b) as a result of the U.S.-Canada Transfer or Canada-U.S.
Transfer specified in such Transfer Notice and (ii) in the case of each Lender,
the aggregate principal amount of the Revolving Credit Loan to be made by such
Lender and the aggregate principal amount (and accrued interest thereon) of the
Revolving Credit Loans of such Lender to be prepaid, in each case pursuant to
subsection 2.9(c) as a result of the U.S.-Canada Transfer or Canada-U.S.
Transfer specified in such Transfer Notice. The Administrative Agent shall
provide a copy of such notice to the Borrower. On the Transfer Effective Date
with respect to any U.S.-Canada Transfer, (i) the Commitment of each Common
Lender shall be reduced by an amount equal to such Common Lender's U.S. Transfer
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Commitment Percentage of the U.S. Dollar Reduction Amount specified in the
Transfer Notice delivered in respect of such U.S.-Canada Transfer and (ii) as
provided in the Canadian Credit Agreement, the Canadian Commitment of each
Canadian Lender shall be increased by an amount equal to such Canadian Lender's
U.S. Transfer Commitment Percentage of the Canadian Dollar Increase Amount
specified in such Transfer Notice. On the Transfer Effective Date with respect
to any Canada-U.S. Transfer, (i) as provided in the Canadian Credit Agreement,
the Canadian Commitment of each Canadian Lender shall be reduced by an amount
equal to such Canadian Lender's Canadian Commitment Percentage of the Canadian
Dollar Reduction Amount specified in the Transfer Notice delivered in respect of
such Canada-U.S. Transfer and (ii) the Commitment of each Common Lender shall be
increased by an amount equal to such Common Lender's Canadian Transfer
Commitment Percentage of the U.S. Dollar Increase Amount specified in such
Transfer Notice. On each Transfer Effective Date, each Common Lender shall
surrender its outstanding Revolving Credit Note to the Administrative Agent, and
the Borrower shall execute and deliver to the Administrative Agent (in exchange
for the outstanding Revolving Credit Note of each Common Lender) a new Revolving
Credit Note to the order of such Common Lender reflecting the change in such
Common Lender's Commitment pursuant to this subsection 2.9(b) on such Transfer
Effective Date and otherwise conforming to the requirements of this Agreement.
(c) On each Transfer Effective Date, (i) each Lender shall, without
regard to the restrictions contained in the first sentence of subsection 2.1(a),
make a Revolving Credit Loan (which shall be a Base Rate Loan unless specified
otherwise in the applicable Transfer Notice) to the Borrower in an amount equal
to the product of (A) that percentage which such Lender's Commitment will
constitute of the aggregate Commitments of all Lenders after giving effect to
the U.S.-Canada Transfer or the Canada-U.S. Transfer occurring on such Transfer
Effective Date, multiplied by (B) the aggregate principal amount of all
-------------
Revolving Credit Loans outstanding immediately prior to such transfer, the
proceeds
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of which Revolving Credit Loans shall be made available to the Administrative
Agent by each Lender on such Transfer Effective Date in accordance with the
penultimate sentence of subsection 2.3 and applied by the Administrative Agent
on such Transfer Effective Date to the prepayment in full of the principal of
the Revolving Credit Loans outstanding immediately prior to such transfer and
(ii) the Borrower shall pay to the Administrative Agent for the account of the
Lenders all accrued and unpaid interest on the Revolving Credit Loans prepaid
pursuant to this subsection 2.9(c) to such Transfer Effective Date. In addition,
upon receipt of notice from any Lender, the Borrower will pay to such Lender all
amounts due from the Borrower pursuant to subsection 4.13 as a consequence of
any prepayment of a Revolving Credit Loan pursuant to this subsection 2.9(c).
J. Swing Line Commitments. (a)(i) Subject to the terms and conditions
----------------------
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"Swing Line Loan"; collectively, the "Swing Line Loans") to the Borrower from
--------------- ----------------
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed $10,000,000, provided that at no time may
--------
the sum of the then outstanding Loans and L/C Obligations exceed the lesser of
(x) the Commitments and (y) the Borrowing Base then in effect. Amounts borrowed
by the Borrower under this subsection 2.10 may be repaid and, through but
excluding the Termination Date, reborrowed. All Swing Line Loans shall be made
as Base Rate Loans and shall not be entitled to be converted into Eurodollar
Loans. The Borrower shall give the Swing Line Lender irrevocable notice (which
notice must be received by the Swing Line Lender prior to 12:00 Noon, New York
City time) on the requested Borrowing Date specifying the amount of the
requested Swing Line Loan. The proceeds of the Swing Line Loan will be made
available by the Swing Line Lender to the Borrower at the office of the Swing
Line Lender by crediting the account of the Borrower at such office with such
proceeds in Dollars.
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(ii) Provided that the conditions precedent contained in subsection 6.2 to
its obligation to make a Swing Line Loan have been satisfied and that there is
sufficient availability under the Swing Line Commitment, on each Interest
Payment Date, the Swing Line Lender shall, on behalf of the Borrower (which
hereby irrevocably authorizes and directs the Swing Line Lender to act on its
behalf), make a Swing Line Loan to the Borrower in an amount equal to the amount
of interest due and payable on such Interest Payment Date pursuant to subsection
4.1. The proceeds of such Swing Line Loan shall be made available by the Swing
Line Lender to the Administrative Agent and applied by the Administrative Agent
to the payment of such interest on such Interest Payment Date; the Swing Line
Lender shall notify the Borrower as soon as reasonably practicable of the amount
of each such Swing Line Loan.
(b) The Swing Line Loans shall be evidenced by a promissory note of the
Borrower substantially in the form of Exhibit A-2, with appropriate insertions
(as the same may be amended, supplemented, replaced or otherwise modified from
time to time, the "Swing Line Note"), payable to the order of the Swing Line
---------------
Lender and representing the obligation of the Borrower to pay the amount of the
Swing Line Commitment or, if less, the unpaid principal amount of the Swing Line
Loans, with interest thereon as prescribed in subsection 4.1. The Swing Line
Lender is hereby authorized to record the Borrowing Date, the amount of each
Swing Line Loan and the date and amount of each payment or prepayment of
principal thereof, on its internal books and records and/or on the schedule
annexed to and constituting a part of the Swing Line Note and any such
recordation on such schedule shall constitute prima facie evidence of the
----- -----
accuracy of the information so recorded, provided that the failure by the
--------
Swing Line Lender to make any such recordation or any error in any such
recordation shall not affect the obligations of the Borrower under this
Agreement or the Swing Line Note. The Swing Line Note shall (a) be dated the
Closing Date, (b) be stated to mature on the Termination Date and (c) provide
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for the payment of interest in accordance with subsection 4.1.
(c) The Swing Line Lender, at any time in its sole and absolute
discretion may, and, at any time when Swing Line Loans are outstanding for more
than seven Business Days, the Swing Line Lender shall, on behalf of the Borrower
(which hereby irrevocably directs and authorizes the Swing Line Lender to act on
its behalf), request each Lender to make a Revolving Credit Loan in an amount
equal to such Lender's Commitment Percentage of the principal amount of the
Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such
-------------------------
notice is given; provided that the provisions of this subsection shall not
--------
affect the Borrower's obligations to prepay Swing Line Loans in accordance with
the provisions of subsection 4.4(d). Unless the Commitments shall have expired
or terminated (in which event the procedures of paragraph (d) of this subsection
2.10 shall apply), each Lender will make the proceeds of the Revolving Credit
Loan made by it pursuant to the immediately preceding sentence available to the
Administrative Agent for the account of the Swing Line Lender at the office of
the Administrative Agent prior to 12:00 Noon, New York City time, in funds
immediately available on the Business Day next succeeding the date such notice
is given. The proceeds of such Revolving Credit Loans shall be immediately
applied to repay the Refunded Swing Line Loans.
(d) If the Commitments shall expire or terminate at any time while Swing
Line Loans are outstanding, each Lender shall, at the option of the Swing Line
Lender exercised reasonably, either (i) notwithstanding the expiration or
termination of the Commitments, make a Revolving Credit Loan or (ii) purchase an
undivided participating interest in such Swing Line Loans, in either case in an
amount equal to such Lender's Commitment Percentage determined on the date of,
and immediately prior to, expiration or termination of the Commitments of the
aggregate principal amount of such Swing Line Loans. Each Lender will make the
proceeds of any Revolving Credit Loan
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made by it pursuant to the immediately preceding sentence available to the
Administrative Agent for the account of the Swing Line Lender at the office of
the Administrative Agent prior to 12:00 Noon, New York City time, in funds
immediately available on the Business Day next succeeding the date on which the
Commitments expire or terminate. The proceeds of such Revolving Credit Loans
shall be immediately applied to repay the Swing Line Loans outstanding on the
date of termination or expiration of the Commitments. In the event that the
Lenders purchase undivided participating interests pursuant to the first
sentence of this paragraph (d), each Lender shall immediately transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swing Line Lender will deliver to any
such Lender that so requests a confirmation of such Lender's undivided
participating interest in the Swing Line Loans dated the date of receipt of such
funds and in such amount.
(e) Whenever, at any time after the Swing Line Lender has received from
any Lender such Lender's participating interest in a Swing Line Loan, the Swing
Line Lender receives any payment on account thereof, the Swing Line Lender will
distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded); provided, however, that in the event that such payment received by the
-------- -------
Swing Line Lender is required to be returned, such Lender will return to the
Swing Line Lender any portion thereof previously distributed by the Swing Line
Lender to it.
SECTION 3. LETTERS OF CREDIT
3.1. L/C Commitment. (a) Subject to the terms and conditions hereof, the
--------------
Issuing Lender, in reliance on the agreements of the other Lenders set forth in
subsection 3.4(a), agrees to issue letters of credit ("Letters of
-----------
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Credit") for the account of the Borrower on any Business Day during the
- ------
Commitment Period in such form as may be approved from time to time by the
Issuing Lender; provided that the Issuing Lender shall have no obligation to
--------
issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the Total Aggregate
Outstandings would exceed the lesser of (x) the aggregate Commitments and (y)
the Borrowing Base then in effect. Each Letter of Credit shall (i) be
denominated in Dollars and shall be either (x) a standby letter of credit
issued to support obligations of the Borrower or any of its Additional
Subsidiaries, contingent or otherwise, which finance the working capital and
business needs of the Borrower and its Additional Subsidiaries incurred in the
ordinary course of business (the "Standby Letters of Credit"), or (y) a
-------------------------
commercial letter of credit in respect of the purchase of goods or services by
the Borrower or any of its Additional Subsidiaries in the ordinary course of
business (the "Commercial Letters of Credit"), (ii) expire no later than five
----------------------------
Business Days prior to the Termination Date, and (iii) expire no later than 365
days after its date of issuance.
(b) Each Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State of New York.
(c) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrower may from
-------------------------------------------
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender, at its address for notices specified herein,
an Application therefor, completed to the reasonable satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as
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the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Lender be required
to issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of
such Letter of Credit to the Borrower promptly following the issuance thereof.
3.3 Fees, Commissions and Other Charges. The Borrower shall pay to the
-----------------------------------
Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit, for the period from and including the date of issuance of such Letter of
Credit to the expiration date of such Letter of Credit, computed at the L/C
Commission Rate, calculated on the basis of a 365- (or 366-, as the case may be)
day year, on the aggregate amount available to be drawn under such Letter of
Credit, payable quarterly in arrears on each L/C Fee Payment Date to occur
during such period and on the expiration date of such Letter of Credit. Such
commissions shall be payable to the Lenders to be shared ratably among them in
accordance with their respective Commitment Percentages. In addition, the
Borrower shall pay to the Administrative Agent, for the account of the Issuing
Bank, a fronting fee with respect to each Letter of Credit, for the period from
and including the date of issuance of such Letter of Credit to the expiration
date of such Letter of Credit, computed at a rate of 1/8 of 1% per annum,
calculated on the basis of a 365- (or 366-, as the case may be) day year, on the
product of (i) the aggregate of the Commitment Percentages of the L/C
Participants multiplied by (ii) the aggregate amount available to be drawn under
such
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Letter of Credit, payable quarterly in arrears on each L/C Fee Payment Date to
occur during such period and on the expiration date of such Letter of Credit.
Such fees and commissions shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, the Borrower shall
pay or reimburse the Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
------------------
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage (as in effect from time to time) in the
Issuing Lender's obligations and rights under each Letter of Credit and the
amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with subsection 3.5(a), such
L/C Participant shall pay to the Issuing Lender at the Issuing Lender's address
for notices specified herein an amount equal to such L/C Participant's
Commitment Percentage (in effect on the date of such demand) of the amount of
such draft, or any part thereof, which is not so reimbursed, such payment to be
made by such L/C Participant on the date
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(which shall be a Business Day) a demand therefor is made by the Issuing Lender
(if such demand is made prior to 12:00 P.M., New York City time on such date) or
on the next Business Day (if such demand is made after 12:00 P.M., New York City
time on such date).
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of such amount, times the daily average Federal
Funds Effective Rate, as quoted by the Issuing Lender, during the period from
and including the date such payment is required to the date on which such
payment is immediately available to the Issuing Lender, times a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.4(a) is not in fact made available to the
Issuing Lender by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Lender shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to Base Rate Loans hereunder. A
certificate of the Issuing Lender submitted to any L/C Participant with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its pro rata
--- ----
share of such payment in accordance with subsection 3.4 (a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of Collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the
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Issuing Lender will, if such payment is received prior to 12:00 Noon, New York
City time, on a Business Day, distribute to such L/C Participant its pro rata
--- ----
share thereof prior to the end of such Business Day and otherwise the Issuing
Lender will distribute such payment on the next succeeding Business Day;
provided, however, that in the event that any such payment received by the
- -------- -------
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to
----------------------------------------
reimburse the Issuing Lender, upon receipt of notice from the Issuing Lender of
the date and amount of a draft presented under any Letter of Credit and paid by
the Issuing Lender, for the amount of such draft so paid and any taxes, fees,
charges or other costs or expenses incurred by the Issuing Lender in connection
with such payment. Except as and to the extent otherwise provided in subsection
3.5(c), each such payment shall be made to the Issuing Lender, at its address
for notices specified herein in Dollars and in immediately available funds, on
the date on which the Borrower receives such notice, if received prior to 11:00
A.M., New York City time, on a Business Day and otherwise on the next succeeding
Business Day.
(b) Interest shall be payable on any and all amounts payable under
subsection 3.5(a) and remaining unpaid by the Borrower (i) from the date the
draft presented under the affected Letter of Credit is paid to the earlier of
the third Business Day after the date on which the Borrower is required to pay
such amounts pursuant to subsection 3.5(a) and the date on which the Borrower
pays all such amounts at the rate which would then be payable on any outstanding
Base Rate Loans and (ii) thereafter until payment in full at the rate which
would be payable on any outstanding Base Rate Loans which were then overdue.
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(c) By 12:00 P.M., New York City time, on the first Business Day after
each date on which a draft is presented under any Letter of Credit and paid by
the Issuing Lender, the Administrative Agent shall, on behalf of the Borrower
(which hereby irrevocably directs and authorizes the Administrative Agent to act
on its behalf), request (in accordance with the applicable provisions of
subsection 2.3) each Lender to make a Revolving Credit Loan (which shall be a
Base Rate Loan) in an amount equal to such Lender's Commitment Percentage of the
amount of such draft so paid. Each Lender agrees to make each Revolving Credit
Loan so requested available to the Administrative Agent in accordance with
subsection 2.3, provided that the conditions precedent contained in subsections
--------
2.1 and 6.2 to its obligation to make such Revolving Credit Loan have been
satisfied. The proceeds of such Revolving Credit Loans shall be made available
by the Administrative Agent to the Issuing Lender and applied to the payment
(whether or not then due) of the obligations of the Borrower under subsection
3.5(a)(i); upon such payment, the Borrower shall be deemed to have satisfied
such obligations to the extent of such payment. The Issuing Lender shall notify
the Administrative Agent and the Borrower as soon as reasonably practicable of
each drawing made under a Letter of Credit and the aggregate principal amount of
the Revolving Credit Loans made under this subsection 3.5(c) in respect thereof.
(3.6) Obligations Absolute. (a) The Borrower's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any beneficiary of a
Letter of Credit, provided, that this paragraph shall not relieve the Issuing
--------
Lender of any liability resulting from the gross negligence or willful
misconduct of the Issuing Lender, or otherwise affect any defense or other right
that the Borrower may have as a result of any such gross negligence or willful
misconduct.
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(b) The Borrower also agrees with the Issuing Lender that the Issuing
Lender shall not be responsible for, and the Borrower's Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements thereon,
even though such documents shall in fact prove to be invalid, fraudulent or
forged, or any dispute between or among the Borrower and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred or any claims whatsoever of the Borrower against any beneficiary of
such Letter of Credit or any such transferee, provided that this paragraph
--------
shall not relieve the Issuing Lender of any liability resulting from the gross
negligence or willful misconduct of the Issuing Lender, or otherwise affect any
defense or other right that the Borrower may have as a result of any such gross
negligence or willful misconduct.
(c) The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Lender's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the Issuing
Lender under or in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the Borrower and shall not
result in any liability of the Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower and the Administrative Agent of the date and amount thereof. The
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any
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Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit, provided, that
--------
this paragraph shall not relieve the Issuing Lender of any liability resulting
from the gross negligence or willful misconduct of the Issuing Lender, or
otherwise affect any defense or other right that the Borrower may have as a
result of any such gross negligence or willful misconduct.
3.8 Application. To the extent that any provision of any Application
-----------
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
4.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
--------------------------------
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin in effect for such day.
(b) Each Base Rate Loan shall bear interest for each day that it is
outstanding at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin in effect for such day.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any facility fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum which is (x) in the case of overdue principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of
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this subsection plus 2% or (y) in the case of overdue interest, facility fee or
other amount, the rate described in paragraph (b) of this subsection plus 2%, in
each case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this subsection
- --------
shall be payable from time to time on demand.
(e) It is the intention of the parties hereto to comply strictly with
applicable usury laws; accordingly, it is stipulated and agreed that the
aggregate of all amounts which constitute interest under applicable usury laws,
whether contracted for, charged, taken, reserved, or received, in connection
with the indebtedness evidenced by this Agreement or the Notes, or any other
document relating or referring hereto or thereto, now or hereafter existing,
shall never exceed under any circumstance whatsoever the maximum amount of
interest allowed by applicable usury laws.
4.2 Conversion and Continuation Options. (a) The Borrower may elect from
-----------------------------------
time to time to convert outstanding Revolving Credit Loans from Eurodollar Loans
to Base Rate Loans by giving the Administrative Agent at least one Business
Day's prior irrevocable notice of such election, provided that any such
--------
conversion of Eurodollar Loans may only be made on the last day of an Interest
Period with respect thereto. The Borrower may elect from time to time to convert
outstanding Revolving Credit Loans from Base Rate Loans to Eurodollar Loans by
giving the Administrative Agent at least three Business Days' prior irrevocable
notice of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and Base
Rate Loans may be converted as provided herein, provided that (i) no Revolving
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Credit Loan
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may be converted into a Eurodollar Loan when any Default or Event of Default
(other than a Default or Event of Default under Section 9(l) which occurs solely
as a result of a Canadian Borrowing Base Default) has occurred and is continuing
and the Administrative Agent has given notice to the Borrower that no such
conversions may be made and (ii) no Revolving Credit Loan may be converted into
a Eurodollar Loan after the date that is one month prior to the Termination
Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, of the length of the next Interest Period to
be applicable to such Loans, determined in accordance with the applicable
provisions of the term "Interest Period" set forth in subsection 1.1, provided
--------
that no Eurodollar Loan may be continued as such (i) when any Default or Event
of Default (other than a Default or Event of Default under Section 9(1) which
occurs solely as a result of a Canadian Borrowing Base Default) has occurred and
is continuing and the Administrative Agent has given notice to the Borrower that
no such continuations may be made or (ii) after the date that is one month prior
to the Termination Date, and provided, further, that if the Borrower shall fail
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to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans shall
be automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period.
4.3 Minimum Amounts of Tranches. All borrowings, conversions and
---------------------------
continuations of Revolving Credit Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Eurodollar Loans comprising each Tranche shall be equal to $2,000,000 or
a whole multiple of $500,000 in excess thereof and so that
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there shall not be more than 10 Tranches at any one time outstanding.
4.4 Optional and Mandatory Prepayments. (a) The Borrower may at any
----------------------------------
time and from time to time prepay the Revolving Credit Loans and the Swing Line
Loans, in whole or in part, without premium or penalty (other than amounts
required to be paid pursuant to subsection 4.13 in connection with such
prepayment), upon at least three Business Days' irrevocable notice to the
Administrative Agent (in the case of Eurodollar Loans) and at least one Business
Day's irrevocable notice to the Administrative Agent (in the case of Base Rate
Loans), specifying the date and amount of prepayment and whether the prepayment
is (i) of Revolving Credit Loans or Swing Line Loans, or a combination thereof,
and (ii) of Eurodollar Loans, Base Rate Loans or a combination thereof, and, in
each case if a combination thereof, the amount allocable to each. Upon the
receipt of any such notice the Administrative Agent shall promptly notify each
affected Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein, together
with any amounts payable pursuant to subsection 4.13 and accrued interest to
such date on the amount prepaid. Unless specified otherwise in such notice,
partial prepayments of the Loans pursuant to this subsection 4.4(a) shall be
applied first, to pay Swing Line Loans then outstanding and second, to pay
----- ------
Revolving Credit Loans then outstanding. Partial prepayments of the Revolving
Credit Loans shall be in an aggregate principal amount of $2,500,000 or a whole
multiple of $500,000 in excess thereof.
(b) If, at any time during the Commitment Period, the Total Aggregate
Outstandings of all Lenders exceed the lesser of (i) the Borrowing Base then in
effect and (ii) the aggregate Commitments then in effect (whether as result of a
reduction in the Commitments pursuant to subsection 2.9(b), subsection 4.4(c) or
otherwise), the Borrower shall, without notice or demand, immediately (in the
case of clause (ii) above) or within three Business Days (in the case of clause
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(i) above), repay the Revolving Credit Loans and the Swing Line Loans and any
then outstanding Reimbursement Obligations in an aggregate principal amount
equal to such excess, together with interest accrued to the date of such payment
and any amounts payable under subsection 4.13. Such payments shall be applied
first to pay Swing Line Loans then outstanding, second to pay any Reimbursement
- ----- ------
Obligations then outstanding and third to pay Revolving Credit Loans then
-----
outstanding. To the extent that after giving effect to any repayment of the
Loans and the Reimbursement Obligations required by the preceding sentence, the
Total Aggregate Outstandings of all Lenders exceed the lesser of (i) the
Borrowing Base then in effect and (ii) the aggregate Commitments then in effect,
the Borrower shall, without notice or demand, immediately cash collateralize
first the then outstanding L/C Obligations and second the then outstanding CAF
- ----- ------
Advances, in an aggregate amount equal to such excess upon terms reasonably
satisfactory to the Administrative Agent.
(c) (i) Unless otherwise agreed in writing by the Aggregate Majority
Lenders, if at any time Holdings or any of its Subsidiaries (other than the
Canadian Borrower or any of its Subsidiaries) shall (A) incur Indebtedness for
borrowed money (including, without limitation, any Subordinated Indebtedness
permitted by subsection 8.2(i) but excluding any other Indebtedness permitted by
subsection 8.2) pursuant to a public offering or private placement or otherwise
or (B) sell or issue shares of its Capital Stock (except for shares of Capital
Stock of Holdings or an Additional Subsidiary issued or sold to one or more
Permitted Equity Purchasers to the extent such sale or issuance is permitted
pursuant to this Agreement and the Holdings Guarantee), then the Commitments
shall be permanently reduced by an amount equal to (1) 100% of the Net Cash
Proceeds thereof (in the case of clause (A) above) or (2) the U.S. Prepayment
Percentage (as in effect on the date of such sale or issuance) of 66-2/3% of the
Net Cash Proceeds thereof (in the case of clause (B) above), with
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such reductions to be effective on the date of receipt of any such Net Cash
Proceeds.
(ii) Unless otherwise agreed in writing by the Majority Lenders, if at any
time the Borrower or any of its Subsidiaries (other than the Canadian Borrower
or any of its Subsidiaries) shall make an Asset Sale pursuant to subsection
8.6(g), the Borrower shall repay the Revolving Credit Loans and the Swing Line
Loans and any then outstanding Reimbursement Obligations in an aggregate amount
equal to 100% of the Net Cash Proceeds thereof, together with accrued interest
on such Loans and Reimbursement Obligations to the date of such payment and any
amounts payable under subsection 4.13, such payments to be made promptly upon
the receipt of such Net Cash Proceeds and to be applied to the Extensions of
Credit in the same order as that specified in subsection 4.4(b).
(d) The Borrower shall prepay all Swing Line Loans then outstanding
simultaneously with each borrowing of Revolving Credit Loans, and may prepay
(without premium or penalty) any outstanding Swing Line Loans upon at least one
Business Day's notice to the Administrative Agent.
(e) Except as otherwise specified by the Borrower in a notice to the
Administrative Agent pursuant to subsection 4.4(a), prepayments of Revolving
Credit Loans pursuant to this subsection 4.4 shall be applied first to Base Rate
Loans then outstanding and thereafter to Eurodollar Loans then outstanding.
4.5 Facility Fees; Agency Fees; Other Fees. (a) The Borrower agrees to pay
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to the Administrative Agent for the account of each Lender, a facility fee for
the period from and including the Closing Date to but excluding the Termination
Date (or such earlier date as the Commitments shall terminate as provided
herein), computed at the Facility Fee Rate on the average daily amount of the
Commitment of such Lender during the period for which payment is made, payable
quarterly in arrears on the last
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day of each March, June, September and December and on the Termination Date or
such earlier date as the Commitments shall terminate as provided herein,
commencing on the first such date to occur after the date hereof.
(b) The Borrower shall pay (without duplication of any fee payable under
subsection 4.5(a)) to the Administrative Agent and the Collateral Agent, for
their respective accounts, the other fees required to be paid pursuant to the
Agency Fee Letter, dated February 24, 1995, between the Administrative Agent,
the Collateral Agent and the Borrower, in each case in the amounts and on the
dates set forth therein.
(c) The Borrower shall pay to the Administrative Agent fees related to
the operation of the CAF in such amounts upon which they shall mutually agree.
4.6 Computation of Interest and Fees. (a) Interest based on the
--------------------------------
Eurodollar Rate shall be calculated on the basis of a 360-day year for the
actual days elapsed; and facility fees and interest (other than interest based
upon the Eurodollar Rate) shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower,
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deliver to the Borrower a statement showing in reasonable detail the
calculations used by the Administrative Agent in determining any interest rate
pursuant to subsection 4.1, excluding any Eurodollar Base Rate which is based
upon the Telerate British Bankers Assoc. Interest Settlement Rates Page and any
Base Rate which is based upon the Prime Rate.
4.7 Inability to Determine Interest Rate. If prior to the first day of
------------------------------------
any Interest Period, the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, the
Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as Base Rate Loans and (y) any Loans that were to
have been converted on the first day of such Interest Period to or continued as
Eurodollar Loans shall be converted to or continued as Base Rate Loans. Until
such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Base Rate Loans to Eurodollar Loans.
4.8 Pro Rata Treatment and Payments. (a) Except as provided in
-------------------------------
subsection 2.9(b) and (c), each borrowing of Loans (other than Swing Line Loans
and CAF Advances) by the Borrower from the Lenders hereunder shall be made, each
payment by the Borrower on account of any facility fee hereunder shall be
allocated by the Administrative Agent, and any reduction of the Commitments of
the Lenders shall be allocated by the Administrative Agent, pro rata according
--- ----
to the relevant Commitment Percentages of the Lenders. Except as provided in
subsection 2.9(c), each payment (including each prepayment) by the Borrower on
account of principal of and interest on any Revolving Credit Loans shall be
allocated by the Administrative Agent pro rata according to
--- ----
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the respective outstanding principal amounts of such Revolving Credit Loans then
held by the Lenders. All payments (including prepayments) to be made by the
Borrower hereunder and under any Notes, whether on account of principal,
interest, fees or otherwise, shall be made without set-off or counterclaim and
shall be made prior to 1:00 P.M., New York City time, on the due date thereof to
the Administrative Agent, for the account of the Lenders holding such Notes, at
the Administrative Agent's office specified in subsection 11.2, in Dollars and
in immediately available funds. The Administrative Agent shall distribute such
payments to such Lenders, if any such payment is received prior to 12:00 Noon,
New York City time, on a Business Day, in like funds as received prior to the
end of such Business Day, and otherwise the Administrative Agent shall
distribute such payment to such Lenders on the next succeeding Business Day. If
any payment hereunder (other than payments on the Eurodollar Loans) becomes due
and payable on a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day (and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the
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Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate per annum equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's share of
such borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, (x) the Administrative Agent
shall notify the Borrower of the failure of such Lender to make such amount
available to the Administrative Agent and the Administrative Agent shall also be
entitled to recover such amount with interest thereon at the rate per annum
applicable to Base Rate Loans hereunder, on demand, from the Borrower and (y)
the Borrower may, without waiving any rights it may have against such Lender,
borrow a like amount on an unsecured basis from any commercial bank for a period
ending on the date upon which such Lender does in fact make such borrowing
available, provided that (i) at the time such borrowing is made and at all times
--------
while such amount is outstanding the Borrower would be permitted to borrow such
amount pursuant to subsection 2.1 of this Agreement and (ii) the commercial bank
from whom such borrowing is made waives in a written agreement reasonably
satisfactory to the Administrative Agent any right of set-off it may have
against the Collateral.
4.9 Borrowing Base Compliance. The Collateral Agent or another financial
-------------------------
institution satisfactory to the Collateral Agent (including any Affiliate of the
Collateral Agent) shall, from time to time during the Commitment Period (except
during any Borrowing Base Elimination Period), review and confirm the
information set forth in each Monthly Borrowing Base Certificate delivered by
the Borrower in order to determine whether, at such time, the Borrower is in
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compliance with the requirements in respect of the Borrowing Base under this
Agreement, and the Borrower shall reimburse the Collateral Agent for its
reasonable out-of-pocket expenses (excluding fees) in respect thereof. If the
Borrower is not in compliance with such requirements, the Collateral Agent shall
promptly notify the Borrower, the Administrative Agent and the Lenders of such
noncompliance, and the Borrower shall make all mandatory prepayments required
pursuant to subsection 4.4(b).
4.10 Illegality. Notwithstanding any other provision herein, if the
----------
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof occurring after the date hereof shall make it unlawful for
any Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement, (a) such Lender shall as soon as reasonably practicable thereafter
give written notice of such circumstances to the Borrower and the Administrative
Agent (which notice shall be withdrawn whenever such circumstances no longer
exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans,
continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar
Loans shall forthwith be cancelled, and, until such time as it shall no longer
be unlawful for such Lender to make or maintain Eurodollar Loans, such Lender
shall then have a commitment only to make a Base Rate Loan when a Eurodollar
Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Eurodollar Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
4.13.
4.11 Requirements of Law. (a) If the adoption of or any change in any
-------------------
Requirement of Law or in the interpretation or application thereof applicable to
any
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Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the date hereof (or, if later, the
date on which such Lender becomes a Lender):
(i) shall subject such Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Letter of Credit, any Application, any
CAF Advance or any Eurodollar Loans made by it or its obligation to make
Eurodollar Loans, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection 4.12
(including Non-Excluded Taxes imposed solely by reason of any failure of such
Lender to comply with its obligations under subsection 4.12(b)) and changes in
rate of tax on the overall net income, or franchise tax (imposed in lieu of such
net income tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition (excluding any tax
of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans, maintaining Eurodollar Rate CAF
Advances or issuing or participating in Letters of Credit or to reduce any
amount receivable hereunder in respect thereof, then, in any such case, upon
notice to the
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Borrower from such Lender, through the Administrative Agent, in accordance
herewith, the Borrower shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable, provided that, in any such case, the Borrower
--------
may elect to convert the Eurodollar Loans or Eurodollar Rate CAF Advances made
by such Lender hereunder to Base Rate Loans by giving the Administrative Agent
at least one Business Day's notice of such election, in which case the Borrower
shall promptly pay to such Lender, upon demand, without duplication, such
amounts, if any, as may be required pursuant to subsection 4.13. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall as soon as reasonably practicable thereafter provide notice thereof to the
Borrower, through the Administrative Agent, certifying (x) that one of the
events described in this paragraph (a) has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. Such a
certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender, through the Administrative Agent, to the Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case, made subsequent to the date hereof (or, if later, the
date on which such Lender becomes a Lender), does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of
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its obligations hereunder or under any Letter of Credit to a level below that
which such Lender or such corporation could have achieved but for such change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within ten Business Days after submission
by such Lender to the Borrower (with a copy to the Administrative Agent) of a
written request therefor certifying (x) that one of the events described in this
paragraph (b) has occurred and describing in reasonable detail the nature of
such event, (y) as to the reduction of the rate of return on capital resulting
from such event and (z) as to the additional amount or amounts demanded by such
Lender and a reasonably detailed explanation of the calculation thereof, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
4.12 Taxes. (a) Except as provided below in this subsection, all payments
-----
made by the Borrower under this Agreement, the Notes and the CAF Advances shall
be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
in the case of each Lender or its applicable lending office, or any branch or
affiliate thereof (i) net income taxes, franchise taxes, branch taxes or taxes
on the overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof imposed by any jurisdiction under the
laws of which such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof and (ii) any such taxes or other tax, levy, impost, duty,
charge, fee, deduction or withholding imposed by reason of any connection
between the jurisdiction imposing such tax and such Lender, applicable lending
office, branch or affiliate other than a
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connection arising solely from such Lender having executed, delivered or
performed its obligations, or received payment under or enforced, this Agreement
or the Notes. If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") are required to be
------------------
withheld from any amounts payable to the Administrative Agent or any Lender
hereunder or under the Notes the amounts so payable to the Administrative Agent
or such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes,
including Non-Excluded Taxes on the amount of such increase), interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the Notes, provided, however, that the Borrower shall be
-----------------
entitled to deduct and withhold any Non-Excluded Taxes and shall not be required
to increase any such amounts payable to any Lender that is not organized under
the laws of the United States of America or a state thereof if such Lender fails
to comply with the requirements of paragraph (b) of this subsection. Whenever
any Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
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(X) (i) on or before the date of any payment by the Borrower under this
Agreement or the Notes to such Lender, deliver to the Borrower and the
Administrative Agent (A) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form or
documentation, as the case may be, certifying that it is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes and (B) an Internal Revenue Service Form W-8 or W-9,
or successor applicable form or documentation, as the case may be, certifying
that it is entitled to an exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Administrative Agent two further
copies of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete such forms
or certifications as may reasonably be requested by the Borrower or the
Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, (i) represent to the Borrower (for the benefit
of the Borrower and the Administrative Agent) that it is not a bank within the
meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the
Borrower on or before the date of any payment by the Borrower, with a copy to
the Administrative Agent, (A) a certificate substantially in the form of Exhibit
B hereto (any such certificate a "U.S. Tax Compliance Certificate" and (B) two
-------------------------------
accurate and complete original signed copies of Internal Revenue Service Form
W-8, or successor applicable form or documentation certifying
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to such Lender's legal entitlement at the date of such certificate to an
exemption from U.S. withholding tax under the provisions of Section 881(c) of
the Code with respect to payments to be made under this Agreement (and to
deliver to the Borrower and the Administrative Agent two further copies of such
form on or before the date it expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recently provided form or
documentation and, if necessary, obtain any extensions of time reasonably
requested by the Borrower or the Administrative Agent for filing and completing
such forms), and (iii) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower (for the benefit
of the Borrower and the Administrative Agent) such other forms or documentation
as may be reasonably required in order to establish the legal entitlement of
such Lender to an exemption from withholding with respect to payments under this
Agreement;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms or documentation inapplicable or which would prevent such Lender from duly
completing and delivering any such form or documentation with respect to it and
such Lender so advises the Borrower and the Administrative Agent. Each Person
that shall become a Lender or a Participant pursuant to subsection 11.6 shall,
upon the effectiveness of the related transfer, be required to provide all of
the forms, documentation, certifications and statements required pursuant to
this subsection, provided that in the case of a Participant the obligations of
--------
such Participant pursuant to this subsection (b) shall be determined as if the
Participant were a Lender except that such Participant shall furnish all such
required forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
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4.13 Indemnity. The Borrower agrees to indemnify each Lender and to hold
---------
each Lender harmless from any loss or expense which such Lender may sustain or
incur (other than through such Lender's gross negligence or willful misconduct)
as a consequence of (a) default by the Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any payment of a Eurodollar
Loan after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a payment of Eurodollar Loans
on a day which is not the last day of an Interest Period with respect thereto.
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so paid, or not so
borrowed, converted or continued, for the period from the date of such payment
or of such failure to borrow, convert or continue to the last day of the
applicable Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) which would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
4.14 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon
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the request, and at the expense, of the Borrower, each Lender to which the
Borrower is required to pay any additional amount pursuant to subsection 4.11 or
4.12, and any Participant in respect of whose participation such payment is
required, shall reasonably afford the Borrower the opportunity to contest,
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and reasonably cooperate with the Borrower in contesting, the imposition of any
Non-Excluded Tax giving rise to such payment; provided that (i) such Lender
--------
shall not be required to afford the Borrower the opportunity to so contest
unless the Borrower shall have confirmed in writing to such Lender its
obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower
shall reimburse such Lender for its reasonable attorneys' and accountants' fees
and disbursements incurred in so cooperating with the Borrower in contesting the
imposition of such Non-Excluded Tax.
(b) If a Lender changes its applicable lending office (other than
pursuant to paragraph (c) below) and the effect of the change, as of the date of
the change, would be to cause the Borrower to become obligated to pay any
additional amount under subsection 4.11 or 4.12, the Borrower shall not be
obligated to pay such additional amount.
(c) If a condition or an event occurs which would, or would upon the
passage of time or giving of notice, result in the payment of any additional
amount to any Lender by the Borrower pursuant to subsection 4.11 or 4.12, such
Lender shall as soon as reasonably practicable thereafter notify the Borrower
and the Administrative Agent and shall take such steps as may reasonably be
available to it and acceptable to the Borrower to mitigate the effects of such
condition or event (which shall include efforts to rebook the Loans held by such
Lender at another lending office, or through another branch or an affiliate, of
such Lender); provided that such Lender shall not be required to take any step
--------
that, in its reasonable judgment, would be materially disadvantageous to its
business or operations or would require it to incur additional costs (unless the
Borrower agrees to reimburse such Lender for all such reasonable and actual
additional costs).
(d) If (and for so long as) the Borrower shall become obligated to pay
additional amounts pursuant to subsection 4.11 or 4.12 and any affected Lender
shall not
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have promptly taken the steps necessary to avoid the need for payments under
subsection 4.11 or 4.12, the Borrower shall have the right, upon payment in full
of all amounts then due from it under subsections 4.11 and 4.12, (i) with the
assistance of the Administrative Agent, to seek one or more substitute Lenders
reasonably satisfactory to the Administrative Agent and the Borrower to purchase
in accordance with the provisions of subsection 11.6(c) the affected Loan, in
whole or in part, at an aggregate price no less than the principal amount of
such Loan or part thereof being purchased plus accrued and unpaid interest
thereon to the date of purchase and all fees and other amounts owing to the
affected Lender hereunder (or under the other Loan Documents) and accrued to the
date of the purchase (but without payment to the affected Lender of any premium
or penalty) and to assume the obligations of the affected Lender under this
Agreement and the other Loan Documents, or (ii) after the Borrower has made a
good faith effort to seek a substitute Lender in accordance with clause (i)
above and provided that no Default or Event of Default has occurred and is
continuing, upon at least three Business Days' irrevocable notice to the
Administrative Agent and the affected Lender, to terminate the entire Commitment
of the affected Lender and to repay the affected Loan, together with accrued and
unpaid interest thereon to date of repayment, any amounts payable under
subsection 4.13 in connection with such repayment and all fees and other amounts
accrued to the date of repayment and owing to the affected Lender hereunder (or
under the other Loan Documents) (but without payment to the affected Lender of
any premium or penalty). In the case of the substitution of a Lender, the
Borrower, the Administrative Agent, the affected Lender, and any substitute
Lender shall execute and deliver an appropriately completed Assignment and
Acceptance pursuant to subsection 11.6(c) to effect the assignment of rights to,
and the assumption of obligations by, the substitute Lender.
(e) Notwithstanding any other provision of this Agreement, no Lender shall
be entitled to receive any
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additional amounts pursuant to subsection 4.11 or 4.12 unless such Lender
represents to the Borrower that, at the time of any request by such Lender that
such amounts be paid, it is the policy or general practice of such Lender to
demand such compensation for comparable costs or deductions, if any, in similar
circumstances, if any, under comparable provisions of other credit agreements
for comparable customers.
(f) The obligations of the Borrower and a Lender or Participant under
this subsection 4.14 shall survive the termination of this Agreement and the
payment of the Notes and all amounts payable.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent, the Collateral Agent and each Lender
to enter into and perform their respective obligations under this Agreement, and
to induce each Lender to make the initial Extension of Credit requested to be
made by it on the Effective Date, the Borrower hereby represents and warrants,
on the Effective Date and on each date on which an Extension of Credit is made
thereafter, to the Administrative Agent, the Collateral Agent and each Lender
that:
5.1 Financial Condition. The consolidated balance sheet of the Borrower and
-------------------
its consolidated Subsidiaries as at December 31, 1995 and the related
consolidated statements of income and of cash flows for the fiscal year ended on
such date, reported on by Coopers & Lybrand, copies of which have heretofore
been furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at December 31, 1996 and the related unaudited consolidated
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statements of income and of cash flows for the twelve-month period ended on such
date, certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the twelve-month period then ended
(subject to normal year-end audit adjustments). All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except as approved by such accountants or Responsible Officer, as the case may
be, and as disclosed therein).
5.2 No Change; Solvent. Since December 31, 1996, there has been no
------------------
development or event which has had or would be reasonably expected to have a
Material Adverse Effect. Except as permitted under this Agreement, no dividends
or other distributions have been declared, paid or made upon the Capital Stock
of the Borrower, the Canadian Borrower or RealCo nor has any of the Capital
Stock of the Borrower, the Canadian Borrower or RealCo been redeemed, retired,
purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries. As of the Closing Date, each of the Borrower and the Canadian
Borrower is Solvent.
5.3 Corporate Existence; Compliance with Law. Each of Holdings, the
----------------------------------------
Borrower, the Canadian Borrower, RealCo and their respective Subsidiaries (a) is
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
except to the extent that the failure to have such legal right would not be
reasonably expected to have a Material Adverse Effect, (c) is duly qualified as
a foreign or extra-provincial corporation and in good standing
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under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, other than
in such jurisdictions where the failure to be so qualified and in good standing
would not be reasonably expected to have a Material Adverse Effect, and (d) is
in compliance with all Requirements of Law except to the extent that the failure
to comply therewith would not, in the aggregate, be reasonably expected to have
a Material Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations. (a) The
-------------------------------------------------------
Borrower has the corporate power and authority to make, deliver and perform the
Loan Documents to which it is a party and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement, the Notes and the Applications and to authorize
the execution, delivery and performance of the Loan Documents to which it is a
party. No consent or authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of the Borrower in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower is a party, except
(i) for consents, authorizations, notices and filings described in Schedule 5.4,
all of which have been obtained or made, (ii) for filings to perfect the Liens
created by the Security Documents and (iii) filings pursuant to the Assignment
of Claims Act of 1940, as amended (31 U.S.C. (S) 3727 et seq.) in respect of
Accounts of the Borrower the Obligor of which is the United States of America or
any department, agency or instrumentality thereof. This Agreement and each other
Loan Document to which the Borrower is a party has been duly executed and
delivered on behalf of the Borrower. This Agreement and each other Loan Document
to which the Borrower is a party constitutes a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency,
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reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(b) Each Loan Party (other than the Borrower and RealCo) has the
corporate power and authority to make, deliver and perform the Loan Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Loan Documents to which it is a
party. No consent or authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of any such Loan Party in connection with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except (i) for consents, authorizations,
notices and filings described in Schedule 5.4, all of which have been obtained
or made, (ii) for filings to perfect the Liens created by the Security
Documents, and (iii) filings pursuant to the Assignment of Claims Act of 1940,
as amended (31 U.S.C. (S) 3727 et seq.) in respect of Accounts of such Loan
Party the Obligor of which is the United States of America or any department,
agency or instrumentality thereof. Each Loan Document to which any such Loan
Party is a party has been duly executed and delivered on behalf of each such
Loan Party. Each Loan Document to which any such Loan Party is a party when
executed and delivered by such Loan Party will constitute a legal, valid and
binding obligation of such Loan Party enforceable against such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
5.5 No Legal Bar. The execution, delivery and performance of the Credit
------------
Documents by each Credit Party (other than RealCo), the borrowings hereunder and
under the
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Canadian Credit Agreement and the use of the proceeds thereof and the creation
and perfection of the Liens contemplated by the Security Documents and the
Canadian Security Documents (a) will not violate any Requirement of Law or
Contractual Obligation of any such Credit Party in any respect that would
reasonably be expected to have a Material Adverse Effect and (b) will not result
in, or require, the creation or imposition of any Lien (other than the Liens
created by the Security Documents and the Canadian Security Documents) on any of
its or their respective properties or revenues pursuant to any such Requirement
of Law or material Contractual Obligation.
5.6 No Material Litigation. No litigation, investigation or proceeding of
----------------------
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower and the Canadian Borrower, threatened by or against
any Credit Party or against any properties or revenues of any Credit Party (a)
with respect to any of the Credit Documents or any of the transactions
contemplated thereby, (b) which, taking into account any indemnification by
Westinghouse pursuant to the Acquisition Agreement or the Canadian Acquisition
Agreement, would be reasonably expected to have a Material Adverse Effect or (c)
as of the Closing Date, with respect to the Acquisition.
5.7 No Default. No Credit Party is in default under or with respect to
----------
any of its Contractual Obligations in any respect which would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
5.8 Ownership of Property; Liens. Each Credit Party has good record and
----------------------------
marketable title in fee simple to, or a valid leasehold interest in, all its
real property, and good title to, or a valid leasehold interest in, all its
other property, except for any failure to have such title or such leasehold
interest that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect and except for the name and mark
"WESCO",
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which is the subject of subsection 5.9; and none of such property is subject to
any Lien, except for Liens permitted by subsection 8.3.
5.9 Intellectual Property. Each Credit Party owns, or has the legal right
---------------------
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes necessary for the conduct of its business as currently conducted,
(except for the name and mark "WESCO") (the "Intellectual Property") except for
---------------------
those the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. The Credit Parties confirm that the
Borrower and its Subsidiaries use the name and mark "WESCO" in connection with
the conduct of the business and own the common law rights associated therewith
as a result of such use. Except as provided on Schedule 5.9, no claim has been
asserted and is pending by any Person challenging or questioning the use of, or
the validity or effectiveness of, any such Intellectual Property or, to the
knowledge of the Credit Parties, the name and mark "WESCO", nor does any Credit
Party know of any such claim, and the use of such Intellectual Property or, to
the knowledge of the Credit Parties, the use of the name and mark "WESCO" by the
Borrower and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that (i) are subject to indemnification
by Westinghouse pursuant to the Acquisition Agreements or (ii) would not be
reasonably expected to have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law applicable to, or
--------------------------
Contractual Obligation of, any Credit Party would be reasonably expected to have
a Material Adverse Effect.
5.11 Taxes. Each Credit Party has filed or caused to be filed all United
-----
States federal income tax returns and all other material tax returns which are
required to be filed by it and has paid (a) all taxes shown to be due and
payable on said returns or (b) all taxes shown to be due and
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payable on any assessments of which it has received notice made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any (i) taxes,
fees or other charges with respect to which the failure to pay, in the
aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other
charges the amount or validity of which are currently being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
reserves in conformity with GAAP have been provided on the books of the
applicable Credit Party); and no tax Lien has been filed, and, to the knowledge
of the Borrower and the Canadian Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge other than real property taxes that
are not yet delinquent.
5.12 Federal Regulations. No part of the proceeds of any Loans will be
-------------------
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or the Administrative Agent,
the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in said Regulation U.
5.13 ERISA. During the five year period prior to each date as of which
-----
this representation is made, or deemed made, with respect to any Plan, (or, with
respect to (vi) or (viii) below, as of the date such representation is made or
deemed made), none of the following events or conditions, either individually or
in the aggregate, has resulted or is reasonably likely to result in a liability
to the Borrower or any of its Subsidiaries which would be reasonably expected to
have a Material Adverse Effect: (i) a Reportable Event; (ii) an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
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302 of ERISA); (iii) any material noncompliance with the applicable provisions
of ERISA or the Code; (iv) a termination of a Single Employer Plan (other than a
standard termination pursuant to Section 4041(b) of ERISA); (v) a Lien in favor
of the PBGC or a Plan; (vi) Underfunding with respect to any Single Employer
Plan; (vii) a complete or partial withdrawal from any Multiemployer Plan by the
Borrower or any Commonly Controlled Entity; (viii) any liability of the Borrower
or any Commonly Controlled Entity under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the annual valuation date most closely preceding the date on which
this representation is made or deemed made; (ix) the Reorganization or
Insolvency of any Multiemployer Plan; (x) the excess of the present value
(determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
aggregate liability of the Borrower or any of its Subsidiaries for post-
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) over
the assets under all such Plans; and (xi) an event or condition with respect to
which the Borrower or any Commonly Controlled Entity could incur any liability
in respect of a Former Plan.
5.14 Collateral. Except with regard to Liens on Equipment constituting
----------
Fixtures, any reserved rights of the United States government as required under
law, Liens upon Trademarks and Trademark Licenses and Patents and Patent
Licenses, which Liens, to the extent not otherwise perfected by the filing of
financing statements under the Uniform Commercial Code in accordance with the
Security Documents, would, or in the case of Trademark Licenses and Patent
Licenses may, be perfected upon filing and acceptance thereof in the United
States Patent and Trademark Office, Liens on uncertificated securities, Liens on
Collateral the perfection of which requires filings in or other actions under
the laws of jurisdictions outside of the United States of America, any State,
territory or dependency thereof or
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the District of Columbia, and Liens on Contracts or Accounts on which the United
States of America or any department, agency, or instrumentality thereof is the
obligor, and except for the claims of creditors of Persons receiving goods
included as Collateral for "sale or return" within the meaning of Section 2-326
of the Uniform Commercial Code of the applicable jurisdiction, upon filing of
the financing statements delivered to the Administrative Agent by the Borrower
on the Closing Date in the jurisdictions listed on Schedule 6.1(j) (which
financing statements are in proper form for filing in such jurisdictions) (and
the recording of the Borrower Patent Security Agreement and the Borrower
Trademark Security Agreement as set forth therein, and the making of filings in
any other jurisdiction as may be necessary under any Requirement of Law after
the Closing Date) and the delivery to, and continuing possession by, the
Administrative Agent of all Instruments, Chattel Paper and Documents a security
interest in which is perfected by possession, the Liens created pursuant to each
Security Document, when executed and delivered, will constitute valid Liens on
and, to the extent provided therein, perfected security interests in the
collateral referred to in such Security Document (but as to the Copyrights and
the Copyright Licenses and accounts arising therefrom, only to the extent the
Uniform Commercial Code of the relevant jurisdiction, from time to time in
effect, is applicable) in favor of the Collateral Agent for the ratable benefit
of the Lenders, which Liens will be prior to all other Liens of all other
Persons, except for Liens permitted pursuant to the Loan Documents (including,
without limitation, those permitted to exist pursuant to subsection 8.3), and
which Liens are enforceable as such as against all other Persons (except (i)
with respect to Trademarks, Trademark Licenses, Patents and Patent Licenses, to
the extent that the recording of an assignment or other transfer of title
thereto to the Collateral Agent in the United States Patent and Trademark Office
may be necessary for such enforceability and (ii) with respect to goods only,
buyers in the ordinary course of business to the extent provided in Section 9-
307(1) of the Uniform Commercial Code as from time
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to time in effect in the applicable jurisdiction), except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law). Notwithstanding any other provision of this Agreement,
capitalized terms which are used in this subsection 5.14 and not defined in this
Agreement are so used as defined in the Borrower Security Agreement.
5.15 Investment Company Act; Other Regulations. The Borrower is not an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness as contemplated
hereby.
5.16 Subsidiaries. Schedule 5.16 sets forth all the Subsidiaries of the
------------
Borrower as of the Closing Date, the jurisdiction of their incorporation and the
ownership interest of the Borrower therein. The Borrower is, and at all times
will be, the sole Subsidiary of Holdings. RealCo has no Subsidiaries. No
Person other than the Borrower, Additional Subsidiaries and Permitted Equity
Purchasers owns any Capital Stock of any Additional Subsidiary.
5.17 Purpose of Loans. The proceeds of the Loans shall be used by the
----------------
Borrower to finance the working capital and business requirements of the
Borrower and its Subsidiaries.
5.18 Environmental Matters.
---------------------
(a) To the knowledge of the Borrower and the Canadian Borrower, the
facilities and properties owned or operated by the Credit Parties (or any one or
more of them) (the "Properties") and all operations at the Properties are in
----------
compliance with all applicable
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Environmental Laws, and there is no violation of any Environmental Law with
respect to the Properties or the business operated by the Borrower or any of its
Subsidiaries (the "Business"), and there are no conditions relating to the
--------
Business or Properties that would be reasonably likely to give rise to liability
under any applicable Environmental Law, except for any failure so to comply or
violation or condition, or any aggregation thereof, that would not be reasonably
expected to result in the payment of a Material Environmental Amount.
b. To the knowledge of the Borrower and the Canadian Borrower, the
Properties do not contain, and have not previously contained, any Materials of
Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a violation of, or could
reasonably give rise to liability under, Environmental Laws except insofar as
the presence of any Materials of Environmental Concern is not reasonably
expected to result in the payment of a Material Environmental Amount.
c. To the knowledge of the Borrower and the Canadian Borrower, no Credit
Party has received any written or verbal notice of, or inquiry from any
Governmental Authority concerning, any violation, alleged violation, non-
compliance, liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or the
Business, nor does the Borrower or the Canadian Borrower have knowledge or
reason to believe that any such notice will be received or is being threatened,
except insofar as such notice or threatened notice, or any aggregation thereof,
does not involve a matter or matters that is or are reasonably expected to
result in the payment of a Material Environmental Amount.
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(d) To the knowledge of the Borrower and the Canadian Borrower, Materials
of Environmental Concern have not been transported or disposed of from the
Properties, or generated, treated, stored or disposed of by or on behalf of
WESCO, the Borrower or any of its Subsidiaries at, on or under any of the
Properties or any other location in violation of, or in a manner that would be
reasonably expected to give rise to liability under, any applicable
Environmental Law, except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, is not reasonably expected to
result in the payment of a Material Environmental Amount.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower and the Canadian Borrower,
threatened, under any Environmental Law to which any Credit Party is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Borrower, any of its Subsidiaries, the Properties or the Business, except
insofar as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably expected to result in the payment of a
Material Environmental Amount.
(f) To the knowledge of the Borrower and the Canadian Borrower, since
February 28, 1991, there has been no release or, to the knowledge of the
Borrower and the Canadian Borrower, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of the Credit Parties
in connection with the Properties or otherwise in connection with the Business,
in violation of or in amounts or in a manner that would be
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reasonably expected to give rise to liability under Environmental Laws, except
insofar as any such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably expected to result in the payment of a
Material Environmental Amount.
5.19 Certain Documents. On the Closing Date, the Borrower delivered to
-----------------
the Administrative Agent (and each Lender requesting the same) and the Canadian
Administrative Agent (and each Canadian Lender requesting the same) complete and
correct copies of the Acquisition Documentation, the First Mortgage Note
Documentation, the Master Lease Documentation and the RealCo Landlord Waiver.
The RealCo Mortgages are in substantially the form of the form of the RealCo
Mortgage delivered by the Borrower to the Administrative Agent and the Canadian
Administrative Agent on the Closing Date, and the Canadian Mortgages are in
substantially the form of the form of Canadian Mortgage delivered by the
Borrower to the Administrative Agent and the Canadian Administrative Agent on
the Closing Date.
5.20 Acquisition Documents; First Mortgage Note Documents. (a) Each
----------------------------------------------------
Credit Party has the corporate power and authority to make, deliver and perform
the Acquisition Documents and the First Mortgage Note Documents to which it is a
party and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Acquisition Documents and the First Mort Note
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required to be obtained or made by or on behalf of any Credit
Party in connection with the execution, delivery or performance by such Credit
Party of the Acquisition Documents and the First Mortgage Note Documents, except
for consents, authorizations, notices, filings and other actions described in
the Acquisition Documents or the First Mortgage Note Documents, as the case may
be. Each Acquisition Document and each First Mortgage Note Document has been
duly executed
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and delivered on behalf of each Credit Party party thereto. Each Acquisition
Document and each First Mortgage Note Document constitutes a legal, valid and
binding obligation of each Credit Party party thereto enforceable against each
such Person in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(b) The execution, delivery and performance of the Acquisition Documents
and the First Mortgage Note Documents by each Credit Party party thereto will
not violate any Requirement of Law or Contractual Obligation of any such Credit
Party in any respect that would be reasonably expected to have a Material
Adverse Effect.
(c) Each Acquisition Document and First Mortgage Note Document is full
force and effect and neither the Borrower, any other Credit Party nor, to the
best of the Borrower's knowledge, any other Person party thereto has defaulted
in the performance of its obligations hereunder.
5.21 Master Lease Agreement; RealCo Landlord Waiver. (a) Each of the
----------------------------------------------
Borrower and RealCo have the corporate power and authority to make, deliver and
perform the Master Lease Agreement and, in the case of RealCo, the RealCo
Landlord Waiver and have taken all necessary corporate action to authorize the
execution, delivery and performance of the Master Lease Agreement and, in the
case of RealCo, the RealCo Landlord Waiver. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required to be obtained or made by or on behalf
of the Borrower or RealCo in connection with the execution, delivery or
performance by the Borrower or RealCo of the Master Lease Agreement and, in the
case of RealCo, the RealCo Landlord Waiver. Each of the Master Lease Agreement
and, in the case of RealCo, the RealCo Landlord Waiver has
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been duly executed and delivered on behalf of the Borrower and RealCo. Each of
the Master Lease Agreement and, in the case of RealCo, the RealCo Landlord
Waiver constitutes a legal, valid and binding obligation of the Borrower and
RealCo enforceable against each such Person in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(b) The execution, delivery and performance of the Master Lease Agreement
and, in the case of RealCo, the RealCo Landlord Waiver by the Borrower and
RealCo will not violate any Requirement of Law or Contractual Obligation of the
Borrower or RealCo in any respect that would be reasonably expected to have a
Material Adverse Effect.
(c) The Master Lease Agreement and the RealCo Landlord Waiver are in full
force and effect and neither the Borrower, RealCo nor, to the best of the
Borrower's knowledge, any other Person party thereto has defaulted in the
performance of its obligations thereunder.
5.22 No Default. Immediately prior to the occurrence of the Effective
----------
Date, no Default or Event of Default (as defined in each of the Existing Credit
Agreement and the Existing Canadian Credit Agreement) has occurred and is
continuing.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Effectiveness. This Agreement shall become effective
---------------------------
on the date (the "Effective Date") upon which each of the following conditions
--------------
shall be satisfied: (i) the execution of this Agreement by all of the parties
hereto (including, without limitation, the Guarantors' signature lines which are
set forth at the foot
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of this Agreement), (ii) the occurrence of the "Effective Date" under and as
defined in subsection 7.1 of the Canadian Credit Agreement and (iii) the first
date upon which each of the conditions precedent set forth in this subsection
6.1 are satisfied:
(a) Revolving Credit Notes. The Administrative Agent shall have received
-----------------------
on behalf of each Lender a new Revolving Credit Note duly executed and delivered
by the Borrower in exchange for the existing Revolving Credit Note payable to
such Lender, which existing Revolving Credit Note shall be returned to the
Borrower.
(b) Legal Opinions. The Administrative Agent shall have received, with
---------------
a copy for each Lender, the executed legal opinions of (A) Debevoise & Plimpton,
special counsel to the Borrower and the other Credit Parties, substantially in
the form of Exhibit D-1 and (B) the Secretary of the Borrower, substantially in
-----------
the form of Exhibit D-2.
-----------
(c) Corporate Proceedings of the Borrower. The Administrative Agent
-------------------------------------
shall have received, with a copy for each Lender, a copy of the resolutions, in
form and substance reasonably satisfactory to the Administrative Agent, of the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of this Agreement, the Revolving Credit Notes to be delivered
pursuant to clause (a) of this subsection 6.1 and the other related documents to
which it is or will be a party, certified by the Secretary or an Assistant
Secretary of the Borrower as of the Effective Date, which certificate shall be
in form and substance reasonably satisfactory to the Administrative Agent and
shall state that the resolutions thereby certified have not been amended,
modified (except as any later such resolution may modify any earlier such
resolution), revoked or rescinded.
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(d) Incumbency Certificates of the Borrower. The Administrative Agent
---------------------------------------
shall have received, with a copy for each Lender, a certificate of a Responsible
Officer of the Borrower, dated the Effective Date, as to the incumbency and
signature of the officers of the Borrower executing this Agreement and any
related document, reasonably satisfactory in form and substance to the
Administrative Agent.
(e) Fee. The Borrower shall have paid to the Administrative Agent, for
---
the ratable account of each Lender in accordance with their respective
Commitment Percentages, a fee, payable in U.S. Dollars, in an amount equal to
0.025% of the sum of (i) the aggregate Commitments of all Lenders under the
Credit Agreement, as amended hereby and (ii) the U.S. Dollar equivalent
(determined on the basis of the Exchange Rate) of the Canadian Commitment of all
Canadian Lenders under the Canadian Credit Agreement.
(f) Prepayment of Loans. The Borrower shall have prepaid in full all of
-------------------
the Loans outstanding under the Existing Credit Agreement as well as any unpaid
and accrued interest thereon and all amounts of fees payable pursuant to
subsection 4.5 of the Existing Credit Agreement.
(g) Fleet Resignation Letter. The Administrative Agent shall have
------------------------
received a duly executed copy of a letter from Fleet Capital Corporation,
substantially in the form of Exhibit K, with respect to its resignation as
Collateral Agent.
6.2 Conditions to Each Extension of Credit. The agreement of each Lender
--------------------------------------
to make any Extension of Credit requested to be made by it on any date
(including, without limitation, the initial Extension of Credit and each Swing
Line Loan) is subject to the satisfaction or waiver of the following conditions
precedent:
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(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party (other than RealCo) pursuant to this Agreement
or any other Loan Document (or in any amendment, modification or supplement
hereto or thereto) to which it is a party, and each of the representations and
warranties contained in any certificate furnished at any time by or on behalf of
any such Loan Party pursuant to this Agreement or any other Loan Document shall,
except to the extent that they relate to a particular date, be true and correct
in all material respects on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default (other than a Default or
----------
an Event of Default under Section 9(l) which occurs solely as a result of the
occurrence of a Canadian Borrowing Base Default) shall have occurred and be
continuing on such date or after giving effect to the Extensions of Credit
requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions of Credit
--------------
requested to be made on such date, the Total Aggregate Outstandings shall not
exceed the lesser of (i) the Borrowing Base then in effect and (ii) the
aggregate Commitments.
Each Extension of Credit made to (or on behalf of) the Borrower hereunder shall
constitute a representation and warranty by the Borrower as of the date of such
Extension of Credit that the conditions contained in this subsection 6.2 have
been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and so
long as the Commitments or the Canadian Commitments remain in effect, and
thereafter until payment in full of all Obligations and all Canadian
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Obligations and termination or expiration of all Letters of Credit and Canadian
Letters of Credit, the Borrower shall and (except in the case of subsections
7.1, 7.2, 7.7 and 7.10) shall cause each of its Subsidiaries to:
7.1 Financial Statements. Furnish to each Lender:
--------------------
(a) as soon as available, but in any event not later than 90 days after
the end of each fiscal year of each of Holdings and the Canadian Borrower, (i) a
copy of the consolidated balance sheet of Holdings and its consolidated
Subsidiaries (other than Realco) and (ii) a copy of the unaudited consolidated
balance sheet of the Canadian Borrower and its consolidated Subsidiaries (if
any), in each case as at the end of each such year and together with copies of
the related consolidated statements of operations, changes in common
stockholders' equity and cash flows for each such year, setting forth in the
case of such balance sheets as at the end of the 1995 fiscal year of Holdings
and the Canadian Borrower and in the case of such balance sheets and statements
of operations, changes in common stockholders' equity and cash flows for the
1996 and subsequent fiscal years of Holdings and the Canadian Borrower, in each
case in comparative form the figures for the previous year, and in the case of
(i) above such consolidated financial statements to be reported on without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by Coopers & Lybrand or other independent certified
public accountants of nationally recognized standing and such financial
statements to be certified by a Responsible Officer of Holdings or the Canadian
Borrower, as the case may be, as being fairly stated in all material respects;
(b) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of
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<PAGE>
Holdings, a copy of the unaudited consolidated and consolidating balance sheet
of Holdings and its consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated and consolidating statements of operations,
changes in common stockholders' equity and cash flows of Holdings and its
consolidated Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth, (x) in the case of each such
consolidated and consolidating balance sheet as of the end of the second fiscal
quarter of 1995 and thereafter, in comparative form the budgeted figures (as
adjusted consistent with past practice) for the relevant period and the figures
as at the end of the previous fiscal year and (y) in the case of each such
consolidated and consolidating statements of operations and cash flows for the
second fiscal quarter of 1995 and thereafter, in comparative form the budgeted
figures (as adjusted consistent with past practice) for the relevant period and
the figures for the corresponding period of the previous fiscal year, certified
by a Responsible Officer of Holdings as being fairly stated in all material
respects (subject to normal year-end audit and other adjustments and except for
the absence of notes);
(c) as soon as available, but in any event not later than 30 days after
the end of each fiscal month of each fiscal year of Holdings, a copy of the
unaudited consolidated balance sheet of Holdings and its consolidated
Subsidiaries as of the end of such month and the related unaudited consolidated
statement of operations, the sales figures with respect to which shall be broken
down between Holdings, each Additional Subsidiary and the Canadian Borrower,
setting forth with respect to months ending after March 1, 1995, in the case of
such consolidated balance sheets, in comparative
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<PAGE>
form the figures as at the end of the previous fiscal year and, in the case of
such consolidated statements of operations, in comparative form the figures for
the corresponding fiscal month of the previous year, certified by a Responsible
Officer of Holdings as being fairly stated in all material respects (subject to
normal year-end audit and other adjustments and except for the absence of
notes); provided that during any Borrowing Base Elimination Period the Borrower
--------
shall not be required to make any delivery pursuant to this subsection 7.1(c);
and
(d) as soon as available, a copy of the consolidated balance sheet of
Holdings and its consolidated Subsidiaries as of March 1, 1994, reported on
without a "going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Coopers & Lybrand or other independent
certified public accountants of nationally recognized standing and certified by
a Responsible Officer of Holdings as being fairly stated in all material
respects;
all such financial statements shall be (and, in the case of financial statements
delivered pursuant to subsection 7.1(a) (but only with respect to the
consolidating financial statements referred to therein), (b), (c) and (d) above,
shall be certified by a Responsible Officer of Holdings as being) fairly stated
in all material respects in conformity with GAAP and shall be (and, in the case
of financial statements delivered pursuant to subsection 7.1(a) (but only with
respect to the consolidating financial statements referred to therein), (b), (c)
and (d) above, shall be certified by a Responsible Officer of Holdings as being)
prepared in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein, and except, in the case
of the financial statements delivered pursuant to subsection 7.1(b) and (d), for
the absence of certain notes).
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7.2 Certificates; Other Information. Furnish to each Lender:
-------------------------------
(a) concurrently with the delivery of the financial statements referred
to in subsection 7.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
audit necessary therefor no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements referred
to in subsections 7.1(a), (b) and (c) and in clause (b) of the definition of
Adjustment Date, a certificate of a Responsible Officer of the Borrower or
Holdings, as the case may be, (i) stating that, to the best of such Officer's
knowledge, the Borrower or Holdings, as the case may be, during such period has
observed or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and in the Notes and the other Loan
Documents to which it is a party to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default or
Event of Default, except, in each case, as specified in such certificate and
(ii) setting forth (in reasonable detail) the calculations required to determine
(A) the Margin Reduction Percentage and compliance with the covenants set forth
in subsection 8.1 (in the case of a certificate furnished with the financial
statements referred to in subsections 7.1(a) and (b) and in clause (b) of the
definition of Adjustment Date) and (B) compliance with the covenant set forth in
subsection 8.9 (in the case of a certificate furnished with the financial
statements referred to in subsection 7.1(a));
(c) on or prior to the first Friday that is after the 15th day of each
calendar month after the Closing Date (except during any Borrowing Base
Elimination
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Period), a certificate substantially in the form of Exhibit E (a "Monthly
-------
Borrowing Base Certificate"), certified by a Responsible Officer of the Borrower
- --------------------------
as true and correct, setting forth the amount of Accounts of the Borrower and
the Additional Subsidiaries, Eligible Accounts, Inventory of the Borrower and
the Additional Subsidiaries and Eligible Inventory, in each case as of the last
Business Day of the immediately preceding month, attached to which shall be
reasonably detailed information including an aging schedule of Accounts of the
Borrower and the Additional Subsidiaries;
(d) as soon as available, but in any event not later than ninety days
after the beginning of each fiscal year of the Borrower, a copy of the
projections by the Borrower of the operating budget and cash flow budget of the
Borrower and its Subsidiaries for such fiscal year, such projections to be
accompanied by a certificate of a Responsible Officer of the Borrower to the
effect that such Responsible Officer believes, as of the date of such
certificate, such projections to have been prepared on the basis of reasonable
assumptions;
(e) within five days after the same are sent, copies of all financial
statements and reports which Holdings or the Borrower sends to its security
holders, and within five days after the same are filed, copies of all financial
statements and periodic reports which Holdings or the Borrower may file with the
Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(f) within two days after the same are filed, copies of all registration
statements and any amendments and exhibits thereto, which Holdings or the
Borrower may file with the Securities and Exchange Commission or any successor
or analogous Governmental Authority;
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(g) promptly after the consummation by the Borrower or any Additional
Subsidiary of a Mixed Asset Sale, a certificate of a Responsible Officer of the
Borrower setting forth (in reasonable detail) the calculations required to
determine compliance with the requirement of clause (iii) of the proviso to
subsection 8.6(g) and stating that, to the best of such officer's knowledge, no
Default or Event of Default has occurred and is continuing or would occur as a
result of such Mixed Asset Sale;
(h) upon the reasonable request of the Administrative Agent, copies of
any certificates delivered to Westinghouse pursuant to Section 6(a)(1) of the
RealCo First Mortgage Notes;
(i) copies of all material written amendments, waivers and modifications
of the DCBU Supply Agreement; and
(j) promptly, such additional financial and other information as the
Administrative Agent, the Collateral Agent or any Lender may from time to time
reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
----------------------
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
diligently conducted and reserves in conformity with GAAP with respect thereto
have been provided on the books of the Borrower or its Subsidiaries, as the case
may be.
7.4 Conduct of Business and Maintenance of Existence. Continue to
------------------------------------------------
engage in business of the same general type as now conducted by the Borrower and
its Subsidiaries, taken as a whole, and preserve, renew and keep in full force
and effect its corporate existence and take
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all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of the business of the Borrower and
its Subsidiaries, taken as a whole, except as otherwise permitted pursuant to
subsection 8.5, provided that the Borrower and its Subsidiaries shall not be
--------
required to maintain any such rights, privileges or franchises, if the failure
to do so would not reasonably be expected to have a Material Adverse Effect; and
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all property useful and
----------------------------------
necessary in the business of the Borrower and its Subsidiaries, taken as a
whole, in good working order and condition; maintain with financially sound and
reputable insurance companies insurance on all property material to the business
of the Borrower and its Subsidiaries, taken as a whole, in at least such amounts
and against at least such risks (but including in any event public liability,
product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business,
which insurance shall also comply with the requirements of Section 5(n) of the
Borrower Security Agreement and Section 2.3 of Canadian Borrower Collateral
Covenant Agreement; and furnish to the Administrative Agent, upon written
request, information in reasonable detail as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions. (a) Keep
----------------------
proper books of records and account in which full, complete and correct entries
in conformity with GAAP and all material Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities; and
(i) prior to the occurrence and continuance of an Event
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of Default, permit a representative of the Lenders, twice during each twelve
month period after the Closing Date, and (ii) after the occurrence of an Event
of Default, permit a representative of the Lenders, as often as may reasonably
be requested during the continuance of such Event of Default, to visit and
inspect any of its properties and examine and, to the extent reasonable, make
abstracts from any of its books and records, including, without limitation, in
connection with any audit or appraisal described in paragraph (b) below, and to
discuss the business, operations, properties and financial and other condition
of the Borrower and its Subsidiaries with officers and employees of the Borrower
and its Subsidiaries and with its independent certified public accountants, in
each case at any reasonable time and upon reasonable notice. Upon the request of
the Administrative Agent or any Lender, the Collateral Agent will provide such
Lender with a reasonably detailed summary of the results of any audit of the
Collateral conducted by it pursuant hereto.
(b) Reimburse the Collateral Agent for any reasonable fees or expenses
incurred by it in connection with one audit of any of the Collateral during each
twelve month period after the Closing Date, provided that, if a Default or Event
--------
of Default shall have occurred and be continuing, the Borrower shall reimburse
the Collateral Agent for any reasonable fees and expenses incurred by it in
connection with any such audit reasonably requested in writing by the Majority
Lenders.
7.7 Notices. Promptly give notice to the Administrative Agent, the
-------
Collateral Agent and each Lender of:
(a) as soon as possible after a Responsible Officer of the Borrower knows
thereof, the occurrence of any Default or Event of Default;
(b) as soon as possible after a Responsible Officer of the Borrower knows
thereof, any (i) default or event of default under any Contractual Obligation
(including, without limitation, the First Mortgage Note Documents) of the
Borrower or any of its Subsidiaries,
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<PAGE>
other than as previously disclosed in writing to the Lenders, or (ii)
litigation, investigation or proceeding which may exist at any time between
Holdings or any of its Subsidiaries and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may be, would
reasonably be expected to have a Material Adverse Effect;
(c) as soon as possible after a Responsible Officer of the Borrower knows
thereof, any litigation or proceeding affecting Holdings or any of its
Subsidiaries in which the amount involved (not covered by insurance) is
$10,000,000 or more or in which injunctive or similar relief is sought that has
had or would be reasonably expected to have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event within 30
days after a Responsible Officer of the Borrower knows thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Single Employer Plan, a failure to make any required contribution to a Single
Employer or Multiemployer Plan, the creation of any Lien in favor of the PBGC or
a Plan or any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan; (ii) Underfunding with respect to the Replacement
Pension Plan in excess of $40,000,000 (provided, no notice shall be required to
be delivered with respect to the Replacement Pension Plan if neither the
Borrower nor any Commonly Controlled Entity has any liability in respect
thereof); (iii) Underfunding with respect to any Single Employer Plan other than
the Replacement Pension Plan which could result in a material liability to the
Borrower or any of its Subsidiaries; (iv) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
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<PAGE>
or the termination, Reorganization or Insolvency of, any Single Employer or
Multiemployer Plan; or (v) the occurrence or expected occurrence of any event or
condition under which the Borrower or any Commonly Controlled Entity has
incurred or could incur any liability in respect of a Former Plan; and
(e) as soon as possible after a Responsible Officer of the Borrower knows
thereof, any (i) material adverse change in the business, operations, property
or condition (financial or otherwise) of the Borrower and its Subsidiaries taken
as a whole and (ii) condition, circumstance, occurrence or event that would be
reasonably expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower (and, if applicable, the relevant Commonly
Controlled Entity or Subsidiary) setting forth details of the occurrence
referred to therein and stating what action the Borrower (or, if applicable, the
relevant Commonly Controlled Entity or Subsidiary) proposes to take with respect
thereto.
7.8 Environmental Laws. (a) Comply with, and use all reasonable efforts
------------------
to ensure compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use all
reasonable efforts to ensure that all tenants and subtenants obtain and comply
with and maintain, any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws, except in each case to the
extent that the failure to do so would not be reasonably expected to result in
the payment of a Material Environmental Amount.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other similar actions required of the
Borrower or any of its Subsidiaries under Environmental Laws and promptly comply
with all lawful orders and directives of all Governmental
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<PAGE>
Authorities regarding Environmental Laws, except to the extent that the same are
being contested in good faith by appropriate proceedings, and except in each
case to the extent that the failure to do so would not be reasonably expected to
result in the payment of a Material Environmental Amount.
7.9 Landlord Waivers. At its own expense, request, and use reasonable
----------------
efforts to obtain, (i) a Landlord's Waiver from each landlord of each of the
existing facilities in which Inventory of the Borrower is located as of the
Closing Date and (ii) prior to entering into a lease of a facility in which
Inventory of the Borrower or any Additional Subsidiary will be located on or
after the Closing Date, a Landlord's Waiver from each landlord of any such
facility. To the extent that the Borrower shall have, prior to the Closing
Date, obtained or used reasonable efforts to obtain a Landlord's Waiver in the
form of Exhibit D to the Existing Credit Agreement (as such term is defined in
the Existing Credit Agreement) in respect of any such existing facility, the
Borrower shall be deemed to have satisfied the requirements of this subsection
7.9 with respect to such existing facility.
7.10 Loans to Cover Canadian Borrowing Base Defaults. If at any time
-----------------------------------------------
Loans are made hereunder during the continuance of a Canadian Borrowing Base
Default, cause that portion of the proceeds of such Loans which is necessary to
cure such Canadian Borrowing Base Default by repaying and/or cash
collateralizing Canadian Extensions of Credit to be promptly exchanged for
Canadian Dollars, contributed, loaned or advanced to the Canadian Borrower and
used by the Canadian Borrower to repay and/or cash collateralize the Canadian
Extensions of Credit.
7.11 Cash Management System. (a) Maintain bank or trust accounts only
----------------------
with the banks or other financial institutions listed on Schedule 7.11 and such
other banks or other financial institutions of which the Administrative
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<PAGE>
Agent and the Collateral Agent may be notified in writing by the Borrower from
time to time (each, a "Depositary Bank").
---------------
(b) Cause all amounts representing Proceeds (as defined in the Borrower
Security Agreement) of Collateral (other than Net Proceeds Allocable to Payee
and Reserved Amounts (as such terms are defined in the RealCo First Mortgage
Notes) and Specified Loss Proceeds (as such term is defined in the RealCo Cash
Collateral Agreement)) which are received by the Borrower or any Additional
Subsidiary from time to time to be promptly deposited into a bank or trust
account maintained with a Depositary Bank (each, a "Depositary Account").
------------------
(c) Instruct each Depositary Bank (other than Citibank, N.A. with respect
to an amount not in excess of $150,000 to cover reimbursement of certain amounts
paid by insurance companies) to transfer, on a daily basis, all available funds
on deposit in each Depositary Account maintained by it to the Concentration
Account established with, and in the name of, the Collateral Agent pursuant to
the Borrower Security Agreement; provided that amounts not in excess of $500,000
--------
(the "Operating Fund Limit") in the aggregate with respect to all Depositary
--------------------
Accounts may be retained by the Depositary Banks on deposit in Depositary
Accounts and withdrawn from time to time therefrom by the Borrower or any
Additional Subsidiary to pay reasonable costs and expenses incurred by the
Borrower or any Additional Subsidiary; provided that, upon the occurrence and
--------
during the continuance of an Event of Default, the Borrower shall instruct the
Depositary Banks to transfer all available funds in the Depositary Accounts to
the Concentration Account on a daily basis and shall not revoke such
instructions unless and until such Event of Default has been cured or waived.
(d) The Concentration Account shall be under the sole dominion and
control of the Collateral Agent. At any time when an Event of Default has
occurred and is continuing, the Collateral Agent may apply all or any of the
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funds on deposit in the Concentration Account to the payment of the Obligations
(as defined in the Borrower Security Agreement), in the order of priority set
forth in Section 8 of the Borrower Security Agreement. So long as no Event of
Default has occurred and is continuing, the Collateral Agent shall promptly
remit any funds on deposit in the Concentration Account to the General Fund
Account (as defined in the Borrower Security Agreement). The Borrower shall have
the right, at any time and from time to time, to withdraw such amounts from the
General Fund Account, and to maintain such balances in the General Fund Account,
as it shall deem to be necessary or desirable .
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and so
long as the Commitments or the Canadian Commitments remain in effect, and
thereafter until payment in full of all Obligations and all Canadian Obligations
and termination or expiration of all Letters of Credit and all Canadian Letters
of Credit, the Borrower shall not, and shall not permit (i) any Additional
Subsidiary or RealCo (in the case of subsections 8.5, 8.6, 8.13 and 8.16(b) and
(c)) or (ii) any of its Subsidiaries (in the case each subsection of this
Section 8 other than subsections 8.5, 8.6, 8.13 and 8.16(b) and (c)) to,
directly or indirectly:
8.1 Financial Condition Covenants.
-----------------------------
(a) Maintenance of Net Worth. Permit Consolidated Net Worth of Holdings
------------------------
and its consolidated Subsidiaries at any time to be less than (i) during the
period from (and including) the Closing Date to (but excluding) the second
anniversary thereof, $78,000,000 and (ii) thereafter, $86,000,000.
(b) Ratio of Consolidated Funded Indebtedness to Consolidated EBITDA.
----------------------------------------------------------------
Permit, on the last day of any
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fiscal year of Holdings set forth below, the ratio of Consolidated Funded
Indebtedness of Holdings and its consolidated Subsidiaries as at such day to
Consolidated EBITDA of Holdings and its consolidated Subsidiaries for the fiscal
year of the Borrower ending on such day (or, with respect to the 1994 fiscal
year of the Borrower, for the period from February 28, 1994 to the last day of
such fiscal year), to be greater than the ratio set forth opposite such test
period below:
<TABLE>
<CAPTION>
Fiscal Year Ratio
- -------------------------------- ----------
<S> <C>
1994 8.25 : 1.0
1995 7.00 : 1.0
1996 6.00 : 1.0
1997 5.00 : 1.0
Thereafter 4.00 : 1.0
</TABLE>
For purposes of compliance with this subsection 8.1(b), Consolidated EBITDA of
Holdings and its consolidated Subsidiaries for Holdings' 1994 fiscal year shall
be annualized by multiplying the Consolidated EBITDA of Holdings and its
consolidated Subsidiaries for the period from February 28, 1994 to last day of
such year by 1.20.
(c) Fixed Charge Coverage Ratio. Permit, on the last day of any fiscal
---------------------------
quarter of Holdings ending during any test period set forth below, the Fixed
Charge Coverage Ratio for the period of four consecutive fiscal quarters of
Holdings ending on such day (or, if prior to March 31, 1995, such lesser number
of full fiscal quarters of Holdings that shall have been completed since
February 28, 1994) to be less than the ratio set forth opposite such test period
below:
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<TABLE>
<CAPTION>
Test Period Ratio
- ----------------------------------------- ----------
<S> <C>
12/30/94 - 3/30/95 1.00 : 1.0
3/31/95 - 12/30/95 1.25 : 1.0
12/31/95 - 12/30/96 1.50 : 1.0
12/31/96 - 12/30/97 1.75 : 1.0
Thereafter 2.00 : 1.0
</TABLE>
It is understood that for purposes of calculating the foregoing financial
condition covenants, the financial statements delivered pursuant to subsection
7.1 shall be used.
8.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist
--------------------------
any Indebtedness (including any Indebtedness of any of its Subsidiaries),
except:
(a) Indebtedness of the Borrower (i) under this Agreement and (ii) in
respect of any notes issued by the Borrower to RealCo, and any accrued rental
obligations of the Borrower to RealCo, pursuant to the Master Lease Agreement,
provided that no cash payments are required to be made on such notes until the
- --------
final scheduled maturity of the RealCo First Mortgage Notes;
(b) Indebtedness of the Canadian Borrower under the Canadian Credit
Agreement and the Canadian First Mortgage Notes;
(c) Indebtedness of RealCo under the RealCo First Mortgage Notes;
(d) Indebtedness of the Borrower to any Subsidiary of the Borrower (other
than RealCo) and of any Subsidiary of the Borrower to the Borrower or any other
Subsidiary of the Borrower (other than RealCo);
(e) Indebtedness of the Borrower and any of its Subsidiaries incurred to
finance the acquisition of fixed or capital assets (whether pursuant to a loan,
a
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Financing Lease, a sale and leaseback transaction or otherwise) otherwise
permitted pursuant to this Agreement in an aggregate principal amount not
exceeding in the aggregate as to the Borrower and its Subsidiaries $10,000,000
at any one time outstanding;
(f) Indebtedness of the Borrower and any of its Subsidiaries (other than
RealCo) incurred to finance the purchase price of any acquisition permitted by
subsection 8.10(g), provided that (i) all such Indebtedness does not in the
--------
aggregate exceed $10,000,000 at any one time outstanding and (ii) immediately
after giving effect to such acquisition no Default or Event of Default shall
have occurred and be continuing;
(g) Indebtedness under (i) the Interest Rate Cap and (ii) other Interest
Rate Agreements relating to Indebtedness of the Borrower under this Agreement,
Indebtedness of the Canadian Borrower under the Canadian Credit Agreement and/or
other Indebtedness permitted by this subsection 8.2; provided that the purpose
--------
for which each Interest Rate Agreement referred to in clause (ii) is entered
into (as determined by the Borrower in good faith) is reasonable in the relation
to the conduct of the business of the Borrower and its Subsidiaries;
(h) Indebtedness outstanding on February 28, 1994 and listed on Schedule
8.2(h) and any refinancings, refundings, renewals or extensions thereof,
provided that (i) the amount of such Indebtedness is not increased in connection
- --------
with such refinancing, refunding, renewal or extension and (ii) all material
terms and conditions (other than interest rates which shall be based on then
current market rates for comparable Indebtedness of comparable borrowers) of the
Indebtedness incurred pursuant to such refinancing, refunding, renewal or
extension are (as determined by the Borrower reasonably and in good faith) no
less
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favorable to the Borrower and its Subsidiaries than those applicable to the
Indebtedness refinanced, refunded, renewed or extended thereby;
(i) Subordinated Indebtedness of the Borrower or any Additional
Subsidiary in an aggregate principal amount not to exceed $100,000,000 at any
one time outstanding, including any Subordinated Indebtedness that may be issued
by the Borrower or such Additional Subsidiary (A) pursuant to any exemption from
the registration requirements of the Securities Act or (B) in exchange for such
Subordinated Indebtedness pursuant to a registered exchange offer and having the
same maturity, principal amount, interest rate, covenants, events of default and
redemption and repurchase provisions as, and otherwise having terms and
conditions substantially identical to, those contained in the Subordinated
Indebtedness exchanged therefor and the documentation relating thereto;
(j) refinancings, refundings, renewals or extensions of Subordinated
Indebtedness permitted by subsection 8.2(i); provided that the Indebtedness
--------
incurred to refinance, refund, renew or extend such Subordinated Indebtedness
(i) is in an amount not greater than the Subordinated Indebtedness so
refinanced, refunded, renewed or extended and any reasonable costs, fees and
expenses incurred in connection with such refinancing, refunding, renewal or
extension, (ii) is unsecured, (iii) has a maturity date no earlier than the
final maturity date of the Subordinated Indebtedness refinanced, refunded,
renewed or extended thereby, (iv) does not require payments of any portion of
the principal thereof (whether by way of mandatory sinking fund, mandatory
redemption or otherwise) prior to the respective date(s) (if any) on which equal
or greater principal payments on the Subordinated Indebtedness refinanced,
refunded, renewed or extended thereby would have been required, (v) has a
maximum interest rate no higher than the maximum
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interest rate applicable to the Subordinated Indebtedness refinanced, refunded,
renewed or extended thereby, (vi) has covenants, default provisions and
subordination provisions no less favorable to the Borrower or the relevant
Additional Subsidiary than the comparable terms of the Subordinated Indebtedness
refinanced, refunded, renewed or extended thereby and (vii) has only such other
material terms and conditions as are reasonably satisfactory in form and
substance to the Administrative Agents (as evidenced by their prior written
approval thereof);
(k) to the extent that any Guarantee Obligation permitted under
subsection 8.4 constitutes Indebtedness, such Indebtedness;
(l) Indebtedness of (i) the Borrower permitted by the last sentence of
subsection 4.8(b) and (ii) the Canadian Borrower permitted by subsection 5.5(b)
of the Canadian Credit Agreement;
(m) additional Indebtedness of the Borrower or any of its Subsidiaries
not exceeding $20,000,000 in aggregate principal amount at any one time
outstanding; and
(n) Indebtedness of Foreign Subsidiaries in an aggregate principal amount
at any time outstanding not in excess of the equivalent of $30,000,000,
including all Guarantee Obligations.
For purposes of clauses (e), (f) and (m) of this subsection 8.2, the U.S. Dollar
equivalent of Canadian Dollar denominated Indebtedness shall be determined on
the basis of the Current Exchange Rate in effect on the date of incurrence
thereof.
8.3 Limitation on Liens. Create, incur, assume or suffer to exist any
-------------------
Lien upon any of its property, assets or
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revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet delinquent or the nonpayment of which in the
aggregate would not reasonably be expected to have a Material Adverse Effect, or
which are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves with respect thereto are maintained on the books
of the Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than 60 days or which are being contested in good
faith by appropriate proceedings diligently conducted;
(c) Liens of landlords or of mortgagees of landlords arising by operation
of law, provided that the rental payments secured thereby are not yet due and
--------
payable;
(d) pledges, deposits or other Liens in connection with workers'
compensation, unemployment insurance, other social security benefits or other
insurance related obligations (including, without limitation, pledges or
deposits securing liability to insurance carriers under insurance or self-
insurance arrangements);
(e) Liens arising by reason of any judgment, decree or order of any court
or other Governmental Authority, if appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order, are being
diligently prosecuted and shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired or if such
Liens are
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fully covered by title insurance or indemnification from Westinghouse
under the Acquisition Agreements;
(f) Liens consisting of deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds, judgment and like bonds, replevin and
similar bonds and other obligations of a like nature incurred in the ordinary
course of business;
(g) zoning restrictions, easements, rights-of-way, restrictions on the
use of property, other similar encumbrances incurred in the ordinary course of
business and minor irregularities of title, which do not materially interfere
with the ordinary conduct of the business of the Borrower and its Subsidiaries
taken as a whole;
(h) Liens securing or consisting of Indebtedness of the Borrower and its
Subsidiaries permitted by subsections 8.2(e) and (f) and incurred to finance the
acquisition of fixed or capital assets or any acquisition permitted by
subsection 8.10(g), respectively; provided that (i) such Liens shall be created
--------
substantially simultaneously with the acquisition of such fixed or capital
assets or such acquisition, (ii) such Liens securing such Indebtedness do not at
any time encumber any property other than the property financed by such
Indebtedness and (iii) except as to Financing Leases, the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the
original purchase price of such assets;
(i) Liens existing on assets or properties at the time of the acquisition
thereof by the Borrower or a Subsidiary which do not materially interfere with
the use of the property subject thereto or extend to or
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cover any assets of the Borrower or such Subsidiary other than the assets or
property being acquired;
(j) Liens (i) in existence on the February 28, 1994 and listed in
Schedule 8.3(j) and other Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 8.2(h), provided that (a) no such Lien is
--------
extended to cover any additional property after February 28, 1994 (except to the
extent required by the terms of the Indebtedness secured thereby or any other
agreement governing such Lien as such terms are in effect on February 28, 1994
or immediately after giving effect to any refinancing, refunding, renewal or
extension of such Indebtedness or other governing agreement permitted by
subsection 8.2(h)), (b) no such Lien secures any Indebtedness or other
obligations other than Indebtedness or other obligations secured by it on
February 28, 1994 and refinancings, refundings, renewals or extensions of such
Indebtedness or other obligations permitted by subsection 8.2(h) and (c) the
amount of Indebtedness secured thereby is not increased; or (ii) not otherwise
permitted hereunder; provided that all Liens permitted pursuant to this
--------
subsection 8.3(j) secure obligations not exceeding (as to the Borrower and all
of its Subsidiaries) the aggregate amount thereof outstanding on February 28,
1994 plus $10,000,000 at any one time outstanding;
----
(k) Liens in favor of any Governmental Authority party to a purchase
agreement with the Borrower or any of its Subsidiaries (other than RealCo) for
goods arising as a result of the payment by such Governmental Authority of
progress or advance payments on account of the goods subject to such purchase
agreement;
(l) Liens on residential real property financed in connection with, and
securing, Investments permitted under subsection 8.10(e)(iii) and Guarantee
Obligations permitted under subsection 8.4(h) not exceeding (as to
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the Borrower and all of its Subsidiaries) $5,000,000 in aggregate amount at any
one time outstanding;
(m) Liens on assets securing Guarantee Obligations permitted under
subsection 8.4(e);
(n) Liens created pursuant to the Canadian Mortgages, the Canadian Cash
Collateral Agreement, the RealCo Mortgages and the RealCo Cash Collateral
Agreement; and
(o) Liens created pursuant to the Security Documents and the Canadian
Security Documents.
For the purposes of clauses (j) and (l) of this subsection 8.3, the U.S. Dollar
equivalent of Canadian Dollar denominated Indebtedness or other obligations
secured by Liens shall be determined on the basis of the Current Exchange Rate
on the date the related Lien was created.
8.4 Limitation on Guarantee Obligations. Create, incur, assume or
-----------------------------------
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on February 28, 1994 and listed in
Schedule 8.4(a), and any refinancings, refundings, extensions or renewals
thereof, provided that (i) the amount of such Guarantee Obligation shall not be
--------
increased in connection with such refinancing, refunding, extension or renewal
and (ii) all material terms and conditions of the Guarantee Obligation incurred
pursuant to such refinancing, refunding, renewal or extension are (as determined
by the Borrower reasonably and in good faith) no less favorable to the Borrower
and its Subsidiaries than those applicable to the Guarantee Obligation
refinanced, refunded, renewed or extended thereby;
(b) Guarantee Obligations in connection with up to an aggregate principal
amount of $8,000,000 of
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Indebtedness outstanding at any one time incurred by directors, officers,
employees, managers or consultants of or to Holdings, the Borrower or any of
their respective Subsidiaries in connection with any Management Subscription
Agreement, and any refinancings, refundings, extensions or renewals thereof;
(c) customary Guarantee Obligations in connection with sales or other
dispositions permitted under subsection 8.6, including guarantees with respect
to leases, indemnification obligations, and guarantees of collectibility in
respect of accounts receivable or notes receivable for up to face value;
(d) Guarantee Obligations for bankers' acceptances, bills of exchange,
performance, appeal and judgment bonds, replevin and similar bonds, suretyship
arrangements, or bank overdrafts repaid in three days, all in the ordinary
course of business, and reimbursement obligations in respect of commercial
documentary letters of credit issued for the account of the Borrower or any of
its Subsidiaries for the purchase of goods or services in the ordinary course of
business;
(e) Guarantee Obligations in respect of standby letters of credit (other than
Standby Letters of Credit) for use in the ordinary course of business, in an
aggregate principal or face amount for all such Guarantee Obligations (as to the
Borrower and all of its Subsidiaries) not to exceed $10,000,000 at any one time
outstanding;
(f) Guarantee Obligations in respect of indemnification and contribution
agreements in favor of CD&R, C&D Fund IV, Affiliates thereof and each Person who
becomes a director of Holdings, the Borrower or any of their Subsidiaries in
respect of liabilities (i) arising under the Securities Act, the Exchange Act
and
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any other applicable securities laws or otherwise in connection with any
offering of securities by Holdings, the Borrower or any of their Subsidiaries,
(ii) incurred to third parties for any action or failure to act of Holdings, the
Borrower or any of their Subsidiaries or successors, (iii) to Persons which are
not Affiliates, arising out of the performance by CD&R of management consulting
or financial advisory services to Holdings, the Borrower or any of their
Subsidiaries, (iv) arising out of the fact that any indemnitee was or is a
director of Holdings, the Borrower or any of their Subsidiaries, or is or was
serving at the request of any such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise or (v) to the fullest extent permitted by Delaware law, arising out
of any breach or alleged breach by such an indemnitee of his or her fiduciary
duty as a director of Holdings, the Borrower or any of their Subsidiaries;
(g) Reimbursement Obligations in respect of the Letters of Credit and
Canadian Reimbursement Obligations in respect of the Canadian Letters of Credit;
(h) Guarantee Obligations in respect of third-party loans and advances to
officers or employees of the Borrower or any Subsidiary for travel,
entertainment and relocation expenses incurred in the ordinary course of
business;
(i) Guarantee Obligations to insurers required in connection with worker's
compensation and other insurance coverage incurred in the ordinary course of
business;
(j) Guarantee Obligations in respect of Interest Rate Agreements permitted by
subsection 8.2(g);
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(k) Guarantee Obligations (other than Guarantee Obligations that are
permitted by any other paragraph of this subsection) in respect of loans by
third parties to Obligors and their Affiliates, and other Guarantee Obligations
incurred after February 28, 1994, in the aggregate not to exceed (as to the
Borrower and all of its Subsidiaries) $10,000,000 at any one time outstanding;
(l) Guarantee Obligations incurred in connection with acquisitions permitted
under subsection 8.10(g), provided (i) that all such Guarantee Obligations do
--------
not in the aggregate exceed (as to the Borrower and all of its Subsidiaries
other than Foreign Subsidiaries) $10,000,000 and, in the case of Foreign
Subsidiaries, $30,000,000 at any one time outstanding and (ii) after giving
effect to such acquisition, no Default or Event of Default shall have occurred
or be continuing;
(m) guarantees made in the ordinary course of its business by the Borrower or
any of its Subsidiaries of obligations of the Borrower or any of its
Subsidiaries (other than RealCo), which obligations are otherwise permitted
under this Agreement;
(n) Guarantee Obligations of (i) Holdings under the Holdings RealCo First
Mortgage Note Guarantees and the Holdings Canadian First Mortgage Note
Guarantees, (ii) the Borrower under the Borrower RealCo First Mortgage Note
Guarantees and the Borrower Canadian First Mortgage Note Guarantees and (iii)
RealCo under RealCo Canadian First Mortgage Note Guarantees; and
(o) Guarantee Obligations incurred pursuant to the Guarantees, the Borrower
Guarantee and the Canadian Subsidiary Guarantees.
For purposes of clauses (b), (e), (k) and (l) of this subsection 8.4, the U.S.
Dollar equivalent of Canadian Dollar denominated Guarantee Obligations shall be
determined
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on the basis of the Current Exchange Rate in effect on the date such Guarantee
Obligation is incurred.
8.5 Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Additional Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with or into any one or more other
Additional Subsidiaries;
(b) any Additional Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Borrower or any other Additional Subsidiary; and
(c) in the case of the Borrower or any Additional Subsidiary, as
permitted by subsection 8.6.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Additional Subsidiary or
RealCo, issue or sell any shares of its Capital Stock, to any Person other than
the Borrower or a Subsidiary of the Borrower (other than RealCo), except:
(a) the sale or other Disposition of (i) obsolete or worn out property,
whether now owned or hereafter acquired, in the ordinary course of business or
(ii) any Inventory not included as Eligible Inventory by virtue of clause (f) or
(g) of the definition of Eligible Inventory;
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(b) the sale or other Disposition of any property (including Inventory and
Intellectual Property) in the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable or notes
receivable arising in the ordinary course of business, or the conversion or
exchange of accounts receivable into or for notes receivable, in connection with
the compromise or collection thereof;
(d) as permitted by subsection 8.5(b);
(e) the abandonment or other Disposition of patents, trademarks or other
Intellectual Property that are, in the reasonable judgment of the Borrower or
the applicable Additional Subsidiary, no longer economically practicable to
maintain or useful in the conduct of the business of the Borrower and its
Subsidiaries taken as a whole;
(f) Dispositions of any assets or property by the Borrower or any of its
Subsidiaries to the Borrower or any of its Subsidiaries (other than RealCo);
(g) Dispositions of assets in a transaction or series of related transactions
for Net Cash Proceeds not in excess of $15,000,000 in any such transaction or
series of related transactions, provided that (i) no Default or Event of Default
--------
has occurred and is continuing or would occur as a result thereof, (ii) such Net
Cash Proceeds are applied to the repayment of the Extensions of Credit pursuant
to subsection 4.4(c) and (iii) notwithstanding the foregoing, no Disposition
constituting a Mixed Asset Sale shall be permitted hereunder if, after giving
effect thereto, the sum of (A) the Aggregate Asset Sale Shortfall Amount and (B)
the U.S. Dollar equivalent (determined on the basis of then Current Exchange
Rates from time to time) of the
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Canadian Aggregate Asset Shortfall Amount would exceed $15,000,000; and
(h) sales to Permitted Equity Purchasers of not more than 20% of the common
stock of any Additional Subsidiary.
8.7 Limitation on Dividends. Declare or pay any dividend (other than
-----------------------
dividends payable solely in common stock of the Borrower or any of its
Subsidiaries or options, warrants or other rights to purchase common stock of
the Borrower or any of its Subsidiaries) or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Borrower or any of its Subsidiaries or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution (other than distributions payable
solely in common stock of the Borrower or any of its Subsidiaries or options,
warrants or other rights to purchase common stock of the Borrower or any of its
Subsidiaries) in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrower or any of its Subsidiaries, except
that:
(a) the Borrower may pay cash dividends to Holdings in an amount sufficient
to allow Holdings to pay expenses incurred in the ordinary course of business;
(b) the Borrower may pay cash dividends to Holdings in an amount sufficient
to cover reasonable and necessary expenses (including professional fees and
expenses) incurred by Holdings in connection with (i) registration, public
offerings and exchange listing of equity or debt securities of Holdings and
maintenance of the same, (ii) compliance with reporting obligations under
federal or state laws or under this Agreement or any of the other Credit
Documents and (iii)
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indemnification and reimbursement of directors, officers and employees of
Holdings in respect of liabilities relating to their serving in any such
capacity;
(c) the Borrower may pay cash dividends to Holdings in amounts sufficient to
pay tax liabilities of Holdings which are paid in cash by Holdings to any taxing
authority;
(d) the Borrower may pay cash dividends to Holdings in an amount sufficient
to allow Holdings to repurchase, and any Additional Subsidiary may repurchase,
shares of its common stock or options in respect thereof transferred pursuant to
the Management Subscription Agreements which may be entered into between
Holdings, the Borrower or such Additional Subsidiary and Permitted Equity
Purchasers; provided that the aggregate amount of all such cash dividends paid
--------
to Holdings and all amounts paid in respect of such repurchases by Additional
Subsidiaries shall not exceed at any time the sum of (i) (A) $4,000,000 in the
aggregate during the period from February 28, 1994 to December 31, 1996 and (B)
$6,000,000 in the aggregate thereafter, plus (ii) in each case (but only after
receipt by Holdings of not less than $5,000,000 pursuant to the Capital Call
Agreement (or otherwise as a capital contribution or from the proceeds of the
sale or issuance of its equity securities) and contribution by Holdings of such
amount in cash to the Borrower) the amount of all cash capital contributions
(other than those referred to in the immediately preceding parenthetical) made
by Holdings to the Borrower from the proceeds of, and all amounts received by
any Additional Subsidiary in respect of, sales of its common stock (or options,
warrants or other rights to purchase its common stock) to Permitted Equity
Purchasers pursuant to Management Subscription Agreements;
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(e) the Borrower may pay cash dividends to Holdings in an amount sufficient
to allow Holdings to pay all fees and expenses incurred by it in connection with
this Agreement and the transactions contemplated hereby; provided that the
--------
aggregate amount of all such cash dividends shall not exceed $1,000,000;
(f) any Subsidiary of the Borrower may pay dividends or make other
distributions to the Borrower or any other Subsidiary of the Borrower;
(g) the Borrower may, at the direction of Holdings and on its behalf, pay an
amount to Westinghouse U.S. not to exceed any amounts required to be paid by the
Borrower pursuant to the Acquisition Agreement; and
(h) in the event that Holdings repurchases all or any portion of the
Westinghouse Equity Interests from Westinghouse U.S. from time to time, then,
concurrently with each such repurchase, the Borrower may pay a cash dividend to
Holdings in an amount not to exceed the Equity Interest Purchase Price with
respect to such repurchase; provided that the aggregate amount of all cash
--------
dividends paid by the Borrower to Westinghouse U.S. pursuant to this subsection
8.7(h) shall not exceed $20,000,000.
8.8 Limitation on Optional Payments and Modifications of Debt Instruments
---------------------------------------------------------------------
and other Contractual Obligations. (a) Without the prior written consent of the
- ---------------------------------
Aggregate Majority Lenders, make any optional payment or prepayment on or
optional redemption, repurchase or defeasance of any Subordinated Indebtedness
or any First Mortgage Note;
(b) without the prior written consent of the Aggregate Majority Lenders,
amend, modify, waive or change, or consent to any amendment, modification,
waiver or change to, any material term of any Subordinated Indebtedness
(including, without limitation, any subordination
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provisions, covenants, stated maturity, principal amount or rate of payment of
interest) in a manner that would have an adverse effect on the respective
interests of the Administrative Agents and the Lending Parties under the Credit
Documents; provided that the Borrower shall have given reasonable notice to
--------
the Administrative Agents in advance of any such amendment, modification,
change, waiver or consent;
(c) without the prior written consent of the Aggregate Majority Lenders,
amend, modify, waive or change, or consent to any amendment, modification,
waiver or change to, any material term of any Acquisition Document in a manner
that would have a material adverse effect on the respective interests of the
Administrative Agents and the Lending Parties under the Credit Documents;
provided that, notwithstanding the foregoing, without the prior written consent
- --------
of the Aggregate Majority Lenders, the Borrower shall not, and shall not permit
any Subsidiary to, amend, modify, waive or change, or consent to any amendment,
modification, waiver or change to, (x) Article I or Sections 2.3, 2.5, 8.2 or
8.4 of the Acquisition Agreement, or (y) Article I or Section 2.4 of the
Canadian Acquisition Agreement (including in the case of clauses (x) and (y)
above, any related defined terms used in any such Article or Section);
(d) without the prior consent of the Aggregate Majority Lenders, amend,
modify, waive or change, or consent to any amendment, modification, waiver or
change to, any First Mortgage Note Document, (i) if such amendment,
modification, waiver or change would have the effect of making any of the
obligations and duties of the Borrower or any other Loan Party under any First
Mortgage Note Document materially more onerous than those to which the Borrower
or such Loan Party was subject immediately prior to such amendment,
modification, waiver or change, (ii) in the case of any RealCo First Mortgage
Note or any Canadian First Mortgage Note, if such amendment, modification,
waiver or change would increase the amount, rate or nature of any
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interest payable thereunder or require that any interest thereunder be paid in
cash, or require that any principal thereof be paid prior to the final maturity
thereof or (iii) in the case of any RealCo First Mortgage Note, any Canadian
First Mortgage Note, the RealCo Cash Collateral Agreement or the Canadian Cash
Collateral Agreement, if such amendment, modification, waiver or change would
require any amounts other than Net Proceeds Allocable to Payee and any Reserved
Amounts (as each such term is defined in each of the RealCo First Mortgage Notes
and each of the Canadian First Mortgages Notes) (to the extent such Reserved
Amounts are not paid to the Borrower) to be paid to any holder of any RealCo
First Mortgage Note or Canadian First Mortgage Note prior to the date such
amounts would otherwise be due and payable thereunder; provided that,
--------
notwithstanding the foregoing, without the prior written consent of the
Aggregate Majority Lenders, the Borrower shall not, and shall not permit any
Subsidiary to, amend, modify, waive or change, or consent to any amendment,
modification, waiver or change to, (x) paragraphs 1, 3, 5, 6(c), 9(c) or 18 of,
or clause (iv) of paragraph 14 of, any RealCo First Mortgage Note or paragraphs
1, 3, 5, 6(3), 9(c) or 17 of, or clause (iv) of paragraph 14 of, any Canadian
First Mortgage Note or (y) Article V or Section 6.02 of the RealCo Cash
Collateral Agreement or Article V or Section 6.02 of the Canadian Cash
Collateral Agreement (including, in the case of clauses (x) and (y) above, any
related defined terms used in any such article, paragraph or section); and
(e) without the prior written consent of the Aggregate Majority Lenders,
amend, modify, waive or change, or consent to any amendment, modification,
waiver or change to, the Interest Rate Caps (or any documentation evidencing the
same).
8.9 Limitation on Capital Expenditures. Make any Capital Expenditures
----------------------------------
(excluding any expenses incurred in connection with normal replacement and
maintenance programs properly charged to current operations and excluding the
amount of any Net Cash Proceeds of Dispositions pursuant to
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subsection 8.6(g) which are reinvested in the business of the Borrower or an
Additional Subsidiary and the amount of any Canadian Net Cash Proceeds of
Canadian Dispositions pursuant to subsection 9.2(g) of the Canadian Credit
Agreement which are reinvested in the business of the Canadian Borrower or any
of its Subsidiaries) exceeding in the aggregate for the Borrower and its
consolidated Subsidiaries, for any fiscal year of the Borrower set forth below,
the amount set forth opposite such fiscal year below:
Fiscal Year Amount
----------- ------
1994 $ 6,000,000
1995 $ 9,000,000
1996 $15,000,000
Thereafter $20,000,000
; provided that up to 25% of the amount of any Capital Expenditures permitted to
--------
be made during any fiscal year and not made during such fiscal year may be
carried over and expended during the next succeeding fiscal year.
8.10 Limitation on Investments, Loans and Advances. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit or division of, or make any other investment in (each, an
"Investment"), any Person, except:
----------
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) Investments existing on February 28, 1994 and described in Schedule
8.10(c), setting forth the respective amounts of such Investments as of a recent
date;
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(d) Investments in notes receivable in connection with transactions permitted
by subsection 8.6(c);
(e) loans and advances to officers, directors or employees of the Borrower or
any of its Subsidiaries (i) in the ordinary course of business for travel and
entertainment expenses, (ii) existing on February 28, 1994 and described in
Schedule 8.10(c), (iii) made after February 28, 1994 for relocation expenses,
not to exceed (as to the Borrower and all of its Subsidiaries), together with
the amount of all Guarantee Obligations permitted pursuant to subsection 8.4(h),
$5,000,000 in the aggregate outstanding at any one time or (iv) relating to
indemnification or reimbursement of any officers, directors or employees of
Holdings or any of its Subsidiaries in respect of liabilities relating to their
serving in any such capacity or as otherwise specified in Section 8.11; for
purposes of this subsection 8.10(e), the U.S. Dollar equivalent of loans and
advances made in Canadian Dollars shall be determined on the basis of the
Current Exchange Rate on date such loan or advance was made;
(f) Investments by the Borrower or any of its Subsidiaries in the Borrower or
any of its Subsidiaries (other than RealCo or a Foreign Subsidiary);
(g) Investments by the Borrower or any of its Subsidiaries consisting of the
acquisition by purchase or otherwise of all or substantially all of the business
or assets of, or evidences of beneficial ownership of, any Person or any
division thereof; provided that (i) each such Investment or series of related
--------
Investments does not exceed $50,000,000 (exclusive of the book value of any
Eligible Inventory acquired pursuant to such Investment) or, in the case of any
Investment or series of related Investments made in Canadian Dollars, the U.S.
Dollar equivalent (determined on the basis of the Current Exchange Rate in
effect on the date such Investment or series of related Investments are made) of
$50,000,000, (ii) immediately before and after giving effect to such Investment
or series of
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related Investments, no Default or Event of Default shall have occurred or be
continuing and (iii) immediately after giving effect to such Investment, the
Available Commitments and the U.S. Dollar equivalent (determined on the basis of
the Closing Date Exchange Rate) of the Available Canadian Commitments together
are at least $25,000,000;
(h) Investments by the Borrower or any of its Subsidiaries in RealCo that (i)
consist solely of payment of amounts then due and payable under, or the
performance of other obligations required by, the Master Lease Documentation,
provided that in no event shall the Borrower or any of its Subsidiaries be
- --------
permitted to make cash payments of Basic Rent under and as defined in the Master
Lease Agreement; or (ii) do not exceed amounts necessary to enable RealCo to pay
(or to reimburse RealCo for having paid) (A) expenses incurred by RealCo in the
ordinary course of business, (B) reasonable and necessary expenses incurred by
RealCo in connection with compliance with reporting and other requirements under
federal and state laws or under any of the Credit Documents or the RealCo First
Mortgage Note Documents, (C) tax liabilities of RealCo and (D) fees and expenses
incurred by RealCo in connection with the Acquisition and the transactions
contemplated thereby, which when aggregated with all other such fees and
expenses paid by Holdings and its Subsidiaries, do not exceed $30,000,000,
provided that no such amounts are paid to RealCo prior to the Business Day
- --------
before the date on which such expenses or liabilities are due and payable by
RealCo; and
(i) Investments by the Borrower or any of its Subsidiaries in any Foreign
Subsidiaries in an aggregate principal amount not to exceed $35,000,000.
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8.11 Limitation on Transactions with Affiliates. Enter into any
------------------------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate; provided, that nothing contained in this subsection
--------
8.11 shall be deemed to prohibit:
(i) the Borrower or any of its Subsidiaries from entering into or
performing any consulting, management or employment agreements or other
compensation arrangements with a director, officer or employee of the Borrower,
Holdings or any of their respective Subsidiaries that provides for annual
aggregate base compensation not in excess of $1,000,000 per annum for any such
director, officer or employee;
(ii) the Borrower or any of its Subsidiaries from entering into or
performing an agreement with CD&R for the rendering of management consulting or
financial advisory services to the Borrower or any of its Subsidiaries for
compensation not to exceed in the aggregate $500,000 per year plus reasonable
out-of-pocket expenses;
(iii) the Borrower or any of its Subsidiaries from entering into,
making payments pursuant to and otherwise performing an indemnification and
contribution agreement in favor of CD&R, C&D Fund IV, the Affiliates thereof and
each person who becomes a director, officer, agent or employee of Holdings, the
Borrower or any of their respective Subsidiaries, in respect of liabilities (A)
arising under the Securities Act, the Exchange Act and any other applicable
securities laws or otherwise, in connection with any
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offering of securities by Holdings, the Borrower or any of their respective
Subsidiaries, (B) incurred to third parties for any action or failure to act of
Holdings, the Borrower or any of their respective Subsidiaries, predecessors or
successors, (C) arising out of the performance by CD&R of management consulting
or financial advisory services provided to Holdings, the Borrower or any of
their respective Subsidiaries, (D) arising out of the fact that any indemnitee
was or is a director, officer, agent or employee of Holdings, the Borrower or
any of their respective Subsidiaries, or is or was serving at the request of any
such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or enterprise or (E) to the
fullest extent permitted by Delaware or other applicable state law, arising out
of any breach or alleged breach by such indemnitee of his or her fiduciary duty
as a director or officer of Holdings, the Borrower or any of their respective
Subsidiaries;
(iv) the Borrower or any of its Subsidiaries from performing any
agreements or commitments with or to any Affiliate existing on February 28, 1994
and described on Schedule 8.11(v);
(v) any transaction permitted under subsection 8.4(b), 8.4(f) or
8.10(e); and
(vi) the Borrower, RealCo and the Canadian Borrower entering into and
performing any of their respective obligations under the Acquisition
Documentation and the First Mortgage Note Documentation.
For purposes of this subsection 8.12, (A) any transaction with any Affiliate
shall be deemed to have satisfied the standard set forth in subparagraph (c) of
the first sentence hereof if (i) such transaction is approved by a majority of
the Disinterested Directors of the Board of Directors of the
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Borrower or the applicable Subsidiary or (ii) a nationally recognized expert
with expertise in appraising the terms and conditions of the type of transaction
for which approval is required delivers to the Borrower or the applicable
Subsidiary (which shall promptly forward a copy to the Administrative Agents) a
written opinion stating that such transaction is fair to the Borrower or the
applicable Subsidiary from a financial point of view and (B) "Disinterested
-------------
Director" shall mean, with respect to any Person and transaction, a member of
- --------
the Board of Directors of such Person who does not have any material direct or
indirect financial interest in or with respect to such transaction.
8.12 Limitation on Sales and Leasebacks. Enter into any arrangement
----------------------------------
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary, other than in
connection with any Disposition permitted under subsection 8.6 or any Canadian
Disposition permitted by subsection 9.2 of the Canadian Credit Agreement or as
permitted by subsection 8.2(e).
8.13 Limitations on Dispositions of Collateral. Convey, sell, transfer,
-----------------------------------------
lease, or otherwise dispose of any of the Collateral, or attempt, offer or
contract to do so, except for (a) mergers, consolidations, sales, leases,
transfers or other Dispositions permitted under subsection 8.5 and (b) sales or
other Dispositions permitted under subsection 8.6, including sales of Inventory
in the ordinary course of business; and the Collateral Agent (or, with respect
to the Borrower Canadian Stock Pledge Agreement, the Administrative Agent)
shall, and the Lenders hereby authorize the Collateral Agent (or the
Administrative Agent, as applicable) to, execute such releases of Liens and take
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such other actions as the Borrower may reasonably request in connection with the
foregoing.
8.14 Limitation on Changes in Fiscal Year. Permit the fiscal year of the
------------------------------------
Borrower or any of its Subsidiaries to end on a day other than December 31.
8.15 Limitation on Negative Pledge Clauses. Enter into with any Person
-------------------------------------
any agreement, other than (a) this Agreement, the other Loan Documents, the
Canadian Loan Documents, the First Mortgage Note Documents and any indenture or
other agreement governing any Subordinated Indebtedness permitted by subsection
8.2(i) or (j) and (b) any industrial revenue or development bonds, purchase
money mortgages, acquisition agreements or Financing Leases permitted by this
Agreement (in which cases, any prohibition or limitation shall only be effective
against the assets financed or acquired thereby) or operating leases of real
property entered into in the ordinary course of business, which prohibits or
limits the ability of the Borrower or any of its Subsidiaries to create, incur,
assume or suffer to exist any Lien in favor of the Lending Parties (or any of
them) upon any of its property, assets or revenues, whether now owned or
hereafter acquired, which constitute Collateral or Canadian Collateral or any
portion thereof.
8.16 Limitation on Lines of Business; Creation of Subsidiaries. (a)
---------------------------------------------------------
Enter into any business, either directly or through any Subsidiary, except for
those businesses of the same general type as those in which the Borrower and its
Subsidiaries are engaged on the date of this Agreement or which are reasonably
related thereto.
b. (A) Create any Additional Subsidiary unless (i) such Additional
Subsidiary is organized under the laws of one of the fifty states constituting
the United States of America and (ii) concurrently with the creation thereof,
(a) such Additional Subsidiary becomes a party to (or executes and delivers to
the Collateral Agent in the case of the first such Additional Subsidiary) the
Subsidiary Guarantee
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as a Guarantor under and as defined therein pursuant to a written instrument
reasonably satisfactory to the Collateral Agent, (b) such Additional Subsidiary
executes and delivers to the Collateral Agent a Subsidiary Security Agreement, a
Subsidiary Patent Security Agreement (if applicable) and a Subsidiary Trademark
Security Agreement (if applicable), (c) each owner (other than Permitted Equity
Purchasers) of any Capital Stock of such Additional Subsidiary executes and
delivers to the Collateral Agent a Subsidiary Stock Pledge Agreement (or, in the
case of the Borrower, a supplement to the Borrower Stock Pledge Agreement) and
delivers to the Collateral Agent all certificates or instruments evidencing such
Capital Stock, together with undated stock powers therefor duly executed by an
authorized officer of such owner, (d) all actions necessary to perfect the liens
created by each Security Document to which such Additional Subsidiary is or
becomes a party have been duly completed and (e) the Collateral Agent receives a
favorable opinion of counsel (reasonably satisfactory to the Collateral Agent)
to such Additional Subsidiary as to the due organization and valid existence of
such Additional Subsidiary, the due authorization, execution and delivery by,
and enforceability against, such Additional Subsidiary of each Loan Document to
which it is or becomes a party and such other customary matters (including the
perfection of the liens contemplated by the Security Documents to which such
Additional Subsidiary is a party) as the Collateral Agent and its counsel may
reasonably request; provided, however, that the Borrower may acquire an
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Additional Subsidiary without complying with the foregoing requirements of this
subsection 8.16(b) so long as the following conditions are satisfied: (x) the
assets of such Additional Subsidiary have a book-value equal to or less than
$20,000,000, (y) at the time of the acquisition of such Additional Subsidiary
the Borrower intends to transfer all of the assets of such Additional Subsidiary
to the Borrower or another Additional Subsidiary that has complied with the
foregoing requirements of this subsection 8.16(b), and (z) such transfer is
completed within sixty days of the acquisition of such Additional Subsidiary.
(B) Notwithstanding the foregoing, with
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respect to any Person that is or becomes a Foreign Subsidiary and that has
material assets, such Foreign Subsidiary shall be permitted hereunder so long as
promptly upon the request of the Administrative Agent, the Borrower shall, or
shall cause such Foreign Subsidiary to: (i) execute and deliver to the
Administrative Agent a pledge agreement as the Administrative Agent shall deem
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by
the Borrower or any of its Subsidiaries (provided that in no event shall more
than 65% of the Capital Stock of any such Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent any certificates representing
such Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of the Borrower or such Subsidiary, as the
case may be, and take or cause to be taken all such other actions under the law
of the jurisdiction of organization of such Foreign Subsidiary as may be
necessary or advisable to perfect such Lien on such Capital Stock and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent. In addition, neither the
Borrower nor any Foreign Subsidiary shall, at any time, without the express
written permission of the Administrative Agent and the Majority Lenders, pledge
the Capital Stock of any Foreign Subsidiary to any other Person (other than to
the Administrative Agent on behalf of the Lenders).
(c) Permit RealCo (i) to engage in any business other than those in
which it is permitted to engage under the First Mortgage Note Documents
(regardless of whether the same shall be terminated) or (ii) to terminate or to
consent to any termination of the Master Lease Agreement.
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SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) (i) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or (ii) the Borrower shall fail to pay any interest on any Loan, or any
other amount payable hereunder, within three Business Days after any such
interest or other amount becomes due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party herein or in any other Loan Document (or in any
amendment, modification or supplement hereto or thereto) or which is contained
in any certificate furnished at any time by or on behalf of the Borrower
pursuant to this Agreement or any such other Loan Document shall prove to have
been inaccurate in any material respect on or as of the date made or deemed
made, and, if susceptible to being cured, such inaccuracy shall not be cured
within 30 days after a Responsible Officer of the Borrower knows or should have
known thereof; or
(c) The Borrower or any other Loan Party shall default in the observance
or performance of any agreement contained in subsection 7.7(a) or Section 8 of
this Agreement, Section 5(b) of the Holdings Stock Pledge Agreement, Section
5(h), 5(i), 5(j), 5(l) or 5(r) (other than clauses (B)(x) and (C)(x) thereof) of
the Borrower Security Agreement or Section 10(b), 10(c) or 10(d) of the Holdings
Guarantee; or
(d) The Borrower or any other Loan Party shall default in the observance
or performance of any other agreement contained in this Agreement or any other
Loan Document (other than as provided in paragraphs (a)
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through (c) of this Section), and such default shall continue unremedied for a
period ending on the earlier of (i) the date which is 30 days after a
Responsible Officer of the Borrower shall have discovered or should have
discovered such default and (ii) the date which is 30 days after written notice
has been given to the Borrower by the Administrative Agent or the Majority
Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the Loans)
in excess of $3,000,000 or in the payment of any Guarantee Obligation in excess
of $3,000,000, beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any Indebtedness or
Guarantee Obligation referred to in clause (i) above or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice or lapse of time if required,
such Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable, and such time shall have lapsed; or
(f) (i) The Borrower or any other Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with
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respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or the
Borrower or any other Loan Party shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrower or any
other Loan Party any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged,
unstayed or unbonded for a period of 60 days; or (iii) there shall be commenced
against the Borrower or any other Loan Party any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, stayed or bonded pending appeal, within 60 days from the entry
thereof; or (iv) the Borrower or any other Loan Party shall take any corporate
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any other Loan Party shall be generally unable to, or
shall admit in writing its general inability to, pay its debts as they become
due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event
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shall occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is reasonably likely to result in the termination of
such Plan for purposes of Title IV of ERISA (other than a standard termination
pursuant to Section 4041(b) of ERISA), (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or is reasonably likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, (vi) the occurrence or expected occurrence of any event or
condition which results or is reasonably likely to result in the Borrower's or
any Commonly Controlled Entity's becoming responsible for any liability in
respect of a Former Plan, or (vii) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vii)
above, such event or condition, together with all other such events or
conditions, if any, would be reasonably expected to result in liability which
could have a Material Adverse Effect; provided, however, that the fact that a
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Plan is underfunded shall not by itself constitute an Event of Default unless
and until another event or condition described in clauses (i) through (vi)
affecting such underfunded Plan occurs; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate at any time a
liability (net of any insurance or indemnity payments actually received in
respect thereof) of $3,000,000 or more, and all such judgments or decrees shall
not have been satisfied, vacated, discharged, stayed or bonded pending appeal
within 60 days from the entry thereof; or
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(i) (i) Any of the Security Documents shall cease, for any reason to be
in full force and effect, or the Borrower or any other Loan Party which is a
party to any of the Security Documents shall so assert in writing, or (ii) the
Lien created by any of the Security Documents shall cease to be perfected and
enforceable in accordance with its terms or of the same effect as to perfection
and priority purported to be created thereby with respect to any material
portion of the Collateral, and the failure of such Lien to be perfected and
enforceable with such priority shall have continued unremedied for a period of
20 days; or
(j) Any Guarantee shall cease, for any reason to be in full force and
effect or any Guarantor shall so assert in writing; or
(k) a Change of Control shall have occurred; or
(l) an "Event of Default" under and as defined in the Canadian Credit
Agreement shall occur and be continuing; or
(m) an "Event of Default" under and as defined in the First Mortgage
Notes shall occur and be continuing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and the Notes shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative
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Agent shall, by notice to the Borrower, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Lender and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower in respect of such Letters
of Credit under this Agreement and the other Loan Documents. The Borrower shall
execute and deliver to the Administrative Agent, for the account of the Issuing
Lender and the L/C Participants, such further documents and instruments as the
Administrative Agent may request to evidence the creation and perfection of such
security interest in such cash collateral account. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the Borrower hereunder and
under the Notes. After all such Letters of Credit shall have expired or been
fully drawn upon, all Reimbursement Obligations shall have been satisfied and
all other obligations of the
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Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower.
Except as expressly provided above in this Section, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 10. THE AGENT
10.1 Appointment. Each Lender hereby irrevocably designates and appoints
-----------
(i) Barclays as the Administrative Agent and (ii) Barclays as the Collateral
Agent of such Lender under this Agreement and the other Loan Documents. The term
"Agent", when used in this Section 10, shall refer to each of (i) Barclays in
its capacity as Administrative Agent and (ii) Barclays in its capacity as
Collateral Agent. Each such Lender irrevocably authorizes Barclays to act as
Administrative Agent and Barclays to act as Collateral Agent of such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to it as Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, neither Agent shall have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against either Agent. Each Lender acknowledges and consents that
(i) the Collateral Agent is also acting in such capacity as agent for the
Canadian Administrative Agent and the other Canadian Secured Parties, (ii) the
Canadian Administrative Agent is an affiliate of the Administrative Agent and
(iii) the Collateral Agent is also acting as Canadian Collateral Agent.
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10.2 Delegation of Duties. Each Agent may execute any of its duties
--------------------
under this Agreement and the other Loan Documents by or through agents (which
may include affiliates of such Agent) or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. Neither
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither Agent nor any officer, director,
----------------------
employee, agent, attorney-in-fact or affiliate of any Agent shall be (i) liable
for any action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other Loan Document (except for its
or such Person's gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Lenders or the other Agent for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by such Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of the Borrower or the other Agent to perform its
obligations hereunder or thereunder. Neither Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower or any other Loan Party.
10.4 Reliance by Agent. Each Agent shall be entitled to rely, and shall
-----------------
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been
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signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by such Agent.
Each Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment or transfer thereof shall have
been filed with the Administrative Agent. Each Agent shall be fully justified as
between itself and the Lenders in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the requisite Lending Parties as it deems appropriate
or it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the requisite
Lending Parties, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Notes.
10.5 Notice of Default. Neither Agent shall be deemed to have knowledge
-----------------
or notice of the occurrence of any Default or Event of Default hereunder unless
such Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that an Agent receives such a
notice, such Agent shall give notice thereof to the Lenders. Each Agent shall
take such action reasonably promptly with respect to such Default or Event of
Default as shall be reasonably directed by the Majority Lenders or the Aggregate
Majority Lenders; provided that unless and until such Agent shall have received
--------
such directions, such Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
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10.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither Agent nor any of its respective officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by either Agent hereinafter taken, including
any review of the affairs of the Borrower or any other Loan Party, shall be
deemed to constitute any representation or warranty by such Agent to any Lender.
Each Lender represents to each Agent that it has, independently and without
reliance upon either Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and the other Loan Parties and
made its own decision to make its Loans hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon either Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the other
Loan Parties. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by an Agent hereunder, such Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower or any
other Loan Party which may come into the possession of such Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
10.7 Indemnification. Each Lender agrees to indemnify each Agent in its
---------------
respective capacities as such (to the extent not reimbursed by the Borrower or
any other
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Loan Party and without limiting the obligation of the Borrower or any
other Loan Party to do so), ratably according to its Commitment Percentage in
effect on the date on which indemnification is sought under this subsection
10.7, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by such Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or willful misconduct of such Agent. The agreements in this
subsection shall survive the payment of the Loans and all other amounts payable
hereunder.
10.8 Agent in Its Individual Capacity. Each Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower and/or the other Credit Parties as though such Agent
was not the Administrative Agent or the Collateral Agent (as applicable)
hereunder and under the other Loan Documents. With respect to the Loans made or
renewed by an Agent and any Note issued to it and with respect to any Letter of
Credit issued or participated in by it, such Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not the Administrative Agent or the
Collateral Agent (as applicable), and the terms "Lender" and "Lenders" shall
include the Agent in its individual capacity.
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10.9 Successor Agent. Each of Administrative Agent and Collateral Agent
---------------
may resign its role as such hereunder and under the other Loan Documents upon 30
days' notice to the Lenders. If an Agent shall resign as Administrative Agent
or Collateral Agent (as applicable) under this Agreement and the other Loan
Documents, then the Aggregate Majority Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the resigning Administrative Agent or Collateral
Agent (as applicable), and the terms "Administrative Agent" or "Collateral
Agent" (as applicable) shall mean such successor agent effective upon such
appointment and approval, and the former Agent's rights, powers and duties as
Administrative Agent or Collateral Agent (as applicable) shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes; provided that the
--------
resigning Agent shall execute all documents which the replacement Agent deems
necessary or desirable to effect such substitution. After any resigning Agent's
resignation as Administrative Agent or Collateral Agent (as applicable), the
provisions of this subsection shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent or Collateral
Agent (as applicable) under this Agreement and the other Loan Documents.
10.9 Swing Line Lender. The provisions of this Section 10 shall apply
-----------------
to the Swing Line Lender in its capacity as such to the same extent that such
provisions apply to the Agents.
10.11 Co-Agents. Each party hereto agrees that the Co-Agents have no
---------
rights or obligations hereunder or under the other Credit Documents in their
respective capacities as such.
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SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement, any Note or any
----------------------
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 11.1. The Aggregate Majority Lenders (or, in the case of the Borrower
Canadian Stock Pledge Agreement, the Majority Lenders) may, or, with the written
consent of the Aggregate Majority Lenders (or, in the case of the Borrower
Canadian Stock Pledge Agreement, the Majority Lenders), the Administrative Agent
may, from time to time, (a) enter into with the Borrower (or any other Loan
Party) written amendments, supplements or modifications hereto and to the Notes
and the other Loan Documents for the purpose of adding any provisions to this
Agreement, the Notes or the other Loan Documents or changing in any manner the
rights or obligations of the Lenders or of the Borrower and the other Loan
Parties hereunder or thereunder or (b) waive at the Borrower's request, on such
terms and conditions as the Aggregate Majority Lenders (or, in the case of the
Borrower Canadian Stock Pledge Agreement, the Majority Lenders) or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement, the Notes or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
-------- -------
such waiver and no such amendment, supplement or modification shall:
(i) reduce the amount or extend the scheduled date of maturity of any
Note or any Reimbursement Obligation or of any scheduled installment thereof, or
reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend the
expiration date of any Lender's Commitment, in each case without the consent of
each Lender affected thereby;
(ii) amend, supplement, modify or waive any provision of this
subsection 11.1 or reduce the
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percentage specified in the definition of "Aggregate Majority Lenders",
"Aggregate Supermajority Lenders" or "Majority Lenders", or consent to the
assignment or transfer by the Borrower (or any other Loan Party) of any of its
rights and obligations under this Agreement and the other Loan Documents or
increase the amount of any Lender's Commitment or increase the percentages set
forth as the advance rates in the definition of "Borrowing Base", in each case
without the consent of all the Lenders and all the Canadian Lenders;
(iii) release all or substantially all of the Collateral without the
consent of the Aggregate Supermajority Lenders;
(iv) amend, supplement, modify or waive any provision of Section 10
or any other provision of this Agreement governing the rights or obligations of
the Administrative Agent and the Collateral Agent without the written consent of
the then Administrative Agent and the then Collateral Agent;
(v) amend, supplement, modify or waive (a) the order of application
of prepayments specified in subsection 4.4 without the consent of the Swing Line
Lender and each Lender adversely affected thereby or (b) any provision of any
Loan Document which specifies the order of application by the Collateral Agent
or the Administrative Agent, as the case may be, of proceeds of Collateral upon
the occurrence and during the continuance of an Event of Default without the
consent of the Collateral Agent, the Administrative Agent, each Lender, the
Canadian Administrative Agent, the Canadian Collateral Agent and each Canadian
Lender;
(vi) amend, supplement, modify or waive any provision of the Swing
Line Note or of subsection 2.5 or any other provision of this Agreement
governing the rights and obligations of the Swing Line Lender or the definitions
used therein without the written consent of
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the Swing Line Lender and, in the case of the Swing Line Note, each Lender, if
any, which holds a participation therein pursuant to subsection 2.5(d); and
(vii) amend, supplement, modify or waive any provision of the Letters
of Credit, the Applications and the L/C Obligations or of Section 3 or any other
provision of this Agreement governing the rights and obligations of the Issuing
Lender or the definitions used therein without the written consent of the
Issuing Lender, and, in the case of the Letters of Credit and the L/C
Obligations, each affected L/C Participant.
Any waiver and any amendment, supplement or modification pursuant to this
subsection 11.1 shall apply to each of the Lenders and shall be binding upon the
Borrower, the other Loan Parties, the Lenders, the Administrative Agent, the
Collateral Agent and all future holders of the Notes. In the case of any waiver,
the Borrower, the other Loan Parties, the Lenders, the Administrative Agent and
the Collateral Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and any other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, or, in the case of delivery by a nationally recognized overnight
courier, when received, addressed as follows in the case of the Borrower, the
Administrative Agent and the Collateral Agent, and as set forth in Schedule 1
hereto in the case of the other
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parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Borrower: Commerce Court
Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Telecopy: (412) 454-2555
Attn: Richard J. Pasquinelli
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: William B. Beekman
Telecopy: (212) 909-6836
The Administrative
Agent and the
Collateral Agent: Barclays Bank PLC
222 Broadway, 11th Floor
New York, New York 10038
Attention: John Livingston
Telecopy: (212) 412-7511
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Gregory A. Weiss
Telecopy: (212) 455-2502
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to subsection 2.3, 2.5, 4.2, 4.4 or 4.8 shall not be
effective until received; provided further, that any notice, request or demand,
-------- -------
relating to the Borrowing Base, including, without limitation, delivery by the
Borrower of the Monthly Borrowing Base Certificate in accordance with subsection
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7.2(c), shall not be effective unless a copy thereof is sent to the
Administrative Agent and the Collateral Agent.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Borrower, the Administrative Agent, the
Collateral Agent or any Lender, any right, remedy, power or privilege hereunder
or under the other Loan Documents shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in the other Loan Documents (or in any amendment,
modification or supplement hereto or thereto) and in any certificate delivered
pursuant hereto or such other Loan Documents shall survive the execution and
delivery of this Agreement and the Notes and the making of the Loans hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
-----------------------------
reimburse the Administrative Agent and the Collateral Agent for all their
respective reasonable out-of-pocket costs and expenses (in the case of taxes,
limited to stamp, excise and other similar taxes) incurred in connection with
the preparation, execution and delivery of, and any amendment, supplement,
waiver or modification to, this Agreement, the Notes and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions (including the
syndication of the Commitments) contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of a single counsel
(and any special or local counsel retained by such counsel to assist it) to the
Administrative Agent and the Collateral Agent, (b) to pay or reimburse each
Lender,
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the Administrative Agent and the Collateral Agent for all its reasonable
costs and expenses (in the case of taxes, limited to stamp, excise and other
similar taxes) incurred in connection with the enforcement or preservation of
any rights under this Agreement, the Notes, the other Loan Documents and any
such other documents, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, the Collateral Agent and
the Lenders, and any reasonable Environmental Costs arising out of or in any way
relating to any Loan Party or any property in which any Loan Party has had any
interest at any time, (c) to pay, indemnify, and hold each Lender, the
Administrative Agent and the Collateral Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the Notes, the
other Loan Documents and any such other documents, and (d) to pay, indemnify,
and hold each Lender, the Administrative Agent and the Collateral Agent (and
their respective directors, officers, employees, agents and successors) harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (whether or not caused by any Lender's, the
Administrative Agent's, the Collateral Agent's or any of their respective
directors', officers', employees', agents', successors' or assigns' negligence
(other than gross negligence) and including, without limitation, the reasonable
fees and disbursements of counsel) with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the Notes, the
other Loan Documents and any such other documents (regardless of whether the
Administrative Agent, the Collateral Agent or any Lender is a party to the
litigation or other proceeding giving rise thereto),
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including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Laws or any orders,
requirements or demands of Governmental Authorities related thereto and
applicable to the operations of the Borrower, any of its Subsidiaries or any of
the Properties (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), provided, that the Borrower shall have no obligation
----------------------- --------
hereunder to the Administrative Agent, the Collateral Agent or any Lender with
respect to Environmental Costs or indemnified liabilities to the extent such
Environmental Costs or indemnified liabilities arise from (i) the gross
negligence or willful misconduct of the Administrative Agent, the Collateral
Agent or any such Lender (or any of their respective directors, officers,
employees, agents or successors) or (ii) legal proceedings commenced against the
Administrative Agent, the Collateral Agent or any such Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such. Notwithstanding
the foregoing, except as provided in clauses (a), (b) and (c) above, the
Borrower shall have no obligation under this subsection 11.5 to the
Administrative Agent, the Collateral Agent or any Lender (or any of their
respective directors, officers, employees, agents or successors) with respect to
any tax, levy, impost, duty, charge, fee, deduction or withholding imposed,
levied, collected, withheld or assessed by any Governmental Authority. The
agreements in this subsection shall survive repayment of the Notes and all other
amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a) This
------------------------------------------------------
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, the Collateral Agent, all future holders of
the Notes and their respective successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
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(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
------------
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement and the other Loan
Documents, and the Borrower, the Administrative Agent and the Collateral Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. Any agreement pursuant to which any Lender shall sell any such
participating interest shall provide that such Lender shall retain the sole
right and responsibility to exercise such Lender's rights and enforce the
Borrower's obligations hereunder, including the right to consent to any
amendment, supplement, modification or waiver of any provision of this Agreement
or any of the other Loan Documents, provided that such participation agreement
--------
may provide that such Lender will not agree to any amendment, supplement,
modification or waiver described in clause (i) or (ii) of the proviso to the
second sentence of subsection 11.1 without the consent of the Participant. The
Borrower agrees that if amounts outstanding under this Agreement and the Notes
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement or any Note, provided that, in purchasing such participating
--------
interest, such Participant shall be deemed to have agreed to share
with the
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Lenders the proceeds thereof as provided in subsection 11.7(a) as fully as if it
were a Lender hereunder. The Borrower agrees that each Lender shall be entitled
to the benefits of subsections 4.10, 4.11, 4.12, 4.13 and 11.1 without regard to
whether it has granted any participating interests, and that all amounts payable
to a Lender under subsections 4.10, 4.11, 4.12 and 4.13 shall be determined as
if such Lender had not granted any such participating interests.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any Affiliate thereof or, with the prior written
consent of the Borrower and the Administrative Agent, to an additional bank or
financial institution (an "Assignee") all or any part of its rights and
--------
obligations under this Agreement and the Notes, including, without limitation,
its Commitments, L/C Obligations and Loans, pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit G, executed by such Assignee,
such assigning Lender (and, in the case of an Assignee that is
not then a Lender or an Affiliate thereof, by the Borrower and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that (i) in the case of any
--------
such transfer of the full amount of such assigning Lender's Commitment to an
additional bank or financial institution, the consent of the Administrative
Agent and the Borrower shall not be unreasonably withheld, (ii) if any Lender
assigns all or any part of its rights and obligations under this Agreement to
one of its Affiliates in connection with or in contemplation of the sale of its
interest in such Affiliate, the Borrower's prior written consent (not to be
unreasonably withheld) shall be required for such assignment and (iii) if any
Lender assigns a part of its rights and obligations under this Agreement to an
Assignee, such Lender shall assign proportionate interests in its Commitment,
Revolving Credit Loans, L/C Obligations, participations in Swing Line Loans and
Letters of Credit and other rights and obligations
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hereunder to such Assignee; and provided, further, that no Common Lender shall
--------
be permitted to make an assignment of its rights and obligations hereunder to an
Assignee unless the parent, subsidiary or affiliate of such Common Lender which
is party to the Canadian Credit Agreement makes a concurrent and proportionate
assignment of its rights and obligations thereunder to a parent, subsidiary or
affiliate of the proposed Assignee, such assignment to be effected in accordance
with subsection 12.6(c) of the Canadian Credit Agreement. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment as set
forth therein, and (y) the assigning Lender thereunder shall be released from
its obligations under this Agreement to the extent that such obligations shall
have been expressly assumed by the Assignee pursuant to such Assignment and
Acceptance (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding the foregoing, no Assignee, which as of the date of any
assignment to it pursuant to this subsection 11.6(c) would be entitled to
receive any greater payment under subsection 4.11 or 4.12 than the assigning
Lender would have been entitled to receive as of such date under such
subsections with respect to the rights assigned, shall be entitled to receive
such payments unless the Borrower has consented in writing to the assignment.
(d) The Administrative Agent shall maintain at its address referred to
in subsection 11.2 a copy of each Assignment and Acceptance delivered to it and
a register (the "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the
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Borrower, the Administrative Agent, the Collateral Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loan recorded therein for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower, the Collateral Agent or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, executed by the Borrower and the
Administrative Agent), together with payment to the Administrative Agent of a
registration and processing fee of $1,500 (in the case of any assignment to a
Lender or an Affiliate thereof) and $3,500 (in the case of any other
assignment), the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give prompt notice of such
acceptance and recordation to the Lenders and the Borrower. On or prior to such
effective date, the assigning Lender shall surrender the outstanding Notes held
by it all or a portion of which are being assigned, and the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent (in exchange for
the outstanding Notes of the assigning Lender) a new Revolving Credit Note
and/or Swing Line Note, as the case may be, to the order of such Assignee and
representing the obligation of the Borrower to pay an amount equal to (i) in the
case of a Revolving Credit Note, the lesser of (A) the amount of such Assignee's
Commitment and (B) the aggregate principal amount of all Revolving Credit Loans
made by such Assignee, and (ii) in the case of a Swing Line Note, the lesser of
(A) the Swing Line Commitment and (B) the aggregate principal amount of all
Swing Line Loans made by such Assignee, in each case with respect to the
relevant Commitment after giving effect to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment hereunder, a new Revolving
Credit Note and Swing
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Line Note, as the case may be, to the order of the assigning Lender and
representing the obligation of the Borrower to pay an amount equal to (i) in the
case of a Revolving Credit Note, the lesser of (A) the amount of such Lender's
Commitment and (B) the aggregate principal amount of all Revolving Credit Loans
made by such Lender, and (ii) in the case of a Swing Line Note, the lesser of
(A) the Swing Line Commitment and (B) the aggregate principal amount of all
Swing Line Loans made by such Lender, in each case with respect to the relevant
Commitment after giving effect to such Assignment and Acceptance. Such new Notes
shall be dated the Closing Date and shall otherwise be in the form of the Note
replaced thereby. The Notes surrendered by the assigning Lender shall be
returned by the Administrative Agent to the Borrower marked "cancelled".
(f) The Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "Transferee") and any prospective Transferee, subject to
----------
the provisions of subsection 11.15, any and all financial information in such
Lender's possession concerning the Borrower and its Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement. No assignment or
participation made or purported to be made to any Transferee shall be effective
without the prior written consent of the Borrower if it would require the
Borrower to make any filing with any Governmental Authority or qualify any Loan
or Note under the laws of any jurisdiction.
(g) Nothing herein shall prohibit any Lender from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
-------------------- -----------------
shall at any time receive any payment of all or part of its Loans or the
Reimbursement Obligations
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owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 9(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans or the Reimbursement
Obligations, as the case may be, owing to it, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders a participating
interest in such portion of each such other Lender's Loans or the Reimbursement
Obligations, as the case may be, owing to it, or shall provide such other
Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
- -------- -------
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon the occurrence of an Event of Default under Section 9(a) to
set-off and appropriate and apply against any amount then due and payable by the
Borrower hereunder or under the other Loan Documents any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the
--------
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failure to give such notice shall not affect the validity of such set-off and
application.
11.8 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be delivered to the Borrower and the
Administrative Agent.
11.9 Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Borrower, the Administrative Agent, the
Collateral Agent and the Lenders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Borrower, the Administrative Agent, the Collateral Agent or any Lender relative
to the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
11.12 Submission To Jurisdiction; Waivers. Each party hereto hereby
-----------------------------------
irrevocably and unconditionally:
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(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower, the
applicable Lender, the Administrative Agent or the Collateral Agent, as the case
may be, at the address specified in subsection 11.2 or the signature pages
hereof, or at such other address of which the Administrative Agent and the
Borrower shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
subsection any punitive damages.
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11.13 Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) none of the Administrative Agent, the Collateral Agent or any Lender
has any fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Administrative Agent, the Collateral Agent and the
Lenders, on one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, THE
---------------------
COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. The Administrative Agent, the Collateral Agent and
---------------
each Lender agree to keep confidential any written or oral information (a)
provided to it by or on behalf of the Borrower or any of its Subsidiaries
pursuant to or in connection with this Agreement or (b) obtained by such Lender
based on a review of the books and records of the Borrower or any of its
Subsidiaries; provided that nothing herein shall prevent the Administrative
--------
Agent, the Collateral Agent or any Lender from disclosing any such information
(i) to the Administrative Agent, the Collateral Agent or any other
197
<PAGE>
Lender, (ii) to any Transferee or prospective Transferee which agrees to comply
with the provisions of this subsection, (iii) to its affiliates, employees,
directors, agents, attorneys, accountants and other professional advisors,
provided that the Administrative Agent, the Collateral Agent or such Lender
- --------
shall inform each such Person of the agreement under this subsection 11.15 and
shall be responsible for any failure by any such Person referred to in this
clause (iii) to comply with this Agreement, (iv) upon the request or demand of
any Governmental Authority having jurisdiction over the Administrative Agent,
the Collateral Agent or such Lender or to the extent required in response to any
order of any court or other Governmental Authority or as shall otherwise be
required pursuant to any Requirement of Law, provided that the Administrative
--------
Agent, the Collateral Agent or such Lender shall notify the Borrower of any
disclosure pursuant to this clause (iv) as far in advance as is reasonably
practicable under such circumstances, (v) which has been publicly disclosed
other than in breach of this Agreement, (vi) in connection with the exercise of
any remedy hereunder or (vii) in connection with periodic regulatory
examinations.
11.16 Amendment to Security Documents. Each of the Security Documents
-------------------------------
and the Guarantees is hereby amended to reflect the resignation of Fleet Capital
Corporation (as successor to Shawmut Capital Corporation) as Collateral Agent
and the appointment of Barclays as successor Collateral Agent, and each of the
parties hereto consents to the execution and delivery by Barclays, Fleet Capital
Corporation ("Fleet") and the Borrower of all such instruments and documents
-----
(including, without limitation, UCC-3 assignment forms) as may be reasonably
requested by Barclays to reflect such change in Collateral Agent and the
assignment by Fleet to Barclays of Fleet's rights and obligations as Collateral
Agent.
11.17 Amendment and Restatement. This Agreement amends and restates the
-------------------------
Existing Credit Agreement and is not intended to be and shall not constitute a
novation of any
198
<PAGE>
indebtedness outstanding thereunder. Any loans and the revolving commitments
outstanding under the Existing Credit Agreement shall be deemed Loans and
Commitments outstanding under this Agreement.
199
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
---------------------------------
Title:
BARCLAYS BANK PLC, as Administrative
Agent, Collateral Agent, Issuing
Bank, Swing Line Lender and a
Lender
By:
---------------------------------
Title:
BANK OF AMERICA ILLINOIS, as a Co-
Agent and a Lender
By: /s/
---------------------------------
Title:
200
<PAGE>
THE BANK OF NEW YORK, as a Co-Agent
and a Lender
By: /s/
----------------------------------
Title:
THE BANK OF NOVA SCOTIA, as a Co-
Agent and a Lender
By:/s/
----------------------------------
Title:
THE CHASE MANHATTAN BANK, as a Co-
Agent and a Lender
By:/s/
----------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and a Lender
By:/s/
----------------------------------
Title:
201
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION,
INC., as a Co-Agent and a Lender
By:/s/
----------------------------------
Title:
MELLON BANK, N.A., as a Co-Agent and
a Lender
By:/s/
----------------------------------
Title:
NATIONSBANK N.A., formerly
NATIONSBANK, N.A. (CAROLINAS),
as a Co-Agent and a Lender
By:/s/
----------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION, as a
Co-Agent and Lender
By:/s/
----------------------------------
Title:
202
<PAGE>
ABN AMRO BANK N.V., as a Lender
By:/s/
----------------------------------
Title:
By:/s/
----------------------------------
Title:
BANK OF MONTREAL, as a Lender
By:/s/
----------------------------------
Title:
NATIONAL BANK OF CANADA, a Canadian
Chartered bank, as a Lender
By:/s/
----------------------------------
Title:
By:/s/
----------------------------------
Title:
203
<PAGE>
THE TORONTO-DOMINION BANK, as a
Lender
By:/s/
----------------------------------
Title:
204
<PAGE>
The undersigned Guarantor does hereby consent and agree to the
foregoing Amended and Restated Credit Agreement.
CDW HOLDING CORPORATION
By:/s/
----------------------------------
Title:
205
<PAGE>
SCHEDULE 1 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
COMMITMENTS; ADDRESSES
A. Commitment Amounts
Lender Commitment
- --------------------------------------------------------------------------------
Bank of America Illinois $ 25,000,000.00
- --------------------------------------------------------------------------------
Barclays Bank PLC $ 28,000,000.00
- --------------------------------------------------------------------------------
The Chase Manhattan Bank $ 18,500,000.00
- --------------------------------------------------------------------------------
General Electric Capital Corporation, Inc. $ 25,000,000.00
- --------------------------------------------------------------------------------
Mellon Bank, N.A. $ 20,250,000.00
- --------------------------------------------------------------------------------
NationsBank N.A. $ 27,500,000.00
- --------------------------------------------------------------------------------
PNC Bank, National Association $ 27,500,000.00
- --------------------------------------------------------------------------------
The Bank of New York $ 25,000,000.00
- --------------------------------------------------------------------------------
The Bank of Nova Scotia $ 16,750,000.00
- --------------------------------------------------------------------------------
The First National Bank of Chicago $ 27,500,000.00
- --------------------------------------------------------------------------------
The Toronto-Dominion Bank $ 18,500,000.00
- --------------------------------------------------------------------------------
National Bank of Canada $ 18,500,000.00
- --------------------------------------------------------------------------------
Bank of Montreal $ 18,500,000.00
- --------------------------------------------------------------------------------
ABN AMRO Bank N.V. $ 18,500,000.00
- --------------------------------------------------------------------------------
TOTAL $315,000,000.00
================================================================================
<PAGE>
B. Addresses for Notices
BANK OF AMERICA ILLINOIS
- ------------------------
Address for Notices: Address for Funding:
231 South LaSalle, 9th Floor 231 South LaSalle, 9th Floor
Chicago, IL 60697 Chicago, IL 0697
Attn: Melinda Elasworth Attn: Michael Gates
Telephone: (312) 828-1091 Telephone: (312) 828-6207
Telecopy: (312) 987-0303 Telecopy: (312) 987-0303
BARCLAYS BANK PLC
- -----------------
Address for Notices: Address for Funding:
222 Broadway 222 Broadway
New York, New York 10038 New York, New York 10038
Attn: John Livingston Attn: Dawn Matthews
Telephone: (212) 412-7588 Telephone: (212) 412-1197
Telecopy: (212) 412-7511 Telecopy: (212) 412-1098
THE CHASE MANHATTAN BANK
- ------------------------
Address for Notices: Address for Funding:
270 Park Avenue, 10th Floor 270 Park Avenue, 10th Floor
New York, New York 10017 New York, New York 10017
Attn: William Caggiano Attn: Andrew Stasiw
Telephone: (212) 270-1338 Telephone: (212) 270-4812
Telecopy: (212) 972-0009 Telecopy: (212) 682-8937
GENERAL ELECTRIC CAPITAL CORPORATION, INC.
- ------------------------------------------
Address for Notices: Address for Funding:
201 High Ridge Road 201 High Ridge Road
Stamford, CT 06927-5100 Stamford, CT 06927
Attn: Karen Walsh Attn: Portfolio Analyst - WESCO
Telephone: (203) 316-7569 Telephone: (203) 316-7674
Telecopy: (203) 316-7893 Telecopy: (203) 316-7817
<PAGE>
MELLON BANK, N.A.
- -----------------
Address for Notices: Address for Funding:
One Mellon Bank Center 1735 Market Street, 6th Floor
Room 4530 P.O. Box 7899
Pittsburgh, PA 15229 Philadelphia, PA 19101-7899
Attn: Mark Johnston Attn: Dorothy Enslin
Telephone: (412) 236-2793 Telephone: (212) 553-2459
Telecopy (412) 236-1914 Telecopy: (212) 553-2224
NATIONSBANK N.A.
- ----------------
Address for Notices: Address for Funding:
100 North Tryon Street 502 Washington Avenue, Suite 700
NC1-007-08-04 Townson, Maryland 21204
Charlotte, NC 28255 Attn: Alena Jobe
Attn: Rajesh Sood Telephone: (410) 821-2311
Telephone: (704) 388-3234 Telecopy: (410) 296-4913
Telecopy: (704) 386-3271
PNC BANK, NATIONAL ASSOCIATION
- ------------------------------
Address for Notices: Address for Funding:
Institutional Banking 5th Avenue & Wood Street
One PNC Plaza - 2nd Floor 2nd Floor
249 Fifth Avenue Pittsburgh, PA 15265
Pittsburgh, PA 15222-2707 Telephone: (412) 762-8417
Attn: William Armitage Telecopy: (412) 762-6484
Telephone: (412) 768-1444
Telecopy: (412) 762-6484
2
<PAGE>
THE BANK OF NEW YORK
- --------------------
Address for Notices: Address for Funding:
One Wall Street One Wall Street
22nd Floor 22nd Floor
New York, New York 10286 New York, New York 10286
Attn: Robert Joyce Attn: Susan Baratta
Telephone: (212) 635-7919 Telephone: (212) 635-6652
Telecopy: (212) 635-6434 Telecopy: (212) 635-6434
THE BANK OF NOVA SCOTIA
- -----------------------
Address for Notices: Address for Funding:
181 West Madison, Suite 3700 Atlanta Agency, Suite 2700
Chicago, Illinois 60602 600 Peachtree Street, N.E.
Attn: Mike Manick Atlanta, Georgia 30308
Telephone: (312) 201-4061 Attn: Pearl Jackson
Telecopy: (312) 201-4108 Telephone: (404) 877-1539
Telecopy: (404) 888-8998
THE FIRST NATIONAL BANK OF CHICAGO
- ----------------------------------
Address for Notices: Address for Funding:
One First National Plaza, One First National Plaza Mall,
Suite 0324, 10th Fl. Suite 0088, 14th Fl.
Chicago, Illinois 60670 Chicago, Illinois 60670-0088
Attn: Kenneth Kramer Attn: Steve Smagur
Telephone: (312) 732-2731 Telephone: (312) 732-5091
Telecopy: (312) 732-5296 Telecopy: (312) 732-2715
THE TORONTO-DOMINION BANK
- -------------------------
Address for Notices: Address for Funding:
70 West Madison, Suite 1900 909 Fannin, Suite 1700
Three First National Plaza Houston, Texas 77010
Chicago, Illinois 60602 Attn: Jorge Garcia
Attn: Philip De Roziere Telecopy: (713) 951-9921
Telephone: (312) 977-2103
3
<PAGE>
Telecopy: (312) 782-6337
31 West 52nd Street, 18th Floor
New York, NY 10019
Attn: Tyler Newton
Telephone: (212) 468-0665
Telecopy: (212) 262-1926
4
<PAGE>
NATIONAL BANK OF CANADA
- -----------------------
Address for Notices: Address for Funding:
301 One Oxford Center 301 One Oxford Center
Suite 3440 Suite 3440
Pittsburgh, PA 15219 Pittsburgh, PA 15219
Attn: Greg Steve Attn: Lisa Stohlberg
Telephone: (412) 281-4890 Telephone: (412) 281-4890
Telecopy: (412) 281-4603 Telecopy: (412) 281-4603
BANK OF MONTREAL
- ------------------
Address for Notices: Address for Funding:
430 Park Avenue 430 Park Avenue
New York, NY 10022 New York, NY 10022
Attn: Tom Peers Attn: Tom Peers
Telephone: (212) 605-1487 Telephone: (212) 605-1487
Telecopy: (212) 605-1454 Telecopy: (212) 605-1454
ABN AMRO BANK N.V.
- ------------------
Address for Notices: Address for Funding:
One PPG Place, Suite 2950 One PPG Place, Suite 2950
Pittsburgh, Pennsylvania 15222 Pittsburgh, Pennsylvania 15222
Attn: Greg Seibley
Telephone: (412)-566-2256
Telecopy: (412) 566-2266
5
<PAGE>
Schedule 5.4 to
Amended and Restated
Credit Agreement
Consents Required
-----------------
None
<PAGE>
Schedule 5.9 to
Amended and Restated
Credit Agreement
Intellectual Property Claims
----------------------------
1. Northern Electric of Canada is using a "RUNNING MAN" design which appears
to be identical with the "RUNNING MAN" design portion of Borrower's WESCO
THE EXTRA EFFORT PEOPLE (and design) mark. Borrower is not aware of any
claim with respect thereto.
2. Canadian Registration No. 129,323 of the mark "WESCO", dated January 4,
1963, owned by J.K. Electronics, Inc. (which does business as "WESCO
Electrical Company, Inc." and is located in Greenfield, Massachusetts) has
been cited by the Canadian Trademark Examiner against Borrower's pending
Canadian Application Nos. 711,041 and 711,285.
<PAGE>
Schedule 5.16 to
Amended and Restated
Credit Agreement
Subsidiaries
------------
1. CDW Canada Acquisition Inc., an Ontario corporation and wholly owned
subsidiary of the Borrower.
2. CDW Realco, Inc., a Delaware corporation and wholly owned subsidiary of the
Borrower.
<PAGE>
Schedule 6.1(j) to
Amended and Restated
Credit Agreement
Filing Jurisdictions
--------------------
(*) = County in which inventory is located but in which Wesco does not
currently own or lease property.
(**) = County in which Wesco owns or leases property but leases it out in
whole to third parties. Wesco may have no personal property at these
sites.
Alabama
- -------
Secretary of State
Alaska
- ------
Secretary of State
Arizona
- -------
Secretary of State
Arkansas
- --------
Secretary of State
Pulaski County
California
- ----------
Secretary of State
Colorado
- --------
Secretary of State
<PAGE>
Connecticut
- -----------
Secretary of State
Delaware
- --------
Secretary of State
Florida
- -------
Secretary of State
Georgia
- -------
Chatham County
Cobb County
Dougherty County
Sumter County
Wilkinson County (*)
Hawaii
- ------
Secretary of State
Idaho
- -----
Secretary of State
Illinois
- --------
Secretary of State
Indiana
- -------
Secretary of State
Iowa
- ----
Secretary of State
<PAGE>
Kansas
- ------
Secretary of State
Kentucky
- --------
Secretary of State
Jefferson County
Louisiana
- ---------
Caddo Parish
East Baton Rouge Parish
Jefferson Parish
Lafayette Parish (**Owned)
Maine
- -----
Secretary of State
Maryland
- --------
Secretary of State
Massachusetts
- -------------
Secretary of State
Michigan
- --------
Secretary of State
Minnesota
- ---------
Secretary of State
Mississippi
- -----------
Secretary of State
Hinds County
Marshall County
<PAGE>
Missouri
- --------
Secretary of State
Montana
- -------
Secretary of State
Nebraska
- --------
Secretary of State
Nevada
- ------
Secretary of State
New Hampshire
- -------------
Secretary of State
New Jersey
- ----------
Secretary of State
New Mexico
- ----------
Secretary of State
New York
- --------
Secretary of State
North Carolina
- --------------
Secretary of State
<PAGE>
North Dakota
- ------------
Secretary of State
Ohio
- ----
Secretary of State
Oklahoma
- --------
Central filing at Oklahoma County
Oregon
- ------
Secretary of State
Pennsylvania
- ------------
Secretary of State
Adams County (*)
Allegheny County
York County (*)
Rhode Island
- ------------
Secretary of State
South Carolina
- --------------
Secretary of State
South Dakota
- ------------
Secretary of State
Tennessee
- ---------
Secretary of State
<PAGE>
Texas
- -----
Secretary of State
Utah
- ----
Secretary of State
Vermont
- -------
Secretary of State
Town of Burlington
Virginia
- --------
Secretary of State
Washington
- ----------
Secretary of State
West Virginia
- -------------
Secretary of State
Wisconsin
- ---------
Secretary of State
Wyoming
- -------
Secretary of State
Campbell County
Sweetwater County (*)
District of Columbia
- --------------------
Recorder of Deeds
<PAGE>
Puerto Rico
- -----------
City of Mayaguez
District of Bayamon
Martin Gonzalez Ward
Guam
- ----
Department of Revenue and Taxation
(Municipality of Dededo)
<PAGE>
Schedule 7.11 to
Amended and Restated
Credit Agreement
Existing Bank Accounts
----------------------
Wesco Distribution, Inc. Bank Accounts
- --------------------------------------
Bank Name Bank Acct # Location Description
- --------- ----------- -------- -----------
Amsouth 00625507 Birmingham, AL Deposit
Bank of Hawaii 0001-032631 Honolulu, HI Deposit
Boatmen's 100101233025 St. Louis, MO Deposit
Citibank 0300-610013 San Juan, PR Deposit
Comerica 1149003475 Detroit, MI Deposit
First Interstate 368805871 California Deposit
First Interstate 368605872 Riverside, CA Deposit
First Interstate 0020193326 Reno, NV Deposit
First Interstate 0311-16848 Phoenix, AZ Deposit
First Chicago 1115000380909 Chicago, IL Deposit
First Bank of MN 170225067512 St. Paul, MN Deposit
Marine Midland 204841496 Syracuse, NY Deposit
Mellon Commonwealth 8842027743 Harrisburg, PA Deposit
Nationsbank 3505278 Baltimore, MD Deposit
Nationsbank 000379230 Charlotte, NC Deposit
Nationsbank 3603389964 Tampa, FL Deposit
Nationsbank 1291444207 Dallas, TX Deposit
PNC Bank 1001145943 Pittsburgh, PA Concentration
and Lockbox
PNC Bank 8542227177 Philadelphia, PA Deposit
PNC Bank 4110348022 Cincinnati, OH Deposit
Seafirst 67635300 Seattle, WA Deposit
PNC Bank 1001145919 Pittsburgh, PA A/P Disbursing
PNC Bank 1001145986 Pittsburgh, PA Payroll
PNC Bank /1/02444318 Pittsburgh, PA EFT
- --------------------------
1. Old Act # - Will remain the same under the new company.
<PAGE>
Bank Name Bank Acct # Location Description
- --------- ----------- -------- -----------
PNC Bank 3707554 Pittsburgh, PA Deposit (VISA,
MC)
PNC Bank 1001146364 Pittsburgh, PA Concentration
Bank of America 78-19676 Chicago, IL Lockbox
<PAGE>
Schedule 8.2(h) to
Amended and Restated
Credit Agreement
Existing Indebtedness
---------------------
None
<PAGE>
Schedule 8.3(j) to
Amended and Restated
Credit Agreement
Existing Liens
--------------
I. Real Property Liens
-------------------
A. Augusta, ME (64 Anthony Avenue)
-------------------------------
1. Restrictions and conditions as set forth in deed of Cushnoc Board
of Trade to Westinghouse Electric Corporation dated January 14,
1980 and recorded in Kennebec County Registry of Deeds in Book
2268, Page 298.
B. Grand Rapids, MI (1200 Front St NW)
-----------------------------------
1. Building and use restriction and other provisions, as contained in
instrument dated November 14, 1962 and recorded November 26, 1962
in Liber 1946, on Page 1155.
C. Johnstown, PA (209 Broad St.)
-----------------------------
1. The covenants and agreements contained in the Redevelopment Plan
for Area B-1 as set forth in plan recorded in the Recorder of Deeds
Office of Cambria County, Pennsylvania in Deed Book Volume 760,
Page 297, and as modified by instrument recorded in the office
aforesaid in Deed Book Volume 785, Page 281.
2. The covenants and restrictions as set forth in the Ordinance of the
City of Johnstown authorizing the conveyance, the resolution of the
Redevelopment Authority of the City of Johnstown authorizing the
conveyance, and the Agreement of Sale between the Redevelopment
Authority of the City of Johnstown and Westinghouse Electric
Corporation.
3. The covenants, conditions, agreements and restrictions as set
forth in the Deed from the Redevelopment Authority of the City of
Johnstown to Westinghouse Electric Corporation, dated September
23, 1964 and recorded in the office aforesaid on September 25, 1964
in Deed Book Volume 798, Page 61.
<PAGE>
4. Terms and conditions of Contract for Sale of Land for Private
Redevelopment between Redevelopment Authority of the City of
Johnstown and Westinghouse Electric Corporation, recorded in the
office aforesaid on September 25, 1964 in Deed Book Volume 798,
Page 25.
D. Milwaukee, WI (1600 N. 6th St.)
-------------------------------
1. Covenants, conditions and restrictions set forth in Quit Claim Deed
executed by the Redevelopment Authority of the City of Milwaukee to
Westinghouse Electric Corporation, a Pennsylvania Corporation,
dated January 22, 1969 and recorded January 23, 1969 on Reel 461,
Image 452, as Document No. 4441795.
II. Other Liens
-----------
A. Premier Utility Distributor Agreement, dated as of March 30, 1993,
between ABB Power T&D Company, Inc., a Delaware corporation and
Westinghouse Electric Supply Company.
B. WESCO's rights to certain personal property is a leasehold interest
subject to the rights of the lessor.
<PAGE>
Schedule 8.4(a) to
Amended and Restated
Credit Agreement
Guarantee Obligations
---------------------
None
<PAGE>
Schedule 8.10(c) to
Amended and Restated
Credit Agreement
Existing Investments
--------------------
Company Percentage
------- ----------
1. CDW Canada Acquisition Inc., an Ontario corporation 100%
and wholly owned subsidiary of the Borrower.
2. CDW Realco, Inc., a Delaware corporation and wholly 100%
owned subsidiary of the Borrower.
<PAGE>
Schedule 8.11(v) to
Amended and Restated
Credit Agreement
Existing Transactions with Affiliates
-------------------------------------
None
<PAGE>
EXHIBIT A-1 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF REVOLVING CREDIT NOTE]
$_______________ New York, New York
March 14, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
--------
the order of _____________ (the "Lender") at the office of BARCLAYS BANK PLC,
------
located at 222 Broadway, New York, N.Y. 10038 in lawful money of the United
States of America and in immediately available funds, the principal amount of
the lesser of (a) __________ DOLLARS AND _________ CENTS ($____________) and
(b) the aggregate unpaid principal amount of all Revolving Credit Loans made by
the Lender to the undersigned pursuant to subsections 2.1, 2.9(c), 2.10(c) or
3.5(c) of the Credit Agreement referred to below, which sum shall be payable on
the earlier of (i) the Termination Date (as defined in the Credit Agreement
referred to below) and (ii) the date on which the Commitments (as defined in the
Credit Agreement referred to below) are terminated.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the applicable
rates per annum and on the dates specified in subsections 4.1 and 4.8 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
The holder of this Revolving Credit Note is authorized to record the
date, Type and amount of each Revolving Credit Loan made pursuant to subsections
2.1, 2.9(c), 2.10(c) or 3.5(c) of the Credit Agreement, each continuation
thereof, each conversion of all or a portion
<PAGE>
thereof to another Type, the date and amount of each payment or prepayment of
principal thereof, and, in the case of each Eurodollar Loan, the Interest Period
and Eurodollar Rate with respect thereto, on its internal books and records
and/or on the schedules annexed hereto and made a part hereof, which recordation
on such schedules shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded; provided that failure by the Lender to make any such
--------
recordation (or any error in any such recordation) shall not affect the
obligations of the Borrower under this Revolving Credit Note or the Credit
Agreement.
This Revolving Credit Note is one of the Revolving Credit Notes
referred to in the Amended and Restated Credit Agreement, dated as of March 14,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the several banks and other financial
- -----------------
institutions from time to time parties thereto (including the Lender) (the
"Lenders"), Barclays Bank PLC, as Administrative Agent for the Lenders and as
- --------
Collateral Agent, and is entitled to the benefits thereof, is secured and
guaranteed as provided therein and is subject to optional and mandatory
prepayment in whole or in part as provided therein. Terms used herein which are
defined in the Credit Agreement shall have such defined meanings unless
otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Revolving Credit Note shall become, or may be declared to be, immediately due
and payable, all as provided therein.
2
<PAGE>
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WESCO DISTRIBUTION, INC.
By:____________________________
Title:
3
<PAGE>
Schedule A to
Revolving
Credit Note
-----------
LOANS, CONVERSIONS AND
PAYMENTS OF EURODOLLAR LOANS
----------------------------
<TABLE>
<CAPTION>
Amount
Amount of Interest of Unpaid
Base Rate Loans Period and Eurodollar Principal
Amount of Converted Eurodollar Loans Amount Balance
Eurodollar into Rate with Converted of of
Loans Eurodollar Respect into Principal Eurodollar Notation
Date Made Loans Thereto Base Rate Loans Repaid Loans Made by
<S> <C> <C> <C> <C> <C> <C> <C>
===============================================================================================================================
</TABLE>
<PAGE>
Schedule B to
Revolving
Credit Note
-----------
LOANS, CONVERSIONS AND
PAYMENTS OF BASE RATE LOANS
----------------------------
<TABLE>
<CAPTION>
Amount
Amount of of Base Rate Unpaid
Eurodollar Loans Principal
Loans Converted bmount Balance
Amount of Converted into of of
Base Rate into Base Rate Eurodollar Principal Base Rate Notation
Date Loan Made Loans Loans Repaid Loans Made by
<S> <C> <C> <C> <C> <C> <C>
===============================================================================================================================
</TABLE>
<PAGE>
EXHIBIT A-2 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF SWING LINE NOTE]
$10,000,000.00 New York, New York
March 14, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
--------
the order of BARCLAYS BANK PLC (the "Swing Line Lender") at the office of the
-----------------
Swing Line Lender located at 222 Broadway, New York, N.Y. 10038 in lawful money
of the United States of America and in immediately available funds, the
principal amount of the lesser of (a) TEN MILLION DOLLARS AND NO CENTS
($10,000,000.00) and (b) the aggregate unpaid principal amount of all Swing Line
Loans made by the Swing Line Lender to the Borrower pursuant to subsection 2.10
of the Credit Agreement referred to below, which sum shall be payable on the
earlier of (i) the Termination Date (as defined in the Credit Agreement referred
to below) and (ii) the date on which the Swing Line Commitment (as defined in
the Credit Agreement referred to below) is terminated.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the applicable
rates per annum and on the dates specified in subsections 4.1 and 4.8 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
The holder of this Swing Line Note is authorized to record the date
and the amount of each Swing Line Loan and the date and amount of each payment
or prepayment of principal thereof, on its internal books and records and/or on
the schedule annexed to and made a part hereof, which recordation on such
schedule shall constitute prima facie
----- -----
<PAGE>
evidence of the accuracy of the information so recorded, provided that the
--------
failure by the Swing Line Lender to make any such recordation (or any error in
such recordation) shall not affect the obligations of the Borrower under this
Swing Line Note or the Credit Agreement.
This Swing Line Note is the Swing Line Note referred to in the Amended
and Restated Credit Agreement, dated as of March 14, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among the Borrower, the several banks and other financial institutions from time
to time parties thereto (the "Lenders"), Barclays Bank PLC, as Administrative
-------
Agent for the Lenders and as Collateral Agent, and is entitled to the benefits
thereof, is secured as provided therein and is subject to optional and mandatory
and guaranteed prepayment in whole or in part as provided therein. Terms used
herein which are defined in the Credit Agreement shall have such defined
meanings unless otherwise defined herein or unless the context otherwise
requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this Swing
Line Note shall become, or may be declared to be, immediately due and payable,
all as provided therein.
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WESCO DISTRIBUTION, INC.
By:___________________________
Title:
2
<PAGE>
Schedule A to
Swing Line Note
---------------
SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
------------------------------------------
<TABLE>
<CAPTION>
Amount of Amount of Unpaid
Swing Line Principal Principal Notation
Date Loans Repaid Balance Made By
<S> <C> <C> <C> <C>
=============================================================================
</TABLE>
<PAGE>
EXHIBIT B TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF U.S. TAX COMPLIANCE CERTIFICATE]
Reference is made to the Note[s] held by the undersigned pursuant to
the Amended and Restated Credit Agreement (the "Agreement") dated as of March
---------
14, 1997, among WESCO DISTRIBUTION, INC., a Delaware corporation (the
"Borrower"), the several banks and other financial institutions from time to
--------
time parties to the Agreement (the "Lenders"), BARCLAYS BANK PLC, as
-------
administrative agent (in such capacity, the "Administrative Agent") for the
--------------------
Lenders and as Collateral Agent. The undersigned hereby certifies that:
(1) The undersigned is the beneficial owner of the Note[s] registered
in its name;
(2) The income from the Note[s] held by the undersigned is not
effectively connected with the conduct of a trade or business within the
United States (as defined below);
(3) The undersigned is not a bank (as such term is used in Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"));
----
(4) The undersigned is a person other than (i) a citizen or resident
of the United States of America, its territories and possessions (including
the Commonwealth of Puerto Rico and all other areas subject to its
jurisdiction) (for purposes of this certificate, the "United States"), (ii)
-------------
a corporation, partnership or other entity created or organized under the
laws of the United States or any political subdivision thereof or therein
or (iii) an estate or trust that is subject to United States federal income
taxation regardless of the source of its income; and
(5) The undersigned is not a natural person.
<PAGE>
We have furnished you with a certificate of our non-U.S. person status
on Internal Revenue Service Form W-8. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall so inform the Borrower, for the benefit of the
Borrower and the Administrative Agent, in writing within thirty days of such
change and (2) the undersigned shall furnish the Borrower, for the benefit of
the Borrower and the Administrative Agent, a properly completed and currently
effective certificate in either the calendar year in which payment is to be made
by the Borrower to the undersigned, or in either of the two calendar years
preceding such payment.
Unless otherwise defined herein, terms defined in the Agreement and
used herein shall have the meanings given to them in the Agreement.
[NAME OF LENDER]
By:________________________
[Address]
Dated: ____________, 199_
2
<PAGE>
EXHIBIT C TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
FORM OF LANDLORD'S LETTER
-------------------------
NAME OF OWNER OF REAL PROPERTY:__________________________________________
(the "Landlord")
ADDRESS OF REAL PROPERTY:_______________________________________________________
(the "Premises")
This Landlord's Letter is made as of this ___ day of ______, 199_. The
Landlord is the tenant under the ground lease for the property located at
________________________ and the owner of the remainder of the Premises and has
entered into a Master Lease Agreement, dated as of February 28, 1994, (as
amended, supplemented or otherwise modified from time to time, the "Lease") with
-----
WESCO Distribution, Inc. (the "Company"), a Delaware corporation.
-------
Pursuant to the Lease the Company has acquired a leasehold or sub-
leasehold interest in all or a portion of the Premises.
Barclays Bank PLC, a banking corporation organized under the laws of the
United Kingdom ("Barclays"), is acting as collateral agent (in such capacity,
--------
together with its successors and assigns under the Amended and Restated Credit
Agreement, the "Collateral Agent") for (i) Barclays, in its capacity as
----------------
administrative agent (in such capacity, together with its successors and assigns
under the Amended and Restated Credit Agreement, the "Administrative Agent")
--------------------
under, and the several banks and other financial institutions (the "Lenders")
-------
from time to time parties to, the Amended and Restated Credit Agreement, dated
as of March 14, 1997 (as the same may be amended, supplemented, modified,
extended, refunded, renewed or refinanced from time to time, the "Credit
------
Agreement"), among the Company, the Administrative Agent, the Lenders and the
- ---------
Collateral Agent and (ii) The Bank of Nova Scotia, a Canadian chartered bank, in
its capacity as administrative agent (the "Canadian Administrative Agent")
-----------------------------
under, and the several banks and other financial institutions (the "Canadian
--------
Lenders") from time to time parties to, the Amended and Restated Credit
- -------
Agreement, dated as of March 14, 1997 (as the same may be amended, supplemented,
modified, extended, refunded, renewed or refinanced from time to time, the
"Canadian Credit Agreement") among WESCO Distribution-Canada, Inc., an Ontario
- --------------------------
corporation and a wholly owned Subsidiary of the Company (the "Canadian
--------
Borrower"), the Canadian Administrative Agent, the Canadian Lenders and
- --------
Barclays, as Canadian Collateral Agent, the Collateral Agent, the Administrative
Agent, the Lenders, the Canadian Administrative Agent, the Canadian Collateral
Agent and the Canadian Lenders, together with their respective successors and
assigns under the Credit Agreement and the Canadian Credit Agreement, being
hereinafter referred to as the "Secured Parties". The Lenders and the Canadian
---------------
Lenders will be providing financing (as the same may be amended, renewed,
extended, modified, refinanced or replaced from time to time, the "Financing")
---------
to the Company and the Canadian Borrower, respectively, pursuant to the Credit
Agreement and the Canadian Credit Agreement, respectively. The Company has
executed a Security Agreement, dated as of February 24, 1995 (as the same may be
amended, supplemented, modified, extended, refunded, renewed or refinanced, the
"Security Agreement"), pursuant to which, as security for the Financing, the
------------------
Company has granted to the Collateral Agent, for the benefit of Secured Parties,
a security interest in, among other things, all inventory and accounts, related
general intangibles and books and records of the Company and its Subsidiaries
(who may guarantee the Company's obligations in respect of the Financing and
execute separate security agreements), including, without limitation, all such
inventory, accounts, related general intangibles and books and records of the
Company and its Subsidiaries which are now or in the future may become located
at, installed in or affixed to, the Premises (the "Collateral"). Terms defined
----------
in the Security Agreement and not defined herein are used herein as therein
defined.
<PAGE>
As an inducement for the Secured Parties to enter into such financing
transactions, in consideration of the Company's entering into the Lease and its
other agreements and arrangements with the Landlord and for other good and
valuable consideration, the receipt and sufficiency of which the Landlord hereby
acknowledges, the Landlord hereby agrees as follows:
1. The Collateral may be stored, placed, kept, utilized and/or installed
at the Premises and shall not be deemed a fixture or part of the real estate but
shall at all times be considered personal property, whether or not any of the
Collateral becomes so related to the real estate that an interest therein arises
under applicable real property law.
2. Until the date (the "Termination Date") on which all extensions of
----------------
credit and other obligations under the Credit Agreement and the Canadian Credit
Agreement have been paid and performed in full, the commitments to make
extensions of credit thereunder shall have been terminated and all letters of
credit issued thereunder shall have expired or been terminated or returned to
the relevant issuing lender, the Landlord disclaims any interest in the
Collateral, confirms that it has no lien or security interest therein, and
agrees not to levy upon or distrain any of the Collateral or to assert any claim
against any of the Collateral without the prior written approval of the
Collateral Agent.
3. Until the Termination Date, the Collateral Agent (including its
officers, employees, agents and representatives), acting on behalf of the
Secured Parties, shall have access to and may enter upon the Premises at any
time from time to time during normal business hours to inspect, take possession
of, liquidate or remove the Collateral, and may advertise and conduct public
auctions or private sales of the Collateral at the Premises, in each case
without liability of the Secured Parties to the Landlord and in each case free
of any right, claim, title, interest or lien of Landlord; provided, however,
that the Collateral Agent shall promptly repair, at its expense, any physical
damage to the Premises actually caused by said removal by the Collateral Agent
(or any of its officers, employees, agents or representatives). The Secured
Parties shall not be liable for any diminution in value of the Premises caused
by the absence of Collateral actually removed or by any necessity of replacing
the Collateral.
4. The Landlord shall not interfere with any sale of the Collateral, by
public auction or otherwise, conducted by or on behalf of the Secured Parties on
the Premises.
5. Landlord hereby agrees that until the Termination Date, Landlord shall
not exercise any right or remedy, or assert any claim, title or interest in or
lien upon, or take any action or institute any suit or proceeding with respect
to, the Collateral.
6. The Lease is in full force and effect and, to the best of the
Landlord's knowledge, the Company is not in default under the Lease. The
Landlord agrees to provide the Collateral Agent, for the benefit of the Secured
Parties, with written notice of any default, claimed default, or any event
which, with the passage of time would result in a default by the Company under
the Lease and, prior to the termination of the Lease, to permit the Collateral
Agent, on behalf of the Secured Parties, the same opportunity without
obligation, to cure or cause to be cured such default as is granted the Company
under the Lease; provided, however, that the Collateral Agent shall have at
least ten (10) days following receipt of said notice to cure such default.
Notwithstanding any of the provisions of this Landlord's Letter, neither the
Collateral Agent, nor any other Secured Party shall be under any obligation to
(i) cure any default by the Company under the Lease or (ii) otherwise pay any
amounts becoming due under the Lease.
7. This Landlord's Letter shall inure to the benefit of the Collateral
Agent and the other Secured Parties and shall be binding upon Landlord, its
successors and assigns. Neither the Company nor the Landlord shall amend,
modify or terminate this Landlord's Letter without the prior written consent of
the Collateral Agent. The Landlord shall notify any subsequent grantee or owner
of the Premises or any other party who may acquire an interest in the Premises
of the existence of this letter.
2
<PAGE>
8. Counterparts. This Landlord's Letter may be executed on any of
------------
separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the counterparts of
this Landlord's Letter shall be lodged with the Administrative Agent.
9. GOVERNING LAW. THIS LANDLORD'S LETTER SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
All notices to the Collateral Agent hereunder shall be in writing, sent by
certified mail, and shall be addressed to the Collateral Agent at the following
address:
Barclays Bank PLC
222 Broadway, 11th Floor
New York, New York 10038
Attention: John Livingston
Telecopy: (212) 412-7511
[________________]
By:____________________________________
Title:
WESCO DISTRIBUTION, INC.
By:____________________________________
Title:
3
<PAGE>
ADDENDUM TO LANDLORD'S LETTER
-----------------------------
Barclays Bank PLC, as collateral agent ("Barclays"), as mortgagee of the
Premises, hereby (i) consents to the Landlord entering into and performing its
obligations under the Landlord's Letter to which this Addendum is appended and
(ii) agrees that, if (a) any proceedings are brought by Barclays for the
foreclosure of any mortgage encumbering the Premises; (b) the Premises (or any
part thereof) should be sold pursuant to a trustee's sale; or (c) the Premises
are conveyed by deed in lieu or assignment in lieu of foreclosure or (d) any
other similar proceedings shall be instituted with respect to the Premises:
(i) Barclays will give written notice of such event to the Collateral
Agent; and
(ii) Barclays, any affiliate thereof or any third party purchaser
taking title to the Premises (each a "Successor Landlord") will be bound by
------------------
the provisions of the Landlord Letter to which this Addendum is appended
except that such Successor Landlord will permit the Collateral Agent to
remain on the Premises for a period of up to one-hundred and eighty (180)
days following receipt by the Collateral Agent of written notice from such
Successor Landlord that such Successor Landlord has terminated the Lease,
subject, however, to the payment to such Successor Landlord by the Collateral
Agent, on behalf of the Secured Parties, of current market value rental for
the occupied Premises for the actual period of occupancy by the Collateral
Agent after such time as such Successor Landlord has become the owner of the
Premises. The Collateral Agent's right to occupy the Premises under the
preceding sentence shall be extended for any time period the Collateral Agent
is prohibited from selling the Collateral due to the imposition of the
automatic stay by the filing of bankruptcy proceedings by or against the
Company or the Landlord.
BARCLAYS BANK PLC
By: _____________________________
Name:
Title:
4
<PAGE>
EXHIBIT D-1 TO
AMENDED AND RESTATE
CREDIT AGREEMENT
-------------------
[Debevoise & Plimpton Letterhead]
March 14, 1997
Barclays Bank PLC
as Administrative Agent under the
Credit Agreement referred to below
222 Broadway, 12th Floor
New York, New York 10038
Barclays Bank PLC
as Collateral Agent under the
Credit Agreement referred to below
and as Canadian Collateral Agent
under the Canadian Credit Agreement
referred to below
222 Broadway, 12th Floor
New York, New York 10038
The Bank of Nova Scotia, as
Administrative Agent under the Canadian
Credit Agreement referred to below
Scotia Plaza Branch
44 Kind Street West
Toronto, Ontario
Canada M5H 1H1
Each of the Lenders and Canadian
Lenders named in Annex A attached
hereto that are parties to the Credit
Agreements referred to below
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 2 March 14, 1997
CDW Holding Corporation
WESCO Distribution, Inc.
------------------------
Ladies and Gentlemen:
We have acted as special counsel to WESCO Distribution, Inc., a
Delaware corporation (the "Borrower"), and CDW Holding Corporation, a Delaware
corporation ("Holdings"), in connection with the Amended and Restated Credit
Agreement, dated as of March 14, 1997 (the "Amended and Restated Credit
Agreement") amending and restating the Credit Agreement, dated as of February
24, 1995 (as previously amended by the First Amendment, dated as of March 29,
1996 and as further amended by the Second Amendment dated as of August 5, 1996),
among the Borrower, the several banks and other financial institutions from time
to time parties thereto (collectively, the "Lenders"), Barclays Bank PLC
("Barclays"), as Administrative Agent thereunder (in such capacity the
"Administrative Agent"), and Barclays, as successor by assignment to Fleet
Capital Corporation as successor-in-interest to Shawmut Capital Corporation in
its capacity as collateral agent (the "Predecessor Collateral Agent"), as
Collateral Agent (in such capacity, the "Collateral Agent").
The opinions expressed below are furnished to you pursuant to
subsection 6.1(b) of the Amended and Restated Credit Agreement. Unless
otherwise defined herein, terms defined in the Amended and Restated Credit
Agreement and used herein shall have the meanings given to them in the Amended
and Restated Credit Agreement. As used herein, the following terms shall have
the following meanings: The term "Contracts" means, collectively, the
contractual obligations to which the Borrower or Holdings is a party that are
listed in Schedule 1 hereto. The term "DGCL" means the General Corporation Law
of the State of Delaware. The term "UCC" means the Uniform Commercial Code as
in effect in the State of New York on the date hereof.
In arriving at the opinions expressed below,
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 3 March 14, 1997
(a) we have examined and relied on the originals, or copies certified
or otherwise identified to our satisfaction, of (1) the Amended and Restated
-
Credit Agreement, (2) and the Revolving Credit Notes issued today, dated the
-
date hereof;
(b) we have examined and relied on the originals, or copies certified
or otherwise identified to our satisfaction, of the agreements to which the
Borrower or Holdings is today a party that are listed in Schedule 2 hereto
(together with the Amended and Restated Credit Agreement and the Notes, the
"Transaction Documents");
(c) we have examined and relied on unfiled copies of the financing
statements in the form attached to Schedule 3 hereto (collectively, the
"Financing Statements") naming WESCO Distribution, Inc. as debtor and the
Predecessor Collateral Agent as secured party and describing certain collateral
as to which security interests are intended to be perfected by filing under the
UCC, which were to be filed in the filing offices in the State of New York
listed in Schedule 3 hereto (the "Filing Offices") pursuant to Section 6.1(j)
of the Existing Credit Agreement;
(d) we have examined and relied as to factual matters on such
corporate documents and records of the Borrower and Holdings and such other
instruments and certificates of public officials, officers and representatives
of the Borrower and Holdings and other Persons as we have deemed necessary or
appropriate for the purposes of this opinion; and
(e) we have made such investigations of law as we have deemed
appropriate as a basis for this opinion.
In rendering the opinions expressed below, we have assumed with your
permission, without independent investigation or inquiry, (a) the authenticity
-
of all documents submitted to us as originals, (b) the genuineness of all signa-
-
tures on all documents that we examined (other than those of any officer of the
Borrower or Holdings), (c) the conformity
-
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 4 March 14, 1997
to authentic originals of documents submitted to us as certified, conformed or
photostatic copies, and (d) the due authorization, execution and delivery of the
-
Amended and Restated Credit Agreement and each of the Transaction Documents by
each party thereto.
Based upon and subject to the foregoing and the qualifications
hereinafter set forth, we are of the opinion that:
1. Due Incorporation. Each of the Borrower and Holdings (a) is
----------------- -
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and (b) has the corporate power and authority to own and
-
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is engaged.
2. Corporate Power and Authority of Borrower, etc. The Borrower has
----------------------------------------------
the corporate power and authority to execute and deliver the Amended and
Restated Credit Agreement and the Notes and to perform its obligations under the
Amended and Restated Credit Agreement, the Notes and each of the other
Transaction Documents to which it is a party and to borrow under the Amended and
Restated Credit Agreement and the Notes. The Borrower has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of the
Amended and Restated Credit Agreement, the Notes and the other Transaction
Documents and to authorize the execution and delivery of the Amended and
Restated Credit Agreement and the Notes and the performance of the Amended and
Restated Credit Agreement, the Notes and the other Transaction Documents to
which it is a party. Except for (a) any consents, authorizations, approvals,
-
notices and filings that have been obtained or made and are in full force and
effect, (b) filings in the United States Patent and Trademark Office, in the
-
United States Copyright Office and in appropriate offices under any applicable
state trademark laws, (c) the filings described on Schedule 3 hereto to perfect
-
the security interests created by the Borrower Security Agreement, (d) filings
-
pursuant to the Assignment of Claims Act of 1940, as amended, in respect of
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 5 March 14, 1997
Accounts of the Borrower the Obligor of which is the United States of America or
any department, agency or instrumentality thereof and (e) those consents,
-
authorizations, approvals, notices, filings and other acts that if not made,
obtained or done, could not reasonably be expected, to our knowledge, to have
a material adverse effect on the business, operations, property or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole,
or on the validity or enforceability of the Amended and Restated Credit
Agreement, the Notes and the other Transaction Documents or the rights and
remedies of the Collateral Agent, the Administrative Agents and the Lending
Parties under the Transaction Documents, to our knowledge no consent or
authorization of, approval by, notice to, filing with or other act by or in
respect of, any Federal, New York or Delaware (insofar as the DGCL is concerned)
court or governmental authority is required to be obtained or made by the
Borrower in connection with the borrowings under the Amended and Restated Credit
Agreement and the Notes or with the execution or delivery of the Amended and
Restated Credit Agreement and the Notes or the performance, validity or
enforceability of the Amended and Restated Credit Agreement, the Notes and the
other Transaction Documents to which it is a party.
3. Corporate Power and Authority of Holdings, etc. Holdings has the
----------------------------------------------
corporate power and authority to execute and deliver the Amended and Restated
Credit Agreement and to perform its obligations under the Transaction Documents
to which it is a party. Holdings has taken all necessary corporate action to
authorize the execution and delivery and the performance of the Transaction
Documents to which it is a party. Except for (a) any consents, authorizations,
-
approvals, notices and filings that have been obtained or made and are in full
force and effect and (b) those consents, authorizations, approvals, notices,
-
filings and other acts that if not made, obtained or done, could not reasonably
be expected, to our knowledge, to have a material adverse effect on business,
operations, property or condition (financial or otherwise) of Holdings and its
Subsidiaries, taken as a whole, or on
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 6 March 14, 1997
the validity or enforceability of the Amended and Restated Credit Agreement and
the other Transaction Documents or the rights and remedies of the Collateral
Agent, the Administrative Agents and the Lending Parties under the Transaction
Documents, to our knowledge no consent or authorization of, approval by, notice
to, filing with or other act by or in respect of, any Federal, New York or
Delaware (insofar as the DGCL is concerned) court or governmental authority is
required to be obtained or made by Holdings in connection with the execution or
delivery of the Amended and Restated Credit Agreement or the performance,
validity or enforceability of the Transaction Documents to which it is a party.
4. Enforceability, etc. The Amended and Restated Credit Agreement
-------------------
and the Notes have been duly executed and delivered on behalf of the Borrower
and each of the Amended and Restated Credit Agreement, the Notes and the other
Transaction Documents to which the Borrower is a party constitutes a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms. The Amended and Restated Credit Agreement has been
duly executed and delivered on behalf of Holdings and each of the Transaction
Documents to which Holdings is a party constitutes a legal, valid and binding
obligation of Holdings enforceable against Holdings in accordance with its
terms.
5. No Violation, etc. The execution and delivery by the Borrower of
-----------------
the Amended and Restated Credit Agreement and the Notes or by Holdings of the
Amended and Restated Credit Agreement, the performance by the Borrower or
Holdings of their respective obligations under the Transaction Documents to
which it is a party, the borrowings under the Amended and Restated Credit
Agreement and the Notes and the use of the proceeds thereof, all as provided
therein, (a) will not violate (i) the certificate of incorporation or by-laws of
- -
the Borrower or Holdings, (ii) any existing Federal, New York or DGCL law, rule
--
or regulation applicable to the Borrower or Holdings or any of its respective
material properties, (iii) any existing
---
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 7 March 14, 1997
judgment, order or decree known to us of any arbitrator, court or other
governmental authority binding upon the Borrower or Holdings or any of their
respective material properties or to which the Borrower or Holdings or any of
their respective material properties is subject or (iv) any Contract, in each
--
case under the foregoing clauses (i) through (iv), in any respect that would to
our knowledge be reasonably expected to have a material adverse effect on the
business, operations, property or condition (financial or otherwise), of
Holdings and its Subsidiaries, taken as a whole, or on the validity or
enforceability of the Amended and Restated Credit Agreement, the Notes and the
other Transaction Documents or the rights and remedies of the Collateral Agent,
the Administrative Agents and the Lending Parties under the Transaction
Documents, and (b) will not result in, or require, the creation or imposition of
-
any Lien (other than any Lien to be created under the Loan Documents) on any of
its or their respective properties or revenues, by operation of any law, rule,
regulation, judgment, order or decree referred to in the preceding clause (a)
or pursuant to any Contract.
6. Security Interests, etc. (a) The provisions of the Borrower
-----------------------
Security Agreement are effective, after giving effect to Barclays' succession as
collateral agent pursuant to Section 11.6 of the Amended and Restated Credit
Agreement (the "Succession"), to create valid security interests in favor of the
Collateral Agent, for the benefit of the Lending Parties, in all of the
collateral described therein that is of the type in which a security interest
can be created under Article 9 of the UCC (the "Collateral"), to the extent the
UCC is applicable to the creation of such security interests. After giving
effect to the Succession and assuming the filing of the Financing Statements in
the Filing Offices, the Collateral Agent has a perfected security interest in
such Collateral of the Borrower (excluding fixtures, as defined in the UCC), to
the extent perfection may be accomplished by the filing of financing statements
under the UCC, and no further filings are required pursuant to the UCC in the
State of New York as a result of the execution and delivery of the Amended and
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 8 March 14, 1997
Restated Credit Agreement to continue such perfection. After giving effect to
the Succession and assuming the delivery of the Collateral in which a security
interest may be perfected by possession pursuant to the UCC to (and provided
that the same has remained in the possession of) the Collateral Agent, the
Collateral Agent has a perfected security interest in such Collateral, and no
further action is required under the UCC by the Collateral Agent (other than the
retention of possession of such Collateral) as a result of the execution and
delivery of the Amended and Restated Credit Agreement to continue such
perfection.
(b) The Collateral Agent has a valid and perfected security interest,
for the benefit of the Lending Parties, (i) in the Pledged Stock (as defined in
-
the Holdings Stock Pledge Agreement) after giving effect to the Succession and
assuming the delivery of certificates representing such Pledged Stock by
Holding, upon the execution and delivery of the Holdings Stock Pledge Agreement,
to the Predecessor Collateral Agent and by the Predecessor Collateral Agent,
upon the execution and delivery of the Amended and Restated Credit Agreement, to
the Collateral Agent (and retention of possession thereof by the Collateral
Agent), and (ii) in the Pledged Stock (as defined in the Borrower Stock Pledge
--
Agreement) after giving effect to the Succession and assuming the delivery of
certificates representing such Pledged Stock by the Borrower, upon the execution
and delivery of the Borrower Stock Pledge Agreement, to the Predecessor
Collateral Agent and by the Predecessor Collateral Agent, upon the execution and
delivery of the Amended and Restated Credit Agreement, to the Collateral Agent
(and retention of possession thereof by the Collateral Agent), and, in the case
of both the preceding clauses (i) and (ii), no further action is required by the
Collateral Agent (other than the retention of possession of such Pledged Stock)
as a result of the execution and delivery of the Amended and Restated Credit
Agreement to continue such perfection. The Administrative Agent has a valid and
perfected security interest, for the benefit of the Lenders, in the Pledged
Stock (as defined in the Borrower Canadian Stock Pledge Agreement) assuming the
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 9 March 14, 1997
delivery, upon the execution and delivery of the Borrower Canadian Stock Pledge
Agreement, of certificates representing such Pledged Stock to (and retention of
possession thereof by) the Administrative Agent, and no further action by the
Administrative Agent (other than the retention of possession of such Pledged
Stock) is required as a result of the execution and delivery of the Amended and
Restated Credit Agreement to continue such perfection.
7. Investment Company Act. Neither the Borrower nor Holdings is an
----------------------
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
Our opinion set forth in paragraph 4 above is subject to the effects
of (a) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
-
and other similar laws relating to or affecting creditors' rights or remedies
generally; (b) general equitable principles (whether considered in a proceeding
-
in equity or at law); (c) an implied covenant of good faith and fair dealing;
-
(d) applicable state laws and interpretations which may affect the validity or
-
enforceability of certain remedies provided for in the Transaction Documents,
which limitations, however, do not, in our opinion, make the remedies provided
for therein inadequate for the practical realization of the rights and benefits
intended to be provided thereby (subject to the other qualifications expressed
herein); and (e) limitations on enforceability of rights to indemnification
-
under Federal or state securities laws or regulations or to the extent such
indemnification would violate public policy. We express no opinion as to (1) the
-
enforceability of any waiver of any statutory right, (2) the security interest
-
referred to in the second paragraph of Section 9 of the Amended and Restated
Credit Agreement, (3) the enforceability of the penultimate sentence of
-
subsection 11.6(b), (4) subsection 11.12(a) of the Amended and Restated Credit
-
Agreement, paragraph 21(a) of the Holdings Guarantee, and any similar provision
in any other Transaction Document, insofar as such provisions relate to the
subject matter jurisdiction of the United States District Court for the
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 10 March 14, 1997
Southern District of New York to adjudicate any controversy, (5) the waiver of
-
inconvenient forum set forth in subsection 11.12(b) of the Amended and Restated
Credit Agreement, paragraph 21(b) of the Holdings Guarantee and any similar
provision in any other Transaction Document and (6) the enforceability of
-
paragraph 19 of the Holdings Guarantee.
We express no opinion as to the validity or perfection of any
security interest, or the validity, binding effect or enforceability of any
Transaction Document to the extent that such Transaction Document grants or
purports to grant a security interest, (i) that is not governed by the UCC
-
(including but not limited to any such security interest with respect to
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses (as such terms are defined in the Borrower Security
Agreement), deposit accounts and insurance policies), (ii) in any collateral of
--
a type described in Section 9-401(1)(a) or (b) of the UCC, (iii) in any
---
collateral that is an "uncertificated security" (as defined in Section 8-
102(1)(b) of the UCC), or (iv) collateral that contains or is governed by
--
provisions that purport to void or prohibit the assignment thereof, or that are
otherwise violated, if it is assigned pursuant to a document such as the
Borrower Security Agreement, including, without limitation, any Accounts the
obligor for which is the United States of America or any department, agency or
instrumentality thereof. No security interest will exist with respect to after-
acquired property of the Borrower or Holdings until such party has rights
therein within the meaning of Section 9-203 of the UCC. We express no opinion
herein as to the title or any other interest of the Borrower or Holdings in or
to any of the collateral described in the Transaction Documents.
Except as set forth in paragraph 6 above, we express no opinion as to
the validity or perfection of the security interests purported to be created by
any Transaction Document. We express no opinion as to the validity or
perfection of such security interests:
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 11 March 14, 1997
(i) with respect to collateral sold, exchanged or otherwise disposed
of by the Borrower or Holdings;
(ii) to the extent such security interests may be affected by (A)
-
Section 552 of the United States Bankruptcy Code, under which a bankruptcy
court has discretion as to the extent to which post-petition proceeds may
be subject to a lien arising from a security agree ment entered into by
the debtor before the commencement of the case, or (B) Section 547(b) of
-
the United States Bankruptcy Code, relating to the power to avoid a pref-
erence;
(iii) with respect to proceeds, to the extent of limitations under
Section 9-306 of the UCC on the perfection of a security interest in
proceeds;
(iv) as to any collateral acquired by the party granting such security
interest more than four months after such party changes its name, identity
or corporate structure so as to make the relevant financing statements
seriously misleading, unless new appropriate financing statements
indicating the new name, identity or corporate structure of such party are
properly filed before the expiration of such four months; and
(v) as to any securities, to the extent of limitations under
Section 8-321 of the UCC on the creation, perfection and continuation of a
security interest therein.
We call to your attention that (i) in the event that a debtor that maintains a
-
place of business in more than one county in the State of New York should at any
time in the future maintain a place of business in only one county in such
state, or a debtor that maintains a place of business in only one county in the
State of New York relocates such place of business to another county in such
state, continued perfection of a security interest granted by such debtor may
require filing of an appropriate financing statement in the office of the filing
officer of such county, (ii) the UCC
--
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 12 March 14, 1997
requires periodic filing of continuation statements in order to maintain the
effectiveness of financing statements filed pursuant thereto and (iii) Sections
---
8-304 and 8-311 of the UCC may in certain circumstances limit the rights of a
secured party in respect of any unauthorized endorsement with respect to
certificated securities constituting collateral under the Transaction Documents
not registered in the name of or issued to the Collateral Agent and not
originally issued in bearer form.
We express no opinion as to the priority of the security interests
purported to be created by the Transaction Documents. Our opinion in paragraph
6(b) above is subject to the effects of the attachment provisions of Section 324
of the DGCL. In rendering the opinion set forth in paragraph 6 above, we have
assumed, with your consent, that all collateral under the Transaction Documents
in which a security interest may be perfected only by possession will be held at
all times by the Collateral Agent or the Administrative Agent, as the case may
be, in New York, New York.
We express no opinion as to the validity, binding effect or
enforceability of any provision of any Transaction Document that purports (i) to
-
waive, release or vary any right of, or any duties owing to, the Borrower or
Holdings, to the extent limited by Section 1-102(3) or 9-501(3) of the UCC or
other provisions of applicable law, (ii) to prohibit the Borrower or Holdings
--
from transferring its respective rights in the collateral described in the
Transaction Documents or any proceeds thereof, as a result of the operation of
Section 9-311 of the UCC, or (iii) to permit the Collateral Agent or the
---
Administrative Agent to vote or otherwise exercise any rights with respect to
any of the collateral under the Transaction Documents absent compliance with the
requirements of applicable laws and regulations as to the voting of or other
exercise of rights with respect to such collateral.
We express no opinion as to the effect of, or compliance with, any
Federal or state laws regarding fraudu-
<PAGE>
Barclays Bank PLC,
as Administrative
Agent, et al. 13 March 14, 1997
lent transfers or conveyances, or of provisions of Delaware or New York law
restricting dividends, loans or other distributions by a corporation or for the
benefit of its stockholders, or any Federal or State securities laws, rules or
regulations, including without limitation as to the effect thereof on the
validity, binding effect or enforceability of any of the Transaction Documents.
We express no opinion as to the laws of any jurisdiction other than
the laws of the State of New York, the DGCL and the Federal laws of the United
States of America. In particular (and without limiting the generality of the
foregoing), we express no opinion as to the law of Canada or any province
thereof or as to the effect of such law (whether limiting, prohibitive or
otherwise) on any of the rights or obligations of any Loan Party or of any other
party to or beneficiary of any of the Transaction Documents. In giving the
foregoing opinion, we express no opinion as to the effect (if any) of any law of
any jurisdiction (except the State of New York) in which any Lending Party is
located which limits the rate of interest that such Lending Party may charge or
collect.
The opinions expressed herein are solely for your benefit and, without
our prior consent, neither our opinion nor this opinion letter may be furnished
or disclosed to or relied upon by any other person.
Very truly yours,
/s/ Debevoise & Plimpton
<PAGE>
Annex A
-------
LENDERS
ABN AMRO Bank N.V.
Barclays Bank PLC
Bank of America Illinois
Bank of Montreal
The Chase Manhattan Bank
The First National Bank of Chicago
General Electric Capital Corporation
Mellon Bank, N.A.
National Bank of Canada
NationsBank N.A.
The Bank of New York
The Bank of Nova Scotia
PNC Bank, National Association
The Toronto-Dominion Bank
CANADIAN LENDERS
Bank of Montreal
The Bank of Nova Scotia
The Toronto-Dominion Bank
General Electric Capital Canada Inc.
Mellon Bank Canada
National Bank of Canada
<PAGE>
Schedule 1
----------
CONTRACTUAL OBLIGATIONS
1. Asset Acquisition Agreement, dated as of February 15, 1994, between
Holdings and Westinghouse U.S.
2. Asset Acquisition Agreement, dated as of February 28, 1994, between the
Canadian Borrower and Westinghouse Canada.
3. Master Lease, dated as of February 28, 1994, between CDW Realco, Inc. and
the Borrower.
4. First Mortgage Note, dated as of February 28, 1994 (the "RealCo Note"), by
CDW Realco, Inc. in favor of Westinghouse U.S.
5. First Mortgage Note, dated as of February 28, 1994 (the "Canadian Note"),
by the Canadian Borrower in favor of Westinghouse Canada.
6. Cash Collateral and Security Agreement, dated as of February 28, 1994,
between CDW Realco, Inc. and Westinghouse U.S.
7. Cash Collateral and Security Agreement, dated as of February 28, 1994,
between the Canadian Borrower and Westinghouse Canada.
8. Guarantee, dated as of February 28, 1994, by Holdings in favor of
Westinghouse U.S., endorsed on the RealCo Note.
8. Guarantee, dated as of February 28, 1994, by the Borrower in favor of
Westinghouse U.S., endorsed on the RealCo Note.
9. Guarantee, dated as of February 28, 1994, by Holdings in favor of
Westinghouse Canada, endorsed on the Canadian Note.
<PAGE>
10. Guarantee, dated as of February 28, 1994, by the Borrower in favor of
Westinghouse Canada, endorsed on the Canadian Note.
11. Guarantee, dated as of February 28, 1994, by CDW Realco, Inc. in favor of
Westinghouse Canada, endorsed on the Canadian Note.
12. Supply Agreement, dated February 18, 1983, between North American Philips
Electric Corp. and Westinghouse Electric Supply Company, as amended as of
the date hereof.
13. WESCO Distributor Agreement, dated January 31, 1984, between Eaton
Corporation and Westinghouse U.S.
14. Master Agreement/Distributor Agreement, dated March 30, 1993, between ABB
Power T&D Company, Inc. and WESCO Utility Operations.
15. Premier Utility Distributor Agreement, dated March 30, 1993, between ABB
Power T&D Company, Inc. and Westinghouse Electric Supply Co.
16. Transitional Services Agreement, dated as of February 28, 1994, between
Westinghouse Electric Corporation and CDW Holding Corporation.
17. National Purchase Agreement for Electrical Products, dated as of February
28, 1994, between Westinghouse Electric Corporation and CDW Acquisition
Corporation.
18. Exclusive Distribution and Purchasing Services Agreement, dated as of
February 28, 1994, between Westinghouse Industry Services Asia Pte Limited
and CDW Acquisition Corporation.
19. Letter, dated April 6, 1993, from Diamond Wire & Cable Co. to Westinghouse
Electric Supply Company, regarding terms of earned volume discount program.
2
<PAGE>
20. Distribution Agreement, dated as of March 21, 1991, between Bryant
Electric, Inc. and Westinghouse Electric Supply Company.
21. Asset Purchase Agreement, dated as of the date hereof, between the Borrower
and CDW Realco, Inc. and EESCO, Inc., EESCO Buying Group, Inc., EESCO
Factoring Corporation, EESCO Communication Systems, Inc., EESCO Data
Services, Inc. and EveryFuse, Inc.
3
<PAGE>
Schedule 2
----------
TRANSACTION DOCUMENTS
1. The Amended and Restated Credit Agreement.
2. The Notes.
3. Security Agreement, dated as of February 24, 1995, made by the Borrower in
favor of the Collateral Agent.
4. Trademark Security Agreement, dated as of February 24, 1995, made by the
Borrower in favor of the Collateral Agent.
5. Stock Pledge Agreement, dated as of February 24, 1995, made by Holdings in
favor of the Collateral Agent.
6. Stock Pledge Agreement, dated as of February 24, 1995, made by the Borrower
in favor of the Collateral Agent.
7. Stock Pledge Agreement, dated as of February 24, 1995, made by the Borrower
in favor of the Administrative Agent.
8. Guarantee, dated as of February 24, 1995, made by Holdings in favor of the
Collateral Agent.
<PAGE>
Schedule 3
----------
FILING JURISDICTIONS IN NEW YORK STATE
1. Secretary of State
<PAGE>
EXHIBIT E TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
Pursuant to subsection 7.2(c) of the Amended and Restated Credit
Agreement, dated as of March 14, 1997 (the "Credit Agreement"), among WESCO
----------------
Distribution, Inc. (the "Borrower"), the Lenders (as defined therein), BARCLAYS
--------
BANK PLC, as Administrative Agent and as Collateral Agent, the Borrower hereby
certifies, and represents and warrants, that this Monthly Borrowing Base
Certificate and the attached Schedules are a true, correct and complete
statement regarding the status of Accounts, Eligible Accounts, Inventory and
Eligible Inventory of the Borrower and the Additional Subsidiaries and that the
amounts set forth in such Schedules are in compliance with the provisions of the
Credit Agreement. The Borrower acknowledges that the Revolving Credit Loans and
the Swing Line Loans made to it and the Letters of Credit issued on its behalf
will be based upon the Administrative Agent's, the Collateral Agent's and the
Lenders' reliance on the information contained herein and therein.
The Borrower hereby certifies, and represents and warrants, that it
has been in compliance with the Borrowing Base applicable to it throughout the
period subsequent to the date of delivery of the Monthly Borrowing Base
Certificate most recently delivered prior to this one. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the
Credit Agreement.
Date:_________________ WESCO DISTRIBUTION, INC.
By:_________________________
Name:
Title:
<PAGE>
SCHEDULE I TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
(1) The Borrowing Base as of __________,
199__ is computed as follows:
(A) Value of 85% of Eligible Accounts $
from Schedule A ----------------
----------
(B) Value of 60% of Eligible Inventory $
from Schedule B ----------------
----------
(C) U.S. Inventory Sublimit Amount $
----------------
(D) Lesser of lines 1(B) and 1(C) $
----------------
(2) Sum of lines (1)(A) and (1)(D) (Gross $
Revolving Availability) ----------------
(3) ABB Payable Reserve $
----------------
(4) Difference between lines (2) and (3)
(The Borrowing Base) $
----------------
(5) Aggregate principal amount of Revolving $
Credit Loans outstanding as of the date ----------------
hereof
(6) Aggregate L/C Obligations outstanding $
as of the date hereof ----------------
(7) Aggregate principal amount of Swing $
Line Loans outstanding as of the date ----------------
hereof
2
<PAGE>
(8) Sum of lines (5), (6) and (7) $
===============
(9) Difference between lines (4) and (8) $
(Net Revolving Availability) ===============
3
<PAGE>
SCHEDULE A TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
ELIGIBLE ACCOUNTS
-----------------
1. ACCOUNTS RECONCILIATION
TOTAL
-----
- ---------------------------------------------------------------
Previous Month's Accounts Balance (per Aged $
Trial Balance)
- ---------------------------------------------------------------
Add: Sales
- ---
- ---------------------------------------------------------------
Debit Adjustments
- ---------------------------------------------------------------
Less: Collections
- ----
- ---------------------------------------------------------------
Credit Adjustments
- ---------------------------------------------------------------
Credit Memos
- ---------------------------------------------------------------
End of Month's Accounts Balance (per Aged $
Trial Balance)
===============================================================
2. AGED TRIAL BALANCE
Detailed Attachment To Be Provided By the Borrower.
4
<PAGE>
VALUE OF ELIGIBLE ACCOUNTS
--------------------------
TOTAL
-----
- ---------------------------------------------------------------
Gross Accounts Receivable $
- ---------------------------------------------------------------
Less Ineligibles:
- -----------------
- ---------------------------------------------------------------
Over 60 Days Past Due $
- ---------------------------------------------------------------
Legal/Notes
- ---------------------------------------------------------------
Cross Age
- ---------------------------------------------------------------
Aged Credits
- ---------------------------------------------------------------
Contra Accounts
- ---------------------------------------------------------------
Government Receivables (1)
- ---------------------------------------------------------------
Foreign Accounts
- ---------------------------------------------------------------
Excluded Guam Accounts (2)
- ---------------------------------------------------------------
Claims & Deductions
- ---------------------------------------------------------------
Related Party
- ---------------------------------------------------------------
Miscellaneous Reserves
Total Ineligibles $
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Eligible Accounts $
- ---------------------------------------------------------------
Advance Rate 85%
- ---------------------------------------------------------------
Availability $
===============================================================
Notes:
- -----
(1) Excess over $6MM unless Assignment of Claims.
(2) Excluded Guam Accounts represent non-government, non-power authority
Accounts.
<PAGE>
SCHEDULE B TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
ELIGIBLE INVENTORY
------------------
TOTAL
-----
- ---------------------------------------------------------------
Gross Book Inventory $
- ---------------------------------------------------------------
Less Ineligibles:
- -----------------
- ---------------------------------------------------------------
Slow Moving $
- ---------------------------------------------------------------
Less: New Product Add Back ( )
-----
- ---------------------------------------------------------------
In Transit
- ---------------------------------------------------------------
Full Absorption
- ---------------------------------------------------------------
Singapore Inventory
- ---------------------------------------------------------------
Specialized Inventory (1)
- ---------------------------------------------------------------
Direct Ship Inventory
- ---------------------------------------------------------------
ABB Security Interest
- ---------------------------------------------------------------
Test Count
- ---------------------------------------------------------------
Intercompany Profit
- ---------------------------------------------------------------
Total Ineligibles $
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Eligible Inventory $
- ---------------------------------------------------------------
Advance Rate 60%
- ---------------------------------------------------------------
Availability $
===============================================================
Notes:
- -----
(1) Specialized inventory is considered eligible up to $5MM.
6
<PAGE>
EXHIBIT F TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF SUBSIDIARY GUARANTEE]
SUBSIDIARY GUARANTEE, dated as of March 14, 1997, made by each of the
corporations that are signatories hereto (the "Guarantors") in favor of BARCLAYS
----------
BANK PLC, a banking corporation organized under the laws of the United Kingdom
("Barclays"), in its capacity as collateral agent (in such capacity, the
--------
"Collateral Agent") for (i) Barclays, in its capacity as administrative agent
- -----------------
(in such capacity, the "Administrative Agent") under, and the several banks and
--------------------
other financial institutions (the "Lenders") from time to time parties to, the
-------
Amended and Restated Credit Agreement, dated as of March 14, 1997 (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among WESCO DISTRIBUTION, INC., a Delaware corporation (the
- -----------------
"Borrower"), the Administrative Agent, the Lenders and the Collateral Agent and
--------
(ii) The Bank of Nova Scotia, a Canadian chartered bank, in its capacity as
administrative agent (in such capacity, the "Canadian Administrative Agent")
-----------------------------
under, and the several banks and other financial institutions (the "Canadian
--------
Lenders") from time to time parties to, the Amended and Restated Credit
- -------
Agreement, dated as of March 14, 1997 (as the same may be amended, supplemented
or otherwise modified from time to time, the "Canadian Credit Agreement"), among
-------------------------
WESCO DISTRIBUTION-CANADA, INC., an Ontario corporation and a wholly owned
Subsidiary of the Borrower (the "Canadian Borrower"), the Canadian
-----------------
Administrative Agent, the Canadian Lenders and Barclays, as Canadian Collateral
Agent.
W I T N E S S E T H :
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Extensions of Credit to the Borrower upon the terms and subject
to the conditions set forth therein;
<PAGE>
WHEREAS, it is a condition precedent to the obligations of the Lenders
to continue to make their respective initial Extensions of Credit to the
Borrower under the Credit Agreement that the Guarantors shall have executed and
delivered this Guarantee to the Collateral Agent for the benefit of the Secured
Parties;
WHEREAS, pursuant to the Canadian Credit Agreement, the Canadian
Lenders have severally agreed to make Canadian Extensions of Credit to the
Canadian Borrower upon the terms and subject to the conditions set forth
therein;
WHEREAS, the Borrower has guaranteed the obligations of the Canadian
Borrower under the Canadian Credit Agreement and the other Canadian Loan
Documents pursuant to the Borrower Guarantee;
WHEREAS, it is a condition precedent to the obligations of the
Canadian Lenders to continue to make their respective initial Canadian
Extensions of Credit to the Canadian Borrower under the Canadian Credit
Agreement that the Guarantors shall have executed and delivered this Guarantee
to the Collateral Agent for the benefit of the Secured Parties;
WHEREAS, the Borrower owns directly or indirectly not less than eighty
percent of the issued and outstanding stock of each Guarantor, and it is to the
advantage of the Guarantors that the Lenders make the Extensions of Credit to
the Borrower and that the Canadian Lenders make the Canadian Extensions of
Credit to the Canadian Borrower;
WHEREAS, the proceeds of the Extensions of Credit and the Canadian
Extensions of Credit will be used in part to enable the Borrower to make
valuable transfers to the Guarantors in connection with the operation of their
respective businesses; and
2
<PAGE>
WHEREAS, the Borrower and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the Extensions of Credit and the Canadian Extensions
of Credit;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Collateral Agent and the Lenders to perform their
obligations under the Credit Agreement and to induce the Lenders to make their
respective Extensions of Credit to the Borrower thereunder, and to induce the
Canadian Administrative Agent, the Canadian Collateral Agent and the Canadian
Lenders to perform their obligations under the Canadian Credit Agreement and to
induce the Canadian Lenders to continue to make their respective Canadian
Extensions of Credit to the Canadian Borrower thereunder, the Guarantors hereby
agree with the Collateral Agent, for the benefit of the Secured Parties, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
-------------
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement and the following terms shall have the following
meanings:
"Acceptance Reimbursement Obligations": as defined in the Canadian
------------------------------------
Credit Agreement.
"Borrower Obligations": the collective reference to the unpaid
--------------------
principal of and interest on (including, without limitation, interest
accruing after the maturity of the Loans and Reimbursement Obligations (as
defined in the Credit
3
<PAGE>
Agreement) and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding) the Loans,
the Reimbursement Obligations (as defined in the Credit Agreement) and all
other obligations and liabilities of the Borrower to the Administrative
Agent, the Collateral Agent and the Lenders (including, without limitation,
the Issuing Lender (as defined in the Credit Agreement) and the Swing Line
Lender), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Credit Agreement, the Notes (as defined
in the Credit Agreement), the Letters of Credit (as defined in the Credit
Agreement), the other Loan Documents or any other document made, delivered
or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all reasonable fees
and disbursements of counsel to the Administrative Agent, the Collateral
Agent or any Lender that are required to be paid by the Borrower pursuant
to the terms of the Credit Agreement or any other Loan Document).
"Canadian Obligations": all obligations and liabilities of the
--------------------
Borrower to the Canadian Administrative Agent for the benefit of the
Canadian Secured Parties, whether direct or indirect, due or to become due
or now existing or hereinafter incurred, which may arise under, out of, or
in connection with, the Borrower Guarantee.
"Commitments": the collective reference to the Commitments (as
-----------
defined in the Credit Agreement) and the Canadian Commitments.
"Default": the occurrence of any "Default" under, and as defined in,
-------
the Credit Agreement or any "Default" under, and as defined in, the
Canadian Credit Agreement.
"Event of Default": the occurrence of any "Event of Default" under,
----------------
and as defined in, the Credit
4
<PAGE>
Agreement, or any "Event of Default" under, and as defined in, the Canadian
Credit Agreement.
"Guarantee": this Guarantee, as the same may be amended, supplemented
---------
or otherwise modified from time to time.
"Issuing Lender": the collective reference to the Issuing Lender (as
--------------
defined in the Credit Agreement) and the Canadian Issuing Lender.
"Letters of Credit": the collective reference to the Letters of
-----------------
Credit (as defined in the Credit Agreement) and the Canadian Letters of
Credit.
"Notes": the collective reference to the Notes (as defined in the
-----
Credit Agreement) and the Canadian Notes.
"Obligations": the collective reference to the Borrower Obligations
-----------
and the Canadian Obligations.
"Reimbursement Obligations": the collective reference to the
-------------------------
Reimbursement Obligations (as defined in the Credit Agreement) and the
Canadian Reimbursement Obligations.
"Secured Parties": the collective reference to the Collateral Agent,
---------------
the Administrative Agent, the Lenders (including, without limitation, the
Issuing Lender (as defined in the Credit Agreement) and the Swing Line
Lender), the Canadian Administrative Agent, the Canadian Collateral Agent
and the Canadian Lenders (including, without limitation, the Canadian
Issuing Lender and the Canadian Swing Line Lender) and their respective
successors.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any
5
<PAGE>
particular provision of this Guarantee, and section and paragraph references are
to this Guarantee unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) Subject to the provisions of Section 2(b), each
---------
of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Collateral Agent, for the benefit of the Secured
Parties, the prompt and complete payment and performance by the Borrower when
due and payable (whether at the stated maturity, by acceleration or otherwise)
of the Obligations.
(b) Anything herein or in any other Loan Document or Canadian Loan
Document to the contrary notwithstanding, the maximum liability of each
Guarantor hereunder and under the other Credit Documents to which it is a party
shall in no event exceed an amount which, under applicable federal and state
laws, including those relating to the insolvency of debtors, would result in the
avoidance or illegality of the obligations of such Guarantor hereunder and under
the other Credit Documents to which it is a party.
(c) Each Guarantor further agrees to pay any and all reasonable
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) which may be paid or incurred by the Collateral Agent or any other
Secured Party in enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the Obligations and/or
enforcing any rights with respect to, or collecting against, such Guarantor
under this Guarantee. This Guarantee shall remain in full force and effect
until the payment and performance in full of the Notes, the Acceptance
Reimbursement Obligations, the Reimbursement Obligations, and, to the extent
then due and owing, all other Obligations, the termination of the
6
<PAGE>
Commitments and the expiration, termination or return to the relevant Issuing
Lender of the Letters of Credit, notwithstanding that from time to time prior
thereto the Borrower may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Collateral Agent or any other Secured Party hereunder.
(e) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Collateral Agent or any other Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application, at any time or from
time to time, in reduction of or in payment of the Obligations shall be deemed
to modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the Obligations pursuant
to this Guarantee, remain liable for the Obligations until the payment and
performance in full of the Notes, the Acceptance Reimbursement Obligations, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations, the termination of the Commitments and the expiration, termination
or return to the relevant Issuing Lender of the Letters of Credit.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Collateral Agent or any other Secured
Party on account of its liability hereunder, it will notify the Collateral Agent
and such Secured Party in writing that such payment is made under this Guarantee
for such purpose.
7
<PAGE>
3. Right of Contribution. Each Guarantor hereby agrees that to the
---------------------
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of paragraph 5 hereof. The
provisions of this paragraph 3 shall in no respect limit the obligations and
liabilities of any Guarantor to the Collateral Agent and the other Secured
Parties, and each Guarantor shall remain liable to the Collateral Agent and the
other Secured Parties for the full amount guaranteed by such Guarantor
hereunder.
4. Right of Set-off. Upon the occurrence and during the continuance
----------------
of any Event of Default, the Collateral Agent and each other Secured Party are
hereby irrevocably authorized at any time and from time to time without notice
to such Guarantor or any other Guarantor, any such notice being expressly waived
by each Guarantor to the extent permitted by applicable law, to set off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Collateral
Agent or such other Secured Party to or for the credit or the account of such
Guarantor, or any part thereof in such amounts as the Collateral Agent or such
other Secured Party may elect, against or on account of the obligations and
liabilities of such Guarantor then due and owing to the Collateral Agent or such
other Secured Party hereunder, whether or not the Collateral Agent or such other
Secured Party has made any demand for payment. The Collateral Agent and each
other Secured Party shall notify such Guarantor promptly of any such set-off and
the application (which shall be made in accordance with paragraph 9(c) hereof)
made by the Collateral Agent or such other Secured Party, as the case may be, of
the proceeds
8
<PAGE>
thereof; provided that the failure to give such notice shall not affect the
--------
validity of such set-off and application. The rights of the Collateral Agent and
each other Secured Party under this paragraph are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which the
Collateral Agent or such other Secured Party may have.
5. No Subrogation. Notwithstanding any payment or payments made by
--------------
any of the Guarantors hereunder or any set-off or application of funds of any of
the Guarantors by any Secured Party, no Guarantor shall be entitled to be
subrogated to any of the rights of the Collateral Agent or any other Secured
Party against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by any Secured Party for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until the payment and
performance in full of the Notes, the Acceptance Reimbursement Obligations, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations, the termination of the Commitments and the expiration, termination
or return to the relevant Issuing Lender of the Letters of Credit. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when (i) the Notes, the Acceptance Reimbursement Obligations, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations shall not have been paid and performed in full and/or (ii) the
Commitments shall not have been terminated and/or (iii) the Letters of Credit
shall not have expired, been terminated or been returned to the relevant Issuing
Lender, such amount shall be returned to the Borrower or such other Guarantor,
as the case may be, or, if an Event of Default shall have occurred and be
continuing, shall be held by such Guarantor in trust for the Collateral Agent
and the other Secured Parties, segregated from other funds of such Guarantor,
and shall, forthwith upon receipt by such Guarantor, be turned over to the
Collateral Agent in
9
<PAGE>
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Collateral Agent, if required), to be held as collateral security for the
Obligations, whether matured or unmatured, and/or then or at any time thereafter
applied against the Obligations then due and owing, in the order of priority set
forth in paragraph 9(c) hereof.
6. Amendments, etc. with respect to the Obligations; Waiver of
-----------------------------------------------------------
Rights. Each Guarantor shall remain obligated hereunder notwithstanding that,
- ------
without any reservation of rights against any Guarantor, and without notice to
or further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Collateral Agent or any other Secured Party may be
rescinded by the Collateral Agent or such other Secured Party, and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Collateral Agent or any other Secured Party, and
the Credit Agreement, the Canadian Credit Agreement or any other Credit Document
(other than this Guarantee), and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent, the Canadian Administrative
Agent, the Lenders (or any requisite portion thereof) or the Canadian Lenders
(or any requisite portion thereof), as applicable, may deem advisable from time
to time, and any collateral security, guarantee or right of offset at any time
held by the Collateral Agent or any other Secured Party for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Collateral Agent nor any other Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Obligations or for this Guarantee or any property subject thereto. When
making any demand hereunder against any of the Guarantors, the Collateral Agent
or any other Secured Party may, but
10
<PAGE>
shall be under no obligation to, make a similar demand on the Borrower or any
other Guarantor or guarantor, and any failure by the Collateral Agent or any
other Secured Party to make any such demand or to collect any payments from the
Borrower or any such other Guarantor or guarantor, or any release of the
Borrower or such other Guarantor or guarantor, shall not relieve any of the
Guarantors in respect of which a demand or collection is not made or any of the
Guarantors not so released of their several obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies, express or
implied, or as a matter of law, of the Collateral Agent or any other Secured
Party against any of the Guarantors. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Collateral Agent or any
other Secured Party upon this Guarantee or acceptance of this Guarantee; the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between the Borrower, the Canadian
Borrower, any other Credit Party and any of the Guarantors, on the one hand, and
the Collateral Agent and the other Secured Parties, on the other, shall likewise
be conclusively presumed to have been had or consummated in reliance upon this
Guarantee. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower, the
Canadian Borrower, any other Credit Party or any of the Guarantors with respect
to the Obligations. To the extent permitted by law, this Guarantee shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to:
(a) The validity or enforceability of, or any contest by the Borrower
or any other Person as to the
11
<PAGE>
validity or enforceability of, any terms of the Credit Agreement, the
Canadian Credit Agreement or any other Credit Document, any of the
Obligations (including, without limitation, the amount thereof) or any
other collateral security therefor (including, without limitation, the
perfection and priority thereof) or guarantee or right of offset with
respect thereto at any time or from time to time held by the Collateral
Agent or any other Secured Party;
(b) Any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be
asserted by the Borrower, the Canadian Borrower or any other Credit Party
against the Collateral Agent or any other Secured Party, including, without
limitation, any defense or cause of action available to the Borrower, the
Canadian Borrower, any Guarantor or any other Credit Party based on any
irregularity or default, whether or not negligent, in the manner or
procedure by which any of the Secured Parties deals with or realizes on the
security which the Collateral Agent holds on behalf of the Secured Parties
or may hold pursuant to the terms and conditions of the Credit Agreement,
the Canadian Credit Agreement, any other Credit Document, this Guarantee or
otherwise, including the taking and giving up of securities, the accepting
of compositions and the granting of releases and discharges of or to any
Credit Party inconsistent with the terms of the Credit Agreement, the
Canadian Credit Agreement or any other Credit Document;
(c) Any extension of the time or times for payment of the Obligations
or any other indulgences any of the Secured Parties may grant to the
Borrower, the Canadian Borrower or any other Credit Party; or
(d) Any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower, the Canadian Borrower or any other Credit
Party) (other than
12
<PAGE>
payment and performance in full of the Obligations) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Borrower, the Canadian Borrower or any other Credit Party for the
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in
any other instance.
When pursuing its rights and remedies hereunder against any Guarantor, the
Collateral Agent or any other Secured Party may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrower, the Canadian Borrower or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Collateral Agent or any other Secured Party to
pursue such other rights or remedies or to collect any payments from the
Borrower, the Canadian Borrower or any such other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Borrower, the Canadian Borrower or any such other Person
or of any such collateral security, guarantee or right of offset, shall not
relieve such Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Collateral Agent or any other Secured Party against such
Guarantor. This Guarantee shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon each Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the Collateral
Agent and the other Secured Parties until the payment and performance in full of
the Notes, the Acceptance Reimbursement Obligations, the Reimbursement
Obligations and, to the extent then due and owing, all other Obligations, the
termination of the Commitments and the expiration, termination or return to the
relevant Issuing Lender of the Letters of Credit, notwithstanding that from time
to time the Borrower may be free from any Obligations.
13
<PAGE>
8. Reinstatement. This Guarantee shall continue to be effective, or
-------------
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Collateral Agent or any other Secured Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower, the
Canadian Borrower, any Guarantor or any other Credit Party, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower, the Canadian Borrower, any
Guarantor, any Credit Party or any substantial part of any of their property, or
otherwise, all as though such payments had not been made.
9. Payments; Application of Payments. (a) Each Guarantor shall
---------------------------------
make payment of the amount of the Obligations and all other amounts payable by
it to any of the Secured Parties hereunder forthwith after demand therefor is
made in writing to it. Such demand shall be deemed to have been effectively
made (i) when an envelope containing such demand addressed to it at its address
as set forth under its signature below (or such other address as may be notified
to the Secured Parties pursuant thereto) is personally delivered to such
address; or (ii) if sent by telex, telecopy or other similar means of
telecommunications, on the Business Day next following the day on which it is so
sent.
(b) Each Guarantor hereby agrees that all payments made by it
hereunder in respect of the Obligations will be paid to the Collateral Agent
without set-off or counterclaim in Dollars in immediately available funds at the
office of the Collateral Agent set forth in subsection 11.2 of the Credit
Agreement.
(c) All payments received by the Collateral Agent hereunder in respect
of the Obligations shall be held by the Collateral Agent for the benefit of the
Secured Parties as collateral security for the Obligations (whether matured or
unmatured), and/or then or at any time thereafter may be
14
<PAGE>
applied by the Collateral Agent against the Acceptance Reimbursement
Obligations, the Reimbursement Obligations and, to the extent then due and
owing, all other Obligations, in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent and the Administrative Agent in connection with this
Guarantee, the Credit Agreement, any other Loan Document or any of the
Borrower Obligations, including all court costs and the reasonable fees and
expenses of their agents and legal counsel, and any other reasonable costs
or expenses incurred in connection with the exercise by the Collateral
Agent and the Administrative Agent of any right or remedy under this
Guarantee, the Credit Agreement or any other Loan Document;
SECOND, to the ratable satisfaction of all other Borrower Obligations;
THIRD, to the payment of all reasonable costs and expenses incurred by
the Canadian Collateral Agent and Canadian Administrative Agent in
connection with this Guarantee, the Canadian Credit Agreement, any other
Canadian Loan Document or any of the Canadian Obligations, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, and any other reasonable costs or expenses incurred in connection
with the exercise by the Canadian Collateral Agent and Canadian
Administrative Agent of any right or remedy under this Guarantee, the
Canadian Credit Agreement or any other Canadian Loan Document;
FOURTH, to the ratable satisfaction of all other Canadian Obligations;
and
FIFTH, to the Guarantors or their respective successors or assigns, or
to whomsoever may be lawfully entitled to receive the same.
15
<PAGE>
10. Representations and Warranties. Each Guarantor represents and
------------------------------
warrants to the Collateral Agent and the other Secured Parties that:
(a) it is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) it has the corporate power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, except to the extent that the
failure to have such power and authority would not reasonably be expected
to have a Material Adverse Effect;
(c) it has the corporate power and authority to make, deliver and
perform its obligations under this Guarantee and the other Credit Documents
to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Guarantee and the
other Credit Documents to which it is a party;
(d) this Guarantee and the other Credit Documents to which it is a
party have been duly executed and delivered on behalf of such Guarantor and
constitute legal, valid and binding obligations of such Guarantor
enforceable against such Guarantor in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at
law);
(e) the execution, delivery and performance of this Guarantee and the
other Credit Documents to which it is a party will not violate any
Requirement of Law or Contractual Obligation of such Guarantor in any
16
<PAGE>
respect that would reasonably be expected to have a Material Adverse Effect
and will not result in, or require, the creation or imposition of any Lien
on any of the properties or revenues of such Guarantor pursuant to any such
Requirement of Law or Contractual Obligation (other than pursuant to any
Credit Document);
(f) no consent or authorization of, filing with, or other act by or in
respect of, any Governmental Authority or any other Person is required to
be obtained or made by or on behalf of such Guarantor or any other Credit
Party in connection with the execution, delivery, performance, validity or
enforceability of this Guarantee or any of the other Credit Documents to
which it is a party, except for such as have been obtained or made;
(g) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any of the
other Credit Documents to which it is a party or any of the transactions
contemplated hereby or thereby, or (ii) which, taking into account any
indemnification by Westinghouse pursuant to the Acquisition Agreements,
would reasonably be expected to have a Material Adverse Effect;
(h) it has good marketable title in fee simple to, or a valid
leasehold interest in, all its material real property, and good title to,
or a valid leasehold interest in, all its other material property, and none
of such property is subject to any Lien except for Liens permitted by
subsection 8.3 of the Credit Agreement;
(i) it has filed or caused to be filed all United States federal
income tax returns and all other
17
<PAGE>
material tax returns which are required to be filed by it and has paid (a)
all taxes shown to be due and payable on said returns or (b) all taxes
shown to be due and payable on any assessments of which it has received
notice made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to
which the failure to pay, in the aggregate, would not have a Material
Adverse Effect, or (ii) taxes, fees or other charges the amount or validity
of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have
been provided on the books of such Guarantor); and no tax Lien has been
filed, and, to the knowledge of such Guarantor, no claim is being asserted,
with respect to any such tax, fee or other charge other than real property
taxes that are not yet delinquent.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
(i) each Extension of Credit to (or on behalf of) the Borrower under the Credit
Agreement and (ii) each Canadian Extension of Credit to (or on behalf of) the
Canadian Borrower under the Canadian Credit Agreement, in each case as though
made hereunder on and as of such date.
11. Covenants. Each Guarantor hereby covenants and agrees with the
---------
Collateral Agent and the other Secured Parties that, from and after the date of
this Guarantee until the payment and performance in full of the Notes, the
Acceptance Reimbursement Obligations, the Reimbursement Obligations, and, to the
extent then due and owing, all other Obligations, the termination of the
Commitments and the expiration, termination or return to the relevant Issuing
Lender of the Letters of Credit, such Guarantor shall refrain from taking any
action that would result in a violation of any of the covenants of the Borrower
or any
18
<PAGE>
other Loan Party contained in the Credit Agreement or any other Loan
Document.
12. Further Assurances. Each Guarantor hereby covenants and agrees
------------------
with the Collateral Agent and the other Secured Parties that, from and after the
date of this Guarantee until the payment and performance in full of the Notes,
the Acceptance Reimbursement Obligations, the Reimbursement Obligations, and, to
the extent then due and owing, all other Obligations, the termination of the
Commitments and the expiration, termination or return to the relevant Issuing
Lender of the Letters of Credit, at any time and from time to time, upon the
written request of the Collateral Agent, and at the sole expense of such
Guarantor, such Guarantor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Collateral Agent may reasonably request for the purposes of obtaining or
preserving the full benefits of this Guarantee and the other Credit Documents to
which it is a party and of the rights and powers herein and therein granted.
13. Authority of Collateral Agent. Each Guarantor acknowledges that
-----------------------------
the rights and responsibilities of the Collateral Agent under this Guarantee or
any other Credit Document to which the Collateral Agent is a party with respect
to any action taken by the Collateral Agent or the exercise or non-exercise by
the Collateral Agent of any option, right, request, judgment or other right or
remedy provided for herein or in any other Credit Document to which the
Collateral Agent is a party or resulting or arising out of this Guarantee or any
other Credit Document to which the Collateral Agent is a party shall, as among
the Collateral Agent and the other Secured Parties, be governed by the Credit
Agreement and the Canadian Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and such Guarantor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain
19
<PAGE>
from acting, and no Guarantor shall be under any obligation to make any inquiry
respecting such authority.
14. Notices. All notices, requests and demands under this Guarantee
-------
shall be given in accordance with subsection 11.2 of the Credit Agreement and
subsection 12.2 of the Canadian Credit Agreement and, in the case of each
Guarantor, its address or transmission number for notices shall be as set forth
under its signature below.
The Secured Parties and the Guarantors may change their respective
addresses and transmission numbers for notices by notice in the manner provided
in subsection 11.2 of the Credit Agreement and subsection 12.2 of the Canadian
Credit Agreement.
15. Counterparts. This Guarantee may be executed by one or more of
------------
the Guarantors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Collateral Agent.
16. Term of Agreement. Subject to the terms of paragraph 8 hereof,
-----------------
this Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms until the payment and performance
in full of the Notes, the Acceptance Reimbursement Obligations, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations, the termination of the Commitments and the expiration, termination
or return to the relevant Issuing Lender of the Letters of Credit,
notwithstanding that from time to time during the respective terms of the Credit
Agreement and the Canadian Credit Agreement the Borrower and/or the Canadian
Borrower may be free from any Obligations.
17. Severability. Any provision of this Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective
20
<PAGE>
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
18. Integration. This Guarantee represents the entire agreement of
-----------
each Guarantor and the Collateral Agent with respect to the subject matter
hereof and there are no promises or representations by any Guarantor, the
Collateral Agent or any other Secured Party relative to the subject matter
hereof not reflected or referred to herein.
19. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
-----------------------------------------------------
of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Collateral Agent, provided that, at any Guarantor's
--------
request, any provision of this Guarantee for the benefit of the Collateral Agent
and/or the Secured Parties may be waived by the Collateral Agent and the other
Secured Parties in a letter or agreement executed by the Collateral Agent or by
telex or facsimile transmission from the Collateral Agent.
(b) Neither the Collateral Agent nor any other Secured Party shall by
any act (except by a written instrument pursuant to paragraph 19(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Collateral Agent or any other
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent or any
other Secured Party of any right or remedy hereunder on any one occasion shall
not be
21
<PAGE>
construed as a bar to any right or remedy which the Collateral Agent or such
other Secured Party would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
20. Judgment Currency. (a) If for the purposes of obtaining
-----------------
judgment in any court it is necessary hereunder or under any other Credit
Document to convert all or any part of the Obligations denominated in any
currency (the "Original Currency") into another currency (the "Other Currency"),
each Guarantor to the fullest extent that it may effectively do so, agrees that
the rate of exchange used shall be the Current Exchange Rate in effect on the
Business Day immediately preceding the day on which any such judgment, or any
relevant part thereof, is paid or otherwise satisfied.
(b) The obligation of each Guarantor in respect of any sum due
hereunder in the Original Currency shall, notwithstanding any judgment in any
Other Currency, be discharged only to the extent that on the Business Day
following receipt by such Secured Party of any sum adjudged to be so due in such
Other Currency such Secured Party could, in accordance with its normal banking
procedures, purchase the Original Currency with such Other Currency. If the
amount of the Original Currency so purchased is less than the sum originally due
to such Secured Party in the Original Currency, such Guarantor shall, as a
separate obligation and notwithstanding any such judgment, indemnify such
Secured Party against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to such Secured Party, such Secured
Party shall remit such excess to such Guarantor.
21. Section Headings. The section headings used in this Guarantee
----------------
are for convenience of reference only and
22
<PAGE>
are not to affect the construction hereof or be taken into consideration in the
interpretation hereof.
22. Submission To Jurisdiction; Waivers. Each of the Guarantors and
-----------------------------------
the Collateral Agent hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Credit Documents to
which it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York and appellate courts from any thereof, and,
to the extent such legal action or proceeding relates to any of the
Canadian Loan Documents to which it is a party, or is for recognition and
enforcement of any judgment in respect thereof, the courts of the province
of Ontario and the appellate courts thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to each
Guarantor or the Collateral Agent, as the case may be, at its address
referred to in paragraph 14 or at such other address of which the
Collateral Agent or such Guarantor, as applicable, shall have been notified
pursuant thereto;
23
<PAGE>
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent permitted by law, any right it may
have to claim or recover in any legal action or proceeding referred to in
this paragraph 22 any punitive damages.
23. Acknowledgements. Each Guarantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Guarantee and the other Credit Documents to which it is a
party;
(b) neither the Collateral Agent nor any other Secured Party has any
fiduciary relationship with or duty to any Guarantor arising out of or in
connection with this Guarantee or any of the other Credit Documents, and
the relationship between the Collateral Agent and other Secured Parties, on
the one hand, and the Borrower and the Guarantors, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Parties or among the Guarantors and the Secured
Parties.
24. Successors and Assigns. This Guarantee shall be binding upon the
----------------------
successors and assigns of each Guarantor and shall inure to the benefit of the
Collateral Agent and the other Secured Parties. Any change or changes in the
name or reorganization (whether by way of recapitalization, consolidation,
amalgamation, merger, transfer, sale, lease or otherwise) of the Borrower or its
business shall not
24
<PAGE>
affect or in any way limit or lessen the liability of any Guarantor hereunder
and this Guarantee shall extend to any person, firm or corporation acquiring or
from time to time carrying on the business of the Borrower so long as such
person, firm or corporation shall be liable under the Obligations.
25. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
26. Addition of Guarantors. Subject to the terms and conditions of
----------------------
the Credit Agreement, from time to time the Borrower may create one or more
Additional Subsidiaries. Concurrently with each creation of an Additional
Subsidiary, the Borrower shall cause such Additional Subsidiary to execute and
deliver to the Collateral Agent a supplement hereto, in substantially the form
of Exhibit A hereto, whereupon such Additional Subsidiary shall be deemed for
all purposes hereunder to be a Guarantor under this Guarantee, commencing on the
effective date of such supplement.
25
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the day first above written.
[INSERT NAME OF GUARANTOR]
By:__________________________
Title:
Address for Notices:
_____________________________
_____________________________
Attention: Chief Financial
Officer
Telecopy: __________________
ACKNOWLEDGED AND AGREED AS
OF THE DATE HEREOF BY:
BARCLAYS BANK PLC,
as Collateral Agent
By:_______________________
Title:
26
<PAGE>
EXHIBIT A to the
Subsidiary Guarantee
--------------------
FORM OF ADDITIONAL SUBSIDIARIES SUPPLEMENT
SUPPLEMENT, dated __________ __, to the Subsidiary Guarantee, dated as
of March 14, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Subsidiary Guarantee"), made by each of the subsidiaries of WESCO
--------------------
Distribution, Inc. (the "Borrower") from time to time parties thereto (the
--------
"Guarantors") in favor of Barclays Bank PLC, as Collateral Agent for the Secured
- -----------
Parties (as defined therein).
W I T N E S S E T H :
WHEREAS, the Subsidiary Guarantee provides that any Subsidiary of the
Borrower, although not originally a Guarantor thereunder, may become a Guarantor
thereunder by executing and delivering to the Collateral Agent a supplement in
substantially the form of this Supplement; and
WHEREAS, the undersigned desires to become a Guarantor under the
Subsidiary Guarantee;
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by all of the provisions of the
Subsidiary Guarantee applicable to a Guarantor thereunder and agrees that
it shall, on the date this Supplement is accepted by the Collateral Agent,
become a Guarantor, for all purposes of the Subsidiary Guarantee to the
same extent as if originally a party thereto.
Terms defined in the Subsidiaries Guarantee shall have their defined
meanings when used herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
[INSERT NAME OF ADDITIONAL SUBSIDIARY]
By:_____________________________
Title:
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
BARCLAYS BANK PLC,
as Collateral Agent
By:________________________
Title:
2
<PAGE>
EXHIBIT G TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 14, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among WESCO DISTRIBUTION, INC., a Delaware
----------------
corporation (the "Borrower"), the several banks and other financial institutions
--------
from time to time parties thereto (the "Lenders"), BARCLAYS BANK PLC, as
-------
administrative agent for the Lenders (in such capacity, the "Administrative
--------------
Agent") and as collateral agent (in such capacity, the "Collateral Agent").
- ----- ----------------
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
__________________ (the "Assignor") and _____
--------
________ (the "Assignee") agree as follows:
--------
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor,
as of the Transfer Effective Date (as defined below), a ___% interest (the
"Assigned Interest") in and to the Assignor's rights and obligations under
-----------------
the Credit Agreement with respect to those credit facilities provided for
in the Credit Agreement as are set forth on Schedule 1 (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a
------------------ -------------------
principal amount for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in
<PAGE>
or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse
claim upon the interest being assigned by it hereunder and that such
interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower, any other Credit Party or any
other obligor or the performance or observance by the Borrower, any other
Credit Party or any other obligor of any of their respective obligations
under the Credit Agreement or any other Credit Document or any other
instrument or document furnished pursuant hereto or thereto; and (c)
attaches the Note(s) held by it evidencing the Assigned Facilities and
requests that the Administrative Agent exchange such Note(s) for a new Note
or Notes payable to the Assignee and (if the Assignor has retained any
interest in the Assigned Facility) a new Note or Notes payable to the
Assignor in the respective amounts which reflect the assignment being made
hereby (and after giving effect to any other assignments which have become
effective on the Transfer Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that
it has received a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements and other
information delivered pursuant to subsections 5.1 and 7.1 thereof and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and
Acceptance; (c) agrees that it will, independently and without reliance
upon the Assignor, the Administrative Agent, the Collateral Agent or any
other Lender and based on such documents
2
<PAGE>
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under the Credit
Agreement, the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto; (d) appoints and authorizes the
Administrative Agent and the Collateral Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent and the Collateral Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by
the provisions of the Credit Agreement and will perform in accordance with
its terms all the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender, including its obligations
pursuant to the paragraph 11.15 of the Credit Agreement, and, if it is
organized under the laws of a jurisdiction outside the United States, its
obligations pursuant to subsection 4.12(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
__________ ___, 19__ (the "Transfer Effective Date"). Following the
-----------------------
execution of this Assignment and Acceptance, it will be delivered to the
Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to subsection 11.6 of the Credit Agreement,
effective as of the Transfer Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five
Business Days after the date of such acceptance and recording by the
Administrative Agent).
5. Upon such acceptance and recording, from and after the Transfer
Effective Date, the Administrative Agent shall make all payments in respect
of the Assigned Interest (including payments of principal,
3
<PAGE>
interest, fees and other amounts) to the Assignee whether such amounts have
accrued prior to the Transfer Effective Date or accrue subsequent to the
Transfer Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Transfer Effective Date or with respect to the making of this
assignment directly between themselves.
6. From and after the Transfer Effective Date, (a) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (b) the Assignor shall, to the extent provided in
this Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Credit Agreement.
7. Notwithstanding any other provision hereof, if the consent of the
Borrower or the Administrative Agent hereto is required under subsection
11.6 of the Credit Agreement, this Assignment and Acceptance shall not be
effective unless such consent shall have been obtained.
8. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
4
<PAGE>
SCHEDULE 1 to the
Assignment and Acceptance
-------------------------
Re: Amended and Restated Credit Agreement, dated as of March 14, 1997,
among WESCO Distribution, Inc., the Lenders from time to time parties
thereto, Barclays Bank PLC, as Administrative Agent and as Collateral
Agent.
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
Credit Commitment Commitment Percentage
Facility Assigned Amount Assigned Assigned
$_______________ ___._____________%
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: ______________________ By:______________________
Title: Title:
Accepted: Consented To:
BARCLAYS BANK PLC,
as Administrative Agent WESCO DISTRIBUTION, INC.
By: ______________________ By:______________________
Title: Title:
<PAGE>
EXHIBIT H TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
FORM OF
CAF ADVANCE CONFIRMATION
_________ __, 199_
Barclays Bank PLC, as
Administrative Agent
222 Broadway
New York, New York 10038
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 14, 1997, among the undersigned, the Lenders named therein and
Barclays Bank PLC, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
----------------
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
In accordance with subsection 2.5(d) of the Credit Agreement, the
undersigned accepts and confirms the offers by the CAF Advance Lender(s) to make
CAF Advances to the undersigned on __________, 199_ under subsection 2.5(d) in
the (respective) amount(s) set forth on the attached list of CAF Advances
offered.
Very truly yours,
WESCO DISTRIBUTION, INC.
By_________________________
Title:
[NOTE: The Borrower must attach CAF Advance offer list prepared by the CAF
Advance Agent with accepted amount entered by the Borrower to the right of each
CAF Advance offer].
<PAGE>
EXHIBIT I TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
FORM OF
CAF ADVANCE OFFER
___________, 199__
Barclays Bank PLC, as
Administrative Agent
222 Broadway
New York, New York 10038
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 14, 1997, among the undersigned, the Lenders named therein and
Barclays Bank PLC, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
----------------
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
In accordance with subsection 2.5 of the Credit Agreement, the
undersigned Lender offers to make CAF Advances thereunder in the following
amounts with the following maturity dates:
============================================================================
Borrowing Date: Aggregate Maximum Amount: $_________
__________, 199__
============================================================================
Maturity Date 1: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
============================================================================
Maturity Date 2: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
============================================================================
Maturity Date 3: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
============================================================================
<PAGE>
[NOTE: Insert the interest rate offered for the specified CAF Advance
where indicated by an asterisk (*). In the case of LIBOR Rate CAF Advances,
insert a margin bid. In the case of Fixed Rate CAF Advances, insert a
fixed rate bid.]
Very truly yours,
[NAME OF LENDER]
By___________________________
Title:
Telephone No.:
Telecopy No.:
2
<PAGE>
EXHIBIT J TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
FORM OF
CAF ADVANCE REQUEST
__________, 199__
Barclays Bank PLC, as
Administrative Agent
222 Broadway
New York, New York 10038
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 14, 1997, among the undersigned, the Lenders named therein and
Barclays Bank PLC, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
----------------
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
This is a [Fixed Rate] [LIBOR Rate] CAF Advance Request pursuant to
subsection 2.5 of the Credit Agreement requesting offers for the following CAF
Advances:
[NOTE: Pursuant to the Credit Agreement, a CAF Advance Request may be
transmitted in writing, by telecopy, or by telephone, immediately
confirmed by telecopy. In any case, a CAF Advance Request shall
contain the information specified in the second paragraph of this
form.]
Loan 1 Loan 2 Loan 3
- --------------------------------------------------------------
Aggregate Principal $__________ $__________ $_________
Amount
- --------------------------------------------------------------
Borrowing Date
- --------------------------------------------------------------
CAF Advance Maturity
Date
- --------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------
CAF Advance Interest
Payment Dates
==============================================================
Very truly yours,
WESCO DISTRIBUTION, INC.
By_______________________
Title:
2
<PAGE>
EXHIBIT K TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
Barclays Bank PLC
222 Broadway
New York, New York 10038
WESCO Distribution, Inc.
Commerce Court
Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Ladies and Gentlemen:
Reference is made to (a) the Amended and Restated Credit Agreement,
dated as of March 14, 1997, among WESCO Distribution, Inc., the several banks
and other financial institutions from time to time parties thereto and Barclays
Bank PLC, as administrative agent and as collateral agent, and (b) the Amended
and Restated Credit Agreement, dated as of March 14, 1997, among WESCO
Distribution-Canada, Inc., the several banks and other financial institutions
from time to time parties thereto, The Bank of Nova Scotia, as administrative
agent, and Barclays Bank PLC, as collateral agent (collectively, the "Credit
Agreements"). Terms defined in the Credit Agreements shall have their defined
meanings when used herein.
<PAGE>
The undersigned hereby resigns as Collateral Agent under the Credit
Agreements, effective as of the "Effective Date" (as such term is defined in the
Credit Agreements). In connection therewith, the undersigned agrees to execute
and deliver all such instruments and documents (including, without limitation,
UCC-3 assignment forms and amendments to the Security Documents and Guarantees)
as may be reasonably requested by Barclays, the successor Collateral Agent, to
reflect the assignment to Barclays of the rights and obligations of the
undersigned as Collateral Agent effected hereby and by the Credit Agreements.
Very truly yours,
FLEET CAPITAL CORPORATION
By__________________
Title:
Agreed to and Accepted:
WESCO DISTRIBUTION, INC.
By____________________
Title:
2
<PAGE>
WESCO DISTRIBUTION-CANADA,INC.
By____________________
Title:
CDW HOLDING CORPORATION
By____________________
Title:
BARCLAYS BANK PLC
By____________________
Title:
3
<PAGE>
FIRST AMENDMENT (this "First Amendment"), dated as of February 13,
---------------
1998, to the Amended and Restated Credit Agreement, dated as of March 14, 1997
(the "Credit Agreement"), among WESCO DISTRIBUTION, INC., a Delaware corporation
---------------------
(the "Borrower"), the several banks and other financial institutions from time
--------
to time parties thereto (the "Lenders"), BARCLAYS BANK PLC, a banking
-------
corporation organized under the laws of the United Kingdom ("Barclays"), as
--------
administrative agent for the Lenders thereunder (in such capacity, the
"Administrative Agent"), and as collateral agent for the Lenders thereunder (in
--------------------
such capacity, the "Collateral Agent").
----------------
W I T N E S S E T H :
-------------------
WHEREAS, the Borrower has requested and the Administrative Agent, the
Collateral Agent and the Lenders have agreed, subject to the terms and
conditions hereof, to amend the Credit Agreement for the purpose of, among other
things, (i) modifying the definition of "Margin Reduction Percentage", (ii)
modifying the definitions of "Borrowing Base" and "Borrowing Base Elimination
Period", (iii) modifying the definition of "Change of Control", (iv) modifying
the definition of "Termination Date", (v) modifying the definition of
"Consolidated Funded Indebtedness", (vi) modifying the definition of
"Consolidated EBITDA", (vii) modifying the definition of "Consolidated Interest
Expense", (viii) modifying the Consolidated Net Worth covenant, (ix) modifying
the covenant relating to the ratio of Consolidated Funded Indebtedness to
Consolidated EBITDA, (x) increasing the permitted Indebtedness basket, (xi)
increasing the basket for sale and leaseback transactions, (xii) modifying the
basket for sales of assets, (xiii) deleting the capital expenditures covenant,
(xiv) modifying the acquisitions covenant, (xv) releasing all of the Collateral
and releasing the Collateral Agent from its obligations under the Credit
Agreement and (xvi) increasing the Commitments by the aggregate amount of
$85,000,000.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree to amend the Credit Agreement as
follows:
1. Defined Terms. Capitalized terms used herein and not defined
-------------
herein shall have the meanings assigned to such terms in the Credit Agreement,
as amended by this First Amendment.
2. Amendment to Section 1 of the Credit Agreement.
----------------------------------------------
a. Section 1 of the Credit Agreement is hereby amended by adding the
following new definitions in proper alphabetical order:
1
<PAGE>
"Bond Rating": the Moody's Bond Rating and the S&P Bond Rating.
-----------
"First Amendment": the First Amendment, dated as of February 13,
---------------
1998, to this Credit Agreement.
"First Amendment Effective Date": as defined in paragraph 12 of the
------------------------------
First Amendment.
"Moody's": Moody's Investors Service, Inc.
-------
"Moody's Bond Rating": for any day, the actual rating of the
-------------------
Borrower's senior long-term unsecured debt by Moody's in effect at 9:00
A.M., New York City time, on such day. If Moody's shall have changed its
system of classifications after the date of the First Amendment, the
Moody's Bond Rating shall be considered to be at or above a specified level
if it is at or above the new rating which most closely corresponds to such
specified level under the old rating system.
"S&P": Standard and Poor's Ratings Service.
---
"S&P Bond Rating": for any day, the actual rating of the Borrower's
---------------
senior long-term unsecured debt by S&P in effect at 9:00 A.M., New York
City time, on such day. If S&P shall have changed its system of
classifications after the date of the First Amendment, the S&P Bond Rating
shall be considered to be at or above a specified level if it is at or
above the new rating which most closely corresponds to such specified level
under the old rating system.
b. Section 1 of the Credit Agreement is hereby amended by deleting
the definitions of "Borrowing Base", "Borrowing Base Elimination Period",
"Change of Control", "Consolidated EBITDA", "Consolidated Funded Indebtedness",
"Consolidated Interest Expense", "Margin Reduction Percentage" and "Termination
Date", each in its entirety and replacing each with the following:
"Borrowing Base": an amount equal to the aggregate Commitments.
--------------
"Borrowing Base Elimination Period": the period commencing on the
---------------------------------
First Amendment Effective Date and ending on the Termination Date.
"Change of Control": the occurrence of any one or more of the
-----------------
following events: (i) at any time prior to the date upon which shares of
common stock of
2
<PAGE>
Holdings shall have been sold in an underwritten public offering for
aggregate gross cash proceeds of at least $150,000,000, CD&R, C&D Fund IV
and the Affiliates of C&D Fund IV and CD&R shall in the aggregate
beneficially own shares of Voting Stock of Holdings constituting less than
30% of the total voting power of all outstanding shares of Voting Stock of
Holdings; or (ii) any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Exchange Act) other than CD&R, C&D Fund IV and the
Affiliates of C&D Fund IV and CD&R shall have acquired (a) beneficial
ownership of more than 30% of the outstanding shares of Voting Stock of
Holdings or (b) the power (whether or not exercised) to elect a majority of
Holdings' directors; or (iii) Holdings shall cease for any reason to own
beneficially and of record 100% of the Capital Stock of the Borrower; or
(iv) the Borrower shall cease for any reason to own beneficially and of
record 100% of the Capital Stock of the Canadian Borrower and of RealCo; or
(v) except as permitted by subsection 8.5 or 8.6, the Borrower, directly or
indirectly through one or more Additional Subsidiaries, shall cease for any
reason to own beneficially and of record at least 80% of the Capital Stock
of each Additional Subsidiary; (vi) except as permitted by subsection 9.1
or 9.2 of the Canadian Credit Agreement, the Canadian Borrower, directly or
through one or more of its Subsidiaries, shall cease for any reason to own
beneficially and of record 100% of the Capital Stock of each Subsidiary of
the Canadian Borrower or (vii) during any two year period, individuals who
at the beginning of such period constituted Holdings' board of directors
(together with any new directors whose election by the board of directors
of Holdings was approved by a vote of a majority of the directors of
Holdings then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
directors of Holdings; as used in this paragraph, "Voting Stock" shall mean
------------
shares of Capital Stock entitled to vote generally in the election of
directors.
"Consolidated EBITDA": of any Person, for any period, the
-------------------
Consolidated Net Income of such Person for such period, adjusted to exclude
the following items of income or expense to the extent that such items are
included in the calculation of Consolidated Net Income: (a) Consolidated
Interest Expense, (b) any non-cash interest expense and any other non-cash
expenses and charges, (c) total income tax expense, (d) depreciation
expense, (e) the expense associated with amortization of intangible and
other assets, (f) non-cash provisions for reserves for discontinued
operations, (g) any extraordinary, unusual or non-recurring gains or losses
or charges or credits and (h) any gains or losses associated with the sale
or write-up or write-down of assets, provided that in the event that such
--------
Person makes an Investment in any other Person pursuant to subsection
8.10(g) on any date during such period, the Consolidated
3
<PAGE>
EBITDA for such period shall be computed on the assumption that such
Investment and any related financing thereof was completed on the first day
of such period.
"Consolidated Funded Indebtedness": of the Borrower and its
--------------------------------
consolidated Subsidiaries, at the date of determination thereof, (i) all
Indebtedness of the Borrower hereunder and of the Canadian Borrower under
the Canadian Credit Agreement (in each case, regardless of when such
Indebtedness matures), (ii) the aggregate then net unrecovered purchase
price of any purchasers of receivables from the Borrower or any of its
Subsidiaries in a transaction permitted by Section 8.6(i), and (iii) all
other Indebtedness of the Borrower and its consolidated Subsidiaries (other
than Indebtedness referred to in clause (e) of the definition thereof),
determined on a consolidated basis in accordance with GAAP, which by its
terms matures more than one year after such date, and any such Indebtedness
maturing within one year from such date which is renewable or extendable at
the option of the obligor to a date more than one year from such date;
provided that Indebtedness of the Borrower and its consolidated
--------
Subsidiaries in respect of the First Mortgage Notes shall be excluded from
the calculation of Consolidated Funded Indebtedness.
"Consolidated Interest Expense": of any Person, for any period, cash
-----------------------------
interest expense of such Person for such period on its Indebtedness
determined on a consolidated basis in accordance with GAAP, provided that
--------
in the event that the such Person makes an Investment in any other Person
pursuant to subsection 8.10(g) on any date during such period the
Consolidated Interest Expense for such period shall be computed on the
assumption that such Investment and any related financing thereof was
completed on the first day of such period.
"Margin Reduction Percentage": (a) during the period from and
---------------------------
including the Closing Date to but excluding the Adjustment Date which
occurs concurrently with the delivery by the Borrower pursuant to
subsection 7.1(c) of its financial statements for the quarterly period
ended June 30, 1995, zero and (b) during each Margin Adjustment Period
which commences on or after the Adjustment Date referred to in clause (a)
above, and
(i) if the Borrower's Moody's Bond Rating and/or S&P Bond Rating on
the last day of the quarter immediately proceeding the commencement of
such Margin Adjusted Period is at or above Baa3/BBB-, and if either
the Moody's Bond Rating or the S&P Bond Rating on such day is (A) at
or above A3/A-, .85% (when used in the definitions of Applicable
Margin and L/C Commission Rate) and .425% (when used in the definition
of Facility Fee Rate), (B) at or above Baa1/BBB+, but below A3/A-,
.81% (when used in the definitions of
4
<PAGE>
Applicable Margin and L/C Commission Rate) and .415% (when used in the
definition of Facility Fee Rate), (C) at or above Baa2/BBB, but below
Baa1/BBB+, .775% (when used in the definitions of Applicable Margin
and L/C Commission Rate) and .40% (when used in the definition of
Facility Fee Rate), (D) at or above Baa3/BBB-, but below Baa2/BBB,
.75% (when used in the definitions of Applicable Margins and L/C
Commission Rate) and .35% (when used in the definition of Facility Fee
Rate);
(ii if the Borrower's Moody's Bond Rating and/or S&P Bond Rating on
the last day of the quarter immediately preceding the commencement of
such Margin Adjusted Period is below Baa3/BBB-, and if the Fixed
Charge Coverage Ratio for the four consecutive fiscal quarters of the
Borrower ending immediately preceding the commencement of such Margin
Adjustment Period (determined by reference to the certificates
delivered pursuant to subsection 7.2(b) concurrently with the
financial statements delivered under subsection 7.1(a) or (c), or the
Annual Unaudited Financial Statements (as defined below in this
definition), as the case may be, with respect to such four consecutive
fiscal quarters) is (i) less than 3.00:1, zero, (ii) less than 3.50:1
but greater than or equal to 3.00:1, 0.125% (when used in the
definitions of Applicable Margin and L/C Commission Rate) and 0.125%
(when used in the definition of Facility Fee Rate), (iii) less than
4.00:1 but greater than or equal to 3.50:1, 0.375% (when used in the
definitions of Applicable Margin and L/C Commission Rate) and 0.125%
(when used in the definition of Facility Fee Rate), (iv) less than
4.50:1 but greater than or equal to 4.00:1, 0.5625% (when used in the
definitions of Applicable Margin and L/C Commission Rate) and 0.1875%
(when used in the definition of Facility Fee Rate), (v) less than
5.00:1 greater than or equal to 4.50:1, 0.65% (when used in the
definitions of Applicable Margin and L/C Commission Rate) and 0.25%
(when used in the definition of Facility Fee Rate), (vi) greater than
or equal to 5.00:1, .725% (when used in the definitions of Applicable
Margin and L/C Commission Rate) and 0.275% (when used in the
definition of Facility Fee Rate);
provided that notwithstanding the forgoing paragraph (b):
--------
(w) if at any time the percentage determined pursuant to
paragraph (b)(i) by reference to a Bond Rating exceeds the percentage
determined by reference to the other respective Bond Rating, the
Margin Reduction Percentage shall be the higher percentage (unless the
difference between the two Bond Ratings is two or more levels, in
which case the Margin Reduction Percentage shall be determined by
reference
5
<PAGE>
to the Bond Rating which is one level higher than the lower of such
two Bond Ratings);
(x) during any period from and including the date on which an
Event of Default has occurred to but excluding the date on which such
Event of Default is no longer continuing, the Margin Reduction
Percentage shall be zero;
(y) if for any Margin Adjustment Period the rate is determined
pursuant to paragraph (b)(ii), above, and the Borrower delivers to the
Administrative Agent any financial statements referred to in clause
(b) of the definition of Adjustment Date (each, an "Annual Unaudited
----------------
Financial Statement") and thereafter the financial statements
-------------------
delivered pursuant to subsection 7.1(a) in respect of the period
covered by such Annual Unaudited Financial Statement demonstrates a
Fixed Charge Coverage Ratio for such period which differs from that
demonstrated by such Annual Unaudited Financial Statement, any change
in the Margin Reduction Percentage occurring as a result of such
difference shall be given retroactive effect to the first Business Day
after delivery of such Annual Unaudited Financial Statement; and
(z) if any Financial Statement Delivery Default becomes an Event
of Default, the Margin Reduction Percentage (if greater than zero)
that was in effect for the period commencing on the date such
Financial Statement Delivery Default occurred to the date such
Financial Statement Delivery Default became an Event of Default shall
be retroactively adjusted to zero for such period and shall remain
zero until the first Business Day following receipt by the
Administrative Agent of the financial statements the failure to
deliver which gave rise to such Financial Statement Delivery Default,
which date shall constitute an Adjustment Date and upon which date the
Margin Adjustment Percentage shall be determined in accordance with
the other provisions of this definition.
If payments are made hereunder on the basis of a Margin Reduction
Percentage that is retroactively adjusted as a result of the occurrence of
any of the events described in clauses (x), (y) or (z) of the proviso to
the immediately preceding sentence, the Lenders and the Borrower shall make
such payments to the Administrative Agent (which shall credit the account
of the Borrower or allocate such payments among the Lenders in accordance
with their respective interests in the payments theretofore made hereunder,
as the case may be, on the basis of the Margin Reduction Percentage that
was so retroactively adjusted) as may be necessary to give effect to such
adjustment, such payments to be calculated by the Administrative Agent
(which shall notify the Borrower
6
<PAGE>
and the Lenders thereof) and to be made as
soon as practicable (but in any event no later than two Business Days after
such notice is given by the Administrative Agent) and to include interest
at the applicable Federal Funds Effective Rate for the period from the date
to which the Margin Reduction Percentage has been retroactively adjusted to
the date of the applicable payment on any amounts required to be paid as a
result of such retroactive adjustment.
"Termination Date": February 28, 2001.
----------------
3. Amendment of Sections 8.1(a) and 8.1(b) to the Credit Agreement.
---------------------------------------------------------------
Sections 8.1(a) and 8.1(b) are hereby amended by deleting them in their entirety
and substituting in lieu thereof the following:
"(a) Maintenance of Net Worth. Permit Consolidated Net Worth of
------------------------
Holdings and its consolidated Subsidiaries at any time to be less than
$100,000,000.
(b) Ratio of Consolidated Funded Indebtedness to Consolidated EBITDA.
----------------------------------------------------------------
Permit, on the last day of any fiscal quarter of Holdings ending during any
period set forth below (each a "Test Period"), the ratio of Consolidated Funded
-----------
Indebtedness to Consolidated EBITDA of Holdings and its consolidated
Subsidiaries for the period of four consecutive fiscal quarters of Holdings
ending on such day to be greater than the ratio set forth opposite such Test
Period below:
Test Period Ratio
- ---------------------------------------- -----------
12/31/97-3/30/98 5.00 : 1.0
3/31/98-6/29/98 4.50 : 1.0
6/30/98-9/29/98 4.25 : 1.0
9/30/98-3/30/00 4.00 : 1.0
Thereafter 3.75 : 1.0"
4. Amendment of Section 8.2(e) to the Credit Agreement. Section
---------------------------------------------------
8.2(e) is hereby amended by deleting it in its entirety and substituting in lieu
thereof the following:
"(e) Indebtedness of the Borrower and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to
a loan, a Financing Lease, a sale and leaseback transaction or otherwise)
otherwise permitted pursuant to this Agreement in an aggregate principal
amount not exceeding in the aggregate as to the Borrower and its
Subsidiaries $35,000,000 at any one time outstanding."
7
<PAGE>
5. Amendment of Section 8.2(m) to the Credit Agreement. Section
---------------------------------------------------
8.2(m) is hereby amended by deleting it in its entirety and substituting in lieu
thereof the following:
"(m) additional Indebtedness of the Borrower or any of its
Subsidiaries not exceeding $30,000,000 in aggregate principal amount at any
one time outstanding; and"
6. Amendment of Section 8.6(g) to the Credit Agreement. Section
---------------------------------------------------
8.6(g) is hereby amended by deleting it in its entirety and substituting in lieu
thereof the following:
"(g) Dispositions of assets in a transaction or series of related
transactions where (i) the amount, if any, by which the aggregate book
value of the assets subject to any single Disposition or series of related
Dispositions exceeds the aggregate Net Cash Proceeds of such Disposition or
series of Dispositions not greater than $30,000,000 and (ii) after giving
effect to any such Disposition, the amount, if any, by which the aggregate
book value of all assets subject to Dispositions during the period from the
First Amendment Effective Date to and including the date of such
Disposition exceeds the aggregate Net Cash Proceeds of all Dispositions
during such period is not greater than $60,000,000, provided that (i) no
--------
Default or Event of Default shall occur and shall be continuing on the date
of any such Disposition or would occur as a result thereof, (ii) such Net
Cash Proceeds are applied to the repayment of the Extensions of Credit
pursuant to subsection 4.4(c), (iii) the proceeds of such Disposition
consist solely of cash and are in an amount not less than the fair market
value of the assets subject to such Disposition and (iv) notwithstanding
the foregoing, no Disposition constituting a Mixed Asset Sale shall be
permitted hereunder if, after giving effect thereto, the sum of (A) the
Aggregate Asset Sale Shortfall Amount and (B) the U.S. Dollar equivalent
(determined on the basis of then Current Exchange Rates from time to time)
of the Canadian Aggregate Asset Shortfall Amount would exceed $15,000,000;"
7. Amendment of Section 8.6 to the Credit Agreement. Section 8.6 is
------------------------------------------------
hereby amended by adding the following as new paragraph (i):
"(i) sales without recourse of receivables, provided that (i) the
--------
aggregate Net Cash Proceeds of all such sales does not exceed $100,000,000,
(ii) no Default or Event of Default shall have occurred and shall be
continuing on the date of any such sale or would occur as a result thereof,
(iii) such Net Cash Proceeds are applied to the repayment of the Extensions
of Credit pursuant to subsection 4.4(c), and (iv) the proceeds of such
sales consist solely of cash and are in an amount not less than the fair
market value of the receivables sold."
8
<PAGE>
8. Amendment of Section 8.9 to the Credit Agreement. Section 8.9 is
------------------------------------------------
hereby amended by deleting it in its entirety.
9. Amendment of Section 8.10(g) to the Credit Agreement. Section
----------------------------------------------------
8.10(g) is hereby amended by deleting it in its entirety and substituting in
lieu thereof the following:
"(g) Investments by the Borrower or any of its Subsidiaries consisting
of the acquisition by purchase or otherwise of all or substantially all of
the business or assets of, or evidences of beneficial ownership of, any
Person or any division thereof; provided that on or prior to the date which
--------
is 5 Business Days prior to such Investment, the Borrower shall have
delivered to each Lender a certificate of a Responsible Officer confirming
and setting forth in reasonable detail computations showing that after
giving effect to such Investment (i) the Borrower would be in compliance
with the provisions of subsection 8.1 as at and for the applicable period
ending on the last day of the then most recently ended fiscal quarter for
which financial statements shall have been delivered to the Lenders
pursuant to subsection 7.1 after giving pro forma effect to such Investment
by assuming such Investment and any related financing thereof was completed
on the first day of such period, (ii) immediately before and after giving
effect to such Investment or series of related Investments, no Default or
Event of Default shall have occurred or be continuing and (iii) the
Available Commitments would exceed $25,000,000."
10. Amendment of Section 8.13 to the Credit Agreement. Section 8.13
-------------------------------------------------
is hereby amended by deleting it in its entirety.
11. Amendment of Schedule 1 to the Credit Agreement. The table of
-----------------------------------------------
Commitment Amounts set forth in Part A of Schedule 1 of the Credit Agreement is
hereby deleted in its entirety and replaced by the table set forth in Part A of
Schedule 1 to this First Amendment.
12. Termination of Existing Security Documents. The Administrative
------------------------------------------
Agent and the Lenders hereby agree to (i) terminate all "Security Documents" (as
defined in the Credit Agreement), and (ii) release and return, without recourse,
representation or warranty, all collateral security delivered under such
Security Documents. The Collateral Agent is hereby released by the Lenders, the
Borrower and the Administrative Agent from any duties and obligations in its
capacity as Collateral Agent under the Agreement.
13. Conditions of Effectiveness. This First Amendment shall become
---------------------------
effective upon satisfaction of each of the following conditions: (i) the signing
of this First Amendment, or, as the case may be, the consent hereto provided for
below, by the Lenders
9
<PAGE>
(after giving effect to this First Amendment), the
Borrower, the Canadian Borrower, the Canadian Lenders, Holdings and each
Subsidiary Guarantor, (ii) the occurrence of the "First Amendment Effective
Date" under and as defined in the First Amendment, dated as of February __, 1998
to the Canadian Credit Agreement and (iii) the first date upon which each of the
conditions precedent set forth below are satisfied (the date upon which all the
conditions set forth in clauses (i), (ii) and (iii) above shall be satisfied,
the "First Amendment Effective Date").
------------------------------
a. Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party (other than RealCo) pursuant to the
Credit Agreement, this First Amendment or any other Loan Document (or in
any amendment, modification or supplement hereto or thereto) to which it is
a party, and each of the representations and warranties contained in any
certificate furnished at any time by or on behalf of any such Loan Party
pursuant to this Agreement or any other Loan Document shall, except to the
extent that they relate to a particular date, be true and correct in all
material respects on and as of the First Amendment Effective Date as if
made on and as of such date.
b. No Default. No Default or Event of Default shall have occurred
----------
and be continuing on and as of the First Amendment Effective Date.
c. Revolving Credit Notes. The Administrative Agent shall have
----------------------
received on behalf of each Lender a new Revolving Credit Note duly executed
and delivered by the Borrower which shall be exchanged for the existing
Revolving Credit Note payable to such Lender (which existing Revolving
Credit Note shall be returned to the Borrower).
d. Legal Opinions. The Administrative Agent shall have received,
--------------
with a copy for each Lender, the executed legal opinions of (A) Debevoise &
Plimpton, special counsel to the Borrower and the other Credit Parties,
substantially in the form of Exhibit A and (B) the General Counsel of the
---------
Borrower, substantially in the form of Exhibit B.
---------
e. Corporate Proceedings of the Borrower. The Administrative Agent
-------------------------------------
shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower authorizing
(i) the execution, delivery and performance of this First Amendment, the
Revolving Credit Notes to be delivered pursuant to clause (c) of this
paragraph 3 and the other related documents to which it is or will be a
party and (ii) the increase in the amount of the Commitments contemplated
hereby, certified by the Secretary or an Assistant Secretary of the
Borrower as of the First Amendment
10
<PAGE>
Effective Date, which certificate shall
be in form and substance reasonably satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified (except as any later such resolution may modify any
earlier such resolution), revoked or rescinded.
f. Incumbency Certificates of the Borrower. The Administrative Agent
---------------------------------------
shall have received, with a copy for each Lender, a certificate of a
Responsible Officer of the Borrower, dated the First Amendment Effective
Date, as to the incumbency and signature of the officers of the Borrower
executing this First Amendment and any related document, reasonably
satisfactory in form and substance to the Administrative Agent.
14. Prepayment of Loans. On the First Amendment Effective Date, the
-------------------
Borrower agrees to prepay all of the Loans outstanding under the Credit
Agreement as well as any unpaid and accrued interest thereon and any amounts
payable pursuant to subsections 4.5, 4.8 and 4.13 of the Credit Agreement
therewith.
15. APPLICABLE LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
16. Counterparts. This First Amendment may be executed in two or
------------
more counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one instrument.
17. Headings. Section headings used in this First Amendment are for
--------
convenience of reference only, are not part of this First Amendment and are not
to affect the construction of, or to be taken into consideration in
interpreting, this First Amendment.
18. Credit Agreement. Except as expressly amended hereby, the Credit
----------------
Agreement shall continue in full force and effect in accordance with the
provisions thereof in effect on the date hereof. As used therein, the terms
"Agreement", "this Agreement", "herein", "hereinafter", "hereunder", "hereto"
and words of similar import shall mean, from and after the First Amendment
Effective Date, unless the context otherwise specifically requires, the Credit
Agreement as amended by this First Amendment.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
-----------------------------------------
Name:
Title:
BARCLAYS BANK PLC, as Administrative Agent,
Collateral Agent, Issuing Bank,
Swing Line Lender and a Lender
By: /s/
-----------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent and
a Lender
By: /s/
-----------------------------------------
Name:
Title:
12
<PAGE>
THE BANK OF NEW YORK, as a Co-Agent and
a Lender
By: /s/
-------------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Co-Agent
and Lender
By: /s/
-------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as a Co-Agent
and a Lender
By: /s/
-------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, as a
Co-Agent and a Lender
By: /s/
-------------------------------------------
Name:
Title:
13
<PAGE>
MELLON BANK, N.A., as a Co-Agent and a Lender
By: /s/
-------------------------------------------
Name:
Title:
NATIONSBANK, N.A., as a Co-Agent and a Lender
By: /s/
-------------------------------------------
Name:
Title:
PNC BANK, National Association, as a Co-Agent
and Lender
By: /s/
-------------------------------------------
Name:
Title:
ABN AMRO BANK, N.V., as a Lender
By: /s/
-------------------------------------------
Name:
Title:
14
<PAGE>
NATIONAL CITY BANK OF PENNSYLVANIA, as
a Lender
By: /s/
-------------------------------------------
Name:
Title:
THE TORONTO-DOMINION BANK, as a Lender
By: /s/
-------------------------------------------
Name:
Title:
15
<PAGE>
Consented and Agreed to:
THE BANK OF NOVA SCOTIA, as
Administrative Agent under the Canadian
Credit Agreement, Canadian Swing Line
Lender and a Canadian Lender
By: /s/
---------------------------------------
Name:
Title:
BARCLAYS BANK PLC, as Collateral Agent
under the Canadian Credit Agreement
By: /s/
---------------------------------------
Name:
Title:
MELLON BANK CANADA, as a Co-Agent under
the Canadian Credit Agreement and a
Canadian Lender
By: /s/
---------------------------------------
Name:
Title:
16
<PAGE>
THE TORONTO-DOMINION BANK, as a
Canadian Lender
By: /s/
---------------------------------------
Name:
Title:
CDW HOLDINGS CORPORATION, as a
Guarantor under the Credit Agreement
By: /s/
---------------------------------------
Name:
Title:
WESCO DISTRIBUTION CANADA, INC.,
as the Borrower under the
Canadian Credit Agreement
By: /s/
---------------------------------------
Name:
Title:
17
<PAGE>
COMMITMENTS; ADDRESSES
A. Commitment Amounts
Lender Commitment
- ----------------------------------------------------------------------
Barclays Bank PLC 62,841,558
- ----------------------------------------------------------------------
First Chicago/NBD 39,000,000
- ----------------------------------------------------------------------
NationsBank 42,500,000
- ----------------------------------------------------------------------
PNC Bank 47,500,000
- ----------------------------------------------------------------------
Bank of Nova Scotia 23,500,000
- ----------------------------------------------------------------------
Toronto Dominion 20,908,442
- ----------------------------------------------------------------------
Mellon 30,250,000
- ----------------------------------------------------------------------
Bank of America 35,000,000
- ----------------------------------------------------------------------
Chase 30,000,000
- ----------------------------------------------------------------------
Bank of New York 25,000,000
- ----------------------------------------------------------------------
National City Bank 25,000,000
- ----------------------------------------------------------------------
ABN-AMRO 18,500,000
- ----------------------------------------------------------------------
TOTAL $400,000,000
======================================================================
18
<PAGE>
[FORM OF LEGAL OPINION OF DEBEVOISE & PLIMPTON-
SPECIAL COUNSEL TO THE BORROWER AND OTHER CREDIT PARTIES]
See attached
19
<PAGE>
[FORM OF LEGAL OPINION OF GENERAL COUNSEL OF THE BORROWER]
See attached
20
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
among
WESCO DISTRIBUTION-CANADA, INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
THE BANK OF NOVA SCOTIA,
as Administrative Agent
and
BARCLAYS BANK PLC,
as Collateral Agent
DATED AS OF MARCH 14, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
=================
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS................................................ 2
1.1 Defined Terms.............................................. 2
1.2 Other Definitional Provisions.............................. 49
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................ 50
2.1 Commitments................................................ 50
2.2 Revolving Credit Notes..................................... 50
2.3 Procedure for Revolving Credit Borrowing................... 51
2.4 Termination or Reduction of Commitments;
Transfers of the Commitment and the U.S.
Commitment................................................. 52
2.5 Swing Line Commitments..................................... 55
SECTION 3. AMOUNT AND TERMS OF ACCEPTANCE SUB-FACILITY................ 59
3.1 Acceptance Commitments..................................... 59
3.2 Creation of Acceptances.................................... 60
3.3 Discount of Acceptances.................................... 61
3.4 Stamping Fees.............................................. 62
3.5 Acceptance Reimbursement Obligations....................... 62
3.6 Converting Loans to Acceptances and
Acceptances to Loans....................................... 64
3.7 Acceptances to be Supplemented by Prime
Rate Loans in order to be Created Ratably.................. 65
3.8 Special Provisions Relating to Non-Chartered Banks......... 66
SECTION 4. LETTERS OF CREDIT.......................................... 67
4.1 L/C Commitment............................................. 67
4.2 Procedure for Issuance of Letters of Credit................ 68
4.3 Fees, Commissions and Other Charges........................ 68
4.4 L/C Participations......................................... 69
4.5 Reimbursement Obligation of the Borrower................... 71
4.6 Obligations Absolute....................................... 73
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.7 Letter of Credit Payments.................................. 74
4.8 Application................................................ 74
SECTION 5. GENERAL PROVISIONS APPLICABLE TO LOANS AND
LETTERS OF CREDIT.......................................... 75
5.1 Interest Rates and Payment Dates........................... 75
5.2 Optional and Mandatory Prepayments......................... 76
5.3 Commitment Fees; Agency Fees; Other Fees................... 78
5.4 Computation of Interest and Fees........................... 78
5.5 Pro Rata Treatment and Payments............................ 79
5.6 Borrowing Base Compliance.................................. 81
5.7 Illegality................................................. 81
5.8 Requirements of Law........................................ 82
5.9 Taxes...................................................... 84
5.10 Certain Rules Relating to the Payment of
Additional Amounts......................................... 86
SECTION 6. REPRESENTATIONS AND WARRANTIES............................. 88
6.1 Solvent.................................................... 89
6.2 Corporate Existence........................................ 89
6.3 Corporate Power; Authorization; Enforceable
Obligations................................................ 89
6.4 No Legal Bar............................................... 90
6.5 No Default................................................. 91
6.6 Collateral................................................. 91
6.7 Subsidiaries............................................... 92
6.8 Purpose of Loans........................................... 92
6.9 Canadian Pension Plans..................................... 92
6.10 Representations and Warranties in the U.S.
Credit Agreement........................................... 93
6.11 No Default................................................. 93
SECTION 7. CONDITIONS PRECEDENT....................................... 93
7.1 Conditions to Effectiveness................................ 93
7.2 Conditions to Each Extension of Credit..................... 94
SECTION 8. AFFIRMATIVE COVENANTS...................................... 95
8.1 Financial Statements....................................... 96
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.2 Certificates; Other Information............................ 99
8.3 Collateral Audit........................................... 101
8.4 Notices.................................................... 102
8.5 Landlord Waivers........................................... 102
8.6 Loans to Cover U.S. Borrowing Base
Defaults................................................... 102
8.7 Cash Management System..................................... 103
SECTION 9. NEGATIVE COVENANTS......................................... 104
9.1 Limitation on Fundamental Changes.......................... 104
9.2 Limitation on Sale of Assets............................... 105
9.3 Limitations on Dispositions of Collateral.................. 107
9.4 Creation of Subsidiaries................................... 107
9.5 Maintenance of Bank Accounts............................... 109
9.6 Limitation on Certain Modifications and
Certain Contractual Obligations............................ 109
SECTION 10. EVENTS OF DEFAULT.......................................... 110
SECTION 11. THE AGENT.................................................. 116
11.1 Appointment................................................ 116
11.2 Delegation of Duties....................................... 117
11.3 Exculpatory Provisions..................................... 117
11.4 Reliance by Agent.......................................... 118
11.5 Notice of Default.......................................... 119
11.6 Non-Reliance on Agent and Other Lenders.................... 119
11.7 Indemnification............................................ 120
11.8 Agent in Its Individual Capacity........................... 121
11.9 Successor Agent............................................ 121
11.10 Swing Line Lender.......................................... 122
11.11 Co-Agents.................................................. 122
SECTION 12. MISCELLANEOUS.............................................. 122
12.1 Amendments and Waivers..................................... 122
12.2 Notices.................................................... 125
12.3 No Waiver; Cumulative Remedies............................. 127
12.4 Survival of Representations and
Warranties................................................. 127
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.5 Payment of Expenses and Taxes.............................. 128
12.6 Successors and Assigns; Participations and
Assignments................................................ 130
12.7 Adjustments; Set-off....................................... 135
12.8 Counterparts............................................... 136
12.9 Severability............................................... 136
12.10 Integration................................................ 137
12.11 GOVERNING LAW.............................................. 137
12.12 Submission To Jurisdiction; Waivers........................ 137
12.13 Acknowledgements........................................... 138
12.14 WAIVERS OF JURY TRIAL...................................... 139
12.15 Confidentiality............................................ 139
12.16 Amendment to Security Documents............................ 140
12.17 Amendment and Restatement.................................. 140
</TABLE>
iv
<PAGE>
SCHEDULES
1 Commitments; Lending Offices and Addresses
6.3 Consents Required
6.6 Filing Jurisdictions
8.7 Depositary Banks
9 Security Agreements
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Swing Line Note
B Form of Banker's Acceptance
C Form of Power of Attorney
D Form of Landlord's Waiver
E Form of Monthly Borrowing Base Certificate
F Form of Assignment and Acceptance
v
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 14, 1997,
among WESCO DISTRIBUTION-CANADA, INC., a corporation organized and existing
under the laws of the Province of Ontario (the "Borrower"), the several banks
--------
and other financial institutions from time to time parties to this Agreement
(the "Lenders"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank ("Bank of
------- -------
Nova Scotia"), as administrative agent for the Lenders hereunder (in such
- -----------
capacity, the "Administrative Agent") and BARCLAYS BANK PLC, a banking
--------------------
corporation organized under the laws of the United Kingdom ("Barclays"), as
--------
collateral agent (in such capacity, the "Collateral Agent").
----------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower is a wholly owned Subsidiary of WESCO
Distribution, Inc., a Delaware corporation (the "U.S. Borrower"; the U.S.
-------------
Borrower and the Borrower, collectively, the "Borrowers");
---------
WHEREAS the Borrowers are companies organized by Clayton, Dubilier &
Rice, Inc. ("CD&R");
----
WHEREAS, the U.S. Borrower is a wholly owned Subsidiary of CDW Holding
Corporation, a Delaware corporation ("Holdings");
--------
WHEREAS, the Borrower is a party to the Credit Agreement, dated as of
February 24, 1995 (as amended by the First Amendment, dated as of March 29,
1996, and the Second Amendment, dated as of August 5, 1996, the "Existing Credit
---------------
Agreement"), with the banks and other financial institutions party thereto and
- ---------
Bank of Nova Scotia, as administrative agent, and Fleet Capital Corporation (as
successor to Shawmut Capital Corporation), as collateral agent, and the U.S.
Borrower is a party to the U.S. Credit Agreement (as such term is defined in the
Existing Credit Agreement, the "Existing U.S. Credit Agreement");
------------------------------
<PAGE>
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Existing U.S. Credit Agreement is being amended and restated (as
amended, supplemented or otherwise modified from time to time, the "U.S. Credit
-----------
Agreement"), among the U.S. Borrower and the financial institutions from time to
- ---------
time parties thereto (the "U.S. Lenders"), Barclays Bank PLC ("Barclays"), as
------------ --------
administrative agent for the U.S. Lenders (in such capacity, the "U.S.
----
Administrative Agent") and Barclays, as collateral agent (in such capacity, the
- --------------------
"U.S. Collateral Agent");
---------------------
WHEREAS, the Company has requested that the Existing Credit Agreement
be amended and restated to extend the period during which loans may be made
thereunder and to modify the adjustments to the interest rate margin to be
charged on the loans made thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree that, effective on the
Effective Date (as hereinafter defined), the Existing Credit Agreement shall be
amended and restated to read in its entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
-------------
shall have the following meanings:
"Acceptances": a Draft drawn by the Borrower and accepted by a Lender
-----------
which is (i) denominated in Canadian Dollars, (ii) in an undiscounted face
amount equal to C$500,000 or a whole multiple of C$100,000 in excess
thereof, (iii) for a term of not less than 30 days nor more than 180 days
and matures prior to the Termination Date and (iv) issuable and payable
only in Canada; provided that, to the extent the context shall require,
--------
each Acceptance Note shall be deemed to be an Acceptance.
2
<PAGE>
"Acceptance Note": as defined in subsection 3.8(b).
---------------
"Acceptance Purchase Price": in respect of an Acceptance of a
-------------------------
specified maturity, the result (rounded to the nearest whole cent, and with
one-half cent being rounded up) obtained by dividing the face amount of
such Acceptance by the sum of (i) one and (ii) the product of (A) the
Reference Discount Rate for Acceptances of the same maturity expressed as a
decimal and (B) a fraction, the numerator of which is the term to maturity
of such Acceptance and the denominator of which is equal to 365.
"Acceptance Reimbursement Obligation": the obligation of the Borrower
-----------------------------------
to each Lender pursuant to subsection 3.5.
"Account Collateral": as defined in subsection 8.7(d).
------------------
"Accounts": as defined in the Personal Property Security Act; and,
--------
with respect to the Borrower or any of its Subsidiaries, all such accounts
of the Borrower or any such Subsidiary, whether now existing or existing in
the future, including, without limitation (i) all accounts receivable of
the Borrower or any such Subsidiary (whether or not specifically listed on
schedules furnished to the Collateral Agent) including, without limitation,
all accounts created by or arising from all of the Borrower's or any such
Subsidiary's sales of goods or rendition of services made under any of its
trade names, or through any of its divisions, (ii) all rights to any goods
represented by any of the foregoing, including returned or repossessed
goods, (iii) all reserves and credit balances held by the Borrower or any
such Subsidiary with respect to any such accounts receivable or Obligors,
(iv) all letters of credit, guarantees or collateral for any of the
3
<PAGE>
foregoing and (v) all insurance policies or rights relating to any of the
foregoing.
"Acquisition": the collective reference to (i) the acquisition by
-----------
Holdings of substantially all of the U.S.-based assets of WESCO, the
transfer of such assets (other than certain real property) on its behalf by
Westinghouse U.S. to the U.S. Borrower and the transfer of such real
property by Westinghouse U.S. on its behalf to RealCo, in each case
pursuant to the U.S. Acquisition Agreement and certain of the Collateral
Documents (as defined in the U.S. Acquisition Agreement) and (ii) the
acquisition by the Borrower of substantially all of the Canadian-based
assets of WESCO pursuant to the Acquisition Agreement and certain of the
Collateral Documents (as defined in the U.S. Acquisition Agreement).
"Acquisition Agreement": the Asset Acquisition Agreement, dated as of
---------------------
February 28, 1994, between the Canadian Borrower and Westinghouse Canada,
as amended, supplemented or otherwise modified from time to time in
accordance with subsection 8.8 of the U.S. Credit Agreement.
"Acquisition Agreements": the collective reference to the Acquisition
----------------------
Agreement and the U.S. Acquisition Agreement.
"Acquisition Documents": as defined in the U.S. Credit Agreement.
---------------------
"Additional Subsidiary": as defined in the U.S. Credit Agreement.
---------------------
"Adjustment Date": the first Business Day following receipt by the
---------------
Administrative Agent of (a) the financial statements required to be
delivered pursuant to subsection 8.1(a) and (c), as the case may be, for
the then most recently completed fiscal period
4
<PAGE>
or (b) unaudited financial statements which (i) comply with all
requirements of subsection 8.1(a) (other than the requirement that such
financial statements be reported on by a certified public accountant) and
(ii) are certified by a Responsible Officer of the U.S. Borrower as being
fairly stated in all material respects.
"Administrative Agent": as defined in the preamble hereto.
--------------------
"Administrative Agents": the collective reference to the
---------------------
Administrative Agent and the U.S. Administrative Agent.
"Affiliate": as to any Person, any other Person (other than a
---------
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 20% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"Aggregate Asset Sale Shortfall Amount": as of any date of
-------------------------------------
determination, with respect to all Mixed Asset Sales (or series of related
Mixed Asset Sales) consummated on or prior to such date, the difference
between (i) the sum of all Asset Sale Shortfall Amounts in respect of such
Mixed Asset Sales (or series of related Mixed Asset Sales) which are
determined to be a positive number in accordance with the definition of
Asset Sale Shortfall Amount, minus (ii) the sum of the absolute value of
-----
all Asset Sale Shortfall Amounts in respect of such Mixed Asset Sales (or
series of related Mixed Asset Sales) which are determined to be a
5
<PAGE>
negative number in accordance with the definition of Asset Sale Shortfall
Amount.
"Aggregate Majority Lenders": as defined in the U.S. Credit
--------------------------
Agreement.
"Aggregate Outstandings": as to any Lender at any time, an amount
----------------------
equal to the sum of (a) the aggregate principal amount of all Revolving
Credit Loans made by such Lender then outstanding, (b) the aggregate
undiscounted face amount of all Acceptances then outstanding, (c) such
Lender's Commitment Percentage of the L/C Obligations then outstanding and
(d) such Lender's Commitment Percentage of the Swing Line Loans then
outstanding.
"Aggregate Supermajority Lenders": as defined in the U.S. Credit
-------------------------------
Agreement.
"Aggregate U.S. Outstandings": the meaning ascribed to the term
---------------------------
"Aggregate Outstandings" in the U.S. Credit Agreement.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"Application": an application, in such form as the Issuing Lender may
-----------
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"Asset Sale": any sale, issuance, conveyance, transfer, lease or
----------
other disposition (any of the foregoing, a "Disposition") by the Borrower
-----------
or any Subsidiary of the Borrower, in one or a series of related
transactions, of any real or personal, tangible or intangible property
(including, without limitation, Capital Stock) of the Borrower or any such
Subsidiary to any Person other than the Borrower or any Subsidiary of the
Borrower.
6
<PAGE>
"Asset Sale Shortfall Amount": with respect to any Mixed Asset Sale
---------------------------
or series of related Mixed Asset Sales, the U.S. Dollar equivalent
(determined on the basis of the Current Exchange Rate in effect on the
Business Day immediately preceding the date such Mixed Asset Sale or series
of related Mixed Asset Sales is consummated) of the difference between (i)
the book value of all Inventory of the Borrower or any of its Subsidiaries
and all other Collateral sold or to be sold in connection with such Mixed
Asset Sale or series of related Mixed Asset Sales (or, at the option of the
Borrower in lieu of such book value, the purchase price allocated to such
Inventory and other Collateral by the Borrower or one of its Subsidiaries
and the purchaser thereof in good faith and set forth in the related
purchase agreement) minus (ii) the Net Cash Proceeds of such Mixed Asset
-----
Sale or series of related Mixed Asset Sales; the Asset Sale Shortfall
Amount with respect to any Mixed Asset Sale or series of related Mixed
Asset Sales may be either a positive or a negative number.
"Assignee": as defined in subsection 12.6(c).
--------
"Available Commitment": as to any Lender at any time, an amount equal
--------------------
to the excess, if any, of (a) the amount of such Lender's Commitment at
such time over (b) the sum of (i) the aggregate unpaid principal amount at
----
such time of all Revolving Credit Loans made by such Lender, (ii) the
aggregate undiscounted face amount of all the then outstanding Acceptances
of such Lender, (iii) an amount equal to such Lender's Commitment
Percentage of the aggregate unpaid principal amount at such time of all
Swing Line Loans, provided that for purposes of calculating Available
--------
Commitments pursuant to subsection 5.3(a) such amount shall be deemed to be
zero and (iv) an amount equal to such Lender's Commitment Percentage of the
outstanding L/C Obligations at such time; collectively, as to all the
Lenders, the "Available Commitments".
---------------------
7
<PAGE>
"Available U.S. Commitment": the meaning ascribed to the term
-------------------------
"Available Commitment" in the U.S. Credit Agreement.
"Bank Act (Canada)": the Bank Act (Canada), as amended from time to
------------------
time.
"Bank Act Security": security granted by the Borrower pursuant to
-----------------
Section 427 of the Bank Act (Canada).
"Bank of Canada Rate": the Bank of Canada's rate for 30-day funds as
-------------------
established on Tuesday of each week, plus .25%.
"Bankruptcy and Insolvency Act (Canada)": the Bankruptcy and
---------------------------------------
Insolvency Act (Canada), as amended from time to time.
"Borrower": as defined in the preamble hereto.
--------
"Borrowers": as defined in the recitals hereto.
---------
"Borrowing Base": an amount, calculated on a monthly basis based upon
--------------
the most recent Monthly Borrowing Base Certificate delivered pursuant to
subsection 8.2(c), equal to the sum (without duplication) of (a) 85% of
Eligible Accounts plus (b) the lesser of (1) the Canadian Inventory
----
Sublimit Amount and (2) 60% of Eligible Inventory; provided, however, that
-------- -------
the Borrowing Base shall be deemed to be infinite in amount at all times
during any Borrowing Base Elimination Period. All determinations in
connection with the Borrowing Base shall be made by the Borrower and
certified to the Collateral Agent by a Responsible Officer of the Borrower;
provided, however, that the Collateral Agent shall have the final right to
-------- -------
review and adjust any such determination to the extent the Collateral Agent
determines, in its
8
<PAGE>
reasonable judgment after consultation with the Borrower and the
Administrative Agent, that such determination is not in accordance with
this Agreement. The Borrower shall from time to time provide such
assistance to the Collateral Agent as the Collateral Agent reasonably may
request for the purpose of determining compliance by the Borrower with the
Borrowing Base.
"Borrowing Base Default": any Default or Event of Default which
----------------------
occurs solely because the Aggregate Outstandings of all Lenders exceed the
Borrowing Base then in effect.
"Borrowing Base Elimination Period": any period commencing on an
---------------------------------
Adjustment Date and ending on the Business Day immediately preceding the
next succeeding Adjustment Date, provided that (a) the Fixed Charge
--------
Coverage Ratio for the four consecutive fiscal quarters of the U.S.
Borrower reflected in the financial statements delivered by the Borrower
hereunder for the period ending immediately prior to the first such
Adjustment Date is greater than or equal to 4.00:1 and (b) no Borrowing
Base Elimination Period may exist so long as an Event of Default shall have
occurred and be continuing.
"Borrowing Date": any Business Day specified in a notice pursuant to
--------------
subsection 2.3 or 2.5 as a date with respect to which the Borrower has
requested the Lenders to make Loans hereunder or, with respect to a Request
for Acceptances, the date with respect to which the Borrower has requested
the Lenders to accept Drafts.
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in Toronto, Ontario are authorized or required by
law to close.
9
<PAGE>
"Canada-U.S. Transfer": as defined in subsection 2.4(b).
--------------------
"Canadian Cash Collateral Agreement": the Cash Collateral and
----------------------------------
Security Agreement, dated as of February 28, 1994, between the Borrower and
Westinghouse Canada, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with subsection 9.6 hereof and
subsection 8.8 of the U.S. Credit Agreement.
"Canadian Dollar Increase Amount": as defined in subsection 2.4(b).
-------------------------------
"Canadian Dollar Reduction Amount": as defined in subsection 2.4(b).
--------------------------------
"Canadian Dollars" and "C$": dollars in the lawful currency of
---------------- --
Canada.
"Canadian First Mortgage Notes": the First Mortgage Note, dated as of
-----------------------------
February 28, 1994, originally issued by the Borrower to Westinghouse
Canada, and all notes issued in exchange therefor and in exchange for such
exchanged notes, in each case, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 9.6
hereof and subsection 8.8 of the U.S. Credit Agreement.
"Canadian First Mortgage Note Documents": the collective reference to
--------------------------------------
the Canadian First Mortgage Notes, the Canadian Mortgages, the Holdings
Canadian First Mortgage Note Guarantees, the U.S. Borrower Canadian First
Mortgage Note Guarantees, the RealCo Canadian First Mortgage Note
Guarantees and the Canadian Cash Collateral Agreement.
10
<PAGE>
"Canadian Inventory Sublimit Amount": at any date of determination,
----------------------------------
an amount equal to 45% of the Commitments of all Lenders then in effect.
"Canadian Mortgaged Property": each parcel of real property owned by
---------------------------
the Borrower and encumbered by a Canadian Mortgage.
"Canadian Mortgages": the collective reference to (i) each of the fee
------------------
mortgages, each dated as of February 28, 1994, each made by the Borrower in
favor of Westinghouse Canada and (ii) any other mortgage made from time to
time by the Borrower in favor of Westinghouse Canada pursuant to the
Canadian First Mortgage Notes, each of such mortgages encumbering one of
the Canadian Mortgaged Properties with a first mortgage lien securing the
Canadian First Mortgage Notes, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with subsection 9.6
hereof and subsection 8.8 of the U.S. Credit Agreement.
"Canadian Pension Plan": any plan, program, arrangement or
---------------------
understanding that is a pension plan for the purposes of any applicable
pension benefits or tax laws of Canada or a province or territory thereof
(whether or not required to be registered under any such laws) which is
maintained, administered or contributed to by (or to which there is or may
be an obligation to contribute by) the Borrower or any of its Subsidiaries
in respect of any person's employment in Canada or a province or territory
thereof, all related funding agreements and all related agreements,
arrangements and understandings in respect of, or related to, any benefits
to be provided thereunder.
"Canadian Prepayment Percentage": as of any date of determination, the
------------------------------
percentage of the sum of the aggregate Commitments and the aggregate U.S.
11
<PAGE>
Commitments which is constituted by the aggregate Commitments.
"Canadian Subsidiary Collateral Covenant Agreement": each agreement
-------------------------------------------------
executed and delivered by a Subsidiary of the Borrower pursuant to
subsection 9.4, each such agreement to be of substantially the same import,
tenor and substance as the Collateral Covenant Agreement, with such changes
thereto (as agreed between the Borrower and the Administrative Agent) as
may be required or advisable under the laws of the jurisdiction of
incorporation of such Subsidiary (and the laws of any other jurisdiction as
may apply to such Canadian Subsidiary Collateral Covenant Agreement
(including any jurisdiction where such Subsidiary owns material assets)) in
connection with all security granted by such Subsidiary pursuant to
subsection 9.4.
"Canadian Subsidiary Debenture Pledge Agreement": each agreement
----------------------------------------------
executed and delivered by a Subsidiary of the Borrower pursuant to
subsection 9.4, each such agreement to be of substantially the same import,
tenor and substance as the Debenture Pledge Agreement, with such changes
thereto (as agreed between the Borrower and the Administrative Agent) as
may be required or advisable under the laws of the jurisdiction of
incorporation of such Subsidiary (and the laws of any other jurisdiction as
may apply to such Canadian Subsidiary Debenture Pledge Agreement (including
any jurisdiction where such Subsidiary owns material assets)) in connection
with the Canadian Subsidiary Demand Debenture.
"Canadian Subsidiary Demand Debenture": each deed or instrument
------------------------------------
executed and delivered by a Subsidiary of the Borrower pursuant to
subsection 9.4, each such agreement to be of substantially the same import,
tenor and substance as the Security Agreement, with such changes thereto
(as agreed between the Borrower and the Administrative Agent) as may be
required or advisable
12
<PAGE>
to create, under the laws of the jurisdiction of incorporation of such
Subsidiary (and the laws of any other jurisdiction as may apply to such
Canadian Subsidiary Demand Debenture (including any jurisdiction where such
Subsidiary owns material assets)), in favor of the Administrative Agent and
the Lenders, a valid, binding and enforceable mortgage, charge, assignment
and security interest in and to all of the assets of such Subsidiary, other
than real estate, motor vehicles and other assets of the type excluded from
Collateral pursuant to the Security Agreement.
"Canadian Subsidiary Guarantee": each Guarantee to be executed and
-----------------------------
delivered by each Subsidiary of the Borrower in favor of the Administrative
Agent, each agreement executed and delivered by a Subsidiary of the
Borrower pursuant to subsection 9.4, each such agreement to be of
substantially the same import, tenor and substance as the Canadian
Subsidiary Guarantee as attached to the Existing Credit Agreement as
Exhibit J, with such changes thereto (as agreed between the Borrower and
the Administrative Agent) as may be required or advisable under the laws of
the jurisdiction of incorporation of such Subsidiary (and the laws of any
other jurisdiction as may apply to such Canadian Subsidiary Guarantee
(including any jurisdiction where such Subsidiary owns material assets) in
connection with the Canadian Subsidiary Guarantee.
"Canadian Subsidiary Stock Pledge Agreement": each Stock Pledge
------------------------------------------
Agreement to be executed and delivered by the Borrower and/or any
Subsidiary of the Borrower that owns any Capital Stock of any Subsidiary of
the Borrower in favor of the Administrative Agent, each such agreement to
be of substantially the same import, tenor and substance as the form of
U.S. Borrower Canadian Stock Pledge Agreement, with such changes (as agreed
between the Borrower and the Administrative Agent) as may be required or
advisable
13
<PAGE>
under the laws of Ontario (in the case of the Borrower) and under the laws
of its jurisdiction of incorporation (in the case of a Subsidiary of the
Borrower) (and the laws of any other jurisdiction as may apply to such
Canadian Subsidiary Stock Pledge Agreement).
"Canadian Transfer Commitment Percentage": as to any Common Lender at
---------------------------------------
any time, the percentage of the aggregate Commitments of all Lenders then
constituted by the Commitment of such Common Lender (in its capacity as a
Lender hereunder) or the Lender which is a subsidiary or an affiliate of
such Common Lender.
"Capital Call Agreement": as defined in the U.S. Credit Agreement.
----------------------
"Capital Expenditures": with respect to any Person for any period,
--------------------
the sum of the aggregate of all expenditures (whether paid in cash,
capitalized as an asset or accrued as a liability) by such Person and its
consolidated Subsidiaries during such period which, in accordance with
GAAP, are or should be included in "capital expenditures" or similar items
reflected in the consolidated statement of cash flows of such Person for
such period.
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"C&D Fund IV": The Clayton & Dubilier Private Equity Fund IV Limited
-----------
Partnership, a Connecticut limited partnership.
"CD&R": as defined in the recitals hereto.
----
14
<PAGE>
"Closing Date": the date on which all the conditions precedent set
------------
forth in subsection 7.1 of the Existing Credit Agreement were satisfied or
waived.
"Closing Date Exchange Rate": $1.00 equals C$1.39310.
--------------------------
"Co-Agents": each Lender designated as such on the signature pages
---------
hereof.
"Collateral": all assets of the Loan Parties, now owned or
----------
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document (other than a U.S. Security Document).
"Collateral Agent": as defined in the preamble hereto.
----------------
"Collateral Covenant Agreement": the Collateral Covenant Agreement
-----------------------------
executed and delivered by the Borrower in favor of the Administrative
Agent, substantially in the form of Exhibit M to the Existing Credit
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
"Commercial Letter of Credit": as defined in subsection 4.1.
---------------------------
"Commitment": as to any Lender, its obligation to make Revolving
----------
Credit Loans to, and/or participate in Swing Line Loans made to, and/or
create Acceptances (or, in lieu thereof, to make loans pursuant to the
Acceptance Notes), and/or participate in Letters of Credit issued on behalf
of, the Borrower in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Lender's name in Schedule 1
under the heading "Commitment", as such amount may be reduced or increased
from time to time as provided in subsection 2.4 and the other
15
<PAGE>
applicable provisions hereof; collectively, as to all the Lenders, the
"Commitments".
-----------
"Commitment Fee Rate": 0.50% per annum, less the Margin Reduction
------------------- ----
Percentage in effect from time to time.
"Commitment Percentage": as to any Lender at any time, the percentage
---------------------
of the aggregate Commitments then constituted by its Commitment (or, if the
Commitments have terminated or expired, the percentage which (i) the sum of
(a) such Lender's then outstanding Revolving Credit Loans plus (b) such
Lender's participations in the aggregate L/C Obligations and Swing Line
Loans then outstanding plus (c) such Lender's Acceptances then outstanding
constitutes of (ii) the sum of (a) the aggregate Revolving Credit Loans of
all the Lenders then outstanding plus (b) the aggregate L/C Obligations
then outstanding plus (c) the aggregate Swing Line Loans then outstanding
plus (d) the aggregate Acceptances then outstanding).
"Commitment Period": the period from and including the Closing Date
-----------------
to but not including the Termination Date, or such earlier date as the
Commitments shall terminate as provided herein.
"Common Lender": each U.S. Lender which is also a Lender or the
-------------
parent or a subsidiary or affiliate thereof.
"Consolidated Adjusted EBITDA": of any Person, for any period, the
----------------------------
difference between (i) Consolidated EBITDA of such Person for such period,
minus (ii) Capital Expenditures (excluding any expenses incurred in
connection with normal replacement and maintenance programs properly
charged to current operations and excluding the amount of any Net Cash
Proceeds of Dispositions of assets pursuant to subsection 9.2(g) which are
reinvested in the business of the Borrower or
16
<PAGE>
a Subsidiary of the Borrower and the amount of any U.S. Net Cash Proceeds
of U.S. Dispositions of assets pursuant to subsection 8.6(g) of the U.S.
Credit Agreement which are reinvested in the business of the U.S. Borrower
or an Additional Subsidiary) paid in cash during such period.
"Consolidated EBITDA": of any Person, for any period, the
-------------------
Consolidated Net Income of such Person for such period, adjusted to exclude
the following items of income or expense to the extent that such items are
included in the calculation of Consolidated Net Income: (a) Consolidated
Interest Expense, (b) any non-cash interest expense and any other non-cash
expenses and charges, (c) total income tax expense, (d) depreciation
expense, (e) the expense associated with amortization of intangible and
other assets, (f) non-cash provisions for reserves for discontinued
operations, (g) any extraordinary, unusual or non-recurring gains or losses
or charges or credits and (h) any gain or loss associated with the sale or
write-up or write-down of assets.
"Consolidated Interest Expense": of any Person, for any period, cash
-----------------------------
interest expense of such Person for such period on its Indebtedness
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income": of any Person, for any period, net income
-----------------------
of such Person for such period, determined on a consolidated basis in
accordance with GAAP, provided that, for purposes of determining
--------
Consolidated Net Income of the U.S. Borrower and its consolidated
Subsidiaries for any period, all Dividends for such period shall be
deducted therefrom as an expense.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which
17
<PAGE>
such Person is a party or by which it or any of its property is bound.
"Credit Documents": the collective reference to the Loan Documents
----------------
and the U.S. Loan Documents.
"Credit Parties": the collective reference to the Loan Parties and
--------------
U.S. Loan Parties.
"Current Exchange Rate": as at any date of determination, the average
---------------------
of the bid/ask spot rates specified on the WRLD screen of Reuters
Information Services Inc. at 10:00 A.M., New York City time, on such date,
with respect to the purchase and sale of Canadian Dollars for U.S. Dollars.
"Debenture Pledge Agreement": the Debenture Pledge Agreement executed
--------------------------
and delivered by the Borrower in favor of the Administrative Agent,
substantially in the form of Exhibit D-2 to the Existing Credit Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Default": any of the events specified in Section 10 prior to the
-------
satisfaction of any requirement for the giving of notice, the lapse of
time, or both, or any other condition.
"Defaulted Receivable": any Account of the Borrower or any of its
--------------------
Subsidiaries which:
(i) has been or should have been charged-off as not
creditworthy in conformity with the accounting policies of the
Borrower as in effect on the Closing Date; or
(ii) is owed by an account debtor described in clause (l) of
the definition of Eligible Accounts.
18
<PAGE>
"Depositary Account": as defined in subsection 8.7(b).
------------------
"Depositary Bank": as defined in subsection 8.7(a).
---------------
"Disposition": as defined in the definition of the term "Asset Sale".
-----------
"Dividends": for any period, all dividends and other distributions
---------
paid by the U.S. Borrower to Holdings in cash during such period other than
(i) the payment permitted by subsection 8.7(g) of the U.S. Credit Agreement
and (ii) dividends and other distributions permitted by subsection 8.7(d)
of the U.S. Credit Agreement (but only to the extent such dividends or
distributions are made in respect of repurchases by Holdings of its common
stock or options, warrants or other rights to purchase its common stock
from Permitted Equity Purchasers referred to in clauses (i) and (ii) of the
definition thereof contained in the U.S. Credit Agreement) which are paid
by the U.S. Borrower to or on behalf of Holdings and used by Holdings for
the purposes described in the immediately preceding parenthetical.
"Draft": a draft substantially in the form of Exhibit B or in such
-----
other form as the Administrative Agent may from time to time reasonably
request (or to the extent the context shall require, an Acceptance Note,
delivered in lieu of a draft), as the same may be amended, supplemented or
otherwise modified from time to time.
"Effective Date": as defined in subsection 6.1.
--------------
"Eligible Accounts": at any time, an amount equal to the aggregate
-----------------
outstanding balance of all Accounts of the Borrower and its Subsidiaries
payable in Canadian Dollars as of such time, provided that, unless
--------
19
<PAGE>
otherwise approved in writing by the Collateral Agent, no Account shall be
deemed to be an Eligible Account if:
(a) either (i) the Account is unpaid more than 60 days after the
original statement due date (including, without limitation, the
aggregate credit balance determined on an Account by Account basis
more than 60 days old) or (ii) the Account is unpaid more than 120
days after the date on which an invoice therefor has been sent to the
Obligor in respect of such Account;
(b) the Obligor has been obligated in respect of a Defaulted
Receivable at any time during the immediately preceding 12-month
period, unless the payment of Accounts from such Obligor is secured in
a manner satisfactory to the Collateral Agent or, if the Account from
such Obligor arises subsequent to a decree or order for relief with
respect to such Obligor under any bankruptcy or insolvency laws (or
other similar laws), as now or hereafter in effect, the Collateral
Agent shall have determined that the timely payment and collection of
such Account will not be impaired;
(c) it is payable by an Obligor (or any known Subsidiary or
Affiliate thereof) and 50% or more, in face amount, of all Accounts
payable by such Obligor (and its known Affiliates) are ineligible
pursuant to (a) above;
(d) it is payable by an Obligor (or any known Subsidiary or
Affiliate thereof) and all Accounts payable by such Obligor (and its
known Subsidiaries and Affiliates) exceed 10% of all Eligible
Accounts; provided that Accounts of such an Obligor (and its known
Subsidiaries and Affiliates) shall only be deemed ineligible
20
<PAGE>
pursuant to this clause (d) to the extent of such excess;
(e) it arises out of a sale or an administrative charge made by
the Borrower or any of its Subsidiaries to the U.S. Borrower or any
Affiliate (other than Westinghouse or any division, Subsidiary or
Affiliate of Westinghouse) or Subsidiary of the Borrower or the U.S.
Borrower;
(f) the sale is to an Obligor located outside of Canada;
(g) the Account is the result of a charge-back or a reinvoice of
a disputed Account, the disposition of which has not been resolved, or
the Account is a Defaulted Receivable;
(h) the Account has been or should have been charged off as not
creditworthy in conformity with the accounting policies of the
Borrower as in effect on the Closing Date;
(i) it is an Account which may be set-off or charged against any
security deposit, progress payment or other similar advance or deposit
made by or for the benefit of the applicable Obligor; provided that
--------
any Account deemed ineligible pursuant to this clause (i) shall only
be ineligible to the extent of such set-off or charge against such
security deposit, progress payment or other similar advance or
deposit;
(j) the sale to the Obligor giving rise to the Account is on a
bill-and-hold, guarantied sale, sale-and-return, sale on approval or
consignment basis or made pursuant to any other written agreement
providing for repurchase or return, provided, however, that no Account
-------- -------
shall
21
<PAGE>
be excluded pursuant to this clause (j) solely as a result of the
customary quality warranties or the general right to return goods
provided by the Borrower or any of its Subsidiaries to its customers;
provided, further, that, with respect to Accounts arising from sales
-------- -------
to an Obligor on a bill-and-hold basis, if such Obligor has requested
that the goods subject to such sales be held by the Borrower or one of
its Subsidiaries and has nonetheless agreed to make payment on such
Accounts, such Accounts shall not be considered ineligible pursuant to
this clause (j); provided, further, that in no event shall the U.S.
-------- -------
Dollar equivalent (determined from time to time on the basis of then
Current Exchange Rates) of the aggregate amount of all Accounts
included as Eligible Accounts pursuant to the immediately preceding
proviso exceed the product of (i) the Canadian Prepayment Percentage
in effect from time to time, multiplied by (ii) $2,500,000;
----------
(k) (i) the Obligor has disputed its liability on, or the Obligor
has made any claim or defense with respect to, such Account or any
other account due from such Obligor to the Borrower, the U.S. Borrower
or any of their respective Subsidiaries, which has not been resolved
or (ii) the Account otherwise is, or is reasonably expected to become,
subject to any right of set-off by the Obligor; provided that any
--------
Account deemed ineligible pursuant to this clause (k) shall only be
ineligible to the extent of the amount owed by the Borrower, the U.S.
Borrower or any of their respective Subsidiaries to the Obligor, the
amount of such dispute, claim or defense, or the maximum amount at any
time of such right of set-off, as applicable; provided, further, that
-------- -------
routine adjustments to an Account common in the industry in which the
Borrower, the U.S. Borrower or any of their respective
22
<PAGE>
Subsidiaries conduct business and common to such businesses, such as
for volume or quantity differences or returned goods, will be deemed
not to constitute a dispute, claim, defense or setoff;
(l) a proceeding under any bankruptcy or insolvency laws (or any
similar laws) has occurred and is continuing with respect to the
Obligor, unless the payment of Accounts from such Obligor is secured
in a manner satisfactory to the Collateral Agent or, if the Account
from such Obligor arises subsequent to a decree or order for relief
with respect to such Obligor under any bankruptcy or insolvency laws
(or any similar laws), as now or hereafter in effect, the Collateral
Agent shall have determined that the timely payment and collection of
such Account will not be impaired;
(m) Accounts in respect of which the Obligor is Canada or any
province, department, agency or instrumentality thereof; provided that
--------
Accounts otherwise ineligible pursuant to this clause (m) shall only
be ineligible to the extent that the aggregate amount of all such
Accounts is in excess of C$1,000,000; and provided further that
--------
amounts in excess of C$1,000,000 in respect of such Accounts shall
nonetheless be considered eligible to the extent that the Borrower or
any applicable Subsidiary duly assigns its rights to payment of such
Accounts to the Administrative Agent pursuant to the Financial
Administration Act (Canada) or similar or equivalent provincial
legislation;
(n) (i) except to the extent set forth in the second and third
provisos to clause (j) above, the goods giving rise to such Account
have not been delivered, and are not in transit, to the Obligor, (ii)
the services giving rise to such Account have not been performed or
(iii) the
23
<PAGE>
Account otherwise does not represent a final sale or transfer of title
to the Obligor;
(o) the Account (or the sale giving rise thereto) does not comply
in all material respects with all applicable legal requirements,
including, where applicable, any consumer protection legislation
applicable to credit transactions;
(p) the Account is subject to any material restrictions on the
transfer, assignability or sale thereof, enforceable against the
assignee, except as described in clause (m) above;
(q) the Administrative Agent does not have a valid and perfected
first priority security interest in such Account or the Account does
not otherwise conform in all material respects to the representations
and warranties contained in this Agreement or any of the Security
Agreements;
(r) any portion of an Account to the extent such portion is for
interest or finance charges accrued on past due balances of any
Accounts;
(s) to the extent the Account represents an amount of billed
receivables resulting from the shipping and invoicing of finished
product which will not be subsequently collected because payment has
already been received on account of progress payment billing (as such
progress billings may be reduced by adjustment thereto);
(t) to the extent an Account is to be reduced as a result of
pending price decreases relating to the agreement giving rise to such
Account, such reduction of such Account; provided that an Account
--------
otherwise ineligible pursuant to this clause (t) shall not be
considered ineligible to the extent that the pending price decrease
24
<PAGE>
consists of a discount for early payment which is not then
determinable or a credit for volume purchases which is not then
determinable; or
(u) Accounts classified as "Legal Accounts" on the books of the
Borrower or one of its Subsidiaries in conformity with the accounting
policies of the Borrower as in effect of the Closing Date.
"Eligible Inventory": all Inventory of the Borrower and its
------------------
Subsidiaries that consists of finished goods or spare parts available for
sale to customers to the extent not excluded pursuant to clauses (a)
through (g) below. In determining the amount to be so included, the amount
of such Inventory shall be valued at the lower of average cost or market
value on a basis consistent with the Borrower's or the relevant
Subsidiary's accounting practice as in effect on the Closing Date less
----
reserves taken, if any, on account of physical inventory adjustments (in
respect of aged Inventory, excess Inventory or otherwise) as recorded in
the Borrower's or the relevant Subsidiary's accounting records and goods in
transit from third parties that are not excluded pursuant to clauses (a)
through (g) below. Unless otherwise approved in writing by the Collateral
Agent, no Inventory shall be deemed Eligible Inventory of the Borrower or
any of its Subsidiaries if:
(a) the Inventory is not owned solely by the Borrower or a
Subsidiary of the Borrower or the Borrower or any such Subsidiary does
not have good, valid and marketable title to such Inventory;
(b) the Inventory is (i) not located at property that is owned or
leased by the Borrower or any Subsidiary of the Borrower and (ii)
subject to a Lien other than Liens pursuant to the
25
<PAGE>
Security Agreements, Liens arising by operation of law (appropriate
reserves for which have been reasonably established by the Borrower or
any such Subsidiary) and Liens for normal and customary warehousing
and transportation charges (appropriate reserves for which have been
reasonably established by the Borrower or any such Subsidiary);
(c) the Inventory is not subject to a perfected first priority
Lien in favor of the Administrative Agent except for Liens arising by
operation of law (appropriate reserves for which have been reasonably
established by the Borrower or any of its Subsidiaries) and, with
respect to Eligible Inventory located at sites described in clause (b)
above, for Liens for normal and customary warehousing and
transportation charges (appropriate reserves for which have been
reasonably established by the Borrower or any of its Subsidiaries);
(d) the Inventory is not located in Canada;
(e) the Inventory does not conform in all material respects to
the representations and warranties contained in this Agreement or any
of the Security Agreements;
(f) Specialized Inventory (other than New Inventory) of a
particular stock keeping unit to the extent that the number of such
stock keeping units held by the Borrower or any of its Subsidiaries on
any date of determination exceeds the number of such stock keeping
units sold by Westinghouse Canada, the Borrower or any of its
Subsidiaries during the 12 consecutive fiscal month period immediately
preceding such date of determination; provided that in no event shall
--------
the U.S. Dollar equivalent (determined from time to
26
<PAGE>
time on the basis of then Current Exchange Rates) of the value of all
Specialized Inventory included as Eligible Inventory pursuant to this
clause (f) exceed at any time the product of (i) the Canadian
Prepayment Percentage in effect from time to time, multiplied by (ii)
----------
$5,000,000; or
(g) Inventory (other than Specialized Inventory and New
Inventory) of a particular stock keeping unit to the extent that the
number of stock keeping units held by the Borrower or any of its
Subsidiaries on any date of determination exceeds (i) for any
determination during the period from the Closing Date to May 31, 1995,
two times, and (ii) for any determination thereafter, one times, the
----- -----
number of such stock keeping units sold by Westinghouse Canada, the
Borrower or any of its Subsidiaries during the 12 consecutive fiscal
month period immediately preceding such date of determination;
provided that in no event shall the U.S. Dollar equivalent (determined
--------
from time to time on the basis of then Current Exchange Rates) of the
value of all Inventory included as Eligible Inventory pursuant to
subclause (i) of this clause (g) exceed in the aggregate at any time
the sum of (x) the product of (1) the Canadian Prepayment Percentage
in effect from time to time, multiplied by (2) $8,500,000 and (y) the
----------
U.S. Dollar equivalent (determined from time to time on the basis of
then Current Exchange Rates) of the value of such Inventory that would
have been included as Eligible Inventory pursuant to such subclause
(i) had the reference therein to the number "two" been a reference to
the number "one".
"Environmental Costs": any and all costs or expenses (including,
-------------------
without limitation, attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses),
27
<PAGE>
of whatever kind or nature, known or unknown, contingent or otherwise,
arising out of, or in any way relating to any violation of, noncompliance
with or liability under any Environmental Laws or any orders, requirements,
demands, or investigations of any person related to any Environmental Laws.
Environmental Costs include any and all of the foregoing, without regard to
whether they arise out of or are related to any past, pending or threatened
proceeding of any kind.
"Environmental Laws": any and all applicable foreign (including,
------------------
without limitation, laws of the United States), federal, territorial,
provincial, local or municipal laws, rules, orders, regulations, statutes,
by-laws, ordinances, codes, decrees, requirements (including, without
limitation, guidelines) of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
"Event of Default": any of the events specified in Section 10,
----------------
provided that any requirement for the giving of notice, the lapse of time,
--------
or both, or any other condition, has been satisfied.
"Existing Credit Agreement": as defined in the recitals hereto.
-------------------------
"Existing U.S. Credit Agreement": as defined in the recitals hereto.
------------------------------
"Extension of Credit": as to any Lender, the making of a Loan by such
-------------------
Lender, the acceptance of a Draft or an Acceptance Note by such Lender or
the issuance of, or participation in, a Letter of Credit by such Lender.
28
<PAGE>
"Financial Statement Delivery Default": any Default which occurs
------------------------------------
solely as a result of a failure by the Borrower to deliver the financial
statements required to be delivered under subsection 8.1(a), (b) or (c) (as
applicable).
"Financing Lease": any lease of property, real or personal, the
---------------
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"First Mortgage Notes": the collective reference to the Canadian
--------------------
First Mortgage Notes and the RealCo First Mortgage Notes.
"Fixed Charge Coverage Ratio": for any period, the ratio of
---------------------------
Consolidated Adjusted EBITDA of the U.S. Borrower and its consolidated
Subsidiaries for such period to Consolidated Interest Expense of the U.S.
Borrower and its consolidated Subsidiaries for such period.
"Foreign Subsidiary": any Subsidiary of the Borrower which is not
------------------
organized under the laws of the United States or any state thereof or the
District of Columbia.
"GAAP": generally accepted accounting principles in effect from time
----
to time in the United States of America or, as the context otherwise
requires, in Canada.
"General Assignment of Book Debts": the General Assignment of Book
--------------------------------
Debts executed and delivered by the Borrower, substantially in the form of
Exhibit P to the Existing Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Governmental Authority": any nation or government, any state or
----------------------
province or other political
29
<PAGE>
subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
-------------------
(the "primary obligor") in any manner, whether directly or indirectly,
---------------
including, without limitation, any such obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment
of any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
-------- -------
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect
of which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing
30
<PAGE>
person may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Guarantees": the collective reference to the U.S. Borrower
----------
Guarantee, each U.S. Guarantee and each Canadian Subsidiary Guarantee.
"Guarantor": each Person party to a Guarantee.
---------
"Holdings": as defined in the recitals hereto.
--------
"Holdings Canadian First Mortgage Note Guarantees": the guarantees
------------------------------------------------
included on the Canadian First Mortgage Notes and made by Holdings in favor
of the holders of the Canadian First Mortgage Notes, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with subsection 9.6 hereof and subsection 8.8 of the U.S. Credit Agreement.
"Holdings Guarantee": as defined in the U.S. Credit Agreement.
------------------
"Indebtedness": of any Person at any date, (a) all indebtedness of
------------
such Person for borrowed money or for the deferred purchase price of
property or services (other than trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (b)
any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in respect of
acceptances issued or
31
<PAGE>
created for the account of such Person, (e) all obligations of such Person
in respect of interest rate protection agreements, interest rate futures,
interest rate options, interest rate caps and any other interest rate hedge
arrangements and (f) all indebtedness or obligations of the types referred
to in the preceding clauses (a) through (e) secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"Intellectual Property": the meaning ascribed to such term in the
---------------------
U.S. Credit Agreement.
"Interest Act": the Interest Act (Canada), as amended from time to
------------
time.
"Interest Payment Date": as to any Prime Rate Loan, the last day of
---------------------
each March, June, September and December to occur while such Loan is
outstanding.
"Inventory": as defined in the Personal Property Security Act; and,
---------
with respect to the Borrower or any of its Subsidiaries, all such inventory
of the Borrower or such Subsidiary, including, without limitation: (i) all
finished goods, parts, components, assemblies, supplies, labor, burden and
materials used or consumed in its business; (ii) all goods, wares and
merchandise, finished or unfinished, held for sale; and (iii) all goods
returned to or repossessed by the Borrower or such Subsidiary.
"Issuing Lender": Bank of Nova Scotia, in its capacity as issuer of
--------------
any Letter of Credit.
"Landlord's Waiver": a Landlord's Waiver, substantially in the form
-----------------
of Exhibit D.
32
<PAGE>
"L/C Commission Rate": 1.50% per annum, less the Margin Reduction
------------------- ----
Percentage in effect from time to time.
"L/C Commitment": C$5,000,000.
--------------
"L/C Fee Payment Date": with respect to any Letter of Credit, the
--------------------
last day of each March, June, September and December occurring after the
date of issuance thereof and prior to the expiration thereof.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
---------------
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to subsection 4.5(a).
"L/C Participants": the collective reference to all Lenders other
----------------
than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
-------
"Lending Parties": the collective reference to the Lenders and the
---------------
U.S. Lenders; individually, a "Lending Party".
-------------
"Letters of Credit": as defined in subsection 4.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, security
----
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing).
33
<PAGE>
"Loans": the collective reference to loans (including, without
-----
limitation, Swing Line Loans) made by Lenders pursuant to this Agreement.
"Loan Documents": this Agreement, the Notes, the Applications, the
--------------
Drafts, the Acceptances, the Acceptance Notes, the Guarantees, the Security
Documents, the Collateral Covenant Agreement and the Canadian Subsidiary
Collateral Covenant Agreements.
"Loan Parties": Holdings, the Borrower, the U.S. Borrower and each
------------
Additional Subsidiary and each Subsidiary of the Borrower which is or
becomes a party to a Loan Document; individually, a "Loan Party".
----------
"Majority Lenders": at any time, Lenders which, in the aggregate,
----------------
have Commitments (or, if the Commitments have terminated or expired,
Aggregate Outstandings) aggregating at least 51% of the Commitments of all
Lenders (or, if the Commitments have terminated or expired, the Aggregate
Outstandings of all Lenders).
"Margin Adjustment Period": each period commencing on an Adjustment
------------------------
Date and ending on the Business Day immediately preceding the next
succeeding Adjustment Date.
"Margin Reduction Percentage": (a) during the period from and
---------------------------
including the Closing Date to but excluding the Adjustment Date which
occurs concurrently with the delivery by the Borrower pursuant to
subsection 8.1(b) or (c) (as applicable) of the financial statements of the
U.S. Borrower for the quarterly period ended June 30, 1995, zero and (b)
during each Margin Adjustment Period which occurs on or after the
Adjustment Date referred to in clause (a) above and in respect of which the
Fixed Charge Coverage Ratio for the four consecutive fiscal quarters of
34
<PAGE>
the U.S. Borrower immediately preceding the commencement of such Margin
Adjustment Period (determined by reference to the certificates delivered
pursuant to subsection 8.2(b) concurrently with the financial statements
delivered under subsection 8.1(a), (b) or (c) (as applicable), or the
Annual Unaudited Financial Statements (as defined below in this
definition), as the case may be, with respect to such four consecutive
fiscal quarters) is (i) less than 3.00:1, zero, (ii) less than 3.50:1 but
greater than or equal to 3.00:1, 0.25% (when used in the definitions of
Prime Rate Margin and L/C Commission Rate and in subsection 3.4) and 0.125%
(when used in the definition of Commitment Fee Rate), (iii) less than
4.00:1 but greater than or equal to 3.50:1, 0.50% (when used in the
definitions of Prime Rate Margin and L/C Commission Rate and in subsection
3.4) and 0.125% (when used in the definition of Commitment Fee Rate), (iv)
less than 4.50:1 but greater than or equal to 4.00:1, 0.75% (when used in
the definitions of Prime Rate Margin and L/C Commission Rate and in
subsection 3.4) and 0.1875% (when used in the definition of Commitment Fee
Rate), (v) less than 5.00:1 but greater than or equal to 4.50:1, 0.90%
(when used in the definitions of Prime Rate Margin and L/C Commission Rate
and in subsection 3.4) and 0.25% (when used in the definition of Commitment
Fee Rate) and (vi) greater than or equal to 5.00:1, 1.0% (when used in the
definitions of Prime Rate Margin and L/C Commission Rate and in subsection
3.4) and 0.275% (when used in the definition of Commitment Fee Rate),
provided that:
--------
(x) notwithstanding the foregoing, during any period from and
including the date on which an Event of Default has occurred to but
excluding the date on which such Event of Default is no longer
35
<PAGE>
continuing, the Margin Reduction Percentage shall be zero;
(y) if the Borrower delivers to the Administrative Agent any
financial statements referred to in clause (b) of the definition of
Adjustment Date (each, an "Annual Unaudited Financial Statement") and
------------------------------------
thereafter the financial statements delivered pursuant to subsection
8.1(a) in respect of the period covered by such Annual Unaudited
Financial Statement demonstrates a Fixed Charge Coverage Ratio for
such period which differs from that demonstrated by such Annual
Unaudited Financial Statement, any change in the Margin Reduction
Percentage occurring as a result of such difference shall be given
retroactive effect to the first Business Day after delivery of such
Annual Unaudited Financial Statement; and
(z) if any Financial Statement Delivery Default becomes an Event
of Default, the Margin Reduction Percentage (if greater than zero)
that was in effect for the period commencing on the date such
Financial Statement Delivery Default occurred to the date such
Financial Statement Delivery Default became an Event of Default shall
be retroactively adjusted to zero for such period and shall remain
zero until the first Business Day following receipt by the
Administrative Agent of the financial statements the failure to
deliver which gave rise to such Financial Statement Delivery Default,
which date shall constitute an Adjustment Date and upon which date the
Margin Adjustment Percentage shall be determined in accordance with
the other provisions of this definition.
If payments are made hereunder on the basis of a Margin Reduction
Percentage that is retroactively adjusted as a result of the occurrence of
any of the
36
<PAGE>
events described in clauses (x), (y) or (z) of the proviso to the
immediately preceding sentence, the Lenders and the Borrower shall make
such payments to the Administrative Agent (which shall credit the account
of the Borrower or allocate such payments among the Lenders in accordance
with their respective interests in the payments theretofore made hereunder,
as the case may be, on the basis of the Margin Reduction Percentage that
was so retroactively adjusted) as may be necessary to give effect to such
adjustment, such payments to be calculated by the Administrative Agent
(which shall notify the Borrower and the Lenders thereof), to be made as
soon as practicable (but in any event no later than two Business Days after
such notice is given by the Administrative Agent) and to include interest
at the applicable Bank of Canada Rate for the period from the date to which
the Margin Reduction Percentage has been retroactively adjusted to the date
of the applicable payment on any amounts required to be paid as a result of
such retroactive adjustment.
"Material Adverse Effect": as defined in the U.S. Credit Agreement.
-----------------------
"Mixed Asset Sale": any Disposition constituting a "Mixed Asset Sale"
----------------
under and as defined in the Canadian First Mortgage Notes.
"Monthly Borrowing Base Certificate": as defined in subsection
----------------------------------
8.2(c).
"Net Cash Proceeds": with respect to any Asset Sale (including any
-----------------
Asset Sale that constitutes a sale and leaseback transaction permitted
under subsection 8.12 of the U.S. Credit Agreement), any sale or issuance
of equity securities of Holdings (but excluding any sale or issuance of
equity securities of Holdings to one or more Permitted Equity Purchasers to
the extent such sale or issuance is permitted by the
37
<PAGE>
Holdings Guarantee) or any incurrence by the Borrower or any of its
Subsidiaries of any Indebtedness for borrowed money (excluding any
Indebtedness permitted by subsection 8.2 of the U.S. Credit Agreement), an
amount equal to the gross cash proceeds of such Asset Sale, issuance or
incurrence, net of the following amounts (but only to the extent such
amounts are paid or incurred by Holdings, the Borrower or any of its
Subsidiaries): (i) reasonable attorneys' fees, accountants' fees,
brokerage, consultant and other customary fees, underwriting commissions
and other reasonable fees and expenses actually incurred in connection with
such Asset Sale, issuance or incurrence, (ii) taxes paid or reasonably
estimated to be payable as a result thereof, after taking into account all
available deductions and credits in connection with such Asset Sale, (iii)
appropriate amounts to be provided by the Borrower or any of its
Subsidiaries as a reserve, in accordance with GAAP as in effect from time
to time in Canada, against any liabilities associated with such Asset Sale
and retained by the Borrower or such Subsidiary, as the case may be, after
such Asset Sale, and (iv) in the case of a sale or sale and leaseback of or
involving an asset subject to a Lien securing (a) any Indebtedness (other
than the Canadian First Mortgage Notes), payments made and installment
payments required to be made to repay such Indebtedness, including payments
in respect of principal, interest and prepayment premiums and penalties or
(b) the Canadian First Mortgage Notes, the Net Proceeds Allocable to Payee
and any Reserved Amounts (as each such term is defined in the Canadian
First Mortgage Notes) to the extent such Reserved Amounts are not paid to
the Borrower, with respect to such Asset Sale.
"New Inventory": Inventory of a particular stock keeping unit which
-------------
has been sold or offered for sale by the Borrower or any of its
Subsidiaries for a period of only fifteen months or less.
38
<PAGE>
"Non-Excluded Taxes": as defined in subsection 5.9.
------------------
"Notes": the collective reference to the Revolving Credit Notes and
-----
the Swing Line Notes.
"Obligor": any purchaser of goods or services or other Person
-------
obligated to make payment to the Borrower or any of its Subsidiaries in
respect of a purchase of such goods or services.
"Obligations": as of any date of determination, (i) the aggregate
-----------
outstanding principal amount of the Loans, together with all accrued and
unpaid interest thereon, (ii) the outstanding Reimbursement Obligations,
together with all accrued and unpaid interest thereon, (iii) the aggregate
outstanding Acceptance Reimbursement Obligations, (iv) all accrued and
unpaid fees payable pursuant to subsections 4.3 and 5.3 and (v) all other
amounts then due and payable hereunder or under any of the other Loan
Documents.
"Operating Fund Limit": as defined in subsection 8.7(c).
--------------------
"Participants": as defined in subsection 12.6(b).
------------
"Permitted Equity Purchasers": as defined in the U.S. Credit
---------------------------
Agreement.
"Person": an individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personal Property Security Act" or "PPSA": the Personal Property
------------------------------ ----
Security Act (Ontario), as amended from time to time.
39
<PAGE>
"Prime Rate": at any date, the greater on such date of (i) the rate
----------
designated by Bank of Nova Scotia from time to time as its prime rate for
Canadian Dollar commercial loans made in Canada and (ii) 3/4 of 1% above
the Reference Discount Rate for Acceptances having a term to maturity of 30
days, as advised by the Administrative Agent to the Borrower on such date.
The Prime Rate is not intended to be the lowest rate of interest charged by
Bank of Nova Scotia in connection with extensions of credit in Canadian
Dollars to debtors.
"Prime Rate Loans": Loans denominated in Canadian Dollars which bear
----------------
interest at a rate based upon the Prime Rate.
"Prime Rate Margin": for each Prime Rate Loan, 0.75% per annum, less
----------------- ----
the Margin Reduction Percentage in effect from time to time, provided that
--------
the Prime Rate Margin shall never be less than zero.
"Principal Loan Documents": as defined in Section 12.1.
------------------------
"Properties": as defined in the U.S. Credit Agreement.
----------
"Qualifying Canadian Institutions": (a) banks incorporated under the
--------------------------------
Bank Act (Canada) and named in Schedule I or Schedule II thereof which are
resident in Canada within the meaning of the Tax Act and (b) other
financial institutions incorporated in Canada and resident in Canada within
the meaning of the Tax Act.
"Quebec Moveable Hypothec": the hypothec executed and delivered by
------------------------
the Borrower, substantially in the form of Exhibit O to the Existing Credit
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
40
<PAGE>
"RealCo": as defined in the recitals to the Existing Credit
------
Agreement.
"RealCo Cash Collateral Agreement": as defined in the U.S. Credit
--------------------------------
Agreement.
"RealCo First Mortgage Notes": as defined in the U.S. Credit
---------------------------
Agreement.
"RealCo First Mortgage Note Guarantees": as defined in the U.S.
-------------------------------------
Credit Agreement.
"RealCo Mortgaged Property": as defined in the U.S. Credit Agreement.
-------------------------
"RealCo Mortgages": as defined in the U.S. Credit Agreement.
----------------
"Reference Banks": Bank of Nova Scotia, Toronto-Dominion Bank and
---------------
National Bank of Canada.
"Reference Discount Rate": on any date with respect to each Draft
-----------------------
requested to be accepted by a Lender, the arithmetic average of the
discount rates (expressed as a percentage calculated on the basis of a year
of 365 days) quoted by the Toronto offices of each of the Reference Banks,
at 10:00 A.M. (Toronto time) on the Borrowing Date as the discount rate at
which each such Reference Bank would, in the normal course of its business,
purchase on such date Acceptances having an aggregate face amount equal to
C$1,000,000 and having the term to maturity as designated by the Borrower
pursuant to subsection 3.2. The Administrative Agent shall advise the
Borrower and the Lenders, either in writing or verbally, by 11:00 A.M.
(Toronto time) on the Borrowing Date as to the applicable Reference
Discount Rate and corresponding Acceptance Purchase Price in respect of
Acceptances having the maturities selected by the Borrower.
41
<PAGE>
"Refunded Swing Line Loans": as defined in subsection 2.5(c).
-------------------------
"Register": as defined in subsection 12.6(d).
--------
"Reimbursement Obligations": the obligation of the Borrower to
-------------------------
reimburse the Issuing Lender pursuant to subsection 4.5(a) for amounts
drawn under Letters of Credit.
"Request for Acceptances": as defined in subsection 3.2(a).
-----------------------
"Requirement of Law": as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule, guideline or regulation or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
material property or to which such Person or any of its material property
is subject.
"Responsible Officer": as to any Person, any of the following
-------------------
officers of such Person: (i) the chief executive officer or the president
of such Person and, with respect to financial matters, the chief financial
officer, the treasurer or the controller of such Person and (ii) any vice
president of such Person or, with respect to financial matters, any
assistant treasurer or assistant controller of such Person, who has been
designated in writing to the Administrative Agent as a Responsible Officer
by such chief executive officer or president of such Person or, with
respect to financial matters, by such chief financial officer of such
Person; the Borrower shall ensure that at least one vice president is
designated to the Administrative Agent as a Responsible Officer by the
chief executive officer or president of the Borrower pursuant to the
foregoing clause (ii) from time to time.
42
<PAGE>
"Revolving Credit Loans": as defined in subsection 2.1.
----------------------
"Revolving Credit Note": as defined in subsection 2.2.
---------------------
"Security Agreement": the Demand Debenture executed and delivered by
------------------
the Borrower in favor of the Administrative Agent, substantially in the
form of Exhibit D-1 to the Existing Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Security Agreements": the collective reference to the Security
-------------------
Agreement, the Quebec Moveable Hypothec, the General Assignment of Book
Debts, the Debenture Pledge Agreement, the Bank Act Security, the
Subsidiary Security Agreements, and instruments, documents and agreements
described in Schedule 9.
"Security Documents": the collective reference to the Security
------------------
Agreements, the Canadian Subsidiary Stock Pledge Agreements and each U.S.
Security Document (other than the U.S. Borrower Canadian Stock Pledge
Agreement).
"Solvent" and "Solvency": with respect to any Person on a particular
------- --------
date, the condition that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
existing debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (d) such Person is not engaged in business or a
transaction, and is not
43
<PAGE>
about to engage in business or a transaction, for which such Person has an
unreasonably small amount of capital.
"Specialized Inventory": Inventory not customarily offered by the
---------------------
Borrower or any of its Subsidiaries for general sale to its customers and
which has been manufactured in accordance with specifications provided to
the Borrower or any such Subsidiary by or on behalf of a particular
customer which render such Inventory unsuitable for general sale to
customers.
"Standby Letter of Credit": as defined in subsection 4.1.
------------------------
"Subordinated Indebtedness": as defined in the U.S. Credit Agreement.
-------------------------
"Subsidiary": as to any Person, a corporation, partnership or other
----------
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Security Agreements": the collective reference to the
------------------------------
Canadian Subsidiary Demand Debentures and the Canadian Subsidiary Debenture
Pledge Agreements.
44
<PAGE>
"Supermajority Lenders": at any time, Lenders which, in the
---------------------
aggregate, have Commitments (or, if the Commitments have terminated or
expired, Aggregate Outstandings) aggregating at least 75% of the
Commitments of all Lenders (or, if the Commitments have terminated or
expired, the Aggregate Outstandings of all Lenders).
"Swing Line Commitment": the Swing Line Lender's obligation to make
---------------------
Swing Line Loans pursuant to subsection 2.5.
"Swing Line Lender": Bank of Nova Scotia in its capacity as provider
-----------------
of the Swing Line Loans.
"Swing Line Loans": as defined in subsection 2.5(a).
----------------
"Swing Line Note": as defined in subsection 2.5(b).
---------------
"Tax Act": the Income Tax Act (Canada), as amended from time to time.
-------
"Termination Date": February 28, 2000.
----------------
"Transferee": as defined in subsection 12.6(f).
----------
"Uniform Customs: the Uniform Customs and Practice for Documentary
---------------
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"U.S. Acquisition Agreement": the Acquisition Agreement, dated as of
--------------------------
February 15, 1994, between Holdings and Westinghouse U.S., as amended,
supplemented or otherwise modified from time to time in accordance with
subsection 8.8.
45
<PAGE>
"U.S. Administrative Agent": as defined in the recitals hereto.
-------------------------
"U.S. Aggregate Asset Sale Shortfall Amount": the meaning ascribed to
------------------------------------------
the term "Aggregate Asset Sale Shortfall Amount" in the U.S. Credit
Agreement.
"U.S. Borrower": as defined in the recitals hereto.
-------------
"U.S. Borrower Canadian First Mortgage Note Guarantees": the
-----------------------------------------------------
guarantees included on the Canadian First Mortgage Note and made by the
U.S. Borrower in favor of the holders of the Canadian First Mortgage Notes,
as the same may be amended, supplemented or otherwise modified from time to
time in accordance with subsection 9.6 hereof and subsection 8.8 of the
U.S. Credit Agreement.
"U.S. Borrower Canadian Stock Pledge Agreement": the meaning ascribed
---------------------------------------------
to the term "Borrower Canadian Stock Pledge Agreement" in the U.S. Credit
Agreement.
"U.S. Borrower Guarantee": the Guarantee, substantially in the form
-----------------------
of Exhibit L to the Existing Credit Agreement, made by the U.S. Borrower in
favor of the Administrative Agent, as the same may be amended, supplemented
or otherwise modified from time to time.
"U.S. Borrowing Base": the meaning ascribed to the term "Borrowing
-------------------
Base" in the U.S. Credit Agreement.
"U.S. Borrowing Base Default": the meaning ascribed to the term
---------------------------
"Borrowing Base Default" in the U.S. Credit Agreement.
"U.S.-Canada Transfer": as defined in subsection 2.4(b).
--------------------
46
<PAGE>
"U.S. Collateral": the meaning ascribed to the term "Collateral" in
---------------
the U.S. Credit Agreement.
"U.S. Collateral Agent": Barclays in its capacity as collateral agent
---------------------
for the U.S. Administrative Agent and the Administrative Agent under each
U.S. Security Document (other than the U.S. Borrower Canadian Stock Pledge
Agreement).
"U.S. Commitment" and "U.S. Commitments": the meanings ascribed to
--------------- ----------------
the term "Commitment" and "Commitments", respectively, in the U.S. Credit
Agreement.
"U.S. Credit Agreement": as defined in the recitals hereto.
---------------------
"U.S. Default": the meaning ascribed to the term "Default" in the
------------
U.S. Credit Agreement.
"U.S. Disposition": the meaning ascribed to the term "Disposition" in
----------------
the U.S. Credit Agreement.
"U.S. Dollar Increase Amount": as defined in subsection 2.4(b).
---------------------------
"U.S. Dollar Reduction Amount": as defined in subsection 2.4(b).
----------------------------
"U.S. Dollars" and "$": dollars in lawful currency of the United
------------ -
States of America.
"U.S. Event of Default": the meaning ascribed to the term "Event of
---------------------
Default" in the U.S. Credit Agreement.
"U.S. Extensions of Credit": the meaning ascribed to the term
-------------------------
"Extensions of Credit" in the U.S. Credit Agreement.
47
<PAGE>
"U.S. Guarantees": the meaning ascribed to the term "Guarantees" in
---------------
the U.S. Credit Agreement.
"U.S. L/C Obligations": the meaning ascribed to the term "L/C
--------------------
Obligations" in the U.S. Credit Agreement.
"U.S. Lenders": as defined in the recitals hereto.
------------
"U.S. Letters of Credit": the meaning ascribed to the term "Letters
----------------------
of Credit" in the U.S. Credit Agreement.
"U.S. Loan Documents": the meaning ascribed to the term "Loan
-------------------
Documents" in the U.S. Credit Agreement.
"U.S. Loans": the meaning ascribed to the term "Loans" in the U.S.
----------
Credit Agreement.
"U.S. Net Cash Proceeds": the meaning ascribed to the term "Net Cash
----------------------
Proceeds" in the U.S. Credit Agreement.
"U.S. Security Documents": the meaning ascribed to the term "Security
-----------------------
Documents" in the U.S. Credit Agreement.
"U.S. Transfer Commitment Percentage": as to any Common Lender or any
-----------------------------------
Lender at any time, the percentage of the aggregate U.S. Commitments of all
Common Lenders then constituted by the U.S. Commitment of (i) in the case
of a Common Lender or a Lender which is a Common Lender, such Common Lender
or (ii) in the case of a Lender which is not a Common Lender, the Common
Lender which is the parent or a subsidiary or an affiliate of such Lender.
"WESCO": an unincorporated division of Westinghouse U.S. that carried
-----
on business under the
48
<PAGE>
names of "Westinghouse Electric Supply Company", "WESCO", and at certain
branch locations, under the names of "Caribe Industrial and Electric
Supplier", "Electra" and "Superior Electric", together with an
unincorporated division of Westinghouse Canada, that carried on business
under the name of "WESCO".
"Westinghouse": the collective reference to Westinghouse U.S. and
------------
Westinghouse Canada.
"Westinghouse Canada": Westinghouse Canada, Inc., a Canadian
-------------------
corporation and a wholly owned Subsidiary of Westinghouse U.S.
"Westinghouse U.S.": Westinghouse Electric Corporation, a
-----------------
Pennsylvania corporation.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes and any other Loan Document, and
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
49
<PAGE>
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions hereof,
-----------
each Lender severally agrees to make revolving credit loans ("Revolving Credit
----------------
Loans") to the Borrower from time to time during the Commitment Period in an
- -----
aggregate principal amount at any one time outstanding which, when added to the
sum of the aggregate undiscounted face amount of all outstanding Acceptances of
such Lender and such Lender's Commitment Percentage of the then outstanding L/C
Obligations and the then outstanding Swing Line Loans, does not exceed the
lesser of (i) the amount of such Lender's Commitment and (ii) such Lender's
Commitment Percentage of the Borrowing Base then in effect. During the
Commitment Period the Borrower may use the Commitments by borrowing, prepaying
the Revolving Credit Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
(b) The Revolving Credit Loans shall be Prime Rate Loans.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
----------------------
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (each, as amended, supplemented, replaced or otherwise modified
from time to time, a "Revolving Credit Note"), payable to the order of such
---------------------
Lender and representing the obligation of the Borrower to pay an amount equal to
the lesser of (a) the amount set forth opposite such Lender's name in Schedule 1
under the heading "Commitment" and (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by such Lender. Each Lender is hereby
authorized to record the date and amount of each Revolving
50
<PAGE>
Credit Loan made by such Lender, each continuation thereof and the date and
amount of each payment or prepayment of principal thereof on its internal books
and records and/or on the schedule annexed to and constituting a part of its
Revolving Credit Note, and any such recordation on such schedule shall
constitute prima facie evidence of the accuracy of the information so recorded,
----- -----
provided that the failure by any Lender to make any such recordation or any
- --------
error in any such recordation shall not affect the obligations of the Borrower
under this Agreement or the Revolving Credit Notes. Each Revolving Credit Note
shall (x) be dated the Closing Date, (y) be stated to mature on the Termination
Date and (z) provide for the payment of interest in accordance with subsection
5.1.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow
----------------------------------------
under the Commitments during the Commitment Period on any Business Day, provided
--------
that the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 10:00 A.M., Toronto
time, on the requested Borrowing Date), specifying the amount to be borrowed as
a Prime Rate Loan and the requested Borrowing Date. Each borrowing under the
Commitments (other than a borrowing made pursuant to subsection 2.4(c)), except
any Prime Rate Loan to be used solely to pay a like amount of outstanding
Reimbursement Obligations or Swing Line Loans, shall be in an amount equal to
C$100,000 or a whole multiple of C$100,000 in excess thereof (or, if the then
Available Commitments are less than C$100,000, such lesser amount). Upon receipt
of any such notice from the Borrower, the Administrative Agent shall promptly
notify each Lender thereof. Each Lender will make the amount of its pro rata
--- ----
share (or, in the case of a borrowing under subsection 2.4(c), its applicable
share of such borrowing determined in accordance with subsection 2.4(c)) of each
borrowing of Revolving Credit Loans available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent specified
in subsection 12.2 prior to 12:00 P.M., Toronto time, on the Borrowing Date
requested by
51
<PAGE>
the Borrower in Canadian Dollars and in funds immediately available to the
Administrative Agent. Except as otherwise provided in subsections 2.4(c) and
4.5(c), such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Lenders and in like funds as received by the Administrative Agent.
2.4 Termination or Reduction of Commitments; Transfers of the
---------------------------------------------------------
Commitment and the U.S. Commitment. (a) The Borrower shall have the right, upon
- ----------------------------------
not less than three Business Days' notice to the Administrative Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments; provided that no such termination or reduction shall be permitted
--------
if, after giving effect thereto and to any prepayments of the Revolving Credit
Loans and the Swing Line Loans made on the effective date thereof, the aggregate
principal amount of the Revolving Credit Loans then outstanding, when added to
the then outstanding L/C Obligations, the aggregate undiscounted face amount of
all then outstanding Acceptances and the then outstanding Swing Line Loans,
would exceed the Commitments then in effect. Any such reduction shall be in an
amount equal to C$5,000,000 or a whole multiple of C$500,000 in excess thereof
and shall reduce permanently the Commitments then in effect.
(b) From time to time prior to August 31, 1995, but on no more than
two (2) occasions, the Borrowers shall have the right, upon not less than five
(5) Business Days' prior written notice (a "Transfer Notice") to the
---------------
Administrative Agent and the U.S. Administrative Agent, to transfer (i) all or a
portion (which shall not exceed the aggregate Available Commitments of all
Lenders immediately before giving effect to the applicable transfer) of the
Commitments to the U.S. Commitments (a "Canada-U.S. Transfer") or (ii) a portion
--------------------
(which shall not exceed the aggregate Available U.S. Commitments of all Common
Lenders
52
<PAGE>
immediately before giving effect to the applicable transfer) of the U.S.
Commitments to the Commitments (a "U.S.-Canada Transfer"); provided that (i)
-------------------- --------
after giving effect to any U.S.-Canada Transfer, the U.S. Dollar equivalent
(determined on the basis of the Closing Date Exchange Rate) of the aggregate
Commitments of all Lenders does not exceed U.S. $50,000,000, (ii) after giving
effect to any Canada-U.S. Transfer, the U.S. Dollar equivalent (determined on
the basis of the Closing Date Exchange Rate) of the aggregate Commitments of all
Lenders does not fall below U.S. $5,000,000 unless the entire Commitments of all
Lenders are transferred to the U.S. Commitments, in which case the rights of the
Borrower under this subsection 2.4(b) shall thereafter terminate, (iii) no
Default or Event of Default (other than a Borrowing Base Default in the case of
a U.S.-Canada Transfer or a U.S. Borrowing Base Default in the case of a Canada-
U.S. Transfer) shall have occurred and be continuing immediately before giving
effect to any such transfer, (iv) no Default or Event of Default shall have
occurred and be continuing immediately after giving effect to any such transfer
and (v) in the case of a U.S.-Canada Transfer, no Acceptances are outstanding on
(or all outstanding Acceptances mature on) the date such transfer is made. Each
Transfer Notice shall specify (i) the effective date of the proposed commitment
transfer (the "Transfer Effective Date"), (ii) in the case of a Canada-U.S.
-----------------------
Transfer, the aggregate amount in Canadian Dollars (the "Canadian Dollar
---------------
Reduction Amount") to be transferred from the Commitments to the U.S.
- ----------------
Commitments and the U.S. Dollar equivalent (determined on the basis of the
Closing Date Exchange Rate) of such amount (the "U.S. Dollar Increase Amount"),
---------------------------
(iii) in the case of a U.S.-Canada Transfer, the aggregate amount in U.S.
Dollars (the "U.S. Dollar Reduction Amount") to be transferred from the U.S.
----------------------------
Commitments to the Commitments and the Canadian Dollar equivalent (determined on
the basis of the Closing Date Exchange Rate) of such amount (the "Canadian
--------
Dollar Increase Amount"), and (iv) the aggregate amount to be borrowed from the
- ----------------------
Lenders on the Transfer Effective Date in accordance with subsection 2.4(c).
Upon receipt of any Transfer Notice, the
53
<PAGE>
Administrative Agent shall promptly notify each Lender thereof, which notice
shall specify, with respect to each Lender, (i) any change in such Lender's
Commitment which occurs pursuant to this subsection 2.4(b) as a result of the
Canada-U.S. Transfer or U.S.-Canada Transfer specified in such Transfer Notice
and (ii) in the case of a U.S.-Canada Transfer, the aggregate principal amount
of the Revolving Credit Loan to be made by such Lender or the aggregate
principal amount (and accrued interest thereon) of the Revolving Credit Loans of
such Lender to be prepaid, as the case may be, in each case pursuant to
subsection 2.4(c) as a result of such U.S.-Canada Transfer. The Administrative
Agent shall provide a copy of such notice to the Borrower. On the Transfer
Effective Date with respect to any Canada-U.S. Transfer, (i) the Commitment of
each Lender shall be reduced by an amount equal to such Lender's Commitment
Percentage of the Canadian Dollar Reduction Amount specified in the Transfer
Notice delivered in respect of such Canada-U.S. Transfer and (ii) as provided in
the U.S. Credit Agreement, the U.S. Commitment of each Common Lender shall be
increased by an amount equal to such Common Lender's Canadian Transfer
Commitment Percentage of the U.S. Dollar Increase Amount specified in such
Transfer Notice. On the Transfer Effective Date with respect to any U.S.-Canada
Transfer, (i) as provided in the U.S. Credit Agreement, the U.S. Commitment of
each Common Lender shall be reduced by an amount equal to such Common Lender's
U.S. Transfer Commitment Percentage of the U.S. Dollar Reduction Amount
specified in the Transfer Notice delivered in respect of such U.S.-Canada
Transfer and (ii) the Commitment of each Lender shall be increased by an amount
equal to such Lender's U.S. Transfer Commitment Percentage of the Canadian
Dollar Increase Amount specified in such Transfer Notice. On each Transfer
Effective Date, each Lender shall surrender its outstanding Revolving Credit
Note to the Administrative Agent, and the Borrower shall execute and deliver to
the Administrative Agent (in exchange for the outstanding Revolving Credit Note
of each Lender) a new Revolving Credit Note to the order of such Lender
reflecting the change in such Lender's Commitment pursuant to this subsection
2.4(b)
54
<PAGE>
on such Transfer Effective Date and otherwise conforming to the requirements of
this Agreement.
(c) On the Transfer Effective Date with respect to any U.S.-Canada
Transfer, each Lender shall make a Revolving Credit Loan to the Borrower in an
amount equal to the excess (if any) of (1) the product of (A) that percentage
which such Lender's Commitment will constitute of the aggregate Commitments of
all Lenders after giving effect to such U.S.-Canada Transfer, multiplied by (B)
-------------
the aggregate principal amount of all Revolving Credit Loans outstanding
immediately before giving effect to such transfer, over (2) the aggregate
----
principal amount of all Revolving Credit Loans made by such Lender which are
outstanding immediately before giving effect to such transfer, the proceeds of
which Revolving Credit Loans shall be made available to the Administrative Agent
by each Lender on such Transfer Effective Date in accordance with the
penultimate sentence of subsection 2.3 and applied by the Administrative Agent
on such Transfer Effective Date to the prepayment of the principal of the then
outstanding Revolving Credit Loans of each Lender that was not required to make
a Revolving Credit Loan pursuant to this sentence on such Transfer Effective
Date so that, after giving effect to such application, the outstanding principal
amount of each Lender's Revolving Credit Loans will equal the product of (1)
that percentage which such Lender's Commitment will constitute of the aggregate
Commitments of all Lenders after giving effect to such U.S.-Canada Transfer,
multiplied by (2) the aggregate principal amount of all Revolving Credit Loans
- ----------
outstanding immediately before such transfer.
2.5 Swing Line Commitments. (a) (i) Subject to the terms and
----------------------
conditions hereof, the Swing Line Lender agrees to make swing line loans
(individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the
--------------- ----------------
Borrower from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed C$5,000,000, provided
--------
that at no time may the sum of the then outstanding Swing Line Loans, Revolving
Credit
55
<PAGE>
Loans, L/C Obligations and the aggregate undiscounted face amount of all then
outstanding Acceptances exceed the lesser of (x) the Commitments and (y) the
Borrowing Base then in effect. Amounts borrowed by the Borrower under this
subsection 2.5 may be repaid and, through but excluding the Termination Date,
reborrowed. All Swing Line Loans shall be made as Prime Rate Loans and shall not
be entitled to be converted into Acceptances. The Borrower shall give the Swing
Line Lender irrevocable notice (which notice must be received by the Swing Line
Lender prior to 12:00 P.M., Toronto time) on the requested Borrowing Date
specifying the amount of the requested Swing Line Loan. The proceeds of the
Swing Line Loan will be made available by the Swing Line Lender to the Borrower
at the office of the Swing Line Lender by crediting the account of the Borrower
at such office with such proceeds in Canadian Dollars.
(ii) Provided that the conditions precedent contained in subsection
7.2 to its obligation to make a Swing Line Loan have been satisfied and that
there is sufficient availability under the Swing Line Commitment, on each
Interest Payment Date, the Swing Line Lender shall, on behalf of the Borrower
(which hereby irrevocably authorizes and directs the Swing Line Lender to act on
its behalf), make a Swing Line Loan to the Borrower in an amount equal to the
amount of interest due and payable on such Interest Payment Date pursuant to
subsection 5.1. The proceeds of such Swing Line Loan shall be made available by
the Swing Line Lender to the Administrative Agent and applied by the
Administrative Agent to the payment of such interest on such Interest Payment
Date; the Swing Line Lender shall notify the Borrower as soon as reasonably
practicable of the amount of each such Swing Line Loan.
(b) The Swing Line Loans shall be evidenced by a promissory note of
the Borrower substantially in the form of Exhibit A-2, with appropriate
insertions (as the same may be amended, supplemented, replaced or otherwise
modified from time to time, the "Swing Line Note"), payable to the order of the
---------------
Swing Line Lender and representing the obligation of
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<PAGE>
the Borrower to pay the amount of the Swing Line Commitment or, if less, the
unpaid principal amount of the Swing Line Loans, with interest thereon as
prescribed in subsection 5.1. The Swing Line Lender is hereby authorized to
record the Borrowing Date, the amount of each Swing Line Loan and the date and
amount of each payment or prepayment of principal thereof, on its internal books
and records and/or on the schedule annexed to and constituting a part of the
Swing Line Note and any such recordation on such schedule shall constitute prima
-----
facie evidence of the accuracy of the information so recorded, provided that the
- ----- --------
failure by the Swing Line Lender to make any such recordation or any error in
any such recordation shall not affect the obligations of the Borrower under this
Agreement or the Swing Line Note. The Swing Line Note shall (a) be dated the
Closing Date, (b) be stated to mature on the Termination Date and (c) provide
for the payment of interest in accordance with subsection 5.1.
(c) The Swing Line Lender, at any time in its sole and absolute
discretion may, and, at any time when Swing Line Loans are outstanding for more
than seven Business Days, the Swing Line Lender shall, on behalf of the Borrower
(which hereby irrevocably directs and authorizes the Swing Line Lender to act on
its behalf), request each Lender to make a Revolving Credit Loan in an amount
equal to such Lender's Commitment Percentage of the principal amount of the
Swing Line Loans (the "Refunded Swing Line Loans") outstanding on the date such
-------------------------
notice is given; provided that the provisions of this subsection shall not
--------
affect the Borrower's obligations to prepay Swing Line Loans in accordance with
the provisions of subsection 5.2(d). Unless the Commitments shall have expired
or terminated (in which event the procedures of paragraph (d) of this subsection
2.5 shall apply), each Lender will make the proceeds of the Revolving Credit
Loan made by it pursuant to the immediately preceding sentence available to the
Administrative Agent for the account of the Swing Line Lender at the office of
the Administrative Agent prior to 10:00 A.M., Toronto time, in funds immediately
available on the Business Day next
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<PAGE>
succeeding the date such notice is given. The proceeds of such Revolving Credit
Loans shall be immediately applied to repay the Refunded Swing Line Loans.
(d) If the Commitments shall expire or terminate at any time while
Swing Line Loans are outstanding, each Lender shall, at the option of the Swing
Line Lender exercised reasonably, either (i) notwithstanding the expiration or
termination of the Commitments, make a Revolving Credit Loan or (ii) purchase an
undivided participating interest in such Swing Line Loans, in either case in an
amount equal to such Lender's Commitment Percentage determined on the date of,
and immediately prior to, expiration or termination of the Commitments of the
aggregate principal amount of such Swing Line Loans. Each Lender will make the
proceeds of any Revolving Credit Loan made by it pursuant to the immediately
preceding sentence available to the Administrative Agent for the account of the
Swing Line Lender at the office of the Administrative Agent prior to 10:00 A.M.,
Toronto time, in funds immediately available on the Business Day next succeeding
the date on which the Commitments expire or terminate. The proceeds of such
Revolving Credit Loans shall be immediately applied to repay the Swing Line
Loans outstanding on the date of termination or expiration of the Commitments.
In the event that the Lenders purchase undivided participating interests
pursuant to the first sentence of this paragraph (d), each Lender shall
immediately transfer to the Swing Line Lender, in immediately available funds,
the amount of its participation and upon receipt thereof the Swing Line Lender
will deliver to any such Lender that so requests a confirmation of such Lender's
undivided participating interest in the Swing Line Loans dated the date of
receipt of such funds and in such amount.
(e) Whenever, at any time after the Swing Line Lender has received
from any Lender such Lender's participating interest in a Swing Line Loan, the
Swing Line Lender receives any payment on account thereof, the Swing Line Lender
will distribute to such Lender its participating
58
<PAGE>
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender's participating
interest was outstanding and funded); provided, however, that in the event that
-------- -------
such payment received by the Swing Line Lender is required to be returned, such
Lender will return to the Swing Line Lender any portion thereof previously
distributed by the Swing Line Lender to it.
SECTION 3. AMOUNT AND TERMS OF ACCEPTANCE
SUB-FACILITY
3.1 Acceptance Commitments. (a) Subject to the terms and conditions
----------------------
hereof, each Lender agrees to create Acceptances for the Borrower on any
Business Day during the Commitment Period by accepting Drafts drawn by the
Borrower; provided that no Lender shall be obligated to accept any Draft if,
--------
after giving effect to such acceptance, (i) the Available Commitment of such
Lender would be less than zero or (ii) the Aggregate Outstandings of all Lenders
would exceed the lesser of (A) the Borrowing Base then in effect and (B) the
aggregate Commitments of all Lenders.
(b) The Borrower may utilize the Commitments in the manner
contemplated by this Section 3 by authorizing each Lender in the manner provided
for in subsection 3.2(b) to draw Drafts on such Lender and having such Drafts
accepted pursuant to subsection 3.2, paying its obligations with respect thereto
pursuant to subsection 3.5, and again authorizing Drafts to be drawn on the
Lenders and having them presented for acceptance, all in accordance with the
terms and conditions of this Section 3.
(c) For the purposes of this Agreement, all Acceptances shall be
considered a utilization of the Commitments in an amount equal to the
undiscounted face amount of such Acceptance.
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3.2 Creation of Acceptances. (a) The Borrower may request the
-----------------------
creation of Acceptances hereunder by submitting to the Administrative Agent at
its office specified in subsection 12.2 prior to 2:00 P.M., Toronto time, one
Business Day prior to the requested Borrowing Date, (i) a request for
acceptances ("Request for Acceptances") completed in a manner in form and
-----------------------
substance reasonably satisfactory to the Administrative Agent and specifying,
among other things, the Borrowing Date, maturity and amount of the Drafts to be
accepted and discounted, (ii) to the extent not theretofore supplied to each
Lender, a sufficient number of Drafts to be drawn on the Lenders, to be
appropriately completed in accordance with subsection 3.2(d) and (iii) such
other certificates, documents and other papers and information as the
Administrative Agent may reasonably request.
(b) In connection with each utilization by it of the Commitments by
way of Acceptances, the Borrower hereby agrees that it shall deliver to the
Administrative Agent on the Closing Date Powers of Attorney substantially in the
form annexed hereto as Exhibit C (each, a "Power of Attorney") authorizing each
-----------------
Lender to draw Drafts on such Lender on behalf of the Borrower and to complete
such Drafts in accordance with the Requests for Acceptances submitted from time
to time pursuant to Section 3.2(a) hereof.
(c) Each Draft requested by or on behalf of the Borrower for
acceptance hereunder shall be denominated in Canadian Dollars, shall have an
undiscounted face amount equal to C$500,000 or whole multiple of C$100,000 in
excess thereof, shall be dated the Borrowing Date specified in the Request for
Acceptances with respect thereto and shall be stated to mature on a Business Day
which is 30, 60, 90 or 180 days after the date thereof (and, in any event, prior
to the Termination Date).
(d) Not later than 12:00 P.M., Toronto time, on the Borrowing Date
specified in the relevant Request for Acceptances, and upon fulfillment of the
applicable
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conditions set forth in Section 7, each Lender will, in accordance with such
Request for Acceptances, (i) sign each Draft on behalf of the Borrower pursuant
to the Power of Attorney, (ii) complete the date, amount and maturity of each
Draft to be accepted, (iii) accept such Drafts and give notice to the
Administrative Agent of such acceptance and (iv) upon such acceptance, discount
such Acceptances to the extent contemplated by subsection 3.3.
3.3 Discount of Acceptances. (a) Each Lender hereby agrees, on the
-----------------------
terms and subject to the conditions set forth in this Agreement, to discount
Acceptances created by it on the Borrowing Date with respect thereto at the
applicable Reference Discount Rate by making available to the Borrower an amount
in immediately available funds equal to the Acceptance Purchase Price in respect
thereof, and to notify the Administrative Agent that such Draft has been
accepted and discounted by the accepting Lender.
(b) In the event that the Borrower has made a Request for
Acceptances, then (i) prior to 11:00 A.M., Toronto time, on the Borrowing Date
with respect thereto, Bank of Nova Scotia will notify the Borrower and the
Lenders of the Reference Discount Rate applicable to such Acceptance and (ii) if
such Reference Discount Rate is acceptable to the Borrower, the Lenders shall
make the Acceptance Purchase Price for the Acceptance discounted by it available
to the Administrative Agent, for the account of the Borrower, at the office of
the Administrative Agent specified in subsection 12.2 prior to 12:00 P.M.,
Toronto time, on the Borrowing Date, in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the
Borrower by the Administrative Agent crediting the account of the Borrower on
the books of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(c) Acceptances discounted by any Lender may be held by it for its
own account until maturity or sold by it
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at any time prior thereto in the relevant market therefor in Canada in such
Lender's sole discretion.
3.4 Stamping Fees. On the Borrowing Date with respect to each
-------------
Acceptance, the Borrower shall pay to the Administrative Agent, for the account
of the Lenders, a stamping fee at a rate per annum equal to 1.50% minus the
-----
Margin Reduction Percentage, computed for the period from and including the
Borrowing Date with respect to such Acceptance to the maturity of such
Acceptance, calculated on the basis of a 365-day year of the undiscounted face
amount of such Acceptance.
3.5 Acceptance Reimbursement Obligations. (a) The Borrower hereby
------------------------------------
unconditionally agrees to pay to each Lender, on the maturity date (whether at
stated maturity, by acceleration or otherwise) for each Acceptance created by
such Lender for the account of the Borrower, the aggregate undiscounted face
amount of each such then-maturing Acceptance.
(b) The obligation of the Borrower to reimburse the Lenders for
then-maturing Acceptances may be satisfied by the Borrower by:
(i) paying to the Administrative Agent, for the account of the
Lenders, the aggregate undiscounted face amount of all Acceptances created
for the account of the Borrower hereunder which are then maturing by 12:00
P.M., Toronto time, on such maturity date; provided that the Borrower
--------
shall have given one Business Day's prior notice to the Administrative
Agent (which shall promptly notify each Lender thereof) of its intent to
reimburse the Lenders in the manner contemplated by this clause (i);
(ii) having new Drafts accepted and discounted by the Lenders
in the manner contemplated by subsections 3.2 and 3.3 in substitution for
the then-maturing Acceptances; provided that (A) the Borrower shall have
--------
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<PAGE>
delivered to the Administrative Agent (which shall promptly provide a copy
thereof to each Lender) a duly completed Request for Acceptances not later
than 2:00 P.M., Toronto time, one Business Day prior to such maturity date,
together with the documents, instruments, certificates and other papers and
information contemplated by subsections 3.2(a)(ii) and 3.2(a)(iii), (B) if
any Default or Event of Default (other than a Default or an Event of
Default under Section 10(j) which occurs solely as result of the occurrence
of a U.S. Borrowing Base Default) has occurred and is then continuing and
the Administrative Agent or the Majority Lenders shall have given notice to
the Borrower that creation of Acceptances is not appropriate, the Request
for Acceptances shall be deemed to be a request for a Prime Rate Loan, (D)
each Lender shall retain the Acceptance Purchase Price for the Acceptance
created by it and apply such Acceptance Purchase Price to the Acceptance
Reimbursement Obligations of the Borrower in respect of the maturing
Acceptance and (E) if the Acceptance Purchase Price so retained by such
Lender is less than the undiscounted face amount of the then-maturing
Acceptance, the Borrower shall have made arrangements reasonably
satisfactory to such Lender for payment of such deficiency; or
(iii) to the extent that the Borrower has not given to the
Administrative Agent a notice contemplated by clause (i) or (ii) above,
then the Borrower shall be deemed to have requested a borrowing pursuant to
subsection 2.3 of Prime Rate Loans in the undiscounted face amount of such
Acceptance. The Borrowing Date with respect to such borrowing shall be the
maturity date (or such earlier date as the Commitment shall be terminated)
for such Acceptance. Except to the extent that any of the events
contemplated by Section 10(f)(i) or (ii) with respect to the Borrower has
occurred and is then continuing (in which case the Borrower shall be
obligated to pay to each Lender the undiscounted face
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<PAGE>
amount of the Acceptances created by such Lender which are then maturing),
each Lender shall be obligated to make the Prime Rate Loan contemplated by
this subsection 3.5(b)(iii) regardless of whether the conditions precedent
to borrowing set forth in this Agreement are then satisfied. The proceeds
of any Prime Rate Loans made pursuant to this subsection 3.5(b)(iii) shall
be retained by the Lenders and applied by them to the Acceptance
Reimbursement Obligations of the Borrower in respect of the then-maturing
Acceptance.
(c) The unpaid amount of any such Acceptance Reimbursement
Obligations shall be treated as a Prime Rate Loan for the purposes hereof and
interest shall accrue on the amount of any such unpaid Acceptance Reimbursement
Obligation from the date such amount becomes due until paid in full at a
fluctuating rate per annum equal to the rate which would then be payable on
Prime Rate Loans. Such interest shall be payable by the Borrower on demand by
the Administrative Agent.
(d) In no event shall the Borrower claim from any Lender any grace
period with respect to the payment at maturity of any Acceptances created by
such Lender pursuant to this Agreement.
3.6 Converting Loans to Acceptances and Acceptances to Loans. (a)
--------------------------------------------------------
Subject to subsection 3.6(b), the Borrower may at any time and from time to time
request that any then outstanding Revolving Credit Loan owing by it be converted
into an Acceptance by delivering to the Administrative Agent (which shall
promptly provide a copy thereof to each Lender) a Request for Acceptances,
together with a statement that the Acceptances so requested are to be created
pursuant to this subsection 3.6(a), such notice to be given not later than three
Business Days prior to the requested conversion date.
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(b) In the event that the Administrative Agent receives such a
Request for Acceptances and the accompanying statement described in subsection
3.6(a), then the Borrower shall pay on the requested Borrowing Date to the
Administrative Agent, for the account of the Lenders, the principal amount of
the then outstanding Revolving Credit Loans being so converted, and each Lender
shall accept and discount the Borrower's Drafts having an aggregate face amount
at least equal to the principal amount of the Revolving Credit Loans of such
Lender which are then being repaid; provided that, following the occurrence and
--------
during the continuance of a Default or an Event of Default (other than a Default
or an Event of Default arising under Section 10(j) which occurs solely as a
result of the occurrence of a U.S. Borrowing Base Default), (i) no Acceptance
may be created when the Administrative Agent has or the Majority Lenders have
given notice to the Borrower that creation of Acceptances is not appropriate and
(iii) no Acceptance which is permitted to be created hereunder shall have a
maturity that extends beyond the Termination Date.
(c) The creation of Acceptances pursuant to this subsection 36 shall
not be subject to the satisfaction of the conditions precedent to borrowing set
forth in this Agreement.
(d) The Borrower may elect from time to time to convert outstanding
Acceptances to Revolving Credit Loans by giving the Administrative Agent at
least one Business Day's irrevocable notice of such election prior to the
maturity of such Acceptances, provided that any such conversion of Acceptances
--------
may only be made on the maturity thereof.
3.7 Acceptances to be Supplemented by Prime Rate Loans in order to be
-----------------------------------------------------------------
Created Ratably. The Borrower hereby agrees that each Request for Acceptances,
- ---------------
reimbursement of Acceptances and conversion of Revolving Credit Loans to
Acceptances shall be made in a manner so that any such Request for Acceptances,
reimbursement or conversion shall apply ratably to all Lenders and so that,
after giving
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<PAGE>
effect to such Request for Acceptances, reimbursement or conversion, as the case
may be, each Lender shall hold its ratable share of the aggregate amount of
Acceptances which mature on the same day. In the event that the aggregate amount
of Acceptances requested by the Borrower to be created by all Lenders hereunder
pursuant to any Request for Acceptances is an amount which, if divided ratably
among the Lenders, would not result in each Lender accepting a Draft which has
an undiscounted face amount equal to C$500,000 or a whole multiple of C$100,000
in excess thereof, then each Lender's ratable share of such Acceptance shall be
rounded downward to an amount which is equal to C$500,000 or a whole multiple of
C$100,000 in excess thereof, and the Borrower shall be deemed to have requested
that such Lender make a Prime Rate Loan to the Borrower (which Loan need not
satisfy the minimum borrowing requirements of subsection 2.3) on the date upon
which such Draft is to be accepted in the amount by which such Lender's ratable
share of the Acceptance requested in such Request for Acceptances was rounded
downward.
3.8 Special Provisions Relating to Non-Chartered Banks. (a) The
--------------------------------------------------
Borrower and each Lender hereby acknowledge and agree that from time to time
certain Lenders which are not Canadian chartered banks or which are Canadian
"Schedule II" chartered banks may not be authorized to or may, as a matter of
general corporate policy, elect not to accept Drafts, and the Borrower and each
Lender agrees that any such Lender may purchase Acceptance Notes of the Borrower
in accordance with the provisions of subsection 3.8(b) in lieu of creating
Acceptances for its account.
(b) In the event that any Lender described in subsection 3.8(a)
above is unable to, or elects as a matter of general corporate policy not to,
create Acceptances hereunder, such Lender shall not create Acceptances
hereunder, but rather the Borrower requesting the creation of such Acceptances
shall deliver to such Lender non-interest bearing promissory notes (the
"Acceptance Notes") of the Borrower, substantially in the form of Exhibit E to
----------------
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the Existing Credit Agreement, having the same maturity as the Acceptances to be
created and in an aggregate principal amount equal to the undiscounted face
amount thereof. Each such Lender hereby agrees to purchase its Acceptance Note
at a purchase price equal to the Acceptance Purchase Price which would have been
applicable if a Draft had been accepted by it (less any stamping fee which would
have been paid pursuant to subsection 3.4 if such Lender had created an
Acceptance) and such Acceptance Notes shall be governed by the provisions of
this Section 3 as if they were Acceptances.
SECTION 4. LETTERS OF CREDIT
4.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
--------------
the Issuing Lender, in reliance on the agreements of the other Lenders set forth
in subsection 4.4(a), agrees to issue letters of credit ("Letters of Credit")
-----------------
for the account of the Borrower on any Business Day during the Commitment Period
in such form as may be approved from time to time by the Issuing Lender;
provided that the Issuing Lender shall have no obligation to issue any Letter of
- --------
Credit if, after giving effect to such issuance, (i) the L/C Obligations would
exceed the L/C Commitment or (ii) the Aggregate Outstandings of all Lenders
would exceed the lesser of (x) the aggregate Commitments and (y) the Borrowing
Base then in effect. Each Letter of Credit shall (i) be denominated in Canadian
Dollars and shall be either (x) a standby letter of credit issued to support
obligations of the Borrower or any of its Subsidiaries, contingent or otherwise,
which finance the working capital and business needs of the Borrower and its
Subsidiaries incurred in the ordinary course of business (a "Standby Letter of
-----------------
Credit"), or (y) a commercial letter of credit in respect of the purchase of
- ------
goods or services by the Borrower or any of its Subsidiaries in the ordinary
course of business (a "Commercial Letter of Credit"), (ii) expire no later than
---------------------------
the Termination Date, and (iii) expire no later than 365 days after its date of
issuance.
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(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the Province of
Ontario and the laws of Canada applicable therein.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
4.2 Procedure for Issuance of Letters of Credit. The Borrower may
-------------------------------------------
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender, at its address for notices specified herein,
an Application therefor, completed to the reasonable satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Lender be required
to issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of
such Letter of Credit to the Borrower promptly following the issuance thereof.
4.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay
-----------------------------------
to the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit, for the period from and including the date of issuance of such Letter of
Credit to the expiration date of
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such Letter of Credit, computed at the L/C Commission Rate, calculated on the
basis of a 365- (or 366-, as the case may be) day year, on the aggregate amount
available to be drawn under such Letter of Credit, payable quarterly in arrears
on each L/C Fee Payment Date to occur during such period and on the expiration
date of such Letter of Credit. Such commissions shall be payable to the Lenders
to be shared ratably among them in accordance with their respective Commitment
Percentages. In addition, the Borrower shall pay to the Administrative Agent,
for the account of the Issuing Bank, a fronting fee with respect to each Letter
of Credit, for the period from and including the date of issuance of such Letter
of Credit to the expiration date of such Letter of Credit, computed at a rate of
1/8 of 1% per annum, calculated on the basis of a 365- (or 366-, as the case may
be) day year, on the product of (i) the aggregate of the Commitment Percentages
of the L/C Participants multiplied by (ii) the aggregate amount available to be
drawn under such Letter of Credit, payable quarterly in arrears on each L/C Fee
Payment Date to occur during such period and on the expiration date of such
Letter of Credit. Such fees and commissions shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
4.4 L/C Participations. (a) The Issuing Lender irrevocably agrees
------------------
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant
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irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage (as in effect from time to time) in the
Issuing Lender's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Lender thereunder.
Each L/C Participant unconditionally and irrevocably agrees with the Issuing
Lender that, if a draft is paid under any Letter of Credit for which the Issuing
Lender is not reimbursed in full by the Borrower in accordance with subsection
4.5(a), such L/C Participant shall pay to the Issuing Lender at the Issuing
Lender's address for notices specified herein an amount equal to such L/C
Participant's Commitment Percentage (in effect on the date of such demand) of
the amount of such draft, or any part thereof, which is not so reimbursed, such
payment to be made by such L/C Participant on the date (which shall be a
Business Day) a demand therefor is made by the Issuing Lender (if such demand is
made prior to 12:00 P.M. Toronto time on such date) or the next Business Day (if
such demand is made after 12:00 P.M. Toronto time on such date).
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to subsection 4.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the weekly average
Bank of Canada Rate, during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 365 (or 366,
as the case may be). If any such amount required to be paid by any L/C
Participant pursuant to subsection 4.4(a) is not in fact made available to the
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Issuing Lender by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Lender shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to Prime Rate Loans hereunder. A
certificate of the Issuing Lender submitted to any L/C Participant with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
---
rata share of such payment in accordance with subsection 4.4(a), the Issuing
- ----
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of Collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will, if such payment is received prior to 12:00 Noon, Toronto
time, on a Business Day, distribute to such L/C Participant its pro rata share
--- ----
thereof prior to the end of such Business Day and otherwise the Issuing Lender
will distribute such payment on the next succeeding Business Day; provided,
--------
however, that in the event that any such payment received by the Issuing Lender
- -------
shall be required to be returned by the Issuing Lender, such L/C Participant
shall return to the Issuing Lender the portion thereof previously distributed by
the Issuing Lender to it.
4.5 Reimbursement Obligation of the Borrower. (a) The Borrower
----------------------------------------
agrees to reimburse the Issuing Lender, upon receipt of notice from the Issuing
Lender of the date and amount of a draft presented under any Letter of Credit
and paid by the Issuing Lender, for the amount of (i) such draft so paid and
(ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing
Lender in connection with such payment. Except as and to the extent otherwise
provided in subsection 4.5(c), each such payment shall be made to the Issuing
Lender, at its address for notices specified herein in Canadian Dollars and in
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immediately available funds, on the date on which the Borrower receives such
notice, if received prior to 11:00 A.M., Toronto time, on a Business Day and
otherwise on the next succeeding Business Day.
(b) Interest shall be payable on any and all amounts payable under
subsection 4.5(a) and remaining unpaid by the Borrower (i) from the date the
draft presented under the affected Letter of Credit is paid to the earlier of
the third Business Day after the date on which the Borrower is required to pay
such amounts pursuant to subsection 4.5(a) and the date on which the Borrower
pays all such amounts at the rate which would then be payable on any outstanding
Prime Rate Loans and (ii) thereafter until payment in full at the rate which
would be payable on any outstanding Prime Rate Loans which were then overdue.
(c) By 12:00 P.M., Toronto time, on the first Business Day after each
date on which a draft is presented under any Letter of Credit and paid by the
Issuing Lender, the Administrative Agent shall, on behalf of the Borrower (which
hereby irrevocably directs and authorizes the Administrative Agent to act on its
behalf), request (in accordance with the applicable provisions of subsection
2.3) each Lender to make a Revolving Credit Loan in an amount equal to such
Lender's Commitment Percentage of the amount of such draft so paid. Each Lender
agrees to make each Revolving Credit Loan so requested available to the
Administrative Agent in accordance with subsection 2.3, provided that the
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conditions precedent contained in subsection 7.2 to its obligation to make such
Revolving Credit Loan have been satisfied. The proceeds of such Revolving
Credit Loans shall be made available by the Administrative Agent to the Issuing
Lender and applied to the payment (whether or not then due) of the obligations
of the Borrower under subsection 4.5(a)(i); upon such payment, the Borrower
shall be deemed to have satisfied such obligations to the extent of such
payment. The Issuing Lender shall notify the Administrative Agent and the
Borrower as soon as reasonably practicable of each drawing
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made under a Letter of Credit and the aggregate principal amount of the
Revolving Credit Loans made under this subsection 4.5(c) in respect thereof.
4.6 Obligations Absolute. (a) The Borrower's obligations under this
--------------------
Section 4 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any beneficiary of a
Letter of Credit, provided that this paragraph shall not relieve the Issuing
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Lender of any liability resulting from the gross negligence or willful
misconduct of the Issuing Lender, or otherwise affect any defense or other right
that the Borrower may have as a result of any such gross negligence or willful
misconduct.
(b) The Borrower also agrees with the Issuing Lender that the Issuing
Lender shall not be responsible for, and the Borrower's Reimbursement
Obligations under subsection 4.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (ii) any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee, provided that
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this paragraph shall not relieve the Issuing Lender of any liability resulting
from the gross negligence or willful misconduct of the Issuing Lender, or
otherwise affect any defense or other right that the Borrower may have as a
result of any such gross negligence or willful misconduct.
(c) The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except
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for errors or omissions caused by the Issuing Lender's gross negligence or
willful misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Customs, shall be binding on the Borrower and shall not result in any liability
of the Issuing Lender to the Borrower.
4.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower, the Swing Line Lender and the Administrative Agent of the date and
amount thereof. The responsibility of the Issuing Lender to the Borrower in
connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit, provided that this paragraph shall
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not relieve the Issuing Lender of any liability resulting from the gross
negligence or willful misconduct of the Issuing Lender, or otherwise affect any
defense or other right that the Borrower may have as a result of any such gross
negligence or willful misconduct.
4.8 Application. To the extent that any provision of any Application
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related to any Letter of Credit is inconsistent with the provisions of this
Section 4, the provisions of this Section 4 shall apply.
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SECTION 5. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
5.1 Interest Rates and Payment Dates. (a) Each Prime Rate Loan
--------------------------------
(including each Swing Line Loan) shall bear interest for each day that it is
outstanding at a rate per annum equal to the Prime Rate for such day plus the
Prime Rate Margin in effect for such day.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum which is (x) in the case of overdue principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y) in the case of overdue interest, commitment fee or
other amount, the rate described in paragraph (a) of this subsection plus 2%, in
each case from the date of such non-payment until such amount is paid in full
(as well after as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (b) of this
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subsection shall be payable from time to time on demand.
(d) It is the intention of the parties hereto to comply strictly with
applicable usury laws; accordingly, it is stipulated and agreed that the
aggregate of all amounts which constitute interest under applicable usury laws,
whether contracted for, charged, taken, reserved, or received, in connection
with the indebtedness evidenced by this Agreement or the Notes, or any other
document relating or referring hereto or thereto, now or hereafter existing,
shall never exceed under any circumstance whatsoever the maximum amount of
interest allowed by applicable usury laws including the Criminal Code of Canada.
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5.2 Optional and Mandatory Prepayments. (a) The Borrower may at any
----------------------------------
time and from time to time repay the Loans, in whole or in part, without premium
or penalty, upon irrevocable notice given to the Administrative Agent no later
than 12:00 P.M., Toronto time on the immediately preceding Business Day
specifying the date and amount of repayment and whether the repayment is of
Revolving Credit Loans or Swing Line Loans or a combination thereof, and, in
each case if a combination thereof, the amount allocable to each. Upon the
receipt of any such notice the Administrative Agent shall promptly notify each
affected Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein together with
accrued interest to such date on the amount prepaid. Repayments of the Loans
shall be applied first, to payment of the Swing Line Loans then outstanding and
-----
second, to payment of the Revolving Credit Loans then outstanding.
- ------
(b) If, at any time during the Commitment Period, the Aggregate
Outstandings of all Lenders exceed the lesser of (i) the Borrowing Base then in
effect and (ii) the aggregate Commitments then in effect (whether as result of a
reduction in the Commitments pursuant to subsection 2.4(b), subsection 5.2(c)(i)
or otherwise), the Borrower shall, without notice or demand, immediately (in the
case of clause (ii) above) or within three Business Days (in the case of clause
(i) above) repay the Loans and any then outstanding Reimbursement Obligations in
an aggregate principal amount equal to such excess, together with interest
accrued to the date of such payment. Such payments shall be applied first, to
-----
pay Swing Line Loans then outstanding, second, to pay any Reimbursement
------
Obligations then outstanding, third, to pay Revolving Credit Loans then
-----
outstanding and fourth, to cash collateralize its then outstanding Acceptances
------
upon terms reasonably satisfactory to the Administrative Agent. To the extent
that after giving effect to any repayment of the Loans or Reimbursement
Obligations or the cash collateralization of any Acceptances required by the
preceding sentence, the Aggregate Outstandings of all
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Lenders exceed the lesser of (i) the Borrowing Base then in effect and (ii) the
aggregate Commitments then in effect, the Borrower shall, without notice or
demand, immediately cash collateralize the then outstanding L/C Obligations in
an amount equal to such excess upon terms reasonably satisfactory to the
Administrative Agent.
(c) (i) Unless otherwise agreed in writing by the Majority Lenders in
the case of clause (A) below or the Aggregate Majority Lenders in the case of
clause (B) below, if at any time (A) the Borrower or any of its Subsidiaries
shall incur Indebtedness for borrowed money (excluding any Indebtedness
permitted by subsection 8.2 of the U.S. Credit Agreement) pursuant to a public
offering or private placement or otherwise or (B) Holdings or any of its
Subsidiaries shall sell or issue shares of its Capital Stock (except for shares
of Capital Stock of Holdings or an Additional Subsidiary issued or sold to one
or more Permitted Equity Purchasers to the extent such sale or issuance is
permitted pursuant to the U.S. Credit Agreement and the Holdings Guarantee),
then the Commitments shall be permanently reduced by an amount equal to (1) 100%
of the Net Cash Proceeds thereof (in the case of clause (A) above) or (2) the
Canadian Prepayment Percentage (as in effect on the date of such sale or
issuance) of 66-2/3% of the Net Cash Proceeds thereof (in the case of clause (B)
above), with such reductions to be effective on the date of receipt of any such
Net Cash Proceeds.
(ii) Unless otherwise agreed in writing by the Majority Lenders, if
at any time the Borrower or any of its Subsidiaries shall make an Asset Sale
pursuant to subsection 9.2(g), the Borrower shall repay the Loans and any then
outstanding Reimbursement Obligations in an aggregate amount equal to 100% of
the Net Cash Proceeds thereof, together with accrued interest on such Loans and
Reimbursement Obligations to the date of such payment, such payments to be made
promptly upon receipt of such Net Cash Proceeds and to be applied to the
Extensions of Credit in the same order as that specified in subsection 5.2(b).
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(d) The Borrower shall prepay all Swing Line Loans then outstanding
simultaneously with each borrowing of Revolving Credit Loans and may prepay
(without premium or penalty) any outstanding Swing Line Loans upon at least one
Business Day's notice to the Administrative Agent.
5.3 Commitment Fees; Agency Fees; Other Fees. (a) The Borrower
----------------------------------------
agrees to pay to the Administrative Agent for the account of each Lender, a
commitment fee for the period from and including the Closing Date to but
excluding the Termination Date (or such earlier date as the Commitments shall
terminate as provided herein), computed at the Commitment Fee Rate on the
average daily amount of the Available Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Termination Date or such
earlier date as the Commitments shall terminate as provided herein, commencing
on the first such date to occur after the date hereof.
(b) The Borrower shall pay (without duplication of any fee payable
under subsection 5.3(a)) to the Administrative Agent and the Collateral Agent,
for their respective accounts, the other fees required to be paid pursuant to
the Agency Fee Letter, dated February 24, 1995 between the U.S. Borrower, the
U.S. Administrative Agent and the U.S. Collateral Agent, in each case in the
amounts and on the dates set forth therein.
5.4 Computation of Interest and Fees. (a) Interest based on the
--------------------------------
Prime Rate and commitment fees and interest (other than the interest component
of the Reference Discount Rate) shall be calculated on the basis of a 365-(or
366-, as the case may be) day year for the actual days elapsed. Any change in
the interest rate on a Loan resulting from a change in the Prime Rate shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
the Borrower and the
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Lenders of the effective date and the amount of each such change in interest
rate.
(b) For purposes of the Interest Act, (i) the principle of deemed
reinvestment of interest does not apply to any interest calculation under this
Agreement; and (ii) the rates of interest stipulated in this Agreement are
intended to be nominal rates and not effective rates or yields.
(c) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing in reasonable detail the calculations used by the
Administrative Agent in determining any interest rate pursuant to subsection
5.1.
5.5 Pro Rata Treatment and Payments. (a) Except as provided in
-------------------------------
subsection 2.4(b) and (c), each borrowing of Loans (other than Swing Line Loans)
by the Borrower from the Lenders hereunder shall be made, each payment by the
Borrower on account of any commitment fee hereunder shall be allocated by the
Administrative Agent, and any reduction of the Commitments of the Lenders shall
be allocated by the Administrative Agent, pro rata according to the relevant
--- ----
Commitment Percentages of the Lenders. Except as provided in subsection 2.4(c),
each payment (including each prepayment) by the Borrower on account of principal
of and interest on any Revolving Credit Loans shall be allocated by the
Administrative Agent pro rata according to the respective outstanding principal
--- ----
amounts of such Revolving Credit Loans then held by the Lenders. All payments
(including prepayments) to be made by the Borrower hereunder and under any
Notes, whether on account of principal, interest, fees or otherwise, shall be
made without set-off or counterclaim and shall be made prior to 12:00 P.M.,
Toronto time, on the due date thereof to the Administrative Agent, for the
account of the Lenders holding such Notes, at the Administrative Agent's office
specified in subsection 12.2, in Canadian Dollars and in immediately available
funds. The Administrative Agent shall distribute such payments to such Lenders,
if any such payment is received prior to 12:00 Noon, Toronto time, on a Business
Day, in like funds as received prior to the end of such Business Day, and
otherwise the
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Administrative Agent shall distribute such payment to such Lenders on the next
succeeding Business Day. If any payment hereunder (other than payments on the
Acceptances) becomes due and payable on a day other than a Business Day, the
maturity of such payment shall be extended to the next succeeding Business Day,
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such
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amount with interest thereon at a rate equal to the Administrative Agent's
reasonable estimate of its daily average cost of funds for the period until such
Lender makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, (x) the Administrative Agent shall notify the Borrower of the
failure of such Lender to make such amount available to the Administrative Agent
and the Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to Prime Rate Loans hereunder,
on demand, from the Borrower and (y) the Borrower may, without waiving any
rights it may have against such Lender, borrow a like amount on an unsecured
basis from any commercial bank for a period ending on the date upon which such
Lender does in fact make such borrowing available, provided that (i) at the time
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such borrowing is made and at all times while such amount is outstanding the
Borrower would be permitted to borrow such amount pursuant to subsection 2.1 of
this Agreement and (ii) the commercial bank from whom such borrowing is made
waives in a written agreement reasonably satisfactory to the Administrative
Agent any right of set-off it may have against the Collateral.
5.6 Borrowing Base Compliance. The Collateral Agent or another
-------------------------
financial institution satisfactory to the Collateral Agent (including any
Affiliate of the Collateral Agent) shall, from time to time during the
Commitment Period, (except during any Borrowing Base Elimination Period) review
and confirm the information set forth in each Monthly Borrowing Base Certificate
delivered by the Borrower in order to determine whether, at such time, the
Borrower is in compliance with the requirements in respect of the Borrowing Base
under this Agreement, and the Borrower shall reimburse the Collateral Agent for
its reasonable out-of-pocket expenses (excluding fees) in respect thereof. If
the Borrower is not in compliance with such requirements, the Collateral Agent
shall promptly notify the Borrower, the Administrative Agent and the Lenders of
such noncompliance, and the Borrower shall make all mandatory prepayments
required pursuant to subsection 5.2(b).
5.7 Illegality. Notwithstanding any other provision herein, if the
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adoption of or any change in any Requirement of Law or in the interpretation or
application thereof occurring after the date hereof shall make it unlawful for
any Lender to create or maintain Acceptances as contemplated by this Agreement,
(a) such Lender shall as soon as reasonably practicable thereafter give written
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notice of such circumstances to the Borrower and the Administrative Agent (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Lender hereunder to accept Drafts, purchase Acceptances and
convert Prime Rate Loans to Acceptances shall forthwith be cancelled, and, until
such time as it shall no longer be unlawful for such Lender to create or
maintain Acceptances, such Lender shall then have a commitment only to make a
Prime Rate Loan when an Acceptance is requested and (c) all outstanding
Acceptances, if any, shall be converted automatically to Prime Rate Loans on the
respective maturities thereof or within such earlier period as required by law.
5.8 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof
applicable to any Lender, or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the date hereof
(or, if later, the date on which such Lender becomes a Lender):
(i) shall subject such Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Acceptance made by it, or change the basis of taxation
of payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by subsection 5.9 (including Non-Excluded Taxes imposed
solely by reason of any failure of such Lender to comply with its
obligations under subsection 5.9(a)) and changes in rate of tax on the
overall net income, or franchise tax (imposed in lieu of such net income
tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(ii) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever);
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and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of creating, converting
into, continuing or maintaining Acceptances or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable,
provided that, in any such case, the Borrower may elect to convert any
- --------
Acceptances made available by such Lender hereunder to Prime Rate Loans by cash
collateralizing all outstanding Acceptances and by giving the Administrative
Agent at least three Business Days' notice of such election. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall as soon as reasonably practicable thereafter provide notice thereof to the
Borrower, through the Administrative Agent, certifying (x) that one of the
events described in this paragraph (a) has occurred and describing in reasonable
detail the nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. Such a
certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender, through the Administrative Agent, to the Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each
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case, made subsequent to the date hereof (or, if later, the date on which such
Lender becomes a Lender), does or shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital as a consequence of its
obligations hereunder or under any Letter of Credit to a level below that which
such Lender or such corporation could have achieved but for such change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within ten Business Days after submission
by such Lender to the Borrower (with a copy to the Administrative Agent) of a
written request therefor certifying (x) that one of the events described in this
paragraph (b) has occurred and describing in reasonable detail the nature of
such event, (y) as to the reduction of the rate of return on capital resulting
from such event and (z) as to the additional amount or amounts demanded by such
Lender and a reasonably detailed explanation of the calculation thereof, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
5.9 Taxes. (a) Except as provided below in this subsection, all
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payments made by the Borrower under this Agreement and the Notes shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding in the
case of each Lender or its applicable lending office, or any branch or affiliate
thereof (i) net income taxes, doing business and franchise and similar taxes,
branch taxes or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof imposed by any
jurisdiction under the laws of which such Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof
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and (ii) any such taxes or other tax, levy, impost, duty, charge, fee, deduction
or withholding imposed by reason of any connection between the jurisdiction
imposing such tax and such Lender, applicable lending office, branch or
affiliate other than a connection arising solely from such Lender having
executed, delivered or performed its obligations, or received payment under or
enforced, this Agreement or the Notes. If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded
------------
Taxes") are required to be withheld from any amounts payable to the
- ------
Administrative Agent or any Lender hereunder or under the Notes, the amounts so
payable to the Administrative Agent or such Lender shall be increased by any
additional amounts to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes on such additional
amounts) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the Notes; provided, however, that
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the Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to pay any such additional amounts to any Lender that is
not incorporated under the laws of Canada or a province thereof or is not a
resident of Canada for purposes of the Tax Act. Whenever any Non-Excluded Taxes
are payable by the Borrower, as promptly as possible thereafter, the Borrower
shall send to the Administrative Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Administrative
Agent and each Lender from any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection 5.9 shall survive the termination of
this Agreement and the payment of the Loans,
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Acceptance Reimbursement Obligations, Letters of Credit and all other amounts
payable hereunder.
(b) Any Lender that is not incorporated under the laws of Canada or
a province thereof or is not a resident of Canada for purposes of the Tax Act
shall, on or before the date of any payment by the Borrower under this
Agreement, notify the Borrower and the Administrative Agent in writing of the
jurisdiction in which the Lender is resident.
5.10 Certain Rules Relating to the Payment of Additional Amounts.
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(a) Upon the request, and at the expense, of the Borrower, each Lender to which
the Borrower is required to pay any additional amount pursuant to subsection 5.8
or 5.9, and any Participant in respect of whose participation such payment is
required, shall reasonably afford the Borrower the opportunity to contest, and
reasonably cooperate with the Borrower in contesting, the imposition of any Non-
Excluded Tax giving rise to such payment; provided that (i) such Lender shall
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not be required to afford the Borrower the opportunity to so contest unless the
Borrower shall have confirmed in writing to such Lender its obligation to pay
such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse
such Lender for its reasonable attorneys' and accountants' fees and
disbursements incurred in so cooperating with the Borrower in contesting the
imposition of such Non-Excluded Tax.
(b) If a Lender changes its applicable lending office (other than
pursuant to paragraph (c) below) and the effect of the change, as of the date of
the change, would be to cause the Borrower to become obligated to pay any
additional amount under subsection 5.8 or 5.9, the Borrower shall not be
obligated to pay such additional amount.
(c) If a condition or an event occurs which would, or would upon
the passage of time or giving of notice, result in the payment of any additional
amount to any Lender by the Borrower pursuant to subsection 5.8 or 5.9, such
Lender shall as soon as reasonably practicable
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thereafter notify the Borrower and the Administrative Agent and shall take such
steps as may reasonably be available to it and acceptable to the Borrower to
mitigate the effects of such condition or event (which shall include efforts to
rebook the Loans held by such Lender at another lending office, or through
another branch or an affiliate, of such Lender); provided that such Lender shall
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not be required to take any step that, in its reasonable judgment, would be
materially disadvantageous to its business or operations or would require it to
incur additional costs (unless the Borrower agrees to reimburse such Lender for
all such reasonable and actual additional costs).
(d) If (and for so long as) the Borrower shall become obligated to
pay additional amounts pursuant to subsection 5.8 or 5.9 and any affected Lender
shall not have promptly taken the steps necessary to avoid the need for payments
under subsection 5.8 or 5.9, the Borrower shall have the right, upon payment in
full of all amounts then due from it under subsections 5.8 and 5.9, (i) with the
assistance of the Administrative Agent, to seek one or more substitute Lenders
reasonably satisfactory to the Administrative Agent and the Borrower to purchase
in accordance with the provisions of subsection 12.6(c) the affected Loan, in
whole or in part, at an aggregate price no less than the principal amount of
such Loan or part thereof being purchased plus accrued and unpaid interest
thereon to the date of purchase and all fees and other amounts owing to the
affected Lender hereunder (or under the other Loan Documents) and accrued to the
date of the purchase (but without payment to the affected Lender of any premium
or penalty) and to assume the obligations of the affected Lender under this
Agreement and the other Loan Documents, or (ii) after the Borrower has made a
good faith effort to seek a substitute Lender in accordance with clause (i)
above and provided that no Default or Event of Default has occurred and is
continuing, upon at least three Business Days' irrevocable notice to the
Administrative Agent and the affected Lender, to terminate the entire Commitment
of the affected Lender and to repay the affected Loan, together
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with accrued and unpaid interest thereon to date of repayment, and all fees and
other amounts accrued to the date of repayment and owing to the affected Lender
hereunder (or under the other Loan Documents) (but without payment to the
affected Lender of any premium or penalty). In the case of the substitution of a
Lender, the Borrower, the Administrative Agent, the affected Lender, and any
substitute Lender shall execute and deliver an appropriately completed
Assignment and Acceptance pursuant to subsection 12.6(c) to effect the
assignment of rights to, and the assumption of obligations by, the substitute
Lender.
(e) Notwithstanding any other provision of this Agreement, no Lender
shall be entitled to receive any additional amounts pursuant to subsection 5.8
or 5.9 unless such Lender represents to the Borrower that, at the time of any
request by such Lender that such amounts be paid, it is the policy or general
practice of such Lender to demand such compensation for comparable costs or
deductions, if any, in similar circumstances, if any, under comparable
provisions of other credit agreements for comparable customers.
(f) The obligations of the Borrower and a Lender or Participant under
this subsection 5.10 shall survive the termination of this Agreement and the
payment of the Notes and all amounts payable.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent, the Collateral Agent and each
Lender to enter into and perform their respective obligations under this
Agreement, and to induce each Lender to make the initial Extension of Credit
requested to be made by it on the Effective Date and to accept and discount
Drafts (or discount Acceptance Notes), the Borrower hereby represents and
warrants, on the Effective Date and on each date that any Extension of Credit is
made thereafter, to the Administrative Agent, the Collateral Agent and each
Lender that:
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6.1 Solvent. As of the Effective Date, the Borrower is Solvent.
-------
6.2 Corporate Existence. The Borrower is duly incorporated, validly
-------------------
existing and in good standing under the laws of the jurisdiction of its
incorporation.
6.3 Corporate Power; Authorization; Enforceable Obligations. (a)
-------------------------------------------------------
The Borrower has the corporate power and authority to make, deliver and perform
the Loan Documents to which it is a party and to borrow hereunder and has taken
all necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement, the Notes, the Drafts, the Acceptance Notes and
the Applications and to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or
any other Person is required to be obtained or made by or on behalf of the
Borrower in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
the Borrower is a party, except (i) for consents, authorizations, notices and
filings described in Schedule 6.3, all of which have been obtained or made, (ii)
for filings to perfect the Liens created by the Security Agreements and (iii)
any consents pursuant to the Financial Administration Act (Canada) or equivalent
legislation in respect of Accounts of the Borrower the Obligor in respect of
which is Canada or any province, department, agency or instrumentality thereof.
This Agreement and each other Loan Document to which the Borrower is a party has
been duly executed and delivered on behalf of the Borrower. This Agreement and
each other Loan Document to which the Borrower is a party constitutes a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights
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generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
(b) Each Loan Party (other than the Borrower) has the corporate power
and authority to make, deliver and perform the Loan Documents to which it is a
party and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of any such Loan Party in connection with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except (i) for consents, authorizations,
notices and filings described in Schedules 6.3, all of which have been obtained
or made, (ii) for filings to perfect the Liens created by the Security
Agreements, and (iii) consents pursuant to the Financial Administration Act or
equivalent legislation in respect of Accounts of such Loan Party the Obligor of
which is Canada or any province, department, agency or instrumentality thereof.
Each Loan Document to which any such Loan Party is a party has been duly
executed and delivered on behalf of each such Loan Party. Each Loan Document to
which any such Loan Party is a party when executed and delivered by such Loan
Party will constitute a legal, valid and binding obligation of such Loan Party
enforceable against such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.4 No Legal Bar. The execution, delivery and performance of the
------------
Loan Documents to which the Borrower is a party, the borrowings hereunder and
the use of the proceeds thereof and the creation and perfection of the Liens
contemplated by the Security Agreements (a) will not violate any Requirement of
Law or Contractual Obligation of the
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Borrower or any of its Subsidiaries in any respect that would reasonably be
expected to have a Material Adverse Effect and (b) will not result in, or
require, the creation or imposition of any Lien (other than the Liens created by
the Security Documents) on any of its properties or revenues pursuant to any
such Requirement of Law or material Contractual Obligation (as defined in the
U.S. Credit Agreement).
6.5 No Default. No Default or Event of Default has occurred and is
----------
continuing.
6.6 Collateral. Upon filing of the financing statements and other
----------
documents delivered to the Administrative Agent by the Borrower on or prior to
the Closing Date in the jurisdictions listed on Schedule 6.6 (which financing
statements and other documents are in proper form for filing in such
jurisdictions), upon the filing of a Notice of Intention (the "Notice of
---------
Intention") to give security pursuant to Section 427 of the Bank Act at the
- ---------
office of the Bank of Canada, upon the filing of the Security Agreement in the
Trademarks Office and upon the registration of the Security Agreements and the
making of filings in any other jurisdiction as may be necessary under any
Requirement of Law on or after the Closing Date, the Liens created pursuant to
each Security Agreement, when executed and delivered, will constitute valid
Liens on and, perfected security interests, mortgages and charges in or on the
collateral referred to in such Security Agreement in favor of the Administrative
Agent for the ratable benefit of the Lenders (and with respect to the Notice of
Intention and other Bank Act Security, in favor of those Lenders holding Bank
Act Security), prior to all other Liens of all other Persons, except, to the
extent such Liens have priority by law, Liens permitted pursuant to subsection
8.3 of the U.S. Credit Agreement, and enforceable as such as against all other
Persons, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable
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principles (whether enforcement is sought by proceedings in equity or at law).
6.7 Subsidiaries. As of the Closing Date, the Borrower had no
------------
Subsidiaries. No Person other than the Borrower or Subsidiaries of the Borrower
owns any Capital Stock of any Subsidiary of the Borrower.
6.8 Purpose of Loans. The proceeds of the Loans shall be used by the
----------------
Borrower to finance the working capital and business requirements of the
Borrower and its Subsidiaries.
6.9 Canadian Pension Plans. (a) (i) The only Canadian Pension Plans
----------------------
of the Borrower are one or more defined contribution pension plans; (ii) each
Canadian Pension Plan, when established by the Borrower, will be in compliance
in all material respects with all applicable pension benefits and tax laws;
(iii) all contributions (including employee contributions made by authorized
payroll deductions) required to be made to the appropriate funding agency in
accordance with all applicable laws and the terms of each Canadian Pension Plan,
once established, will be made in accordance with applicable laws and the terms
of each Canadian Pension Plan; and (iv) no event has occurred or will occur and
no condition exists or will exist with respect to any Canadian Pension Plan that
has resulted or could reasonably be expected to result in any Canadian Pension
Plan having its registration revoked or refused for the purposes of any
applicable pension benefits or tax laws or being placed under the administration
of any relevant pension benefits regulatory authority or being required to pay
any taxes or penalties under any applicable pension benefits or tax laws; except
in each case under clauses (i) through (iv) above, to the extent that any of the
foregoing could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) With respect to any retirement or other deferred compensation
plan maintained, administered or
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contributed to by or to which there may be an obligation to contribute by the
Borrower or any of its Subsidiaries in respect of employees in Canada which is
not a Canadian Pension Plan, all required contributions have been made and there
are no unfunded liabilities in respect of such plans (either on a "going
concern" or on a "winding up" basis and determined in accordance with all
applicable laws and using assumptions and methods that are appropriate in the
circumstances and in accordance with generally accepted actuarial principles and
practices in Canada), except to the extent that all such unfunded liabilities
and failures to make required contributions could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.10 Representations and Warranties in the U.S. Credit Agreement.
-----------------------------------------------------------
The representations and warranties made by the U.S. Borrower in the U.S. Credit
Agreement are true and correct in all material respects.
6.11 No Default. Immediately prior to the occurrence of the
----------
Effective Date, no Default or Event of Default (as defined in each of the
Existing Credit Agreement and the Existing U.S. Credit Agreement) has occurred
and is continuing.
SECTION 7. CONDITIONS PRECEDENT
7.1 Conditions to Effectiveness. This Agreement shall become
---------------------------
effective on the date (the "Effective Date") upon which each of the following
conditions shall be satisfied: (i) the execution and delivery of this Agreement
by each party hereto, (including, without limitation, the Guarantors' signature
lines which are set forth at the foot of this Agreement), (ii) the occurrence of
the "Effective Date" under and as defined in subsection 6.1 of the U.S. Credit
Agreement, and (iii) the first date upon which each of the conditions precedent
set forth in this subsection 7.1 are satisfied (the "Effective Date"):
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(a) Legal Opinions. The Administrative Agent shall have received
--------------
(with a copy for each Lender) and the Administrative Agent and the Lenders
shall be reasonably satisfied with, the legal opinions referred to in
subsection 6.1 of the U.S. Credit Agreement, and each such legal opinion
shall state, or be accompanied by a separate letter to the effect, that the
Administrative Agent and the Lenders are entitled to rely thereon as if
such legal opinions were addressed to the Administrative Agent and the
Lenders.
(b) Corporate Proceedings of the Loan Parties. The
-----------------------------------------
Administrative Agent shall have received, with a copy for each Lender, a
copy of the resolutions, in form and substance reasonably satisfactory to
the Administrative Agent, of the Board of Directors of the Borrower
authorizing, as applicable, (i) the execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents to which it is or
will be a party and (ii) the borrowings contemplated hereunder.
(c) Incumbency Certificates of the Loan Parties. The
-------------------------------------------
Administrative Agent shall have received, with a copy for each Lender, a
certificate of the Borrower dated the Closing Date, as to the incumbency
and signature of the officers of the Borrower executing any Loan Document,
reasonably satisfactory in form and substance to the Administrative Agent,
executed by the Secretary or any Assistant Secretary of the Borrower.
7.2 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, the initial Extension of Credit and each Swing
Line Loan) is subject to the satisfaction or waiver of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party pursuant to this Agreement or any other
Loan Document
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(or in any amendment, modification or supplement hereto or thereto) to
which it is a party, and each of the representations and warranties
contained in any certificate furnished at any time by or on behalf of any
Loan Party pursuant to this Agreement or any other Loan Document shall,
except to the extent that they relate to a particular date, be true and
correct in all material respects on and as of such date as if made on and
as of such date.
(b) No Default. No Default or Event of Default (other than a Default
----------
or an Event of Default arising under Section 10(j) which occurs solely as a
result of the occurrence of a U.S. Borrowing Base Default) shall have
occurred and be continuing on such date or after giving effect to the
Extensions of Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions of Credit
--------------
requested to be made on such date, the Aggregate Outstandings of all the
Lenders shall not exceed the lesser of (i) the Borrowing Base then in
effect and (ii) the aggregate Commitments.
Each Extension of Credit made to (or on behalf of) the Borrower hereunder shall
constitute a representation and warranty by the Borrower as of the date of such
Extension of Credit that the conditions contained in this subsection 7.2 have
been satisfied.
SECTION 8. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and
so long as the Commitments remain in effect, and thereafter until payment in
full of the Notes, the Acceptance Reimbursement Obligations, all Reimbursement
Obligations and any other amount then due and owing to any Lender, the
Collateral Agent or the Administrative Agent hereunder or under any other Loan
Document and termination
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or expiration of all Letters of Credit, the Borrower shall and (except in the
case of subsections 8.1, 8.2 and 8.6) shall cause each of its Subsidiaries to:
8.1 Financial Statements. Furnish to each Lender:
--------------------
(a) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of each of the U.S. Borrower and the
Borrower, (i) a copy of the consolidated balance sheet of Holdings and its
consolidated Subsidiaries (other than Realco) and (ii) a copy of the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries (if any), in each case as at the end of each such year and
together with copies of the related consolidated statements of operations,
changes in common stockholders' equity and cash flows for each such year,
setting forth in the case of such balance sheets as at the end of the 1995
fiscal year of Holdings and the Borrower and in the case of such balance
sheets and statements of operations, changes in common stockholders' equity
and cash flows for the 1996 and subsequent fiscal years of Holdings and the
Borrower, in each case in comparative form the figures for the previous
year, and in the case of (i) above such consolidated financial statements
to be reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
Coopers & Lybrand or other independent certified public accountants of
nationally recognized standing and such financial statements to be
certified by a Responsible Officer of Holdings or the Borrower, as the case
may be, as being fairly stated in all material respects;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of Holdings, a copy of the unaudited consolidated and consolidating
balance sheet of Holdings and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated and consolidating
statements of operations, changes in common stockholders' equity and cash
flows of Holdings and its
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consolidated Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth, (x) in the case of
each such consolidated and consolidating balance sheet as of the end of the
second fiscal quarter of 1995 and thereafter, in comparative form the
budgeted figures (as adjusted consistent with past practice) for the
relevant period and the figures as at the end of the previous fiscal year
and (y) in the case of each such consolidated and consolidating statements
of operations and cash flows for the second fiscal quarter of 1995 and
thereafter, in comparative form the budgeted figures (as adjusted
consistent with past practice) for the relevant period and the figures for
the corresponding period of the previous fiscal year, certified by a
Responsible Officer of Holdings as being fairly stated in all material
respects (subject to normal year-end audit and other adjustments and except
for the absence of notes);
(c) as soon as available, but in any event not later than 30 days
after the end of each fiscal month of each fiscal year of Holdings, a copy
of the unaudited consolidated balance sheet of Holdings and its
consolidated Subsidiaries as of the end of such month and the related
unaudited consolidated statement of operations, the sales figures with
respect to which shall be broken down between Holdings and the Borrower,
setting forth with respect to months ending after March 1, 1995, in the
case of such consolidated balance sheets, in comparative form the figures
as at the end of the previous fiscal year and, in the case of such
consolidated statements of operations, in comparative form the figures for
the corresponding fiscal month of the previous year, certified by a
Responsible Officer of Holdings as being fairly stated in all material
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respects (subject to normal year-end audit and other adjustments and except
for the absence of notes) provided that during any Borrowing Base
--------
Elimination Period the Borrower shall not be required to make any delivery
pursuant to this subsection 8.1(c); and
(d) as soon as available, a copy of the consolidated balance sheet of
Holdings and its consolidated Subsidiaries as of March 1, 1994, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Coopers & Lybrand
or other independent certified public accountants of nationally recognized
standing and certified by a Responsible Officer of the Borrower as being
fairly stated in all material respects;
all such financial statements shall be (and, in the case of financial statements
delivered pursuant to subsection 8.1(a) (but only with respect to the
consolidating financial statements referred to therein), (b), (c) and (d) above,
shall be certified by a Responsible Officer of Holdings as being) fairly stated
in all material respects in conformity with GAAP and shall be (and, in the case
of financial statements delivered pursuant to subsection 8.1(a) (but only with
respect to the consolidating financial statements referred to therein), (b), (c)
and (d) above, shall be certified by a Responsible Officer of Holdings as being)
prepared in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such accountants
or officer, as the case may be, and disclosed therein, and except, in the case
of the financial statements delivered pursuant to subsection 8.1(b) and (c), for
the absence of certain notes).
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8.2 Certificates; Other Information. Furnish to each Lender:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a) a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the audit necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a), (b) and (c), and in clause (b) of the
definition of Adjustment Date, a certificate of a Responsible Officer of
the U.S. Borrower or Holdings, as the case may be, (i) stating that, to the
best of such Officer's knowledge, the U.S. Borrower and the Borrower or
Holdings, as the case may be, during such period has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in the U.S. Credit Agreement and this Agreement and in the Notes
and the other Loan Documents to which it is a party to be observed,
performed or satisfied by it, and that such Responsible Officer has
obtained no knowledge of any Default or Event of Default hereunder or under
the U.S. Credit Agreement, except, in each case, as specified in such
certificate and (ii) setting forth the calculations required to determine
(A) the Margin Reduction Percentage and compliance with the covenants set
forth in subsection 8.1 of the U.S. Credit Agreement (in the case of a
certificate furnished with the financial statements referred to in
subsections 8.1(a) and (b) hereof and in clause (b) of the definition of
Adjustment Date) and (B) compliance with the covenant set forth in
subsection 8.9 of the U.S. Credit Agreement (in the case of a certificate
furnished with the financial statements referred to in subsection 8.1(a)
hereof);
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(c) on or prior to the first Friday that is after the 15th day of
each calendar month after the Closing Date (except during any Borrowing
Base Elimination Period), a certificate substantially in the form of
Exhibit E (a "Monthly Borrowing Base Certificate"), certified by a
----------------------------------
Responsible Officer of the Borrower as true and correct, setting forth the
amount of Accounts of the Borrower and its Subsidiaries, Eligible Accounts,
Inventory of the Borrower and its Subsidiaries and Eligible Inventory, in
each case as of the last Business Day of the immediately preceding month,
attached to which shall be reasonably detailed information including an
aging schedule of Accounts of the Borrower and its Subsidiaries;
(d) as soon as available, but in any event not later than ninety days
after the beginning of each fiscal year of the U.S. Borrower, a copy of the
projections by the U.S. Borrower of the operating budget and cash flow
budget of the U.S. Borrower and its Subsidiaries for such fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer of
the U.S. Borrower to the effect that such Responsible Officer believes, as
of the date of such certificate, such projections to have been prepared on
the basis of reasonable assumptions;
(e) within five days after the same are sent, copies of all financial
statements and reports which Holdings or the U.S. Borrower sends to its
security holders, and within five days after the same are filed, copies of
all financial statements and periodic reports which Holdings or the U.S.
Borrower may file with the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(f) within two days after the same are filed, copies of all
registration statements and any amendments and exhibits thereto, which
Holdings or the U.S. Borrower may file with the Securities and Exchange
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Commission or any successor or analogous Governmental Authority;
(g) promptly after the consummation by the Borrower or any of its
Subsidiaries of a Mixed Asset Sale, a certificate of a Responsible Officer
of the Borrower setting forth (in reasonable detail) the calculations
required to determine compliance with the requirement of clause (iii) of
the proviso to subsection 9.2(g) and stating that, to the best of such
officer's knowledge, no Default or Event of Default has occurred and is
continuing or would occur as a result of such Mixed Asset Sale;
(h) upon the reasonable request of the Administrative Agent, copies
of any certificates delivered to Westinghouse pursuant to Section 6(a)(1)
of the RealCo First Mortgage Notes;
(i) copies of all material written amendments, waivers or
modifications of the DCBU Supply Agreement (as defined in the U.S. Credit
Agreement); and
(j) promptly, such additional financial and other information as the
Administrative Agent, the Collateral Agent or any Lender may from time to
time reasonably request.
8.3 Collateral Audit. Reimburse the Collateral Agent for any
----------------
reasonable fees or expenses incurred by it in connection with one audit of any
of the Collateral during each twelve month period after the Closing Date
(without duplication of the fees and expenses with respect to a collateral audit
referred to in subsection 7.6 of the U.S. Credit Agreement) provided that, if a
--------
Default or Event of Default shall have occurred and be continuing, the Borrower
shall reimburse the Collateral Agent for any reasonable fees and expenses
incurred by it in connection with any such audit reasonably requested in writing
by the Majority Lenders.
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8.4 Notices. (a) As soon as possible after a Responsible Officer of
-------
the Borrower knows thereof, promptly give notice to the Administrative Agent,
the Collateral Agent and each Lender of the occurrence of any Default or Event
of Default.
(b) Concurrently with the delivery thereof to the U.S. Administrative
Agent and the U.S. Lenders, promptly give to the Administrative Agent, the
Collateral Agent and each Lender copies of all notices delivered to the U.S.
Administrative Agent, the U.S. Collateral Agent and the U.S. Lenders pursuant to
subsection 7.7 of the U.S. Credit Agreement.
(c) Each notice (or copy of a notice) delivered pursuant to this
subsection shall be accompanied by a statement of a Responsible Officer of the
Borrower setting forth details of the occurrence referred to therein and stating
what action the Borrower proposes to take with respect thereto.
8.5 Landlord Waivers. At its own expense, request, and use
----------------
reasonable efforts to obtain, (i) a Landlord's Waiver from each landlord of each
of the existing facilities in which Inventory of the Borrower is located as of
the Closing Date, and (ii) prior to entering into a lease of a facility in which
Inventory of the Borrower or any of its Subsidiaries will be located on or after
the Closing Date, a Landlord's Waiver from each landlord of any such facility.
To the extent that the Borrower shall have, prior to the Closing Date, obtained
or used reasonable efforts to obtain a Landlord's Waiver in the form of Exhibit
E to the Existing Credit Agreement in respect of any such existing facility, the
Borrower shall be deemed to have satisfied the requirements of this subsection
8.5 with respect to such existing facility.
8.6 Loans to Cover U.S. Borrowing Base Defaults. If at any time Loans
-------------------------------------------
are made hereunder during the continuance of a U.S. Borrowing Base Default,
cause that
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portion of the proceeds of such Loans which is necessary to cure such U.S.
Borrowing Base Default by repaying and/or cash collateralizing U.S. Extensions
of Credit to be promptly exchanged for U.S. Dollars, dividended, loaned or
advanced to the U.S. Borrower and used by the U.S. Borrower to repay and/or cash
collateralize the U.S. Extensions of Credit.
8.7 Cash Management System. (a) Maintain bank or trust accounts
----------------------
only with the banks or other financial institutions listed on Schedule 8.7 and
such other banks or other financial institutions of which the Administrative
Agent and the Collateral Agent may be notified in writing by the Borrower from
time to time (each, a "Depositary Bank").
---------------
(b) Cause all amounts representing Proceeds (as defined in the
Collateral Covenant Agreement) of Collateral (other than Net Proceeds Allocable
to Payee and Reserved Amounts (as such terms are defined in the Canadian First
Mortgage Notes) and Specified Loss Proceeds (as defined in the Canadian Cash
Collateral Agreement)) which are received by the Borrower or any of its
Subsidiaries from time to time to be promptly deposited into a bank or trust
account maintained with a Depositary Bank (each, a "Depositary Account").
------------------
(c) Instruct each Depositary Bank to transfer, on a daily basis, all
available funds on deposit in each Depositary Account maintained by it to the
Concentration Account established with, and in the name of, the Administrative
Agent pursuant to the Collateral Covenant Agreement; provided that amounts not
--------
in excess of C$100,000 (the "Operating Fund Limit") in the aggregate with
--------------------
respect to all Depositary Accounts may be retained by the Depositary Banks on
deposit in Depositary Accounts and withdrawn from time to time therefrom by the
Borrower or any of its Subsidiaries to pay reasonable costs and expenses
incurred by the Borrower or any of its Subsidiaries; provided that, upon the
--------
occurrence and during the continuance of an Event of Default, the Borrower shall
instruct the Depositary Banks
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to transfer all available funds in the Depositary Accounts to the Concentration
Account on a daily basis and shall not revoke such instructions unless and until
such Event of Default has been cured or waived.
(d) The Concentration Account shall be under the sole dominion and
control of the Administrative Agent. Subject to applicable law, at any time when
an Event of Default has occurred and is continuing, the Administrative Agent may
apply all or any of the funds on deposit in the Concentration Account to the
payment of the Obligations (as defined in the Collateral Covenant Agreement) in
accordance with Section 4.9 of the Collateral Covenant Agreement. So long as no
Event of Default has occurred and is continuing, the Administrative Agent shall
promptly remit any funds on deposit in the Concentration Account to the General
Fund Account (as defined in the Collateral Covenant Agreement). The Borrower
shall have the right, at any time and from time to time, to withdraw such
amounts from the General Fund Account, and to maintain such balances in the
General Fund Account, as it shall deem to be necessary or desirable.
SECTION 9. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Closing Date and
so long as the Commitments remain in effect, and thereafter until payment in
full of the Notes, all Acceptance Reimbursement Obligations, all Reimbursement
Obligations and any other amount then due and owing to any Lender, the
Collateral Agent or the Administrative Agent hereunder or under any other Loan
Document and termination or expiration of all Letters of Credit, the Borrower
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
9.1 Limitation on Fundamental Changes. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
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transfer or otherwise dispose of, all or substantially all of its property,
business or assets, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower or with or into any one or more wholly owned
Subsidiaries of the Borrower;
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Borrower or any other wholly owned Subsidiary of the
Borrower; and
(c) in the case of the Borrower or any of its Subsidiaries, as
permitted by subsection 9.2.
9.2 Limitation on Sale of Assets. Convey, sell, lease, assign,
----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock, to any Person other than the
Borrower or a Subsidiary of the Borrower, except:
(a) the sale or other Disposition of (i) obsolete or worn out
property, whether now owned or hereafter acquired, in the ordinary course
of business or (ii) any Inventory not included as Eligible Inventory by
virtue of clause (f) or (g) of the definition of Eligible Inventory;
(b) the sale or other Disposition of any property (including
Inventory and Intellectual Property) in the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable or
notes receivable arising in the ordinary course of business, or the
conversion or
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exchange of accounts receivable into or for notes receivable, in connection
with the compromise or collection thereof;
(d) as permitted by subsection 9.1(b);
(e) the abandonment or other Disposition of patents, trademarks or
other Intellectual Property that are, in the reasonable judgment of the
Borrower, no longer economically practicable to maintain or useful in the
conduct of the business of the Borrower and its Subsidiaries taken as a
whole;
(f) Dispositions of any assets or property by the Borrower or any
wholly owned Subsidiary of the Borrower (i) to the Borrower or any wholly
owned Subsidiary of the Borrower or (ii) so long as no Default or Event of
Default has occurred and is continuing, to the U.S. Borrower or any of its
Subsidiaries (other than RealCo), provided that Dispositions of assets or
--------
property in the ordinary course of business to the U.S. Borrower or any of
its Subsidiaries shall not be prohibited pursuant to this clause (ii)
notwithstanding the occurrence and continuance of a Default or an Event of
Default; and
(g) Dispositions of assets in a transaction or series of related
transactions for Net Cash Proceeds not in excess of the Canadian Dollar
equivalent (determined on the basis of the Current Exchange Rate in effect
on the Business Day immediately preceding the date of such Disposition) of
$15,000,000 in any such transaction or series of related transactions,
provided that (i) no Default or Event of Default has occurred or is
--------
continuing or would occur as a result thereof, (ii) such Net Cash Proceeds
are applied to the repayment of the Extensions of Credit pursuant to
subsection 5.2(c) and (iii) notwithstanding the foregoing, no Disposition
constituting a Mixed Asset Sale shall be permitted hereunder if, after
giving effect thereto, the sum of
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(A) the U.S. Dollar equivalent (determined on the basis of then Current
Exchange Rates from time to time) of the Aggregate Asset Sale Shortfall
Amount and (B) the U.S. Aggregate Asset Sale Shortfall Amount would exceed
U.S.$15,000,000.
9.3 Limitations on Dispositions of Collateral. Convey, sell,
-----------------------------------------
transfer, lease, or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, except for (a) mergers, consolidations, sales,
leases, transfers or other Dispositions permitted under subsection 9.1 and (b)
sales or other Dispositions permitted under subsection 9.2, including sales of
Inventory in the ordinary course of business; and the Administrative Agent
shall, and the Lenders hereby authorize the Administrative Agent (or the U.S.
Collateral Agent, as applicable) to, execute such releases of Liens and take
such other actions as the Borrower may reasonably request in connection with the
foregoing or in connection with subsection 8.13 of the U.S. Credit Agreement, as
applicable.
9.4 Creation of Subsidiaries. (A) Create any Subsidiary unless (i)
------------------------
such Subsidiary is wholly owned by the Borrower and/or another wholly owned
Subsidiary of the Borrower and organized under the laws of one of the ten
provinces of Canada and (ii) concurrently with the creation thereof, (a) such
Subsidiary executes and delivers to the Administrative Agent a valid and
enforceable Canadian Subsidiary Guarantee as Guarantor under and as defined
therein, (b) such Subsidiary executes and delivers to the Administrative Agent a
valid and enforceable Canadian Subsidiary Demand Debenture, a Canadian
Subsidiary Demand Debenture Pledge Agreement and a Canadian Subsidiary
Collateral Covenant Agreement, (c) the Borrower and/or such other Subsidiary of
the Borrower that owns any Capital Stock of such Subsidiary executes and
delivers to the Administrative Agent a valid and enforceable Subsidiary Stock
Pledge Agreement and delivers to the Administrative Agent all certificates or
instruments evidencing such Capital Stock owned by it, along with evidence of
any
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transfer approval required by the directors or shareholders of such Subsidiary
to enable such Capital Stock to be registered in the name of the Administrative
Agent, (d) all actions necessary to perfect the liens created by each Security
Document to which such Subsidiary is or becomes a party have been duly completed
and (e) the Administrative Agent receives a favorable opinion of counsel
(reasonably satisfactory to the Administrative Agent) to such Subsidiary as to
the due organization and valid existence of such Subsidiary, the due
authorization, execution and delivery by, and enforceability against, such
Subsidiary of each Loan Document to which it is or becomes a party and such
other customary matters (including the perfection of the liens contemplated by
the Security Documents to which such Subsidiary is a party) as the
Administrative Agent and its counsel may reasonably request; provided, however,
-------- -------
that the Borrower may acquire a Subsidiary without complying with the foregoing
requirements of this subsection 9.4 so long as the following conditions are
satisfied: (x) the assets of such Subsidiary have a book-value equal to or less
than $20,000,000, (y) at the time of the acquisition of such Subsidiary the
Borrower intends to transfer all of the assets of such Subsidiary to the
Borrower or another Subsidiary that has complied with the foregoing requirements
of this subsection 9.4, and (z) such transfer is completed within sixty days of
the acquisition of such Subsidiary.
(B) Notwithstanding the foregoing, with respect to any Person that is
or becomes a Foreign Subsidiary and that has material assets, such Foreign
Subsidiary shall be permitted hereunder so long as promptly upon the request of
the Administrative Agent, the Borrower shall, or shall cause such Foreign
Subsidiary to: (i) execute and deliver to the Administrative Agent a pledge
agreement as the Administrative Agent shall deem necessary or advisable to grant
to the Administrative Agent, for the benefit of the Lenders, a Lien on the
Capital Stock of such Subsidiary which is owned by the Borrower or any of its
Subsidiaries (provided that in no event shall more than 65% of the Capital Stock
of any such Subsidiary be required to be so
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pledged), (ii) deliver to the Administrative Agent any certificates representing
such Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of the Borrower or such Subsidiary, as the
case may be, and take or cause to be taken all such other actions under the law
of the jurisdiction of organization of such Foreign Subsidiary as may be
necessary or advisable to perfect such Lien on such Capital Stock and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i) and (ii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent. In addition, neither the
Borrower nor any Foreign Subsidiary shall, at any time, without the express
written permission of the Administrative Agent and the Majority Lenders, pledge
the Capital Stock of any Foreign Subsidiary to any other Person (other than to
the Administrative Agent on behalf of the Lenders).
9.5 Maintenance of Bank Accounts. Maintain any material bank
----------------------------
accounts outside of Canada (including, without limitation, any such accounts
which could reasonably be deemed to be "principal operating accounts").
9.6 Limitation on Certain Modifications and Certain Contractual
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Obligations. Without the prior consent of the Majority Lenders, amend, modify,
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waive or change, or consent to any amendment, modification, waiver or change to,
any Canadian First Mortgage Note Document, (i) if such amendment, modification,
waiver or change would have the effect of making any of the obligations and
duties of the Borrower or any other Loan Party under any Canadian First Mortgage
Note Document materially more onerous than those to which the Borrower or such
Loan Party was subject immediately prior to such amendment, modification, waiver
or change, (ii) in the case of any Canadian First Mortgage Note, if such
amendment, modification, waiver or change would increase the amount, rate or
nature of any interest payable thereunder or require that any interest
thereunder
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be paid in cash, or require that any principal thereof be paid prior to the
final maturity thereof or (iii) in the case of any Canadian First Mortgage Note
or the Canadian Cash Collateral Agreement, if such amendment, modification,
waiver or change would require any amounts other than Net Proceeds Allocable to
Payee and any Reserved Amounts (as each such term is defined in each of the
Canadian First Mortgages Notes), to the extent such Reserved Amounts are not
paid to the Borrower, to be paid to any holder of any Canadian First Mortgage
Note prior to the date such amounts would otherwise be due and payable
thereunder; provided that, notwithstanding the foregoing, without the prior
--------
written consent of the Majority Lenders, the Borrower shall not, and shall not
permit any Subsidiary to, amend, modify, waive or change, or consent to any
amendment, modification, waiver or change to, paragraphs 1, 3, 5, 6(3), 9(c) or
17 of, or clause (iv) of paragraph 14 of the Canadian First Mortgage Note or
Article V or Section 6.02 of Canadian Cash Collateral Agreement (including any
related defined terms used in any such paragraphs).
SECTION 10. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) (i) The Borrower shall fail to pay any principal of any Note,
any Acceptance Reimbursement Obligation or any Reimbursement Obligation
when due in accordance with the terms thereof or hereof; or (ii) the
Borrower shall fail to pay any interest on any Note, or any other amount
payable hereunder, within three Business Days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party in this Agreement (other than the
representation and warranty
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contained in subsection 6.10 hereof) or in any other Loan Document that
does not also constitute a U.S. Loan Document (or in any amendment,
modification or supplement hereto or thereto) or which is contained in any
certificate furnished at any time by or on behalf of the Borrower pursuant
to this Agreement or any such other Loan Document that does not also
constitute a U.S. Loan Document shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made, and, if
susceptible to being cured, such inaccuracy shall not be cured within 30
days after a Responsible Officer of the Borrower knows or should have known
thereof; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 9 of this
Agreement, or subsection 2.3 (other than the third and fourth sentences of
such subsection) of the Collateral Covenant Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document that does not also constitute a U.S.
Loan Document (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period ending on
the earlier of (i) the date which is 30 days after a Responsible Officer of
the Borrower shall have discovered or should have discovered such default
and (ii) the date which is 30 days after written notice has been given to
the Borrower by the Administrative Agent or the Majority Lenders; or
(e) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Notes, the Acceptance Reimbursement Obligations or the Reimbursement
Obligations) in excess of C$1,000,000 or
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in the payment of any Guarantee Obligation in excess of C$1,000,000, beyond
the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance of
any other agreement or condition relating to any Indebtedness or Guarantee
Obligation referred to in clause (i) above or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice or lapse of time if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable, and such time shall have
lapsed; or
(f) (i) the Borrower or any other Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking, or with respect to, the appointment of a
receiver, trustee, custodian, conservator or other similar official for it
or for all or any substantial part of its assets, or the Borrower or any
other Loan Party shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any
other Loan Party any case, proceeding or other action pursuant to statute,
contract or common law of a nature referred to
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in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged, unstayed or unbonded for a period of 60 days; or (iii) there
shall be commenced against the Borrower or any other Loan Party any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part
of its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, stayed or bonded pending
appeal, within 60 days from the entry thereof; or (iv) the Borrower or any
other Loan Party shall take any corporate action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
other Loan Party shall be generally unable to, or shall admit in writing
its general inability to, pay its debts as they become due; or
(g) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate at any time
a liability (net of any insurance or indemnity payments actually received
in respect thereof) of C$1,000,000 or more, and all such judgments or
decrees shall not have been satisfied, vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof; or
(h) (i) Any of the Security Agreements or any Subsidiary Stock
Pledge Agreements shall cease for any reason to be in full force and
effect, or the Borrower or any other Loan Party which is a party to any of
the Security Agreements or any of Subsidiary Stock Pledge Agreements shall
so assert in writing, or (ii) the Lien created by any of the Security
Agreements or any of Subsidiary Stock Pledge Agreements shall cease to be
perfected and enforceable in accordance with its terms
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or of the same effect as to perfection and priority purported to be created
thereby with respect to any material portion of the Collateral, and the
failure of such Lien to be perfected and enforceable with such priority
shall have continued unremedied for a period of 20 days; or
(i) The U.S. Borrower Guarantee or the Subsidiary Guarantee shall
cease for any reason to be in full force and effect or any Guarantor shall
so assert in writing; or
(j) an "Event of Default" under and as defined in the U.S. Credit
Agreement shall occur and be continuing; or
(k) an "Event of Default" under and as defined in the Canadian First
Mortgage Notes shall occur and be continuing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all Acceptance Reimbursement
Obligations (regardless of whether or not such Acceptance Reimbursement
Obligations are then due and payable) and all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and the Notes shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
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Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all
Acceptance Reimbursement Obligations (regardless of whether or not such
Acceptance Reimbursement Obligations are then due and payable) and all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) and
the Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph and with respect to all outstanding
Acceptance Reimbursement Obligations, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit and
the aggregate undiscounted face amount of all unmatured Acceptances. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Lender, the L/C Participants and the Lenders, a security interest in
such cash collateral to secure all obligations of the Borrower in respect of
such Letters of Credit and outstanding Acceptance Reimbursement Obligations
under this Agreement and the other Loan Documents. The Borrower shall execute
and deliver to the Administrative Agent, for the account of the Issuing Lender,
the L/C Participants and the Lenders, such further documents and instruments as
the Administrative Agent may request to evidence the creation and perfection of
such security interest in such cash collateral account. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to the
payment of (i) drafts drawn under such Letters of Credit and (ii) maturing
Acceptances, and the unused portion thereof after all such Letters of Credit
shall have expired or been
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fully drawn upon and all such Acceptances shall have matured, if any, shall be
applied to repay other obligations of the Borrower hereunder and under the
Notes. After all such Letters of Credit shall have expired or been fully drawn
upon, all Reimbursement Obligations and Acceptance Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the Notes shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 11. THE AGENT
11.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints (i) Bank of Nova Scotia as the Administrative Agent and (ii) Barclays
as Collateral Agent of such Lender hereunder and under the other Loan Documents.
The term "Agent", when used in this Section 11, shall refer to each of (i) Bank
of Nova Scotia in its capacity as Administrative Agent and (ii) Barclays in its
capacity as Collateral Agent. Each such Lender irrevocably authorizes Bank of
Nova Scotia to act as Administrative Agent and Barclays to act as Collateral
Agent of such Lender, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to it as Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. For greater certainty and without limiting
the powers of the Administrative Agent herein, and solely for the purposes of
constituting security on any property located in the Province of Quebec
(including, without limitation, the Quebec Moveable Hypothec), the Borrower,
each Lender and the Administrative Agent hereby acknowledge that the
Administrative Agent shall
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be the holder of a power of attorney for the Lenders, and the Administrative
Agent accepts such appointment. The execution of an Assignment and Acceptance by
any Assignee pursuant to Section 12.6 hereof shall constitute ratification of
the power of attorney constituted hereby. Notwithstanding any provision to the
contrary elsewhere in this Agreement, neither Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against either Agent.
Each Lender acknowledges and consents (i) that the U.S. Administrative Agent is
an Affiliate of the Administrative Agent, (ii) the Collateral Agent is also
acting as U.S. Collateral Agent and (iii) to the appointment by the
Administrative Agent of the U.S. Collateral Agent to act on its behalf and on
behalf of the Lenders under the U.S. Security Documents (other than the U.S.
Borrower Canadian Stock Pledge Agreement).
11.2 Delegation of Duties. Each Agent may execute any or all of its
--------------------
duties under this Agreement and the other Loan Documents by or through agents
(which may include its Affiliates or attorneys-in-fact) and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. For the
purposes of this Section 11 and all subsections thereof the word "Agent" shall
be deemed to include any Affiliate or attorney-in-fact thereof. Neither Agent
shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
11.3 Exculpatory Provisions. Neither Agent nor any officer,
----------------------
director, employee, agent, attorney-in-fact or Affiliate of either Agent shall
be (i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's gross negligence or willful misconduct) or (ii)
responsible in any manner to
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any of the Lenders for any recitals, statements, representations or warranties
made by any Loan Party or any officer thereof contained in this Agreement or any
other Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by either Agent under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the Notes or any other Loan Document or for any failure of the
Borrower or any other Loan Party to perform its obligations hereunder or
thereunder. Neither Agent shall be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
other Loan Party.
11.4 Reliance by Agent. Each Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by such Agent. Each Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment or
transfer thereof shall have been filed with the Administrative Agent. Each
Agent shall be fully justified as between itself and the Lenders in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the requisite
Lenders (and, if applicable, the requisite U.S. Lenders) as it deems appropriate
or it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking
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or continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the requisite
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
11.5 Notice of Default. Neither Agent shall be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default
hereunder or of a U.S. Default or a U.S. Event of Default under the U.S. Credit
Agreement unless such Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default or U.S.
Default or U.S. Event of Default and stating that such notice is a "notice of
default". In the event that an Agent receives such a notice, such Agent shall
give notice thereof to the Lenders. Each Agent shall take such action reasonably
promptly with respect to such Default or Event of Default or U.S. Default or
U.S. Event of Default as shall be reasonably directed by the Majority Lenders;
provided that unless and until such Agent shall have received such directions,
- --------
such Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders; and provided, further, that
in the case of any U.S. Default or U.S. Event of Default such Agent shall be
entitled to take such action provided for under the applicable U.S. Loan
Documents.
11.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither Agent nor any officer, director, employee, agent,
attorney-in-fact or Affiliate of either Agent has made any representations or
warranties to it and that no act by either Agent hereinafter taken, including
any review of the affairs of the Borrower or any other Loan Party, shall be
deemed to constitute any representation or warranty by such Agent to any Lender.
Each Lender represents to each Agent that it has,
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independently and without reliance upon either Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the other
Loan Parties and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon either Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and the other Loan Parties. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by an Agent
hereunder, such Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower or any other Loan Party which may come into the possession of such
Agent or any of its respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
11.7 Indemnification. Each Lender agrees to indemnify each Agent in
---------------
its respective capacities as such (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower or any other Loan Party to
do so), ratably according to its Commitment Percentage in effect on the date on
which indemnification is sought under this subsection (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans, Reimbursement Obligations and Acceptance Reimbursement Obligations shall
have been paid in full, ratably in accordance with its Commitment Percentage
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties,
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actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by such Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or willful misconduct of such Agent. The agreements in this
subsection shall survive the payment of the Notes and all other amounts payable
hereunder.
11.8 Agent in Its Individual Capacity. Each Agent and its Affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower and/or the other Loan Parties as though such Agent
was not an Agent hereunder and under the other Loan Documents. With respect to
the Loans made or renewed by an Agent and any Note issued to it and with respect
to any Acceptance completed and accepted by it or any Letter of Credit issued or
participated in by it, such Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include such Agent in its individual capacity.
11.9 Successor Agent. Each of the Administrative Agent and the
---------------
Collateral Agent may resign as such upon 30 days' notice to the Lenders. If an
Agent shall resign as Administrative Agent or Collateral Agent (as applicable)
under this Agreement and the other Loan Documents, then the Majority Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall
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be approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the resigning Administrative Agent or Collateral
Agent (as applicable), and the term "Administrative Agent" or "Collateral Agent"
(as applicable) shall mean such successor agent effective upon such appointment
and approval, and the former Agent's rights, powers and duties as Administrative
Agent or Collateral Agent (as applicable) shall be terminated, without any other
or further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes; provided that the resigning Agent
--------
shall execute all documents which the replacement Agent deems reasonably
necessary or advisable to effect such substitution. After any resigning Agent's
resignation as Administrative Agent or Collateral Agent (as applicable), the
provisions of this subsection shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent or Collateral
Agent (as applicable) under this Agreement and the other Loan Documents.
11.10 Swing Line Lender. The provisions of this Section 11 shall
-----------------
apply to the Swing Line Lender in its capacity as such to the same extent that
such provisions apply to the Agent.
11.11 Co-Agents. Each party hereto agrees that the Co-Agents have no
---------
rights or obligations hereunder or under the other Credit Documents in their
respective capacities as such.
SECTION 12. MISCELLANEOUS
12.1 Amendments and Waivers. Neither this Agreement, any Note or any
----------------------
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 12.1. The Majority Lenders may, or, with the written consent of the
Majority Lenders, the Administrative
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Agent may, from time to time, (a) enter into with the Borrower and the other
Loan Parties written amendments, supplements or modifications hereto and to the
Notes, the Applications, the Drafts, the Acceptances, the Acceptance Notes, the
Security Agreements, the Canadian Subsidiary Guarantees, the Collateral Covenant
Agreement, the Canadian Subsidiary Collateral Covenant Agreements and the
Canadian Subsidiary Stock Pledge Agreements (collectively, the "Principal Loan
--------------
Documents") for the purpose of adding any provisions to this Agreement, the
- ---------
Notes or the other Principal Loan Documents or changing in any manner the rights
or obligations of the Lenders or of the Borrower and the other Loan Parties
hereunder or thereunder or (b) waive at the Borrower's request, on such terms
and conditions as the Majority Lenders or the Administrative Agent, as the case
may be, may specify in such instrument, any of the requirements of this
Agreement, the Notes or the other Principal Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
-------- -------
and no such amendment, supplement or modification shall
(i) reduce the amount or extend the scheduled date of maturity
of any Note, Acceptance Reimbursement Obligation or any Reimbursement
Obligation or of any scheduled installment thereof, or reduce the stated
rate of any interest or fee payable hereunder or extend the scheduled date
of any payment thereof or increase the amount or extend the expiration date
of any Lender's Commitment, in each case without the consent of each Lender
affected thereby;
(ii) amend, supplement, modify or waive any provision of this
subsection 12.1 or reduce the percentage specified in the definition of
"Majority Lenders" or "Supermajority Lenders", or consent to the assignment
or transfer by the Borrower or any other Loan Party of any of its rights
and obligations under this Agreement and the other Principal Loan Documents
or increase the amount of any Lender's Commitment or increase the
percentages set forth as the advance rates
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in the definition of "Borrowing Base", in each case without the written
consent of all the Lenders;
(iii) release all or substantially all of the Collateral without
the consent of the Supermajority Lenders;
(iv) amend, supplement, modify or waive any provision of
Section 11 or any other provision of this Agreement governing the rights or
obligations of the Administrative Agent and the Collateral Agent without
the written consent of the then Administrative Agent and the then
Collateral Agent;
(v) amend, supplement, modify or waive (a) the order of
application of prepayments specified in subsection 5.2 without the consent
of the Swing Line Lender and each Lender adversely affected thereby or (b)
any provision of any Principal Loan Document which specifies the order of
application by the Administrative Agent of proceeds of Collateral upon the
occurrence and during the continuance of an Event of Default without the
consent of the Administrative Agent, the Collateral Agent and each Lender;
(vi) amend, supplement, modify or waive any provision of the
Swing Line Note or of subsection 2.5 or any other provision of this
Agreement governing the rights and obligations of the Swing Line Lender or
the definitions used therein without the written consent of the Swing Line
Lender and, in the case of the Swing Line Note, each Lender, if any, which
holds a participation therein pursuant to subsection 2.5(d); and
(vii) amend, supplement, modify or waive any provision of the
Letters of Credit, the Applications relating thereto and the L/C
Obligations or of Section 4 or any other provision of this Agreement
governing the rights and obligations of the Issuing Lender or the
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definitions used therein without the written consent of the Issuing Lender,
and, in the case of the Letters of Credit and the L/C Obligations, each
affected L/C Participant.
Any waiver and any amendment, supplement, modification or waiver pursuant to
this subsection 12.1 shall apply to each of the Lenders and shall be binding
upon the Borrower, the other Loan Parties, the Lenders, the Administrative
Agent, the Collateral Agent and all future holders of the Notes. In the case of
any waiver, the Borrower, the other Loan Parties, the Lenders, the Collateral
Agent and the Administrative Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes and any other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon. Each
Loan Document (other than the Principal Loan Documents) may be amended,
supplemented, modified or waived only in accordance with the provisions of
subsection 11.1 of the U.S. Credit Agreement.
12.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, or, in the case of delivery by a nationally recognized overnight
courier, when received, addressed as follows in the case of the Borrower, the
Collateral Agent or the Administrative Agent and as set forth in Schedule 1
hereto in the case of the other parties hereto, or to such other address as may
be hereafter notified by the respective parties hereto and any future holders of
the Notes:
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The Borrower: 475 Hood Road
Markham, Ontario L3R 0S8
Canada
Attention: Douglas Haughton
Telecopy: (905) 475-0294
with a copy to: Commerce Court
Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Attention: Richard J. Pasquinelli
Telecopy: (412) 454-2555
Osler, Hoskin & Harcourt
1 First Canadian Place
100 King Street West,
66th Floor
Toronto, Ontario M5X 1B8
Canada
Attention: Philip Heath
Telecopy: (416) 862-6666
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: William B. Beekman
Telecopy: (212) 909-6836
The Administrative
Agent: The Bank of Nova Scotia
Scotia Plaza Branch
44 King Street West
Toronto, Ontario
Canada M5H 1H1
Attention: Sharron McIntyre
Telecopy: (416) 866-2009
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The Collateral
Agent: Barclays Bank PLC
222 Broadway, 11th Floor
New York, New York 10038
Attention: John Livingston
Telecopy: (212) 412-7511
provided that any notice, request or demand to or upon the Administrative Agent
- --------
or the Lenders pursuant to subsection 2.3, 2.5, 3.6, 5.2 or 5.5 shall not be
effective until received; provided further, that any notice, request or demand
-------- -------
relating to the Borrowing Base, including, without limitation, delivery by the
Borrower of the Monthly Borrowing Base Certificate in accordance with subsection
8.2(c), shall not be effective unless a copy thereof is sent to the
Administrative Agent and the Collateral Agent.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Borrower, the Administrative Agent, the
Collateral Agent or any Lender, any right, remedy, power or privilege hereunder
or under the other Loan Documents shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder or hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided herein and in the other Loan Documents are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
12.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder and in the other Loan Documents (or in any
amendment, modification or supplement hereto or thereto) and in any certificate
delivered pursuant hereto or such other Loan Documents shall survive the
execution and delivery of this Agreement and the Notes and the making of the
Loans and the other Extensions of Credit hereunder.
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12.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
-----------------------------
or reimburse the Administrative Agent and the Collateral Agent for all their
respective reasonable out-of-pocket costs and expenses incurred in connection
with the preparation, execution and delivery of, and any amendment, supplement,
waiver or modification to, this Agreement, the Notes and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions (including the
syndication of the Commitments) contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of a single counsel
(and any special or local counsel retained by such counsel to assist it) to the
Administrative Agent and the Collateral Agent, (b) to pay or reimburse each
Lender, the Administrative Agent and the Collateral Agent for all their
respective reasonable costs and expenses (in the case of taxes, limited to
stamp, excise and other similar taxes) incurred in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, the Collateral Agent and the Lenders, and any reasonable
Environmental Costs arising out of or in way relating to any Loan Party or any
property in which any Loan Party has had any interest at any time, (c) to pay,
indemnify, and hold each Lender, the Collateral Agent and the Administrative
Agent harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender, the Administrative
Agent and the Collateral Agent (and their respective directors, officers,
employees, agents and
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successors harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (whether or not caused by any
Lender's, the Administrative Agent's, the Collateral Agent's or any of their
respective directors', officers', employees', agents', successors' or assigns'
negligence (other than gross negligence) and including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, the
Collateral Agent and the Lenders) with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the Notes, the
other Loan Documents and any such other documents (regardless of whether the
Administrative Agent, the Collateral Agent or any Lender is a party to the
litigation or other proceeding giving rise thereto), including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Laws or any orders, requirements or
demands of Governmental Authorities related thereto applicable to the operations
of the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
----------- -----------
provided, that the Borrower shall have no obligation hereunder to
- --------
the Administrative Agent or any Lender with respect to Environmental Costs or
indemnified liabilities to the extent such Environmental Costs or liabilities
arise from (i) the gross negligence or willful misconduct of the Administrative
Agent, the Collateral Agent or any such Lender (or any of their respective
directors, officers, employees, agents or successors) or (ii) legal proceedings
commenced against the Administrative Agent, the Collateral Agent or any such
Lender by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such. Notwithstanding the foregoing, except as provided in clauses (b) and (c)
above, the Borrower shall have no obligation under this subsection 12.5 to the
Administrative Agent, the Collateral Agent or any Lender (or any of their
respective directors, officers, employees,
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agents or successors) with respect to any tax, levy, impost, duty, charge, fee,
deduction or withholding imposed, levied, collected, withheld or assessed by any
Governmental Authority. The agreements in this subsection shall survive
repayment of the Notes, the Reimbursement Obligations, the Acceptance
Reimbursement Obligations and the Acceptance Notes and all other amounts payable
hereunder.
12.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Administrative Agent, the Collateral Agent, all future holders
of the Notes and their respective successors and permitted assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
------------
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents, provided that such Participant shall be a Qualifying Canadian
--------
Institution. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement and the other Loan
Documents, and the Borrower, the Collateral Agent and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. Any agreement pursuant to which any Lender shall sell any such
participating interest shall provide that such Lender shall retain the sole
right and responsibility to exercise such Lender's rights and enforce
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the Borrower's obligations hereunder, including the right to consent to any
amendment, supplement, modification or waiver of any provision of this Agreement
or any of the other Loan Documents, provided that such participation agreement
--------
may provide that such Lender will not agree to any amendment, supplement,
modification or waiver described in clause (i) or (ii) of the proviso to the
second sentence of subsection 12.1 without the consent of the Participant. The
Borrower agrees that if amounts outstanding under this Agreement and the Notes
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement or any Note, provided that, in purchasing such participating
--------
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in subsection 12.7(a) as fully as if it
were a Lender hereunder. The Borrower agrees that each Lender shall be entitled
to the benefits of subsections 5.7, 5.8 and 5.9 and 12.1 without regard to
whether it has granted any participating interests, and that all amounts payable
to a Lender under subsections 5.7, 5.8 and 5.9 shall be determined as if such
Lender had not granted any such participating interests.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender, or any Affiliate thereof or, with the prior written
consent of the Borrower and the Administrative Agent, to an additional bank or
financial institution (an "Assignee") all or any part of its rights and
--------
obligations under this Agreement and the Notes, including, without limitation,
its Commitments, L/C Obligations, Acceptances, Acceptance Notes and Loans,
pursuant to an Assignment and Acceptance, substantially in the form of Exhibit
F, executed by such Assignee, such assigning Lender (and, in the case of
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an Assignee that is not then a Lender, a U.S. Lender or an Affiliate thereof, by
the Borrower and the Administrative Agent) and delivered to the Administrative
Agent for its acceptance and recording in the Register; provided that (i) the
--------
Assignee is a Qualifying Canadian Institution, (ii) in the case of any such
transfer of the full amount of such assigning Lender's Commitment to an
additional bank or financial institution, the consent of the Administrative
Agent and the Borrower shall not be unreasonably withheld, (iii) if any Lender
assigns all or any part of its rights and obligations under this Agreement to
one of its Affiliates in connection with or in contemplation of the sale of its
interest in such Affiliate, the Borrower's prior written consent (not to be
unreasonably withheld) shall be required for such assignment and (iv) if any
Lender assigns a part of its rights and obligations under this Agreement to an
Assignee, such Lender shall assign proportionate interests in its Commitment,
Revolving Credit Loans, Acceptances, Acceptance Notes, L/C Obligations,
participations in Swing Line Loans and Letters of Credit and other rights and
obligations hereunder to such Assignee; and provided, further, that no Lender
--------
shall be permitted to make an assignment of its rights and obligations hereunder
to an Assignee unless the parent, a subsidiary or an affiliate of such Lender
which is party to the U.S. Credit Agreement makes a concurrent and proportionate
assignment of its rights and obligations thereunder to the proposed Assignee or
the parent, a subsidiary or an affiliate of the proposed Assignee, such
assignment to be effected in accordance with subsection 11.6(c) of the U.S.
Credit Agreement. Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall be released from its obligations under
this Agreement to the extent that such obligations shall have been expressly
assumed by the Assignee pursuant to such Assignment and
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Acceptance (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding the foregoing, no Assignee, which as of the date of any
assignment to it pursuant to this subsection 12.6(c) would be entitled to
receive any greater payment under subsection 5.8 or 5.9, than the assigning
Lender would have been entitled to receive as of such date under such
subsections with respect to the rights assigned, shall be entitled to receive
such payments unless the Borrower has consented in writing to the assignment.
(d) The Administrative Agent shall maintain at its address referred
to in subsection 12.2 a copy of each Assignment and Acceptance delivered to it
and a register (the "Register") for the recordation of the names and addresses
--------
of the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent, the Collateral Agent and the Lenders may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower, the Collateral Agent or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender, or an Affiliate thereof, executed by the Borrower and the
Administrative Agent), together with payment to the Administrative Agent of a
registration and processing fee of C$1,500 (in the case of any assignment to a
Lender, an Affiliate thereof) and C$3,500 (in the case of any other assignment),
the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
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information contained therein in the Register and give prompt notice of such
acceptance and recordation to the Lenders and the Borrower. On or prior to such
effective date, the assigning Lender shall surrender the outstanding Notes held
by it all or a portion of which are being assigned, and the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent (in exchange for
the outstanding Notes of the assigning Lender) a new Revolving Credit Note
and/or Swing Line Note, as the case may be, to the order of such Assignee and
representing the obligation of the Borrower to pay an amount equal to (i) in the
case of a Revolving Credit Note, the lesser of (A) the amount of such Assignee's
Commitment and (B) the aggregate principal amount of all Revolving Credit Loans
made by such Assignee, and (ii) in the case of a Swing Line Note, the lesser of
(A) the Swing Line Commitment and (B) the aggregate principal amount of all
Swing Line Loans made by such Assignee, in each case with respect to the
relevant Commitment after giving effect to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment hereunder, a new Revolving
Credit Note and/or Swing Line Note, as the case may be, to the order of the
assigning Lender and representing the obligation of the Borrower to pay an
amount equal to (i) in the case of a Revolving Credit Note, the lesser of (A)
the amount of such Lender's Commitment and (B) the aggregate principal amount of
all Revolving Credit Loans made by such Lender, and (ii) in the case of a Swing
Line Note, the lesser of (A) the Swing Line Commitment and (B) the aggregate
principal amount of all Swing Line Loans made by such Lender, in each case with
respect to the relevant Commitment after giving effect to such Assignment and
Acceptance. Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Note replaced thereby. The Notes surrendered by the
assigning Lender shall be returned by the Administrative Agent to the Borrower
marked "cancelled".
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
----------
subject to the
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provisions of subsection 12.15, any and all financial information in such
Lender's possession concerning the Borrower and its Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement. No assignment or
participation made or purported to be made to any Transferee shall be effective
without the prior written consent of the Borrower if it would require the
Borrower to make any filing with any Governmental Authority or qualify any Loan
or Note under the laws of any jurisdiction.
12.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
-------------------- -----------------
shall at any time receive any payment of all or part of its Revolving Credit
Loans, Acceptance Reimbursement Obligations or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral (including, without
limitation, any Bank Act Security) in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 10(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Revolving Credit Loans, Acceptance Reimbursement
Obligations or the Reimbursement Obligations, as the case may be, owing to it,
or interest thereon, such benefitted Lender shall purchase for cash from the
other Lenders a participating interest (except that, in the case of any Bank Act
Security, such benefitted Lenders shall instead so purchase an assignment) in
such portion of each such other Lender's Revolving Credit Loans, Acceptance
Reimbursement Obligations or the Reimbursement Obligations, as the case may be,
owing to it or (other than with respect to Bank Act Security provided to it
hereunder), shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the
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Lenders; provided, however, that if all or any portion of such excess payment or
-------- -------
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon the occurrence of an Event of Default under Section 10(a)
to set-off and appropriate and apply against any amount then due and payable by
the Borrower hereunder or under the other Loan Documents any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify
the Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
--------
affect the validity of such set-off and application.
12.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be delivered to the Borrower and the
Administrative Agent.
12.9 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction
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shall not invalidate or render unenforceable such provision in any other
jurisdiction.
12.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Borrower, the Administrative
Agent, the Collateral Agent or any Lender relative to the subject matter hereof
not expressly set forth or referred to herein or in the other Loan Documents.
12.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE
OF ONTARIO, CANADA AND OF CANADA APPLICABLE THEREIN.
12.12 Submission To Jurisdiction; Waivers. Each party hereto hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof and to
the courts of the Province of Ontario and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
137
<PAGE>
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower, the applicable Lender, the Collateral Agent or the Administrative
Agent, as the case may be, at the address specified in subsection 12.2 or
on Schedule 1 hereof, or at such other address of which the Administrative
Agent and the Borrower shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any punitive damages.
12.13 Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) neither the Administrative Agent, the Collateral Agent or any
Lender has any fiduciary relationship with or duty to the Borrower arising
out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Administrative Agent, the
Collateral Agent and the Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of debtor
and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of
138
<PAGE>
the transactions contemplated hereby among the Lenders or among the
Borrower and the Lenders.
12.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT,
---------------------
THE COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
12.15 Confidentiality. The Administrative Agent, the Collateral Agent
---------------
and each Lender agree to keep confidential any written or oral information (a)
provided to it by or on behalf of the Borrower or any of its Subsidiaries
pursuant to or in connection with this Agreement or (b) obtained by such Lender
based on a review of the books and records of the Borrower or any of its
Subsidiaries; provided that nothing herein shall prevent the Administrative
--------
Agent, the Collateral Agent or any Lender from disclosing any such information
(i) to the Administrative Agent or any other Lender, (ii) to any Transferee or
prospective Transferee which agrees to comply with the provisions of this
subsection, (iii) to its affiliates, employees, directors, agents, attorneys,
accountants and other professional advisors, provided that the Administrative
--------
Agent, the Collateral Agent or such Lender shall inform each such Person of the
agreement under this subsection 12.15 and shall be responsible for any failure
by any such Person referred to in this clause (iii) to comply with this
Agreement, (iv) upon the request or demand of any Governmental Authority having
jurisdiction over the Administrative Agent, the Collateral Agent or such Lender
or to the extent required in response to any order of any court or other
Governmental Authority or as shall otherwise be required pursuant to any
Requirement of Law, provided that the Administrative Agent, the Collateral Agent
--------
or such Lender shall notify the Borrower of any disclosure pursuant to this
clause (iv) as far in advance as is reasonably practicable under such
circumstances, (v) which has been publicly disclosed other than in breach of
this
139
<PAGE>
Agreement, (vi) in connection with the exercise of any remedy hereunder or (vii)
in connection with periodic regulatory examinations.
12.16 Amendment to Security Documents. Each of the Security Documents
-------------------------------
and the Guarantees is hereby amended to reflect the resignation of Fleet Capital
Corporation (as successor to Shawmut Capital Corporation) as Collateral Agent
and the appointment of Barclays as successor Collateral Agent, and each of the
parties hereto consents to the execution and delivery by Barclays, Fleet Capital
Corporation ("Fleet") and the Borrower of all such instruments and documents
-----
(including, without limitation, UCC-3 assignment forms) as may be reasonably
requested by Barclays to reflect such change in Collateral Agent and the
assignment by Fleet to Barclays of Fleet's rights and obligations as Collateral
Agent.
12.17 Amendment and Restatement. This Agreement amends and restates
-------------------------
the Existing Credit Agreement and is not intended to be and shall not constitute
a novation of any indebtedness outstanding thereunder. Any loans and the
revolving commitments outstanding under the Existing Credit Agreement shall be
deemed Loans and Commitments outstanding under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
WESCO DISTRIBUTION-CANADA, INC.
By: _______________________________
Title:
140
<PAGE>
THE BANK OF NOVA SCOTIA,
as Administrative Agent, Swing
Line Lender and a Lender
By:_________________________________
Title:
By:_________________________________
Title:
BARCLAYS BANK PLC,
as Collateral Agent
By:__________________________________
Title:
GENERAL ELECTRIC CAPITAL
CANADA INC.,
as a Co-Agent and a Lender
By:__________________________________
Title:
MELLON BANK CANADA, as a Co-Agent
and a Lender
By:__________________________________
Title:
141
<PAGE>
BANK OF MONTREAL, as a Lender
By:__________________________________
Title:
NATIONAL BANK OF CANADA, as a Lender
By:__________________________________
Title
By:__________________________________
Title:
THE TORONTO-DOMINION BANK, as a Lender
By:__________________________________
Title:
The undersigned Guarantors do hereby consent and agree to the
foregoing Amended and Restated Credit Agreement.
CDW HOLDING CORPORATION
By:______________________
Title:
142
<PAGE>
WESCO DISTRIBUTION, INC.
By:_____________________________
Title:
143
<PAGE>
SCHEDULE 1 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
COMMITMENTS; ADDRESSES
A. Commitment Amounts
<TABLE>
<CAPTION>
================================================================================
Lender Commitment
- --------------------------------------------------------------------------------
<S> <C>
General Electric Capital Canada Inc. C$8,706,875.00
- --------------------------------------------------------------------------------
Mellon Bank Canada 8,706,875.00
- --------------------------------------------------------------------------------
National Bank of Canada 8,834,425.00
- --------------------------------------------------------------------------------
Bank of Montreal 8,706,875.00
- --------------------------------------------------------------------------------
The Bank of Nova Scotia 14,500,000.00
- --------------------------------------------------------------------------------
The Toronto-Dominion Bank 13,234,450.00
- --------------------------------------------------------------------------------
TOTAL C$62,689,500.00
================================================================================
</TABLE>
<PAGE>
B. Addresses for Notices
THE BANK OF NOVA SCOTIA
- -----------------------
Funding Requests: Other Notices:
- ----------------- --------------
Scotia Plaza Branch
44 King Street West 44 King Street West
Toronto, Ontario, M5H 1H1 Toronto, Ontario, M5H 1H1
Attention: Don G. Elliott Attn: Sharron McIntyre
Telephone: (416) 866-6774 Telephone: (416) 866-3632
Telecopier: (416) 866-6489 Telecopier: (416) 866-2009
THE TORONTO-DOMINION BANK
- -------------------------
Funding Requests: Other Notices:
- ----------------- --------------
55 King Street, West & Bay St. 70 West Madison Street
9th Floor, TD Bank Tower Suite 5430
Toronto, Ontario, M5K 1A2 Chicago, IL 60602-4227
Attn: Parin Kanji Attn: Philip De Roziere
Telephone: (416) 982-7736 Telephone: (312) 977-2103
Telecopier: (416) 982-6630 Telecopier: (312) 782-6337
GENERAL ELECTRIC CAPITAL CANADA INC.
- ------------------------------------
Funding Requests: Other Notices:
- ----------------- ---------------
201 High Ridge Road 201 High Ridge Road
Stamford, CT 06927-5100 Stamford, CT 06927-5100
Attn: Portfolio Analyst - WESCO Attn: Karen Walsh
Telephone: (203) 316-7674 Telephone: (203) 316-7569
Telecopier: (203) 316-7817 Telecopier: (203) 316-7893
MELLON BANK CANADA
- ------------------
Funding Requests: Other Notices:
- ----------------- ---------------
Mellon Bank Center One Mellon Bank Center
1735 Market Street, 6th Floor Room 4530
P.O. Box 7899 Pittsburgh, PA 15229
Attn: Dorothy Enslin Attn: Mark Johnston
Telephone: (215) 553-2459 Telephone: (412) 236-2793
Telecopier: (215) 553-2224 Telecopier: (412) 236-1914
1
<PAGE>
NATIONAL BANK OF CANADA
- -----------------------
Funding Requests: Other Notices:
- ----------------- ---------------
150 York Street, 2nd Floor 150 York Street, 2nd Floor
Toronto Ontario, M5H 3A9 Toronto, Ontario M5H 3A9
Attn: Mona Poland Attn: Jeffrey Burden
Telephone: (412) 864-7880 Telephone: (412) 281-4890
Telephone: (416) 864-7569 Telecopier: (1412) 281-4603
BANK OF MONTREAL
- ----------------
Funding Requests: Other Notices:
- ----------------- ---------------
First Canadian Place, 24th Floor First Canadian Place, 24th Floor
Toronto, Canada M5X 1A1 Toronto, Canada M5X 1A1
Attn: Lynn McDougal Attn: Lynn McDougal
Telephone: (416) 867-6774 Telephone: (416) 867-6774
Telecopy: (416) 867-5818 Telecopy: (416) 867-5818
2
<PAGE>
Schedule 6.3 to
Amended and Restated
Credit Agreement
--------------------
CONSENTS
NIL
<PAGE>
SCHEDULE 6.6
FILING JURISDICTIONS
1. Federal
-------
Filing in the Toronto office of the Bank of Canada of Notices of Intention
with respect to all of the Bank Act Security.
2. British Columbia
----------------
Registration under the Personal Property Security Act (B.C.) of a Financing
Statement in respect of the Demand Debenture and the General Assignment of
Book Debts.
3. Alberta
-------
Registration under the Personal Property Security Act (Alberta) of a
Financing Statement in respect of the Demand Debenture and the General
Assignment of Book Debts.
4. Saskatchewan
------------
Registration under the Personal Property Security Act (Saskatchewan) of a
Financing Statement in respect of the Demand Debenture and the General
Assignment of Book Debts.
5. Manitoba
--------
Registration under the Personal Property Security Act (Manitoba) of a
Financing Statement in respect of the Demand Debenture, together with a
notarially certified copy thereof.
<PAGE>
Registration under the Personal Property Security Act (Manitoba) of a
Financing Statement in respect of the General Assignment of Book Debts,
together with a notarially certified copy thereof.
6. Ontario
-------
Registration under the Personal Property Security Act (Ontario) of a
Financing Statement in respect of the Demand Debenture and the General
Assignment of Book Debts.
7. Quebec
------
Registration under the Civil Code of Quebec of an application for
registration form RH in respect of the Quebec Moveable Hypothec at the
register of personal and movable real rights.
8. New Brunswick
-------------
Filing of the Demand Debenture at the Office of the Registrar under the
Corporations Securities Registration Act (N.B.).
Filing of the General Assignment of Book Debts in the Assignment of Book
Debts Registry maintained at the Office of the Registrar of Deeds for the
County of York.
9. Nova Scotia
-----------
Registration of the Debenture at the Office of the Registrar of Joint Stock
Companies at Halifax under the Corporations Securities Registration Act
(N.S.).
Filing of the General Assignment of Book Debts at the Office of the
Registrar of Deeds for the County of Halifax under the Assignment of Book
Debts Act (N.S.).
2
<PAGE>
10. Newfoundland
------------
Registration under the Registration of Deeds Act (Newfoundland) of the
Demand Debenture.
Registration under the Assignment of Book Debts Act (Newfoundland) of the
General Assignment of Book Debts.
3
<PAGE>
SCHEDULE 9
SECURITY AGREEMENTS
-------------------
Demand Debenture
Debenture Pledge Agreement
General Assignment of Book Debts
Quebec Moveable Hypothec
Bank Act Security, comprised of
Notice of Intention to Give Security
General Assignment Under Section 427(l)(a),(b),(c) or (e) of the Bank
Act (Canada)
Application for Credit and Promise to Give Security Under Section 427
of the Bank Act (Canada)
Agreement as to Loans and Advances and Security Therefor
<PAGE>
SCHEDULE 8.7 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
DEPOSITARY BANKS
----------------
<TABLE>
<CAPTION>
Bank Name Bank Acct. # Location Acct. Description
- --------- ------------ -------- -----------------
<S> <C> <C> <C>
The Toronto-Dominion Bank 0690-0321767 Toronto, Ont. Concentration
Bank of Montreal 1226359 Toronto, Ont. Deposit
The Toronto-Dominion Bank 0690-0319932 Toronto, Ont. WESCO General Funds
Account
The Toronto-Dominion Bank 0690-0321708 Toronto, Ont. A/P Disb-Can Pay
The Toronto-Dominion Bank 0690-7308451 Toronto, Ont. A/P Disb-US Pay
</TABLE>
<PAGE>
EXHIBIT A-1 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF REVOLVING CREDIT NOTE]
C$_______________ Toronto, Ontario
March 14, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION-CANADA, INC.,
a corporation organized and existing under the laws of the Province of Ontario
(the "Borrower"), hereby unconditionally promises to pay to the order of
--------
_____________ (the "Lender") at the office of THE BANK OF NOVA SCOTIA ("Bank of
------ -------
Nova Scotia"), located at Scotia Plaza Branch, 44 King Street West, Toronto,
- -----------
Ontario, Canada M5H 1H1 in lawful money of Canada and in immediately available
funds, the principal amount of the lesser of (a) ____________ CANADIAN DOLLARS
AND _________ CENTS (C$____________) and (b) the aggregate unpaid principal
amount of the Revolving Credit Loans made by the Lender to the undersigned
pursuant to subsection 2.1, 2.4(c), 2.5(c), 3.5(b)(iii), 3.6(d) or 4.5(c) of the
Credit Agreement referred to below, which sum shall be payable on the earlier of
(i) the Termination Date (as defined in the Credit Agreement referred to below)
and (ii) the date on which the Commitments (as defined in the Credit Agreement
referred to below) are terminated.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the applicable
rates per annum and on the dates specified in subsections 5.1 and 5.4 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
The holder of this Revolving Credit Note is authorized to record the
date and amount of each Revolving Credit Loan made by it pursuant to subsection
2.1, 2.4(c), 2.5(c), 3.5(b)(iii), 3.6(d) or 4.5(c) of the Credit Agreement, each
continuation thereof, and the date and amount of each payment or prepayment of
principal thereof on its internal books and records and/or on the schedules
annexed hereto and made a part hereof, which recordation on such schedules shall
constitute prima facie
----- -----
<PAGE>
evidence of the accuracy of the information so recorded; provided that failure
--------
by the Lender to make any such recordation (or any error in any such
recordation) shall not affect the obligations of the Borrower under this
Revolving Credit Note or the Credit Agreement.
This Revolving Credit Note is one of the Revolving Credit Notes
referred to in the Amended and Restated Credit Agreement, dated as of March 14,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the several banks and other financial
- -----------------
institutions from time to time parties thereto (including the Lender) (the
"Lenders"), Bank of Nova Scotia, as Administrative Agent for the Lenders and
- --------
Barclays Bank PLC, as Collateral Agent, and is entitled to the benefits thereof,
is secured and guaranteed as provided therein and is subject to optional and
mandatory prepayment in whole or in part as provided therein. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Revolving Credit Note shall become, or may be declared to be, immediately due
and payable, all as provided therein.
All parties now and hereafter liable with respect to this Revolving
Credit Note, whether maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any kind,
except as expressly required by the terms of the Credit Agreement and the Loan
Documents.
2
<PAGE>
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO, CANADA AND
OF CANADA APPLICABLE THEREIN.
WESCO DISTRIBUTION-CANADA, INC.
By: __________________________
Title:
3
<PAGE>
Schedule A to
Revolving
Credit Note
-----------
LOANS AND PAYMENTS
OF PRIME RATE LOANS
-------------------
<TABLE>
<CAPTION>
=========================================================================================================
Unpaid Principal
Amount of Prime Amount of Principal Balance of
Date Rate Loan Made Repaid Prime Rate Loans Notation Made by
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
</TABLE>
<PAGE>
EXHIBIT A-2 TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF SWING LINE NOTE]
C$5,000,000.00 Toronto, Ontario
March 14, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION-CANADA, INC.,
a corporation organized and existing under the laws of the Province of Ontario
(the "Borrower"), hereby unconditionally promises to pay to the order of THE
--------
BANK OF NOVA SCOTIA ("Bank of Nova Scotia") (the "Swing Line Lender") at the
------------------- -----------------
office of the Swing Line Lender located at Scotia Plaza Branch, 44 King Street
West, Toronto, Ontario, Canada M5H 1H1 in lawful money of Canada and in
immediately available funds, the principal amount of the lesser of (a) FIVE
MILLION CANADIAN DOLLARS (C$5,000,000) and (b) the aggregate unpaid principal
amount of all Swing Line Loans made by the Swing Line Lender to the Borrower
pursuant to subsection 2.5 of the Credit Agreement referred to below, which sum
shall be payable on the earlier of (i) the Termination Date (as defined in the
Credit Agreement referred to below) and (ii) the date on which the Swing Line
Commitment (as defined in the Credit Agreement referred to below) is terminated.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the applicable
rates per annum and on the dates specified in subsections 5.1 and 5.4 of the
Credit Agreement until such principal amount is paid in full (both before and
after judgment).
The holder of this Swing Line Note is authorized to record the date
and the amount of each Swing Line Loan and the date and amount of each payment
or prepayment of principal thereof, on its internal books and records and/or on
the schedule annexed to and made a part hereof, which recordation on such
schedule shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded, provided that the failure by the
--------
<PAGE>
Swing Line Lender to make any such recordation (or any error in such
recordation) shall not affect the obligations of the Borrower under this Swing
Line Note or the Credit Agreement.
This Swing Line Note is the Swing Line Note referred to in the Amended
and Restated Credit Agreement, dated as of March 14, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among the Borrower, the several banks and other financial institutions from time
to time parties thereto (the "Lenders"), Bank of Nova Scotia, as Administrative
-------
Agent for the Lenders and Barclays Bank PLC, as Collateral Agent, and is
entitled to the benefits thereof, is secured and guaranteed as provided therein
and is subject to optional and mandatory prepayment in whole or in part as
provided therein. Terms used herein which are defined in the Credit Agreement
shall have such defined meanings unless otherwise defined herein or unless the
context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this Swing
Line Note shall become, or may be declared to be, immediately due and payable
all as provided therein.
All parties now and hereafter liable with respect to this Swing Line
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind, except as
expressly required by the terms of the Credit Agreement and the Loan Documents.
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO, CANADA AND
OF CANADA APPLICABLE THEREIN.
WESCO DISTRIBUTION-CANADA, INC.
By: _________________________
Title:
2
<PAGE>
Schedule A to
Swing Line Note
---------------
SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
------------------------------------------
<TABLE>
<CAPTION>
================================================================================
AMOUNT OF AMOUNT OF UNPAID
SWING LINE PRINCIPAL PRINCIPAL NOTATION
DATE LOANS REPAID BALANCE MADE BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
<PAGE>
EXHIBIT B TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[NAME OF LENDER]
BANKER'S ACCEPTANCE
No._______________
Due_______________
On ______________
For value received pay to the order of
the undersigned drawer the sum of ______________DOLLARS
Drawn by
______________COMPANY
To: [NAME OF LENDER] _________________________
[ADDRESS] Authorized Signature
_________________________
Authorized Signature
ACCEPTED
Date:
Payable at
[Name of Lender]
[Address]
_________________________
Authorized Signature
_________________________
Authorized Signature
<PAGE>
FOR VALUE RECEIVED, [Name of Lender], (the "Guarantor") hereby
unconditionally guarantees payment of the within Instrument (the "Instrument")
when, where and as the same shall become due and payable without any requirement
that the holder first proceed against [Name of Lender].
The Guarantor waives notice of acceptance of this guarantee and notice
of non-payment of the Instrument. The unconditional obligation of the Guarantor
hereunder will not be affected, impaired or released by and extension of time
for payment of the Instrument or by any other matter or thing whatsoever which
would release a guarantor.
Corporate action has been duly taken by the Guarantor to authorized
execution of this guarantee.
This guarantee shall be governed by and construed in accordance with
laws of [Jurisdiction of incorporation of Lender].
The date of this guarantee is the date of the Instrument.
IN WITNESS WHEREOF, [Name of Lender], has caused this guarantee to be
executed on its behalf by facsimile signature, by two of its authorized
officers.
[NAME OF LENDER],
By:______________________
Authorized Officer
By:______________________
Authorized Officer
2
<PAGE>
This guarantee shall become valid only when the acceptance has been signed
manually on behalf of [Name Lender].
3
<PAGE>
EXHIBIT C TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[NAME OF LENDER]
_____________________ BRANCH
POWER OF ATTORNEY - GENERAL
The undersigned hereby appoints [NAME OF LENDER] (hereinafter called
the "Lender"), acting by any authorized signatory of the Lender, the attorney of
------
the undersigned:
(a) to sign for and on behalf and in the name of the undersigned as
drawer, drafts drawn on the Lender payable to the order of the
undersigned or payable to the order of the Lender;
(b) to fill in the amount, date and maturity date of such drafts;
(c) in the case of such drafts payable to the order of any person other
than the Lender, to endorse such drafts in blank for and on behalf of
and in the name of the undersigned; and
(d) to discount and/or deliver such drafts which have been accepted by the
Lender;
provided that such acts in each case are to be undertaken by the Lender in
accordance with instructions given to the Lender by the undersigned as provided
in this power of attorney.
Instructions from the undersigned to the Lender relating to the
execution, completion, endorsement, discount and/or delivery by the Lender on
behalf of the undersigned of drafts which the undersigned wishes to submit to
the Lender for acceptance by the Lender shall be communicated to the Lender on
behalf of the undersigned in writing to the Lender's manager or acting manager
at the branch where the undersigned has an account with the Lender (in
accordance with the terms of the Amended and Restated Credit Agreement, dated as
of March 14, 1997, to which the undersigned and the Lender are parties (as
amended,
<PAGE>
supplemented or otherwise modified from time to time, the "Credit Agreement"))
----------------
and shall specify the following information:
(a) reference to this power of attorney;
(b) a Canadian dollar amount, which shall be the aggregate face amount of
the drafts to be drawn in a particular transaction; and
(c) a specified period of time (not less than 30 days or in excess of 180
days) which shall be the number of days after date that the drafts are
to be payable, and the dates of issues and maturity of the drafts; and
(d) discount/payment instructions specifying the account number of the
undersigned and the financial institution at which the proceeds of
discount are to be credited.
The communication in writing by the undersigned to the Lender of the
instructions referred to above shall constitute (a) the authorization and
instruction of the undersigned to the Lender to complete and/or endorse drafts
in accordance with such information as set out above and (b) the request of the
undersigned to the Lender to accept such drafts and discount the same. The
undersigned acknowledges that the Lender shall not be obligated to accept any
such drafts.
The Lender shall be and it is hereby authorized to act on behalf of the
undersigned upon and in compliance with instructions communicated to the Lender
as provided herein if the Lender reasonably believes them to be genuine. If,
but only if, the Lender is prepared to accept drafts pursuant to any such
instructions, the Lender shall confirm particulars of such instructions and
advise the undersigned that the Lender has complied therewith by notice in
writing addressed to the undersigned and served personally or sent by prepaid
registered mail or by telex, telecopier or other form of recorded communication
to the address of the undersigned as shown on the books kept in relation to the
account of the undersigned at the branch of the Lender from which such notice is
mailed or
2
<PAGE>
transmitted by telex, telecopier or other form of recorded communication. Any
notice so given shall be deemed to have been given and received, if mailed, on
the third business day next following the mailing thereof; if transmitted by
telex, telecopier or other form of recorded communication, on the first business
day after its transmission; and if served personally, on the date of delivery.
The Lender's actions confirmed and advised to the undersigned by such notice
shall be conclusively deemed to have been in accordance with the instructions of
the undersigned unless the undersigned notifies the Lender to the contrary in
writing not later than the business day next following such deemed receipt by
the undersigned. Notice in writing to the Lender as contemplated hereby may be
delivered by hand at the branch of the Lender from which the notice given by the
Lender was mailed or transmitted by telex, telecopier or other form of recorded
communication.
The undersigned hereby agrees and promises to pay the Lender, on the
maturity date thereof, the face amount of each draft signed, completed and
endorsed as contemplated herein and accepted by the Lender, such payment to be
made in immediately available funds in Canadian dollars at the branch of the
Lender specified above, free and clear of and without deduction by reason of any
taxes or charges whatsoever, and for purposes of effecting any such payment, the
undersigned hereby authorizes the Lender to debit any deposit account of the
undersigned maintained with the Lender, but the Lender shall not be required
hereby to effect any such debit.
The undersigned agrees to indemnify the Lender and its directors,
officers, employees and agents and to hold it and them harmless from and against
any loss, liability, expense or claim of any kind or nature whatsoever incurred
by any of them as a result of any action or inaction in any way relating to or
arising out of this power of attorney or the acts contemplated hereby.
This power of attorney may be revoked at any time upon not less than 5
business days' written notice served upon the Lender at its branch referred to
above, provided that (i) it
3
<PAGE>
shall be replaced with another power of attorney forthwith in accordance with
the requirements of subsection 3.2(b) of the Credit Agreement; and (ii) no such
revocation shall reduce, limit or otherwise affect the obligations of the
undersigned in respect of any draft executed, completed, endorsed, discounted
and/or delivered in accordance herewith prior to the time at which such
revocation becomes effective.
This power of attorney shall be governed in all respects by the laws
of the jurisdiction in which the branch of the Lender named on page 1 hereof is
located and the federal laws of Canada applicable in such jurisdiction and each
of the undersigned and the Lender hereby irrevocably attorns to the non-
exclusive jurisdiction of the courts of such jurisdiction in respect of all
matters arising out of this power of attorney.
This power of attorney is in addition to and not in substitution of
any agreement to which the Lender and the undersigned are parties.
In the event of a conflict between the provisions of this Power of
Attorney and the Credit Agreement, the Credit Agreement shall prevail.
4
<PAGE>
The undersigned has (have) expressly requested that this document be
drawn up in the English language. Le(s) soussigne(s) a(ont) expressement
demande que ce document soit redige en langue anglaise.
DATED at _______________ this ___ day of __________________,
19__.
SIGNED SEALED AND DELIVERED Name: ______________________________
in the presence of
____________________________ By: ______________________________
(Witness) Name:
Title:
Must be
sealed and
witnessed
if signed
by an
individual
____________________________ By: ______________________________
(Witness) Name:
Title:
Note: If the undersigned is a corporation, the corporate seal must be
affixed and this form must be accompanied by a certified copy of a
resolution of the director(s) of the corporation authorizing the
execution and delivery of this form.
Please have the undersigned initial all alterations/ deletions made to
this form.
5
<PAGE>
EXHIBIT D TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
WESCO DISTRIBUTION-CANADA, INC
March 14, 1997
[Landlord's Name
and Address]
[Address of Leased Facility]
- ----------------------------
Dear Landlord:
WESCO, the electrical products distribution division (the "Division")
of Westinghouse Canada, Inc., is the tenant at the above location (the
"Property"). As you know, in connection with the sale of the assets of the
Division, Westinghouse is assigning its interest in the lease of the Property to
the undersigned, WESCO Distribution-Canada, Inc.
In connection with the acquisition of the assets of the Division, we
have arranged for financing from a group of banks to which The Bank of Nova
Scotia is serving as Administrative Agent. These banks have agreed to make loans
to us secured, among other things, by a first lien on any inventory that is now
or in the future may be located at the Property and at other acquired properties
and the Administrative Agent has asked that we notify you and have you agree to
this letter and return it to us in the enclosed postage-paid envelope.
By signing this letter you agree that any lien of any kind that you
may have or obtain on our inventory shall be junior to the Administrative
Agent's lien, and that prior to taking any action to enforce any lien, you will
give the Administrative Agent at least ten (10) business days' prior notice of
your intent to take action. If we should default to the banks, you agree that in
all circumstances the Administrative Agent may have access to the Property for
the purpose of removing or selling the inventory, provided that the
Administrative Agent agrees to pay
<PAGE>
you for any physical damage to the Property caused by the Administrative Agent
in connection with any removal or sale.
Because these loans are important for the future of our company and
because the bank group and the Administrative Agent will be relying on this
letter, we would greatly appreciate it if you would sign the enclosed copy of
this letter and return it to me in the enclosed envelope. If you have any
questions, please feel free to contact ___________________, at (____) ________.
Thank you in advance for your cooperation.
Sincerely,
WESCO DISTRIBUTION-CANADA, INC.
By: _________________________
Name:
Title:
Acknowledged and agreed as of
the date first above written:
[Name of Landlord]
By: _________________________
Name:
Title:
2
<PAGE>
EXHIBIT E TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF MONTHLY BORROWING
BASE CERTIFICATE]
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
Pursuant to subsection 8.2(c) of the Amended and Restated Credit
Agreement, dated as of March 14, 1997 (the "Credit Agreement"), among WESCO
Distribution-Canada, Inc. (the "Borrower"), the Lenders (as defined therein),
The Bank of Nova Scotia, as Administrative Agent, and Barclays Bank PLC, as
Collateral Agent, the Borrower hereby certifies, and represents and warrants,
that this Monthly Borrowing Base Certificate and the attached Schedules are a
true, correct and complete statement regarding the status of Accounts, Eligible
Accounts, Inventory and Eligible Inventory of the Borrower and any Subsidiaries
of the Borrower and that the amounts set forth in such Schedules are in
compliance with the provisions of the Credit Agreement. The Borrower
acknowledges that the Revolving Credit Loans and the Swing Line Loans made to
it, the Acceptances accepted on its behalf and the Letters of Credit issued on
its behalf will be based upon the Administrative Agent's, the collateral Agent's
and the Lenders' reliance on the information contained herein and therein.
The Borrower hereby certifies, and represents and warrants, that it
has been in compliance with the Borrowing Base applicable to it throughout the
period subsequent to the date of delivery of the Monthly Borrowing Base
Certificate most recently delivered prior to this one. Capitalized terms used
herein and not otherwise defined
<PAGE>
shall have the meanings ascribed thereto in the Credit Agreement.
Date: WESCO DISTRIBUTION-CANADA, INC.
By:_______________________
Name:
Title:
2
<PAGE>
SCHEDULE I TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
(All Amounts are in Thousands)
(1) The Borrowing Base as of is
computed as follows:
(A) Value of 85% of Eligible Accounts
from Schedule A
----------
(B) Value of 60% of Eligible Inventory C$______
from Schedule B
----------
(C) Canadian Inventory Sublimit Amount C$______
(D) Lesser of lines 1(B) and 1(C) C$______
(2) Sum of lines (1)(A) and (1)(D) (Gross C$______
Revolving Availability)
(3) Aggregate principal amount of Revolving C$______
Credit Loans outstanding as of the date
hereof
(4) Aggregate face amount of all C$______
Acceptances outstanding as of the date
hereof
(5) Aggregate L/C Obligations outstanding C$______
as of the date hereof
(6) Aggregate principal amount of Swing C$______
Line Loans outstanding as of the date
hereof
(7) Sum of lines (3), (4), (5) and (6) C$______
(8) Difference between lines (2) and (7) C$______
(Net Revolving Availability)
<PAGE>
SCHEDULE A TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
(All Amounts are in Thousands and are
Computed as of ______________)
ELIGIBLE ACCOUNTS
-----------------
1. ACCOUNTS RECONCILIATION
<TABLE>
<CAPTION>
===============================================================================
TOTAL
-----
<S> <C>
- -------------------------------------------------------------------------------
Previous Month's Accounts Balance (per Aged C$
Trial Balance)
- --------------------------------------------------------------------------------
Add: Sales
---
- --------------------------------------------------------------------------------
Debit Adjustments
- --------------------------------------------------------------------------------
Less: Collections
- ----
- --------------------------------------------------------------------------------
Credit Adjustments
- --------------------------------------------------------------------------------
Miscellaneous Adjustments
- --------------------------------------------------------------------------------
End of Month's Accounts Balance (per Aged C$
Trial Balance)
================================================================================
</TABLE>
2. AGED TRIAL BALANCE
Detailed Attachment To Be Provided By the Borrower.
<PAGE>
VALUE OF ELIGIBLE ACCOUNTS
--------------------------
(All Amounts are in Thousands and are
Computed as of )
<TABLE>
<CAPTION>
================================================================================
TOTAL
-------
<S> <C>
- --------------------------------------------------------------------------------
Gross Accounts Receivable C$
- --------------------------------------------------------------------------------
Less Ineligibles:
- ----------------
- --------------------------------------------------------------------------------
Over 60 Days Past Due C$
- --------------------------------------------------------------------------------
Legal/Notes C$
- --------------------------------------------------------------------------------
Cross Age C$
- --------------------------------------------------------------------------------
Aged Credits C$
- --------------------------------------------------------------------------------
Contra Accounts C$
- --------------------------------------------------------------------------------
Government Receivables (1) C$
- --------------------------------------------------------------------------------
Foreign Accounts C$
- --------------------------------------------------------------------------------
Claims & Deductions C$
- --------------------------------------------------------------------------------
Related Party C$
- --------------------------------------------------------------------------------
Miscellaneous Reserves C$
- --------------------------------------------------------------------------------
Total Ineligibles C$
- --------------------------------------------------------------------------------
Eligible Accounts C$
- --------------------------------------------------------------------------------
Advance Rate 85%
- --------------------------------------------------------------------------------
Availability C$
================================================================================
</TABLE>
Notes:
- -----
(1) Excess over C$ 1,000,000 unless Assignment of Claims.
<PAGE>
SCHEDULE C TO
MONTHLY BORROWING BASE CERTIFICATE
----------------------------------
ELIGIBLE INVENTORY
------------------
(All Amounts are in Thousands and are
Computed as of )
<TABLE>
<CAPTION>
================================================================================
TOTAL
--------
- --------------------------------------------------------------------------------
<S> <C>
Gross Book Inventory C$
- --------------------------------------------------------------------------------
Less Ineligibles:
- ----------------
- --------------------------------------------------------------------------------
Slow Moving C$
- --------------------------------------------------------------------------------
Less: New Product Add Back ( )
----
- --------------------------------------------------------------------------------
In Transit C$
- --------------------------------------------------------------------------------
Full Absorption C$
- --------------------------------------------------------------------------------
Singapore Inventory C$
- --------------------------------------------------------------------------------
Specialized Inventory (1) C$
- --------------------------------------------------------------------------------
Direct Ship Inventory C$
- --------------------------------------------------------------------------------
Intercompany Profit C$
- --------------------------------------------------------------------------------
Total Ineligibles C$
- --------------------------------------------------------------------------------
Eligible Inventory C$
- --------------------------------------------------------------------------------
Advance Rate 60%
- --------------------------------------------------------------------------------
Availability C$
================================================================================
</TABLE>
Notes:
- -----
(1) Specialized inventory is considered eligible up to product of the Canadian
Prepayment Percentage in effect multiplied by C$5,000,000.
<PAGE>
EXHIBIT F TO
AMENDED AND RESTATED
CREDIT AGREEMENT
--------------------
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 14, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among WESCO DISTRIBUTION-CANADA, INC., a
----------------
corporation organized and existing under the laws of the Province of Ontario
(the "Borrower"), the several banks and other financial institutions from time
--------
to time parties thereto (the "Lenders"), The Bank of Nova Scotia, as
-------
Administrative Agent for the Lenders (in such capacity, the "Administrative
--------------
Agent") and Barclays Bank PLC, as Collateral Agent. Unless otherwise defined
- -----
herein, terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement.
____________________ (the "Assignor") and
--------
_____________ (the "Assignee") agree as follows:
--------
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor,
as of the Transfer Effective Date (as defined below), a ___% interest (the
"Assigned Interest") in and to the Assignor's rights and obligations under
-----------------
the Credit Agreement with respect to those credit facilities provided for
in the Credit Agreement as are set forth on Schedule 1 (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a
----------------- -------------------
commitment amount for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in
<PAGE>
or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse
claim upon the interest being assigned by it hereunder and that such
interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower, any of its Subsidiaries or any
other obligor or guarantor or the performance or observance by the
Borrower, any of its Subsidiaries or any other obligor or guarantor of any
of their respective obligations under the Credit Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto
or thereto; and (c) attaches the Note(s) held by it evidencing the Assigned
Facilities and requests that the Administrative Agent exchange such Note(s)
for a new Note or Notes payable to the Assignee and (if the Assignor has
retained any interest in the Assigned Facility) a new Note or Notes payable
to the Assignor in the respective amounts which reflect the assignment
being made hereby (and after giving effect to any other assignments which
have become effective on the Transfer Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that
it has received a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements delivered
pursuant to subsection 8.1 thereof and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision
to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Administrative
Agent, the Collateral Agent or any other Lender and based on
2
<PAGE>
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints
and authorizes the Administrative Agent and the Collateral Agent to take
such action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent or the Collateral Agent (as
applicable) by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions
of the Credit Agreement and will perform in accordance with its terms all
the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender, including its obligations pursuant to the
subsection 12.15 of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
__________ ___, 19__ (the "Transfer Effective Date"). Following the
-----------------------
execution of this Assignment and Acceptance, it will be delivered to the
Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to subsection 12.6 of the Credit Agreement,
effective as of the Transfer Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, be earlier than five
Business Days after the date of such acceptance and recording by the
Administrative Agent).
5. Upon such acceptance and recording, from and after the Transfer
Effective Date, the Administrative Agent shall make all payments in respect
of the Assigned Interest (including payments of principal, interest, fees
and other amounts) to the Assignee whether such amounts have accrued prior
to the Transfer Effective Date or accrue subsequent to the Transfer
3
<PAGE>
Effective Date. The Assignor and the Assignee shall make all appropriate
adjustments in payments by the Administrative Agent for periods prior to
the Transfer Effective Date or with respect to the making of this
assignment directly between themselves.
6. From and after the Transfer Effective Date, (a) the Assignee
shall be a party to the Credit Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (b) the Assignor shall, to the extent provided in
this Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Credit Agreement.
7. Notwithstanding any other provision hereof, if the consent of the
Borrower hereto is required under subsection 12.6 of the Credit Agreement,
this Assignment and Acceptance shall not be effective unless such consent
shall have been obtained.
8. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
4
<PAGE>
SCHEDULE 1 to the
Assignment and Acceptance
-------------------------
Re: Amended and Restated Credit Agreement, dated as of March 14, 1997,
among WESCO DISTRIBUTION-CANADA, INC., the Lenders from time to time
parties thereto, The Bank of Nova Scotia, as Administrative Agent and
Barclays Bank PLC, as Collateral Agent.
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
Credit Commitment Commitment Percentage
Facility Assigned Amount Assigned Assigned
----------------- --------------- ---------------------
$_______________ ___. ____________%
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: ______________________ By:______________________
Title: Title:
Accepted: Consented To:
THE BANK OF NOVA SCOTIA, WESCO DISTRIBUTION-
as Administrative Agent CANADA, INC.
By: ______________________ By:______________________
Title: Title:
<PAGE>
SCHEDULE 9
SECURITY AGREEMENTS
-------------------
Demand Debenture
Debenture Pledge Agreement
General Assignment of Book Debts
Quebec Moveable Hypothec
Bank Act Security, comprised of
Notice of Intention to Give Security
General Assignment Under Section 427(1)(a),(b),(c) or
(e) of the Bank Act (Canada)
Application for Credit and Promise to Give Security
Under Section 427 of the Bank Act (Canada)
Agreement as to Loans and Advances and Security Therefor
<PAGE>
EXECUTION COPY
FIRST AMENDMENT (this "First Amendment"), dated as of February 13,
---------------
1998, to the Amended and Restated Credit Agreement, dated as of March 14, 1997
----------------
(the "Credit Agreement"), among WESCO DISTRIBUTION-CANADA, INC., a corporation
organized and existing under the laws of the Province of Ontario (the
"Borrower"), the several banks and other financial institutions from time to
--------
time parties thereto (the "Lenders"), THE BANK OF NOVA SCOTIA, a Canadian
-------
chartered bank ("Bank of Nova Scotia"), as administrative agent for the Lenders
thereunder (in such capacity, the "Administrative Agent"), and BARCLAYS BANK
--------------------
PLC, a banking corporation organized under the laws of the United Kingdom as
collateral agent for the Lenders thereunder (in such capacity, the "Collateral
----------
Agent").
- -----
W I T N E S S E T H :
-------------------
WHEREAS, the Borrower has requested and the Administrative Agent, the
Collateral Agent and the Lenders have agreed, subject to the terms and
conditions hereof, to amend the Credit Agreement for the purpose of, among other
things, (i) modifying the definition of "Margin Reduction Percentage", (ii)
modifying the definitions of "Borrowing Base" and "Borrowing Base Elimination
Period", (iii) modifying the definition of "Termination Date", (iv) modifying
the definition of "Consolidated EBITDA", (v) modifying the definition of
"Consolidated Interest Expense" and (vi) releasing all of the Collateral and
releasing the Collateral Agent from its obligations under the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree to amend the Credit Agreement as
follows:
1. Defined Terms. Capitalized terms used herein and not defined
-------------
herein shall have the meanings assigned to such terms in the Credit Agreement,
as amended by this First Amendment.
2. Amendment to Section 1 of the Credit Agreement.
----------------------------------------------
a. Section 1 of the Credit Agreement is hereby amended by adding the
following new definitions in proper alphabetical order:
"Bond Rating": the Moody's Bond Rating and the S&P Bond Rating.
-----------
"First Amendment": the First Amendment, dated as of February 13,
---------------
1998, to this Credit Agreement.
<PAGE>
"First Amendment Effective Date": as defined in paragraph 5 of the
------------------------------
First Amendment.
"Moody's": Moody's Investors Service, Inc.
-------
"Moody's Bond Rating": for any day, the actual rating of the U.S.
-------------------
Borrower's senior long-term unsecured debt by Moody's in effect at 9:00
A.M., New York City time, on such day. If Moody's shall have changed its
system of classifications after the date of the First Amendment, the
Moody's Bond Rating shall be considered to be at or above a specified level
if it is at or above the new rating which most closely corresponds to such
specified level under the old rating system.
"S&P": Standard and Poor's Ratings Service.
---
"S&P Bond Rating": for any day, the actual rating of the U.S.
---------------
Borrower's senior long-term unsecured debt by S&P in effect at 9:00 A.M.,
New York City time, on such day. If S&P shall have changed its system of
classifications after the date of the First Amendment, the S&P Bond Rating
shall be considered to be at or above a specified level if it is at or
above the new rating which most closely corresponds to such specified level
under the old rating system.
b. Section 1 of the Credit Agreement is hereby amended by deleting
the definitions of "Borrowing Base", "Borrowing Base Elimination Period",
"Consolidated EBITDA", "Consolidated Interest Expense", "Margin Reduction
Percentage" and "Termination Date", each in its entirety and replacing each with
the following:
"Borrowing Base": an amount equal to the aggregate Commitments.
--------------
"Borrowing Base Elimination Period": the period commencing on the
---------------------------------
First Amendment Effective Date and ending on the Termination Date.
"Consolidated EBITDA": of any Person, for any period, the
-------------------
Consolidated Net Income of such Person for such period, adjusted to exclude
the following items of income or expense to the extent that such items are
included in the calculation of Consolidated Net Income: (a) Consolidated
Interest Expense, (b) any non-cash interest expense and any other non-cash
expenses and charges, (c) total income tax expense, (d) depreciation
expense, (e) the expense associated with amortization of intangible and
other assets, (f) non-cash provisions for reserves for discontinued
operations, (g) any extraordinary, unusual or non-recurring gains or losses
or charges or credits and (h) any gains or losses associated with the sale
or write-up or write-down of assets,
2
<PAGE>
provided that in the event that such Person makes an Investment in any
--------
other Person pursuant to subsection 8.10(g) of the U.S. Credit Agreement on
any date during such period, the Consolidated EBITDA for such period shall
be computed on the assumption that such Investment and any related
financing thereof was completed on the first day of such period.
"Consolidated Interest Expense": of any Person, for any period, cash
-----------------------------
interest expense of such Person for such period on its Indebtedness
determined on a consolidated basis in accordance with GAAP, provided that
--------
in the event that the such Person makes an Investment in any other Person
pursuant to subsection 8.10(g) of the U.S. Credit Agreement on any date
during such period the Consolidated Interest Expense for such period shall
be computed on the assumption that such Investment and any related
financing thereof was completed on the first day of such period.
"Margin Reduction Percentage": (a) during the period from and
---------------------------
including the Closing Date to but excluding the Adjustment Date which
occurs concurrently with the delivery by the Borrower pursuant to
subsection 8.1(b) or 8.1(c) as applicable of financial statements of the
U.S. Borrower for the quarterly period ended June 30, 1995, zero and (b)
during each Margin Adjustment Period which commences on or after the
Adjustment Date referred to in clause (a) above, and
(i) if the Borrower's Moody's Bond Rating and/or S&P Bond Rating on
the last day of the quarter immediately proceeding the commencement of
such Margin Adjusted Period is at or above Baa3/BBB-, and if either
the Moody's Bond Rating or the S&P Bond Rating on such day is (A) at
or above A3/A-, .85% (when used in the definitions of Prime Rate
Margin and L/C Commission Rate and in subsection 3.4) and .425% (when
used in the definition of Commitment Fee Rate), (B) at or above
Baa1/BBB+, but below A3/A-, .81% (when used in the definitions of
Prime Rate Margin and L/C Commission Rate and in subsection 3.4) and
.415% (when used in the definition of Commitment Fee Rate), (C) at or
above Baa2/BBB, but below Baa1/BBB+, .775% (when used in the
definitions of Prime Rate Margin and L/C Commission Rate and in
subsection 3.4) and .40% (when used in the definition of Commitment
Fee Rate), (D) at or above Baa3/BBB-, but below Baa2/BBB, .75% (when
used in the definitions of Prime Rate Margin and L/C Commission Rate
and in subsection 3.4) and .35% (when used in the definition of
Commitment Fee Rate);
3
<PAGE>
(ii) if the Borrower's Moody's Bond Rating and/or S&P Bond Rating on
the last day of the quarter immediately preceding the commencement of
such Margin Adjusted Period is below Baa3/BBB-, and if the Fixed
Charge Coverage Ratio for the four consecutive fiscal quarters of the
U.S. Borrower ending immediately preceding the commencement of such
Margin Adjustment Period (determined by reference to the certificates
delivered pursuant to subsection 8.2(b) concurrently with the
financial statements delivered under subsection 8.1(a), (b) or (c), or
the Annual Unaudited Financial Statements (as defined below in this
definition), as the case may be, with respect to such four consecutive
fiscal quarters) is (i) less than 3.00:1, zero, (ii) less than 3.50:1
but greater than or equal to 3.00:1, 0.125% (when used in the
definitions of Prime Rate Margin and L/C Commission Rate and
subsection 3.4) and 0.125% (when used in the definition of Commitment
Fee Rate), (iii) less than 4.00:1 but greater than or equal to 3.50:1,
0.375% (when used in the definitions of Prime Rate Margin and L/C
Commission Rate and subsection 3.4) and 0.125% (when used in the
definition of Commitment Fee Rate), (iv) less than 4.50:1 but greater
than or equal to 4.00:1, 0.5625% (when used in the definitions of
Prime Rate Margin and L/C Commission Rate and subsection 3.4) and
0.1875% (when used in the definition of Commitment Fee Rate), (v) less
than 5.00:1 greater than or equal to 4.50:1, 0.65% (when used in the
definitions of Prime Rate Margin and L/C Commission Rate and
subsection 3.4) and 0.25% (when used in the definition of Commitment
Fee Rate), (vi) greater than or equal to 5.00:1, .725% (when used in
the definitions of Prime Rate Margin and L/C Commission Rate and
subsection 3.4) and 0.275% (when used in the definition of Commitment
Fee Rate);
provided that notwithstanding the forgoing paragraph (b):
--------
(w) if at any time the a percentage determined pursuant to
paragraph (b)(i) by reference to a Bond Rating exceeds the percentage
determined by reference to the other respective Bond Rating, the
Margin Reduction Percentage shall be the higher percentage (unless the
difference between the two Bond Ratings is two or more levels, in
which case the Margin Reduction Percentage shall be determined by
reference to the Bond Rating which is one level higher than the lower
of such two Bond Ratings);
(x) during any period from and including the date on which an
Event of Default has occurred to but excluding the date on which such
Event of Default is no longer continuing, the Margin Reduction
Percentage shall be zero;
4
<PAGE>
(y) if for any Margin Adjustment Period the rate is determined
pursuant to paragraph (b)(ii), above, and the Borrower delivers to the
Administrative Agent any financial statements referred to in clause
(b) of the definition of Adjustment Date (each, an "Annual Unaudited
----------------
Financial Statement") and thereafter the financial statements
-------------------
delivered pursuant to subsection 8.1(a) in respect of the period
covered by such Annual Unaudited Financial Statement demonstrates a
Fixed Charge Coverage Ratio for such period which differs from that
demonstrated by such Annual Unaudited Financial Statement, any change
in the Margin Reduction Percentage occurring as a result of such
difference shall be given retroactive effect to the first Business Day
after delivery of such Annual Unaudited Financial Statement; and
(z) if any Financial Statement Delivery Default becomes an Event
of Default, the Margin Reduction Percentage (if greater than zero)
that was in effect for the period commencing on the date such
Financial Statement Delivery Default occurred to the date such
Financial Statement Delivery Default became an Event of Default shall
be retroactively adjusted to zero for such period and shall remain
zero until the first Business Day following receipt by the
Administrative Agent of the financial statements the failure to
deliver which gave rise to such Financial Statement Delivery Default,
which date shall constitute an Adjustment Date and upon which date the
Margin Adjustment Percentage shall be determined in accordance with
the other provisions of this definition.
If payments are made hereunder on the basis of a Margin Reduction
Percentage that is retroactively adjusted as a result of the occurrence of
any of the events described in clauses (x), (y) or (z) of the proviso to
the immediately preceding sentence, the Lenders and the Borrower shall make
such payments to the Administrative Agent (which shall credit the account
of the Borrower or allocate such payments among the Lenders in accordance
with their respective interests in the payments theretofore made hereunder,
as the case may be, on the basis of the Margin Reduction Percentage that
was so retroactively adjusted) as may be necessary to give effect to such
adjustment, such payments to be calculated by the Administrative Agent
(which shall notify the Borrower and the Lenders thereof) and to be made as
soon as practicable (but in any event no later than two Business Days after
such notice is given by the Administrative Agent) and to include interest
at the applicable Bank of Canada Effective Rate for the period from the
date to which the Margin Reduction Percentage has been retroactively
adjusted to the date of the applicable payment on any amounts required to
be paid as a result of such retroactive adjustment.
5
<PAGE>
"Termination Date": February 28, 2001.
----------------
3. Amendment of Section 9.3 to the Credit Agreement. Section 9.3 is
------------------------------------------------
hereby amended by deleting it in its entirety.
4. Amendment of Schedule 1 to the Credit Agreement. The table of
-----------------------------------------------
Commitment Amounts set forth in Part A of Schedule 1 of the Credit Agreement is
hereby deleted in its entirety and replaced by the table set forth in Part A of
Schedule 1 to this First Amendment.
5. Termination of Existing Security Documents. The Administrative
------------------------------------------
Agent and the Lenders hereby agree to (i) terminate all "Security Documents" (as
defined in the Credit Agreement), and (ii) release and return, without recourse,
representation or warranty, all collateral security delivered under such
Security Documents. The Collateral Agent is hereby released by the Lenders, the
Borrower and the Administrative Agent from any duties and obligations in its
capacity as Collateral Agent under the Agreement.
6. Conditions of Effectiveness. This First Amendment shall become
---------------------------
effective upon satisfaction of each of the following conditions: (i) the signing
of this First Amendment, or, as the case may be, the consent hereto provided for
below, by the Lenders (after giving effect to this First Amendment), the
Borrower, the U.S. Borrower, Holdings and each Subsidiary Guarantor, (ii) the
occurrence of the "First Amendment Effective Date" under and as defined in the
First Amendment, dated as of February 13, 1998 to the U.S. Credit Agreement and
(iii) the first date upon which each of the conditions precedent set forth below
are satisfied (the date upon which all the conditions set forth in clauses (i),
(ii) and (iii) above shall be satisfied, the " First Amendment Effective Date").
-------------------------------
a. Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party (other than RealCo) pursuant to the
Credit Agreement, this First Amendment or any other Loan Document (or in
any amendment, modification or supplement hereto or thereto) to which it is
a party, and each of the representations and warranties contained in any
certificate furnished at any time by or on behalf of any such Loan Party
pursuant to this Agreement or any other Loan Document shall, except to the
extent that they relate to a particular date, be true and correct in all
material respects on and as of the First Amendment Effective Date as if
made on and as of such date.
b. No Default. No Default or Event of Default shall have occurred
----------
and be continuing on and as of the First Amendment Effective Date.
6
<PAGE>
c. Corporate Proceedings of the Borrower. The Administrative Agent
-------------------------------------
shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower authorizing
the execution, delivery and performance of this First Amendment and any
other related documents to which it is or will be a party, certified by the
Secretary or an Assistant Secretary of the Borrower as of the First
Amendment Effective Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state that
the resolutions thereby certified have not been amended, modified (except
as any later such resolution may modify any earlier such resolution),
revoked or rescinded.
d. Incumbency Certificates of the Borrower. The Administrative Agent
---------------------------------------
shall have received, with a copy for each Lender, a certificate of a
Responsible Officer of the Borrower, dated the First Amendment Effective
Date, as to the incumbency and signature of the officers of the Borrower
executing this First Amendment and any related document, reasonably
satisfactory in form and substance to the Administrative Agent.
7. Prepayment of Loans. On the First Amendment Effective Date, the
-------------------
Borrower agrees to prepay all of the Loans outstanding under the Credit
Agreement as well as any unpaid and accrued interest thereon and any
amounts payable pursuant to subsections 5.3 and 5.5 of the Credit Agreement
therewith.
8. APPLICABLE LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO, CANADA AND OF
CANADA APPLICABLE THEREIN.
9. Counterparts. This First Amendment may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
10. Headings. Section headings used in this First Amendment are for
--------
convenience of reference only, are not part of this First Amendment and are not
to affect the construction of, or to be taken into consideration in
interpreting, this First Amendment.
11. Credit Agreement. Except as expressly amended hereby, the Credit
----------------
Agreement shall continue in full force and effect in accordance with the
provisions thereof in effect on the date hereof. As used therein, the terms
"Agreement", "this Agreement", "herein", "hereinafter", "hereunder", "hereto"
and words of similar import shall mean, from
7
<PAGE>
and after the First Amendment Effective Date, unless the context otherwise
specifically requires, the Credit Agreement as amended by this First Amendment.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
WESCO DISTRIBUTION-CANADA, INC.
By: /s/
---------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA, as Administrative
Agent Swing Line Lender and a Lender
By: /s/
---------------------------------------
Name:
Title:
BARCLAYS BANK PLC, as Collateral Agent
By: /s/
---------------------------------------
Name:
Title:
MELLON BANK CANADA, as a Co-Agent and a
Lender
By: /s/
---------------------------------------
Name:
Title:
9
<PAGE>
FIRST CHICAGO NBD BANK CANADA, as a Lender
By: /s/
-------------------------------
Name:
Title:
THE TORONTO-DOMINION BANK, as a Lender
By: /s/
-------------------------------
Name:
Title:
Consented and Agreed to:
CDW HOLDINGS CORPORATION, as a Guarantor
under the Credit Agreement
By: /s/
-------------------------------
Name:
Title:
WESCO DISTRIBUTION, INC.,
as the Borrower under the
U.S. Credit Agreement
By: /s/
-------------------------------
Name:
Title:
10
<PAGE>
SCHEDULE 1 TO THE
First Amendment
---------------
COMMITMENTS
A. Commitment Amounts
<TABLE>
<CAPTION>
================================================================================
Lender Commitment
- --------------------------------------------------------------------------------
<S> <C>
First Chicago NBD Bank, Canada $ 8,706,875
- --------------------------------------------------------------------------------
Mellon Bank Canada 8,706,875
- --------------------------------------------------------------------------------
The Bank of Nova Scotia 21,465,500
- --------------------------------------------------------------------------------
The Toronto-Dominion Bank 23,810,250
- --------------------------------------------------------------------------------
TOTAL $62,689,500
================================================================================
</TABLE>
<PAGE>
EXHIBIT 4.3
-----------
For purposes of Section 1275(c) of the Internal Revenue Code of 1986,
as amended, relating to "original issue discount," the issue price of this Note
is $45,000,000.00, the amount of "original issue discount" is $32,925,440.14,
the "issue date" is February 28, 1994, and the "yield to maturity" is 8% per
annum, compounded semiannually.
GUARANTEED FIRST MORTGAGE NOTE due February 28, 2001
Original Face Amount: $77,925,440.14 New York, NY
Initial Amount: $45,000,000.00 February 28, 1994
R-1
1. OBLIGATION TO PAY
FOR VALUE RECEIVED, the undersigned CDW Realco, Inc., a Delaware
corporation ("MAKER"), promises to pay to the order of WESTINGHOUSE ELECTRIC
CORPORATION, a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, or registered assigns ("PAYEE"), the amount of
$77,925,440.14, which amount includes accrued amortization of the Discount (at
the date of issuance) of this Note, on the Stated Maturity.
2. DEFINITIONS
The following terms as used herein shall be defined as follows:
"ACCRETED VALUE" of any Note on any date of determination shall mean
(a) the sum of (i) the Initial Amount of such Note, plus (ii) the aggregate of
- - ---- --
the Semi-Annual Accrual Amounts of such Note accrued from and including the date
of such Note to and including the Semi-Annual Accrual Date coinciding with or
immediately preceding the date of determination plus (iii) any Stub Amount minus
---- --- -----
(b) each partial prepayment of such Note made on or prior to such date of
-
<PAGE>
determination (it being understood that the Accreted Value of such Note shall be
reduced by the amount of each such partial prepayment as of the Semi-Annual
Accrual Date on which such partial prepayment is made).
"ACCRUAL RATE" shall mean 8% per annum.
"ACQUISITION AGREEMENT" shall mean the Asset Acquisition Agreement,
dated as of February 15, 1994, between Seller and Buyer, as amended,
supplemented, waived or otherwise modified from time to time.
"ADJUSTED FACE AMOUNT" of any Note shall mean, following any partial
prepayment of such Note, the Face Amount of such Note (determined before giving
effect to such partial prepayment) multiplied by a fraction the numerator of
which is the Accreted Value of such Note after giving effect to such partial
prepayment and the denominator of which is the Accreted Value of such Note
before giving effect to such partial prepayment.
"ADMINISTRATIVE AGENTS" shall mean the respective administrative
agents under the Barclays Senior Credit Agreement and the Canadian Senior Credit
Agreement or under any extension, refunding, renewal or refinancing (other than
the Permitted Newco Subordinated Debt) thereof.
"ADVANCES" shall mean any loans or other advances of credit under the
Barclays Senior Credit Agreement (or any extension, refunding, renewal or
refinancing thereof).
"AFFILIATE" shall mean as to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person. "Control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies
2
<PAGE>
of a Person, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or executor, or otherwise. Each of the C&D Fund,
Buyer, Newco, Realco and the Canadian Buyer shall be regarded as Affiliates of
each other; Seller and Westinghouse Canada Inc. shall be regarded as Affiliates
of each other; and none of the C&D Fund, Buyer, Newco, Realco or the Canadian
Buyer, on the one hand, and Seller or Westinghouse Canada Inc., on the other
hand, shall be regarded as Affiliates of each other.
"APPRAISED VALUE" with respect to any Mortgaged Property shall mean
the amount that would be paid for such Mortgaged Property by a willing buyer who
purchases such Mortgaged Property "as is" and "where is" in a transaction
negotiated on an arm's length basis in which neither such buyer nor the seller
of such Mortgaged Property is under any compulsion to engage in the transaction.
"APPROVED APPRAISER" shall mean (i) any of The Manufacturer's
-
Appraisal Company, Cushman & Wakefield and Binswanger & Co. or (ii) any other
--
independent real estate appraisal firm approved by Maker and the Required
Mortgage Lenders.
"BANK" shall mean each financial institution that is listed on the
signature pages of the Barclays Senior Credit Agreement and its permitted
successors, assigns and transferees under the Barclays Senior Credit Agreement.
"BCI" shall mean Barclays Business Credit, Inc.
"BARCLAYS SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of the Closing Date, among Newco, BCI, as Administrative Agent and
Collateral Agent, Barclays Bank PLC, as Managing Agent, and the Banks, as
amended, supplemented, waived or otherwise modified from time to time.
3
<PAGE>
"BENEFICIAL OWNER" shall mean a "beneficial owner", as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (or any successor
provision).
"BOARD OF DIRECTORS" shall mean the Board of Directors of Buyer.
"BORROWING BASE" shall mean the sum of the value of certain accounts
receivable plus the value of certain inventory, in each case of Newco and its
----
Subsidiaries (other than Canadian Buyer and its respective Subsidiaries), that
are eligible under the Barclays Senior Credit Agreement (or any extension,
refunding, renewal or refinancing thereof) to support Advances made thereunder,
provided that, for the purpose of determining the maximum Advances permitted by
- --------
the Borrowing Base immediately prior to and immediately after giving effect to a
Mixed Asset Sale, any changes pursuant to an amendment, supplement, waiver or
other modification to the Barclays Senior Credit Agreement in the method of
calculating the Borrowing Base, and in the extent to which a Borrowing Base of a
given size and composition supports Advances, that take effect within 10
Business Days prior to the date of such Mixed Asset Sale shall be ignored.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required to close.
"BUYER" shall mean CDW Holding Corporation, a Delaware corporation.
"C&D FUND" shall mean The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership.
"CD&R" shall mean Clayton, Dubilier & Rice, Inc., a Delaware
corporation.
"CANADIAN BUYER" shall mean CDW Canada Acquisition Inc., an Ontario
corporation.
4
<PAGE>
"CANADIAN DOLLARS" shall mean dollars in the lawful currency of
Canada.
"CANADIAN MORTGAGE DOCUMENTS" shall mean (a) each mortgage of real
-
property that by its terms secures the performance by the Canadian Buyer of its
obligations under the Canadian Notes and (b) the Cash Collateral and Security
-
Agreement dated as of the Closing Date between the Canadian Buyer and
Westinghouse Canada Inc.
"CANADIAN MORTGAGED PROPERTY" shall mean the Mortgaged Premises, as
defined in each of the Canadian Mortgage Documents.
"CANADIAN NOTES" shall mean the "Notes", as defined in the first
mortgage note issued on the Closing Date by the Canadian Buyer to Westinghouse
Canada Inc.
"CANADIAN SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of the Closing Date, among Canadian Buyer, Barclays Bank of Canada, as
Administrative Agent, BCI as Collateral Agent, and the financial institutions
from time to time party thereto, as amended, supplemented, waived or otherwise
modified from time to time.
"CASH COLLATERAL AGREEMENT" shall mean the Cash Collateral and
Security Agreement, dated as of the Closing Date, between Realco and Mortgagee,
as amended, supplemented, waived or otherwise modified from time to time.
"CASH CONSIDERATION" shall mean, in respect of any Restricted Asset
Sale, any consideration for such sale or other disposition received in the form
of cash.
"CASH INTEREST EXPENSE" shall mean, with reference to any period, all
cash interest charges (including imputed interest on capital lease obligations)
paid or accrued by Newco and its Subsidiaries for such period.
5
<PAGE>
"CHANGE OF CONTROL" shall be deemed to occur at any time that (a)
-
prior to the consummation of the Specified Public Offering, CD&R, the C&D Fund,
Seller and their respective Affiliates cease to have the power collectively
(whether through the ownership of Voting Stock, by contract with one or more
holders of Voting Stock, by irrevocable proxy or by provision of the certificate
of incorporation of Buyer) to elect a majority of the members of the Board of
Directors; (b) after the consummation of the Specified Public Offering, any
-
Person or group (as described in Section 13d-3 of the Securities Exchange
Act of 1934, as amended), other than either (x) CD&R, the C&D Fund and their
-
respective Affiliates or (y) Seller or any such group of which Seller is a
-
member, is or becomes the Beneficial Owner of Voting Stock that represents more
than (i) 30% in the aggregate of the total Voting Stock of Buyer then
-
outstanding and (ii) the total Voting Stock of Buyer of which CD&R, the C&D Fund
--
and their respective Affiliates are Beneficial Owners; (c) Buyer is the
-
Beneficial Owner of less than all the outstanding equity securities of Newco or
of Realco; (d) Newco is the Beneficial Owner of less than all the outstanding
-
equity securities of Realco or the Canadian Buyer; or (e) during any two-year
-
period, individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election by the Board of
Directors, was approved by a vote of a majority of the directors of Buyer then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors.
"CHANGE PREPAYMENT DATE" shall have the meaning specified in paragraph
7(b).
"CLOSING DATE" shall mean February 28, 1994.
"CLOSING DATE EXCHANGE RATE" Shall mean 0.73995 United States Dollars
per Canadian Dollar.
6
<PAGE>
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean, with reference
to any period, the ratio of EBITDA to Fixed Charges for such period.
"CONSOLIDATED NET INCOME" SHALL mean, with reference to any period,
the net income (or deficit) of Newco and its consolidated Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with GAAP on a
consolidated basis, adjusted, to the extent included in calculating such net
income (or deficit), by excluding, without duplication, (i) all extraordinary or
-
non-recurring gains and losses (less all fees and expenses relating thereto),
(ii) the portion of net income (or deficit) of Newco and its consolidated
--
Subsidiaries allocable to minority interests in unconsolidated Persons to the
extent that cash dividends or distributions have not actually been received by
Newco or one of its consolidated Subsidiaries, (iii) net income (or loss) of any
---
Person combined with Buyer or any of its Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) net gains or losses (less all fees and expenses relating thereto) net of
--
taxes in respect of dispositions of assets other than in the ordinary course of
business, (v) non-cash gains or expenses and charges related to asset write-ups
-
or write-downs, (vi) the net income of any U.S. Subsidiary of Newco to the
--
extent that the declaration of dividends or similar distributions by such
Subsidiary of such income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such U.S.
Subsidiary or its shareholders, (vii) any non-cash gains or expenses and charges
---
resulting from any write-up or write-down of assets of Newco or any of its
consolidated Subsidiaries in connection with the acquisition by Newco from
Seller of certain assets pursuant to the Acquisition Agreement and (viii) the
----
effect of foreign currency transaction adjustments for such period.
7
<PAGE>
"CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses and charges of Newco and
its consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP (excluding any non-cash expense or charge
which requires an accrual or reserve for cash charges for any future period,
other than accruals for future retiree medical obligations made pursuant to SFAS
No. 106, as amended or modified), including any non-cash expenses and charges
resulting from the write-up in book value of inventory of Newco or any of its
consolidated Subsidiaries resulting from, and the depreciation and
amortization of fixed assets and intangible assets of Newco or any of its
consolidated Subsidiaries pertaining to, adjustments required or permitted by
Accounting Principles Bulletin Opinion Nos. 16 and 17 in connection with the
acquisition by Newco from Seller of certain assets pursuant to the Acquisition
Agreement, but excluding any item to the extent an adjustment was taken for such
item in accordance with the definition of "Consolidated Net Income."
"CURRENT EXCHANGE RATE" on any date of determination shall mean the
average of the bid/ask spot rates specified on the WRLD screen of Reuters
Information Services Inc. at 10:00 a.m., New York City time, on such date, with
respect to Canadian Dollars.
"DEBT" shall mean, as applied to any Person (without duplication):
(a) any indebtedness for borrowed money which such Person has directly
or indirectly created, incurred or assumed; and
(b) any indebtedness, whether or not for borrowed money, secured by
any Lien in respect of property owned by such Person, whether or not such
Person has assumed or become liable for the payment of such indebtedness;
and
8
<PAGE>
(c) any indebtedness, whether or not for borrowed money, with respect
to which such Person has become directly or indirectly liable and which
represents or has been incurred to finance the purchase price (or a portion
thereof) of any property or services or business acquired by such Person,
whether by purchase, consolidation, merger or otherwise (other than trade
debt incurred for the purchase of goods or of services in the ordinary
course of business); and
(d) any indebtedness of the character referred to in clause (a), (b)
or (c) of this definition deemed to be extinguished under GAAP but for
which such Person remains legally liable; and
(e) any obligation which is required to be classified and accounted
for as a capital lease (a "CAPITAL LEASE") on the face of a balance sheet
of such Person prepared in accordance with GAAP (the amount of such
obligation shall be the capitalized amount thereof, determined in
accordance with GAAP); and
(f) all obligations of such Person for the reimbursement of any
issuer on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations referred to in another clause
of this definition) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit); and
(g) any indebtedness of any other Person of the character referred to
in any of the foregoing clauses of this definition with respect to which
the Person
9
<PAGE>
whose Debt is being determined has become liable by way of a
Guaranty.
"DISCOUNT" of any Note at any date of determination shall mean the
difference between the Face Amount of such Note and the Accreted Value of such
Note at such date.
"EBITDA" shall mean, with reference to any period, Consolidated Net
Income for such period, plus the aggregate amounts deducted in determining
Consolidated Net Income for such period in respect of (i) interest expense, (ii)
- --
income taxes, and (iii) Consolidated Non-Cash Charges.
---
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
5 provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCESS RESERVED AMOUNT" shall mean, with respect to any Restricted
Asset Sale, an amount equal to the excess, if any, of the initial balance of the
Reserved Amount established in respect of such Restricted Asset Sale over the
aggregate amount of cash paid by Maker to satisfy the Permitted Liabilities
underlying such Reserved Amount (such excess, if any, to be determined at the
time the reserves in respect of such Reserved Amount are reversed).
"FACE AMOUNT" of any Note shall mean (i) prior to the date of any
-
partial prepayment of such Note, the Original Face Amount of such Note, and (ii)
--
on and after the date of any partial prepayment of such Note, the Adjusted Face
Amount of such Note.
"FAIR MARKET VALUE" with respect to any Mortgaged Property or
Mortgaged Properties to be sold or disposed of in a single Restricted Asset Sale
or a series of related
10
<PAGE>
Restricted Asset Sales (a) shall mean the amount agreed between Maker and the
-
Majority Holders as the fair market value of such Mortgaged Property or
Mortgaged Properties or (b) if such agreement is not reached within ten days of
-
notice of the proposed Restricted Asset Sale to each holder of Notes at the time
outstanding, shall mean the Appraised Value of such Mortgaged Property or
Mortgaged Properties, as determined by an Approved Appraiser selected and
compensated by Maker, such determination to be set forth in writing in
reasonable detail by such Approved Appraiser and given to Maker and to holders
of the Notes at the time outstanding. Notwithstanding the previous sentence, (i)
-
Maker shall endeavor in good faith to select the Approved Appraiser for a given
transaction on a basis such that the Restricted Asset Sales through the date of
such transaction shall be allocated approximately evenly (by number of
Restricted Asset Sales and series of related Restricted Asset Sales) among the
Approved Appraisers and (ii) in the event of a Major Asset Sale, within five
--
Business Days after receipt by the holders of the written appraisal contemplated
by the preceding sentence, the Majority Holders may require that a second
Approved Appraiser determine the Appraised Value of the Mortgaged Property or
Mortgaged Properties being disposed of in such Major Asset Sale, in which event
(A) such holders shall be responsible for the selection and compensation of such
-
second Approved Appraiser, (B) such second Approved Appraiser shall deliver its
-
determination of Appraised Value to Maker on a date not less than five Business
Days prior to the scheduled closing date of such Major Asset Sale, such
determination to be set forth in writing in reasonable detail by such second
approved Appraiser and (C) the Fair Market Value shall be the average of the
respective amounts determined as the Appraised Value by the first and second
Approved Appraisers.
"FIXED CHARGES" shall mean, with respect to any period, the sum of the
following for Newco and its Subsidiaries on a consolidated basis: (a) all
-
Cash Interest Expense for such period, and (b) the pretax equivalent (using as
-
the tax rate Newco's then current effective composite
11
<PAGE>
federal, state and local income tax rate) of Preferred Stock dividends of Newco
and its Subsidiaries accrued for such period (other than any Preferred Stock
dividends payable by a Subsidiary of Newco to Newco or another Subsidiary of
Newco).
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States. For the purposes of the definitions of
Consolidated Net Income, Consolidated Non-Cash Charges and EBITDA, GAAP shall
be determined as in effect on the Closing Date.
"GUARANTY" shall mean, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable.
"INITIAL AMOUNT" of any Note is the amount stated as the Initial
Amount on the face of such Note.
"LEASE" shall mean the Master Lease, dated as of the Closing Date,
between Realco and Newco, as amended, supplemented, waived or otherwise modified
from time to time.
"LIEN" shall mean any mortgage, pledge, assignment, hypothecation,
security deposit arrangement, encumbrance (statutory or other), charge or other
security interest or any preference, priority or other lien, security agreement
or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing).
12
<PAGE>
"MAJOR ASSET SALE" shall mean any Mixed Asset Sale (or series of
related transactions involving one or more Mixed Asset Sales to a single
purchaser or group of related purchasers) including (a) a Mortgaged Property or
-
Mortgaged Properties the Fair Market Value of which exceeds, in the aggregate,
$15,000,000 or (b) any of the Mortgaged Properties located in Warrendale,
-
Pennsylvania or Byhalia, Mississippi, and used by Newco immediately following
the Closing Date as a distribution center.
"MAJORITY HOLDERS" shall mean the holders of at least a majority of
the aggregate Face Amount of the Notes at the time outstanding.
"MAJORITY OWNED" as applied to any Subsidiary of Newco, shall mean a
Subsidiary of Newco (a) at least 80% of the outstanding shares of every class of
-
stock of which is at the time owned, directly or indirectly, by Newco or by one
or more Majority Owned Subsidiaries of Newco or by Newco and one or more
Majority Owned Subsidiaries of Newco and (b) the balance of the outstanding
-
shares of every class of stock of which is at the time owned, directly or
indirectly, by other Persons that are not Affiliates of the C&D Fund.
"MAKER" shall have the meaning specified in paragraph 1.
"MATURITY" with respect to any Note shall mean the earlier of (a)
-
Stated Maturity or (b) the date on which (whether by acceleration or prepayment
-
or otherwise) all or any part of the Accreted Value of such Note becomes due and
payable.
"MIXED ASSET SALE" shall mean any sale or disposition of a Mortgaged
Property or Mortgaged Properties to a Person, if such Person or any of its
Affiliates is acquiring other assets from Maker or an Affiliate of Maker in
connection with such sale or disposition.
13
<PAGE>
"MORTGAGE DOCUMENTS" shall mean (a) each mortgage of real property
-
executed by Maker that by its terms secures the performance by Maker of its
obligations under the Notes and (b) the Cash Collateral Agreement.
-
"MORTGAGED PROPERTY" shall mean the Mortgaged Property, as defined in
each of the Mortgage Documents.
"MORTGAGEE" shall mean Seller in its capacity as Mortgagee under the
Mortgage Documents and as Collateral Agent under the Cash Collateral Agreement,
or any successor Mortgagee or Collateral Agent.
"NET PROCEEDS" of any Restricted Asset Sale shall mean the proceeds of
such Restricted Asset Sale after (a) provision for all income, title, recording
-
or other taxes measured by or resulting from such Restricted Asset Sale, to the
extent payable by Maker or any of its Affiliates, after taking into account all
available deductions and credits, (b) payment of all reasonable brokerage
-
commissions, reasonable investment banking and legal fees and other reasonable
fees and expenses, to the extent payable by Maker or any of its Affiliates,
related to such Restricted Asset Sale (other than any such amounts payable to
any Affiliate of Maker), and (c) deduction of an amount equal to the initial
-
balance of the Reserved Amount, if any, in respect of such Restricted Asset
Sale; provided that if the reserves underlying such Reserved Amount are
--------
reversed, any Excess Reserved Amount with respect to such Restricted Asset Sale
shall be added to the Net Proceeds of such Restricted Asset Sale.
"NET PROCEEDS ALLOCABLE TO PAYEE" shall have the meaning specified in
paragraph 6(c)(6).
"NET WORTH" shall mean, as to any Person at any time, the excess of
the total assets over the total liabilities of such Person at such time,
determined on a consolidated basis in accordance with GAAP.
14
<PAGE>
"NEWCO" shall mean CDW Acquisition Corporation, a Delaware corporation
and a Wholly Owned Subsidiary of Buyer.
"NOTES" shall mean the Guaranteed First Mortgage Notes due February
28, 2001, issued by Maker on the Closing Date in an Original Face Amount of
$77,925,440.14, and all securities issued upon transfer or exchange thereof.
This Note is one of the Notes.
"ORIGINAL FACE AMOUNT" of any Note is the amount stated as the
Original Face Amount on the face of such Note.
"PAYEE" shall have the meaning specified in paragraph 1.
"PERMITTED JUNIOR SECURITIES" shall have the meaning specified in
paragraph 6(b)(2).
"PERMITTED LIABILITY", in respect of any Restricted Asset Sale, shall
mean any liability of Maker to the extent (i) arising out of or associated with
-
the assets included in such Restricted Asset Sale and (ii) retained by Maker or
--
Newco after such Restricted Asset Sale, including, without limitation, any
liability relating to environmental matters and any liability for
indemnification obligations arising out of such Restricted Asset Sale, but
excluding any liability to the extent arising out of any breach by Maker of its
obligations under the Notes and the Mortgage Documents.
"PERMITTED NEWCO DEBT" shall mean (i) any Debt created, incurred or
-
assumed by Newco or the Canadian Buyer pursuant to the Barclays Senior Credit
Agreement or the Canadian Senior Credit Agreement, as the case may be, and any
extension, refunding, renewal or refinancing thereof (including any refinancing
in part) and (ii) Permitted Newco Subordinated Debt, provided that the combined
-- --------
principal amount of the Debt described in the preceding clauses (i) and (ii)
shall not exceed (a) $270,000,000 (exclusive of any interest thereon deemed
-
added to principal) (any
15
<PAGE>
outstanding Debt denominated in Canadian Dollars to be converted to United
States Dollars at the Current Exchange Rate in effect on the date of incurrence
of such Debt) plus (b) the amount, if any, by which the aggregate principal
---- -
amount of outstanding Permitted Newco Subordinated Debt exceeds $75,000,000.
"PERMITTED NEWCO SUBORDINATED DEBT" shall mean unsecured subordinated
Debt created, incurred or assumed by Newco in an aggregate principal amount not
exceeding $100,000,000 (and any extension, refunding, renewal or refinancing
thereof, including, without limitation, any unsecured subordinated Debt of Newco
issued in exchange for a portion or all of such Permitted Newco Subordinated
Debt); provided that no such subordinated Debt need be subordinated to Newco's
--------
Guaranty of the Notes; and provided, further, that any principal amount of such
-------- -------
Debt in excess of $75,000,000 shall not be "PERMITTED NEWCO SUBORDINATED DEBT"
unless originally incurred not later than the earlier of (i) the first
-
anniversary of the date on which Seller first causes to be delivered to Buyer
for inclusion in an offering document and prospectus the balance sheet of the
Business (as defined in the Acquisition Agreement) as of December 31, 1991,
December 31, 1992, December 31, 1993 and the Closing Date and the statement of
income and cash flow of the Business for each year ended each such December 31
and the interim period ended the Closing Date, reported on (in each case)
without a "going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Price Waterhouse, and (ii) the later
--
of (A) the first anniversary of the date on which Seller first causes to be
-
delivered to Buyer for inclusion in an offering document and prospectus the
balance sheet of the Business as of December 31, 1992, December 31, 1993 and the
Closing Date and the statement of income and cash flow of the Business for each
year ended each such December 31 and the interim period ended the Closing Date,
reported on (in each case) without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by Price
Waterhouse, and (B) May 31, 1996.
-
16
<PAGE>
"PERMITTED NON-CASH CONSIDERATION" shall mean, in respect of any
Restricted Asset Sale, any consideration for such Restricted Asset Sale received
in the form of notes issued by the purchaser (or an Affiliate thereof) in such
Restricted Asset Sale, provided that such notes (a) are secured by a perfected,
-------- -
first priority mortgage lien on the Mortgaged Property or Mortgaged Properties
sold in such Restricted Asset Sale, (b) are freely transferable (subject only to
-
compliance with applicable securities laws), (c) have a scheduled maturity date
-
no later than the later of (i) Stated Maturity or (ii) the five-year anniversary
- --
of the date on which such notes are issued and (d) bear cash interest (i)
- -
payable not less often than semiannually and (ii) at a rate not less than the
--
Treasury Yield (determined as of the date on which such notes are issued) plus
250 basis points. The "Treasury Yield" shall be equal to the yield to maturity
implied by (i) the Treasury Constant Maturity Series yields reported, for the
-
latest day for which such yields shall have been so reported as of the Business
Day next preceding the date of determination, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the Weighted
Average Life to Maturity of such Permitted Non-Cash Consideration as of such
date of determination or (ii) if such yields shall not be reported as of such
--
time or the yields reported as of such time shall not be ascertainable, the
yields reported, as of 10:00 a.m. (New York City time) on the Business Day next
preceding the date of determination, on the display designated as "Page 500" on
the Telerate Service for actively traded U.S. Treasury securities having a
maturity equal to the Weighted Average Life to Maturity of such Permitted Non-
Cash Consideration. Such implied yield shall be determined, if necessary, by (1)
-
converting U.S. Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (2) interpolating linearly between reported
-
yields. The Treasury Yield shall be computed to the fifth decimal place (one
thousandth of a percentage point) and
17
<PAGE>
then rounded to the fourth decimal place (one hundredth of a percentage point).
"PERSON" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"PREFERRED STOCK" shall mean, as applied to any corporation, shares of
capital stock of such corporation which shall be entitled to preference or
priority over any other shares of capital stock of such corporation in respect
of the payment of dividends or the distribution of assets upon liquidation.
"PREPAYMENT DATE" shall have the meaning specified in paragraph 7(c).
"REALCO" shall mean CDW Realco, Inc., a Delaware corporation and a
Wholly Owned Subsidiary of Buyer.
"REGISTER" shall have the meaning specified in paragraph 9(a).
"REQUIRED MORTGAGE LENDERS" shall mean the holders of at least a
majority of the sum of (a) the aggregate Accreted Value of the Notes at the time
-
outstanding and (b) the aggregate principal amount (after giving effect to all
-
interest accrued prior to the date of determination) of the Canadian Notes at
the time outstanding. For the purpose of this definition, Canadian Dollar
amounts shall be converted to United States Dollar amounts at the Closing Date
Exchange Rate.
"RESERVED AMOUNT" shall mean, in respect of any Restricted Asset Sale,
an amount equal to the initial balance of any Liability Reserve (as defined in
the Cash Collateral Agreement) established by Maker, in accordance with GAAP at
the time of such Restricted Asset Sale in connection with any Permitted
Liabilities in respect of such
18
<PAGE>
Restricted Asset Sale, as adjusted from time to time pursuant to Section 5.03 of
the Cash Collateral Agreement.
"RESPONSIBLE OFFICER" of any Person shall mean any of the following
officers of such Person: (a) the chief executive officer or the president of
-
such Person and, with respect to financial matters, the chief financial officer,
the treasurer or the controller of such Person, (b) any vice president of such
-
Person or, with respect to financial matters, any assistant treasurer or
assistant controller of such Person, who has been designated in writing to
Mortgagee as a Responsible Officer by such chief executive officer or president
of such Person or, with respect to financial matters, the chief financial
officer, the treasurer or the controller of such Person and (c) with respect to
-
paragraphs 6(a)(5) and 17 and without limiting the foregoing, the general
counsel of such Person.
"RESTRICTED ASSET SALE" shall mean the sale or disposition of any
Mortgaged Property or of assets sold in a Mixed Asset Sale, as the case may be,
other than in respect of a casualty to or condemnation of any Mortgaged
Property.
"RESTRICTED PAYMENT" shall mean (a) any dividend or other
-
distribution, direct or indirect, on account of any shares of any class of stock
of Newco or its Subsidiaries now or hereafter outstanding, except a dividend
payable solely in shares of common stock of Buyer or Newco, (b) any redemption,
-
retirement, purchase or other acquisition, direct or indirect, of any shares of
any class of stock of Newco or its Subsidiaries, now or hereafter outstanding,
or of any warrants, rights or options to acquire any such shares, except to the
extent that the consideration therefor consists of shares of common stock of
Buyer or Newco, and (c) any payment, direct or indirect, of or on account of any
-
principal of Subordinated Debt or any redemption, retirement, purchase or other
acquisition of Subordinated Debt (except mandatory payments at the scheduled
maturity of Subordinated Debt and mandatory scheduled prepayments and fixed
sinking fund payments of Subordinated Debt).
19
<PAGE>
"SELLER" shall mean Westinghouse Electric Corporation, a Pennsylvania
corporation.
"SEMI-ANNUAL ACCRUAL AMOUNT" of any Note with respect to any Semi-
Annual Accrual Date shall mean the portion of the Discount (at the immediately
preceding Semi-Annual Accrual Date or, in the case of the first Semi-Annual
Accrual Date following the Closing Date, at the Closing Date) of such Note equal
to the product of (A) the Accrual Rate, multiplied by (B) (1) in the case of the
- - -
Semi-Annual Accrual Amount with respect to the first Semi-Annual Accrual Date
following the date of issuance of such Note, the Initial Amount of such Note, or
(2) in the case of each Semi-Annual Accrual Amount with respect to each Semi-
-
Annual Accrual Date thereafter, the Accreted Value of such Note as of the
immediately preceding Semi-Annual Accrual Date after giving effect to any
partial prepayment of such Note made on such preceding Semi-Annual Accrual Date,
multiplied by (C) a fraction (X) the numerator of which is (1) in the case of
- - -
the first Semi-Annual Accrual Date following the Closing Date, the number of
days (using a 30-day month, 360-day year convention) elapsed during the period
from and including the Closing Date to but excluding such first Semi-Annual
Accrual Date, or (2) in the case of each Semi-Annual Accrual Amount with respect
-
to each Semi-Annual Accrual Date thereafter, 180, and (Y) the denominator of
-
which is 360.
"SEMI-ANNUAL ACCRUAL DATE" shall mean each February 28 (or, in any
year that is a leap year, February 29) and August 31 from and including August
31, 1994, to and including Maturity.
"SHORTFALL AMOUNT" shall have the meaning specified in paragraph
6(c)(6).
"SIGNIFICANT HOLDER" shall mean (a) Seller, so long as Seller shall
-
hold any Note and (b) any other holder of at least 10% of the aggregate Face
-
Amount of the Notes from time to time outstanding whether acting for itself or
in a trust, agency or other fiduciary capacity.
20
<PAGE>
"SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary of Buyer (other
than Newco, Realco and the Canadian Buyer) that owns, directly or indirectly,
any shares of any class of stock issued by any of Newco, Realco or the Canadian
Buyer or has given any Guaranty of the Notes or the Canadian Notes.
"SPECIFIED PREPAYMENT" shall mean any prepayment in part of the Notes
or the Canadian Notes to the extent not made (i) out of the proceeds of the sale
-
or disposition of any Mortgaged Property, (ii) out of the proceeds from the
--
enforcement of any Mortgage Document or Canadian Mortgage Document, (iii) out of
---
amounts released from the Lien of any Mortgage Document (other than any Excess
Reserved Amounts, to the extent that such Excess Reserved Amounts do not
constitute Net Proceeds Allocable to Payee) or (iv) otherwise pursuant to any
--
Mortgage Document.
"SPECIFIED PUBLIC OFFERING" shall mean the consummation of a bona
fide public offering of common stock of Buyer (the "Common Stock") pursuant to a
registration statement filed under the Securities Act of 1933, as amended, which
offering is underwritten by a syndicate of underwriters led by one or more
underwriters at least one of which is an underwriter of recognized national
standing and which (whether alone or together with any other prior registered
offerings) results in (a) an aggregate percentage of the outstanding Common
-
Stock (on a fully diluted basis) being held by the public that is greater than
the percentage of the outstanding Common Stock (on a fully diluted basis) held
by Seller upon, and after giving effect to, the consummation of such offering,
and (b) Buyer being subject to the reporting requirements of Section 13 of the
-
Securities Exchange Act of 1934, as amended, other than by reason solely of
Section 15(d) of the Securities Exchange Act of 1934, as amended.
"STATED MATURITY" shall mean February 28, 2001.
21
<PAGE>
"STUB AMOUNT" shall mean, for purposes of calculating the Accreted
Value of any Note as of any date of determination that does not coincide with a
Semi-Annual Accrual Date, the portion of the Discount (at the immediately
preceding Semi-Annual Accrual Date or, in the case of the first Semi-Annual
Accrual Date following the Closing Date, at the Closing Date) equal to the
product of (A) the Accrual Rate, multiplied by (B) (1) in the case of the Stub
- - -
Amount with respect to any date of determination prior to the first Semi-Annual
Accrual Date following the date of issuance of such Note, the Initial Amount of
such Note, or (2) in the case of any date of determination after such first
-
Semi-Annual Accrual Date, the Accreted Value of such Note as of the Semi-Annual
Accrual Date immediately preceding such date of determination after giving
effect to any partial prepayment of such Note made on such preceding Semi-Annual
Accrual Date, multiplied by (C) a fraction (X) the numerator of which is the
- -
number of days (using a 30-day month, 360-day year convention) elapsed during
the period (1) in the case of the Stub Amount with respect to any date of
-
determination prior to the first Semi-Annual Accrual Date following the Closing
Date, from and including the Closing Date to but excluding such date of
determination, or (2) in the case of any Stub Amount with respect to any date of
-
determination after such first Semi-Annual Accrual Date, from and including the
Semi-Annual Accrual Date immediately preceding such date of determination to but
excluding such date of determination, and (Y) the denominator of which is 360.
-
"SUBORDINATED DEBT" shall mean any Debt of Newco which is subordinated
in right of payment to Newco's Guaranty of this Note endorsed hereon.
"SUBSIDIARY" of any Person shall mean a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other man-
22
<PAGE>
agers of such corporation, partnership or other entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person.
"UNITED STATES DOLLARS" and "$" shall mean dollars in the lawful
currency of the United States of America.
"VOTING STOCK" shall mean, with respect to any corporation or other
entity, any shares of stock or other ownership interests of such corporation or
entity whose holders are entitled under ordinary circumstances to vote for the
election of directors of such corporation or to manage any such other entity
(irrespective of whether at the time stock or ownership interests of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" as applied to any Debt at any
date, the number of years obtained by dividing (a) the then outstanding
-
principal amount of such Debt into (b) the total of the products obtained by
-
multiplying (i) the amount of each then remaining sinking fund or other required
-
payments, including payment at final maturity, in respect thereof, by (ii) the
--
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the date on which such required payment is to be made.
"WHOLLY OWNED" as applied to any Subsidiary of a Person, shall mean a
Subsidiary of such Person all the outstanding shares (other than shares, if any,
required to qualify directors under applicable law) of every class of stock of
which is at the time owned by such Person or by one or more Wholly Owned
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Subsidiaries of such Person.
23
<PAGE>
3. RATE OF ACCRUAL
On each Semi-Annual Accrual Date, a portion of the Discount (at the
date of issuance) of this Note equal to the Semi-Annual Accrual Amount of this
Note on such Semi-Annual Accrual Date shall accrue and be added to the Accreted
Value hereof, and any partial prepayment of this Note made on such Semi-Annual
Accrual Date shall be subtracted from the Accreted Value hereof. If it shall be
necessary to determine the Accreted Value of this Note as of a date that does
not coincide with a Semi-Annual Accrual Date, an additional portion of the
Discount (at the date of issuance) of this Note equal to the Stub Amount shall
accrue and be added to the Accreted Value hereof for the purpose of such
determination.
4. PAYMENTS
(a) Maker will pay all sums becoming due on this Note by the method
and at the address specified for such purpose in paragraph 4(c) without the
presentation or surrender of this Note or, subject to the next sentence, the
making of any notation hereon, except that any Note paid or prepaid in full
shall be surrendered to Maker as a condition to such payment or prepayment and
shall be cancelled and shall not be reissued. Upon any partial prepayment of
this Note, Payee shall endorse hereon the amount and date of such partial
prepayment, provided that Payee's failure to do so shall not affect Maker's
--------
obligations under this Note.
(b) If any amount of Accreted Value of this Note shall not be paid
upon any Maturity, Discount on such amount shall cease to accrue, and such
amount shall bear interest (to the extent permitted by applicable law), payable
on demand, from such Maturity to the date such amount of Accreted Value is paid
in full, at a rate equal to 9% per annum, compounded semi-annually and
calculated on the basis of a 30-day month, 360-day year convention.
24
<PAGE>
(c) All cash payments due hereunder shall be made by wire transfer of
immediately available funds prior to noon, New York City time, on the due date
for payment thereof to such bank account as shall be designated by Payee to
Maker in writing at least five Business Days prior to the due date for such
payment. For so long as Seller is Payee, such account shall be the account of
Westinghouse Electric Corporation, Mellon Bank, Pittsburgh, Pennsylvania,
Account no. 000-6082, ABA no. 043-000-261, unless a different account shall be
designated by Payee. Any cash payment due hereunder on a day that is not a
Business Day shall be made on the first Business Day following the due date for
such payment.
(d) As hereinafter provided, Maker shall have the right to prepay
this Note in full at any time or in part on any Semi-Annual Accrual Date
without, in either case, penalty.
5. EVENTS OF DEFAULT AND REMEDIES
Upon the occurrence of an Event of Default (as hereinafter defined),
the entire Accreted Value of this Note shall, automatically, in the case of any
Event of Default with respect to Buyer, Newco, Realco or the Canadian Buyer
described in subdivision (e) or (f) of this paragraph 5 (other than such an
Event of Default described in clause (i) of subdivision (e) or described in
clause (vi) of subdivision (e) by virtue of reference in such clause (vi) to
such clause (i)), or by written notice of the Required Mortgage Lenders
delivered to Maker, in the case of any other Event of Default, become
immediately due and payable.
The occurrence of any of the following events shall constitute an
Event of Default hereunder:
(a) Maker shall fail to pay any amount of Accreted Value of any Note
when the same becomes due and payable, or the Canadian Buyer shall fail to
pay
25
<PAGE>
any principal amount on any Canadian Note when the same becomes due and
payable; or
(b) any of Maker, Newco or the Canadian Buyer, respectively, shall
fail to perform or observe any term, covenant or agreement to be performed
or observed by it that is contained in any Note, any Canadian Note, any
Mortgage Document or any Canadian Mortgage Document (other than any failure
referred to in subdivision (a) above), and any such failure shall remain
unremedied for forty-five (45) days after written notice thereof shall have
been given to Maker by Mortgagee or to the Canadian Buyer by the
"Mortgagee" (as defined in the Canadian Notes), as applicable; or
(c) Maker or any of its Affiliates shall default (as principal or
guarantor or surety) in the payment of any principal payable at final
maturity under any Permitted Newco Debt or in the payment of principal
payable under any Permitted Newco Debt in a principal amount of greater
than $35,000,000, and in each case such default shall continue unremedied
for a period of more than 90 days and shall not have been waived pursuant
to the applicable Permitted Newco Debt; or
(d) any amounts outstanding in respect of any Debt described in
clause (i) of the definition of "Permitted Newco Debt" (whether or not such
Debt also constitutes Permitted Newco Subordinated Debt) shall be declared,
or shall have automatically become, immediately due and payable or all
commitments with respect to revolving debt under any such Debt shall be
terminated, in either case as a result of an "Event of Default" or an event
of default under such Debt; or
(e) any of Buyer, Newco, Realco, the Canadian Buyer or any
Significant Subsidiary shall (i) be generally not paying its debts as they
-
become due, (ii) file, or consent by answer or otherwise to the filing
--
against it of, a petition for relief or reorga-
26
<PAGE>
nization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make an assignment for the benefit of its creditors,
---
(iv) consent to the appointment of a custodian, receiver, trustee or other
--
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) be adjudicated insolvent or (vi) take
- --
corporate action for the purpose of any of the foregoing; or
(f) a court or governmental authority of competent jurisdiction
shall enter an order appointing a custodian, receiver, trustee or other
officer with similar powers with respect to any of Buyer, Newco, Realco,
the Canadian Buyer or any Significant Subsidiary or with respect to any
substantial part of its property (other than any such order consented to by
Buyer, Newco, Realco, the Canadian Buyer or such Significant Subsidiary, as
applicable), or an order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of any of Buyer, Newco, Realco, the
Canadian Buyer or any Significant Subsidiary or any petition for any such
relief shall be filed against any of Buyer, Newco, Realco, the Canadian
Buyer or any Significant Subsidiary and such petition shall not be
dismissed within sixty (60) days.
Presentment, demand, protest and notice of dishonor are hereby
waived by Maker.
6. COVENANTS
(a) Affirmative Covenants of Newco -- Newco covenants and agrees
------------------------------
that, so long as this Note shall remain
27
<PAGE>
unpaid, Newco will perform and observe each and all of the covenants set forth
below:
(1) Delivery of Information -- Newco covenants that it will deliver
-----------------------
to each Significant Holder and to Mortgagee:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the fourth
quarterly period) in each fiscal year of Newco, beginning with the
second fiscal quarter of 1994 and thereafter, a copy of the unaudited
consolidated and consolidating balance sheet of Newco and its
consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated and consolidating statements of
operations, changes in common stockholders' equity and cash flows of
Newco and its consolidated Subsidiaries for such quarter, in each case
setting forth in comparative form, for the second fiscal quarter of
1995 and thereafter, figures for the corresponding period in the
preceding fiscal year, certified by a Responsible Officer of Newco as
being fairly stated in all material respects in conformity with GAAP
and as being prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods
(except as approved by such officer and disclosed therein, and subject
to normal year-end audit and other adjustments and except for the
absence of notes);
(ii) as soon as practicable and in any event within 90 days
after the end of each fiscal year of Newco, a copy of the consolidated
and consolidating balance sheet of Newco and its consolidated
Subsidiaries as at the end of such year and the related consolidated
and consolidating statements of operations, changes in common
stockholders' equity and cash flows of
28
<PAGE>
Newco and its consolidated Subsidiaries for such year, in each case
setting forth in comparative form, for the 1996 fiscal year and
thereafter, corresponding figures from the preceding fiscal year, with
such consolidated financial statements reported on without a "going
concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by independent public accountants of
recognized national standing selected by Newco and with such
consolidating financial statements certified by a Responsible Officer
of Newco as being fairly stated in all material respects in conformity
with GAAP and as being prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein);
(iii) with reasonable promptness and in any event within five
Business Days of the date thereof, all notices of default and
periodic compliance certificates delivered pursuant to any Permitted
Newco Debt, provided, however, that Newco shall not be required
--------
pursuant to this clause (iii) to deliver to any Significant Holder the
certificate delivered to the Banks under the Barclays Senior Credit
Agreement or to the financial institutions party to the Canadian
Senior Credit Agreement (or any extension, refunding, renewal or
refinancing thereof) analyzing the Borrowing Base;
(iv) as soon as practicable and in any event within 45 days of
the execution thereof by all necessary parties, copies of any
amendment, supplement, waiver or modification to the Permitted Newco
Debt; and
29
<PAGE>
(v) with reasonable promptness, such other information and
financial data as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses
(i) and (ii) above, Newco will deliver to each Significant Holder and to
Mortgagee a report certified by a Responsible Officer of Newco (A)
-
demonstrating (with computations in reasonable detail, to the extent
relevant) compliance by Newco with the provisions of paragraph 6(b), (B)
-
containing a statement of the aggregate Shortfall Amount, if any, as of the
last day of such fiscal period and any adjustments to such aggregate
Shortfall Amount required by clause (a)(C) of paragraph 6(c)(6) and (C)
-
stating that there exists no continuing Default, or, if any continuing
Default exists, specifying the nature and period of existence thereof and,
if determined, stating what action Newco proposes to take or is taking with
respect thereto (except any proposed action which may be reasonably subject
to the attorney-client privilege between Newco and its attorneys to the
extent such proposed actions relate to litigation or threatened
litigation). In addition, with respect to any Restricted Asset Sale in
respect of which any Net Proceeds Allocable to Payee or Reserved Amounts
were held by Mortgagee pursuant to the Cash Collateral Agreement during the
period covered by the financial statements accompanying such report
certified by such Responsible Officer, such report shall set forth with
respect to each such Restricted Asset Sale (a) the date of such Restricted
-
Asset Sale, (b) if such Restricted Asset Sale occurred during such fiscal
-
period, the terms of such Restricted Asset Sale in sufficient detail to
demonstrate compliance by Maker with the provisions of paragraph 6(c)(6),
(c) the aggregate amount of Net Proceeds Allocable
-
30
<PAGE>
to Payee applied to purchase a Mortgaged Property or Mortgaged Properties
during such fiscal period, if any, (e) the aggregate amount of such Net
-
Proceeds Allocable to Payee applied to any partial prepayment of the Notes
during such fiscal period, if any, (f) the remaining balance of any
-
Reserved Amount in respect of such Restricted Asset Sale as of the end of
such fiscal period, if any, (g) the aggregate amount of the initial balance
-
of such Reserved Amount applied to the payment of the Permitted Liabilities
associated with such Reserved Amount during such fiscal period, if any, and
(h) the aggregate amount of such Reserved Amount constituting an Excess
-
Reserved Amount during such fiscal period, if any, and the application of
such Excess Reserved Amount.
(2) Corporate Existence, etc. -- Newco covenants that it will (i) at
------------------------- -
all times preserve and keep in full force and effect the corporate
existence of each of Newco, Realco and the Canadian Buyer, (ii) at all
--
times preserve and keep in full force and effect any rights and franchises
of it and its Subsidiaries with respect to which the failure to do so would
have a material adverse effect on the business, operations, results of
operations, condition (financial or otherwise), assets or liabilities of
Buyer and its Subsidiaries, taken as a whole, and (iii) qualify Newco,
---
Realco and the Canadian Buyer to do business in any jurisdiction where the
failure to do so would have a material adverse effect on the business,
operations, results of operations, condition (financial or otherwise),
assets or liabilities of Buyer and its Subsidiaries, taken as a whole.
(3) Statement of Accreted Value and Face Amount -- Together with each
-------------------------------------------
delivery of financial statements required by subparagraph (1) above, Newco
will provide to Payee a statement of the aggregate Accreted Value and the
aggregate Face Amount of all Notes then
31
<PAGE>
outstanding and the Accreted Value and the Face Amount of this Note.
(4) Conduct of Business -- Newco will continue to conduct directly
-------------------
(and not through any of its Subsidiaries) the lines of business conducted
by Newco immediately after the Closing Date (including the direct ownership
of the assets used to conduct such business), provided that Newco shall not
--------
be required to continue to conduct such business (or to own such assets)
itself if any Subsidiary that conducts any portion of such business (or
owns any such assets) executes a Guaranty of the Notes substantially in the
form of the Guaranty endorsed hereon, and provided further that nothing in
-------- -------
this paragraph 6(a)(4) shall prohibit Newco from engaging in new lines of
business (whether acquired from third parties or developed by Newco or any
of its Subsidiaries), whether directly or through a Subsidiary of Newco.
(5) Events of Default. Within five Business Days of a Responsible
-----------------
Officer of Newco becoming aware of any Event of Default, Newco will deliver
to Payee a notice describing such Event of Default, its status and what
action Newco is taking or proposes to take with respect thereto.
(b) Negative Covenants of Newco -- So long as this Note shall remain
---------------------------
unpaid, Newco covenants and agrees that it will not, except with the prior
written consent of the Required Mortgage Lenders:
(1) Limitation on Debt -- Create, incur, assume or suffer to exist
------------------
any Debt, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist any Debt, except that:
(a) Newco or any Subsidiary of Newco may become and remain
liable with respect to the Debt evidenced by the Notes, the Canadian
Notes or any
32
<PAGE>
accrued rentals, and/or securities issuable by Newco to Realco
evidencing such accrued rentals, pursuant to the Lease;
(b) Newco or any Subsidiary of Newco may become and remain
liable with respect to Permitted Newco Debt;
(c) Newco or any Subsidiary of Newco may become and remain
liable with respect to Debt in addition to that otherwise permitted by
this paragraph 6(b)(1) that consists of:
(A) Debt of Newco or any Subsidiary of Newco incurred to finance
the acquisition of fixed or capital assets in an aggregate
principal amount not exceeding in the aggregate as to Newco
and its Subsidiaries $15,000,000 at any one time
outstanding;
(B) Debt of Newco or any Subsidiary of Newco incurred to finance
the purchase price of any acquisition (other than an
acquisition of fixed or capital assets), provided that (i)
-------- -
all such Debt does not in the aggregate exceed $15,000,000
at any one time outstanding and (ii) immediately after
--
giving effect to such acquisition no Default or Event of
Default shall have occurred and be continuing;
(C) obligations of Newco or any Subsidiary of Newco under any
interest rate or currency hedging agreements relating to
Debt otherwise permitted by the Notes, provided that the
--------
purpose for which each such hedging agreement is entered
into (as determined by Newco or such
33
<PAGE>
Subsidiary in good faith) is reasonable in the relation to
the conduct of the business of Newco and its Subsidiaries;
and
(D) to the extent that any Guaranty by Newco or any Subsidiary
of Newco constitutes Debt, such Debt;
(d) Newco or any Subsidiary of Newco may become and remain
liable with respect to Debt in addition to that otherwise permitted by
this paragraph 6(b)(1) in an aggregate principal amount (taking into
account all outstanding Debt with respect to which Newco or any of its
Subsidiaries remains liable in reliance on this clause (d)) not to
exceed $25,000,000; and
(e) Newco or any Subsidiary of Newco may become and remain
liable with respect to Debt in addition to that otherwise permitted by
this paragraph 6(b)(1), provided that, on the date Newco or such
--------
Subsidiary becomes liable with respect to any such additional Debt and
immediately after giving effect thereto and the concurrent incurrence
or retirement of any other Debt, the Consolidated Fixed Charge
Coverage Ratio for the most recent period of four consecutive fiscal
quarters ended prior to such date for which consolidated financial
statements are available (determined giving pro forma effect to such
transactions as though (x) all such Debt so incurred, as well as any
-
other Debt incurred in reliance upon this clause (e) since the
beginning of such four quarter period, had been incurred at the
beginning of such four quarter period, (y) any such Debt so retired
-
had been retired at the beginning of such four-quarter period, and
(z) any acquisitions and divestitures consummated during such four-
-
quarter period had been consummated at
34
<PAGE>
the beginning of such period) shall not be less than (i) 1.25 to 1.0,
-
in the event such additional Debt is created, incurred or assumed on
or prior to the fourth anniversary of the Closing Date, and (ii) 1.75
--
to 1.0, in the event that such additional Debt is created, incurred
or assumed thereafter.
For purposes of clauses (c) and (d) of this paragraph 6(b)(1), the United
States Dollar equivalent of any outstanding Debt denominated in Canadian
Dollars shall be determined on the basis of the Current Exchange Rate in
effect on the date of incurrence thereof.
(2) Restricted Payments -- Make any Restricted Payment, or permit any
-------------------
of its Subsidiaries to make any Restricted Payment (other than any
Restricted Payments described in the following proviso), unless,
immediately before and after giving effect to any such proposed action:
(a) no condition or event shall exist which constitutes an Event
of Default; and
(b) Newco could incur at least $1 of additional Debt pursuant
to clause (e) of paragraph 6(b)(1); and
(c) the aggregate amount of all sums included in all Restricted
Payments declared, ordered, paid, made or set apart by Newco or any
Subsidiary of Newco (other than any Restricted Payments made to Newco
or any of its Subsidiaries) during the period after the Closing Date
to and including the date of such proposed action shall not exceed the
sum of:
(A) 60% (but, in the case of a deficit, 100%) of Consolidated
Net Income for
35
<PAGE>
such period (treated as a single accounting period); plus
(B) the aggregate amount of (i) net cash proceeds received by
-
Newco during such period from the sales of its equity
securities which are not required to be redeemed,
repurchased or otherwise retired, and are not redeemable or
subject to any repurchase or retirement requirement at the
option of the holder thereof prior to Stated Maturity and
(ii) all other capital contributions made to Newco; plus
--
(C) $15,000,000;
provided that, without regard to the foregoing restrictions, Newco
--------
shall be permitted to make Restricted Payments as follows:
(A) Newco may pay cash dividends to Buyer in an amount
sufficient to allow Buyer to pay expenses incurred in the
ordinary course of business;
(B) Newco may pay cash dividends to Buyer in an amount
sufficient to cover reasonable and necessary expenses
(including professional fees and expenses) incurred by Buyer
in connection with (i) registration, public offerings and
-
exchange listing of equity or debt securities of Buyer and
maintenance of the same, (ii) compliance with reporting
--
obligations under federal or state laws or under the Notes
or any Debt permitted by the Notes and (iii) indemnification
---
and reimbursement of directors, officers and employees of
Buyer in respect of
36
<PAGE>
liabilities relating to their serving in any such capacity;
(C) Newco may pay cash dividends to Buyer in amounts sufficient
to pay tax liabilities of Buyer which are paid in cash by
Buyer to any taxing authority;
(D) Newco may pay cash dividends to Buyer in an amount
sufficient to allow Buyer to repurchase, and any Subsidiary
of Newco (other than Realco, the Canadian Buyer or any of
the Canadian Buyer's Subsidiaries) may repurchase, shares of
its common stock or options in respect thereof transferred
pursuant to certain stock subscription or stock option
agreements which may be entered into between Buyer, Newco or
such Subsidiary and the purchasers of such stock or options;
provided that the aggregate amount of all such cash
--------
dividends paid to Buyer and all amounts paid in respect of
such repurchases by such Subsidiaries shall not exceed at
any time the sum of (i) (A) $5,000,000 in the aggregate
- -
prior to December 31, 1996, and (B) $7,000,000 in the
-
aggregate thereafter, plus (ii) in each case (but only after
---- --
receipt by Buyer of not less than $5,000,000 pursuant to a
capital contribution or from the proceeds of the sale or
issuance of its equity securities and contribution by Buyer
of such amount in cash to Newco) the amount of all cash
capital contributions (other than those referred to in the
immediately preceding parenthetical) made by Buyer to Newco
from the proceeds of, and all amounts received by any
37
<PAGE>
Subsidiary of Newco in respect of, sales of its common stock
(or options, warrants or other rights to purchase its common
stock) pursuant to certain stock subscription or stock
option agreements which may be entered into between Buyer,
Newco or such Subsidiary and the purchasers of such stock or
options;
(E) Newco may pay cash dividends to Buyer in an amount
sufficient to allow Buyer to pay all fees and expenses
incurred by it in connection with the Acquisition Agreement
or the transactions contemplated thereby or related thereto,
provided that the aggregate amount of all such cash
--------
dividends, when aggregated with all amounts paid by Newco or
any of its Subsidiaries pursuant to clause (b)(iii) of the
proviso to subparagraph 6(b)(3), shall not exceed
$30,000,000;
(F) any Subsidiary of Newco may make Restricted Payments to
Newco or any other Subsidiary of Newco; and
(G) Newco may pay a dividend or make a distribution to or on
behalf of Buyer in an amount not to exceed the Newco Cash
Amount (as such term is defined in the Acquisition
Agreement), provided that such dividend or distribution is
--------
paid or made no earlier than the date on which the Newco
Cash Amount is due and payable pursuant to the Acquisition
Agreement;
and provided further that Newco may redeem Subordinated Debt with the
-------- -------
proceeds from the issuance of new Subordinated Debt on subordination
terms reasonably satisfactory to the Majority
38
<PAGE>
Holders ("PERMITTED JUNIOR SECURITIES") so long as such Permitted
Junior Securities have a Weighted Average Life to Maturity greater
than the Weighted Average Life to Maturity of the Notes at the time of
the issuance of such Permitted Junior Securities.
(3) Transactions with Affiliates -- Directly or indirectly engage in
----------------------------
any transaction with any Affiliate, or permit any of its Subsidiaries to
do so, except on terms that are not less favorable to Newco or such
Subsidiary, as the case may be, than those which would be obtained in an
arm's length transaction at the time from Persons which are not Affiliates
and, in the case of any such transaction having a value or involving an
amount in excess of $1,000,000, unless such transaction has been approved
by a majority vote of disinterested directors on the Newco Board of
Directors, provided that the foregoing restrictions shall not apply to (a)
-------- -
any transaction between Newco and any of its Majority Owned Subsidiaries
or between one such Majority Owned Subsidiary and another such Majority
Owned Subsidiary or (b) any of the following:
-
(i) any consulting, management or employment agreement or other
compensation arrangement between Newco or any of its
Subsidiaries and a director, officer or employee of Newco,
Buyer or any of their respective Subsidiaries that provides for
annual aggregate base compensation not in excess of $1,000,000
per annum for any such director, officer or employee;
(ii) an agreement between Newco or any of its Subsidiaries and CD&R
for the rendering of management consulting or financial
advisory services to Newco or any of its Subsidiaries for
compensation not to exceed in the
39
<PAGE>
aggregate $500,000 per year plus reasonable out-of-pocket
expenses;
(iii) the payment of transaction expenses in connection with the
Acquisition Agreement and the transactions contemplated thereby
and related thereto, provided that such transaction expenses,
--------
including all Restricted Payments paid to Buyer to enable it to
pay such transaction expenses, do not exceed $30,000,000 in the
aggregate;
(iv) an indemnification and contribution agreement by Newco or any
of its Subsidiaries in favor of CD&R, C&D Fund IV, the
Affiliates thereof and each person who becomes a director,
officer, agent or employee of Buyer, Newco or any of their
respective Subsidiaries, in respect of liabilities (A) arising
-
under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and any other applicable
securities laws or otherwise, in connection with any offering
of securities by Buyer, Newco or any of their respective
Subsidiaries, (B) incurred to third parties for any action or
-
failure to act of Buyer, Newco or any of their respective
Subsidiaries, predecessors or successors, (C) arising out of
-
the performance by CD&R of management consulting or financial
advisory services provided to Buyer, Newco or any of their
respective Subsidiaries, (D) arising out of the fact that any
-
indemnitee was or is a director, officer, agent or employee of
Buyer, Newco or any of their respective Subsidiaries, or is or
was serving at the request of any such corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or enterprise or (E) to
-
40
<PAGE>
the fullest extent permitted by Delaware or other applicable
state law, arising out of any breach or alleged breach by such
indemnitee of his or her fiduciary duty as a director or
officer of Buyer, Newco or any of their respective
Subsidiaries;
(v) any agreements or commitments between Newco or any of its
Subsidiaries and any Affiliate thereof existing on the Closing
Date;
(vi) any Guaranty in connection with up to an aggregate principal
amount of $8,000,000 of Debt outstanding at any one time
incurred by directors, officers, employees, managers or
consultants of or to Buyer, Newco or any of their respective
Subsidiaries in connection with any stock subscription or stock
purchase agreement for the issuance thereto of common stock of
Buyer or any Subsidiary thereof (except for Newco, Realco, the
Canadian Buyer or any Subsidiary of Canadian Buyer) or options,
warrants or other rights in respect of such common stock, and
any refinancings, refundings, extensions or renewals thereof;
(vii) Guaranties in respect of indemnification and contribution
agreements in favor of CD&R, the C&D Fund, Affiliates thereof
and each Person who becomes a director of Buyer, Newco or any
of their Subsidiaries in respect of liabilities (i) arising
-
under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and any other applicable
securities laws or otherwise in connection with any offering of
securities by Buyer, Newco or any of their Subsidiaries, (ii)
--
incurred to third parties for any action or failure to act of
Buyer, Newco or any of their Subsidiaries or successors, (iii)
---
to
41
<PAGE>
Persons which are not Affiliates, arising out of the
performance by CD&R or management consulting or financial
advisory services to Buyer, Newco or any of their Subsidiaries,
(iv) arising out of the fact that any indemnitee was or is a
--
director of Buyer, Newco or any of their Subsidiaries, or is or
was serving at the request of any such corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (v) to
-
the fullest extent permitted by Delaware law, arising out of
any breach or alleged breach by such an indemnitee of his or
her fiduciary duty as a director of Buyer, Newco or any of
their Subsidiaries;
(viii) any loan or advance to officers, directors or employees of
Newco or any of its Subsidiaries (A) in the ordinary course of
-
business for travel and entertainment expenses, (B) existing on
-
the Closing Date, (C) made after the Closing Date for
-
relocation expenses, not to exceed (as to Newco and all of its
Subsidiaries) $5,000,000 in the aggregate outstanding at any
one time, and (D) relating to indemnification or reimbursement
-
of any officers, directors or employees of Buyer or any of its
Subsidiaries in respect of liabilities relating to their
serving in any such capacity.
(4) Consolidation, Merger, Sale of Assets, etc. -- Consolidate with
-------------------------------------------
or merge with or into any Person, or convey, transfer or lease
substantially all of its assets to any Person, or permit any of its
Subsidiaries
42
<PAGE>
to do any of the foregoing, unless the following conditions are satisfied:
(a) except in the case of a merger in which Newco or such
Subsidiary is the surviving corporation, the entity formed by such
consolidation or into which Newco or such Subsidiary is merged, or the
Person that acquires by conveyance, transfer or lease substantially
all of the assets of Newco or such Subsidiary, shall be a corporation
organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia (or, if such
Subsidiary was organized and existing under the laws of another
country or any political subdivision thereof, shall be a corporation
organized and existing under the laws of such other country or any
political subdivision thereof), and shall execute and deliver to Payee
an agreement, in form and substance satisfactory to the Required
Mortgage Lenders, containing an assumption by such successor Person of
the due and punctual performance and observance of each obligation,
covenant and condition of Newco or such Subsidiary, as the case may
be, under this Note (including the Guaranty endorsed hereon or other
Guaranty hereof) and the Mortgage Documents and, in the case of Newco
or Realco, under their respective Guaranties of the Canadian Notes;
(b) immediately before and after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and
(c) immediately after giving effect to such transaction (i) the
-
Net Worth of Newco (or, in the case of a consolidation or merger
involving Newco or the conveyance, transfer or lease of substantially
all of Newco's assets to any Person, the Net Worth of the
Person formed by such consolida-
43
<PAGE>
tion or with or into which Newco is merged, or of the Person that
acquired by conveyance, transfer or lease substantially all of the
assets of Newco) shall not be less than 100% of the Net Worth of Newco
prior to such consolidation, merger, conveyance, transfer or lease
and (ii) Newco (or, in the case of a consolidation or merger involving
--
Newco or the conveyance, transfer or lease of substantially all of
Newco's assets to any Person, the Person referred to in the
parenthetical in clause (i) above) could incur at least $1 of
additional Debt in compliance with clause (e) of paragraph 6(b)(1).
(5) Lease -- Amend, modify or waive any provision of section 22 of
-----
the Lease.
(c) Covenants of Maker. Maker covenants and agrees that, so long as
------------------
this Note shall remain unpaid, Maker will perform and observe each and all of
the covenants set forth in clause (1) below and Maker will not, except with the
prior written consent of the Required Mortgage Lenders, take any action
prohibited by the covenants set forth in clauses (2), (3), (4), (5) and (6)
below:
(1) Payment of Accreted Value. Maker will duly and punctually pay or
-------------------------
cause to be paid the Accreted Value of the Notes in accordance with the
terms of the Notes.
(2) Covenants of Newco. Maker will not take, suffer to be taken or
------------------
omit to take any action the effect of which is or would be to cause Newco
or any of its Subsidiaries to violate any of the covenants with respect
thereto set forth herein.
(3) Incurrence of Debt. Maker will not incur any Debt, other than
------------------
the Debt evidenced by the Notes and Maker's Guaranty of the Canadian Notes
(regardless of
44
<PAGE>
whether Maker would be permitted to incur Debt pursuant to paragraph
6(b)(1)).
(4) Business of Maker. Maker will not engage in any trade or
-----------------
business other than the owning of real property located in the United
States and the leasing of such real property to Newco, Maker's Guaranty of
the Canadian Notes and the transactions contemplated hereby and by the
Mortgage Documents.
(5) Incurrence of Liabilities. Maker will not incur any material
-------------------------
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise, other than (i) under the Notes
-
and Maker's Guaranty of the Canadian Notes, the Mortgage Documents and the
Lease, (ii) liabilities, if any, arising out of Maker's acknowledgment and
--
consent as issuer of the stock pledged by Newco under the Stock Pledge
Agreement, dated as of the Closing Date, (iii) liabilities arising under
---
contracts for the purchase or sale of Mortgaged Property and (iv)
--
liabilities arising out of Maker's ownership or leasing to Newco of
Mortgaged Property.
(6) Sale of Mortgaged Properties. Maker will not make or permit any
----------------------------
Restricted Asset Sale unless the following conditions have been satisfied:
(a) such Restricted Asset Sale is to a Person who is not an
Affiliate of Maker and (i) if such Restricted Asset Sale does not
-
constitute a Mixed Asset Sale, an amount equal to at least 75% of the
Net Proceeds Allocable to Payee (determined as of the closing date of
such Restricted Asset Sale) is in the form of Cash Consideration and
the balance of such Net Proceeds Allocable to Payee is in the form of
Permitted Non-Cash Consideration; or (ii) if such Restricted Asset
--
Sale constitutes a Mixed Asset Sale:
45
<PAGE>
(A) if any amount of Net Proceeds Allocable to Payee (determined as
of the closing date of such Restricted Asset Sale) is in a form
other than Cash Consideration, such amount of Net Proceeds
Allocable to Payee is in the form of Permitted Non-Cash
Consideration in an amount not exceeding 25% of the Fair Market
Value of the Mortgaged Property or Mortgaged Properties disposed
of in such Restricted Asset Sale and the balance of such Net
Proceeds Allocable to Payee is in the form of Cash Consideration;
(B) if such Restricted Asset Sale constitutes a Major Asset Sale, the
amount of the Net Proceeds Allocable to Payee (determined as of
the closing date of such Restricted Asset sale) is at least 75%
of the Fair Market Value of the Mortgaged Property or Mortgaged
Properties disposed of in such Restricted Asset Sale;
(C) after giving effect to such Restricted Asset Sale, the aggregate
Shortfall Amount for all Mixed Asset Sales to the date of
determination does not exceed $8,000,000 (reduced by the
aggregate "Shortfall Amount" under paragraph 6(3) of the Canadian
Notes to the date of determination, such "Shortfall Amount" to be
converted into United States Dollars at the Closing Date Exchange
Rate, and increased by the aggregate amount of any Specified
Prepayments made on or prior to the date of determination);
(D) not less than 30 days prior to the closing date of such
Restricted Asset Sale (45 days if such Restricted Asset Sale
would constitute a Major Asset Sale), Maker delivers
46
<PAGE>
to Payee written notice of such Restricted Asset Sale; and
(E) not less than five Business Days prior to the closing date of
such Restricted Asset Sale (30 days if such Restricted Asset Sale
would constitute a Major Asset Sale), Maker delivers to Payee any
written appraisal required by clause (b) of the first sentence of
the definition of "Fair Market Value" in paragraph 2; and
(b) (i) all Cash Consideration constituting Net Proceeds
-
Allocable to Payee (determined as of the closing date of such
Restricted Asset Sale) in respect of such Restricted Asset Sale is
immediately paid over by Maker to Mortgagee and held and applied
pursuant to the Cash Collateral Agreement, (ii) any Permitted Non-Cash
--
Consideration (and related security documentation) constituting Net
Proceeds Allocable to Payee in respect of such Restricted Asset Sale
is immediately delivered by Maker to Mortgagee and held and applied
pursuant to the Cash Collateral Agreement and (iii) the initial
---
balance of the Reserved Amount, if any, in respect of such Restricted
Asset Sale (A) in the case of any Mixed Asset Sale in respect of which
-
the Shortfall Amount is equal to zero, is immediately paid over by
Maker to Newco and (B) in the case of any other Restricted Asset Sale,
-
is immediately paid over by Maker to Mortgagee and held and applied
pursuant to the Cash Collateral Agreement.
For purposes of the foregoing, (x) "NET PROCEEDS ALLOCABLE TO PAYEE"
-
shall mean (1) in respect of a Restricted Asset Sale which does not constitute a
-
Mixed Asset Sale, all the Net Proceeds of such Restricted Asset Sale or (2) in
-
respect of a Restricted Asset Sale that constitutes a Mixed Asset Sale, the Net
Proceeds of such
47
<PAGE>
Restricted Asset Sale (including any Excess Reserved Amount in respect of such
Restricted Asset Sale) remaining (not to exceed 100% of the Fair Market Value of
the Mortgaged Property or Mortgaged Properties disposed of in such Restricted
Asset Sale, it being understood that any amounts of Net Proceeds of such
Restricted Asset Sale (including any Excess Reserved Amount in respect of such
Restricted Asset Sale) in excess of such Fair Market Value shall be available
for the account of Maker or, if held or received by Mortgagee in the form of
cash or cash equivalents under the Cash Collateral Agreement, released to Maker
within two Business Days of receipt) after a portion of the Cash Consideration
is retained by or on behalf of Newco or is applied to reduce the outstanding
Advances (such portion to be limited to the excess, if any, of the maximum
Advances permitted by the Borrowing Base immediately prior to such Mixed Asset
Sale over the maximum Advances permitted by the Borrowing Base immediately after
giving effect to such Mixed Asset Sale), (y) "SHORTFALL AMOUNT" shall mean, in
-
respect of each Restricted Asset Sale which constitutes a Mixed Asset Sale, the
amount (if any) by which the Net Proceeds Allocable to Payee in respect of such
Restricted Asset Sale (including any Excess Reserved Amount in respect of such
Restricted Asset Sale to the extent such Excess Reserved Amount increases the
amount of such Net Proceeds Allocable to Payee) is less than the Fair Market
Value of the Mortgaged Property or Mortgaged Properties included in such Mixed
Asset Sale, and (z) the amount of any Net Proceeds Allocable to Payee
-
consisting of Permitted Non-Cash Consideration shall be deemed to be equal to
the aggregate principal amount of such Permitted Non-Cash Consideration.
7. PREPAYMENTS
(a) Optional Prepayment. Maker may, at its option, upon notice,
-------------------
prepay at any time or from time to time all or any part of the Accreted Value of
the Notes without premium or penalty, provided that any partial prepayment of
--------
the Accreted Value of the Notes may not be made on any date other than a Semi-
Annual Accrual Date.
48
<PAGE>
(b) Contingent Prepayment Upon Change of Control. In the event of a
--------------------------------------------
Change of Control, Maker will, not less than 30 days prior to such Change of
Control (or, if none of Buyer, Newco or Maker is aware of such Change of Control
until later than 30 days prior thereto, not less than five Business Days after
Buyer, Newco or Maker becomes aware of such Change of Control), give written
notice of such condition to Payee and Mortgagee by registered mail. Such
notice shall contain a written irrevocable offer by Maker to prepay, in whole or
in part, by a date (the "CHANGE PREPAYMENT DATE") specified in such notice
(which date shall not be less than 30 days and not more than 60 days after the
date of such notice), this Note, provided, that if Payee elects to require a
--------
partial prepayment only, the Change Prepayment Date (if not a Semi-Annual
Accrual Date) shall be the first Semi-Annual Accrual Date after Maker's notice
is given (or, if Maker's notice is given less than 30 days before the first
Semi-Annual Accrual Date thereafter, the Change Prepayment Date shall be the
second Semi-Annual Accrual Date after Maker's notice is given). Such offered
prepayment shall be made on the Change Prepayment Date at the Accreted Value of
this Note (or the portion of such Accreted Value elected by Payee to be prepaid,
if Payee elects to require prepayment of less than all of such Accreted Value)
without premium or penalty, calculated as of the date fixed for such prepayment,
upon acceptance of such offer by Payee mailed to Maker within 10 Business Days
after receipt of such notice by Payee, such acceptance to specify the portion of
the Accreted Value of this Note to be prepaid and, if this Note is to be prepaid
in full, to be accompanied by this Note endorsed in favor of Maker or
accompanied by duly executed instruments of transfer. In the event of a
prepayment of this Note in part pursuant to this paragraph 7(b), (x) Maker shall
-
not be obliged to prepay this Note unless Payee shall have delivered to Maker
this Note endorsed in favor of Maker or accompanied by duly executed instruments
of transfer, and (y) following the Change Prepayment Date, Maker at its expense
-
(except for transfer taxes, if any) (i) will execute and deliver in exchange
-
herefor a new Note or Notes and (ii) will cause
--
49
<PAGE>
Buyer and Newco to endorse thereon the related Guaranty. Such new Note or Notes
shall (A) have in the aggregate an Initial Amount equal to the Accreted Value of
-
the surrendered Note (determined as of the Change Prepayment Date) after giving
effect to such partial prepayment, (B) have in each case an Initial Amount of at
-
least $100,000, as requested by the holder or transferee, (C) have in the
-
aggregate an Original Face Amount equal to the Face Amount of the surrendered
Note (determined as of the Change Prepayment Date) after giving effect to such
partial prepayment, (D) have in each case an Original Face Amount equal to the
-
Face Amount of the surrendered Note after giving effect to such partial
prepayment multiplied by a fraction, the numerator of which is the portion of
the Accreted Value of the surrendered Note specified by such holder to be
allocated to the Initial Amount of such Note and the denominator of which is the
Accreted Value of the surrendered Note (determined as of the Change Prepayment
Date) after giving effect to such partial prepayment, (E) be registered in each
-
case in such names as such holder or transferee may request, and (F) be dated as
-
of the Change Prepayment Date.
(c) Required Notice; Partial Prepayments to be Pro Rata Where More
--------------------------------------------------------------
Than One Note Outstanding.
- -------------------------
(1) Written notice of each prepayment pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement shall be given by Maker to Payee
and Mortgagee not less than 10 nor more than 30 days prior to the date
fixed for such prepayment (each, a "Prepayment Date"), specifying (A) such
-
date (which shall be a Semi-Annual Accrual Date in the case of any partial
prepayment), (B) the aggregate portion of Accreted Value of all Notes to be
-
prepaid on such date and the balance of such Accreted Value and the
Adjusted Face Amount of all Notes after giving effect to such prepayment
and (C) the corresponding portion of Accreted Value of this Note to be
-
prepaid on such date and the balance of such Accreted Value and the
Adjusted
50
<PAGE>
Face Amount of this Note after giving effect to such prepayment. Any such
notice shall be irrevocable once given.
(2) In the event of any prepayment pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement of less than the entire Accreted
Value of all of the outstanding Notes, at a time when more than one Note is
outstanding, the Accreted Value of the Notes so to be prepaid shall be
allocated among the respective Notes and holders thereof so that the
Accreted Value of each Note to be prepaid pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement shall bear the same ratio to the
Accreted Value of such Note as the aggregate amount of such prepayment
bears to the aggregate Accreted Value of all Notes then outstanding, except
that if upon any allocation on such basis the amount so to be prepaid to
any such holder would be greater than, but not be an exact multiple of,
$100,000, then additional or lesser amounts not exceeding $100,000 may be
allocated to such holder so that such holder shall be entitled to receive
an exact multiple of $100,000, or if the amount so to be prepaid to any
such holder pursuant to such paragraph would be less than $100,000, then no
amount need be allocated to such holder, in each such case so long as (i)
-
allocations of prepayments among the respective Notes and holders thereof
shall be appropriate to maintain, through successive partial prepayments,
as nearly as practicable the ratio above provided and (ii) in the case of a
--
prepayment that is required to be of a certain size, the aggregate amount
of the prepayment applied to all the Notes is not less than the required
size.
8. SECURITY
(a) Payee is entitled to the benefits of certain security held or to
be held by Mortgagee pursuant to the Mortgage Documents. The Notes are entitled
to the benefits
51
<PAGE>
of the security provided for in such agreements and instruments, to which
reference is made for a description of the properties and rights included in
such security, the nature and extent of such security and the rights of the
holders of the Notes, Mortgagee, Maker, and various parties to such agreements
and instruments in respect of such security.
(b) By acceptance of this Note, Payee hereby irrevocably appoints
Mortgagee as Payee's agent, and Payee hereby irrevocably authorizes Mortgagee,
as Payee's agent, (i) to take such action on Payee's behalf and to exercise such
-
powers and perform such duties under each of the Mortgage Documents as may be
delegated to Mortgagee by the terms thereof, together with all such powers as
are reasonably incidental thereto, (ii) to hold any liens or security interests
--
granted to Mortgagee pursuant to each of the Mortgage Documents for the benefit
of Payee and the other holders of the Notes, if any, and (iii) to enforce the
---
Mortgage Documents for the benefit of Payee and the other holders of the Notes,
if any, all in accordance with the Mortgage Documents. Payee hereby acknowledges
receipt of a copy of the Cash Collateral Agreement (and such of the other
Mortgage Documents as Payee shall have requested) (or the form thereof) and
Payee has, and each subsequent holder of Notes will be deemed by its acquisition
of Notes to have, approved the terms and provisions of each of the Mortgage
Documents and agreed to be bound thereby, consented to the appointment of
Mortgagee under the Mortgage Documents and acknowledged the rights, immunities
and privileges of Mortgagee thereunder (including, without limitation, Article
VII of the Cash Collateral Agreement). Neither Mortgagee nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
liable for any action lawfully taken or omitted to be taken by it or such Person
in its capacity as agent under or in connection with this Note or any Mortgage
Document (except for its or such Person's own gross negligence or willful
misconduct).
(c) Notwithstanding anything contained in paragraphs 8(a) and 8(b),
Payee hereby acknowledges that it is
52
<PAGE>
not entitled to the benefits of any Canadian Mortgage Document.
9. REGISTRATION, TRANSFERS AND EXCHANGES
(a) Generally. Maker will keep at its principal office at One
---------
Riverfront Center, Pittsburgh, PA 15222 a register (the "REGISTER") in which
Maker will provide for the registration and transfer of the Notes and will
record the name of, and address for notices to, each holder of the Notes.
Maker, Mortgagee and any agent of Maker or Mortgagee may treat the Person in
whose name this Note is registered as the owner of such Note for the purpose of
receiving payment of the Accreted Value of this Note and for all other purposes,
whether or not this Note be overdue, and neither Maker, Mortgagee nor any such
agent shall be affected by notice to the contrary.
(b) Transfer and Exchange of Notes. Upon surrender of this Note for
------------------------------
registration of transfer or for exchange to Maker at its principal office set
forth above, Maker at its expense (except for transfer taxes, if any) (i) will
-
execute and deliver in exchange herefor a new Note or Notes and (ii) will cause
--
Buyer and Newco to endorse thereon the related Guaranty. Such new Note or Notes
shall (A) have in the aggregate an Initial Amount equal to the Accreted Value of
-
the surrendered Note (determined as of the Semi-Annual Accrual Date coinciding
with or immediately preceding the date of such surrender), (B) have in each case
-
an Initial Amount of at least $100,000, as requested by the holder or
transferee, (C) have in the aggregate an Original Face Amount equal to the Face
-
Amount of the surrendered Note, (D) have in each case an Original Face Amount
-
equal to the Face Amount of the surrendered Note multiplied by a fraction, the
numerator of which is the portion of the Accreted Value of the surrendered Note
specified by such holder to be allocated to the Initial Amount of such Note and
the denominator of which is the Accreted Value of the surrendered Note
(determined as of the Semi-Annual Accrual Date coinciding with or immediately
preceding the date of
53
<PAGE>
surrender), (E) be registered in each case in such names as such holder or
-
transferee may request, and (F) be dated as of the Semi-Annual Accrual Date
-
coinciding with or immediately preceding the date of such surrender.
(c) Restrictions on Transfer. Payee may not transfer this Note to
------------------------
any other Person (x) if there has been any partial prepayment of this Note since
-
the date hereof, unless Payee shall first surrender this Note for exchange
pursuant to paragraph 9(b) or (y) prior to the fourth anniversary of the Closing
-
Date, except to one or more Affiliates controlled by Seller, which Affiliates
shall at all times that they continue to hold Notes continue to be controlled by
Seller. Payee may, on or after the fourth anniversary of the Closing Date,
transfer, sell or convey this Note or any portion of this Note (A) to Seller or
-
to one or more Affiliates controlled by Seller, which Affiliates shall at all
times that they continue to hold Notes continue to be controlled by Seller or
(B) in a minimum aggregate Initial Amount of $2,500,000 (or, if the aggregate
-
Initial Amount of all Notes held by Payee is less than $2,500,000, in such
aggregate Initial Amount) (i) to any Person with the prior written consent of
-
Maker and the Administrative Agents, which consent (in each case) shall not be
unreasonably withheld, or (ii) to one or more Affiliates controlled by Payee,
--
which Affiliates shall at all times that they continue to hold Notes continue to
be controlled by the Person that relied on this clause (ii) in transferring
Notes to such Affiliates.
10. NON-WAIVER
No course of dealing between Maker and Payee, or between Maker and
Mortgagee, or any delay or failure on the part of Payee or Mortgagee in
exercising any rights hereunder or under any Mortgage Document shall operate as
a waiver of any rights of Payee, except to the extent expressly waived in
writing by Payee.
54
<PAGE>
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE
Upon receipt by Maker of evidence reasonably satisfactory to Maker of
the loss, theft, destruction or mutilation of this Note, and of indemnity or
security reasonably satisfactory to Maker (it being agreed that any indemnity
from Seller will be reasonably satisfactory to Maker), and upon reimbursement to
Maker of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note, if mutilated, Maker will make and deliver a new Note
of like tenor, in lieu of this Note. Any Note made and delivered in accordance
with the provisions of this paragraph 11 shall be dated the date hereof.
12. GOVERNING LAW
This Note shall be construed in accordance with and governed by the
law of the State of New York.
13. SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements contained in
this Note shall bind the successors and assigns of Maker and Payee and shall
inure to the benefit of the successors and permitted assigns of Payee, whether
so expressed or not. Any assumption of the obligations of Buyer, Newco or Maker
hereunder shall not release Buyer, Newco or Maker, as applicable, from its
obligations hereunder (including the Guaranties endorsed hereon) without the
prior written consent of Payee.
14. AMENDMENT
Any term of the Notes or any Mortgage Document may be amended and the
observance of any term of the Notes or any Mortgage Document may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of (i) Maker, (ii) the Required
- --
Mortgage Lenders, (iii) in the case of any amendment or waiver of any Mortgage
---
Document, Mortgagee and
55
<PAGE>
(iv) in the case of any amendment or waiver of (w) the definition of the term
-- -
"Administrative Agents" in paragraph 2 of this Note, (x) clause (i) of paragraph
-
9(c) of this Note, (y) paragraph 18 of this Note, or (z) this clause (iv), the
- -
Administrative Agents, provided that (1) without the prior written consent of
-------- -
the holders of all the Notes at the time outstanding, no such amendment or
waiver shall (a) change the Stated Maturity, the Initial Amount or the Face
-
Amount of, or reduce the rate or change the date of accrual of Discount on, or
change the amount or the time of payment of any Accreted Value of, any Note, (b)
-
amend, modify or waive this proviso to this paragraph 14 or the definition of
the term "Required Mortgage Lenders" in paragraph 2 of this Note, (c) release or
-
subordinate the Lien of the Mortgage Documents or (d) release Newco or Buyer
-
from their respective Guaranties endorsed on any Note, and (2) no such amendment
-
or waiver shall amend, modify or waive any provision of the Notes without
simultaneously amending, modifying or waiving the comparable provision of the
Canadian Notes unless such amendment, modification or waiver shall have also
received the written consent of the holders of a majority of the aggregate
principal amount (after giving effect to all interest accrued prior to the date
of determination) of the Canadian Notes at the time outstanding. Any amendment
or waiver effected in accordance with this paragraph 14 shall be binding upon
each holder of any Note at the time outstanding, each future holder of any Note
and Maker, whether or not (in the case of an amendment or waiver affecting the
Notes) the substance of such amendment or waiver is thereafter incorporated in
the form of the Notes or noted on the face thereof.
15. HEADINGS
The headings of the sections and paragraphs of this Note are inserted
for convenience only and shall not be deemed to constitute a part hereof.
56
<PAGE>
16. CERTAIN TAX MATTERS
The stated principal amount (within the meaning of Section 1274 of the
Internal Revenue Code of 1986, as amended) of the Notes is $45,000,000. An
amount equal to $32,925,440.14 is stated interest (within the meaning of such
Section 1274) payable under the Notes.
17. NOTICES
Any notice or other communication under this Note shall be in writing
and shall be deemed to have been duly given or made (i) when delivered by hand,
-
(ii) four Business Days after it is sent by express, registered or certified
--
mail, return receipt requested, postage prepaid, or (iii) one Business Day after
---
it is sent by nationally recognized overnight courier, in each case addressed as
follows:
(a) if to Payee, at the address set forth for Payee in the Register,
-
which shall be such address as Payee shall from time to time furnish to Maker in
writing, the initial address for Payee being:
Westinghouse Electric Corporation
Westinghouse Building
Gateway Center
11 Stanwix Street
Pittsburgh, PA 15222
Attention: Treasurer
with a copy to the General Counsel, at such address;
(b) if to Maker, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Maker named below or to
the attention of such
57
<PAGE>
other Responsible Officer, as Maker shall have furnished to Payee in writing:
CDW Realco, Inc.
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to each of Newco and Buyer at their respective addresses set forth
in this paragraph 17 and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
(c) if to Newco, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Newco named below or to
the attention of such other Responsible Officer, as Newco shall have furnished
to Payee in writing:
CDW Acquisition Corporation
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to each of Buyer, Maker and Debevoise & Plimpton at their respective
addresses set forth in this paragraph 17;
(d) if to Buyer, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Buyer named below or to
the attention of such
58
<PAGE>
other Responsible Officer, as Buyer shall have furnished to Payee in writing:
CDW Holding Corporation
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to each of Newco, Maker and Debevoise & Plimpton at their respective
addresses set forth in this paragraph 17.
18. PROVISIONS FOR THE BENEFIT OF THIRD PARTIES
The provisions of clause (i) of paragraph 9(c) of this Note and clause
(iv) of paragraph 14 of this Note are for the benefit of the Banks and the
financial institutions party to any extension, refunding, renewal or refinancing
of the Barclays Senior Credit Agreement, and the Administrative Agents shall be
entitled to enforce such provisions on their behalf. The provisions of clause
(2) of the proviso in paragraph 14 of this Note are for the benefit of the
holders of the Canadian Notes. Except as set forth in the preceding sentence,
nothing in this Note shall confer any rights upon any Person other than Maker,
Buyer, Newco, the Canadian Buyer, Mortgagee and Payee and their respective
successors and permitted assigns. Payee and Mortgagee may conclusively rely on a
certificate of an Administrative Agent as to whether or not the Administrative
Agents have given any consent under clause (i) of paragraph 9(c) of this Note or
clause (iv) of paragraph 14 of this Note.
59
<PAGE>
IN WITNESS WHEREOF, CDW REALCO, INC. has caused this Note to be signed
in its corporate name by a duly authorized officer and to be dated as of the
day and year first above written.
CDW REALCO, INC.
By /s/
--------------------------
Name:
Title:
60
<PAGE>
Note (cont'd)
PREPAYMENTS
Date Amount of Accreted Value Prepaid Notation Made By
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
61
<PAGE>
GUARANTY
--------
The undersigned, CDW HOLDING CORPORATION and CDW ACQUISITION
CORPORATION (to be renamed WESCO Distribution, Inc.) (the "Guarantors"), for
valuable consideration, hereby each, jointly and severally, unconditionally and
irrevocably guarantees, as primary obligor and not merely surety, (i) the due
-
and punctual payment of the Accreted Value of this Note, as the same shall
become due and payable, whether at the date of maturity or by prepayment or
acceleration or otherwise, (ii) the due and punctual payment of each other
--
payment required to be made by Realco (as Maker or otherwise) under this Note or
any of the Mortgage Documents and (iii) the due and punctual performance by
---
Newco or Realco of all other obligations of Newco or Realco (as Maker or
otherwise), respectively, under this Note and the Mortgage Documents (all the
foregoing obligations being collectively called the "Guaranteed Obligations");
and CDW Acquisition Corporation hereby agrees with Payee to perform the
covenants of Newco set forth in paragraphs 6(a) and 6(b) of this Note. This
Guaranty is an absolute, unconditional present and continuing Guaranty of
payment and not of collectibility, and in any case in which the Maker shall fail
or be unable punctually to make any payment required to be made by or in respect
of this Note, the Guarantors jointly and severally agree to pay the same to the
holder of this Note forthwith upon demand. The obligations of each Guarantor
under this Guaranty are general unsecured and full recourse obligations of such
Guarantor and may be fully enforced against such Guarantor.
(a) Each Guarantor waives presentment to, demand of payment from and
protest to Realco of any of the Guaranteed Obligations, and also waives notice
of acceptance of this Guaranty and notice of protest for nonpayment. The
obligation of each Guarantor hereunder shall not be affected by (i) the failure
-
of any Person to assert any claim or demand or to enforce any right or remedy
against Realco under the provisions of this Note or any Mortgage Document
1
<PAGE>
or otherwise; (ii) any rescission, waiver, amendment or modification of, or any
--
release from any of the terms or provisions of, any Guaranty or any other
agreement; (iii) the release of any security held by any Person for the
---
Guaranteed Obligations or any of them; or (iv) the failure of any Person to
--
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations. Each Guarantor further waives any right to require that any resort
be had to any security held for payment of the Guaranteed Obligations or to any
balance of any deposit account or credit on the books of any Person in favor of
Realco or any other Person.
(b) The obligations of each Guarantor shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor hereunder shall not be discharged
or impaired or otherwise affected by the failure of any Person to assert any
claim or demand or to enforce any remedy under this Note, any Mortgage Document,
any Guaranty or any other agreement, by any waiver or modification of any
thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Guaranteed Obligations, or by any other act or omission which
may or might in any manner or to any extent vary the risk of the Guarantors or
otherwise operate as a discharge of the Guarantors as a matter of law or equity
(other than the indefeasible payment in full of all the Guaranteed Obligations).
Each Guarantor agrees that it will never have, and hereby waives and disclaims,
any claim or right against Realco by way of subrogation or otherwise in respect
of any payment that such Guarantor may be required to make hereunder. This
Guaranty shall survive and be in full force and effect so long as any Guaranteed
Obligation is outstanding and has not been indefeasibly paid.
2
<PAGE>
(c) Paragraphs 10, 12, 14 and 15 and the first sentence of paragraph
13 of this Note shall apply to this Guaranty as if references therein to "this
Note" were references to this Guaranty and references therein to "Maker" were
references to the Guarantors. The definitions in paragraph 2 of this Note and
the last sentence of paragraph 13 of this Note shall apply to this Guaranty.
CDW HOLDING CORPORATION
By /s/
--------------------------------
Name:
Title:
CDW ACQUISITION CORPORATION
By /s/
--------------------------------
Name:
Title:
3
<PAGE>
EXHIBIT 4.4
-----------
CASH COLLATERAL AND SECURITY AGREEMENT dated as of February 28, 1994,
between CDW REALCO, INC., a Delaware corporation (the "Grantor"), and
-------
WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania
corporation, as collateral agent (in such capacity, the "Collateral Agent") for
---------- -----
the Secured Parties, as defined herein.
Reference is made to the Asset Acquisition Agreement (the "Acquisition
-----------
Agreement") dated as of February 15, 1994, between CDW Holding Corporation
- ---------
("Buyer") and Westinghouse Electric Corporation ("Seller") pursuant to which
----- ------
(a) Seller has agreed to transfer certain assets to Buyer and Buyer has agreed
-
to acquire such assets from Seller, (b)in partial consideration for such
-
acquisition, Buyer has agreed to execute and deliver to Seller $77,925,440.14
Original Face Amount (as defined therein) of its first mortgage notes due 2001
(the "Buyer Notes"), (c) Seller has agreed to transfer such assets (other than
----------- -
certain real property) to CDW Acquisition Corporation ("Newco") at the direction
-----
of Buyer and release Buyer from its obligations under the Buyer Notes in
consideration for, among other things, the assumption by Newco of the Buyer
Notes, (d) Seller has agreed to transfer certain real property to the Grantor at
-
the direction of Buyer and Newco and release Newco from its obligations under
the Buyer Notes in consideration for, among other things, (i) the assumption
-
by the Grantor of the Buyer Notes, (ii) the execution and delivery by Buyer and
--
Newco of the guaranties endorsed on the Buyer Notes, (iii) the execution and
---
delivery by the Grantor of mortgages on such real property securing the Buyer
Notes and (iv) the execution and delivery by the Grantor of a security agreement
--
in the form hereof and (e) Seller has agreed to surrender the Buyer Notes to the
-
Grantor in exchange for $77,925,440.14 Original Face Amount (as defined therein)
of the Grantor's first mortgage notes due 2001 (the "Realco Notes").
------------
Accordingly, the Grantor and the Collateral Agent hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
Section 1.1 Terms Defined in the Notes. Terms used herein and not
--------------------------
otherwise defined herein shall have the meanings set forth in the Notes (as
defined below).
Section 1.2 Definition of Certain Terms Used Herein. As used herein,
---------------------------------------
the following terms shall have the following meanings:
"Applicable Law" shall mean all applicable provisions of all (i)
-------------- -
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Authority and (ii)
--
orders, decisions, injunctions, judgments, awards and decrees of or agreements
with any Governmental Authority.
"Cash Collateral Accounts" shall mean the Cash Consideration Account,
------------------------
the Reserve Account and the Specified Loss Account.
"Cash Consideration Account" shall mean the Cash Consideration Account
--------------------------
established pursuant to Section 5.1.
A "Change Prepayment Event" shall have occurred and be continuing if
-----------------------
(a) a Change of Control has occurred and (b) the Grantor has not yet discharged
- -- -
in full its obligations with respect to giving notice of such Change of Control
to the holders of the Notes and the prepayment of Notes, in part or in whole, at
the request of such holders.
"Collateral" shall mean all right, title and interest of the Grantor
----------
in all (i) Permitted Non-Cash Consideration that forms part of the Net Proceeds
-
Allocable to Payee in respect of any Restricted Asset Sale and all related FMN
Mortgages, (ii) Cash Consideration that forms part of the Net Proceeds Allocable
--
to Payee in respect of any Restricted Asset Sale, (iii) amounts (including
---
Specified Loss Proceeds) required to be deposited in, and
2
<PAGE>
amounts from time to time held in, the Cash Collateral Accounts, (iv) Permitted
--
Investments held for the account of any Cash Collateral Account, (v) Documents
-
and (vi) Proceeds.
--
"Documents" shall mean all instruments, files, records, ledger sheets
---------
and documents covering or relating to any of the Collateral.
"FMN Debtor" shall mean any Person who is or who may become obligated
----------
under, with respect to or on account of any Permitted Non-Cash Consideration
that forms part of the Collateral.
"FMN Mortgages" shall mean the mortgages that secure any Permitted
-------------
Non-Cash Consideration.
"Governmental Approval" shall mean any consent, approval,
---------------------
authorization, waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or filing with or
report or notice to any Governmental Authority.
"Governmental Authority" shall mean any nation or government, any
----------------------
state, province or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any government authority, agency,
department, board, commission or instrumentality of the United States, Canada,
any state of the United States, any province of Canada or any political
subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
"Guaranty Agreement" shall mean the guaranty by the Grantor endorsed
------------------
on each Canadian Note.
"Liability Reserve", with respect to any Restricted Asset Sale, shall
-----------------
mean any reserve established by
3
<PAGE>
the Grantor in accordance with GAAP pursuant to Section 5.3(a) at the time of
such Restricted Asset Sale in connection with any Permitted Liabilities in
respect of such Restricted Asset Sale.
"Loan Documents" shall mean the Notes (including the Guaranties
--------------
endorsed thereon), the Canadian Notes (including the Guaranties endorsed
thereon) and the Mortgage Documents.
"Mortgages" shall mean the mortgages of real property executed by the
---------
Grantor that by their terms secure the payment by the Grantor of its obligations
under the Notes (whether or not such mortgages also secure other obligations).
"Notes" shall mean the Buyer Notes until the Buyer Notes are
-----
surrendered by Seller to the Grantor in exchange for the Realco Notes, and
thereafter shall mean the Realco Notes.
"Obligations" shall mean (i) the due and punctual payment by the
----------- -
Grantor of (A) the Accreted Value of the Notes, when and as due, whether at
-
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) all monetary obligations of the Grantor under the Guaranty
-
Agreement and (C) all other monetary obligations of the Grantor under the Loan
-
Documents and (ii) the due and punctual performance of all other obligations of
--
the Grantor under the Loan Documents.
"Permitted Encumbrances", with respect to any Replacement Property (as
----------------------
defined below), shall mean the "Permitted Encumbrances", as defined in the
Mortgage relating to such Replacement Property.
"Permitted Investments" shall mean:
---------------------
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States of
4
<PAGE>
America or issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within one
year from the date of acquisition thereof;
(b) marketable general obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within six months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; or
(c) commercial paper maturing no more than six months from the date
of creation thereof and, at the time of acquisition, having a rating of A-2
or higher from Standard & Poor's Corporation or P-2 or higher from Moody's
Investors Service, Inc.;
(d) domestic certificates of deposit, time or demand deposits or
bankers' acceptances maturing within six months after the date of
acquisition issued by any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia
having combined capital, surplus and undivided profits (less any undivided
losses) of not less than $250,000,000; and
(e) fully collateralized repurchase agreements with a term of not
more than 30 days for underlying securities of the type described in clause
(a) or (b) above entered into with any institution meeting the
qualifications specified in clause (d) above;
provided, however, that any Permitted Investment must have a stated maturity
- -------- -------
prior to Stated Maturity.
"Permitted Liens" shall mean any (i) Liens for taxes that are not yet
--------------- -
due and payable or that may after
5
<PAGE>
contest be paid without penalty or that are being contested in good faith by the
Grantor and (ii) Liens arising by reason of any judgment, decree or order of
--
any Governmental Authority that does not arise out of any breach by the Grantor
of any of the Loan Documents if (A) appropriate legal proceedings have been duly
-
initiated for the review of such judgment, decree or order, are being diligently
prosecuted and have not been finally terminated or (B) the period within which
-
such proceedings may be initiated has not expired.
"Proceeds" shall mean any consideration received from the sale,
--------
exchange, license, lease or other disposition of any asset or property which
constitutes Collateral, any payments received on Permitted Non-Cash
Consideration that forms part of the Collateral, any payments or other assets
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property which constitutes Collateral (but only to the
extent such payment relates to any such asset or property), and shall include
all cash and negotiable instruments received or held on behalf of the Collateral
Agent pursuant to Article V.
"Replacement Property" is defined in Section 5.1(d).
--------------------
"Reserve Account" shall mean the Reserve Account established pursuant
---------------
to Section 5.3.
"Secured Parties" shall mean (i) each holder of Notes, (ii) each
--------------- - --
holder of Canadian Notes, (iii) the Collateral Agent in its capacity as such,
---
(iv) the beneficiaries of each indemnification obligation undertaken by the
--
Grantor under any Mortgage Document and (v) the successors of the foregoing.
-
6
<PAGE>
"Specified Loss Account" shall mean the Specified Loss Account
----------------------
established pursuant to Section 5.4.
"Specified Loss Proceeds" shall mean any amounts paid to the
-----------------------
Collateral Agent pursuant to Section 4.3 or 4.4 of any Mortgage.
ARTICLE II
SECURITY INTEREST
-----------------
Section 2.1 Security Interest. As security for the payment or
-----------------
performance, as the case may be, of the Obligations, the Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent and its successors, for the benefit of the
Secured Parties, and hereby grants to the Collateral Agent and its successors,
for the benefit of the Secured Parties, a security interest in, all the
Grantor's right, title and interest in, to and under the Collateral (the
"Security Interest"). Without limiting the foregoing, the Collateral Agent is
-----------------
hereby authorized to file one or more financing statements, continuation
statements or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by the
Grantor, without the signature of the Grantor to the extent permitted by
Applicable Law, naming the Grantor as debtor and the Collateral Agent as secured
party.
Section 2.2 No Assumption of Liability. The Security Interest is
--------------------------
granted as security only and shall not subject the Collateral Agent or any
Secured Party to, or in any way alter or modify, any obligation or liability of
the Grantor with respect to or arising out of any of the Collateral.
7
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
As of the date hereof and as of the date any Cash Consideration or
Permitted Non-Cash Consideration is delivered to the Collateral Agent to be held
pursuant to this Agreement, the Grantor represents and warrants to the
Collateral Agent and the Secured Parties that:
Section 3.1 Title and Authority. The Grantor has (or, in the case of
-------------------
after-acquired Collateral, on the date of its delivery to the Collateral Agent,
will have) good and valid rights in and title to the Collateral with respect to
which it has purported to grant a Security Interest hereunder and has (or, in
the case of after-acquired Collateral, on the date of its delivery to the
Collateral Agent, will have) full power and authority to grant to the Collateral
Agent the Security Interest in such Collateral pursuant hereto and has full
power and authority to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other Person, other than any consent or approval which has been obtained.
Section 3.2 Filings. The Grantor has (or promptly after the Closing
-------
Date, but in no event later than the date Collateral is first delivered to the
Collateral Agent, will have) made all the filings, recordings and registrations
listed on Schedule 3.2A, which are the only filings, recordings and
registrations necessary to protect the validity of and to establish a legal,
valid and perfected security interest in favor of the Collateral Agent (for the
benefit of the Secured Parties) in respect of all such Collateral in which the
Security Interest may be perfected by filing, recording or registration with
respect to such Collateral under the Uniform Commercial Code (the "UCC") as in
effect in the United States (or any political subdivision thereof), and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary with respect to such Collateral under
8
<PAGE>
the UCC as in effect in any such jurisdiction, except as provided under
Applicable Law with respect to the filing of continuation statements and except
that additional filings may be necessary if the Grantor thereafter changes its
name, identity or corporate structure or the location of its places of business,
its chief executive office or the Collateral. Without limiting the generality of
the foregoing, simultaneously, with delivery of any Permitted Non-Cash
Consideration to the Collateral Agent or as soon thereafter as practicable, the
Grantor shall have taken all such actions and made all such filings, recordings
and registrations that are necessary in order to enable the Collateral Agent to
enforce directly against the applicable FMN Debtor its obligations in respect of
such Permitted Non Cash Consideration and to exercise remedies under the
applicable FMN Mortgage, without the necessity of any further consent or
approval of the Grantor.
Section 3.3 Validity of Security Interest. The Security Interest
-----------------------------
constitutes (or, in the case of after-acquired Collateral, will on the date of
delivery of such after-acquired Collateral to the Collateral Agent constitute)
(a) a legal and valid security interest in all the Collateral securing the
-
payment and performance of the Obligations and (b) a perfected security interest
-
in all Collateral in which a security interest may be perfected by either (i)
-
possession of the Collateral by the Collateral Agent (assuming continuing
possession by the Collateral Agent) or (ii) filing, recording or registering a
--
financing statement or analogous document under the UCC as in effect in the
United States (or any political subdivision thereof). To the extent priority is
governed by the UCC, the Security Interest is and shall be prior to any other
Lien on any of the Collateral, including any Permitted Lien.
Section 3.4 Absence of Other Liens. Collateral is owned by the
----------------------
Grantor free and clear of any Lien (other than the Security Interest and any
Permitted Lien). Other than as contemplated hereby, the Grantor has not filed
or consented to the filing of (a) any financing statement or
-
9
<PAGE>
analogous document under the UCC or any other Applicable Law covering any
Collateral or (b) any assignment in which the Grantor assigns any Collateral or
-
any security agreement or similar instrument covering any Collateral with any
Governmental Authority.
Section 3.5 Location of Chief Executive Office. The principal place
----------------------------------
of business and chief executive office of the Grantor, and the office where the
Grantor keeps the Documents and any other books and records concerning the
Collateral, are located at the address specified for the Grantor in Section 8.8.
The exact corporate name of the Grantor as it appears in its certificate of
incorporation, each other corporate name the Grantor has had, and all other
names (including trade names or similar appellations) under which the Grantor or
any of its divisions, subsidiaries or other business units has carried on
business are as listed in the caption to this Agreement or notified to the
Collateral Agent pursuant to Section 4.1.
ARTICLE IV
COVENANTS
---------
Section 4.1 Change of Name; Location of Collateral; Place of
------------------------------------------------
Business. The Grantor will promptly notify the Collateral Agent of any change
- --------
(i) in its corporate name or in any trade name used to identify it in the
- --
conduct of its business or in the ownership of its properties, (ii) in the
--
location of its chief executive office, its principal place of business or any
office in which it maintains books or records relating to Collateral or (iii) in
---
its identity or corporate structure. The Grantor will not effect or permit any
change referred to in the preceding sentence unless all filings, recordings or
registrations have been made under the UCC or otherwise which are required in
order for the Collateral Agent to continue at all times following such change to
have a legal, valid and perfected security interest in all the Collateral in
which a security interest may be perfected under the UCC
10
<PAGE>
by filing, recording or registering a financing statement or similar document.
Section 4.2 Periodic Certification. Each year, at the time of
----------------------
delivery of Newco's annual financial statements with respect to the preceding
fiscal year pursuant to the Notes, the Grantor will deliver to the Collateral
Agent a certificate executed by a financial officer and the chief legal officer
of the Grantor (a) certifying that all appropriate UCC financing statements
-
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each Governmental Authority to the extent necessary under the UCC to
perfect the Security Interest for a period of not less than six months after the
date of such certificate, (b) setting forth all filings, recordings and
-
registrations, including all refilings, rerecordings and reregistrations, that,
with respect to the Collateral as of the date of such certificate, would be
required under the UCC to be made within 18 months after the date of such
certificate to perfect the Security Interest in such Collateral for a period of
not less than two years after the date of such certificate, (c) setting forth,
-
with respect to each filing, recording or registration (including each refiling,
rerecording or reregistration) made since the date of the most recent
certificate delivered pursuant to this Section, the filing office, date and file
number thereof and (d) attaching true, correct and complete acknowledgement
-
copies of each such filing, recording or registration not theretofore delivered
to the Collateral Agent.
Section 4.3 Protection of Security. The Grantor will, at its own
----------------------
cost and expense, take any and all actions necessary to (i) defend title to the
-
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
(other than any Permitted Lien) and
11
<PAGE>
(ii) resist enforcement of any Permitted Lien against any Collateral.
--
Section 4.4 Further Assurances. (a) The Grantor will, at its own
------------------
cost and expense, execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Collateral Agent may from time to time reasonably request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and filing, registration,
stamp and other similar taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements (including fixture filings) or other documents in
connection herewith.
(b) Without limiting the generality of the foregoing, any Permitted
Non-Cash Consideration delivered to the Collateral Agent (and the related FMN
Mortgage) shall, unless otherwise requested by the Collateral Agent, be
registered in the name of the Collateral Agent or its nominee. If the
Collateral Agent requests that any such Permitted Non-Cash Consideration and the
related FMN Mortgage not be registered in the name of the Collateral Agent or
its nominee, such Permitted Non-Cash Consideration and related FMN Mortgage (i)
-
shall be duly endorsed in a manner, or accompanied by instruments of transfer or
assignment in a form reasonably satisfactory to the Collateral Agent, (ii) shall
--
provide that (A) the rights of the Grantor under such Permitted Non-Cash
-
Consideration and related FMN Mortgage may be assigned without the consent of
the applicable FMN Debtor, (B) any assignee of the Grantor can exercise all of
-
the rights of the Grantor under such Permitted Non-Cash Consideration and
related FMN Mortgage, (C) the applicable FMN Debtor will make all payments under
-
such Permitted Non-Cash Consideration as directed by the Grantor, and (D) the
-
terms of such Permitted Non-Cash Consideration and related FMN Mortgage shall
not be amended or modified, and the Grantor will not agree to a waiver or
12
<PAGE>
compromise thereof, without the consent of the Grantor and any assignee of the
Grantor and (iii) shall be accompanied by an instrument duly executed by the
---
applicable FMN Debtor, in a form reasonably satisfactory to the Collateral
Agent, pursuant to which such FMN Debtor shall acknowledge the assignment to the
Collateral Agent of all the rights of the Grantor in respect of such Permitted
Non-Cash Consideration and related FMN Mortgage (it being agreed that, as
between the Grantor and the Collateral Agent, the exercise of rights and powers
accruing to the owner of any Permitted Non-Cash Consideration shall be governed
by this Agreement).
(c) The Collateral Agent shall have the right (in its sole and
absolute discretion) to hold any Permitted Non-Cash Consideration forming part
of the Collateral in its own name as pledgee, the name of its nominee or the
name of the Grantor. The Grantor will promptly give to the Collateral Agent
copies of any notices or other communications received by it with respect to any
Permitted Non-Cash Consideration forming part of the Collateral registered in
the name of the Grantor.
(d) The Collateral Agent shall, upon the reasonable request of the
Grantor, sign any financing statement or other similar document, in form and
substance reasonably satisfactory to the Collateral Agent, required to be filed
by the Grantor pursuant to this Agreement and that requires the signature of the
Collateral Agent.
Section 4.5 Rights and Obligations Under Permitted Non-Cash
-----------------------------------------------
Consideration. (a) Unless and until an Event of Default shall have occurred
- -------------
and be continuing and the Collateral Agent shall have notified the Grantor that
the Grantor's rights under this Section are being suspended:
(i) The Grantor shall be entitled to exercise any and all the rights
and powers of the owner of any Permitted Non-Cash Consideration forming
part of the Collateral (and the related FMN Mortgage) to amend, waive or
modify the terms thereof and to grant consents
13
<PAGE>
or approvals thereunder; provided, however, that (A) such exercise could
-------- ------- -
not reasonably be expected to materially and adversely affect the rights
inuring to a holder of such Permitted Non-Cash Consideration or the rights
and remedies of the Collateral Agent or any of the Secured Parties under
any of the Loan Documents or any of the Secured Parties to exercise the
same and (B) the Grantor may not amend, waive, modify or compromise any
-
such Permitted Non-Cash Consideration (or the related FMN Mortgage) to (w)
-
extend the maturity or decrease the principal amount of, or reduce the rate
of interest or extend the time of payment of any installment of principal
of or interest on, any such Permitted Non-Cash Consideration, (x) release
-
or subordinate the Lien of any FMN Mortgage forming part of the Collateral
or adversely affect the ability to exercise remedies thereunder, (y) permit
-
any FMN Mortgage forming part of the Collateral to secure any obligation
other than an obligation to the Grantor or an obligation under Permitted
Non-Cash Consideration forming part of the Collateral or (z) restrict the
-
assignability thereof.
(ii) The Grantor shall be entitled to (and hereby agrees for the
benefit of the Secured Parties that it will exercise commercially
reasonable efforts to) enforce, in a commercially reasonable manner, the
rights and remedies accruing to the owner of any Permitted Non-Cash
Consideration forming part of the Collateral (and the related FMN
Mortgage), including enforcement of the payment when due of amounts payable
thereunder; provided, however, that the foregoing shall not be construed to
-------- -------
constitute a guarantee by the Grantor of collection or otherwise.
(iii) The Collateral Agent will execute and deliver to the Grantor, or
cause to be executed and delivered to the Grantor, all such proxies, powers
of attorney and other instruments as the Grantor may reasonably request for
the purpose of enabling the Grantor to
14
<PAGE>
exercise the rights and powers which it is entitled (or obligated) to
exercise pursuant to Section 4.5(a)(i) or 4.5(a)(ii).
(b) Upon the occurrence and during the continuance of an Event of
Default, after the Collateral Agent shall have notified the Grantor of the
suspension of its rights under Section 4.5(a), then all rights and obligations
of the Grantor to exercise the rights and powers which it is entitled to
exercise pursuant to Section 4.5(a), and the obligations of the Collateral Agent
under Section 4.5(a), shall cease, and all such rights shall thereupon become
vested in the Collateral Agent, which shall have the sole and exclusive right
and authority to exercise such rights and powers.
(c) Any notice given by the Collateral Agent to the Grantor
suspending its rights under Section 4.5(a)(i) may be given by telephone if
-
promptly confirmed in writing and (ii) may suspend the rights of the Grantor
--
under Section 4.5(a) in part without suspending all such rights (as specified by
the Collateral Agent in its sole and absolute discretion) and without waiving or
otherwise affecting the Collateral Agent's rights to give additional notices
from time to time suspending other rights so long as an Event of Default has
occurred and is continuing.
Section 4.6 Inspection and Verification. The Collateral Agent and
---------------------------
such persons as the Collateral Agent may reasonably designate shall have the
right, at any reasonable time or times, to inspect all records related to the
Collateral (and to make extracts and copies from such records) and to verify
under reasonable procedures the validity, amount, quality, quantity, value,
condition and status of, or any other matter relating to the Collateral,
including by contacting FMN Debtors. The Collateral Agent shall have the
absolute right to share any information it gains from such inspection or
verification with any Secured Party. Without the prior written consent of the
Grantor, the Collateral Agent shall not disclose, and shall require
15
<PAGE>
as a condition to sharing such information with any Secured Party or other
Person that such Secured Party or other Person agree not to disclose, to any
Person that is not a Secured Party any such information which is designated by
the Grantor to the Collateral Agent in writing as confidential; provided,
--------
however, that the Collateral Agent or any Secured Party may disclose such
- -------
information (a) to any of their respective accountants, counsel, consultants,
-
employees or agents who are advised of the confidential nature of such
information, (b) if it becomes publicly available other than by reason of a
-
breach of this sentence, (c) if received from a third party not bound by any
-
confidentiality agreement with Buyer, Newco, the Grantor or the Canadian Buyer,
(d) required by Applicable Law or any Governmental Approval to be disclosed by
-
such Person, (e) necessary to establish such Person's rights under any of the
-
Loan Documents or (f) to any prospective permitted assignee of all or a portion
-
of the rights of such Person under the Loan Documents if such prospective
permitted assignee agrees to be bound by the confidentiality provisions
contained in this sentence.
Section 4.7 Taxes; Encumbrances. At its option, the Collateral Agent
-------------------
may discharge past-due taxes, assessments, charges, fees, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
(other than any Permitted Lien), and may pay for the maintenance and
preservation of the Collateral to the extent the Grantor fails to do so, and the
Grantor agrees to reimburse the Collateral Agent on demand for any payment made
or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section shall be
-------- -------
interpreted as excusing the Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of the Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance.
16
<PAGE>
Section 4.8 Continuing Obligations of the Grantor. The Grantor shall
-------------------------------------
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral unless and until title to such contract, agreement or
instrument has been indefeasibly vested in the Collateral Agent pursuant to the
exercise of its remedies under Article VI, all in accordance with the terms and
conditions thereof, and the Grantor will indemnify and hold harmless the
Collateral Agent and the Secured Parties from and against any and all liability
arising out of the Grantor's performance or failure to perform the same.
Section 4.9 Use and Disposition of Collateral. Except for the
---------------------------------
Security Interest, the Grantor will not (i) make or permit to be made an
-
assignment, pledge or hypothecation of the Collateral or (ii) grant any other
--
Lien in respect of the Collateral. The Grantor will not make or permit to be
made any transfer of the Collateral other than withdrawals from the Cash
Collateral Accounts made in accordance with Article V.
Section 4.10 Register. The Collateral Agent and such persons as the
--------
Collateral Agent may reasonably designate shall have the right, at any
reasonable time or times, to inspect the Register (and to make extracts from and
copies of the Register). At the request of the Collateral Agent, the Grantor
shall use reasonable efforts to provide to the Collateral Agent a copy of the
"Register" (as defined in the Canadian Notes).
ARTICLE V
CASH COLLATERAL ACCOUNTS
------------------------
Section 5.1 Cash Consideration Account. (a) Prior to the first
--------------------------
delivery to the Collateral Agent of any Cash Consideration or Permitted Non-Cash
Consideration constituting Net Proceeds Allocable to Payee, the Collateral
17
<PAGE>
Agent will establish with a financial institution reasonably satisfactory to the
Grantor (it being agreed that such financial institution shall not be a creditor
of the Grantor or any of its Affiliates) an account (the "Cash Consideration
------------------
Account") over which the Collateral Agent shall have exclusive dominion and
- -------
control, including the exclusive right of withdrawal.
(b) Any Proceeds from the investment pursuant to Section 5.5 of
amounts of Net Proceeds Allocable to Payee in respect of any Restricted Asset
Sale, net of the amount so invested, shall, solely for the purposes of this
Section, constitute additional Net Proceeds in respect of such Restricted Asset
Sale.
(c) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Cash Consideration Account and apply such cash to prepay,
in whole or in part, the Notes in accordance with the instructions of the
Grantor set forth in such written request; provided, however, that (i) such
-------- ------- -
instructions are consistent with paragraph 7(c) of the Notes, (ii) such written
--
request specifies each Restricted Asset Sale the Net Proceeds Allocable to Payee
in respect of which are to be so applied and, if more than one Restricted Asset
Sale is so specified, the amount of the Net Proceeds Allocable to Payee in
respect of each Restricted Asset Sale to be so applied, (iii) the amount of any
---
Net Proceeds Allocable to Payee in respect of any Restricted Asset Sale to be so
applied does not exceed the remaining balance of such Net Proceeds Allocable to
Payee in respect of such Restricted Asset Sale and (iv) cash withdrawn from the
--
Cash Consideration Account pursuant to this Section 5.1(c) shall be applied to
the prepayment of the Notes only at the direction of the Grantor.
(d) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Cash Consideration Account and pay
such cash at the direction of the Grantor on the date specified by the
18
<PAGE>
Grantor if the following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than 10 Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified the amount of cash to be withdrawn and shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
-
Newco, to the effect that (x) no Event of Default has occurred and is
-
continuing and (y) the proceeds of such withdrawal are to be used to
-
finance the purchase by the Grantor of a fee simple interest in real
property located in the United States (the "Replacement Property") from a
--------------------
Person who is not an Affiliate of the Grantor and (B) a copy of a contract
-
for the purchase of the Replacement Property.
(2) On or prior to the date on which such cash is to be withdrawn,
the Collateral Agent shall have received (A) a first mortgage securing the
-
Obligations, in recordable form and otherwise substantially in the form of
the Mortgages, of the Replacement Property, duly executed and delivered by
the Grantor, (B) a title insurance policy, issued by a nationally
-
recognized title insurance company reasonably satisfactory to the
Collateral Agent, insuring the lien of Collateral Agent's mortgage on the
Replacement Property, subject only to standard exceptions and Permitted
Encumbrances, in an amount not less than the amount of the proposed
withdrawal, and (C) such surveys, environmental audits and documents
-
relating to the Permitted Encumbrances and compliance with Applicable Law
and applicable Governmental Approvals, as reasonably requested by the
Collateral Agent, as shall be reasonably necessary to satisfy the
Collateral Agent that the mortgaging of the Replacement Property to secure
the Obligations and the proposed withdrawal, taken together, would not
materially and adversely affect the aggregate value of
19
<PAGE>
the Mortgaged Property and the Collateral or the rights and remedies of the
Collateral Agent or any of the Secured Parties under the Loan Documents or
the ability of the Collateral Agent or any of the Secured Parties to
exercise the same.
(3) On the date on which such cash is to be withdrawn, the
Collateral Agent shall have received a certificate bringing down to date
the certificate referred to in Section 5.1(d)(1)(A).
(4) If the Replacement Property is being purchased in connection
with the purchase by the Grantor, or any of its Affiliates, of any assets
or services from the seller of the Replacement Property or any of its
Affiliates, the Collateral Agent shall be reasonably satisfied that the
amount of cash proposed to be withdrawn shall not be greater than the fair
market value of the Replacement Property. If the Replacement Property is
not being purchased in connection with the purchase by the Grantor, or any
of its Affiliates, of any assets or services from the seller of the
Replacement Property or any of its Affiliates, the Collateral Agent shall
be reasonably satisfied that the amount of cash proposed to be withdrawn
shall not be greater than the cash purchase price for the Replacement
Property.
(5) The Grantor directs that the cash withdrawn is to be paid to, or
at the direction of, the seller of the Replacement Property.
(6) The amount of cash to be withdrawn does not exceed (A) the amount
-
of Cash Consideration received by the Collateral Agent during the preceding
18 months (including in such amount any portion of Excess Reserved Amounts
transferred to the Cash Consideration Account from the Reserve Account
pursuant to Section 5.3(e) in respect of a Liability Reserve established
within the preceding 18 months) and not previously withdrawn from the Cash
Consideration Account plus
20
<PAGE>
(B) the amount of cash Proceeds received by the Collateral Agent
during the preceding 18 months in respect of Permitted Non-Cash
Consideration and not previously withdrawn from the Cash Consideration
Account plus (C) the amount of any Proceeds from the investment pursuant to
-
Section 5.5 of cash described in clause (A) or (B) above to the extent not
previously withdrawn from the Cash Consideration Account.
(e) At least 10 days prior to each Semi-Annual Accrual Date that
occurs at least 18 months after the receipt by the Collateral Agent of any Net
Proceeds Allocable to Payee, the Grantor shall direct the Collateral Agent in
writing (1) to retain in the Cash Consideration Account all Net Proceeds
-
Allocable to Payee deposited therein less than 18 months (including in such
amount any amounts transferred to the Cash Consideration Account from the
Reserve Account pursuant to Section 5.3(e) in respect of a Liability Reserve
established within the preceding 18 months) prior to such Semi-Annual Accrual
Date (and all Proceeds therefrom or from the investment thereof in accordance
with Sections 5.1(b) and 5.5) and (2) to apply any balance of the amount in the
-
Cash Collateral Account, after such retention and after any application pursuant
to Section 5.1(d), to prepayment of the Notes on such Semi-annual Accrual Date.
Upon such written direction of the Grantor the Collateral Agent shall withdraw
cash in an amount equal to such balance, if any, from the Cash Consideration
Account and apply such cash to prepay, in whole or in part, the Notes in
accordance with the instructions of the Grantor set forth in such written
direction; provided, however, that (i) such instructions are consistent with
-------- ------- -
paragraph 7(c) of the Notes and (ii) any cash withdrawn from the Cash
--
Consideration Account pursuant to this Section 5.1(e) shall be applied to the
prepayment of the Notes only at the direction of the Grantor.
(f) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Cash Consideration
21
<PAGE>
Account to satisfy in accordance with Section 6.2 any Obligations then due and
payable.
Section 5.2 Deposits. (a) The Grantor will notify and direct
--------
promptly each FMN Debtor and every other Person obligated to make payments on or
with respect to Permitted Non-Cash Consideration forming part of the Collateral
to make all such payments to the Cash Consideration Account. The Grantor shall
use all reasonable efforts to cause each FMN Debtor and every other Person
identified in the preceding sentence to make all payments on or with respect to
Permitted Non-Cash Consideration forming part of the Collateral directly to the
Cash Consideration Account.
(b) In the event that the Grantor directly receives any Proceeds on
or with respect to Permitted Non-Cash Consideration forming part of the
Collateral (including Proceeds from any exercise of remedies in respect thereof,
under any FMN Mortgage or otherwise), notwithstanding the arrangements for
payment directly into the Cash Consideration Account, such Proceeds shall be
held in trust for the benefit of the Collateral Agent and the Secured Parties
and shall be segregated from other funds of the Grantor, subject to the Security
Interest granted hereby, and the Grantor shall cause such Proceeds to be
deposited into the Cash Consideration Account as soon as practicable after the
Grantor's receipt thereof.
(c) All Cash Consideration constituting Net Proceeds Allocable to
Payee received by the Grantor or the Collateral Agent shall forthwith be
deposited into the Cash Consideration Account, subject to (i) the rights of the
-
Collateral Agent to apply Cash Consideration in accordance with Section 6.2 if
an Event of Default has occurred and is continuing and (ii) the rights of the
--
Grantor to direct the Collateral Agent to withdraw amounts on deposit in the
Cash Consideration Account.
22
<PAGE>
Section 5.3 Reserve Account. (a) In connection with any Restricted
---------------
Asset Sale, the Grantor may establish a Liability Reserve (not in excess of the
reserve in respect thereof required by GAAP) by:
(i) not less than five Business Days prior to the consummation of
such Restricted Asset Sale, giving the Collateral Agent written notice that
the Grantor intends to establish a Liability Reserve with respect to such
Restricted Asset Sale;
(ii) simultaneously with the consummation of such Restricted Asset
Sale, delivering to the Collateral Agent a certificate, signed by the chief
accounting officer of Newco, stating (A) that the Grantor is establishing a
-
reserve with respect to Permitted Liabilities in respect of such Restricted
Asset Sale and stating the initial balance of the related Reserved Amount,
(B) that the Grantor is required by GAAP to establish such a reserve in an
-
amount not less than such stated initial balance and (C) whether or not the
-
Grantor is obligated by paragraph 6(c)(6)(b) of the Notes to deliver cash
equal to such Reserved Amount for deposit hereunder; and
(iii) simultaneously with the consummation of such Restricted Asset
Sale, if obligated to do so by paragraph 6(c)(6)(b) of the Notes,
delivering to the Collateral Agent an amount of cash equal to the initial
balance of the Reserved Amount (such amount to be in addition to any Cash
Consideration paid to the Collateral Agent in connection with such
Restricted Asset Sale to be deposited in the Cash Consideration Account).
(b) Prior to the first delivery to the Collateral Agent of any cash
pursuant to Section 5.3(a)(iii), the Collateral Agent will establish with a
financial institution reasonably satisfactory to the Grantor (it being agreed
that such financial institution shall not be a creditor of the
23
<PAGE>
Grantor or any of its Affiliates) an account (the "Reserve Account") over which
---------------
the Collateral Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal. All amounts received by the Collateral Agent
pursuant to Section 5.3(a)(iii) and all cash Proceeds from investments thereof
pursuant to Section 5.5 shall forthwith be deposited into the Reserve Account.
(c) The Reserved Amount in respect of any Restricted Asset Sale shall
be increased by the amount of any Proceeds from the investment of such Reserved
Amount pursuant to Section 5.5, net of the amount so invested, and reduced by
any withdrawals pursuant to this Section in respect of such Reserved Amount.
(d) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Reserve Account and apply such cash to prepay, in whole
or in part, the Notes in accordance with the instructions of the Grantor set
forth in such written request; provided, however, that (i) such instructions are
-------- ------- -
consistent with paragraph 7(c) of the Notes, (ii) such written request specifies
--
each Restricted Asset Sale the Reserved Amount in respect of which is to be
reduced in connection with such withdrawal and, if more than one Restricted
Asset Sale is so specified, the amount by which each related Reserved Amount is
to be reduced, (iii) the amount by which any Reserved Amount is to be reduced
---
does not exceed the remaining balance of such Reserved Amount and (iv) any cash
--
withdrawn from the Reserve Account pursuant to this Section 5.3(d) shall be
applied to the prepayment of the Notes only at the direction of the Grantor.
(e) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will, upon written request from the Grantor, transfer all or a
portion of any Excess Reserved Amount from the Reserve Account to the Cash
Consideration Account if the following conditions shall have been satisfied:
24
<PAGE>
(1) Such request shall specify each Restricted Asset Sale with
respect to which such Excess Reserved Amount has arisen and, if more than
one Restricted Asset Sale is so specified, the amount of each related
Excess Reserved Amount.
(2) The amount of each Excess Reserved Amount does not exceed the
remaining balance of the related Reserved Amount.
(3) Such request shall be accompanied by a certificate, signed by the
chief accounting officer of Newco, to the effect that the Grantor is no
longer required by GAAP to maintain the related Excess Reserved Amount in
its reserve in respect of each such Restricted Asset Sale.
(4) The amount of each such Excess Reserved Amount to be transferred
constitutes Net Proceeds Allocable to Payee.
(f) Unless an Event of Default or a Change Prepayment Event has
occurred and is continuing, the Collateral Agent will withdraw cash from the
Reserve Account and pay such cash at the direction of the Grantor on the date
specified by the Grantor if the following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by a certificate, signed by the chief financial officer of
Newco, to the effect that (A) no Event of Default or Change Prepayment
-
Event has occurred and is continuing and (B) the proceeds of such
-
withdrawal are to be used to discharge a Permitted Liability which is then
due and payable (and describing such Permitted Liability in general terms,
including
25
<PAGE>
the Restricted Asset Sale out of which such Permitted Liability has
arisen).
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a certificate bringing down to date the
certificate referred to in Section 5.3(f)(1).
(3) The amount of cash to be withdrawn does not exceed the remaining
balance of the Reserved Amount in respect of such Restricted Asset Sale.
(g) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Reserve Account and pay such cash
at the direction of the Grantor on the date specified by the Grantor if the
following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by a certificate, signed by the chief financial officer of
Newco, to the effect that (A) no Event of Default has occurred and is
-
continuing and (B) the proceeds of such withdrawal are to be used to
-
discharge a Permitted Liability which is then due and payable (and
describing such Permitted Liability in general terms, including the
Restricted Asset Sale out of which such Permitted Liability has arisen).
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a certificate bringing down to date the
certificate referred to in Section 5.3(g)(1).
(3) The amount of cash to be withdrawn does not exceed the remaining
balance of the Reserved Amount in respect of such Restricted Asset Sale.
26
<PAGE>
(4) Such Restricted Asset Sale was a Mixed Asset Sale, and the
Shortfall Amount in respect of such Restricted Asset Sale is zero.
(h) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Reserve Account representing all or
a portion of any Excess Reserved Amount and pay such cash to or at the direction
of the Grantor on the date specified by the Grantor if the following conditions
shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified each Restricted Asset Sale with respect to which such Excess
Reserved Amount arises, and, if more than one Restricted Asset Sale is so
specified, the amount of each related Excess Reserved Amount. Such request
shall have been accompanied by (A) a certificate, signed by the chief
-
financial officer of Newco, to the effect that no Event of Default has
occurred and is continuing and (B) a certificate, signed by the chief
-
accounting officer of Newco, to the effect that the Grantor is no longer
required by GAAP to maintain the related Excess Reserved Amount in its
reserve in respect of each such Restricted Asset Sale.
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received certificates bringing down to date the
certificates referred to in Section 5.3(h)(1).
(3) The amount of each such Excess Reserved Amount to be withdrawn
does not exceed the then remaining balance of the related Reserved Amount.
27
<PAGE>
(4) Each such Restricted Asset Sale was a Mixed Asset Sale, and the
Shortfall Amount in respect of each such Restricted Asset Sale is zero.
(i) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Reserve Account to satisfy in accordance with Section 6.2 any Obligations
then due and payable.
Section 5.4 Specified Loss Account. (a) Prior to the first delivery
----------------------
to the Collateral Agent of any Specified Loss Proceeds, the Collateral Agent
will establish with a financial institution reasonably satisfactory to the
Grantor (it being agreed that such financial institution shall not be a creditor
of the Grantor or any of its Affiliates) an account (the "Specified Loss
--------------
Account") over which the Collateral Agent shall have exclusive dominion and
- -------
control, including the exclusive right of withdrawal. All Specified Loss
Proceeds received by the Collateral Agent and all cash Proceeds from investments
thereof pursuant to Section 5.4(b) shall forthwith be deposited into the
Specified Loss Account.
(b) The amount of Specified Loss Proceeds in respect of any Mortgaged
Property shall be increased by the amount of any Proceeds from the investment of
amounts of such Specified Loss Proceeds pursuant to Section 5.5, net of the
amount so invested.
(c) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Specified Loss Account and apply such cash to prepay, in
whole or in part, the Notes in accordance with the instructions of the Grantor
set forth in such written request; provided, however, that (i) such
-------- ------- -
instructions are consistent with paragraph 7(c) of the Notes, (ii) such written
--
request specifies the Mortgaged Property the Specified Loss Proceeds in respect
of which are to be reduced in connection with such withdrawal, (iii) the amount
---
by which the Specified
28
<PAGE>
Loss Proceeds in respect of any Mortgaged Property are to be reduced does not
exceed the remaining balance of such Specified Loss Proceeds and (iv) any cash
--
withdrawn from the Specified Loss Account pursuant to this Section 5.4(c) shall
be applied to the prepayment of the Notes only at the direction of the Grantor.
(d) Unless an Event of Default or a Change Prepayment Event has
occurred and is continuing, the Collateral Agent will withdraw cash from the
Specified Loss Account and pay such cash at the direction of the Grantor on the
date specified by the Grantor if the following conditions shall have been
satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
-
Newco, to the effect that (x) no Event of Default or Change Prepayment
-
Event has occurred and is continuing and (y) the proceeds of such
-
withdrawal are to be used to pay for costs of repairs to or restoration of
the Mortgaged Property in respect of which Specified Loss Proceeds were
received by the Collateral Agent pursuant to Section 4.3 or 4.4 of the
applicable Mortgage and (B) a copy of an invoice or invoices for such costs
-
(the issuer or issuers of which shall not be Affiliates of the Grantor)
evidencing that such costs have been incurred and are then due (or have
been paid).
(2) Such request shall have been received by the Collateral Agent not
sooner than 30 days following the most recent withdrawal from the Specified
Loss Account under this Section 5.4(d).
(3) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a
29
<PAGE>
certificate bringing down to date the certificate referred to in Section
5.4(d)(1).
(4) The amount of cash to be withdrawn (i) does not exceed the
-
aggregate amount shown on the invoice or invoices accompanying the
certificate delivered pursuant to section 5.4(d)(1) and (ii) when
--
aggregated with all other amounts previously withdrawn pursuant to this
Section with respect to such Mortgaged Property, does not exceed such
Specified Loss Proceeds.
(5) Either (i) the cash withdrawn is paid to the Grantor to reimburse
-
the Grantor for amounts paid to the issuer of the invoice or invoices
accompanying the certificate delivered pursuant to Section 5.4(d)(1) that
are marked "paid" or (ii) the Grantor directs that the cash withdrawn is to
--
be paid to, or at the direction of, the issuer or issuers of any unpaid
invoice or invoices.
(e) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Specified Loss Account and pay such
cash at the direction of the Grantor on the date specified by the Grantor if the
following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than 10 Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified the amount of cash to be withdrawn and specified the Mortgaged
Property the replacement of which is to be effected with the cash to be
withdrawn and shall have been accompanied by (A) a certificate, signed by
-
the chief financial officer of Newco, to the effect that (x) no Event of
-
Default has occurred and is continuing and (y) the proceeds of such
-
withdrawal are to be used to finance the purchase by the Grantor of
Replacement Property from a Person who is not an
30
<PAGE>
Affiliate of the Grantor and (B) a copy of a contract for the purchase of
-
the Replacement Property.
(2) On or prior to the date on which such cash is to be withdrawn, the
Collateral Agent shall have received (A) a first mortgage securing the
-
Obligations, in recordable form and otherwise substantially in the form of
the Mortgages, of the Replacement Property, duly executed and delivered by
the Grantor, (B) a title insurance policy, issued by a nationally
-
recognized title insurance company reasonably satisfactory to the
Collateral Agent, insuring the lien of the Collateral Agent's mortgage on
the Replacement Property, subject only to standard exceptions and Permitted
Encumbrances, in an amount not less than the amount of the proposed
withdrawal, and (C) such surveys, environmental audits and documents
-
relating to the Permitted Encumbrances and compliance with Applicable Law
and applicable Governmental Approvals, as reasonably requested by the
Collateral Agent, as shall be reasonably necessary to satisfy the
Collateral Agent that the mortgaging of the Replacement Property to secure
the Obligations and the proposed withdrawal, taken together, would not
materially and adversely affect the aggregate value of the Mortgaged
Property and the Collateral or the rights and remedies of the Collateral
Agent or any of the Secured Parties under the Loan Documents or the ability
of the Collateral Agent or any of the Secured Parties to exercise the same.
(3) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a certificate bringing down to date the
certificate referred to in Section 5.4(e)(1)(A).
(4) If the Replacement Property is being purchased in connection with
the purchase by the Grantor, or any of its Affiliates, of any assets or
services from the seller of the Replacement Property or any of its
Affiliates, the Collateral Agent shall be
31
<PAGE>
reasonably satisfied that the amount of cash proposed to be withdrawn shall
not be greater than the fair market value of the Replacement Property. If
the Replacement Property is not being purchased in connection with the
purchase by the Grantor, or any of its Affiliates, of any assets or
services from the seller of the Replacement Property or any of its
Affiliates, the Collateral Agent shall be reasonably satisfied that the
amount of cash proposed to be withdrawn shall not be greater than the cash
purchase price for the Replacement Property.
(5) The amount of cash to be withdrawn in respect of any Mortgaged
Property (when aggregated with all other amounts previously withdrawn
pursuant to this Section 5.4 with respect to such Mortgaged Property) does
not exceed the Specified Loss Proceeds received in respect of such
Mortgaged Property.
(6) The Grantor directs that the cash withdrawn is to be paid to, or
at the direction of, the seller of the Replacement Property.
(f) If Specified Loss Proceeds with respect to a Mortgaged Property
have been withdrawn from the Specified Loss Account pursuant to Section 5.4(d),
upon completion of the repairs to such Mortgaged Property the Grantor shall
direct the Collateral Agent pursuant to Section 5.4(c) to apply any balance of
such Specified Loss Proceeds with respect to such Mortgaged Property remaining
in the Specified Loss Account to the prepayment of the Notes. If the Grantor
has notified the Collateral Agent in accordance with the Mortgage that Specified
Loss Proceeds with respect to a Mortgaged Property are to be used to finance the
purchase of Replacement Property pursuant to Section 5.4(e), the Grantor may at
any time and from time to time direct the Collateral Agent pursuant to Section
5.4(c) to apply any portion of such Specified Loss Proceeds with respect to such
Mortgaged Property to the prepayment of the Notes.
32
<PAGE>
(g) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Specified Loss Account to satisfy in accordance with Section 6.2 any
Obligations then due and payable.
Section 5.5 Investment. Unless an Event of Default has occurred and
----------
is continuing, the Collateral Agent will accept directions from the Grantor as
to the investment of any funds in any Cash Collateral Account in Permitted
Investments; provided, however, that (i) the Collateral Agent shall not be
-------- ------- -
required to make any investment that, in its sole judgment, would require or
cause the Collateral Agent to be, or would result in, any violation of
Applicable Law or any Governmental Approval, (ii) the Collateral Agent shall be
--
authorized to sell any investment held for the account of any Cash Collateral
Account to the extent cash is needed in such Cash Collateral Account to make a
withdrawal of cash from such Cash Collateral Account (and shall not be liable
for any loss resulting from any such sale) and (iii) the Collateral Agent shall
---
not be required to make any investment unless the Collateral Agent is able to
perfect the Security Interest in such investment. The Grantor will indemnify
the Collateral Agent for any losses resulting from such investments pursuant to
this Section. Except as expressly set forth in this Section, the Collateral
Agent shall not be obligated to invest any amounts on deposit in any Cash
Collateral Account, nor shall any Cash Collateral Account pay interest. The
Collateral Agent shall, upon reasonable request from the Grantor from time to
time, provide the Grantor with a report as to the Collateral Agent's holdings of
Permitted Investments.
ARTICLE VI
REMEDIES
--------
Section 6.1 Remedies upon Default. Upon the occurrence and during
---------------------
the continuance of an Event of Default, the Grantor will deliver each item of
Collateral at
33
<PAGE>
the time in the possession of the Grantor to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right (subject to
applicable law), with or without legal process and with or without previous
notice or demand for performance, to exercise any and all rights afforded to a
secured party under the UCC or other Applicable Law. Without limiting the
generality of the foregoing, the Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of current law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of the
Grantor, and the Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which the Grantor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.
The Collateral Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section 9-
504(3) of the UCC as in effect in the State of New York or its equivalent in
other jurisdictions) of the Collateral Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the
34
<PAGE>
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay, valuation or appraisal on the part of the Grantor (all said rights being
also hereby waived and released to the extent permitted by law), the Collateral
or any part thereof offered for sale and may make payment on account thereof by
using any claim under any Loan Document then due and payable to such Secured
Party from the Grantor as a credit against the purchase price, and such Secured
Party may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to the Grantor therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be
35
<PAGE>
free to carry out such sale pursuant to such agreement and the Grantor shall not
be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose this Agreement and to sell the Collateral
or any portion thereof pursuant to a judgment or decree of a court or courts
having competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
Section 6.2 Application of Proceeds. The Collateral Agent shall
-----------------------
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash and any amounts paid to the Collateral Agent
pursuant to any Mortgage, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such collection or sale or otherwise in
connection with this Agreement, any of the Mortgages or any of the
Obligations, including all court costs and the reasonable fees and expenses
of its agents and one legal counsel for it and the holders of the Notes
(plus any necessary local counsel), the repayment of all advances made by
the Collateral Agent hereunder or under any Mortgage on behalf of the
Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any Mortgage;
SECOND, to the payment in full of the Obligations other than the
payment of the Accreted Value of the Notes and other than all monetary
obligations of the Grantor under the Guaranty Agreement (the amounts so
36
<PAGE>
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of such Obligations owed to them on the date of any such
distribution);
THIRD, to the payment in full of the Accreted Value of the Notes (the
amounts so applied to be distributed among the Secured Parties pro rata in
accordance with the Accreted Value of the Notes held by them on the date of
any such distribution);
FOURTH, to the payment in full of all monetary obligations of the
Grantor under the Guaranty Agreement (the amounts so applied to be
distributed among the Secured Parties pro rata in accordance with the
amounts of such Obligations owed to them on the date of any such
distribution); and
FIFTH, to the Grantor or its successors, or to whomsoever may lawfully
be entitled to receive the same.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement; provided, however, that the Collateral Agent shall apply such
-------- -------
proceeds, moneys or balances within six months of receipt thereof (such six
months to be subject to extension during any period for which the Collateral
Agent is not permitted by Applicable Law or this Agreement to apply such
proceeds, moneys or balances). Upon any sale of the Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the Collateral Agent or of the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
37
<PAGE>
ARTICLE VII
RIGHTS AND DUTIES OF COLLATERAL AGENT
-------------------------------------
Section 7.1 Delegation of Duties. The Collateral Agent may execute
--------------------
any of its duties under any Loan Document by or through agents or attorneys-in-
fact and shall be entitled to advice of counsel or other advisors concerning all
matters pertaining to its duties and rights hereunder. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise expressly required by Section 7.2 or 8.3.
Section 7.2 Powers; General Immunity. (a) Each Secured Party, by
------------------------
its acquisition of any Note or Canadian Note, irrevocably authorizes the
Collateral Agent to take such action on such Secured Party's behalf and to
exercise such powers under the Loan Documents as are specifically delegated to
it by the terms thereof, together with such powers as are reasonably incidental
thereto. The Collateral Agent shall have only those duties and responsibilities
which are expressly specified in the Loan Documents and it may perform such
duties by or through its agents or employees. The duties of the Collateral
Agent shall be mechanical and administrative in nature; and the Collateral Agent
shall not have by reason of any Loan Document a fiduciary relationship in
respect of any Secured Party; and nothing in any of the Loan Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
the Collateral Agent any obligations in respect of any of the Loan Documents
except as expressly set forth therein.
(b) The Collateral Agent shall not be responsible to any Secured Party
for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of any of the Loan Documents or for any Liens or
Guaranties granted by, or purported to be granted by, any of the Loan Documents,
or for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or other
38
<PAGE>
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Collateral Agent to
any Secured Party or by or on behalf of Buyer, Newco, the Grantor or the
Canadian Buyer, to the Collateral Agent or any Secured Party, or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
of the existence or possible existence of any Default or Event of Default.
(c) Notwithstanding anything to the contrary in this Agreement,
neither the Collateral Agent, nor any of its officers, directors, employees,
agents, investigators, consultants, attorneys-in-fact or affiliates shall be
liable to any Secured Party for any action taken or omitted under any of the
Loan Documents or in connection herewith or therewith unless, but only to the
extent, caused by its or their gross negligence or willful misconduct. If the
Collateral Agent shall request instructions with respect to any act or action
(including the failure to take an action) in connection with any of the Loan
Documents, the Collateral Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from the
Required Mortgage Lenders. Without prejudice to the generality of the
foregoing, (i) the Collateral Agent shall be entitled to rely, and shall be
-
fully protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys for the
Grantor or its Affiliates), accountants, experts and other professional advisors
selected by it; and (ii) no Secured Party shall have any right of action
--
whatsoever against the Collateral Agent as a result of the Collateral Agent
acting or (where so instructed) refraining from acting under any Loan Document
in accordance with the instructions of the Required Mortgage Lenders. The
Collateral Agent shall be entitled to refrain
39
<PAGE>
from exercising any power, discretion or authority vested in it under the Loan
Documents unless and until it has obtained the instructions of the Required
Mortgage Lenders.
(d) The agency hereby created shall in no way impair or affect any of
the rights and powers of, or impose any duties or obligations upon, the
Collateral Agent in its individual capacity as a Secured Party. With respect to
any Notes or Canadian Notes that it holds, the Collateral Agent shall have the
same rights and powers hereunder as any other Secured Party and may exercise the
same as though it were not performing the duties and functions delegated to it
hereunder. The Collateral Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of banking, trust, financial
advisory or any other business with the Grantor or any Affiliate of the Grantor
as if it were not performing the duties specified herein, and may accept fees
and other consideration from the Grantor or any Affiliate of the Grantor without
having to account for the same to the Secured Parties.
(e) Without limiting the foregoing, the Collateral Agent may deem and
treat the holder of any Note or any Canadian Note as the owner thereof for all
purposes. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Note or Canadian Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or Canadian Note or of any Note or Canadian
Note issued in exchange therefor.
(f) The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, on the Register and the copies of the "Register" (as
defined in the Canadian Notes), in each case as provided to the Collateral Agent
by the Grantor pursuant to Section 4.10, for purposes of determining the names
and addresses of the holders of the Notes and the Canadian Notes.
40
<PAGE>
Section 7.3 Non-Reliance on Agent. Each Secured Party, by its
---------------------
acquisition of any Note or Canadian Note, expressly acknowledges that neither
the Collateral Agent, nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates have made any representations or warranties to
it and that no act by the Collateral Agent hereinafter taken shall be deemed to
constitute any representation or warranty by such Person. The Collateral Agent
shall not have any duty or responsibility either initially or on a continuing
basis to make any such investigation or any such appraisal on behalf of the
Secured Parties or to provide any Secured Party with any credit or other
information with respect thereto, and the Collateral Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to the Secured Parties.
Section 7.4 Determinations Pursuant to Loan Documents. In each
-----------------------------------------
circumstance where, under any provision of any Loan Document, the Collateral
Agent shall have the right to grant or withhold any consent, exercise any
remedy, make any determination or direct any action under such Loan Document,
the Collateral Agent shall act in respect of such consent, exercise of remedies,
determination or action, as the case may be, only with the consent of and at the
direction of the Required Mortgage Lenders; provided, however, that (i) no such
-------- ------- -
consent of the Required Mortgage Lenders shall be required with respect to any
consent, determination or other matter that is, in the Collateral Agent's
reasonable judgment, ministerial or administrative in nature or provided for in
such Loan Document, (ii) the Collateral Agent is hereby authorized on behalf of
--
all of the Secured Parties, without the necessity of any further consent from
any Secured Party, from time to time prior to an Event of Default, to release
the security interests and Liens imposed by the Mortgage Documents in connection
with any dispositions permitted by the terms of the Mortgage Documents or as may
be required by Applicable Law and (iii) the Collateral Agent may in its
---
discretion take such action as it deems necessary, without the consent or
41
<PAGE>
direction of the Required Mortgage Lenders, if in the good faith determination
of the Collateral Agent the interests of the Secured Parties would be adversely
affected were such action to be delayed pending the obtaining of such consent or
direction. In each circumstance where any consent of or direction from the
Required Mortgage Lenders is required, the Collateral Agent shall send to the
Secured Parties a notice setting forth a description in reasonable detail of the
matter as to which consent or direction is requested and the Collateral Agent's
proposed course of action with respect thereto. In the event the Collateral
Agent shall not have received a response from any Secured Party within five
Business Days after the giving of such notice (unless such notice is given by
mail, in which case 10 Business Days after the giving of such notice), such
Secured Party shall be deemed to have agreed to the course of action proposed by
the Collateral Agent, provided that such notice states that a failure to respond
shall have the consequences specified in this sentence.
Section 7.5 Resignation of the Collateral Agent. The Collateral Agent
-----------------------------------
may at any time, by giving 30 days' prior written notice to the Grantor, resign
and be discharged from the responsibilities hereby created, such resignation to
become effective upon the earlier of (i) the acceptance of the appointment of a
-
successor pursuant to the next sentence of this Section or (ii) the appointment
--
of a successor by the Required Mortgage Lenders and the acceptance of such
appointment by such successor. If no successor shall be appointed and approved
pursuant to clause (ii) above within 30 days after the date of any such
resignation, the Collateral Agent may apply to any court of competent
jurisdiction to appoint a successor to act until a successor shall have been
appointed by the Required Mortgage Lenders as above provided or may, on behalf
of the Secured Parties, appoint a successor Collateral Agent. Any successor
Collateral Agent shall be (A) a bank with an office in New York, New York,
-
having a combined capital and surplus of at least $500,000,000 that is
authorized to perform the functions of the Collateral Agent hereunder or
42
<PAGE>
(B) the holder of a majority in outstanding Accreted Value of the Notes. Any
-
successor Collateral Agent shall assume the obligations of the retiring
Collateral Agent under the Landlord Lien Waiver dated the Closing Date among
BCI, the Grantor and Seller, as initial Collateral Agent.
ARTICLE VII
MISCELLANEOUS
-------------
Section 8.1 Security Interest Absolute; Release of Security Interest.
--------------------------------------------------------
(a) All rights of the Collateral Agent hereunder, the Security Interest and all
obligations of the Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Notes (or any
-
Guaranty endorsed thereon), any Mortgage or the Guaranty Agreement, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
-
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Notes (or any Guaranty endorsed thereon), any Mortgage or the Guaranty Agreement
or any other agreement or instrument, (c) any exchange, release or non-
-
perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance which
-
might otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Obligations or this Agreement, except the payment in
full of the Obligations and except for any matter approved in writing by the
Required Mortgage Lenders and the Collateral Agent.
(b) The consent or approval of any Secured Party shall not be required
for the release of any Collateral by the Collateral Agent to the Grantor in
accordance with the express provisions of this Agreement.
43
<PAGE>
Section 8.2 Successors. Whenever in this Agreement any of the
----------
parties hereto is referred to, such reference shall be deemed to include the
successors of such party (including, in the case of the Collateral Agent, any
successor Collateral Agent); and all covenants, promises and agreements by or on
behalf of the Grantor or the Collateral Agent that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
(including, in the case of the Collateral Agent, any successor Collateral
Agent).
Section 8.3 Collateral Agent Appointed Attorney-in-Fact. The Grantor
-------------------------------------------
hereby appoints the Collateral Agent the attorney-in-fact of the Grantor, with
power of substitution and in the Grantor's name or otherwise, for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Collateral Agent may reasonably deem
necessary or advisable to accomplish the purposes hereof, including, upon the
occurrence and during the continuance of an Event of Default, the power to (a)
-
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral or
any part thereof; (b) demand, collect, receive payment of, give receipt for and
-
give discharges and releases of all or any of the Collateral; (c) commence and
-
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (d)
-
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; and (e) use, sell, assign, transfer,
-
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
--------
however, that nothing herein contained shall be construed as requiring or
- -------
obligating the Collateral
44
<PAGE>
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken or omitted to be taken by the
Collateral Agent with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of the Grantor or to any
claim or action against the Collateral Agent other than any such matter to the
extent arising out of the gross negligence or willful misconduct of the
Collateral Agent. It is understood and agreed that the appointment of the
Collateral Agent as the agent and attorney-in-fact of the Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve the Grantor of any of its
obligations hereunder or under any Mortgage with respect to the Collateral or
any part thereof or impose any obligation on the Collateral Agent or any Secured
Party to proceed in any particular manner with respect to the Collateral or any
part thereof, or in any way limit the exercise by the Collateral Agent or any
Secured Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, by law or otherwise; provided,
--------
however, that the Collateral Agent's sole duty with respect to the custody,
- -------
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Collateral Agent deals with similar property for its own account.
Section 8.4 Collateral Agent's Expenses; Indemnification. (a) The
--------------------------------------------
Grantor will pay upon demand to the Collateral Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of one counsel
for it and the holders of the Notes (plus any necessary local counsel), of any
experts or agents and of any financial institution with which any Cash
Collateral Account is maintained, which the Collateral Agent may incur
45
<PAGE>
in connection with (i) the administration of the Mortgage Documents, (ii) the
- --
custody, preservation or investment of, or the sale of, collection from or other
realization upon any of the Collateral, (iii) the exercise, enforcement or
---
protection of any of the rights of the Collateral Agent hereunder or under any
Mortgage or (iv) the failure of the Grantor to perform or observe any of the
--
provisions hereof, other than any such expenses to the extent arising out of the
gross negligence or willful misconduct of the Collateral Agent.
(b) The Grantor will indemnify the Collateral Agent against, and hold
it harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses, incurred by or
asserted against it arising out of, in any way connected with, or as a result
of, the execution, delivery or performance of any Mortgage Document, or any
exercise of remedies thereunder, or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral or any Mortgage or Mortgaged
Property, whether or not a party thereto, other than, and only to the extent,
caused by the gross negligence or willful misconduct of the Collateral Agent.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations. The provisions of this Section shall remain operative
and in full force and effect regardless of the termination of this Agreement,
the consummation of the transactions contemplated hereby, the invalidity or
unenforceability of any term or provision of this Agreement, any Note, the
Guaranty Agreement or any Mortgage, or any investigation made by or on behalf of
the Collateral Agent. All amounts due under this Section shall be payable on
written demand therefor.
Section 8.5 Waivers; Amendment. (a) No failure or delay of the
------------------
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power,
46
<PAGE>
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder are
cumulative and are not exclusive of any rights or remedies which it would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by the Grantor therefrom shall in any event be effective unless the
same shall be permitted by Section 8.5(b), and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice or demand on the Grantor in any case shall entitle the Grantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with paragraph 14 of the Notes.
Section 8.6 Termination. This Agreement (including the
-----------
representations and warranties herein) and the Security Interest shall terminate
when and only when all the Obligations have been paid in full. Upon such
termination, the Collateral Agent shall forthwith assign, transfer and deliver
any Collateral in the possession or under the control of the Collateral Agent
(including any Collateral in any Cash Collateral Account) to or on order of the
Grantor and, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
Any execution and delivery of such documents shall be without recourse to or
warranty by the Collateral Agent.
Section 8.7 Severability. If any provision of this Agreement is
------------
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of
47
<PAGE>
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, Sections or
subsections of this Agreement shall not affect the remaining portions of this
Agreement.
Section 8.8 Notices. All notices and other communications made in
-------
connection with this Agreement shall be in writing. Any notice or other
communication in connection herewith shall be deemed duly given (a) four
Business Days after it is sent by express, registered or certified mail, return
receipt requested, postage prepaid or (b) one Business Day after it is sent by
overnight courier, in each case, addressed as follows:
(i) if to the Grantor:
CDW Realco, Inc.
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to:
CDW Acquisition Corporation
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
and to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
48
<PAGE>
(ii) if to the Collateral Agent:
Westinghouse Electric Corporation
Westinghouse Building
Gateway Center
11 Stanwix Center
Pittsburgh, PA 15222
Telecopy: (412) 642-3819
Telephone: (412) 244-2000
Attention: Treasurer
with a copy to the attention
of the General Counsel
(telecopy: (412) 642-5671)
or, in each case, at such other address as may be specified in writing to the
other parties hereto. Any party may give any notice or other communication in
connection herewith using any other means (including, without limitation,
personal delivery, messenger service, telecopy, telex or ordinary mail), but no
such notice or other communication shall be deemed to have been duly given
unless and until it is actually received by the individual for whom it is
intended.
Section 8.9 Headings. The headings contained in this Agreement are
--------
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
Section 8.10 Entire Agreement. This Agreement, together with the
----------------
Acquisition Agreement, the Notes, the Canadian Notes, the Mortgages and the
Guaranty Agreement, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
Section 8.11 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be
49
<PAGE>
deemed an original and all of which shall together constitute one and the same
instrument.
Section 8.12 Governing Law. This Agreement shall be governed in all
-------------
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof.
Section 8.13 No Third Party Beneficiaries. Nothing in this Agreement
----------------------------
shall confer any right upon any person or entity other than the parties hereto,
the Secured Parties and each such party's respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CDW REALCO, INC.,
By /s/
---------------------------------------
Name:
Title:
WESTINGHOUSE ELECTRIC CORPORATION, as Collateral
Agent,
By /s/
---------------------------------------
Name:
Title:
50
<PAGE>
Exhibit A
---------
Debtor: Secured Party:
WESCO Distribution, Inc. Westinghouse Electric
One Riverfront Center Corporation, as
Pittsburgh, PA 15222 Collateral Agent
Attention: Chief Financial Westinghouse Building
Officer Gateway Center
11 Stanwix Street
Pittsburgh, PA 15222
Attention: Treasurer
All of Debtor's accounts, chattel paper, documents, general intangibles,
instruments, or securities (whether certificated or uncertificated), in each
case now in existence or hereafter arising or acquired, and all proceeds of or
substitutions for, any and all of the foregoing collateral and, to the extent
not otherwise included, all payments under insurance or any indemnity, warranty,
or guaranty payable by reason of loss or damage to or otherwise with respect to
any of the foregoing collateral, and all cash, wherever located.
<PAGE>
[to be typed on face of UCC form]
All of Debtor's accounts, chattel paper, documents, general intangibles,
instruments or securities now or hereafter arising or acquired, and all proceeds
of any of the foregoing, and all payments under insurance or any indemnity
payable with respect to any of the foregoing, and all cash, all as more fully
described on the attached Schedule A.
2
<PAGE>
Schedule 3.02A
to
Cash Collateral Agreement
Filings
-------
UCC-1 financing statements, in substantially the form of Exhibit A attached
hereto, filed in the following jurisdictions:
Delaware
--------
Secretary of State
New York
--------
Secretary of State
Pennsylvania
------------
Secretary of State
Allegheny County
<PAGE>
EXHIBIT 4.5
-----------
GUARANTEED FIRST MORTGAGE NOTE due February 28, 2001
Original Principal Amount: C$6,757,250 Toronto, Ontario
R-1 February 28, 1994
1. OBLIGATION TO PAY
FOR VALUE RECEIVED, the undersigned CDW Canada Acquisition Inc., an
Ontario corporation ("MAKER"), promises to pay to the order of WESTINGHOUSE
CANADA INC., a corporation organized and existing under the laws of Canada, or
registered assigns ("PAYEE"), the principal sum of C$6,757,250, plus interest
accrued thereon from and including the date hereof and interest upon such
interest accrued at the rate and in the manner provided in paragraph 3 of this
Note.
2. DEFINITIONS
The following terms as used herein shall be defined as follows:
"ADDITIONAL PRINCIPAL AMOUNT" of any Note with respect to any
Interest Date shall mean the amount of interest accrued on the Principal Amount
of such Note equal to the product of (A) the Interest Rate, multiplied by (B)
- -
(1) in the case of the Additional Principal Amount with respect to the first
-
Interest Date following the date of issuance of such Note, the Original
Principal Amount of such Note, or (2) in the case of each Additional Principal
-
Amount with respect to each Interest Date thereafter, the Principal Amount of
such Note as of the immediately preceding Interest Date after giving effect to
any partial prepayment of such Note, multiplied by (C) a fraction (X) the
- -
numerator of which is the actual number of days elapsed during the period (1) in
-
the case of the Additional Principal Amount with respect to the first Interest
Date following the Closing
<PAGE>
Date, from and including the Closing Date to but excluding such first Interest
Date, or (2) in the case of each Additional Principal Amount with respect to
-
each Interest Date thereafter, from and including the immediately preceding
Interest Date to but excluding the Interest Date with respect to which such
calculation is being made, and (Y) the denominator of which is 365 or 366, as
-
appropriate.
"ADMINISTRATIVE AGENTS" shall mean the respective administrative
agents under the Canadian Senior Credit Agreement and the U.S. Senior Credit
Agreement or under any extension, refunding, renewal or refinancing thereof.
"ADVANCES" shall mean any loans or other advances of credit under the
Canadian Senior Credit Agreement (or any extension, refunding, renewal or
refinancing thereof).
"AFFILIATE" shall mean as to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person. "Control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities by contract or credit arrangement, as trustee or executor,
or otherwise. Each of the C&D Fund, Buyer, Newco, Realco and Maker shall be
regarded as Affiliates of each other; Seller and Westinghouse Canada Inc. shall
be regarded as Affiliates of each other; and none of the C&D Fund, Buyer, Newco,
Realco or Maker, on the one hand, and Seller or Westinghouse Canada Inc., on the
other hand, shall be regarded as Affiliates of each other.
"APPRAISED VALUE" with respect to any Mortgaged Property shall mean
the amount that would be paid for such Mortgaged Property by a willing buyer who
purchases such Mortgaged Property "as is" and "where is" in a transaction
negotiated on an arm's length basis in which neither such
2
<PAGE>
buyer nor the seller of such Mortgaged Property is under any compulsion to
engage in the transaction.
"APPROVED APPRAISER" shall mean (i) any of The Manufacturer's
-
Appraisal Company, Cushman & Wakefield and Binswanger & Co. or (ii) any other
--
independent real estate appraisal firm approved by Maker and the Required
Mortgage Lenders.
"BANK" shall mean each financial institution that is listed on the
signature pages of the Canadian Senior Credit Agreement and its permitted
successors, assigns and transferees under the Canadian Senior Credit Agreement.
"BCI" shall mean Barclays Business Credit, Inc.
"BENEFICIAL OWNER" shall mean a "beneficial owner", as defined in Rule
13d-3 under the United States Securities Exchange Act of 1934, as amended (or
any successor provision).
"BOARD OF DIRECTORS" shall mean the Board of Directors of Buyer.
"BORROWING BASE" shall mean the sum of the value of certain accounts
receivable plus the value of certain inventory, in each case of Maker and its
----
Subsidiaries, that are eligible under the Canadian Senior Credit Agreement (or
any extension, refunding, renewal or refinancing thereof) to support Advances
made thereunder, provided that, for the purpose of determining the maximum
--------
Advances permitted by the Borrowing Base immediately prior to and immediately
after giving effect to a Mixed Asset Sale, any changes pursuant to an amendment,
supplement, waiver or other modification to the Canadian Senior Credit Agreement
in the method of calculating the Borrowing Base, and in the extent to which a
Borrowing Base of a given size and composition supports Advances, that take
effect within 10 Business Days prior to the date of such Mixed Asset Sale shall
be ignored.
3
<PAGE>
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in Toronto, Ontario are authorized or
required to close.
"BUYER" shall mean CDW Holding Corporation, a Delaware corporation.
"C&D FUND" shall mean The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership.
"CD&R" shall mean Clayton, Dubilier & Rice, Inc., a Delaware
corporation.
"CANADIAN DOLLARS" and "C$" shall mean dollars in the lawful currency
of Canada.
"CANADIAN SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of the Closing Date, among Maker, Barclays Bank of Canada, as
Administrative Agent, BCI, as Collateral Monitoring Agent, and the Banks, as
amended, supplemented, waived or otherwise modified from time to time.
"CASH COLLATERAL AGREEMENT" shall mean the Cash Collateral and
Security Agreement, dated as of the Closing Date, between Maker and Mortgagee,
as amended, supplemented, waived or otherwise modified from time to time.
"CASH CONSIDERATION" shall mean, in respect of any Restricted Asset
Sale, any consideration for such sale or other disposition received in the form
of cash.
"CHANGE OF CONTROL" shall be deemed to occur at any time that (a)
-
prior to the consummation of the Specified Public Offering, CD&R, the C&D Fund,
Seller and their respective Affiliates cease to have the power collectively
(whether through the ownership of Voting Stock, by contract with one or more
holders of Voting Stock, by irrevocable proxy or by provision of the certificate
of incorporation of
4
<PAGE>
Buyer) to elect a majority of the members of the Board of Directors; (b) after
-
the consummation of the Specified Public Offering, any Person or group (as
described in Section 13(d)(3) of the United States Securities Exchange Act of
1934, as amended), other than either (x) CD&R, the C&D Fund and their respective
-
Affiliates or (y) Seller or any such group of which Seller is a member, is or
-
becomes the Beneficial Owner of Voting Stock that represents more than (i) 30%
-
in the aggregate of the total Voting Stock of Buyer then outstanding and (ii)
--
the total Voting Stock of Buyer of which CD&R, the C&D Fund and their respective
Affiliates are Beneficial Owners; (c) Buyer is the Beneficial Owner of less than
-
all the outstanding equity securities of Newco or of Realco; (d) Newco is the
-
Beneficial Owner of less than all the outstanding equity securities of Realco or
of Maker; or (e) during any two year period, individuals who at the beginning of
-
such period constituted the Board of Directors (together with any new directors
whose election by the Board of Directors, was approved by a vote of a majority
of the directors of Buyer then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors.
"CHANGE PREPAYMENT DATE" shall have the meaning specified in paragraph
7(b).
"CLOSING DATE" shall mean February 28, 1994.
"CONVERSION RATE" shall mean 0.73995 United States Dollars per
Canadian Dollar.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
5 provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
5
<PAGE>
"EXCESS RESERVED AMOUNT" shall mean, with respect to any Restricted
Asset Sale, an amount equal to the excess, if any, of the initial balance of the
Reserved Amount established in respect of such Restricted Asset Sale over the
aggregate amount of cash paid by Maker to satisfy the Permitted Liabilities
underlying such Reserved Amount at the time the reserves in respect of such
Reserved Amount are reversed.
"FAIR MARKET VALUE" with respect to any Mortgaged Property or
Mortgaged Properties to be sold or disposed of in a single Restricted Asset Sale
or a series of related Restricted Asset Sales (a) shall mean the amount agreed
-
between Maker and the Majority Holders as the fair market value of such
Mortgaged Property or Mortgaged Properties or (b) if such agreement is not
-
reached within ten days of notice of the proposed Restricted Asset Sale to each
holder of Notes at the time outstanding, shall mean the Appraised Value of such
Mortgaged Property or Mortgaged Properties, as determined by an Approved
Appraiser selected and compensated by Maker, such determination to be set forth
in writing in reasonable detail by such Approved Appraiser and given to Maker
and to holders of the Notes at the time outstanding. Notwithstanding the
previous sentence, (i) Maker shall endeavor in good faith to select the Approved
-
Appraiser for a given transaction on a basis such that the Restricted Asset
Sales through the date of such transaction shall be allocated approximately
evenly (by number of Restricted Asset Sales and series of related Restricted
Asset Sales) among the Approved Appraisers and (ii) in the event of a Major
--
Asset Sale, within five Business Days after receipt by the holders of the
written appraisal contemplated by the preceding sentence, the Majority Holders
may require that a second Approved Appraiser determine the Appraised Value of
the Mortgaged Property or Mortgaged Properties being disposed of in such Major
Asset Sale, in which event (A) such holders shall be responsible for the
-
selection and compensation of such second Approved Appraiser, (B) such second
-
Approved Appraiser shall deliver its determination of Appraised Value to Maker
on a date not less than five
6
<PAGE>
Business Days prior to the scheduled closing date of such Major Asset Sale, such
determination to be set forth in writing in reasonable detail by such second
approved Appraiser and (C) the Fair Market Value shall be the average of the
-
respective amounts determined as the Appraised Value by the first and second
Approved Appraisers.
"GAAP" shall mean generally accepted accounting principles as in
effect in Canada.
"GUARANTY" shall mean, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable.
"INTEREST DATE" shall mean each February 28 and August 31 from and
including August 31, 1994, to and including the Interest Date immediately prior
to Maturity.
"INTEREST RATE" shall mean 8% per annum.
"LIEN" shall mean any mortgage, pledge, assignment, hypothecation,
security deposit arrangement, encumbrance (statutory or other), charge or other
security interest or any preference, priority or other lien, security agreement
or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing).
"MAJOR ASSET SALE" shall mean any Mixed Asset Sale (or series of
related transactions involving one or more Mixed Asset Sales to a single
purchaser or group of related purchasers) including a Mortgaged Property or
Mortgaged
7
<PAGE>
Properties the Fair Market Value of which exceeds, in the aggregate,
US$15,000,000.
"MAJORITY HOLDERS" shall mean the holders of at least a majority of
the aggregate Principal Amount of (plus accrued interest from the immediately
preceding Interest Date on) the Notes at the time outstanding.
"MAKER" shall have the meaning specified in paragraph 1.
"MATURITY" with respect to any Note shall mean the earlier of (a)
-
Stated Maturity or (b) the date on which (whether by acceleration or prepayment
-
or otherwise) all or any part of the Principal Amount of such Note becomes due
and payable.
"MIXED ASSET SALE" shall mean any sale or disposition of a Mortgaged
Property or Mortgaged Properties to a Person, if such Person or any of its
Affiliates is acquiring other assets from Maker or an Affiliate of Maker in
connection with such sale or disposition.
"MORTGAGE DOCUMENTS" shall mean (a) each mortgage of real property
-
executed by Maker that by its terms secures the performance by Maker of its
obligations under the Notes and (b) the Cash Collateral Agreement.
-
"MORTGAGED PROPERTY" shall mean the Mortgaged Property, as defined in
each of the Mortgage Documents.
"MORTGAGEE" shall mean Westinghouse Canada Inc. in its capacity as
Mortgagee under the Mortgage Documents and as Collateral Agent under the Cash
Collateral Agreement, or any successor Mortgagee or Collateral Agent.
"NET PROCEEDS" of any Restricted Asset Sale shall mean the proceeds of
such Restricted Asset Sale after (a) provision for all income, title, recording
-
or other taxes measured by or resulting from such Restricted Asset
8
<PAGE>
Sale, to the extent payable by Maker or any of its Affiliates, after taking into
account all available deductions and credits, (b) payment of all reasonable
-
brokerage commissions, reasonable investment banking and legal fees and other
reasonable fees and expenses, to the extent payable by Maker or any of its
Affiliates, related to such Restricted Asset Sale (other than any such amounts
payable to any Affiliate of Maker), and (c) deduction of an amount equal to the
-
initial balance of the Reserved Amount, if any, in respect of such Restricted
Asset Sale; provided that if the reserves underlying such Reserved Amount are
--------
reversed, any Excess Reserved Amount with respect to such Restricted Asset Sale
shall be added to the Net Proceeds of such Restricted Asset Sale.
"NET PROCEEDS ALLOCABLE TO PAYEE" shall have the meaning specified in
paragraph 6(3).
"NET WORTH" shall mean, as to any Person at any time, the excess of
the total assets over the total liabilities of such Person at such time,
determined on a consolidated basis in accordance with GAAP.
"NEWCO" shall mean CDW Acquisition Corporation, a Delaware corporation
and a Wholly Owned Subsidiary of Buyer.
"NOTES" shall mean the Guaranteed First Mortgage Note due February 28,
2001, issued by Maker on the Closing Date in a principal amount of C$6,757,250,
and all securities issued upon transfer or exchange thereof. This Note is one
of the Notes.
"ORIGINAL PRINCIPAL AMOUNT" of any Note is the amount stated as the
Original Principal Amount on the face of such Note.
"PAYEE" shall have the meaning specified in paragraph 1.
9
<PAGE>
"PERMITTED LIABILITY", in respect of any Restricted Asset Sale, shall
mean any liability of Maker to the extent (i) arising out of or associated with
-
the assets included in such Restricted Asset Sale and (ii) retained by Maker or
--
Newco after such Restricted Asset Sale, including, without limitation, any
liability relating to environmental matters and any liability for
indemnification obligations arising out of such Restricted Asset Sale, but
excluding any liability to the extent arising out of any breach by Maker of its
obligations under the Notes and the Mortgage Documents.
"PERMITTED NON-CASH CONSIDERATION" shall mean, in respect of any
Restricted Asset Sale, any consideration for such Restricted Asset Sale received
in the form of notes issued by the purchaser (or an Affiliate thereof) in such
Restricted Asset Sale, provided that such notes (a) are secured by a perfected,
-------- -
first priority mortgage lien on the Mortgaged Property or Mortgaged Properties
sold in such Restricted Asset Sale, (b) are freely transferable (subject only to
-
compliance with applicable securities laws), (c) have a scheduled maturity date
-
no later than the later of (i) Stated Maturity or (ii) the five-year anniversary
- --
of the date on which such notes are issued and (d) bear cash interest (i)
- -
payable not less often than semiannually and (ii) at a rate not less than the
--
Government of Canada Yield (determined as of the date on which such notes are
issued) plus 250 basis points. The "Government of Canada Yield" shall be equal
to the yield to maturity on such date, compounded semi-annually, which a non-
callable Government of Canada Bond would carry if issued, in Canadian Dollars in
Canada, at 100% of its principal amount on such date with a term to maturity
equal to the weighted average life to maturity of such Permitted Non-Cash
Consideration as of such date of determination. The Government of Canada Yield
shall be provided by two investment dealers that are members of the Investment
Dealers Association of Canada selected by Maker and acceptable to Payee. Such
implied yield shall be determined, if necessary, by interpolating linearly
between yields so provided by such investment dealers. The
10
<PAGE>
Government of Canada Yield shall be computed to the fifth decimal place (one
thousandth of a percentage point) and rounded to the fourth decimal place (one
hundredth of a percentage point).
"PERSON" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"PREPAYMENT DATE" shall have the meaning specified in paragraph 7(c).
"PRINCIPAL AMOUNT" of any Note on any date of determination shall mean
(a) the sum of (i) the Original Principal Amount of such Note plus (ii) the
- - ---- --
aggregate of the Additional Principal Amounts of such Note accrued from and
including the date of issuance of such Note to and including the Interest Date
coinciding with or immediately preceding the date of determination minus (b)
----- -
each partial prepayment of such Note made on or prior to such date of
determination (it being understood that the Principal Amount of such Note shall
be reduced by the amount of each such partial prepayment as of the date on which
such partial prepayment is made).
"REALCO" shall mean CDW Realco, Inc., a Delaware corporation and a
Wholly Owned Subsidiary of Buyer.
"REGISTER" shall have the meaning specified in paragraph 9(a).
"REQUIRED MORTGAGE LENDERS" shall mean the holders of at least a
majority of the sum of (a) the aggregate Principal Amount (plus accrued interest
-
from the immediately preceding Interest Date on) the Notes at the time
outstanding and (b) the aggregate principal amount of (plus any original issue
-
discount accrued on) the U.S. Notes at the time outstanding. For the purpose of
this definition,
11
<PAGE>
Canadian Dollar amounts shall be converted to United States Dollar amounts at
the Conversion Rate.
"RESERVED AMOUNT" shall mean, in respect of any Restricted Asset Sale,
an amount equal to the initial balance of any Liability Reserve (as defined in
the Cash Collateral Agreement) established by Maker, in accordance with GAAP at
the time of such Restricted Asset Sale in connection with any Permitted
Liabilities in respect of such Restricted Asset Sale, as adjusted from time to
time pursuant to Section 5.03 of the Cash Collateral Agreement.
"RESPONSIBLE OFFICER" of any Person shall mean any of the following
officers of such Person: (a) the chief executive officer or the president of
-
such Person and, with respect to financial matters, the chief financial officer,
the treasurer or the controller of such Person, (b) any vice president of such
-
Person or, with respect to financial matters, any assistant treasurer or
assistant controller of such Person, who has been designated in writing to
Mortgagee as a Responsible Officer by such chief executive officer or president
of such Person or, with respect to financial matters, the chief financial
officer, the treasurer or the controller of such Person and (c) with respect to
-
paragraphs 6(2) and 16 and without limiting the foregoing, the general counsel
of such Person.
"RESTRICTED ASSET SALE" shall mean the sale or disposition of any
Mortgaged Property or of assets sold in a Mixed Asset Sale, as the case may be,
other than in respect of a casualty to or condemnation of any Mortgaged
Property.
"SELLER" shall mean Westinghouse Electric Corporation, a Pennsylvania
corporation.
"SHORTFALL AMOUNT" shall have the meaning specified in paragraph 6(3).
"SIMPLE INTEREST COMPONENT" on any date of determination with respect
to any Note means that portion of
12
<PAGE>
the Principal Amount of such Note equal to the aggregate amount of interest
which has accrued on the Original Principal Amount of such Note from the Closing
Date to the date of determination minus the aggregate amount of any partial
prepayments previously applied to the Simple Interest Component.
"SPECIFIED PREPAYMENT" shall mean any prepayment in part of the Notes
or the U.S. Notes to the extent not made (i) out of the proceeds of the sale or
-
disposition of any Mortgaged Property, (ii) out of the proceeds from the
--
enforcement of any Mortgage Document or U.S. Mortgage Document, (iii) out of
---
amounts released from the Lien of any Mortgage Document (other than any Excess
Reserved Amounts, to the extent that such Excess Reserved Amounts do not
constitute Net Proceeds Allocable to Payee) or (iv) otherwise pursuant to any
--
Mortgage Document.
"SPECIFIED PUBLIC OFFERING" shall mean the consummation of a bona fide
public offering of common stock of Buyer (the "Common Stock") pursuant to a
registration statement filed under the United States Securities Act of 1933, as
amended, which offering is underwritten by a syndicate of underwriters led by
one or more underwriters at least one of which is an underwriter of recognized
national standing and which (whether alone or together with any other prior
registered offerings) results in (a) an aggregate percentage of the
-
outstanding Common Stock (on a fully diluted basis) being held by the public
that is greater than the percentage of the outstanding Common Stock (on a fully
diluted basis) held by Seller upon, and after giving effect to, the consummation
of such offering, and (b) Buyer being subject to the reporting requirements of
-
Section 13 of the United States Securities Exchange Act of 1934, as amended,
other than by reason solely of Section 15(d) of the United States Securities
Exchange Act of 1934, as amended.
"STATED MATURITY" shall mean February 28, 2001.
13
<PAGE>
"SUBSIDIARY" of any Person shall mean a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"UNITED STATES DOLLARS" and "US$" shall mean dollars in the lawful
currency of the United States of America.
"U.S. MORTGAGE DOCUMENTS" shall mean (a) each mortgage of real
property that by its terms secures the performance by Realco of its obligations
under the U.S. Notes and (b) the Cash Collateral and Security Agreement dated as
of the Closing Date between Realco and Seller.
"U.S. NOTES" shall mean the "Notes", as defined in the first mortgage
note issued on the Closing Date by Realco to Seller.
"U.S. SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement, dated
as of the Closing Date, among Newco, BCI, as Administrative Agent and Collateral
Agent, Barclays Bank PLC, as Managing Agent, and the financial institutions from
time to time party thereto, as amended, supplemented, waived or otherwise
modified from time to time.
"VOTING STOCK" shall mean, with respect to any corporation or other
entity, any shares of stock or other ownership interests of such corporation or
entity whose holders are entitled under ordinary circumstances to vote for the
election of directors of such corporation or to manage any such other entity
(irrespective of whether at the time stock or ownership interests of any other
class or
14
<PAGE>
classes shall have or might have voting power by reason of the happening of any
contingency).
"WHOLLY OWNED" as applied to any Subsidiary of a Person, shall mean a
Subsidiary of such Person all the outstanding shares (other than shares, if any,
required to qualify directors under applicable law) of every class of stock of
which is at the time owned by such Person or by one or more Wholly Owned
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Subsidiaries of such Person.
3. INTEREST
(a) The Principal Amount of this Note outstanding from time to time
shall bear interest from the date of this Note until due, whether upon maturity,
by acceleration or otherwise, at a rate of 8% per annum. On each Interest Date
prior to Maturity, interest accrued on this Note in the amount of the Additional
Principal Amount shall be compounded and added to the Principal Amount of this
Note, and shall itself bear interest. Except as otherwise specifically stated
in this Note, no payment of interest or principal will be due prior to Maturity.
On Stated Maturity, the Principal Amount of this Note, with accrued interest
from the immediately preceding Interest Date, shall be due and payable in full.
(b) If any amount of Principal Amount of or accrued interest on this
Note shall not be paid upon Maturity thereof, such Principal Amount and, to the
extent permitted by applicable law, accrued interest, shall bear interest
payable on demand, from the date of such Maturity to the date such amount is
paid in full, at a rate equal to 9% per annum, compounded semi-annually.
4. PAYMENTS
(a) Maker will pay all sums becoming due on this Note by the method
and at the address specified for such
15
<PAGE>
purpose in paragraph 4(b) without the presentation or surrender of this Note or,
subject to the next sentence, the making of any notation hereon, except that any
Note paid or prepaid in full shall be surrendered to Maker as a condition to
such payment or prepayment and shall be cancelled and shall not be reissued.
Upon any partial prepayment of this Note, Payee shall endorse hereon the amount
and date of such partial prepayment, provided that Payee's failure to do so
--------
shall not affect Maker's obligations under this Note.
(b) All cash payments due hereunder shall be made by wire transfer of
immediately available funds prior to noon, Toronto time, on the due date for
payment thereof to such bank account as shall be designated by Payee to Maker in
writing at least five Business Days prior to the due date for such payment. For
so long as Westinghouse Canada Inc. is Payee, such account shall be the account
of Westinghouse Canada Inc., Toronto Dominion Bank, Jackson Square Branch,
Hamilton, Ontario, Account No. 0985-159, bank transit number 2512, unless a
different account shall be designated by Payee. Any cash payment due hereunder
on a day that is not a Business Day shall be made on the first Business Day
following the due date for such payment.
(c) As hereinafter provided, Maker shall have the right to prepay
this Note in full or in part at any time with accrued interest on the Principal
Amount so prepaid through the date of such prepayment and without, in either
case, penalty.
5. EVENTS OF DEFAULT AND REMEDIES
Upon the occurrence of an Event of Default (as hereinafter defined),
the entire Principal Amount of (plus accrued interest from the immediately
preceding Interest Date on) this Note shall, automatically, in the case of any
Event of Default described in subdivision (c) or (d) of this paragraph 5 (other
than such an Event of Default described in clause (i) of subdivision (c) or
described in clause (vi) of subdivision (c) by virtue of reference in such
16
<PAGE>
clause (vi) to such clause (i)) or an Event of Default described in subdivision
(a) of this paragraph 5 occurring at Stated Maturity, or by written notice of
the Required Mortgage Lenders delivered to Maker, in the case of any other Event
of Default, become immediately due and payable, provided that if an Event of
--------
Default under subdivision (e) has occurred and is continuing, and the entire
principal amount of (plus accrued original issue discount on) the U.S. Notes has
become due and payable prior to Stated Maturity, such written notice to Maker
may be given by the Majority Holders.
The occurrence of any of the following events shall constitute an
Event of Default hereunder:
(a) Maker shall fail to pay any amount of Principal Amount of (plus
accrued interest from the immediately preceding Interest Date on) any Note
when the same becomes due and payable; or
(b) Maker shall fail to perform or observe any term, covenant or
agreement to be performed or observed by it that is contained in any Note
or any Mortgage Document (other than any failure referred to in subdivision
(a) above), and any such failure shall remain unremedied for forty-five
(45) days after written notice thereof shall have been given to Maker by
Mortgagee; or
(c) Maker shall (i) be generally not paying its debts as they become
-
due, (ii) file, or consent by answer or otherwise to the filing against it
--
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment
---
for the benefit of its creditors, (iv) consent to the appointment of a
--
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v)
-
be
17
<PAGE>
adjudicated insolvent or (vi) take corporate action for the purpose of any
--
of the foregoing; or
(d) a court or governmental authority of competent jurisdiction shall
enter an order appointing a custodian, receiver, trustee or other officer
with similar powers with respect to Maker or with respect to any
substantial part of its property (other than any such order consented to by
Maker), or an order for relief shall be entered in any case or proceeding
for liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of Maker or any petition for any
such relief shall be filed against Maker and such petition shall not be
dismissed within sixty (60) days; or
(e) an "Event of Default" under the U.S. Notes shall have occurred
and be continuing.
Presentment, demand, protest and notice of dishonor are hereby waived
by Maker.
6. COVENANTS
Covenants of Maker. Maker covenants and agrees that, so long as this
------------------
Note shall remain unpaid, Maker will perform and observe each and all of the
covenants set forth in clauses (1), (2) and (4) below and Maker will not, except
with the prior written consent of the Majority Holders, take any action
prohibited by the covenants set forth in clauses (3) and (5) below:
(1) Payment of Principal Amount. Maker will duly and punctually pay
---------------------------
or cause to be paid the Principal Amount of (plus accrued interest from the
immediately preceding Interest Date on) the Notes in accordance with the
terms of the Notes.
18
<PAGE>
(2) Events of Default. Within five Business Days of a Responsible
-----------------
Officer of Maker becoming aware of any Event of Default, Maker will deliver
to Payee a notice describing such Event of Default, its status and what
action Maker is taking or proposes to take with respect thereto.
(3) Sale of Mortgaged Properties. Maker will not make or permit any
----------------------------
Restricted Asset Sale unless the following conditions have been satisfied:
(a) such Restricted Asset Sale is to a Person who is not an
Affiliate of Maker and (i) if such Restricted Asset Sale does not
-
constitute a Mixed Asset Sale, an amount equal to at least 75% of the
Net Proceeds Allocable to Payee (determined as of the closing date of
such Restricted Asset Sale) is in the form of Cash Consideration and
the balance of such Net Proceeds Allocable to Payee is in the form of
Permitted Non-Cash Consideration; or (ii) if such Restricted Asset
--
Sale constitutes a Mixed Asset Sale:
(A) if any amount of Net Proceeds Allocable to Payee (determined as
of the closing date of such Restricted Asset Sale) is in a form
other than Cash Consideration, such amount of Net Proceeds
Allocable to Payee is in the form of Permitted Non-Cash
Consideration in an amount not exceeding 25% of the Fair Market
Value of the Mortgaged Property or Mortgaged Properties disposed
of in such Restricted Asset Sale and the balance of such Net
Proceeds Allocable to Payee is in the form of Cash Consideration;
(B) if such Restricted Asset Sale constitutes a Major Asset Sale, the
amount of the Net Proceeds Allocable to Payee (determined as of
the closing date of such Restricted Asset
19
<PAGE>
sale) is at least 75% of the Fair Market Value of the Mortgaged
Property or Mortgaged Properties disposed of in such Restricted
Asset Sale;
(C) after giving effect to such Restricted Asset Sale, the aggregate
Shortfall Amount for all Mixed Asset Sales to the date of
determination (such "Shortfall Amount" to be converted into
United States Dollars at the Closing Date Exchange Rate) does not
exceed US$8,000,000, reduced by the aggregate "Shortfall Amount"
under paragraph 6(c)(6) of the U.S. Notes to the date of
determination, and increased by the aggregate amount of any
Specified Prepayments made on or prior to the date of
determination);
(D) not less than 30 days prior to the closing date of such
Restricted Asset Sale (45 days if such Restricted Asset Sale
would constitute a Major Asset Sale), Maker delivers to Payee
written notice of such Restricted Asset Sale; and
(E) not less than five Business Days prior to the closing date of
such Restricted Asset Sale (30 days if such Restricted Asset Sale
would constitute a Major Asset Sale), Maker delivers to Payee any
written appraisal required by clause (b) of the first sentence of
the definition of "Fair Market Value" in paragraph 2; and
(b) (i) all Cash Consideration constituting Net Proceeds
-
Allocable to Payee (determined as of the closing date of such
Restricted Asset Sale) in respect of such Restricted Asset Sale is
immediately paid over by Maker to Mortgagee and held and applied
pursuant to the Cash Collateral
20
<PAGE>
Agreement, (ii) any Permitted Non-Cash Consideration (and related
--
security documentation) constituting Net Proceeds Allocable to Payee
in respect of such Restricted Asset Sale is immediately delivered by
Maker to Mortgagee and held and applied pursuant to the Cash
Collateral Agreement and (iii) the initial balance of the Reserved
---
Amount, if any, in respect of such Restricted Asset Sale (A) in the
-
case of any Mixed Asset Sale in respect of which the Shortfall Amount
is equal to zero, is immediately paid over by Maker to Newco and (B)
-
in the case of any other Restricted Asset Sale, is immediately paid
over by Maker to Mortgagee and held and applied pursuant to the Cash
Collateral Agreement.
For purposes of the foregoing, (x) "NET PROCEEDS ALLOCABLE TO PAYEE"
-
shall mean (1) in respect of a Restricted Asset Sale which does not constitute a
-
Mixed Asset Sale, all the Net Proceeds of such Restricted Asset Sale or (2) in
-
respect of a Restricted Asset Sale that constitutes a Mixed Asset Sale, the Net
Proceeds of such Restricted Asset Sale (including any Excess Reserved Amount in
respect of such Restricted Asset Sale) remaining (not to exceed 100% of the Fair
Market Value of the Mortgaged Property or Mortgaged Properties disposed of in
such Restricted Asset Sale, it being understood that any amounts of Net Proceeds
of such Restricted Asset Sale (including any Excess Reserved Amount in respect
of such Restricted Asset Sale) in excess of such Fair Market Value shall be
available for the account of Maker or, if held or received by Mortgagee in the
form of cash or cash equivalents under the Cash Collateral Agreement, released
to Maker within two Business Days of receipt) after a portion of the Cash
Consideration is retained by or on behalf of Maker or is applied to reduce the
outstanding Advances (such portion to be limited to the excess, if any, of the
maximum Advances permitted by the Borrowing Base immediately prior to such Mixed
Asset Sale over the maximum Advances permitted by the Borrowing Base immediately
after giving effect to such Mixed
21
<PAGE>
Asset Sale), (y) "SHORTFALL AMOUNT" shall mean, in respect of each Restricted
-
Asset Sale which constitutes a Mixed Asset Sale, the amount (if any) by which
the Net Proceeds Allocable to Payee in respect of such Restricted Asset Sale
(including any Excess Reserved Amount in respect of such Restricted Asset Sale
to the extent such Excess Reserved Amount is identified to such Net Proceeds
Allocable to Payee) is less than the Fair Market Value of the Mortgaged Property
or Mortgaged Properties included in such Mixed Asset Sale, and (z) the amount of
-
any Net Proceeds Allocable to Payee consisting of Permitted Non-Cash
Consideration shall be deemed to be equal to the aggregate principal amount of
such Permitted Non-Cash Consideration.
(4) Corporate Existence, etc. Maker will (i) at all times preserve
------------------------- -
and keep in full force and effect its corporate existence, (ii) at all
--
times preserve and keep in full force and effect any rights and franchises
of it and its Subsidiaries with respect to which the failure to do so would
have a material adverse effect on the business, operations, results of
operations, condition (financial or otherwise), assets or liabilities of
Maker and its Subsidiaries, taken as a whole, and (iii) qualify to do
---
business in any jurisdiction where the failure to do so would have a
material adverse effect on the business, operations, results of operations,
condition (financial or otherwise), assets or liabilities of Maker and its
Subsidiaries, taken as a whole.
(5) Consolidation, Amalgamation, Sale of Assets, etc. Maker will not
-------------------------------------------------
consolidate or amalgamate with any Person, or convey, transfer or lease
substantially all of its assets to any Person, unless the following
conditions are satisfied:
(a) except in the case of a statutory amalgamation under the laws
of Canada or a province thereof, the entity formed by such
consolidation or amalgamation, or the Person that
22
<PAGE>
acquires by conveyance, transfer or lease substantially all of the
assets of Maker, shall be a corporation organized and existing under
the laws of Canada or any province thereof, and shall execute and
deliver to Payee an agreement, in form and substance satisfactory to
the Required Mortgage Lenders, containing an assumption by such
successor Person of the due and punctual performance and observance of
each obligation, covenant and condition of Maker under this Note and
the Mortgage Documents;
(b) immediately before and after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and
(c) immediately after giving effect to such transaction the Net
Worth of Maker (or, in the case of a consolidation or amalgamation
involving Maker or the conveyance, transfer or lease of substantially
all of Maker's assets to any Person, the Net Worth of the Person
formed by such consolidation or amalgamation, or of the Person that
acquired by conveyance, transfer or lease substantially all of the
assets of Maker) shall not be less than 100% of the Net Worth of Maker
prior to such consolidation, amalgamation, conveyance, transfer or
lease.
7. PREPAYMENTS
(a) Optional Prepayment. Maker may, at its option, upon notice,
-------------------
prepay at any time or from time to time all or any part of the Principal Amount
of the Notes (plus accrued interest from the immediately preceding Interest Date
through but excluding the date of such prepayment) without premium or penalty.
(b) Contingent Prepayment Upon Change of Control. In the event of a
--------------------------------------------
Change of Control, Maker will, not less
23
<PAGE>
than 30 days prior to such Change of Control (or, if none of Buyer, Newco or
Maker is aware of such Change of Control until later than 30 days prior thereto,
not less than five Business Days after Buyer, Newco or Maker becomes aware of
such Change of Control), give written notice of such condition to Payee and
Mortgagee by registered mail. Such notice shall contain a written irrevocable
offer by Maker to prepay, in whole or in part, by a date (the "CHANGE PREPAYMENT
DATE") specified in such notice (which date shall not be less than 30 days and
not more than 60 days after the date of such notice), this Note. Such offered
prepayment shall be made on the Change Prepayment Date at the Principal Amount
of this Note (or the portion of such Principal Amount elected by Payee to be
prepaid, if Payee elects to require prepayment of less than all of such
Principal Amount) without premium or penalty, calculated as of the Interest Date
immediately preceding such prepayment, plus interest accrued on such Principal
Amount from such immediately preceding Interest Date through but excluding the
Change Prepayment Date, upon acceptance of such offer by Payee mailed to Maker
within 10 Business Days after receipt of such notice by Payee, such acceptance
to specify the portion of the Principal Amount of this Note to be prepaid and to
be accompanied by this Note endorsed in favor of Maker or accompanied by duly
executed instruments of transfer. In the event of a prepayment of this Note in
part pursuant to this paragraph 7(b), following the Change Prepayment Date,
Maker at its expense (except for transfer taxes, if any) (i) will execute and
-
deliver in exchange herefor a new Note or Notes and (ii) will cause Buyer, Newco
--
and Realco to endorse thereon the related Guaranty. Such new Note or Notes shall
(A) have an Original Principal Amount of C$100,000 or any multiple thereof
-
(except that a Note may be issued in a lesser Original Principal Amount if the
aggregate Principal Amount (after giving effect to such partial prepayment) of
the surrendered Note or Notes is not evenly divisible by, or is less than,
C$100,000), (B) have the same aggregate Original Principal Amount as the
-
aggregate Principal Amount (after giving effect to such partial prepayment) of
the Note or Notes so surrendered,
24
<PAGE>
(C) be dated as of the Interest Date coinciding with or immediately preceding
- -
the date of such surrender, and (D) be registered in such name or names, all as
-
may be designated by the holder of the surrendered Note or Notes or such
holder's transferee.
(c) Required Notice; Partial Prepayments to be Pro Rata Where More
--------------------------------------------------------------
Than One Note Outstanding.
- -------------------------
(1) Written notice of each prepayment pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement shall be given by Maker to Payee
and Mortgagee not less than 10 nor more than 30 days prior to the date
fixed for such prepayment (each, a "PREPAYMENT DATE"), specifying (A) such
-
date, (B) the aggregate portion of Principal Amount of all Notes to be
-
prepaid on such date and the balance of such Principal Amount of all Notes
after giving effect to such prepayment and (C) the corresponding portion of
-
Principal Amount of this Note to be prepaid on such date and the balance of
such Principal Amount of this Note after giving effect to such prepayment.
Any such notice shall be irrevocable once given.
(2) In the event of any prepayment pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement of less than the entire Principal
Amount all of the outstanding Notes, at a time when more than one Note is
outstanding, the Principal Amount of the Notes so to be prepaid shall be
allocated among the respective Notes and holders thereof so that the
Principal Amount of each Note to be prepaid pursuant to paragraph 7(a) or
pursuant to the Cash Collateral Agreement shall bear the same ratio to the
Principal Amount of such Note as the aggregate amount of such prepayment
bears to the aggregate Principal Amount of all Notes then outstanding,
except that if upon any allocation on such basis the amount so to be
prepaid to any such holder would be greater than, but not be an exact
multiple of, C$100,000, then additional or lesser
25
<PAGE>
amounts not exceeding C$100,000 may be allocated to such holder so that
such holder shall be entitled to receive an exact multiple of C$100,000, or
if the amount so to be prepaid to any such holder pursuant to such
paragraph would be less than C$100,000, then no amount need be allocated to
such holder, in each such case so long as (i) allocations of prepayments
-
among the respective Notes and holders thereof shall be appropriate to
maintain, through successive partial prepayments, as nearly as practicable
the ratio above provided and (ii) in the case of a prepayment that is
--
required to be of a certain size, the aggregate amount of the prepayment
applied to all the Notes is not less than the required size.
(d) The amount of any prepayment of the Principal Amount shall be
applied, first, to the portion of the Principal Amount not attributable to the
Simple Interest Component or the Original Principal Amount, second, to the
Simple Interest Component and, third, to the Original Principal Amount.
8. SECURITY
(a) Payee is entitled to the benefits of certain security held or to
be held by Mortgagee pursuant to the Mortgage Documents. The Notes are entitled
to the benefits of the security provided for in such agreements and instruments,
to which reference is made for a description of the properties and rights
included in such security, the nature and extent of such security and the rights
of the holders of the Notes, Mortgagee, Maker, and various parties to such
agreements and instruments in respect of such security.
(b) By acceptance of this Note, Payee hereby irrevocably appoints
Mortgagee as Payee's agent, and Payee hereby irrevocably authorizes Mortgagee,
as Payee's agent, (i) to take such action on Payee's behalf and to exercise such
-
powers and perform such duties under each of the Mortgage Documents as may be
delegated to Mortgagee by the
26
<PAGE>
terms thereof, together with all such powers as are reason ably incidental
thereto, (ii) to hold any Liens or security interest granted to Mortgagee
--
pursuant to each of the Mortgage Documents for the benefit of Payee and the
other holders of the Notes, if any, and (iii) to enforce the Mortgage Documents
---
for the benefit of Payee and the other holders of the Notes, if any, all in
accordance with the Mortgage Documents. Payee hereby acknowledges receipt of a
copy of the Cash Collateral Agreement (and such of the other Mortgage Documents
as Payee shall have requested) (or the form thereof) and Payee has, and each
subsequent holder of Notes will be deemed by its acquisition of Notes to have,
approved the terms and provisions of each of the Mortgage Documents and agreed
to be bound thereby, consented to the appointment of Mortgagee under the
Mortgage Documents and acknowledged the rights, immunities and privileges of
Mortgagee thereunder (including, without limitation, Article VII of the Cash
Collateral Agreement). Neither Mortgagee nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be liable for any
action lawfully taken or omitted to be taken by it or such Person in its
capacity as agent under or in connection with this Note or any Mortgage Document
(except for its or such Person's own gross negligence or willful misconduct).
9. REGISTRATION, TRANSFERS AND EXCHANGES
(a) Generally. Maker will keep at its principal office at 475 Hood
---------
Road, Markham, Ontario L3R 0S8 a register (the "REGISTER") in which Maker will
provide for the registration and transfer of the Notes and will record the name
of, and address for notices to, each holder of the Notes. Maker, Mortgagee and
any agent of Maker or Mortgagee may treat the Person in whose name this Note is
registered as the owner of such Note for the purpose of receiving payment of the
Principal Amount of (plus accrued interest from the immediately preceding
Interest Date on) this Note and for all other purposes, whether or not this Note
be overdue, and neither Maker, Mortgagee nor any such agent shall be affected by
notice to the contrary.
27
<PAGE>
(b) Transfer and Exchange of Notes. Upon surrender of this Note for
------------------------------
registration of transfer or for exchange to Maker at its principal office set
forth above, Maker at its expense (except for transfer taxes, if any) (i) will
-
execute and deliver in exchange herefor a new Note or Notes and (ii) will cause
--
Buyer, Newco and Realco to endorse thereon the related Guaranty. Such new Note
or Notes shall (A) have an Original Principal Amount of C$100,000 or any
-
multiple thereof (except that a Note may be issued in a lesser Original
Principal Amount if the aggregate Principal Amount (after giving effect to such
partial prepayment) of the surrendered Note or Notes is not evenly divisible by,
or is less than, C$100,000), (B) have the same aggregate Original Principal
-
Amount as the aggregate Principal Amount (after giving effect to such partial
prepayment) of the Note or Notes so surrendered, (C) be dated as of the Interest
-
Date coinciding with or immediately preceding the date of such surrender, and
(D) be registered in such name or names, all as may be designated by the holder
-
of the surrendered Note or Notes or such holder's transferee.
(c) Restrictions on Transfer. Payee may not transfer this Note to any
------------------------
other Person (x) if there has been any partial prepayment of this Note since the
-
date hereof, unless Payee shall first surrender this Note for exchange pursuant
to paragraph 9(b) or (y) prior to the fourth anniversary of the Closing Date,
-
except to one or more Affiliates controlled by Seller, which Affiliates shall at
all times that they continue to hold Notes continue to be controlled by Seller.
Payee may, on or after the fourth anniversary of the Closing Date, transfer,
sell or convey this Note or any portion of this Note (A) to Seller or to one or
-
more Affiliates controlled by Seller, which Affiliates shall at all times that
they continue to hold Notes continue to be controlled by Seller or (B) in a
-
minimum aggregate Principal Amount of C$1,000,000 (or, if the aggregate
Principal Amount of all Notes held by Payee is less than C$1,000,000, in such
aggregate Principal Amount) (i) to any Person with the prior written consent of
-
Maker
28
<PAGE>
and the Administrative Agents, which consent (in each case) shall not be
unreasonably withheld, or (ii) to one or more Affiliates controlled by Payee,
--
which Affiliates shall at all times that they continue to hold Notes continue to
be controlled by the Person that relied on this clause (ii) in transferring
Notes to such Affiliates.
10. NON-WAIVER
No course of dealing between Maker and Payee, or between Maker and
Mortgagee, or any delay or failure on the part of Payee or Mortgagee in
exercising any rights hereunder or under any Mortgage Document shall operate as
a waiver of any rights of Payee, except to the extent expressly waived in
writing by Payee.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE
Upon receipt by Maker of evidence reasonably satisfactory to Maker of
the loss, theft, destruction or mutilation of this Note, and of indemnity or
security reasonably satisfactory to Maker (it being agreed that any indemnity
from Seller will be reasonably satisfactory to Maker), and upon reimbursement to
Maker of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note, if mutilated, Maker will make and deliver a new
Note of like tenor, in lieu of this Note. Any Note made and delivered in
accordance with the provisions of this paragraph 11 shall be dated the date
hereof.
12. GOVERNING LAW
This Note shall be construed in accordance with and governed by the
laws of the Province of Ontario and the laws of Canada applicable therein.
Maker hereby irrevocably submits to the non-exclusive general jurisdiction of
the courts of the Province of Ontario and appellate courts from any thereof.
29
<PAGE>
13. SUCCESSORS AND ASSIGNS
All the covenants, stipulations, promises and agreements contained in
this Note shall bind the successors and assigns of Maker and Payee and shall
inure to the benefit of the successors and permitted assigns of Payee, whether
so expressed or not. Any assumption of the obligations of Maker hereunder shall
not release Maker, as applicable, from its obligations hereunder (including the
Guaranties endorsed hereon) without the prior written consent of Payee. The
obligations of Maker under this Note may not be assumed by a non-resident of
Canada (as defined in the Income Tax Act (Canada)).
14. AMENDMENT
Any term of the Notes or any Mortgage Document may be amended and the
observance of any term of the Notes or any Mortgage Document may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of (i) Maker, (ii) the Required
- --
Mortgage Lenders, (iii) in the case of any amendment or waiver of any Mortgage
---
Document, Mortgagee and (iv) in the case of any amendment or waiver of (w) the
-- -
definition of the term "Administrative Agents" in paragraph 2 of this Note, (x)
-
clause (i) of paragraph 9(c) of this Note, (y) paragraph 17 of this Note, or (z)
- -
this clause (iv), the Administrative Agents, provided that (1) without the prior
-------- -
written consent of the holders of all the Notes at the time outstanding, no such
amendment or waiver shall (a) change the Stated Maturity, the Interest Payment
-
Date or the Principal Amount of, or reduce the Interest Rate on, or change the
amount or the time of payment of any Principal Amount of, any Note, (b) amend,
-
modify or waive this proviso to this paragraph 14 or the definition of the term
"Required Mortgage Lenders" in paragraph 2 of this Note, (c) release or
-
subordinate the Lien of the Mortgage Documents or (d) release Buyer, Newco or
-
Realco from their respective Guaranties endorsed on any Note, and (2) no such
-
amendment or waiver shall amend, modify or waive any provision of the
30
<PAGE>
Notes without simultaneously amending, modifying or waiving the comparable
provision of the U.S. Notes unless such amendment, modification or waiver shall
have also received the written consent of the Majority Holders. Any amendment or
waiver effected in accordance with this paragraph 14 shall be binding upon each
holder of any Note at the time outstanding, each future holder of any Note and
Maker, whether or not (in the case of an amendment or waiver affecting the
Notes) the substance of such amendment or waiver is thereafter incorporated in
the form of the Notes or noted on the face thereof.
15. HEADINGS
The headings of the sections and paragraphs of this Note are inserted
for convenience only and shall not be deemed to constitute a part hereof.
16. NOTICES
Any notice or other communication under this Note shall be in writing
and shall be deemed to have been duly given or made (i) when delivered by hand,
-
(ii) four Business Days after it is sent by express, registered or certified
--
mail, return receipt requested, postage prepaid, or (iii) one Business Day after
---
it is sent by nationally recognized overnight courier, in each case addressed as
follows:
(a) if to Payee, at the address set forth for Payee in the Register,
-
which shall be such address as Payee
31
<PAGE>
shall from time to time furnish to Maker in writing, the initial address for
Payee being:
Westinghouse Canada Inc.
120 King Street West
Hamilton, Ontario L8N 3K2
Attention: General Counsel
a copy to:
Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Ontario M5L 1A9
Attention: Mitchell Wigdor
(b) if to Maker, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Maker named below or to
the attention of such other Responsible Officer, as Maker shall have furnished
to Payee in writing:
CDW Canada Acquisition Inc.
475 Hood Street
Markham, Ontario L3R 0S8
Attention: Chief Financial Officer
with a copy to each of Buyer, Newco and Realco at their respective addresses set
forth in this paragraph 16 and with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
(c) if to Buyer, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Buyer named below or to
the attention of such
32
<PAGE>
other Responsible Officer, as Maker shall have furnished to Payee in writing:
CDW Holding Corporation
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to each of Newco, Maker, Realco and Debevoise & Plimpton at their
respective addresses set forth in this paragraph 16;
(d) if to Newco, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Newco named below or to
the attention of such other Responsible Officer, as Newco shall have furnished
to Payee in writing:
CDW Acquisition Corporation
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
with a copy to each of Buyer, Maker, Realco and Debevoise & Plimpton at their
respective addresses set forth in this paragraph 16; and
(e) if to Realco, at the address set forth below or at such other
-
address, to the attention of the Responsible Officer of Realco named below or to
the attention of such other Responsible Officer, as Realco shall have furnished
to Payee in writing:
CDW Realco, Inc.
One Riverfront Center
Pittsburgh, PA 15222
Attention: Chief Financial Officer
33
<PAGE>
with a copy to each of Buyer, Newco, Maker and Debevoise & Plimpton at their
respective addresses set forth in this paragraph 16.
17. PROVISIONS FOR THE BENEFIT OF BANKS
The provisions of clause (i) of paragraph 9(c) of this Note and clause
(iv) of paragraph 14 of this Note are for the benefit of the Banks and the
financial institutions party to any extension, refunding, renewal or refinancing
of the Canadian Senior Credit Agreement, and the Administrative Agents shall be
entitled to enforce such provisions on their behalf. Except as set forth in the
preceding sentence, nothing in this Note shall confer any rights upon any Person
other than Maker, Buyer, Newco, Realco, Mortgagee and Payee and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, CDW CANADA ACQUISITION INC. has caused this Note
to be signed in its corporate name by a duly authorized officer and to be dated
as of the day and year first above written.
CDW CANADA ACQUISITION INC.
By ___________________________
Name: Richard Marshuetz
Title: Vice President,
Assistant Secretary
34
<PAGE>
Note (cont'd)
PREPAYMENTS
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35
<PAGE>
GUARANTY
The undersigned, CDW HOLDING CORPORATION, CDW ACQUISITION CORPORATION
(to be renamed WESCO Distribution, Inc.) and CDW REALCO, INC. (the
"Guarantors"), for valuable consideration, hereby each, jointly and severally,
unconditionally and irrevocably guarantee, as primary obligor and not merely
surety, (i) the due and punctual payment of the Principal Amount (plus all
-
accrued and unpaid interest thereon) of this Note, as the same shall become due
and payable, whether at the date of maturity or by prepayment or acceleration or
otherwise, (ii) the due and punctual payment of each other payment required to
--
be made by Maker under this Note or any of the Mortgage Documents and (iii) the
---
due and punctual performance by Maker of all other obligations of Maker,
respectively, under this Note and the Mortgage Documents (all the foregoing
obligations being collectively called the "Guaranteed Obligations"). This
Guaranty is an absolute, unconditional present and continuing Guaranty of
payment and not of collectibility, and in any case in which the Maker shall fail
or be unable punctually to make any payment required to be made by or in respect
of this Note, the Guarantors jointly and severally agree to pay the same to the
holder of this Note forthwith upon demand. The obligations of each Guarantor
under this Guaranty are general full recourse obligations of such Guarantor and
may be fully enforced against such Guarantor.
(a) Except as provided below in this subsection (a), all payments made
to Payee by any Guarantor pursuant to this Guaranty shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any governmental authority, excluding (i) net income
-
taxes, franchise taxes, branch taxes or taxes on the overall capital or net
worth of Payee imposed by any jurisdiction under the laws of which Payee is
organized or
<PAGE>
is located, or in which its principal executive office is located, or any
nation within which such jurisdiction is located or any political subdivision
thereof and (ii) any such taxes or other tax, levy, impost, duty, charge, fee,
--
deduction or withholding imposed by reason of any connection between the
jurisdiction imposing such tax and Payee, other than a connection arising
solely from Payee having received payment under or enforced, this Guaranty. If
any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings ("Non-Excluded Taxes") are required to be withheld from any
------------------
amounts payable to Payee hereunder, the amounts so payable to Payee shall be
increased to the extent necessary to yield to Payee (after payment of all Non-
Excluded Taxes, and all Non-Excluded Taxes on the amount of such increase),
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in the Note on which this Guaranty is endorsed, provided,
--------
however, that such Guarantor shall be entitled to deduct and withhold any Non-
- -------
Excluded Taxes and shall not be required to increase any such amounts payable to
Payee if Payee is not organized under the laws of Canada or a province thereof
or is not a resident of Canada for purposes of the Income Tax Act (Canada), as
amended from time to time. Whenever any Non-Excluded Taxes are payable by any
Guarantor, as promptly as possible thereafter such Guarantor shall send to Payee
a certified copy or an original official receipt received by such Guarantor
showing payment thereof. If such Guarantor fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to Payee the
required receipts or other required documentary evidence, such Guarantor shall
indemnify Payee for any incremental taxes, interest or penalties that may become
payable by Payee as a result of any such failure. The agreements in this
subsection shall survive the payment of the Note on which this Guaranty is
endorsed and all other amounts payable hereunder.
Upon the request, and at the expense, of any such Guarantor, Payee
shall reasonably afford such Guarantor the opportunity to contest, and
reasonably cooperate with such
2
<PAGE>
Guarantor in contesting, the imposition of any Non-Excluded Tax giving rise to
such payment; provided that (i) Payee shall not be required to afford such
-------- -
Guarantor the opportunity to so contest unless such Guarantor shall have
confirmed in writing to Payee its obligation to pay such amounts pursuant to
this Guaranty and (ii) such Guarantor shall reimburse Payee for its reasonable
--
attorneys' and accountants' fees and disbursements incurred in so cooperating
with such Guarantor in contesting the imposition of such Non-Excluded Tax.
(b) Each Guarantor waives presentment to, demand of payment from and
protest to Maker of any of the Guaranteed Obligations, and also waives notice of
acceptance of this Guaranty and notice of protest for nonpayment. The
obligation of each Guarantor hereunder shall not be affected by (i) the failure
-
of any Person to assert any claim or demand or to enforce any right or remedy
against Maker under the provisions of this Note or any Mortgage Document or
otherwise; (ii) any rescission, waiver, amendment or modification of, or any
--
release from any of the terms or provisions of, any Guaranty or any other
agreement; (iii) the release of any security held by any Person for the
---
Guaranteed Obligations or any of them; or (iv) the failure of any Person to
--
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations. Each Guarantor further waives any right to require that any resort
be had to any security held for payment of the Guaranteed Obligations or to any
balance of any deposit account or credit on the books of any Person in favor of
Maker or any other Person.
(c) The obligations of each Guarantor shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Guaranteed Obligations or otherwise. Without limiting the generality of the
fore-
3
<PAGE>
going, the obligations of each Guarantor hereunder shall not be discharged or
impaired or otherwise affected by the failure of any Person to assert any claim
or demand or to enforce any remedy under this Note, any Mortgage Document, any
Guaranty or any other agreement, by any waiver or modification of any thereof,
by any default, failure or delay, willful or otherwise, in the performance of
the Guaranteed Obligations, or by any other act or omission which may or might
in any manner or to any extent vary the risk of the Guarantors or otherwise
operate as a discharge of the Guarantors as a matter of law or equity (other
than the payment in full of all the Guaranteed Obligations). Upon payment and
performance in full of the Guaranteed Obligations, each Guarantor shall be
subrogated to the rights of the holder of this Note in respect of any payment or
other obligation with respect to which an amount has been payable by such
Guarantor hereunder. This Guaranty shall survive and be in full force and effect
so long as any Guaranteed Obligation is outstanding and has not been
indefeasibly paid.
(d) Paragraphs 10, 12, 14 and 15 and the first sentence of paragraph
13 of this Note shall apply to this Guaranty as if references therein to "this
Note" were references to this Guaranty and references therein to "Maker" were
references to the Guarantors. The definitions in paragraph 2 of this Note and
the second sentence of paragraph 13 of this Note shall apply to this Guaranty.
4
<PAGE>
CDW HOLDING CORPORATION
By /s/
---------------------------
Name:
Title:
CDW ACQUISITION CORPORATION
By /s/
---------------------------
Name:
Title:
CDW REALCO, INC.
By /s/
---------------------------
Name:
Title:
5
<PAGE>
EXHIBIT 4.12
CASH COLLATERAL AND SECURITY AGREEMENT dated as of February 28, 1994,
between CDW CANADA ACQUISITION INC., an Ontario corporation (the
"Grantor") and WESTINGHOUSE CANADA INC., a Canadian corporation, as
-------
collateral agent (in such capacity, the "Collateral Agent") for the
----------------
Secured Parties, as defined herein.
Reference is made to the Canadian Asset Acquisition Agreement (the
"Acquisition Agreement") dated as of February 28, 1994, between the Grantor and
---------------------
Westinghouse Canada Inc., as seller (in such capacity, "Seller") pursuant to
------
which (a) Seller has agreed to transfer certain assets to the Grantor and the
Grantor has agreed to acquire such assets from Seller, (b) in partial
consideration for such acquisition, the Grantor has agreed to execute and
deliver, or cause to be executed and delivered, to Seller (i) C$6,757,250.00
Original Principal Amount of the Grantor's guaranteed first mortgage notes due
2001 (the "Notes"), (ii) the guaranties endorsed on the Notes by each of Buyer,
-----
Newco and Realco, (iii) mortgages by the Grantor on the real property acquired
by the Grantor from Seller securing the Notes and (iv) a security agreement by
the Grantor in the form hereof.
Accordingly, the Grantor and the Collateral Agent hereby agree as
follows:
ARTICLE I. DEFINITIONS
Section 1.01 Terms Defined in the Notes. Terms used herein and not
--------------------------
otherwise defined herein shall have the meanings set forth in the Notes.
Section 1.02 Definition of Certain Terms Used Herein. As used
---------------------------------------
herein, the following terms shall have the following meanings:
"Applicable Law" shall mean all applicable provisions of all (i)
--------------
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Authority and (ii)
orders, decisions, injunctions, judgments, awards and decrees of or agreements
with any Governmental Authority.
"Cash Collateral Accounts" shall mean the Cash Consideration Account,
------------------------
the Reserve Account and the Specified Loss Account.
"Cash Consideration Account" shall mean the Cash Consideration
--------------------------
Account established pursuant to Section 5.01.
<PAGE>
A "Change Prepayment Event" shall have occurred and be continuing if
-----------------------
(a) a Change of Control has occurred and (b) the Grantor has not yet discharged
in full its obligations with respect to giving notice of such Change of Control
to the holders of the Notes and the prepayment of Notes, in part or in whole, at
the request of such holders.
"Collateral" shall mean all right, title and interest of the Grantor
----------
in all (i) Permitted Non-Cash Consideration that forms part of the Net Proceeds
Allocable to Payee in respect of any Restricted Asset Sale and all related FMN
Mortgages, (ii) Cash Consideration that forms part of the Net Proceeds Allocable
to Payee in respect of any Restricted Asset Sale, (iii) amounts (including
Specified Loss Proceeds) required to be deposited in, and amounts from time to
time held in, the Cash Collateral Accounts, (iv) Permitted Investments held for
the account of any Cash Collateral Account, (v) Documents and (vi) Proceeds.
"Documents" shall mean all instruments, files, records, ledger sheets
---------
and documents covering or relating to any of the Collateral and includes, for
greater certainty, the Register.
"FMN Debtor" shall mean any Person who is or who may become obligated
----------
under, with respect to or on account of any Permitted Non-Cash Consideration
that forms part of the Collateral.
"FMN Mortgages" shall mean the mortgages that secure any Permitted
-------------
Non-Cash Consideration.
"Governmental Approval" shall mean any consent, approval,
---------------------
authorization, waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or filing with or
report or notice to any Governmental Authority.
"Governmental Authority" shall mean any nation or government, any
----------------------
state, province, territory or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission or instrumentality of the United States,
Canada, any state of the United States, any province or territory of Canada or
any political subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization.
"Liability Reserve", with respect to any Restricted Asset Sale, shall
-----------------
mean any reserve established by the Grantor in accordance with GAAP pursuant to
2
<PAGE>
Section 5.03(a) at the time of such Restricted Asset Sale in connection with any
Permitted Liabilities in respect of such Restricted Asset Sale.
"Loan Documents" shall mean the Notes (including the Guaranties
--------------
endorsed thereon) and the Mortgage Documents.
"Mortgages" shall mean the mortgages of real property executed by the
---------
Grantor that by their terms secure the payment by the Grantor of its obligations
under the Notes (whether or not such mortgages also secure other obligations).
"Obligations" shall mean (i) the due and punctual payment by the
-----------
Grantor of (A) the Principal Amount of the Notes, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (B) all monetary obligations of the Grantor under the Loan
Documents and (ii) the due and punctual performance of all other obligations of
the Grantor under the Loan Documents.
"Permitted Encumbrances", with respect to any Replacement Property,
----------------------
shall mean the "Permitted Encumbrances", as defined in the Mortgage relating to
such Replacement Property.
"Permitted Investments" shall mean:
---------------------
(a) marketable direct obligations issued or unconditionally
guaranteed by the government of Canada or issued by any agency thereof and
backed by the full faith and credit of the government of Canada, in each
case maturing within one year from the date of acquisition thereof;
(b) marketable general obligations issued by any government of any
province of Canada or any political subdivision of any such province or any
public instrumentality thereof maturing within six months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either CBRS Inc. or Dominion Bond
Rating Service Limited;
(c) commercial paper maturing no more than six months from the date
of creation thereof and, at the time of acquisition, having a rating of A-1
(low) or higher from CBRS Inc. or R-1 (low) or higher from Dominion Bond
Rating Service Limited;
(d) domestic certificates of deposit, guaranteed investment
certificates, deposit receipts or evidences of demand deposits or bankers'
acceptances
3
<PAGE>
maturing within six months after the date of acquisition issued by any
Canadian chartered bank or any loan or trust company organized under the
laws of Canada or any province thereof, having combined capital, surplus
and undivided profits (less any undivided losses), as of its last annual
audited financial statements, of not less than C$250,000,000; and
(e) fully collateralized repurchase agreements with a term of not
more than 30 days for underlying securities of the type described in clause
(a) or (b) above entered into with any company which is registered and in
good standing as an investment dealer under the Securities Act (Ontario),
which is a member in good standing of the Investment Dealers Association of
Canada or any successor association thereof and which meets the
quantitative qualifications specified in clause (d) above;
provided, however, that any Permitted Investment (i) must have a stated maturity
- -------- -------
prior to Stated Maturity (ii) be denominated in Canadian Dollars and (iii) be in
bearer form or, if in registrable form, be registered in the name of the
Collateral Agent.
"Permitted Liens" shall mean any (i) Liens for taxes that are not yet
---------------
due and payable or that may after contest be paid without penalty or that are
being contested in good faith by the Grantor and (ii) Liens arising by reason of
any judgment, decree or order of any Governmental Authority that does not arise
out of any breach by the Grantor of any of the Loan Documents if (A) appropriate
legal proceedings have been duly initiated for the review of such judgment,
decree or order, are being diligently prosecuted and have not been finally
terminated or (B) the period within which such proceedings may be initiated has
not expired.
"PPSA" shall mean the Personal Property Security Act (Ontario).
----
"Proceeds" shall mean any consideration received from the sale,
--------
exchange, license, lease or other disposition of any asset or property which
constitutes Collateral, any payments received on Permitted Non-Cash
Consideration that forms part of the Collateral, any payments or other assets
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property which constitutes Collateral (but only to the
extent such payment relates to any such asset or property), and shall include
all cash and negotiable instruments received or held on behalf of the Collateral
Agent pursuant to Article V.
"Replacement Property" shall have the meaning ascribed thereto in
--------------------
Section 5.01(d)(1).
4
<PAGE>
"Reserve Account" shall mean the Reserve Account established
---------------
pursuant to Section 5.03.
"Secured Parties" shall mean (i) each holder of Notes, (ii) the
---------------
Collateral Agent in its capacity as such, (iii) the beneficiaries of each
indemnification obligation undertaken by the Grantor under any Mortgage Document
and (iv) the successors of the foregoing.
"Security Interest" shall have the meaning ascribed thereto in
-----------------
Section 2.01.
"Specified Loss Account" shall mean the Specified Loss Account
----------------------
established pursuant to Section 5.04.
"Specified Loss Proceeds" shall mean any amounts paid to the
-----------------------
Collateral Agent pursuant to Section 11 or 12 of any Mortgage.
Section 1.03 Extended Meanings. Words importing the singular
-----------------
include the plural thereof and vice versa, and words importing gender include
the masculine, feminine and neuter genders. Any defined term used in the
singular preceded by "any" or "each" shall be taken to indicate any number of
the members of the relevant class. When used in this Agreement, the following
words have the following meanings: (i) "mortgage" means "mortgage, charge or
hypothec"; (ii) "mortgaging" means "mortgaging, charging or hypothecating"; and
(iii) "real property" means "freehold real or immoveable property". Unless
otherwise specified, any reference in this Agreement to any statute will include
all regulations made thereunder or in connection therewith from time to time,
and will include such statute as it may be amended, supplemented or replaced
from time to time.
ARTICLE II. SECURITY INTEREST
Section 2.01 Security Interest. As security for the payment or
-----------------
performance, as the case may be, of the Obligations, the Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent and its successors, for the benefit of the
Secured Parties, and hereby grants to the Collateral Agent and its successors,
for the benefit of the Secured Parties, a security interest in, all the
Grantor's right, title and interest in, to and under the Collateral (the
"Security Interest").
-----------------
Section 2.02 No Assumption of Liability. The Security Interest is
--------------------------
granted as security only and shall not subject the Collateral Agent or any
Secured Party
5
<PAGE>
to, or in any way alter or modify, any obligation or liability of the Grantor
with respect to or arising out of any of the Collateral.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
As of the date hereof and as of the date any Cash Consideration or
Permitted Non-Cash Consideration is delivered to the Collateral Agent to be held
pursuant to this Agreement, the Grantor represents and warrants to the
Collateral Agent and the Secured Parties that:
Section 3.01 Title and Authority. The Grantor has (or, in the case
-------------------
of after-acquired Collateral, on the date of its delivery to the Collateral
Agent, will have) good and valid rights in and title to the Collateral with
respect to which it has purported to grant a Security Interest hereunder and has
(or, in the case of after-acquired Collateral, on the date of its delivery to
the Collateral Agent, will have) full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and
has full power and authority to execute, deliver and perform its obligations in
accordance with the terms of this Agreement, without the consent or approval of
any other Person, other than any consent or approval which has been obtained.
Section 3.02 Filings. The Grantor has (or promptly after the Closing
-------
Date, but in no event later than the date Collateral is first delivered to the
Collateral Agent, will have) made all the filings, recordings and registrations
listed on Schedule 3.02A, which are the only filings, recordings and
registrations necessary to create, preserve, perfect and protect the Security
Interest under all Applicable Laws (including, without limitation, the PPSA) in
all applicable jurisdictions in Canada, and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration, of the
filings, recordings and reregistrations listed on Schedule 3.02A is necessary
under any such Applicable Law in any such applicable jurisdiction, except as
provided under Applicable Law with respect to the filing, recording or
registration of continuation statements, financing change statements or
analogous documents and except that additional filings, recordings or
registrations may be necessary if the Grantor thereafter changes its name,
identity or corporate structure or the location of its places of business, its
chief executive office, its chief place of business or the Collateral or
thereafter transfers all or any part of the Collateral, with or without the
prior consent of the Collateral Agent. Without limiting the generality of the
foregoing or of Section 4.04, simultaneously with delivery of any Permitted Non-
Cash Consideration to the Collateral Agent or as soon thereafter as practicable,
the Grantor shall have taken all such actions and made all such filings,
recordings and registrations that are necessary in order to enable the
Collateral Agent to enforce directly against the applicable FMN
6
<PAGE>
Debtor its obligations in respect of such Permitted Non-Cash Consideration and
to exercise remedies under the applicable FMN Mortgage, without the necessity of
any further consent or approval of the Grantor.
Section 3.03 Validity of Security Interest. The Security Interest
-----------------------------
constitutes (or, in the case of after-acquired Collateral, will on the date of
delivery of such after-acquired Collateral to the Collateral Agent constitute)
(a) a legal and valid security interest in all the Collateral securing the
payment and performance of the Obligations and (b) a perfected security interest
in all Collateral in which a security interest may be perfected by either (i)
possession of the Collateral by the Collateral Agent (assuming continuing
possession by the Collateral Agent) or (ii) filing, recording or registering a
financing statement or analogous document under the PPSA or any other Applicable
Law in any applicable jurisdiction in Canada. Except as otherwise agreed from
time to time by the Collateral Agent in writing, the Security Interest is and
shall be prior to any other Lien on any of the Collateral, including any
Permitted Lien.
Section 3.04 Absence of Other Liens. The Collateral is owned by the
----------------------
Grantor free and clear of any Lien (other than the Security Interest and any
Permitted Lien). Other than as contemplated hereby, the Grantor has not filed
or consented to the filing of (a) any financing statement or analogous document
under any Applicable Law covering any Collateral or (b) any assignment in which
the Grantor assigns any Collateral or any security agreement or similar
instrument covering any Collateral with any Governmental Authority.
Section 3.05 Location of Chief Executive Office. The registered
----------------------------------
office, principal place of business, chief place of business and chief executive
office of the Grantor, and the office where the Grantor keeps the Documents and
any other books and records concerning the Collateral, are located at the
address specified for the Grantor in Section 8.08. The exact corporate name of
the Grantor as it appears in its constating documents, each other corporate name
the Grantor has had, and all other names (including trade names or similar
appellations) under which the Grantor or any of its divisions, subsidiaries or
other business units has carried on business are as listed in the caption to
this Agreement or notified to the Collateral Agent pursuant to Section 4.01.
ARTICLE IV. COVENANTS
Section 4.01 Change of Name; Location of Collateral: Place of
------------------------------------------------
Business. The Grantor will promptly notify the Collateral Agent of any change
- --------
(i) in its corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of its registered office, its chief
7
<PAGE>
executive office, its chief place of business, its principal place of business
or any office in which it maintains books or records relating to Collateral or
(iii) in its identity or corporate structure. The Grantor will not effect or
permit any change referred to in the preceding sentence unless all filings,
recordings or registrations have been made under all Applicable Laws in all
applicable jurisdictions in Canada or otherwise which are required in order for
the Collateral Agent to continue at all times following such change to have a
legal, valid and perfected Lien in all the Collateral in which a Lien may be
perfected or by which the priority of the Lien may be protected under such
Applicable Law by filing, recording or registering this Agreement, any security
documentation delivered by the Grantor to the Collateral Agent pursuant hereto
or any by the Grantor to the Collateral Agent pursuant hereto or any financing
statement or similar document.
Section 4.02 Periodic Certification. Each year, at the time of
----------------------
delivery of Newco's annual financial statements with respect to the preceding
fiscal year pursuant to the U.S. Notes, the Grantor will deliver to the
Collateral Agent a certificate executed by a financial officer and the chief
legal officer of the Grantor (a) certifying that all appropriate financing
statements or analogous documents or other appropriate filings, recordings or
registrations (including registrations of notices of security interest in
fixtures, as applicable), including all refilings, rerecordings and
reregistrations have been filed, recorded or registered under all Applicable
Laws in all applicable jurisdictions in Canada to the extent necessary under (i)
the PPSA to protect and perfect the Security Interest for a period of not less
than 6 months after the date of such certificate and (ii) all other Applicable
Laws in all other applicable jurisdictions in Canada to create, preserve,
perfect and protect the Security Interest and any Lien constituted by any
security documentation delivered by the Grantor to the Collateral Agent pursuant
hereto, in each case for a period of not less than 6 months after the date of
such certificate, (b) setting forth all filings, recordings and registrations,
including all refilings, rerecordings and reregistrations, that, with respect to
the Collateral as of the date of such certificate, would be necessary under the
PPSA and under all other Applicable Laws in all other applicable jurisdictions
in Canada within 18 months after the date of such certificate in order to
create, preserve, perfect and protect the Security Interest in such Collateral
and any Lien in such Collateral constituted by any security documentation
delivered by the Grantor to the Collateral Agent pursuant hereto, (c) setting
forth, with respect to each filing, recording or registration (including each
refiling, rerecording or reregistration) made since the date of the most recent
certificate delivered pursuant to this Section, the filing office, the date of
filing, all relevant filing numbers thereof, the collateral description set out
therein and the expiry date thereof and (d) attaching true, correct and complete
verification statements, acknowledgment copies or copies of this Agreement or of
such other security documentation, as applicable, with filing particulars
officially stamped thereon, of each such filing, recording or registration not
theretofore delivered to the Collateral Agent.
8
<PAGE>
Section 4.03 Protection of Security. The Grantor will, at its own
----------------------
cost and expense, take any and all actions necessary to (i) defend title to the
Collateral against all Persons and to defend the Security Interest or any other
Lien of the Collateral Agent in the Collateral and the priority thereof against
any Lien (other than any Permitted Lien) and (ii) resist enforcement of any
Permitted Lien against any Collateral.
Section 4.04 Further Assurances. (a) The Grantor will, at its own
------------------
cost and expense, execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Collateral Agent may from time to time reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and remedies created hereby, including the payment of any fees and filing,
registration, stamp and other similar taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
or such other Lien and the filing or execution of any financing or financing
charge statements or analogous documents (including registrations of notices of
security interest in fixtures) under any Applicable Law in any jurisdiction with
respect to the Security Interest. The Grantor also hereby authorizes the
Collateral Agent to file any such financing or financing change statement or
analogous document without the signature of the Grantor to the extent permitted
by Applicable Law. If permitted by Applicable Law, a copy of this Agreement
will be sufficient as a financing statement or an analogous document for filing
in any jurisdiction. Without limiting the generality of the foregoing, the
Grantor acknowledges that this Agreement has been prepared based upon the
requirements of existing laws in the Province of Ontario and that such laws may
change. The Grantor also acknowledges that the laws of other jurisdictions may
require the execution and delivery of different forms of security documentation.
The Grantor agrees that the Collateral Agent will have the right to require that
this Agreement be amended or supplemented: (i) to reflect any changes in such
laws, whether arising as a result of statutory amendments, court decisions or
otherwise; (ii) to facilitate the creation and registration of appropriate
security in all appropriate jurisdictions; or (iii) if the Grantor merges or
amalgamates with any other Person or enters into any corporate reorganization,
in each case in order to confer upon the Collateral Agent the Security Interest
intended to be created hereby.
(b) Without limiting the generality of the foregoing, any Permitted
Non-Cash Consideration delivered to the Collateral Agent (and the related FMN
Mortgage) shall, unless otherwise requested by the Collateral Agent, be
registered in the name of the Collateral Agent or its nominee. If the
Collateral Agent requests that any such Permitted Non-Cash Consideration and the
related FMN Mortgage not be registered in the name of the Collateral Agent or
its nominee, such Permitted Non-Cash Consideration and related FMN Mortgage (i)
shall be duly endorsed in a manner, or accompanied by registrable instruments of
transfer or assignment in a form reasonably
9
<PAGE>
satisfactory to the Collateral Agent (it being agreed that the Collateral Agent
may at any time in its sole and absolute discretion register any of such
instruments), (ii) shall provide that (A) the rights of the Grantor under such
Permitted Non-Cash Consideration and related FMN Mortgage may be assigned
without the consent of the applicable FMN Debtor, (B) any assignee of the
Grantor can exercise all of the rights of the Grantor under such Permitted Non-
Cash Consideration and related FMN Mortgage, (C) the applicable FMN Debtor will
make all payments under such Permitted Non-Cash Consideration as directed by the
Grantor, and (D) the terms of such Permitted Non-Cash Consideration and related
FMN Mortgage shall not be amended or modified, and the Grantor will not agree to
a waiver or compromise thereof, without the consent of the Grantor and any
assignee of the Grantor and (iii) shall be accompanied by an instrument duly
executed by the applicable FMN Debtor, in a form reasonably satisfactory to the
Collateral Agent, pursuant to which such FMN Debtor shall acknowledge the
assignment to the Collateral Agent of all the rights of the Grantor in respect
of such Permitted Non-Cash Consideration and related FMN Mortgage (it being
agreed that, as between the Grantor and the Collateral Agent, the exercise of
rights and powers accruing to the owner of any Permitted Non-Cash Consideration
shall be governed by this Agreement).
(c) The Collateral Agent shall have the right (in its sole and
absolute discretion) to hold any Permitted Non-Cash Consideration forming part
of the Collateral in its own name as pledgee, the name of its nominee or the
name of the Grantor. The Grantor will promptly give to the Collateral Agent
copies of any notices or other communications received by it with respect to any
Permitted Non-Cash Consideration forming part of the Collateral registered in
the name of the Grantor.
(d) The Collateral Agent shall, upon the reasonable request of the
Grantor, sign any financing statement or other similar document, in form and
substance reasonably satisfactory to the Collateral Agent, required to be filed
by the Grantor pursuant to this Agreement and that requires the signature of the
Collateral Agent.
Section 4.05 Rights and Obligations Under Permitted Non-Cash
-----------------------------------------------
Consideration. (a) Unless and until an Event of Default shall have occurred and
- -------------
be continuing and the Collateral Agent shall have notified the Grantor that the
Grantor's rights under this Section are being suspended:
(i) The Grantor shall be entitled to exercise any and all the rights
and powers of the owner of any Permitted Non-Cash Consideration forming
part of the Collateral (and the related FMN Mortgage) to amend, waive or
modify the terms thereof and to grant consents or approvals thereunder;
provided, however, that (A) such exercise could not reasonably be expected
-------- -------
to materially and adversely affect the rights inuring to a holder of such
Permitted Non-Cash
10
<PAGE>
Consideration or the rights and remedies of the Collateral Agent or any of
the Secured Parties under any of the Loan Documents or any of the Secured
Parties to exercise the same and (B) the Grantor may not amend, waive,
modify or compromise any such Permitted Non-Cash Consideration (or the
related FMN Mortgage) to (w) extend the maturity or decrease the principal
amount of, or reduce the rate of interest or extend the time of payment of
any installment of principal of or interest on, any such Permitted Non-Cash
Consideration, (x) release or subordinate the Lien of any FMN Mortgage
forming part of the Collateral or adversely affect the ability to exercise
remedies thereunder, (y) permit any FMN Mortgage forming part of the
Collateral to secure any obligation other than an obligation to the Grantor
or an obligation under Permitted Non-Cash Consideration forming part of the
Collateral or (z) restrict the assignability thereof.
(ii) The Grantor shall be entitled to (and hereby agrees for the
benefit of the Secured Parties that it will exercise commercially
reasonable efforts to) enforce, in a commercially reasonable manner, the
rights and remedies accruing to the owner of any Permitted Non-Cash
Consideration forming part of the Collateral (and the related FMN
Mortgage), including enforcement of the payment when due of amounts payable
thereunder; provided, however, that the foregoing shall not be construed to
-------- -------
constitute a guarantee by the Grantor of collection or otherwise.
(iii) The Collateral Agent will execute and deliver to the Grantor, or
cause to be executed and delivered to the Grantor, all such proxies, powers
of attorney and other instruments as the Grantor may reasonably request for
the purpose of enabling the Grantor to exercise the rights and powers which
it is entitled (or obligated) to exercise pursuant to Section 4.05(a)(i) or
4.05(a)(ii).
(b) Upon the occurrence and during the continuance of an Event of
Default, after the Collateral Agent shall have notified the Grantor of the
suspension of its rights under Section 4.05(a), then all rights and obligations
of the Grantor to exercise the rights and powers which it is entitled to
exercise pursuant to Section 4.05(a), and the obligations of the Collateral
Agent under Section 4.05(a), shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall have the sole and exclusive
right and authority to exercise such rights and powers.
(c) Any notice given by the Collateral Agent to the Grantor
suspending its rights under Section 4.05(a) (i) may be given by telephone if
promptly confirmed in writing and (ii) may suspend the rights of the Grantor
under Section 4.05(a) in part without suspending all such rights (as specified
by the Collateral Agent in its sole and absolute discretion) and without waiving
or otherwise affecting the Collateral Agent's
11
<PAGE>
rights to give additional notices from time to time suspending other rights so
long as an Event of Default has occurred and is continuing.
Section 4.06 Inspection and Verification. The Collateral Agent and
---------------------------
such persons as the Collateral Agent may reasonably designate shall have the
right, at any reasonable time or times, to inspect all records (including,
without limitation, all of the Documents) related to the Collateral (and to make
extracts and copies from such records) and to verify under reasonable procedures
the validity, amount, quality, quantity, value, condition and status of, or any
other matter relating to, the Collateral, including by contacting FMN Debtors.
The Collateral Agent shall have the absolute right to share any information it
gains from such inspection or verification with any Secured Party. Without the
prior written consent of the Grantor, the Collateral Agent shall not disclose,
and shall require as a condition to sharing such information with any Secured
Party or other Person that such Secured Party or other Person agree not to
disclose, to any Person that is not a Secured Party any such information which
is designated by the Grantor to the Collateral Agent in writing as confidential;
provided, however, that the Collateral Agent or any Secured Party may disclose
- -------- -------
such information (a) to any of their respective accountants, counsel,
consultants, employees or agents who are advised of the confidential nature of
such information, (b) if it becomes publicly available other than by reason of a
breach of this sentence, (c) if received from a third party not bound by any
confidentiality agreement with the Grantor, (d) required by Applicable Law or
any Governmental Approval to be disclosed by such Person, (e) necessary to
establish such Person's rights under any of the Loan Documents or (f) to any
prospective permitted assignee of all or a portion of the rights of such Person
under the Loan Documents if such prospective permitted assignee agrees to be
bound by the confidentiality provisions contained in this sentence.
Section 4.07 Taxes: Encumbrances. At its option, the Collateral
-------------------
Agent may discharge past-due taxes, assessments, charges, fees or other Liens at
any time levied or placed on the Collateral (other than any Permitted Lien), and
may pay for the maintenance and preservation of the Collateral to the extent the
Grantor fails to do so, and the Grantor agrees to reimburse the Collateral Agent
on demand for any payment made or any expense incurred by the Collateral Agent
pursuant to the foregoing authorization; provided, however, that nothing in this
-------- -------
Section shall be interpreted as excusing the Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of the Grantor with respect to taxes,
assessments, charges, fees or other Liens and maintenance.
Section 4.08 Continuing Obligations of the Grantor. The Grantor
-------------------------------------
shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument
relating to the
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Collateral unless and until title to such contract, agreement or instrument has
been indefeasibly vested in the Collateral Agent pursuant to the exercise of its
remedies under Article VI, all in accordance with the terms and conditions
thereof, and the Grantor will indemnify and hold harmless the Collateral Agent
and the Secured Parties from and against any and all liability arising out of
the Grantor's performance or failure to perform the same.
Section 4.09 Use and Disposition of Collateral. Except for the
---------------------------------
Security Interest, the Grantor will not (i) make or permit to be made an
assignment, pledge or hypothecation of the Collateral or (ii) grant any other
Lien in respect of the Collateral. The Grantor will not make or permit to be
made any transfer of the Collateral other than withdrawals from the Cash
Collateral Accounts made in accordance with Article V.
ARTICLE V. CASH COLLATERAL ACCOUNTS
Section 5.01 Cash Consideration Account. (a) Prior to the first
--------------------------
delivery to the Collateral Agent of any Cash Consideration or Permitted Non-Cash
Consideration constituting Net Proceeds Allocable to Payee, the Collateral Agent
will establish with a financial institution reasonably satisfactory to the
Grantor (it being agreed that such financial institution shall not be a creditor
of the Grantor or any of its Affiliates) an account maintained in the name of
the Collateral Agent and in Toronto, Ontario (the "Cash Consideration Account")
--------------------------
over which the Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal.
(b) Any Proceeds from the investment pursuant to Section 5.05 of
amounts of Net Proceeds Allocable to Payee in respect of any Restricted Asset
Sale, net of the amount so invested, shall, solely for the purposes of this
Section, constitute additional Net Proceeds in respect of such Restricted Asset
Sale.
(c) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Cash Consideration Account and apply such cash to prepay,
in whole or in part, the Notes in accordance with the instructions of the
Grantor set forth in such written request; provided, however, that (i) such
-------- -------
instructions are consistent with paragraph 7(c) of the Notes, (ii) such written
request specifies each Restricted Asset Sale the Net Proceeds Allocable to Payee
in respect of which are to be so applied and, if more than one Restricted Asset
Sale is so specified, the amount of the Net Proceeds Allocable to Payee in
respect of each Restricted Asset Sale to be so applied, (iii) the amount of any
Net Proceeds Allocable to Payee in respect of any Restricted Asset Sale to be so
applied does not exceed the remaining balance of such Net Proceeds Allocable to
Payee in respect of such Restricted Asset Sale and (iv) any cash withdrawn from
the
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Cash Consideration Account pursuant to this Section 5.01(c) shall be applied to
the prepayment of the Notes only at the direction of the Grantor.
(d) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Cash Consideration Account and pay
such cash at the direction of the Grantor on the date specified by the Grantor
if the following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than 10 Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified the amount of cash to be withdrawn and shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
Newco, to the effect that (x) no Event of Default has occurred and is
continuing and (y) the proceeds of such withdrawal are to be used to
finance the purchase by the Grantor of a fee simple interest in real
property located in Canada (the "Replacement Property") from a Person who
--------------------
is not an Affiliate of the Grantor and (B) a copy of a contract for the
purchase of the Replacement Property.
(2) On or prior to the date on which such cash is to be withdrawn,
the Collateral Agent shall have received (A) a first mortgage securing the
Obligations, in registrable form and otherwise substantially in the form
and substance of the Mortgages, of the Replacement Property, duly executed
and delivered by the Grantor, (B) at the Collateral Agent's option (acting
reasonably), either (i) a title opinion rendered by legal counsel, duly
qualified in the jurisdiction in which the Replacement Property is located
and satisfactory to the Collateral Agent (acting reasonably), confirming
the fee simple interest of the Grantor in the Replacement Priority, the
priority of the Collateral Agent's mortgage therein (in each case, subject
only to standard exceptions and Permitted Encumbrances) and such other
matters as the Collateral Agent may reasonably request or (ii) a title
insurance policy, issued by a nationally recognized title insurance company
satisfactory to the Collateral Agent (acting reasonably), insuring the Lien
of the Collateral Agent's mortgage in the Replacement Property subject only
to standard exceptions and Permitted Encumbrances, in an amount not less
than the amount of the proposed withdrawal, and (C) such surveys,
environmental audits and documents relating to the Permitted Encumbrances
and compliance with Applicable Law and applicable Governmental Approvals,
as reasonably requested by the Collateral Agent, as shall be reasonably
necessary to satisfy the Collateral Agent that the mortgaging of the
Replacement Property to secure the Obligations and the proposed withdrawal,
taken together, would not materially and adversely affect the aggregate
value of the Mortgaged Property and the Collateral or the rights
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<PAGE>
and remedies of the Collateral Agent or any of the Secured Parties under
the Loan Documents or the ability of the Collateral Agent or any of the
Secured Parties to exercise the same.
(3) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a certificate bringing down to date the
certificate referred to in Section 5.01(d)(1)(A).
(4) If the Replacement Property is being purchased in connection with
the purchase by the Grantor, or any of its Affiliates, of any assets or
services from the seller of the Replacement Property or any of its
Affiliates, the Collateral Agent shall be reasonably satisfied that the
amount of cash proposed to be withdrawn shall not be greater than the fair
market value of the Replacement Property. If the Replacement Property is
not being purchased in connection with the purchase by the Grantor, or any
of its Affiliates, of any assets or services from the seller of the
Replacement Property or any of its Affiliates, the Collateral Agent shall
be reasonably satisfied that the amount of cash proposed to be withdrawn
shall not be greater than the cash purchase price for the Replacement
Property.
(5) The Grantor directs that the cash withdrawn is to be paid to, or
at the direction of, the seller of the Replacement Property.
(6) The amount of cash to be withdrawn does not exceed (A) the amount
of Cash Consideration received by the Collateral Agent during the preceding
18 months (including in such amount any portion of Excess Reserved Amounts
transferred to the Cash Consideration Account from the Reserve Account
pursuant to Section 5.03(e) in respect of a Liability Reserve established
within the preceding 18 months) and not previously withdrawn from the Cash
Consideration Account plus (B) the amount of cash Proceeds received by the
Collateral Agent during the preceding 18 months in respect of Permitted
Non-Cash Consideration and not previously withdrawn from the Cash
Consideration Account plus (C) the amount of any Proceeds from the
investment pursuant to Section 5.05 of cash described in clause (A) or (B)
above to the extent not previously withdrawn from the Cash Consideration
Account.
(e) At least 10 days prior to each Interest Date that occurs at least
18 months after the receipt by the Collateral Agent of any Net Proceeds
Allocable to Payee, the Grantor shall direct the Collateral Agent in writing (1)
to retain in the Cash Consideration Account all Net Proceeds Allocable to Payee
deposited therein less than 18 months (including in such amount any amounts
transferred to the Cash Consideration Account from the Reserve Account pursuant
to Section 5.03(e) in respect
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<PAGE>
of a Liability Reserve established within the preceding 18 months) prior to such
Interest Date (and all Proceeds therefrom or from the investment thereof in
accordance with Sections 5.01(b) and 5.05) and (2) to apply any balance of the
amount in the Cash Collateral Account after such retention and after any
application pursuant to Section 5.01(d) to prepayment of the Notes on such
Interest Date. Upon such written direction of the Grantor the Collateral Agent
shall withdraw cash in an amount equal to such balance, if any, from the Cash
Consideration Account and apply such cash to prepay, in whole or in part, the
Notes in accordance with the instructions of the Grantor set forth in such
written direction; provided, however, that (i) such instructions are consistent
-------- -------
with paragraph 7(c) of the Notes and (ii) any cash withdrawn from the Cash
Consideration Account pursuant to this Section 5.01(e) shall be applied to the
prepayment of the Notes only at the direction of the Grantor.
(f) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Cash Consideration Account to satisfy in accordance with Section 6.02 any
Obligations then due and payable.
Section 5.02 Deposits. (a) The Grantor will notify and direct
--------
promptly each FMN Debtor and every other Person obligated to make payments on or
with respect to Permitted Non-Cash Consideration forming part of the Collateral
to make all such payments to the Cash Consideration Account. The Grantor shall
use all reasonable efforts to cause each FMN Debtor and every other Person
identified in the preceding sentence to make all payments on or with respect to
Permitted Non-Cash Consideration forming part of the Collateral directly to the
Cash Consideration Account.
(b) In the event that the Grantor directly receives any Proceeds on
or with respect to Permitted Non-Cash Consideration forming part of the
Collateral (including Proceeds from any exercise of remedies in respect thereof,
under any FMN Mortgage or otherwise) notwithstanding the arrangements for
payment directly into the Cash Consideration Account, such Proceeds shall be
held in trust for the benefit of the Collateral Agent and the Secured Parties
and shall be segregated from other funds of the Grantor, subject to the Security
Interest granted hereby, and the Grantor shall cause such Proceeds to be
deposited into the Cash Consideration Account as soon as practicable after the
Grantor's receipt thereof.
(c) All Cash Consideration constituting Net Proceeds Allocable to
Payee received by the Grantor or the Collateral Agent shall forthwith be
deposited into the Cash Consideration Account, subject to (i) the rights of the
Collateral Agent to apply Cash Consideration in accordance with Section 6.02 if
an Event of Default has
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<PAGE>
occurred and is continuing and (ii) the rights of the Grantor hereunder to
direct the Collateral Agent to withdraw amounts on deposit in the Cash
Consideration Account.
(d) All cash Proceeds from investments pursuant to Section 5.01(b)
shall be deposited into the Cash Consideration Account.
Section 5.03 Reserve Account. (a) In connection with any Restricted
---------------
Asset Sale, the Grantor may establish a Liability Reserve (not in excess of the
reserve in respect thereof required by GAAP) by:
(i) not less than five Business Days prior to the consummation of
such Restricted Asset Sale, giving the Collateral Agent written notice that
the Grantor intends to establish a Liability Reserve with respect to such
Restricted Asset Sale;
(ii) simultaneously with the consummation of such Restricted Asset
Sale, delivering to the Collateral Agent a certificate, signed by the chief
accounting officer of the Grantor, stating (A) that the Grantor is
establishing a reserve with respect to Permitted Liabilities in respect of
such Restricted Asset Sale and stating the initial balance of the related
Reserved Amount, (B) that the Grantor is required by GAAP to establish such
a reserve in an amount not less than such stated initial balance and (C)
whether the Grantor is obligated by paragraph 6(3)(b) of the Notes to
deliver cash equal to such Reserved Amount for deposit hereunder; and
(iii) simultaneously with the consummation of such Restricted Asset
Sale, if obligated to do so by paragraph 6(3)(b) of the Notes, delivering
to the Collateral Agent an amount of cash equal to the initial balance of
the Reserved Amount (such amount to be in addition to any Cash
Consideration paid to the Collateral Agent in connection with such
Restricted Asset Sale to be deposited in the Cash Consideration Account).
(b) Prior to the first delivery to the Collateral Agent of any cash
pursuant to Section 5.03(a)(iii), the Collateral Agent will establish with a
financial institution reasonably satisfactory to the Grantor (it being agreed
that such financial institution shall not be a creditor of the Grantor or any of
its Affiliates) an account maintained in the name of the Collateral Agent and in
Toronto, Ontario (the "Reserve Account") over which the Collateral Agent shall
---------------
have exclusive dominion and control, including the exclusive right of
withdrawal. All amounts received by the Collateral Agent pursuant to Section
5.03(a)(iii) and all cash Proceeds from investments thereof pursuant to Section
5.05 shall forthwith be deposited into the Reserve Account.
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<PAGE>
(c) The Reserved Amount in respect of any Restricted Asset Sale shall
be increased by the amount of any Proceeds from the investment of such Reserved
Amount pursuant to Section 5.05, net of the amount so invested, and reduced by
any withdrawals pursuant to this Section in respect of such Reserved Amount.
(d) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Reserve Account and apply such cash to prepay, in whole
or in part, the Notes in accordance with the instructions of the Grantor set
forth in such written request; provided, however, that (i) such instructions are
-------- -------
consistent with paragraph 7(c) of the Notes, (ii) such written request specifies
each Restricted Asset Sale the Reserved Amount in respect of which is to be
reduced in connection with such withdrawal and, if more than one Restricted
Asset Sale is so specified, the amount by which each related Reserved Amount is
to be reduced, (iii) the amount by which any Reserved Amount is to be reduced
does not exceed the remaining balance of such Reserved Amount and (iv) any cash
withdrawn from the Reserve Account pursuant to this Section 5.03(d) shall be
applied to the prepayment of the Notes only at the direction of the Grantor.
(e) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will, upon written request from the Grantor, transfer all or a
portion of any Excess Reserved Amount from the Reserve Account to the Cash
Consideration Account if the following conditions shall have been satisfied:
(1) Such request shall specify each Restricted Asset Sale with
respect to which such Excess Reserved Amount has arisen and, if more than
one Restricted Asset Sale is so specified, the amount of each related
Excess Reserved Amount.
(2) The amount of each Excess Reserved Amount does not exceed the
remaining balance of the related Reserved Amount.
(3) Such request shall be accompanied by a certificate, signed by the
chief accounting officer of the Grantor, to the effect that the Grantor is
no longer required by GAAP to maintain the related Excess Reserved Amount
in its reserve in respect of each such Restricted Asset Sale.
(4) The amount of each such Excess Reserved Amount to be transferred
constitutes Net Proceeds Allocable to Payee.
(f) Unless an Event of Default or a Change Prepayment Event has
occurred and is continuing, the Collateral Agent will withdraw cash from the
Reserve
18
<PAGE>
Account and pay such cash at the direction of the Grantor on the date specified
by the Grantor if the following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
Newco, to the effect that no Event of Default or Change Prepayment Event
has occurred and is continuing and (B) a certificate, signed by the chief
accounting officer of the Grantor, to the effect that the proceeds of such
withdrawal are to be used to discharge a Permitted Liability which is then
due and payable (and describing such Permitted Liability in general terms,
including the Restricted Asset Sale out of which such Permitted Liability
has arisen).
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received certificates bringing down to date the
certificates referred to in Section 5.03(f)(1).
(3) The amount of cash to be withdrawn does not exceed the remaining
balance of the Reserved Amount in respect of such Restricted Asset Sale.
(g) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Reserve Account and pay such cash
at the direction of the Grantor on the date specified by the Grantor if the
following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
Newco, to the effect that no Event of Default has occurred and is
continuing and (B) a certificate, signed by the chief accounting officer of
the Grantor, to the effect that the proceeds of such withdrawal are to be
used to discharge a Permitted Liability which is then due and payable (and
describing such Permitted Liability in general terms, including the
Restricted Asset Sale out of which such Permitted Liability has arisen).
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received certificates bringing down to date the
certificates referred to in Section 5.03(g)(1).
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<PAGE>
(3) The amount of cash to be withdrawn does not exceed the remaining
balance of the Reserved Amount in respect of such Restricted Asset Sale.
(4) Such Restricted Asset Sale was a Mixed Asset Sale, and the
Shortfall Amount in respect of such Restricted Asset Sale is zero.
(h) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw Cash from the Reserve Account representing all or
a portion of any Excess Reserved Amount and pay such cash to or at the direction
of the Grantor on the date specified by the Grantor if the following conditions
shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified each Restricted Asset Sale with respect to which such Excess
Reserved Amount arises, and, if more than one Restricted Asset Sale is so
specified, the amount of each related Excess Reserved Amount. Such request
shall have been accompanied by (A) a certificate, signed by the chief
financial officer of Newco, to the effect that no Event of Default has
occurred and is continuing and (B) a certificate, signed by the chief
accounting officer of the Grantor, to the effect that the Grantor is no
longer required by GAAP to maintain the related Excess Reserved Amount in
its reserve in respect of each such Restricted Asset Sale.
(2) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received certificates bringing down to date the
certificates referred to in Section 5.03(h)(1).
(3) The amount of each such Excess Reserved Amount to be withdrawn
does not exceed the then remaining balance of the related Reserved Amount.
(4) Each such Restricted Asset Sale was a Mixed Asset Sale, and the
Shortfall Amount in respect of each such Restricted Asset Sale is zero.
(i) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Reserve Account to satisfy in accordance with Section 6.02 any Obligations
then due and payable.
Section 5.04 Specified Loss Account. (a) Prior to the first
----------------------
delivery to the Collateral Agent of any Specified Loss Proceeds, the Collateral
Agent will establish with a financial institution reasonably satisfactory to the
Grantor (it being agreed that
20
<PAGE>
such financial institution shall not be a creditor of the Grantor or any of its
Affiliates) an account maintained in the name of the Collateral Agent and in
Toronto, Ontario (the "Specified Loss Account") over which the Collateral Agent
----------------------
shall have exclusive dominion and control, including the exclusive right of
withdrawal. All Specified Loss Proceeds received by the Collateral Agent and all
cash Proceeds from investments thereof pursuant to Section 5.04(b) shall
forthwith be deposited into the Specified Loss Account.
(b) The amount of Specified Loss Proceeds in respect of any Mortgaged
Property shall be increased by the amount of any Proceeds from the investment of
amounts of such Specified Loss Proceeds pursuant to Section 5.05, net of the
amount so invested.
(c) The Collateral Agent will, upon written request from the Grantor,
withdraw cash from the Specified Loss Account and apply such cash to prepay, in
whole or in part, the Notes in accordance with the instructions of the Grantor
set forth in such written request; provided, however, that (i) such instructions
-------- -------
are consistent with paragraph 7(c) of the Notes, (ii) such written request
specifies the Mortgaged Property the Specified Loss Proceeds in respect of which
are to be reduced in connection with such withdrawal, (iii) the amount by which
the Specified Loss Proceeds in respect of any Mortgage Property are to be
reduced does not exceed the remaining balance of such Specified Loss Proceeds
and (iv) any cash withdrawn from the Specified Loss Account pursuant to this
Section 5.04(c) shall be applied to the prepayment of the Notes only at the
direction of the Grantor.
(d) Unless an Event of Default or a Change Prepayment Event has
occurred and is continuing, the Collateral Agent will withdraw cash from the
Specified Loss Account and pay such cash at the direction of the Grantor on the
date specified by the Grantor if the following conditions shall have been
satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than five Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have been
accompanied by (A) a certificate, signed by the chief financial officer of
Newco, to the effect that no Event of Default or Change Prepayment Event
has occurred and is continuing and (B) a certificate, signed by the chief
accounting officer of the Grantor, to the effect that the proceeds of such
withdrawal are to be used to pay for costs of repairs to or restoration of
the Mortgaged Property in respect of which Specified Loss Proceeds were
received by the Collateral Agent pursuant to Section 11 or 12 of the
applicable Mortgage and (C) a copy of an invoice or invoices for such costs
(the issuer or issuers of which shall not be Affiliates of
21
<PAGE>
the Grantor) evidencing that such costs have been incurred and are then due
(or have been paid).
(2) Such request shall have been received by the Collateral Agent not
sooner than 30 days following the most recent withdrawal from the Specified
Loss Account under this Section 5.04(d).
(3) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received certificates bringing down to date the
certificates referred to in Section 5.04(d)(1).
(4) The amount of cash to be withdrawn (i) does not exceed the
aggregate amount shown on the invoice or invoices accompanying the
certificate delivered pursuant to Section 5.04(d)(1)(B) and (ii) when
aggregated with all other amounts previously withdrawn pursuant to this
Section with respect to such Mortgaged Property, does not exceed such
Specified Loss Proceeds.
(5) Either (i) the cash withdrawn is paid to the Grantor to reimburse
the Grantor for amounts paid to the issuer of the invoice or invoices
accompanying the certificate delivered pursuant to Section 5.04(d)(1)(B)
that are marked "paid" or (ii) the Grantor directs that the cash withdrawn
is to be paid to, or at the direction of, the issuer or issuers of any
unpaid invoice or invoices.
(e) Unless an Event of Default has occurred and is continuing, the
Collateral Agent will withdraw cash from the Specified Loss Account and pay such
cash at the direction of the Grantor on the date specified by the Grantor if the
following conditions shall have been satisfied:
(1) The Grantor shall have requested in writing that the Collateral
Agent effect such withdrawal not less than 10 Business Days prior to the
date on which such cash is to be withdrawn. Such request shall have
specified the amount of cash to be withdrawn and specified the Mortgaged
Property the replacement of which is to be effected with the cash to be
withdrawn and shall have been accompanied by (A) a certificate, signed by
the chief financial officer of Newco, to the effect that (x) no Event of
Default has occurred and is continuing and (y) the proceeds of such
withdrawal are to be used to finance the purchase by the Grantor of
Replacement Property from a Person who is not an Affiliate of the Grantor
and (B) a copy of a contract for the purchase of the Replacement Property.
(2) On or prior to the date on which such cash is to be withdrawn,
the Collateral Agent shall have received (A) a first mortgage securing the
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Obligations, in registrable form and otherwise substantially in the form
and substance of the Mortgages, of the Replacement Property, duly executed
and delivered by the Grantor, (B) at the Collateral Agent's option (acting
reasonably), either (i) a title opinion rendered by legal counsel, duly
qualified in the jurisdiction in which the Replacement Property is located
and satisfactory to the Collateral Agent (acting reasonably), confirming
the fee simple interest of the Grantor in the Replacement Priority, the
priority of the Collateral Agent's mortgage therein (in each case, subject
only to standard exceptions and Permitted Encumbrances) and such other
matters as the Collateral Agent may reasonably request or (ii) a title
insurance policy, issued by a nationally recognized title insurance company
satisfactory to the Collateral Agent (acting reasonably), insuring the Lien
of the Collateral Agent's mortgage in the Replacement Property subject only
to standard exceptions and Permitted Encumbrances, in an amount not less
than the amount of the proposed withdrawal, and (C) such surveys,
environmental audits and documents relating to the Permitted Encumbrances
and compliance with Applicable Law and applicable Governmental Approvals,
as reasonably requested by the Collateral Agent, as shall be reasonably
necessary to satisfy the Collateral Agent that the mortgaging of the
Replacement Property to secure the Obligations and the proposed withdrawal,
taken together, would not materially and adversely affect the aggregate
value of the Mortgaged Property and the Collateral or the rights and
remedies of the Collateral Agent or any of the Secured Parties under the
Loan Documents or the ability of the Collateral Agent or any of the Secured
Parties to exercise the same.
(3) On the date on which such cash is to be withdrawn, the Collateral
Agent shall have received a certificate bringing down to date the
certificate referred to in Section 5.04(e)(1)(A).
(4) If the Replacement Property is being purchased in connection with
the purchase by the Grantor, or any of its Affiliates, of any assets or
services from the seller of the Replacement Property or any of its
Affiliates, the Collateral Agent shall be reasonably satisfied that the
amount of cash proposed to be withdrawn shall not be greater than the fair
market value of the Replacement Property. If the Replacement Property is
not being purchased in connection with the purchase by the Grantor, or any
of its Affiliates, of any assets or services from the seller of the
Replacement Property or any of its Affiliates, the Collateral Agent shall
be reasonably satisfied that the amount of cash proposed to be withdrawn
shall not be greater than the cash purchase price for the Replacement
Property.
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(5) The amount of cash to be withdrawn in respect of any Mortgaged
Property (when aggregated with all other amounts previously withdrawn
pursuant to this Section 5.04 with respect to such Mortgaged Property) does
not exceed the Specified Loss Proceeds received in respect of such
Mortgaged Property.
(6) The Grantor directs that the cash withdrawn is to be paid to, or
at the direction of, the seller of the Replacement Property.
(f) If Specified Loss Proceeds with respect to a Mortgaged Property
have been withdrawn from the Specified Loss Account pursuant to Section 5.04(d),
upon completion of the repairs to such Mortgaged Property the Grantor shall
direct the Collateral Agent pursuant to Section 5.04(c) to apply any balance of
such Specified Loss Proceeds with respect to such Mortgaged Property remaining
in the Specified Loss Account to the prepayment of the Notes. If the Grantor
has notified the Collateral Agent in accordance with the Mortgage that Specified
Loss Proceeds with respect to a Mortgaged Property are to be used to finance the
purchase of Replacement Property pursuant to Section 5.04(e), the Grantor may at
any time and from time to time direct the Collateral Agent pursuant to Section
5.04(c) to apply any portion of such Specified Loss Proceeds with respect to
such Mortgaged Property to the prepayment of the Notes.
(g) If an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, apply all amounts on deposit in
the Specified Loss Account to satisfy in accordance with Section 6.02 any
Obligations then due and payable.
Section 5.05 Investment. Unless an Event of Default has occurred and
----------
is continuing, the Collateral Agent will accept directions from the Grantor as
to the investment of any funds in any Cash Collateral Account in Permitted
Investments; provided, however, that (i) the Collateral Agent shall not be
-------- -------
required to make any investment that, in its sole judgment, would require or
cause the Collateral Agent to be, or would result in, any violation of
Applicable Law or any Governmental Approval, (ii) the Collateral Agent shall be
authorized to sell any investment held for the account of any Cash Collateral
Account to the extent cash is needed in such Cash Collateral Account to make a
withdrawal of cash from such Cash Collateral Account (and shall not be liable
for any loss resulting from any such sale) and (iii) the Collateral Agent shall
not be required to make any investment unless the Collateral Agent is able to
perfect the Security Interest in such investment. The Grantor will indemnify
the Collateral Agent for any losses resulting from such investments pursuant to
this Section. Except as expressly set forth in this Section, the Collateral
Agent shall not be obligated to invest any amounts on deposit in any Cash
Collateral Account, nor shall
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any Cash Collateral Account pay interest. The Collateral Agent shall, upon
reasonable request from the Grantor from time to time, provide the Grantor with
a report as to the Collateral Agent's holdings of Permitted Investments.
ARTICLE VI. REMEDIES
Section 6.01 Remedies upon Default. (a) Upon the occurrence and
---------------------
during the continuance of an Event of Default, the Grantor will deliver each
item of Collateral at the time in the possession of the Grantor to the
Collateral Agent on demand, and it is agreed that the Collateral Agent shall
have the right (subject to applicable law), with or without legal process and
with or without previous notice or demand for performance, to exercise, in
addition to all other rights granted to the Collateral Agent in this Agreement,
any and all rights afforded to a secured party under the PPSA or other
Applicable Law. Without limiting the generality of the foregoing, the
Collateral Agent (and, in the case of Section 6.01(vi), any other Secured Party)
may at any time or from time to time upon the occurrence and during the
continuance of an Event of Default take any one or more of the following
actions:
(i) enter into possession of the Collateral;
(ii) commence proceedings in any court of competent jurisdiction for
sale or foreclosure of all or any part of the Collateral;
(iii) file proofs of claim and any other documents to establish its
claims in any proceeding relative to the Grantor;
(iv) collect, receive, appropriate and realize upon the Collateral,
and/or sell, give one or more options to purchase, or otherwise dispose of
and deliver all or any part of the Collateral (or contract to do any of the
foregoing), at public or private sale or sales, at any broker's board or on
any securities exchange or elsewhere upon such terms and conditions as the
Collateral Agent may deem advisable and at such prices as it may deem best,
for cash or on credit or future delivery without assumption of any credit
risk;
(v) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part of any
property in addition to the Collateral securing any of the Obligations, or
compromise or extend or renew for any period (whether or not longer than
the original period) any obligations of any nature of any Person with
respect to any such property; and/or
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(vi) to the extent permitted by applicable law, purchase any or all of
the Collateral, whether in connection with a sale made under the power of
sale herein contained or pursuant to judicial proceedings or otherwise.
(b) Without limiting the generality of the foregoing and, in
particular, of Sections 6.01(l)(iv) and 6.01(l)(vi), the Collateral Agent shall
be authorized at any offer or sale of any of the Collateral (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to Persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such public or private sale
shall hold the property sold absolutely, free from any claim or right on the
part of the Grantor, and the Grantor hereby waives (to the extent permitted by
law) all rights or equity of redemption, stay and appraisal which the Grantor
now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted. At any such public or private sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
sale made pursuant to this Section 6.01 to any Secured Party, the Collateral or
any part thereof purchased by any such Secured Party shall be free (to the
extent permitted by law) from any right or equity of redemption, stay, valuation
or appraisal on the part of the Grantor (all said rights being also hereby
waived and released to the extent permitted by law). To the extent permitted by
law, such Secured Party may make payment on account of such sale by using any
claim under any Loan Document then due and payable to such Secured Party from
the Grantor as a credit against the purchase price, and such Secured Party may,
upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to the Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and the Grantor shall not be entitled
to the return of the Collateral or any
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portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full.
(c) The Collateral Agent may take any or all of the foregoing actions
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except as required by law) to or upon the
Grantor or any other Person, and the Grantor hereby waives each such demand,
presentment, protest, advertisement and notice to the extent permitted by
applicable law.
(d) To the extent permitted by applicable law, the Grantor waives all
claims, damages and demands it may acquire against the Collateral Agent or any
other Secured Party arising out of the exercise by the Collateral Agent of any
rights hereunder. The Grantor will remain liable for any deficiency if the
proceeds from any proceeding or of any collection, receipt, appropriation,
realization, sale, other disposition or delivery of the Collateral are
insufficient to pay and satisfy the Obligations.
Section 6.02 Application of Proceeds. The Collateral Agent shall
-----------------------
apply the proceeds from any proceeding or of any collection, receipt,
appropriation, realization, sale, other disposition or delivery of any of the
Collateral, as well as any Collateral consisting of cash and any amounts paid to
the Collateral Agent pursuant to any Mortgage, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such collection or sale or otherwise in
connection with this Agreement, any of the Mortgages or any of the
Obligations or incidental to the care or safekeeping of any of the
Collateral, including all court costs and the reasonable fees and expenses
of its agents, experts and one legal counsel on a solicitor and his own
client basis for it and the holders of the Notes (plus any necessary local
counsel), the repayment of all advances made by the Collateral Agent
hereunder or under any Mortgage on behalf of the Grantor and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any Mortgage;
SECOND, to the payment in full of the Obligations in such order as the
Collateral Agent may elect (the amounts so applied to be distributed among
the Secured Parties pro rata in accordance with the amounts of such
Obligations owed to them on the date of any such distribution); and
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THIRD, after payment by the Collateral Agent of any other amount
required by applicable law, to the Grantor or its successors, or to
whomsoever may lawfully be entitled to receive the same.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement; provided, however, that the Collateral Agent shall apply such
-------- -------
proceeds, moneys or balances within 6 months of receipt thereof (such 6 months
to be subject to extension during any period for which the Collateral Agent is
not permitted by Applicable Law or this Agreement to apply such proceeds, moneys
or balances). Upon any sale of the Collateral by the Collateral Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
ARTICLE VII. RIGHTS AND DUTIES OF COLLATERAL AGENT
SECTION 7.01. Delegation of Duties. The Collateral Agent may execute
--------------------
any of its duties under any Loan Document by or through agents or attorneys-in-
fact and shall be entitled to advice of counsel or other advisors concerning all
matters pertaining to its duties and rights hereunder. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise expressly required by Section 7.02 or 8.03.
SECTION 7.02. Powers; General Immunity. (a) Each Secured Party, by
------------------------
its acquisition of any Note, irrevocably authorizes the Collateral Agent to take
such action on such Secured Party's behalf and to exercise such powers under the
Loan Documents as are specifically delegated to it by the terms thereof,
together with such powers as are reasonably incidental thereto. The Collateral
Agent shall have only those duties and responsibilities which are expressly
specified in the Loan Documents and it may perform such duties by or through its
agents or employees. The duties of the Collateral Agent shall be mechanical and
administrative in nature; and the Collateral Agent shall not have by reason of
any Loan Document a fiduciary relationship in respect of any Secured Party; and
nothing in any of the Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon the Collateral Agent any obligations in
respect of any of the Loan Documents except as expressly set forth therein.
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(b) The Collateral Agent shall not be responsible to any Secured
Party for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of any of the Loan Documents or for any Liens or
Guaranties granted by, or purported to be granted by, any of the Loan Documents,
or for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Collateral Agent to
any Secured Party or by or on behalf of Buyer, Newco, Realco or the Grantor, to
the Collateral Agent or any Secured Party, or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or of the
existence or possible existence of any Default or Event of Default.
(c) Notwithstanding anything to the contrary in this Agreement,
neither the Collateral Agent, nor any of its officers, directors, employees,
agents, investigators, consultants, attorneys-in-fact or Affiliates shall be
liable to any Secured Party for any action taken or omitted under any of the
Loan Documents or in connection herewith or therewith unless, but only to the
extent, caused by its or their gross negligence or willful misconduct. If the
Collateral Agent shall request instructions with respect to any act or action
(including the failure to take an action) in connection with any of the Loan
Documents, the Collateral Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from the
Required Mortgage Lenders. Without prejudice to the generality of the
foregoing, (i) the Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys for the
Grantor or its Affiliates), accountants, experts and other professional advisors
selected by it; and (ii) no Secured Party shall have any right of action
whatsoever against the Collateral Agent as a result of the Collateral Agent
acting or (where so instructed) refraining from acting under any Loan Document
in accordance with the instructions of the Required Mortgage Lenders. The
Collateral Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under the Loan Documents unless and until
it has obtained the instructions of Required Mortgage Lenders.
(d) The agency hereby created shall in no way impair or affect any of
the rights and powers of, or impose any duties or obligations upon, the
Collateral Agent in its individual capacity as a Secured Party. With respect to
any Notes that it holds, the Collateral Agent shall have the same rights and
powers hereunder as any other Secured Party and may exercise the same as though
it were not performing the duties and functions delegated to it hereunder. The
Collateral Agent and its Affiliates
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may accept deposits from, lend money to and generally engage in any kind of
banking, trust, financial advisory or any other business with the Grantor or any
Affiliate of the Grantor as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Grantor or any
Affiliate of the Grantor without having to account for the same to the Secured
Parties.
(e) Without limiting the foregoing, the Collateral Agent may deem and
treat the holder of any Note as the owner thereof for all purposes. Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of that
Note or of any Note issued in exchange therefor.
(f) The Collateral Agent shall be entitled to rely, and shall be
fully protected in relying, on the Register and the copies of the Register, in
each case as provided to the Collateral Agent by the Grantor pursuant to Section
4.06, for purposes of determining the names and addresses of the holders of the
Notes.
Section 7.03 Non-Reliance on Agent. Each Secured Party, by its
---------------------
acquisition of any Note, expressly acknowledges that neither the Collateral
Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates have made any representations or warranties to it and that no act
by the Collateral Agent hereinafter taken shall be deemed to constitute any
representation or warranty by such Person. The Collateral Agent shall not have
any duty or responsibility either initially or on a continuing basis to make any
such investigation or any such appraisal on behalf of the Secured Parties or to
provide any Secured Party with any credit or other information with respect
thereto, and the Collateral Agent shall not have any responsibility with respect
to the accuracy of or the completeness of any information provided to the
Secured Parties.
Section 7.04 Determinations Pursuant to Loan Documents. In each
-----------------------------------------
circumstance where, under any provision of any Loan Document, the Collateral
Agent shall have the right to grant or withhold any consent, exercise any
remedy, make any determination or direct any action under such Loan Document,
the Collateral Agent shall act in respect of such consent, exercise of remedies,
determination or action, as the case may be, only with the consent of and at the
direction of the Required Mortgage Lenders; provided, however, that (i) no such
-------- -------
consent of the Required Mortgage Lenders shall be required with respect to any
consent, determination or other matter that is, in the Collateral Agent's
reasonable judgment, ministerial or administrative in nature or provided for in
such Loan Document, (ii) the Collateral Agent is hereby authorized on behalf of
all of the Secured Parties, without the necessity of any further consent from
any Secured Party, from time to time prior to an Event of Default, to
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release the security interests and Liens imposed by the Mortgage Documents in
connection with any dispositions permitted by the terms of the Mortgage
Documents or as may be required by Applicable Law and (iii) the Collateral Agent
may in its discretion take such action as it deems necessary, without the
consent or direction of the Required Mortgage Lenders, if in the good faith
determination of the Collateral Agent the interests of the Secured Parties would
be adversely affected were such action to be delayed pending the obtaining of
such consent or direction. In each circumstance where any consent of or
direction from the Required Mortgage Lenders is required, the Collateral Agent
shall send to the Secured Parties a notice setting forth a description in
reasonable detail of the matter as to which consent or direction is requested
and the Collateral Agent's proposed course of action with respect thereto. In
the event the Collateral Agent shall not have received a response from any
Secured Party within five Business Days after the giving of such notice (unless
such notice is given by mail, in which case 10 Business Days after the giving of
such notice), such Secured Party shall be deemed to have agreed to the course of
action proposed by the Collateral Agent, provided that such notice states that a
failure to respond shall have the consequences specified in this sentence.
Section 7.05 Resignation of the Collateral Agent. The Collateral
-----------------------------------
Agent may at any time, by giving 30 days' prior written notice to the Grantor,
resign and be discharged from the responsibilities hereby created, such
resignation to become effective upon the earlier of (i) the acceptance of the
appointment of a successor pursuant to the next sentence of this Section or (ii)
the appointment of a successor by the Required Mortgage Lenders and the
acceptance of such appointment by such successor. If no successor shall be
appointed and approved pursuant to clause (ii) above within 30 days after the
date of any such resignation, the Collateral Agent may apply to any court of
competent jurisdiction to appoint a successor to act until a successor shall
have been appointed by the Required Mortgage Lenders as above provided or may,
on behalf of the Secured Parties, appoint a successor Collateral Agent. Any
successor Collateral Agent shall be (A) a Canadian chartered bank or any loan or
trust company organized under the laws of Canada or any province thereof with an
office in Toronto, Ontario, having a combined capital, surplus and undivided
profits (less any undivided losses), as of its last annual audited financial
statements, not less than C$250,000,000 and being authorized to perform the
functions of the Collateral Agent hereunder (who, if appointed after the fourth
anniversary of the Closing Date, shall be entitled to receive reasonable fees
from the Grantor for its services as Collateral Agent) or (B) the holder of at
least a majority of the aggregate Principal Amount of the Notes then outstanding
plus all accrued interest thereon from the immediately preceding Interest Date.
ARTICLE VII MISCELLANEOUS
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Section 8.01 Security Interest Absolute; Release of Security
-----------------------------------------------
Interest. (a) All rights of the Collateral Agent hereunder, the Security
Interest and all obligations of the Grantor hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Notes (or any Guaranty endorsed thereon), any Mortgage, any agreement with
respect to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Notes (or any
Guaranty endorsed thereon), any Mortgage or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Grantor in respect of the Obligations or this Agreement,
except the payment in full of the Obligations and except for any matter approved
in writing by, subject to paragraph 14 of the Notes, the Required Mortgage
Lenders and the Collateral Agent.
(b) The consent or approval of any Secured Party shall not be
required for the release of any Collateral by the Collateral Agent to the
Grantor in accordance with the express provisions of this Agreement.
Section 8.02 Successors. Whenever in this Agreement any of the
----------
parties hereto is referred to, such reference shall be deemed to include the
successors of such party (including, in the case of the Collateral Agent, any
successor Collateral Agent); and all covenants, promises and agreements by or on
behalf of the Grantor or the Collateral Agent that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
(including, in the case of the Collateral Agent, any successor Collateral
Agent).
Section 8.03 Collateral Agent Appointed Attorney-in-Fact. (a) The
-------------------------------------------
Grantor hereby appoints the Collateral Agent the attorney-in-fact of the
Grantor, with power of substitution and in the Grantor's name or otherwise, for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Collateral Agent may reasonably
deem necessary or advisable to accomplish the purposes hereof, including, upon
the occurrence and during the continuance of an Event of Default, the power to
(a) receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral;
(c) commence and prosecute any and all suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect or otherwise realize
on all
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or any of the Collateral or to enforce any rights in respect of any Collateral;
(d) settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; and (e) use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as fully and completely as though the
Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, however, that nothing contained in this Section or in this Agreement
- -------- -------
shall be construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent, or to present or file any claim or notice, or
to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken or omitted to be taken by the Collateral Agent with respect
to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Grantor or to any claim or action against
the Collateral Agent, other than any such matter to the extent arising out of
the gross negligence or willful misconduct of the Collateral Agent. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantor for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve the Grantor of any of its obligations hereunder or under any
Mortgage with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, by law or otherwise; provided, however, that the Collateral
-------- -------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession or under its control shall be
to use reasonable care in the custody and preservation of such Collateral. The
Grantor agrees that the Collateral Agent shall be deemed to have used reasonable
care in the custody and preservation of the Collateral if the Collateral Agent
deals with such Collateral in the same manner as the Collateral Agent deals with
similar property for its own account and, to the extent permitted by applicable
law, the Collateral Agent need not take any steps to preserve rights against any
other Person (including prior parties).
(b) The Grantor also authorizes the Collateral Agent, at any time and
from time to time, upon the occurrence and during the continuance of an Event of
Default, to execute any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral in connection with any
sale provided for in Section 6.01 hereof.
Section 8.04 Collateral Agent's Expenses; Indemnification. (a) The
--------------------------------------------
Grantor will pay upon demand to the Collateral Agent the amount of any and all
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reasonable expenses, including the reasonable fees and expenses of one counsel
on a solicitor and his own client basis for it and the holders of the Notes
(plus any necessary local counsel), of any experts or agents and of any
financial institution with which any Cash Collateral Account is maintained,
which the Collateral Agent may incur in connection with (i) the administration
of the Mortgage Documents, (ii) the custody, preservation or investment of, or
the sale of, collection from or other realization upon any of the Collateral,
(iii) the exercise, enforcement or protection of any of the rights of the
Collateral Agent (hereunder, under any Mortgage or otherwise) or (iv) the
failure of the Grantor to perform or observe any of the provisions hereof, other
than any such expenses to the extent arising out of the gross negligence or
willful misconduct of the Collateral Agent. If the Grantor fails to perform or
observe any of the provisions hereof, then the Collateral Agent shall be
entitled, but shall have no obligation, to perform or observe or otherwise cause
the performance or observance of any of the provisions hereof.
(b) The Grantor will indemnify the Collateral Agent against, and hold
it harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses on a solicitor and his
own client basis, incurred by or asserted against it arising out of, in any way
connected with, or as a result of, the execution, delivery or performance of any
Mortgage Document, or any exercise of remedies thereunder, or any claim,
litigation, investigation or proceeding relating hereto or to the Collateral or
any Mortgage or Mortgaged Property, whether or not a party thereto, other than,
and only to the extent, caused by the gross negligence or willful misconduct of
the Collateral Agent.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations. The provisions of this Section shall remain operative
and in full force and effect regardless of the termination of this Agreement,
the consummation of the transactions contemplated hereby, the invalidity or
unenforceability of any term or provision of this Agreement, any Note or any
Mortgage, or any investigation made by or on behalf of the Collateral Agent.
All amounts due under this Section shall be payable on written demand therefor.
Section 8.05 Waivers, Amendment. (a) No failure or delay of the
------------------
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
are cumulative, may be exercised singly or concurrently and in any order, and
are not exclusive of any rights or remedies which it would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by the
Grantor therefrom shall in any event be effective unless
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the same shall be permitted by Section 8.05(b), and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Grantor in any case shall entitle the Grantor
to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with paragraph 14 of the Notes.
Section 8.06 Termination. This Agreement (including the
-----------
representations and warranties herein) and the Security Interest shall terminate
when and only when all the Obligations have been paid in full. Upon such
termination, the Collateral Agent shall forthwith assign, transfer and deliver
any Collateral in the possession or under the control of the Collateral Agent
(including any Collateral in any Cash Collateral Account) to or on order of the
Grantor and, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
Any execution and delivery of such documents shall be without recourse to or
warranty by the Collateral Agent.
Section 8.07 Severability. If any provision of this Agreement is
------------
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
Sections or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
Section 8.08 Notices. All notices and other communications made in
-------
connection with this Agreement shall be in writing. Any notice or other
communication in connection herewith shall be deemed duly given (a) four
Business Days after it is sent by express, registered or certified mail, return
receipt requested, postage prepaid or (b) one Business Day after it is sent by
overnight courier, in each case, addressed as follows:
35
<PAGE>
(i) if to the Grantor:
CDW Canada Acquisition Inc.
475 Hood Road
Markham, Ontario
L3R 0S8
Attention: Chief Financial Officer
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
and a copy to each of Buyer, Newco and Realco at the
addresses set forth in paragraph 16 of the Notes
(ii) if to the Collateral Agent:
Westinghouse Canada Inc.
120 King Street West, 6th Floor
Hamilton, Ontario
L8N 3K2
Attention: General Counsel
or, in each case, at such other address as may be specified in writing to the
other parties hereto. Any party may give any notice or other communication in
connection herewith using any other means (including, without limitation,
personal delivery, messenger service, telecopy, telex or ordinary mail), but no
such notice or other communication shall be deemed to have been duly given
unless and until it is actually received by the individual for whom it is
intended.
Section 8.09 Headings. The headings contained in this Agreement are
--------
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
36
<PAGE>
Section 8.10 Entire Agreement. This Agreement, together with the
----------------
Acquisition Agreement, the Notes and the Mortgages, constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
Section 8.11 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
Section 8.12 Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the Province of Ontario and the laws
of Canada applicable therein. Without prejudice to the ability of the
Collateral Agent to enforce this Agreement in any other proper jurisdiction, the
Grantor hereby irrevocably submits and attorns to the jurisdiction of the courts
of the Province of Ontario for the purposes of this Agreement.
Section 8.13 No Third Party Beneficiaries. Nothing in this Agreement
----------------------------
shall confer any right upon any Person, other than the parties hereto, the
Secured Parties and each such party's respective successors and permitted
assigns.
Section 8.14 No Merger. Neither the taking and holding of the
---------
Collateral nor the obtaining of any judgment by the Collateral Agent will
operate as a merger of any Obligation or any other indebtedness or liability of
the Grantor to the Collateral Agent, the Secured Parties or any of them or
operate to prejudice the security constituted by this Agreement. This Agreement
and the Security Interest are in addition to and not in substitution for any
other security now or hereafter held by the Collateral Agent in respect of the
Grantor, the Obligations or the Collateral. No remedy for the enforcement of
the rights of the Collateral Agent hereunder will be exclusive of or dependent
on any other such remedy but any one or more of such remedies may from time to
time be exercise0d independently or in combination.
Section 8.15 Release of Information. The Grantor hereby authorizes
----------------------
the Collateral Agent and any other Secured Party to deliver a copy of this
Agreement and to provide such other information as may be requested of any of
the Secured Parties by Persons entitled thereto pursuant to the PPSA, any other
applicable statute and otherwise with the consent of the Grantor.
Section 8.16 Miscellaneous Provisions. Possession of an executed
------------------------
copy of this Agreement by the Collateral Agent constitutes conclusive evidence
that this Agreement was executed and delivered by the Grantor, free of all
conditions. The
37
<PAGE>
Grantor confirms that value has been given and that the parties have not agreed
to postpone the time for attachment of the Security Interest to any of the
Collateral.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CDW CANADA ACQUISITION INC.,
By: /s/ R.J. Marshuetz
-----------------------------------
Name: R.J. Marshuetz
Title:
WESTINGHOUSE CANADA INC., as
Collateral Agent
By: /s/ Carolyn Crowe Worthington
-----------------------------------
Name: Carolyn Crowe Worthington
Title: Assistant Secretary
/s/ J.S. Cowan
-----------------------------------
J.S. Cowan
Vice President and Treasurer
38
<PAGE>
SCHEDULE 3.02A
--------------
REQUIRED FILINGS, RECORDINGS AND REGISTRATIONS
1. Province of Ontario.
39
<PAGE>
EXHIBIT 4.7
PROMISSORY NOTE
$700,000 HOUSTON, TEXAS
DECEMBER 10, 1996
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of POWER
SUPPLY, INC., a Texas corporation ("Payee"), the principal sum of Seven Hundred
Thousand Dollars ($700,000) together with Accrued Interest, as defined herein,
on the terms provided in this Note. All payments hereunder shall be made to
Payee when due at the following address: Byron Snyder, P.O. Box 56766, Houston,
Texas 77256-6766, or such other address as Payee shall designate in writing to
Maker.
This Note shall bear interest at the annual rate of eight percent (8%)
(computed on the basis of a 365 day year) compounded monthly, subject to
provisions contained herein regarding interest after default. Interest shall
not be paid but shall accrue monthly (the "Accrued Interest") until Maturity (as
defined herein) when the principal balance of the Note and all Accrued Interest
shall be satisfied. Principal and Accrued Interest shall be due and payable, if
not sooner paid or accelerated pursuant to the terms of this Note on the fifth
anniversary of the date of this Note ("Maturity").
If at any time the Maker shall effect an underwritten public offering
of shares of common stock of Maker ("Common Stock") led by one or more
underwriters at least one of which is an underwriter of nationally recognized
standing (the "Public Offering") then effective upon the closing of the sale of
shares of Common Stock pursuant to such Public Offering, the unpaid principal
sum of the Note and all Accrued Interest shall without further action of Maker
or Payee automatically convert to shares of restricted Common Stock. The number
of shares of common stock of the Maker to be delivered to the Payee shall be
determined by dividing the principal sum of the Note plus all Accrued Interest
by the initial purchase price per share of Common Stock paid by the public in
the Public Offering. Certificates evidencing the shares of restricted Common
Stock will be delivered to Payee upon surrender of the Note and execution and
delivery of a stock subscription agreement in form and substance reasonably
satisfactory to Maker.
If the Maker has not closed a Public Offering on or before December
31, 1999, then at Maker's sole option, Maker may any time after December 31,
1999 prepay all, but not less than all, of the principal sum of this Note
together with all
<PAGE>
Accrued Interest to the day of prepayment, without penalty. Maker shall exercise
this option by delivering written notice ("Prepayment Notice") to Payee of its
election to prepay this Note. Such prepayment shall be made in immediately
available funds and shall be paid to Payee within seven (7) days of the date of
the Prepayment Notice.
The Maker waives presentment, demand, notice, protest and all other
demands and notices in respect to the delivery, acceptance, performance, default
or enforcement of this Note, except as expressly provided herein.
This Note is non-assignable by the holder hereof other than to Byron
Snyder, a shareholder of Payee, or in the event of his death, to his heirs or to
a trust for the benefit of his heirs.
For a period of six months from the date hereof, the principal amount
of this Note and Accrued Interest is subject to set-off on a dollar-for-dollar
basis by the Maker for unpaid claims for indemnification made by the undersigned
as provided in Section 8(e) of the Asset Purchase Agreement dated as of the date
hereof among the Maker, Sharman and the Payee, which agreement is incorporated
herein by reference.
The following events shall be "Events of Default" hereunder.
(a) Default by Maker in the payment of any principal of or interest
on the indebtedness evidenced by or arising under this Note within ten (10) days
of its due date; or
(b) Default by Maker in the due observance or performance of any
material term, provision, covenant or agreement herein (other than for the
payment of principal or interest), or in the Asset Purchase Agreement, if such
default continues unremedied for a period of ten (10) days after written notice
to Maker.
If any one or more of the foregoing Events of Default shall occur,
then Payee or the holder hereof may, at any time and at its option, by written
notice to Maker, declare the unpaid principal balance of and interest on the
indebtedness evidenced by or arising under this Note and any and all other
indebtedness of Maker to Payee to be immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by Maker, and Payee or the holder hereof may
take such additional action as provided by law.
2
<PAGE>
Upon the occurrence and during the continuance of any "Event of
Default" as defined in this Note, the principal balance outstanding hereunder
shall bear interest at a per annum rate of twelve percent (12%), which interest
shall be computed and payable as otherwise set forth herein.
The Maker shall pay all reasonable expenses and costs incurred in the
collection of this Note, including, without limitation, attorneys' fees and
court costs.
No extension of this Note and no delay in the enforcement of the
payment of this Note shall affect the liability of Maker.
This Note shall be governed by and construed and enforced in
accordance with the law of the State of Texas other than the laws of said State
relating to conflict of laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
has caused this Note to be executed the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
--------------------------
Title: Vice President
----------------------
3
<PAGE>
EXHIBIT 4.8
ASSIGNMENT OF PROMISSORY NOTE
This Assignment is effective from and after the 6th day of May, 1997 (the
"Effective Date"), as follows:
Frase Enterprises, Inc. ("Frase"), formerly known as Ambord Corporation
("Ambord"), a California corporation, hereby irrevocably assigns and transfers
to Michael Baker, his successors and assigns, any and all rights and interest in
and to that Promissory Note No. 1 ("Note No. 1") dated May 6, 1997, and issued
to Ambord in connection with the Asset Purchase Agreement executed on May 6th,
1997, and attached hereto as Appendix 1 and by this reference made a part
hereof.
Frase warrants that it is the sole owner of the interest assigned hereby,
and that the interest is not subject to any liens or encumbrances.
FRASE ENTERPRISES, INC.
By: /s/ Robert Frase
------------------------------
Robert C. Frase, President
By: /s/ Sharon Frase
------------------------------
Sharon Frase, Secretary
<PAGE>
PROMISSORY NOTE NO. 1
$250,000 SAN FRANCISCO, CALIFORNIA
MAY 6, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of AMBORD
CORPORATION, a California corporation ("Payee"), or its successors or assigns,
the principal sum of Two Hundred Fifty Thousand Dollars ($250,000) together with
Accrued Interest, as defined herein, on the terms provided in this Note. All
payments hereunder shall be made to Payee when due to Payee's Account No. 4435-
410-402 at Wells Fargo Bank, or such other account or address as Payee shall
designate in writing to Maker.
This Note shall bear interest at the annual rate of nine percent (9%)
(computed on the basis of a 365 day year) compounded monthly, subject to
provisions contained herein regarding interest after default. Interest shall not
be paid but shall accrue monthly (the "Accrued Interest") until Maturity (as
defined herein) when the principal balance of the Note and all Accrued Interest
shall be satisfied.
Principal and Accrued Interest shall be due and payable, if not sooner paid
or accelerated pursuant to the terms of this Note on the eighteen (18) month
anniversary of the date of this Note ("Maturity").
If at any time prior to Maturity the Maker shall effect an underwritten
public offering of shares of common stock of Maker ("Common Stock") led by one
or more underwriters at least one of which is an underwriter of nationally
recognized standing (the "Public Offering") then, effective upon the closing of
the sale of shares of Common Stock pursuant to such Public Offering, the unpaid
principal sum of the Note and all Accrued Interest shall without further action
of Maker or Payee automatically convert to shares of restricted Common Stock.
The number of shares of common stock of the Maker to be delivered to the Payee
shall be determined by dividing the principal sum of the Note plus all Accrued
Interest by the initial purchase price per share of Common Stock paid by the
public in the Public Offering.
<PAGE>
Certificates evidencing the shares of restricted Common Stock will be delivered
to Payee upon surrender of the Note and execution and delivery of a stock
subscription agreement in form and substance reasonably satisfactory to Maker.
The Maker waives presentment, demand, notice, protest and all other demands
and notices in respect to the delivery, acceptance, performance, default or
enforcement of this Note, except as expressly provided herein.
The following events shall be "Events of Default" hereunder.
(a) Default by Maker in the payment of any principal of or interest on the
indebtedness evidenced by or arising under this Note within ten (10) days of its
due date; or
(b) Default by Maker in the due observance or performance of any material
term, provision, covenant or agreement herein (other than for the payment of
principal or interest), or in the Asset Purchase Agreement, dated as of the date
hereof among the Maker and Payee, which agreement is memorialized herein by
reference, if such default continues unremedied for a period of ten (10) days
after written notice to Maker.
If any one or more of the foregoing Events of Default shall occur, then
Payee or the holder hereof may, at any time and at its option, by written notice
to Maker, declare the unpaid principal balance of and interest on the
indebtedness evidenced by or arising under this Note and any and all other
indebtedness of Maker to Payee to be immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by Maker, and Payee or the holder hereof may
take such additional action as provided by law.
Upon the occurrence and during the continuance of any "Event of Default" as
defined in this Note, the principal balance outstanding hereunder shall bear
interest at a per annum rate of twelve percent (12%), which interest shall be
computed and payable as otherwise set forth herein.
2
<PAGE>
The Maker shall pay all reasonable expenses and costs incurred in the
collection of this Note, including, without limitation, attorneys' fees and
court costs.
No extension of this Note and no delay in the enforcement of the payment of
this Note shall affect the liability of Maker.
This Note shall be governed by and construed and enforced in accordance
with the law of the State of California other than the laws of said State
relating to conflict of laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Note to be executed the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
------------------------
Title: Vice President
----------------------
3
<PAGE>
EXHIBIT 4.9
ASSIGNMENT OF PROMISSORY NOTE
This Assignment is effective from and after the 6th day of May, 1997 (the
"Effective Date"), as follows:
Frase Enterprises, Inc. ("Frase"), formerly known as Ambord Corporation
("Ambord"), a California corporation, hereby irrevocably assigns and transfers
to Glenn Lancaster, his successors and assigns, any and all rights and interest
in and to that Promissory Note No. 2 ("Note No. 2") dated May 6, 1997, and
issued to Ambord in connection with the Asset Purchase Agreement executed on May
6th, 1997, and attached hereto as Appendix 1 and by this reference made a part
hereof.
Frase warrants that it is the sole owner of the interest assigned hereby,
and that the interest is not subject to any liens or encumbrances.
FRASE ENTERPRISES, INC.
By: /s/ Robert Frase
--------------------------------
Robert C. Frase, President
By: /s/ Sharon Frase
-------------------------------
Sharon Frase, Secretary
<PAGE>
PROMISSORY NOTE NO. 2
$250,000 SAN FRANCISCO, CALIFORNIA
MAY 6, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of AMBORD
CORPORATION, a California corporation ("Payee"), or its successors or assigns,
the principal sum of Two Hundred Fifty Thousand Dollars ($250,000) together with
Accrued Interest, as defined herein, on the terms provided in this Note. All
payments hereunder shall be made to Payee when due to Payee's Account No. 4435-
410-402 at Wells Fargo Bank, or such other account or address as Payee shall
designate in writing to Maker.
This Note shall bear interest at the annual rate of nine percent (9%)
(computed on the basis of a 365 day year) compounded monthly, subject to
provisions contained herein regarding interest after default. Interest shall
not be paid but shall accrue monthly (the "Accrued Interest") until Maturity (as
defined herein) when the principal balance of the Note and all Accrued Interest
shall be satisfied.
Principal and Accrued Interest shall be due and payable, if not sooner paid
or accelerated pursuant to the terms of this Note on the eighteen (18) month
anniversary of the date of this Note ("Maturity").
If at any time prior to Maturity the Maker shall effect an underwritten
public offering of shares of common stock of Maker ("Common Stock") led by one
or more underwriters at least one of which is an underwriter of nationally
recognized standing (the "Public Offering") then, effective upon the closing of
the sale of shares of Common Stock pursuant to such Public Offering, the unpaid
principal sum of the Note and all Accrued Interest shall without further action
of Maker or Payee automatically convert to shares of restricted Common Stock.
The number of shares of common stock of the Maker to be delivered to the Payee
shall be determined by dividing the principal sum of the Note plus all Accrued
Interest by the initial purchase price per share of Common Stock paid by the
public in the Public Offering.
<PAGE>
Certificates evidencing the shares of restricted Common Stock will be delivered
to Payee upon surrender of the Note and execution and delivery of a stock
subscription agreement in form and substance reasonably satisfactory to Maker.
The Maker waives presentment, demand, notice, protest and all other demands
and notices in respect to the delivery, acceptance, performance, default or
enforcement of this Note, except as expressly provided herein.
The following events shall be "Events of Default" hereunder.
(a) Default by Maker in the payment of any principal of or interest on the
indebtedness evidenced by or arising under this Note within ten (10) days of its
due date; or
(b) Default by Maker in the due observance or performance of any material
term, provision, covenant or agreement herein (other than for the payment of
principal or interest), or in the Asset Purchase Agreement, dated as of the date
hereof among the Maker and Payee, which agreement is memorialized herein by
reference, if such default continues unremedied for a period of ten (10) days
after written notice to Maker.
If any one or more of the foregoing Events of Default shall occur, then
Payee or the holder hereof may, at any time and at its option, by written notice
to Maker, declare the unpaid principal balance of and interest on the
indebtedness evidenced by or arising under this Note and any and all other
indebtedness of Maker to Payee to be immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by Maker, and Payee or the holder hereof may
take such additional action as provided by law.
Upon the occurrence and during the continuance of any "Event of Default" as
defined in this Note, the principal balance outstanding hereunder shall bear
interest at a per annum rate of twelve percent (12%), which interest shall be
computed and payable as otherwise set forth herein.
2
<PAGE>
The Maker shall pay all reasonable expenses and costs incurred in the
collection of this Note, including, without limitation, attorneys' fees and
court costs.
No extension of this Note and no delay in the enforcement of the payment of
this Note shall affect the liability of Maker.
This Note shall be governed by and construed and enforced in accordance
with the law of the State of California other than the laws of said State
relating to conflict of laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Note to be executed the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
---------------------
Title: Vice President
-----------------
3
<PAGE>
EXHIBIT 4.10
PROMISSORY NOTE NO. 3
$500,000 SAN FRANCISCO, CALIFORNIA
MAY 6, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of AMBORD
CORPORATION, a California corporation ("Payee"), the principal sum of Five
Hundred Thousand Dollars ($500,000) together with Accrued Interest, as defined
herein, on the terms provided in this Note. All payments hereunder shall be made
to Payee when due to Payee's Account No. 4435-410-402 at Wells Fargo Bank, or
such other account or address as Payee shall designate in writing to Maker.
This Note shall bear interest at the annual rate of nine percent (9%)
(computed on the basis of a 365 day year) compounded monthly, subject to
provisions contained herein regarding interest after default. Interest shall not
be paid but shall accrue monthly (the "Accrued Interest") until Maturity (as
defined herein) when the principal balance of the Note and all Accrued Interest
shall be satisfied. Principal and Accrued Interest shall be due and payable, if
not sooner paid or accelerated pursuant to the terms of this Note on the four
(4) year anniversary of the date of this Note ("Maturity").
If at any time prior to Maturity the Maker shall effect an underwritten
public offering of shares of common stock of Maker ("Common Stock") led by one
or more underwriters at least one of which is an underwriter of nationally
recognized standing (the "Public Offering") then, effective upon the closing of
the sale of shares of Common Stock pursuant to such Public Offering, the unpaid
principal sum of the Note and all Accrued Interest shall without further action
of Maker or Payee automatically convert to shares of restricted Common Stock.
The number of shares of common stock of the Maker to be delivered to the Payee
shall be determined by dividing the principal sum of the Note plus all Accrued
Interest by the initial purchase price per share of Common Stock paid by the
public in the Public Offering. Upon
<PAGE>
surrender of this Note, execution and delivery of a stock subscription agreement
in form and substance satisfactory to Maker in the reasonable exercise of its
discretion and execution and delivery of a Pledge Agreement substantially in the
same form as attached hereto as Exhibit A (the "Pledge Agreement"), certificates
evidencing the number described in the next sentence (the "Pledged Shares") of
shares of restricted Common Stock to be issued to Payee will be delivered to
Maker to be held subject to the terms and conditions of the Pledge Agreement.
The number of the Pledged Shares shall be the number of shares that have been
issued with respect to the principal amount of Five Hundred Thousand Dollars
($500,000.00) of this Note.
The Maker waives presentment, demand, notice, protest and all other demands
and notices in respect to the delivery, acceptance, performance, default or
enforcement of this Note, except as expressly provided herein.
The principal amount of this Note and Accrued Interest is subject to set-
off on a dollar-for-dollar basis by the Maker as provided in sections 1(e),
1(f), and 8(e) of the Asset Purchase Agreement dated as of the date hereof among
the Maker and the Payee, which agreement is incorporated herein by reference. No
interest shall accrue on the principal amount hereof which is set-off as
described above.
The following events shall be "Events of Default" hereunder.
(a) Default by Maker in the payment of any principal of or interest on the
indebtedness evidenced by or arising under this Note within ten (10) days of its
due date; or
(b) Default by Maker in the due observance or performance of any material
term, provision, covenant or agreement herein (other than for the payment of
principal or interest), or in the Asset Purchase Agreement, if such default
continues unremedied for a period of ten (10) days after written notice to
Maker.
If any one or more of the foregoing Events of Default shall occur, then
Payee or the holder hereof may, at any time and at its option, by written notice
to Maker, declare the unpaid principal balance of and interest on the
indebtedness evidenced by or arising under this Note and any and all other
indebtedness
2
<PAGE>
of Maker to Payee to be immediately due and payable, and such principal and
interest shall thereupon become and be immediately due and payable, without
presentment, demand, protest or notice of any land, all of which are hereby
expressly waived by Maker, and Payee or the holder hereof may take such
additional action as provided by law.
Upon the occurrence and during the continuance of any "Event of Default" as
defined in this Note, the principal balance outstanding hereunder shall bear
interest at a per annum rate of twelve percent (12%), which interest shall be
computed and payable as otherwise set forth herein.
The Maker shall pay all reasonable expenses and costs incurred in the
collection of this Note, including, without limitation, attorneys' fees and
court costs.
No extension of this Note and no delay in the enforcement of the payment of
this Note shall affect the liability of Maker.
This Note shall be governed by and construed and enforced in accordance
with the law of the State of California other than the laws of said State
relating to conflict of laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Note to be executed the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
-------------------------
Title: Vice President
----------------------
3
<PAGE>
EXHIBIT 4.11
PROMISSORY NOTE NO. 4
$500,000 SAN FRANCISCO, CALIFORNIA
MAY 6, 1997
FOR VALUE RECEIVED, the undersigned, WESCO DISTRIBUTION, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of AMBORD
CORPORATION, a California corporation ("Payee"), the principal sum of Five
Hundred Thousand Dollars ($500,000) together with Accrued Interest, as defined
herein, on the terms provided in this Note. All payments hereunder shall be
made to Payee when due to Payee's Account No. 4435-410-402 at Wells Fargo Bank,
or such other account or address as Payee shall designate in writing to Maker.
Principal and Accrued Interest shall be due and payable, if not sooner paid
or accelerated pursuant to the terms of this Note on the eighteen (18) month
anniversary of the date of this Note ("Maturity").
If at any time prior to Maturity the Maker shall effect an underwritten
public offering of shares of common stock of Maker ("Common Stock") led by one
or more underwriters at least one of which is an underwriter of nationally
recognized standing (the "Public Offering") then, effective upon the closing of
the sale of shares of Common Stock pursuant to such Public Offering, the unpaid
principal sum of the Note and all Accrued Interest shall without further action
of Maker or Payee automatically convert to shares of restricted Common Stock.
The number of shares of common stock of the Maker to be delivered to the Payee
shall be determined by dividing the principal sum of the Note plus all Accrued
Interest by the initial purchase price per share of Common Stock paid by the
public in the Public Offering. Upon surrender of this Note, execution and
delivery of a stock subscription agreement in form and substance satisfactory to
Maker in the reasonable exercise of its discretion and execution and delivery of
a Pledge Agreement substantially in the same form as attached hereto as Exhibit
A (the "Pledge Agreement"), certificates evidencing the number described in the
next sentence
<PAGE>
(the "Pledged Shares") of shares of restricted Common Stock to be issued to
Payee will be delivered to Maker to be held subject to the terms and conditions
of the Pledge Agreement. The number of the Pledged Shares shall be the number of
shares that have been issued with respect to the principal amount of Five
Hundred Thousand Dollars ($500,000.00) of this Note.
The Maker waives presentment, demand, notice, protest and all other demands
and notices in respect to the delivery, acceptance, performance, default or
enforcement of this Note, except as expressly provided herein.
The principal amount of this Note and Accrued Interest is subject to set-
off on a dollar-for-dollar basis by the Maker as provided in sections 1(e),
1(f), and 8(e) of the Asset Purchase Agreement dated as of the date hereof among
the Maker and the Payee, which agreement is incorporated herein by reference.
No interest shall accrue on the principal amount hereof which is set-off as
described above.
The following events shall be "Events of Default" hereunder.
(a) Default by Maker in the payment of any principal of or interest on the
indebtedness evidenced by or arising under this Note within ten (10) days of its
due date; or
(b) Default by Maker in the due observance or performance of any material
term, provision, covenant or agreement herein (other than for the payment of
principal or interest), or in the Asset Purchase Agreement, if such default
continues unremedied for a period of ten (10) days after written notice to
Maker.
If any one or more of the foregoing Events of Default shall occur, then
Payee or the holder hereof may, at any time and at its option, by written notice
to Maker, declare the unpaid principal balance of and interest on the
indebtedness evidenced by or arising under this Note and any and all other
indebtedness of Maker to Payee to be immediately due and payable, and such
principal and interest shall thereupon become and be immediately due and
payable, without presentment, demand, protest or notice of any land, all of
which are hereby expressly waived by Maker, and Payee or the holder hereof may
take such additional action as provided by law.
2
<PAGE>
Upon the occurrence and during the continuance of any "Event of Default" as
defined in this Note, the principal balance outstanding hereunder shall bear
interest at a per annum rate of twelve percent (12%), which interest shall be
computed and payable as otherwise set forth herein.
The Maker shall pay all reasonable expenses and costs incurred in the
collection of this Note, including, without limitation, attorneys' fees and
court costs.
No extension of this Note and no delay in the enforcement of the payment of
this Note shall affect the liability of Maker.
This Note shall be governed by and construed and enforced in accordance
with the law of the State of California other than the laws of said State
relating to conflict of laws.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has
caused this Note to be executed the day and year first above written.
WESCO DISTRIBUTION, INC.
By: /s/
--------------------
Title: Vice President
-----------------
3
<PAGE>
EXHIBIT 4.12
===============================================================================
CDW HOLDING CORPORATION
----------------------------
REGISTRATION AND PARTICIPATION AGREEMENT
-----------------------------
Dated as of February 28, 1994
===============================================================================
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. Background.................................................1
2. Definitions................................................3
3. Registration...............................................9
3.1. Registration on Request..............................9
(a) Requests other than by Westinghouse..............9
(b) Request by Westinghouse.........................10
(c) Obligation to Effect Registration...............10
(d) Registration Statement Form.....................11
(e) Expenses........................................12
(f) Inclusion of Other Securities...................13
(g) Effective Registration Statement................13
(h) Pro Rata Allocation.............................13
3.2. Incidental Registration.............................14
3.3. Registration Procedures.............................17
3.4. Underwritten Offerings..............................23
(a) Underwritten Offerings Exclusive................23
(b) Underwriting Agreement..........................23
(c) Selection of Underwriters.......................24
(d) Incidental Underwritten Offerings...............25
(e) Hold Back Agreements............................25
(f) Notice of Impending Effective Date..............26
3.5. Preparation; Reasonable Investigation...............26
3.6. Other Registrations.................................27
3.7. Indemnification.....................................27
(a) Indemnification by the Company..................27
(b) Indemnification by the Sellers..................29
(c) Notices of Claims, etc..........................30
(d) Other Indemnification...........................31
(e) Other Remedies..................................31
(f) Officers and Directors..........................32
<PAGE>
4. Participation Rights......................................32
(a) Procedures for Qualifying Sales.................32
(b) Qualifying Sale Defined.........................34
5. Investors' Rights to Purchase Additional
Capital Stock.............................................34
5.1. C&D Sale............................................34
5.2. Offer Procedures....................................35
(a) Procedures......................................35
(b) Allocated Amount Defined........................36
(c) Terms of Offer..................................37
(d) Election as to Form of Consideration............38
6. Designation of Directors by the C&D Fund..................39
7. Miscellaneous.............................................41
7.1. Rule 144; Legended Securities; etc..................41
7.2. Amendments and Waivers..............................42
7.3. Nominees for Beneficial Owners......................43
7.4. Successors, Assigns and Transferees.................43
7.5. Notices.............................................44
II
<PAGE>
REGISTRATION AND PARTICIPATION AGREEMENT
----------------------------------------
REGISTRATION AND PARTICIPATION AGREEMENT, dated as of February 28,
1994, among CDW Holding Corporation, a Delaware corporation (the "Company"), and
-------
the undersigned parties hereto.
1. Background. (a) The Company is a party to an Asset Acquisition
----------
Agreement, dated as of February 15, 1994 (the "Acquisition Agreement"), with
---------------------
Westinghouse Electric Corporation, a Pennsylvania corporation ("Westinghouse").
------------
(b) In connection with the transactions contemplated by the
Acquisition Agreement, the Company is a party to (i) a Stock Subscription
-
Agreement, dated as of the date hereof (the "Fund Stock Subscription
-----------------------
Agreement"), between the Company and The Clayton & Dubilier Private Equity Fund
IV Limited Partnership, a Connecticut limited partnership (the "C&D Fund"),
--------
pursuant to which the Company has agreed to issue 833,280 shares of Class A
Common Stock (as this term and other capitalized terms used herein are defined
in Section 2) to the C&D Fund, (ii) a Management Stock Subscription Agreement,
--
dated as of the date hereof (the "Management Stock Subscription Agreement"),
---------------------------------------
between the Company and one of its executive officers (the "Management
----------
Purchaser"), pursuant to which the Company has agreed to issue an aggregate of
- ---------
16,720 shares of Class A Common Stock to the Management Purchaser, (iii) a
---
Management Stock Option Agreement, dated as of the date hereof (the "Management
----------
Stock Option Agreement"), between the Company and the Management Purchaser,
- ----------------------
covering options to acquire up to an aggregate of 22,280 shares of Class A
Common Stock, and (iv) a Capital Call Agreement, dated as of the date hereof
--
(the "Capital Call Agreement"), among the Company, Barclays Business Credit,
----------------------
Inc. and the C&D Fund, pursuant to which the Company has agreed to issue, under
certain circumstances, up to 50,000 shares of Class A Common Stock to the C&D
Fund.
<PAGE>
(c) Pursuant to the Acquisition Agreement, the Company is a party to
a Stock Subscription, Stock Option and Stockholders Agreement, dated as of the
date hereof (the "Westinghouse Stock Subscription and Stock Option Agreement"),
-----------------------------------------------------------
among the Company, Westinghouse and the C&D Fund, pursuant to which the Company
has agreed, in partial payment of the U.S. Purchase Price (as defined in the
Acquisition Agreement), to (i) issue to Westinghouse 100,000 shares of Class A
-
Common Stock and (ii) grant to Westinghouse an option (the "Option") to
-- ------
purchase 100,000 shares of Class A Common Stock.
(d) The Company or the C&D Fund may in the future issue or sell
directly, or pursuant to options or other rights, additional shares of Class A
Common Stock to certain directors, executive officers and key employees of the
Company or one of its Subsidiaries (the "Subsequent Management Purchasers"),
--------------------------------
and additional shares of Class A Common Stock to certain Individual Investors or
other purchasers (the "Subsequent Purchasers"), in each case, pursuant to stock
---------------------
subscription or purchase agreements the terms of which are not inconsistent with
the terms of this Agreement (the "Subsequent Stock Subscription Agreements") or
-----------------------------------------
stock option or rights agreements, plans or arrangements the terms of which are
not inconsistent with the terms of this Agreement (the "Subsequent Stock Option
-----------------------
Agreements").
- ----------
(e) The Management Purchaser and the Subsequent Management Purchasers
and any trusts holding shares of Class A Common Stock or options to purchase
shares of Class A Common Stock for the benefit of relatives or dependents of the
Management Purchaser or any Subsequent Management Purchaser are referred to
herein collectively as the "Management Stockholders". The Fund Stock
-----------------------
Subscription Agreement, the Management Stock Subscription Agreement, the
Management Stock Option Agreement, the Capital Call Agreement, the Westinghouse
Stock Subscription and Stock Option Agreement, the Subsequent Stock Subscription
Agreements and the Subsequent Stock Option Agreements are referred to herein
collectively as the "Stock Subscription Agreements".
-----------------------------
2
<PAGE>
2. Definitions. For purposes of this Agreement,
-----------
the following terms have the following respective meanings:
"Accepting Holder": See Section 5.2(a).
----------------
"Acquisition Agreement": See Section 1.
---------------------
"Affiliate": With respect to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person. "Control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract or credit arrangement, as trustee or executor,
or otherwise. The C&D Fund and the Company shall be deemed not to be Affiliates
of Westinghouse. Any director, member of management or other employee of the
Company or any of its Subsidiaries who would not otherwise be an Affiliate of
the C&D Fund shall not be deemed to be an Affiliate of the C&D Fund.
"Allocated Amount": See Section 5.2(b).
----------------
"Allocation Calculation": See Section 5.2(b).
----------------------
"Business Day": A day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required to close.
"C&D Fund": See Section 1.
--------
"C&D Offeree": See Section 5.1.
-----------
"C&D Sale": See Section 5.1.
--------
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
3
<PAGE>
"Capital Call Agreement": See Section 1.
----------------------
"Class A Common Stock": The Class A Common Stock,
--------------------
par value $.01 per share, of the Company.
"Class B Common Stock": The Class B Common Stock,
--------------------
par value $.01 per share, of the Company.
"Common Stock": The Class A Common Stock and the
------------
Class B Common Stock.
"Company": See the introduction to this Agreement.
-------
"Eligible Holder": See Section 5.1.
---------------
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
any successor Federal statute, and the rules and regulations thereunder which
shall be in effect at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any, of any such
successor Federal statute, and the rules and regulations thereunder.
"Fund Stock Subscription Agreement": See Section 1.
---------------------------------
"Individual Investors": Directors or senior executives of
--------------------
corporations in which entities managed or sponsored by CD&R have made
substantial equity investments.
"Initial Public Offering": The consummation of a bona fide public
-----------------------
offering of Common Stock pursuant to a registration statement filed under the
Securities Act, which offering is underwritten on a firm commitment basis by a
syndicate of underwriters led by one or more underwriters at least one of which
is an underwriter of recognized national standing.
"Management Purchaser": See Section 1.
--------------------
4
<PAGE>
"Management Stockholders": See Section 1.
-----------------------
"Management Stock Option Agreement": See Section 1.
---------------------------------
"Management Stock Subscription Agreement": See Section 1.
---------------------------------------
"NASD": National Association of Securities Dealers, Inc.
----
"NASDAQ": The NASD Automated Quotation System.
------
"Newco": CDW Acquisition Corporation, a Delaware corporation and
-----
wholly owned subsidiary of the Company.
"Offer": See Section 5.1.
-----
"Offered Securities": See Section 5.2(a).
------------------
"Option": See Section 1(c).
------
"Participants": See Section 5.2(b).
------------
"Person": Any natural person, firm, partnership, association,
------
corporation, company, trust, business trust, governmental entity or other
entity.
"Proportionate First Share": See Section 5.2(b).
-------------------------
"Proportionate Subsequent Share": See Section 5.2(b).
------------------------------
"Qualifying Sale": See Section 4(b).
---------------
"Qualifying Securities": See Section 4(a).
---------------------
"Registrable Securities": (a) Any Class A Common Stock or Class B
---------------------- -
Common Stock issued pursuant to the Stock Subscription Agreements (including
upon exercise of options
5
<PAGE>
granted pursuant to the Management Stock Option Agreement, the Subsequent Stock
Option Agreements or the Westinghouse Stock Subscription and Stock Option
Agreement), only if, in the case of the issuance pursuant to any Stock
Subscription Agreement, such Stock Subscription Agreement provides that such
Common Stock shall be entitled to the benefits of this Agreement applicable to
Registrable Securities, (b) any Class A Common Stock issued upon conversion of
-
the Class B Common Stock referred to in clause (a) above, (c) any Class B Common
-
Stock issued in exchange for the Class A Common Stock referred to in clause (a)
or (b) above, (d) any equity securities of the Company issued pursuant to the
-
terms of, and under the circumstances set forth in, Section 5, and (e) any
-
securities issued or issuable with re spect to any equity securities of the
Company referred to in the foregoing clauses (i) upon any conversion or exchange
-
thereof, (ii) by way of stock dividend or stock split, (iii) in connection with
-- ---
a combination of shares, recapital ization, merger, consolidation or other
reorganization or (iv) otherwise, in all cases subject to the last paragraph of
--
Section 3.3. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (A) a registration
-
statement (other than a Special Registration pursuant to which such securities
were issued by the Company) with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (B) such
-
securities shall have been distributed to the public in reliance upon Rule 144,
(C) subject to the provisions of the second paragraph of Section 7.1, such
-
securities shall have been otherwise transferred, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such securities shall not
require registration or qualification of such securities under the Securities
Act or any similar state law then in force or (D) such securities shall have
-
ceased to be outstanding. Subject to the immediately preceding sentence,
Registrable Securities shall not cease to be Registrable Securities upon
transfer.
6
<PAGE>
"Registration Expenses": All expenses incident to the Company's
---------------------
performance of its obligations under or compliance with Section 3, including,
but not limited to, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws, all fees and expenses associated
with listing securities on exchanges or NASDAQ, all fees and other expenses
associated with filings with the NASD (including, if required, the fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, and the expenses of any special audits made
by such account ants required by or incidental to such performance and
compliance, but not including (a) fees and disbursements of counsel retained by
-
the holders of Registrable Securities or (b) any underwriting discounts or
-
commissions or any trans fer taxes payable in respect of the sale of Registrable
Securities by the holders thereof.
"Requisite Percentage of Stockholders": At any time prior to an
------------------------------------
Initial Public Offering, the holder or holders (other than Westinghouse and its
successors and permitted assigns) of at least 50% (by number of shares) of the
Registrable Securities at the time outstanding; there after, the holder or
holders (other than Westinghouse and its successors and permitted assigns) of at
least 20% (by number of shares) of the Registrable Securities at the time
outstanding.
"Rule 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
"Sale Notice": See Section 4(a).
-----------
"Securities Act": The Securities Act of 1933, as amended, or any
--------------
successor Federal statute, and the rules and regulations thereunder which shall
be in effect at the time.
7
<PAGE>
Any reference to a particular section thereof shall include a reference to the
corresponding section, if any, of any such successor Federal statute, and the
rules and regulations thereunder.
"Securities and Exchange Commission": The Securities and Exchange
----------------------------------
Commission or any other Federal agency at the time administering the Securities
Act or the Exchange Act.
"Special Registration": The registration of shares of equity
--------------------
securities and/or options or other rights in respect thereof (a) to be offered
-
to directors, members of management, employees or sales agents, distributors or
similar representatives of the Company or its Subsidiaries, (b) concerning or
-
relating to shares of Class A Common Stock to be offered to Individual Investors
or (c) made solely on Form S-4 or S-8 or any successor form.
-
"Specified Public Offering": The consummation of any offering of
-------------------------
Common Stock pursuant to a registration statement filed under the Securities
Act, which offering is underwritten by a syndicate of underwriters led by one or
more underwriters at least one of which is an underwriter of recognized national
standing, which represents a bona fide offering to the public and which
(together with any prior registered offerings) results in (a) an aggregate
-
percentage of the outstanding Common Stock (on a fully diluted basis) being held
by the public (it being agreed that no party hereto who holds more than 5% of
the outstanding Common Stock (on a fully diluted basis) constitutes a member of
the public) that is greater than the percentage of the outstanding Common
Stock (on a fully diluted basis) held by Westinghouse upon, and after giving
effect to, the consummation of such offering, and (b) the Company being subject
-
to the reporting requirements of Section 13 of the Exchange Act other than by
reason solely of Section 15(d) of the Exchange Act.
"Specified Securities": See Section 4(a).
--------------------
8
<PAGE>
"Stock Subscription Agreements": See Section 1.
-----------------------------
"Subscribed Amount": See Section 5.2(a).
-----------------
"Subsequent Management Purchasers": See Section 1.
--------------------------------
"Subsequent Purchasers": See Section 1.
---------------------
"Subsequent Stock Option Agreements": See Section 1.
----------------------------------
"Subsequent Stock Subscription Agreements": See Section 1.
----------------------------------------
"Subsidiary": Each corporation or other Person in which a person owns
----------
or controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
"Westinghouse": See Section 1.
------------
"Westinghouse Stock Subscription and Stock Option
------------------------------------------------
Agreement": See Section 1.
- ---------
3. Registration.
------------
3.1. Registration on Request.
-----------------------
(a) Requests other than by Westinghouse. Subject to the provisions
-----------------------------------
of Section 3.6, at any time or from time to time the Requisite Percentage of
Stockholders shall have the right to make one or more written requests that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities of the holder or holders making such request, which
requests shall specify the intended method of disposition thereof by such holder
or holders.
9
<PAGE>
(b) Request by Westinghouse. Subject to the provisions of Section
-----------------------
3.6, at any time after the fifth anniversary of the date hereof Westinghouse
(or a permitted assignee to which Westinghouse has transferred all or a
portion of its rights under this Section 3.1(b)) shall have the right to make
two written requests that the Company effect the registration under the
Securities Act of all or part of the Registrable Securities owned by
Westinghouse (or such assignee), which requests shall specify the intended
method of disposition thereof by Westinghouse (or such assignee).
(c) Obligation to Effect Registration. Upon receipt by the Company
---------------------------------
of any request for registration pursuant to Section 3.1(a) or 3.1(b), the
Company will promptly give written notice of such requested registration to all
holders of Registrable Securities, and thereupon will use its best efforts to
effect the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register pursuant to Section 3.1(a) or 3.1(b), as the case
may be, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 30 days after the Company has given such written notice
(which request shall specify the intended method of disposition of such
Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(A) the Company shall not be required to effect a registration
requested pursuant to Section 3.1(a) if the aggregate number of Registrable
Securities referred to in clauses (i) and (ii) of the preceding sentence to
10
<PAGE>
be included in such registration shall be less than 20% of the Registrable
Securities at the time outstanding;
(B) the Company shall not include in any regis tration requested
pursuant to Section 3.1(b) any Regis trable Securities of any holder
(other than a holder entitled to make a request under Section 3.1(b)) who
was not a stockholder of the Company on the date of this Agreement; and
(C) if the Board of Directors of the Company determines in its good
faith judgment, after consultation with a firm of nationally recognized
underwriters, that there will be an adverse effect on a then contemplated
Initial Public Offering unless such Initial Public Offering is not made
contemporaneously with a registration pursuant to Section 3.1(a) or
3.1(b), each holder of Registrable Securities to be included pursuant to
this Section 3.1(c) in a requested registration shall be given notice of
such fact and the holder or holders of Registrable Securities initiating
such request for registration pursuant to Section 3.1(a) or 3.1(b), as the
case may be, shall be deemed to have withdrawn such request and such
registration shall not be deemed to have been effected pursuant to this
Section 3.1, provided that the Company may not exercise its rights under
---------
this clause (C) with respect to a request pursuant to Section 3.1(b) if
the Company has exercised its rights under this clause (C) with respect to
such a request made more than 180 days, but less than 15 months, prior to
such request.
(d) Registration Statement Form. Each registration requested
---------------------------
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), unless the use
of a different form is (i) required by law or (ii) permitted by law and agreed
- --
to
11
<PAGE>
in writing by holders holding at least a majority (by number of shares) of the
Registrable Securities as to which registration has been requested pursuant to
this Section 3.1. At any time after the Company has issued and sold any shares
of its capital stock registered under an effective registration statement under
the Securities Act, or after the Company shall have registered any class of
equity securities pursuant to Section 12 of the Exchange Act, it will use its
best efforts to qualify for registration on Form S-2 or Form S-3 (or any other
comparable form hereinafter adopted).
(e) Expenses. The Company will pay all Registration Expenses in
--------
connection with (i) the first three registrations effected pursuant to a
-
request under Section 3.1(a) and (ii) the two registrations effected pursuant to
--
a request under Section 3.1(b). The Registration Expenses in connection with
each other registration, if any, requested under Section 3.1(a) shall be
apportioned among the holders whose Registrable Securities are then being
registered, on the basis of the respective amounts (by number of shares) of
Registrable Securities then being registered, provided that any such
--------
Registration Expenses so apportioned to Westinghouse will be paid by the
Company. However, in the case of each registration requested under Section
3.1(a) or 3.1(b), the Company shall pay all amounts in respect of (A) any
-
allocation of salaries of personnel of the Company and its Subsidiaries or other
general overhead expenses of the Company and its Subsidiaries or other
expenses for the preparation of financial statements or other data normally
prepared by the Company and its Subsidiaries in the ordinary course of its
business, (B) the expenses of any officers' and directors' liability insurance,
-
(C) the expenses and fees for listing the securities to be registered on each
-
exchange on which similar securities issued by the Company are then listed or,
if no such securities are then listed, on an exchange selected by the Company or
on NASDAQ and (D) all fees associated with filings required to be made with the
-
NASD (including, if required, the fees and expenses of any "qualified
independent underwriter" and its counsel).
12
<PAGE>
(f) Inclusion of Other Securities. The Company shall not register
-----------------------------
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to
Section 3.1(a) or 3.1(b) unless (i) in the case of a registration requested
-
pursuant to Section 3.1(a), permitted to do so by the written consent of holders
holding at least a majority (by number of shares) of the Registrable Securities
proposed to be sold in such registration and (ii) in the case of a registration
--
requested pursuant to Section 3.1(b), such securities are being sold for the
account of a Person who was a stockholder of the Company on the date of this
Agreement or who is entitled to make a request under Section 3.1(b).
(g) Effective Registration Statement. A registration requested
--------------------------------
pursuant to Section 3.1(a) or 3.1(b) will not be deemed to have been effected
unless it has become effective for the period specified in Section 3.3(b).
Notwithstanding the preceding sentence, a registration requested pursuant to
Section 3.1(a) or 3.1(b) which does not become effective after the Company has
filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the holder or holders of Registrable Securities requesting
the registration shall be deemed to have been effected by the Company at the
request of such holder or holders, provided that this sentence shall not apply
--------
to the first registration requested pursuant to Section 3.1(b) that so fails
to become effective if the Person requesting such registration reimburses the
Company for all Registration Expenses with respect thereto.
(h) Pro Rata Allocation. If the holders of a majority (by number of
-------------------
shares) of the Registrable Securities for which registration is being requested
pursuant to Section 3.1(a) or 3.1(b) determine, based on consultation with the
managing underwriters or, in an offering which is not underwritten, with an
investment banker, that the number of securities to be sold in any such offering
should be limited due to market conditions or otherwise, all holders of
13
<PAGE>
Registrable Securities proposing to sell their securities in such registration
and (if the Company proposes to sell securities for its own account in such
offering) the Company shall share pro rata in the number of securities being
offered (as determined by the holders holding a majority (by number of shares)
of the Registrable Securities for which registration is being requested in
consultation with the managing underwriters or investment banker, as the case
may be) and registered for their account, such sharing to be based on the
number of Registrable Securities as to which registration was requested by such
holders and the number of securities that the Company proposed to sell for its
own account in such offering, respectively, provided that, in the case of a
--------
registration requested pursuant to Section 3.1(b), all Registrable Securities
that the Person making such request under Section 3.1(b) wishes to include in
such registration shall be included in such registration (at the time such
registration becomes effective) before any other securities are included in such
registration, unless such Person otherwise consents in writing.
3.2. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its equity securities (as defined in the Exchange Act) under the
Securities Act (other than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and the registration
form to be used may be used for the registration of Registrable Securities, it
will each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and, upon the written request of any holder
of Registrable Securities given to the Company within 30 days after the Company
has given any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method
of disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
required to permit the disposition (in accordance with the intended methods
thereof as
14
<PAGE>
aforesaid) of the Registrable Securities so to be registered, provided that:
--------
(a) if such registration shall be in connection with the Initial
Public Offering, the Company shall not include any Registrable Securities
in such proposed registration if the Company's Board of Directors shall
have determined, after consultation with the managing underwriters for such
offering, that it is not in the best interests of the Company to include
any Registrable Securities in such registration, provided that, if the
--------
Company's Board of Directors makes such a determination, the Company
shall not include in such registration any securities not being sold for
the account of the Company;
(b) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to each holder
of Registrable Securities that was previously notified of such registration
and, thereupon, shall not register any Registrable Securities in connection
with such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to the
rights of any holder or holders of Registrable Securities to request that a
registration be effected under Section 3.1; and
(c) if the Company shall be advised in writing by the managing
underwriters (or, in connection with an offering which is not underwritten,
by an investment banker) that in their or its opinion the number of
securities requested to be included in such registration (whether by the
Company, pursuant to this Section 3.2 or pursuant to any other rights
granted by the Company to a holder or holders of its securities to
15
<PAGE>
request or demand such registration or inclusion of any such securities in
any such registration) exceeds the number of such securities which can be
sold in such offering,
(i) the Company shall include in such registration the number
(if any) of Registrable Securities so requested to be included which
in the opinion of such underwriters or investment banker, as the case
may be, can be sold and shall not include in such registration any
securities (other than securities being sold by the Company, which
shall have priority in being included in such registration) so
requested to be included other than Registrable Securities unless all
Registrable Securities requested to be so included are included
therein, and
(ii) if in the opinion of such underwriters or investment banker,
as the case may be, some but not all of the Registrable Securities may
be so included, all holders of Registrable Securities requested to be
included therein shall share pro rata in the number of shares of
Registrable Securities included in such public offering on the basis
of the number of Registrable Securities requested to be included
therein by such holders, provided that, in the case of a registration
--------
initially requested or demanded by a holder or holders of securities
other than Registrable Securities, the holders of the Registrable
Securities requested to be included therein and the holders of such
other securities shall share pro rata (based on the number of shares
if the requested or demanded registration is to cover only Common
Stock and, if not, based on the proposed offering price of the total
number of securities included in such public offering requested to be
included therein),
16
<PAGE>
and the Company shall so provide in any registration agreement hereinafter
entered into with respect to any of its securities.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
No registration effected under this Section 3.2 shall relieve the Company from
its obligation to effect registrations upon request under Section 3.1.
3.3. Registration Procedures. If and whenever the Company is
-----------------------
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company will promptly:
(a) prepare and file with the Securities and Exchange Commission
within 120 days, and use its best efforts to prepare and file within 60
days, after receipt of a request pursuant to Section 3.1 a registration
statement with respect to such securities, make all required filings with
the NASD and use best efforts to cause such registration statement to
become effective;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith and such other documents as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all
of such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement, but in no event for a period of more than six
months after such registration statement becomes effective;
17
<PAGE>
(c) furnish to counsel (if any) selected by the holders of a majority
(by number of shares) of the Registrable Securities covered by such
registration statement and to counsel for the underwriters in any
underwritten offering copies of all documents proposed to be filed with the
Securities and Exchange Commission (including all documents to be filed on
a confidential basis) in connection with such registration, which documents
will be subject to the review of such counsel;
(d) furnish to each seller of such securities, without charge, such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case, including all exhibits
and documents filed therewith (other than those filed on a confidential
basis), except that the Company shall not be obligated to furnish any
seller of securities with more than two copies of such exhibits and
documents), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus) in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in
order to facilitate the disposition of the securities owned by such seller;
(e) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, subject
itself to taxation in any jurisdiction wherein it is not so subject, or
take any action which would subject it to general
18
<PAGE>
service of process in any jurisdiction wherein it is not so subject;
(f) in connection with an underwritten public offering only,
furnish to each seller a signed counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement, and
(ii) a "comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's financial
statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g) (i) notify each holder of Registrable Securities covered by such
-
registration statement if such registration statement, at the time it or
any amendment thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and, as
promptly as practicable, prepare and file with the Securities and Exchange
Commission a post-effective amendment to such registration statement and
use best efforts to cause such post-effective amendment to become effective
such that such registration statement, as so amended, shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not
19
<PAGE>
misleading, and (ii) notify each holder of Registrable Securities covered
--
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, if the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and, as promptly as is practicable, prepare and
furnish to such holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement of the Company complying with the provisions of Section
11(a) of the Securities Act and Rule 158 under the Securities Act;
(i) notify each seller of any securities covered by such registration
statement (i) when such registration statement, or any post-effective
-
amendment to such registration statement, shall have become effective, or
any amendment of or supplement to the prospectus used in connection
therewith shall have been filed, (ii) of any request by the Securities and
--
Exchange Commission to amend such registration statement or to amend or
supplement such prospectus or for additional information, (iii) of the
---
issuance by the Securities and Exchange Commission of any stop order
suspending the effectiveness of such registration statement or of any
20
<PAGE>
order preventing or suspending the use of any preliminary prospectus, and
(iv) of the suspension of the qualification of such securities for offering
--
or sale in any jurisdiction, or of the institution of any proceedings for
any of such purposes;
(j) use its best efforts (i) (A) to list such securities on any
- -
securities exchange on which the Common Stock is then listed or, if no
Common Stock is then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange or (B) if
-
such listing is not practicable or the Board of Directors of the Company
determines that quotation as a NASDAQ National Market System security is
preferable, to secure designation of such securities as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 under the
Exchange Act or, failing that, to secure NASDAQ authorization for such
securities, and, without limiting the foregoing, to arrange for at least
two market makers to register as such with respect to such securities with
the NASD, (ii) to provide a transfer agent and registrar for such
--
Registrable Securities not later than the effective date of such
registration statement and (iii) to obtain a CUSIP number for the
---
Registrable Securities; and
(k) use every reasonable effort to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
any preliminary prospectus.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
21
<PAGE>
information previously furnished to the Company by such holder not materially
misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company pursuant to Section 3.3(g), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such holder
shall have received, in the case of clause (i) of Section 3.3(g), notice from
the Company that such registration statement has been amended, as contemplated
by Section 3.3(g), and, in the case of clause (ii) of Section 3.3(g), copies of
the supplemented or amended prospectus contemplated by Section 3.3(g). If so
directed by the Company, each holder of Registrable Securities will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the Company
shall give any such notice, the period mentioned in Section 3.3(b) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.3(g).
22
<PAGE>
Although shares of Class A Common Stock issuable upon the exercise of
options and shares of Class B Common Stock are included in the definition of
Registrable Securities, the Company shall, in respect of any such Registrable
Securities requested to be registered pursuant hereto, be required to include in
any registration statement only shares of Class A Common Stock issuable upon
conversion of or pursuant to such Registrable Securities and only if the Company
has received assurances, reasonably satisfactory to it, in the case of shares
issuable upon exercise of options, that such options will be exercised and in
the case of Class B Common Stock that such Registrable Securities will be
converted into shares of Class A Common Stock, in each case, promptly after such
registration statement has become effective or the sale to an underwriter has
been consummated so that only Class A Common Stock shall be distributed to the
public under such registration statement.
3.4. Underwritten Offerings. The provisions of this Section 3.4 do
----------------------
not establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 3.1 through 3.3, to any
registration which is an underwritten offering.
(a) Underwritten Offerings Exclusive. Whenever a registration
--------------------------------
requested pursuant to Section 3.1 is for an underwritten offering, only
securities which are to be distributed by the underwriters may be included in
the registration.
(b) Underwriting Agreement. If requested by the underwriters for any
----------------------
underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 3.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the holders of a majority
(by number of shares) of the Registrable Securities to be covered by such
registration and to the underwriters and to contain such representations and
warranties by the Company and such other
23
<PAGE>
terms and provisions as are customarily contained in agreements of this type,
including, but not limited to, indemnities to the effect and to the extent
provided in Section 3.7, provisions for the delivery of officers' certificates,
opinions of counsel and accountants' "comfort" letters and hold-back
arrangements. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Registrable Securities. In the
case of a registration requested by the C&D Fund pursuant to Section 3.1(a),
Westinghouse shall not be required by the Company or the C&D Fund to make any
representations or warranties to, or agreements with, the Company or the under
writers other than as set forth in Section 3.4(e) and representations,
warranties or agreements regarding Westinghouse and its intended method of
distribution.
(c) Selection of Underwriters. Whenever a registration requested
-------------------------
pursuant to Section 3.1 is for an underwritten offering, the Company will have
the right to select one or more underwriters to administer the offering at least
one of which shall be an underwriter of nationally recognized standing,
provided that, in the case of any such registration requested pursuant to
- --------
Section 3.1(b), the selection of such underwriters by the Company shall be
subject to the consent of Westinghouse, which consent shall not be unreasonably
withheld. If the Company at any time proposes to register any of its securities
under the Securities Act for sale for its own account and such securities are to
be distributed by or through one or more underwriters, the Company will have the
right to select one or more underwriters to administer the offering at least
one of which shall be an underwriter of nationally recognized standing.
24
<PAGE>
(d) Incidental Underwritten Offerings. Subject to the provisions of
---------------------------------
the proviso to the first sentence of Section 3.2, if the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for its own account, and such securities are to be distributed by
or through one or more underwriters, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to do so and, if
requested by any holder of Registrable Securities, will arrange for such
underwriters to include the Registrable Securities to be offered and sold by
such holder among those to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to
the obligations of the underwriters under such underwriting agreement shall also
be conditions precedent to the obligations of such holders of Registrable
Securities. No such holder of Registrable Securities shall be required by the
Company to make any representations or warranties to, or agreements with, the
Company or the underwriters other than as set forth in Section 3.4(e) and
representations, warranties or agreements regarding such holder and such
holder's intended method of distribution.
(e) Hold Back Agreements. If and whenever the Company proposes to
--------------------
register any of its equity securities under the Securities Act for its own
account (other than pursuant to a Special Registration) or is required to use
its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, each holder of
Registrable Securities agrees by acquisition of such Registrable Securities not
to effect (other than pursuant to such registration) any public
25
<PAGE>
sale or distribution, including, but not limited to, any sale pursuant to Rule
144 or Rule 144A, of any Registrable Securities, any other equity securities of
the Company or any securities convertible into or exchangeable or exercisable
for any equity securities of the Company for 120 days (180 days if such
registration statement relates to the Initial Public Offering) after, and
(assuming compliance by the Company with Section 3.4(f)) during the 20 days
prior to, the effective date of such registration and the Company agrees to
cause each holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased
from the Company at any time other than in a public offering to enter into a
similar agreement with the Company. The Company further agrees not to effect
(other than pursuant to such registration or pursuant to a Special Registration)
any public sale or distribution, or to file any registration statement
(other than such registration or a Special Registration) covering any, of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 20 days prior to, and for 120 days
(180 days if such registration statement relates to the Initial Public Offering)
after, the effective date of such registration.
(f) Notice of Impending Effective Date. The Company will give at
----------------------------------
least 20 days' written notice to each holder of Registrable Securities of the
date when the Company expects, in its good faith judgment, that any
registration pursuant to Section 3.1 or 3.2 will become effective (such notice
to specify the expected effective date) and will respond promptly to any
subsequent reasonable requests from any holder of Registrable Securities
concerning the likely effective date of such registration.
3.5. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and their
26
<PAGE>
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Securities and Exchange
Commission, and each amendment thereof or supplement thereto, and will give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have issued audit reports on its financial statements as shall
be necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
3.6. Other Registrations. If and whenever the Company is required to
-------------------
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any registration statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
six months shall have elapsed from the effective date of such previous
registration; and the Company shall so provide in any registration agreement
with respect to any of its securities.
3.7. Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any Registrable Securities under the Securities Act pursuant to Section 3.1
or 3.2, the Company will indemnify and hold harmless the seller of such
securities, its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering or sale of such
securities and each other person, if any, who controls such seller or any such
participating person within the meaning of either Section 15 of
27
<PAGE>
the Securities Act or Section 20 of the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which such seller
or any such director, officer, employee, participating person or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
-
untrue statement of a fact contained in any registration statement under which
such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein or related
thereto, or any amendment or supplement thereto, or (ii) any omission or alleged
--
omission to state a fact required to be stated in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or necessary to make the statements therein not
misleading; and the Company will reimburse such seller and each such director,
officer, employee, participating person and controlling person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding, provided
--------
that the Company shall not be liable in any such case to the extent that any any
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such seller or participating person expressly for use in the
preparation thereof and provided, further, that the Company shall not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the prospectus and the
seller of Registrable Securities thereafter fails to deliver such prospectus as
so amended or supplemented prior
28
<PAGE>
to or concurrently with the sale of Registrable Securities to the person
asserting such loss, claim, damage, liability or expense after the Company had
furnished such seller with a sufficient number of copies of the same or if the
seller received notice from the Company of the existence of such untrue
statement or alleged untrue statement or omission or alleged omission and the
seller continued to dispose of Registrable Securities prior to the time of the
receipt of either (A) an amended or supplemented prospectus which completely
-
corrected such untrue statement or omission or (B) a notice from the Company
-
that the use of the existing prospectus may be resumed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any such director, officer, employee, participating
person or controlling person and shall survive the transfer of such securities
by such seller.
(b) Indemnification by the Sellers. The Company may require, as a
------------------------------
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 3.3, that the Company shall have received an
undertaking satisfactory to it from each of the prospective sellers of such
securities, to indemnify and hold harmless (in the same manner and to the extent
as set forth in Section 3.7(a)) the Company, each director of the Company,
each officer of the Company who shall sign such registration statement and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company by such seller expressly for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, provided that the liability of each such
--------
seller will be in proportion to and limited to the net amount received by such
seller (after deducting any underwriting discount
29
<PAGE>
and expenses) from the sale of Registrable Securities pursuant to such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any
such director, officer or controlling person and shall survive the transfer of
such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 3.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party hereunder, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
--------
to give notice as provided therein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 3.7. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, provided that if
--------
such indemnified party and the indemnifying party reasonably determine, based
upon advice of their respective independent counsel, that a conflict of
interest may exist between the indemnified party and the indemnifying party
with respect to such action and that it is advisable for such indemnified party
to be represented by separate counsel, such indemnified party may retain other
counsel, reasonably satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of such indemnified party,
30
<PAGE>
which consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Other Remedies. If for any reason the foregoing indemnity is
--------------
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses party as well as
any other relevant equitable considerations (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
on the one hand and the indemnified party on the other from the offering of
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each such party) or (ii) if the allocation provided by
--
clause (i) above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnifying party on the one hand and the indemnified party on the other
but also the relative fault of the indemnifying party and the indemnified. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
31
<PAGE>
liable for contribution under this Section 3.7(e) except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 3.7 if such indemnification were enforceable under applicable law.
(f) Officers and Directors. As used in this Section 3.7, the terms
----------------------
"officers" and "directors" shall include the partners of the holders of
Registrable Securities which are partnerships.
4. Participation Rights. The C&D Fund shall not make any Qualifying
--------------------
Sale, except pursuant to the following provisions of this Section 4.
(a) Procedures for Qualifying Sales. At least 30 days prior to
-------------------------------
making any Qualifying Sale, the C&D Fund will deliver a written notice (the
"Sale Notice") to the Company, the holder of the Option and the holders of
- ------------
Registrable Securities. The Sale Notice will fully disclose the identity of
the prospective transferee and the terms and conditions of the proposed
Qualifying Sale, including the class of Registrable Securities to be sold (the
"Specified Securities"), the maximum amount of Specified Securities that the
- ----------------------
prospective transferee is willing to purchase and the intended consummation
date of such Qualifying Sale. The C&D Fund may not give a Sale Notice with
respect to any Qualifying Sale unless both the C&D Fund and the prospective
transferee shall be legally bound to complete such Qualifying Sale (subject
only to the satisfaction of the conditions of such Qualifying Sale disclosed in
such Sale Notice and compliance with this Section 4 and any Applicable Law).
The C&D Fund will not consummate any Qualifying Sale until at least 30 days
after the related Sale Notice has been given to the holder of the Option and the
holders of Registrable Securities, unless the C&D Fund shall have received a
notice from each holder of Specified Securities or securities presently
convertible into or exchangeable or exercisable for Specified Securities
(collectively, "Qualifying Securities") indicating whether or not such holder
----------------------
has elected to participate in such Qualifying Sale and the amount of
32
<PAGE>
Specified Securities to be sold by each such holder so electing to participate
has been finally determined pursuant hereto prior to the expiration of such 30-
day period. Each holder of Qualifying Securities may elect to participate in the
contemplated Qualifying Sale by giving written notice to the C&D Fund and the
Company within 30 days after the C&D Fund has given the related Sale Notice to
such holder. If a holder of Qualifying Securities elects to participate, such
holder will be entitled to sell in the contemplated Qualifying Sale, at the same
price and (subject to the immediately following sentence) on the same terms
and conditions as set forth in the related Sale Notice, an amount of Specified
Securities equal to the product of (i) the quotient determined by dividing (A)
- -
the amount of Specified Securities then held by such holder (including in such
amount all Specified Securities issuable upon conversion, exchange or exercise
of all Qualifying Securities then held by such holder) by (B) the aggregate
--
amount of Specified Securities held by the C&D Fund and all holders of
Qualifying Securities (other than the C&D Fund) so electing to participate
(including in such aggregate amount all Specified Securities issuable upon
conversion, exchange or exercise of Qualifying Securities then held by the C&D
Fund and such holders) and (ii) the amount of Specified Securities such
--
transferee has agreed to purchase in the contemplated Qualifying Sale.
Notwithstanding the immediately preceding sentence, Westinghouse shall not be
required in connection with any Qualifying Sale in which it elects to
participate (x) to enter into any non-competition covenant or agreement having a
-
scope or duration beyond that contained in the Non-Competition Agreement dated
the date hereof entered into by Westinghouse pursuant to the Acquisition
Agreement or (y) other than in respect of representations, warranties,
-
covenants and agreements made solely on its own behalf, to undertake any
liability in excess of its proportionate share (based on the amount of
securities sold in such Qualifying Sale) for representations, warranties,
covenants and agreements made jointly by the selling holders in such Qualifying
Sale. If a holder of Qualifying Securities elects to participate in any
Qualifying Sale, the C&D Fund will not
33
<PAGE>
consummate such Qualifying Sale unless such holder has been afforded the
opportunity to consummate simultaneously the sale by such holder of the amount
of Specified Securities determined in accordance with the preceding sentence
with respect to such holder. Each holder of Qualifying Securities proposing
to include in any contemplated Qualifying Sale Specified Securities to be issued
to such holder upon the conversion of other Qualifying Securities then held by
such holder shall effect such conversion prior to the time of such Qualifying
Sale.
(b) Qualifying Sale Defined. The term "Qualifying Sale" shall mean
----------------------- ----------------
any sale or transfer of securities of the Company by the C&D Fund other than any
sale or transfer (i) pursuant to a bona fide firm commitment underwritten public
-
offering (A) pursuant to a registration under the Securities Act effected
-
pursuant to Section 3.1 or (B) pursuant to a registration under the Securities
-
Act not effected pursuant to Section 3.1 if Section 3.2 applies to such
registration and, in each of clauses (A) and (B), the Company has complied with
all its obligations under Section 3 with respect to such registration, (ii) if
--
the Company is subject to the reporting requirements of the Exchange Act, in
transactions that comply with the manner of sale requirements set forth in
Rule 144(f)) or (iii) to Individual Investors or Management Stockholders.
---
5. Investors' Rights to Purchase Additional Capital Stock.
------------------------------------------------------
5.1. C&D Sale. If, prior to the consummation of a Specified Public
--------
Offering, the Company shall propose to issue any additional shares of its
capital stock (or any securities that may be exercised or exchanged for or
converted into such capital stock) to the C&D Fund or any Affiliate of the C&D
Fund (such Persons to whom the Company proposes to issue securities are referred
to collectively as the "C&D Offeree", and such issuance is referred to as a "C&D
----------- ---
Sale"), the Company shall offer to the holder of the Option and each holder of
- ----
Registrable Securities (other than
34
<PAGE>
the C&D Offeree) that is an accredited investor (as defined in Rule 501 of
Regulation D under the Securities Act) (each, an "Eligible Holder") the right to
---------------
acquire such holder's Allocated Amount of such securities (an "Offer").
-----
Notwithstanding the foregoing, none of the following transactions shall
constitute a C&D Sale: the issuance by the Company of any shares of its
capital stock (or any securities that may be exercised or exchanged for or
converted into such capital stock) (A) pursuant to the Fund Stock Subscription
-
Agreement or the Capital Call Agreement (each as in effect on the date hereof),
(B) in exchange for Class A Common Stock, (C) upon conversion of Class B Common
- -
Stock or (D) as a dividend or other distribution (including, but not limited to,
-
in connection with any merger, consolidation or other reorganization) made pro
---
rata to the holders of the Common Stock outstanding on the record date for such
- ----
dividend or distribution.
5.2. Offer Procedures.
----------------
(a) Procedures. The Company shall make an Offer by giving to each
----------
Eligible Holder at least 30 Business Days' prior written notice of the proposed
C&D Sale. Such notice will (i) identify the class and number of shares or
-
amount of securities proposed to be issued (the "Offered Securities"), the
-------------------
proposed date of issuance and the price and other terms of the issuance and (ii)
--
constitute an offer to issue to each such Eligible Holder its Allocated Amount
of the Offered Securities at the same price and on the same other terms (subject
to Section 5.2(c)) as are proposed for such C&D Sale, which offer shall remain
open for a period of 15 Business Days from the date such notice is given by the
Company. Each Eligible Holder desiring to accept such Offer shall give written
notice to the Company prior to the end of the 15-Business Day period of such
Offer. Such notice (a "Notice of Acceptance") will (A) set forth the maximum
-------------------- -
amount of the Offered Securities which such Eligible Holder elects to purchase
(such Eligible Holder's "Subscribed Amount") and (B) constitute an acceptance of
----------------- -
the Offer with respect to such Eligible Holder's Allocated Amount of the
35
<PAGE>
Offered Securities. If any such Eligible Holder fails to give a Notice of
Acceptance, such Eligible Holder shall be deemed to have rejected such Offer in
full. At the closing of the C&D Sale, each Eligible Holder who shall have
timely accepted the related Offer pursuant to this Section 5.2(a) (each, an
"Accepting Holder") shall acquire from the Company, and the Company shall issue
- -----------------
to such Eligible Holder, its Allocated Amount of the Offered Securities at the
same price and on the same other terms (subject to Section 5.2(c)) as such C&D
Sale. The C&D Offeree shall be entitled to acquire at the closing of the C&D
Sale its Allocated Amount of the Offered Securities. Any Offered Securities not
issued at the C&D Sale may not thereafter be sold or otherwise issued by the
Company to the C&D Fund or any Affiliate of the C&D Fund until they are again
offered to the Eligible Holders under the procedures specified in this Section
5(a).
(b) Allocated Amount Defined. For the purposes of Section 5.2(a),
------------------------
the term "Allocated Amount" shall mean, with respect to each Accepting Holder
----------------
and the C&D Offeree (collectively, the "Participants") in a C&D Sale, the
aggregate amount of the Offered Securities in such C&D Sale allocated to such
Participant in a series of calculations (each, an "Allocation Calculation") as
----------------------
follows: first, each Participant shall be allocated an amount of the Offered
Securities in such C&D Sale equal to the lesser of (a) such Participant's
-
Subscribed Amount of such Offered Securities and (b) such Participant's
-
Proportionate First Share of such Offered Securities; thereafter, in each
subsequent Allocation Calculation for such C&D Sale, each Participant whose
Subscribed Amount of such Offered Securities exceeds the aggregate amount of
Offered Securities allocated to such Participant in prior Allocation
Calculations in respect of such C&D Sale shall be allocated an additional amount
of Offered Securities equal to the lesser of (i) such Participant's
-
Proportionate Subsequent Share of such Offered Securities and (ii) the excess of
--
such Participant's Subscribed Amount of such Offered Securities over the
aggregate amount of Offered Securities allocated to such Participant
36
<PAGE>
in all prior Allocation Calculations in respect of such C&D Sale. For the
purposes of this Section 5.2(a), the term "Proportionate First Share" shall
-------------------------
mean, with respect to each Participant in a C&D Sale, an amount of the Offered
Securities in such C&D Sale that is equal to the product of (a) the quotient
-
determined by dividing (i) the percentage of the outstanding Common Stock (on a
-
fully diluted basis) held by such Participant by (ii) the aggregate percentage
--
of the outstanding Common Stock (on a fully diluted basis) held by all
Participants in such C&D Sale and (b) the aggregate amount of such Offered
-
Securities. For the purposes of this Section 5.2(b), the term "Proportionate
-------------
Subsequent Share" shall mean, with respect to each Participant in a C&D Sale
- ----------------
being allocated a Proportionate Subsequent Share of Offered Securities in an
Allocation Calculation for such C&D Sale, an amount of the Offered Securities in
such C&D Sale equal to the product of (a) the quotient determined by dividing
-
(i) the percentage of the outstanding Common Stock (on a fully diluted basis)
-
held by such Participant by (ii) the aggregate percentage of the outstanding
--
Common Stock (on a fully diluted basis) held by all Participants being
allocated a Proportionate Subsequent Share of Offered Securities in such
Allocation Calculation and (b) the aggregate amount of the Offered Securities
-
not allocated to the Participants in such C&D Sale in any prior Allocation
Calculation.
(c) Terms of Offer. Notwithstanding Section 5.2(a), if the terms of
--------------
any C&D Sale provide for the payment by the C&D Offeree of consideration other
than cash, then the purchase price payable by each Accepting Holder (other than
Westinghouse) per unit of Offered Securities shall be an amount in cash equal to
the fair market value of the aggregate consideration payable by the C&D Offeree
per unit of Offered Securities. For the purpose of determining the fair market
value of any noncash consideration, (i) any portion of such consideration in the
-
form of securities shall be valued at the arithmetical average of the closing
sale prices of such securities over the five trading days immediately preceding
the relevant date on the national securities exchange on which such securities
are listed, or,
37
<PAGE>
if not so listed, as reported by the National Association of Securities Dealers
Automated Quotations System, or, if not so reported, at the average of the high
bid and low asked quotations for the securities as reported by the National
Quotations Bureau Incorporated or a similar organization, or, if no price
quotations are available, such securities shall be valued by the Board of
Directors of the Company in good faith as of the relevant date or, at the
election (which shall be made in its Notice of Acceptance) and expense of an
Accepting Holder which has succeeded by assignment to Westinghouse's rights
under this Section 5 (other than Section 5.2(d)) in respect of Registrable
Securities or the Option transferred by Westinghouse to such Accepting Holder,
by an independent valuer with expertise in valuing such securities selected by
the Company with the approval of such Accepting Holder, such approval not to be
unreasonably withheld; and (ii) any other portion of such consideration shall be
--
valued by the Board of Directors of the Company in good faith as of the relevant
date or, at the election (which shall be made in its Notice of Acceptance) and
expense of such an Accepting Holder, by an independent valuer with expertise
in valuing such consideration selected by the Company with the approval of such
Accepting Holder, such approval not to be unreasonably withheld.
(d) Election as to Form of Consideration. Notwithstanding Section
------------------------------------
5.2(a), if Westinghouse elects to exercise its rights under Section 5.2(a) with
respect to any C&D Sale the terms of which provide for payment in
consideration other than cash, Westinghouse may, at its option, make such
payment in the form of consideration provided by such terms (including, if the
consideration consists in whole or in part of the delivery of any debt security
of any Person or other promise of any Person to pay cash, by delivery of a
security or other promise of Westinghouse, of the same tenor) or in cash equal
to the fair market value of such consideration. For the purpose of determining
the fair market value of any non-cash consideration, (i) any portion of such
-
consideration in the form of securities shall be valued at the arithmetical
average of the closing sale
38
<PAGE>
prices of such securities over the five trading days immediately preceding the
relevant date on the national securities exchange on which such securities are
listed, or, if not so listed, as reported by the National Association of
Securities Dealers Automated Quotations System, or, if not so reported, at the
average of the high bid and low asked quotations for the securities as reported
by the National Quotations Bureau Incorporated or a similar organization, or, if
no price quotations are available, such securities shall be valued by the Board
of Directors of the Company in good faith as of the relevant date or, at the
election (which shall be made in its Notice of Acceptance) and expense of
Westinghouse, by an independent valuer with expertise in valuing such
securities selected by the Company with the prior approval of Westinghouse, such
approval not to be unreasonably withheld; and (ii) any other portion of such
--
consideration shall be valued by the Board of Directors of the Company in good
faith as of the relevant date or, at the election (which shall be made in its
Notice of Acceptance) and expense of Westinghouse, by an independent valuer
with expertise in valuing such consideration selected by the Company with the
prior approval of Westinghouse, such approval not to be unreasonably withheld.
6. Designation of Directors by the C&D Fund. (a) So long as the C&D
----------------------------------------
Fund owns any securities of the Company, the C&D Fund shall have the right to
nominate one candidate for election to the board of directors (each, a "Board")
-----
of each of the Company, Newco and the Canadian Buyer. In the event that the C&D
Fund shall exercise its rights under this Section 6, (i) each of the parties
-
hereto (other than the Company) shall vote, or cause to be voted, the capital
stock of the Company held or controlled by such party or any Affiliate of such
party and (ii) the Company shall vote, or cause to be voted, the capital stock
--
of Newco and the Canadian Buyer held or controlled by the Company or any
Affiliate of the Company, in each case, in favor of a slate of directors which
includes the nominees of the C&D Fund for the Boards of the Company, Newco and
the Canadian Buyer, respectively.
39
<PAGE>
(b) The respective By-Laws of the Company, Newco and the Canadian
Buyer shall provide that, in the event that a vacancy shall be created on the
Board of such Buyer Party as a result of the death, resignation or removal (with
or without cause) of a director nominated by the C&D Fund in accordance with
Section 6(a), such Board shall within five Business Days of the creation of such
vacancy request the C&D Fund to nominate a candidate to be appointed by such
Board to fill such vacancy. In the event that any such vacancy shall be created
on the Board of the Company, Newco or the Canadian Buyer immediately before or
at the annual meeting of the stockholders of such Buyer Party, the C&D Fund
shall have the right to nominate a candidate to fill such vacancy and the
provisions of the second sentence of the immediately preceding paragraph shall
apply with respect to the election of such nominee to fill such vacancy. If the
preceding sentence shall not be applicable and a candidate nominated by the
C&D Fund to fill any such vacancy shall not have been appointed to fill such
vacancy within five Business Days of the Board of the applicable Buyer Party
having been given the name of such candidate by the C&D Fund, then, as
applicable, (i) in the case of a vacancy on the Board of the Company, each of
-
the parties hereto (other than the Company) shall act by written consent, or
call a special meeting of stockholders of the Company for the sole purpose of
filling such vacancy and at such special meeting vote or cause to be voted the
capital stock of the Company held or controlled by such party or any Affiliate
of such party, and (ii) in the case of a vacancy on the Board of Newco or the
--
Canadian Buyer, the Company shall (or shall cause each Affiliate of the Company
owning outstanding voting securities of Newco or the Canadian Buyer, as the
case may be, to) act by written consent, or call a special meeting of
stockholders of Newco or the Canadian Buyer, as the case may be, for the sole
purpose of filling such vacancy and at such special meeting vote or cause to be
voted the capital stock of Newco or the Canadian Buyer, as the case may be, held
or controlled by the Company or any Affiliate of the Company, in each case, to
elect such nominee to fill such vacancy.
40
<PAGE>
(c) The C&D Fund may elect, at its option, not to have a designated
director on any Board.
(d) No party hereto shall, and the Company shall not permit Newco to,
vote, or give any consent, in favor of the removal as a director of the Company,
Newco or the Canadian Buyer, respectively, of any candidate nominated by the C&D
Fund for election as such director in accordance with Section 6(a) without the
prior written consent of the C&D Fund.
(e) No party hereto shall give, and the Company shall not permit
Newco to give, any proxy with respect to shares of the capital stock of the
Company, Newco or the Canadian Buyer, respectively, entitling the holder of such
proxy to vote on, or give consents with respect to, the election of directors
unless the holder of such proxy shall have agreed to comply with the obligations
of such party under this Section 6.
(f) If, in connection with the election of any candidate nominated by
the C&D Fund for election as a director of the Company or Newco, any party
hereto fails or refuses to vote as required by this Section 6, or votes or
gives any consent in contravention of this Section 6, the C&D Fund shall have an
irrevocable proxy pursuant to Section 212(e) of the General Corporation Law of
the State of Delaware, coupled with an interest, to vote (i) if the defaulting
-
party is any party hereto other than the Company, all the shares of capital
stock of the Company held or controlled by such party or (ii) if the
--
defaulting party is the Company, all the shares of capital stock of Newco held
or controlled by the Company, in each case, in accordance with this Section 6,
and each party hereto hereby grants such proxy.
7. Miscellaneous.
-------------
7.1. Rule 144; Legended Securities; etc. If the Company shall have
----------------------------------
filed a registration statement pursuant
41
<PAGE>
to Section 12 of the Exchange Act or a registration statement pursuant to the
Securities Act relating to any class of equity securities (other than a
registration statement pursuant to a Special Registration), the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available such information as necessary to permit sales pursuant to
Rule 144), and will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell shares of Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
The Company will not issue new certificates for shares of Registrable
Securities without a legend restricting further transfer unless such shares
have been sold to the public pursuant to an effective registration statement
under the Securities Act or Rule 144, or unless otherwise permitted under the
Securities Act and the holder of such shares expressly so requests in writing.
7.2. Amendments and Waivers. This Agreement may be amended, and the
----------------------
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the holder
or holders of at least a majority of the shares of Registrable Securities and
(a) if Westinghouse is still a holder of the Option or any Registrable
-
Securities, the written consent of Westinghouse or (b) if Westinghouse is no
-
longer the holder of the Option or any Registrable Securities and the C&D Fund
and its Affiliates continue to own a percentage of the Registrable Securities
that is greater than the percentage of Registrable Securities held in the
aggregate by Westinghouse's successors and permitted
42
<PAGE>
assigns, the written consent of Westinghouse's successors or permitted assigns
holding a majority in interest of the Registrable Securities held by
Westinghouse's successors and permitted assigns, treating, for the purposes of
this clause (b), any unexercised portion of the Option as the Registrable
Securities issuable upon exercise thereof. Each holder of the Option or any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 7.2, whether or not the Option or such
Registrable Securities shall have been marked to indicate such consent. No
amendment, modification or discharge of this Agreement, and no waiver hereunder,
shall be valid or binding unless set forth in writing. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party or parties granting
such waiver in any other respect or at any other time.
7.3. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determinnation of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7.4. Successors, Assigns and Transferees. This Agreement shall be
-----------------------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto
43
<PAGE>
other than the Company shall also be for the benefit of and enforceable by any
subsequent holder of the Option or any Registrable Securities, subject to the
provisions respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein, provided that, upon any transfer by
--------
Westinghouse of the Option or of any Registrable Securities, the rights granted
in Sections 3 and 5 to Westinghouse or its permitted assignee (as opposed to the
holders of Registrable Securities generally) shall not be enforceable by any
subsequent holder of the Option or such Registrable Securities unless
Westinghouse expressly assigns such rights (which may be assigned by
Westinghouse in part) and notifies the Company of such assignment, provided
---------
further that Westinghouse's rights under Sections 3.4(c) and 5.2(d) are personal
- -------
to Westinghouse and shall not be assignable or otherwise transferable and any
attempt to assign or transfer such rights shall be void and of no effect.
7.5. Notices. All notices and other communications in connection
-------
with this Agreement shall be in writing. Any notice or other communication in
connection herewith shall be deemed duly given to any party (a) two Business
-
Days after it is sent by express, registered or certified mail, return receipt
requested, postage prepaid or (b) one Business Day after it is sent by overnight
-
courier, in each case, to the address of such party set forth beneath its name
on the schedules hereto, or to such other address as such party may have
designated to the Company in writing, or if to any holder of Registrable
Securities not a party hereto on the date hereof, at the address of such
holder in the stock record books of the Company, and if to the Company or the
C&D Fund to the following addresses:
44
<PAGE>
(i) if to the Company, to:
CDW Holding Corporation
c/o The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Telecopy: (203) 661-0544
Telephone: (203) 661-3998
Attention: Clayton & Dubilier Associates IV
---------
Limited Partnership
Attention: Joseph L. Rice, III
(ii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Telecopy: (203) 661-0544
Telephone: (203) 661-3998
Attention: Clayton & Dubilier Associates IV
---------
Limited Partnership
Attention: Joseph L. Rice, III
or at such other address or addresses as the Company or the C&D Fund, as the
case may be, may have designated in writing to each holder of Registrable
Securities at the time outstanding. Copies of any notice or other
communication given under the Agreement shall also be given to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Telecopy: (212) 752-7629
Telephone: (212) 355-0740
Attention: Alberto Cribiore
---------
45
<PAGE>
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Steven Ostner, Esq.
---------
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, telecopy, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it
is actually received by the individual for whom it is intended.
7.6. No Inconsistent Agreements. The Company will not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities by this
Agreement.
7.7. Remedies; Attorneys' Fees. The holder of the Option and each
-------------------------
holder of Registrable Securities, in addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any provision of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
7.8. Stock Splits, etc. Each party hereto agrees that it will vote
-----------------
to effect a stock split (forward or reverse, as the case may be) with respect
to any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that in their or its opinion such a stock split would facilitate
46
<PAGE>
or increase the likelihood of success of the offering. Each party hereto agrees
that any number of shares of Common Stock referred to in this Agreement shall be
equitably adjusted to reflect any stock split, stock dividend, stock
combination, recapitalization or similar transaction.
7.9. Term. This Agreement shall be effective as of the date hereof
----
and shall continue in effect thereafter until the earliest of (a) its
-
termination by the consent of the parties hereto or their respective successors
in interest, (b) the date on which the Option shall have been exercised in
-
full or shall have terminated and no Registrable Securities remain outstanding
and (c) the dissolution, liquidation or winding up of the Company.
-
7.10. Severability. If any provision of this Agreement is
------------
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any
extent whatsoever. The invalidity of any one or more phrases, sentences,
clauses, Sections or subsections of this Agreement shall not affect the
remaining portions of this Agreement.
7.11. Headings. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
7.12. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
7.13. Governing Law. This Agreement shall be governed in all
-------------
respects, including, but not limited to, as to validity, interpretation and
effect, by the internal laws of the State of New York, without giving effect to
the conflict of law rules thereof.
47
<PAGE>
7.14. No Third Party Beneficiaries. Except as provided in Sections
----------------------------
3.7 and 7.4, nothing in this Agreement shall confer any rights upon any person
or entity other than the parties hereto, each such party's respective successors
and permitted assigns.
7.15. Consent to Jurisdiction. Each party irrevocably submits to
-----------------------
the exclusive jurisdiction of (a) the Supreme Court of the State of New York,
-
New York County, and (b) the United States District Court for the Southern
-
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby (and
agrees not to commence any such suit, action or proceeding except in such
courts). Each party further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any such suit, action or
proceeding. Each party irrevocably and unconditionally waives any objection to
the laying of venue of any such suit, action or proceeding in (i) the Supreme
-
Court of the State of New York, New York County, and (ii) the United States
--
District Court for the Southern District of New York, that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum.
7.16. Waiver of Jury Trial. Each party hereby waives, to the fullest
--------------------
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding arising out of this Agreement or any
transaction contemplated hereby. Each party (a) certifies that no
-
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
-
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 7.16.
48
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
CDW HOLDING CORPORATION
By: /s/ Alexander F. Brigham
-----------------------------------
Name: Alexander F. Brigham
Title: Vice President & Assistant
Secretary
THE CLAYTON & DUBILIER PRIVATE
EQUITY FUND IV LIMITED PARTNERSHIP
By: Clayton & Dubilier Associates IV
Limited Partnership, the
General Partner
By: /s/ Alberto Cribiore
-----------------------------
a general partner
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ Thomas P. Costello
----------------------------------
Name: Thomas P. Costello
Title: Executive Vice President
Address:
Westinghouse Electric Corporation
Westinghouse Building
Gateway Center
11 Stanwix Center
Pittsburgh, PA 15222
Telecopy: (412) 642-5751
49
<PAGE>
Telephone: (412) 244-2000
Attention: Treasurer
ROY W. HALEY
/s/ Roy W. Haley
----------------------------------
Address: 592 Shadow Way Court
Houston, Texas 77024
50
<PAGE>
EXHIBIT 10.1
CDW HOLDING CORPORATION STOCK PURCHASE PLAN
-------------------------------------------
Section 1. Purpose
-------------------
The purpose of this CDW Holding Corporation Stock Purchase Plan
is to incentivize eligible employees to foster and promote the long-term
financial success of Holding and the Company and to increase materially
stockholder value by (a) motivating superior performance by participants in the
Plan, (b) providing participants in the Plan with an ownership interest in
Holding and (c) enabling the Company to attract and retain the services of an
outstanding management team upon whose judgment, interest and special effort the
successful conduct of its operations is largely dependent.
Section 2. Definitions
-----------------------
2.1. Definitions. Whenever used herein, the
-----------
following terms shall have the respective meanings set forth
below:
(1) "Active Employment" means active employment with Holding or
any direct or indirect subsidiary of Holding.
(2) "Board" means the Board of Directors of Holding.
(3) "C&D Fund" means The Clayton & Dubilier Private Equity Fund
IV Limited Partnership, a Connecticut limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(4) "Cause" means (i) the willful failure by the Participant
substantially to perform his employment-related duties (other than any
such failure due to physical or mental illness) after a demand for
substantial
<PAGE>
performance is delivered to the Participant by the Board,
which notice identifies the manner in which the Board believes that the
Participant has not substantially performed his employment-related
duties, (ii) the engaging by the Participant in willful and serious
misconduct that is injurious to the Company or any of its affiliates,
(iii) the conviction of the Participant of, or the entering by the
Participant of a plea of nolo contendere to, a crime that constitutes a
felony, (iv) the breach by the Participant of any written covenant or
agreement with the Company or any of its affiliates not to disclose any
information pertaining to the Company or any of its affiliates or not
to compete or interfere with the Company or any of its affiliates or (v)
the breach by the Participant of his obligations pursuant to the
"take-along" provisions of any Subscription Agreement to which he is or
becomes a party, as contemplated by Section 9 hereof.
(5) "Common Stock" means the Class A Common Stock, par value $.01
per share, of Holding.
(6) "Company" means WESCO Distribution, Inc., a Delaware
corporation, and any successor thereto.
(7) "Effective Date" means June 15, 1994.
(8) "Employee" means any executive or senior officer or other
executive or key employee of Holding, the Company or any Subsidiary.
(9) "First Option Period" shall have the meaning set forth in
Section 8.1 hereof.
(10) "First Refusal Period" shall have the meaning set forth in
Section 7.1 hereof.
(11) "Holding" means CDW Holding Corporation, a Delaware
corporation, and any successor thereto.
2
<PAGE>
(12) "Offer Price" shall have the meaning set forth in Section
7.1 hereof.
(13) "Offer Terms" shall have the meaning set forth in Section
7.1 hereof.
(14) "Participant" means any Employee designated by the Board to
participate in the Plan.
(15) "Permanent Disability" means a physical or mental disability
or infirmity that prevents the performance of a Participant's
employment-related duties lasting (or likely to last, based on competent
medical evidence presented to the Board) for a continuous period of six
months or longer. The Board's reasoned and good faith judgment of
Permanent Disability shall be final and shall be based on such competent
medical evidence as shall be presented to it by such Participant or by
any physician or group of physicians or other competent medical expert
employed by the Participant or Holding to advise the Board.
(16) "Plan" means this CDW Holding Corporation Stock Purchase
Plan.
(17) "Public Offering" means the first day as of which sales of
Common Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally
recognized standing.
(18) "Refusal Rights" shall have the meaning set forth in Section
7.3 hereof.
(19) "Retirement" means a Participant's retirement at age 65 or
later.
(20) "Second Option Period" shall have the meaning set forth in
Section 8.2 hereof.
3
<PAGE>
(21) "Second Refusal Period" shall have the meaning set forth in
Section 8.2 hereof.
(22) "Shares" means the shares of Common Stock acquired by a
Participant pursuant to the Plan.
(23) "Subscription Agreement" means a management stock
subscription agreement between Holding and the Participant embodying the
terms of any stock purchase made pursuant to the Plan, which agreement
shall, unless the Board otherwise determines, be substantially in the
form attached hereto as Exhibit A.
(24) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by the
Company or Holding.
(25) "Unforeseen Personal Hardship" means financial hardship
arising from (i) extraordinary medical expenses or other expenses
directly related to illness or disability of a Participant, a member of
such Participant's immediate family or one of such Participant's
parents or (ii) payments necessary or required to prevent the eviction
of such Participant from such Participant's principal residence or
foreclosure on the mortgage on that residence. The Board's reasoned and
good faith determination of Unforeseen Personal Hardship shall be
binding on Holding and such Participant.
(26) "Westinghouse" means Westinghouse Electric Corporation, a
Pennsylvania corporation.
2.2. Gender and Number. Except when otherwise indicated by the
-----------------
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
4
<PAGE>
Section 3. Eligibility and Participation
-----------------------------------------
Participants in the Plan shall be those Employees selected by the
Board to participate in the Plan by reason of their expected contribution to the
growth and success of Holding, the Company and their Subsidiaries. The selection
of an Employee as a Participant shall neither entitle such Employee to nor
disqualify such Employee from participation in any other award or incentive
plan.
Section 4. Powers of the Board
------------------------------
4.1. Power to Grant. The Board shall determine the Participants
--------------
to whom offers to purchase Common Stock under the Plan shall be made and the
terms and conditions of any and all such offers made to Participants. In making
such determination, the Board shall give due consideration for such factors as
it deems appropriate, including, without limitation, the performance of the
Company, any Employee and/or such Employee's business unit.
4.2. Administration. The Board shall be responsible for the
--------------
administration of the Plan. Any authority exercised by the Board under the Plan
shall be exercised by the Board in its sole discretion. Subject to the terms of
the Plan, the Board, by majority action thereof, is authorized to prescribe,
amend and rescind rules and regulations relating to the administration of the
Plan, to provide for conditions and assurances deemed necessary or advisable to
protect the interests of Holding and the Company, and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan in order to carry out its provisions and purposes. Determinations,
interpretations or other actions made or taken by the Board pursuant to the
provisions of the Plan shall be final, binding and conclusive for all purposes
and upon all persons.
4.3 Delegation by the Board. All of the powers,
-----------------------
duties and responsibilities of the Board specified in this
5
<PAGE>
Plan may, to the full extent permitted by applicable law, be exercised and
performed by any duly constituted committee thereof to the extent authorized by
the Board to exercise and perform such powers, duties and responsibilities.
Section 5. Shares of Common Stock Subject to Plan
--------------------------------------------------
5.1. Number. Subject to the provisions of Section 5.2, the
------
maximum number of shares of Common Stock subject to offers made under the Plan
may not exceed 35,000. The shares of Common Stock to be delivered upon the
purchase of any Common Stock under the Plan may consist, in whole or in part, of
treasury Common Stock or authorized but unissued Common Stock, not reserved for
any other purpose.
5.2. Adjustment in Capitalization. The number of shares of Common
----------------------------
Stock available for issuance under the Plan may be adjusted by the Board, in its
sole discretion, if it shall deem such an adjustment to be necessary or
appropriate to reflect any Common Stock dividend, stock split or share
combination or any recapitalization, merger, consolidation, exchange of shares,
liquidation or dissolution of Holding.
Section 6. Terms of Offers to
Purchase Common Stock
------------------------------
6.1. Offers to Purchase Common Stock. Offers to purchase Common
-------------------------------
Stock may be made to Participants at such time or times as shall be determined
by the Board. Each purchase of Common Stock by a Participant shall be made
pursuant to a Subscription Agreement that shall include customary
representations, warranties, covenants and other terms and conditions with
respect to securities law matters. Unless otherwise determined by the Board,
such Subscription Agreement shall also state that in respect of any Shares
purchased by the Participant pursuant to such Subscription Agreement the
Participant is entitled to the benefits of and bound by the obligations set
forth in the Registration and
6
<PAGE>
Participation Agreement, dated as of February 28, 1994, among Holding, C&D Fund
IV, Westinghouse and Roy W. Haley (as the same may be amended, waived, modified
or supplemented from time to time) to the extent set forth in such Subscription
Agreement.
6.2. Purchase Price. The purchase price per
--------------
share of Common Stock to be purchased under the Plan shall
be determined by the Board.
Section 7. Options of Holding and the
CD&R Fund Upon Proposed Disposition
--------------------------------------
7.1. Holding's Right of First Refusal. Unless otherwise provided
--------------------------------
in the Subscription Agreement or otherwise determined by the Board, if a
Participant desires to accept an offer (which must be in writing and for cash,
be irrevocable by its terms for at least 60 days and be a bona fide offer as
determined in good faith by the Board or the Executive Committee thereof) from
any prospective purchaser to purchase all or any part of the Shares at any time
owned by the Participant, the Participant shall give notice in writing to
Holding and the C&D Fund (i) designating the number of such Shares proposed to
be sold, (ii) naming the prospective purchaser of such Shares and (iii)
specifying the price (the "Offer Price") at and terms (the "Offer Terms") upon
which the Participant desires to sell the same. During the 30-day period
following receipt of such notice by Holding and the C&D Fund (the "First Refusal
Period"), Holding shall have the right to purchase from the Participant the
Shares specified in such notice, at the Offer Price and on the Offer Terms.
7.2. C&D Fund's Right of First Refusal. Unless otherwise provided
---------------------------------
in the Subscription Agreement or otherwise determined by the Board, if Holding
fails to exercise the rights described in Section 7.1 within the First Refusal
Period, the C&D Fund shall have the right to purchase the Shares specified in
the notice from the Participant, at the
7
<PAGE>
Offer Price and on the Offer Terms, at any time during the period beginning at
the earlier of (x) the end of the First Refusal Period and (y) the date of
receipt by the C&D Fund of written notice that Holding has elected not to
exercise its right and ending 30 days thereafter (the "Second Refusal Period").
7.3. Exercise of Right of Refusal. Unless otherwise provided in
----------------------------
the Subscription Agreement or otherwise determined by the Board, the rights
provided under Sections 7.1 and 7.2 hereof (the "Refusal Rights") shall be
exercised by written notice to the Participant given at any time during the
applicable period.
7.4. Participant's Right to Sell. Unless otherwise provided in
---------------------------
the Subscription Agreement or otherwise determined by the Board, if neither
Holding nor the C&D Fund exercise its Refusal Right prior to the expiration of
the Second Refusal Period, then at any time during the 60 days following the
expiration of the Second Refusal Period, subject to such terms and conditions
as shall be set forth in the applicable Subscription Agreement, the Participant
may sell such Shares to (but only to) the intended purchaser named in his notice
to Holding and the C&D Fund at the Offer Price and on the Offer Terms specified
in such notice, free of all restrictions or obligations imposed by, and free of
all rights and benefits set forth in, the Plan or the applicable Subscription
Agreement, except as provided in such Subscription Agreement.
Section 8. Options Effective on Termination
of Employment or Unforeseen Personal
Hardship of the Participant
---------------------------------------------
8.1. Rights of Holding Upon Termination of Employment. Unless
------------------------------------------------
otherwise provided in the Subscription Agreement or otherwise determined by the
Board, if the Participant's Active Employment is terminated for any reason
whatsoever, Holding shall have an option to purchase all
8
<PAGE>
(but not less than all) of the Shares then held by the Participant (or, if his
employment was terminated by his death, his estate) and shall have 30 days from
the date of the Participant's termination (such 30-day period being hereinafter
referred to as the "First Option Period") during which to give notice in writing
to the Participant (or his estate) of its election to exercise or not to
exercise such option.
8.2. Rights of C&D Fund Upon Termination of Employment. Unless
-------------------------------------------------
otherwise provided in the Subscription Agreement or otherwise determined by the
Board, if Holding fails to give notice that it intends to exercise the option
described in Section 8.1 within the First Option Period, the C&D Fund shall have
the right to purchase all (but not less than all) of the Shares then held by the
Participant (or his estate) and shall have until the expiration of the earlier
of (x) 30 days following the end of the First Option Period, or (y) 30 days from
the date of receipt by the C&D Fund of written notice that Holding does not
intend to exercise such option (such 30-day period being hereinafter referred to
as the "Second Option Period"), to give notice in writing to the Participant (or
his estate) of the C&D Fund's exercise of its option.
8.3. Participant's Right to Sell. Unless otherwise provided in
the Subscription Agreement or otherwise determined by the Board, (a) if the
options of Holding and the C&D Fund to purchase the Participant's Shares are not
exercised as contemplated by this Section 8, then, subject to such terms and
conditions as shall be set forth in the applicable Subscription Agreement, the
Participant (or his estate) shall be entitled to retain the Shares which could
have been acquired on exercise thereof, and (b) if Holding and the C&D Fund have
failed to exercise their respective options as contemplated by this Section 8
within the time periods specified herein, and if the Participant's Active
Employment with each of Holding and any direct and indirect subsidiaries of
Holding that employ the Participant is terminated (A) by such employer or
employers without Cause,
9
<PAGE>
(B) by the Participant by Retirement at Normal Retirement Age, or (C) by reason
of Permanent Disability or death, then on notice from the Participant (or his
estate) in writing and delivered to Holding within 30 days following the end of
the Second Option Period, Holding shall purchase all (but not less than all) of
the Shares then held by the Participant (or his estate). The foregoing right of
a Participant to require Holding to repurchase any Shares shall be subject to
Holding having the ability to do so under Delaware law and, unless otherwise
provided in the Subscription Agreement or otherwise determined by the Board,
under the terms of its financing arrangements.
8.4. Unforeseen Personal Hardship. The Board may provide, in any
----------------------------
Subscription Agreement, that in the event that the Participant, while in the
employment of Holding or any Subsidiary, experiences Unforeseen Personal
Hardship, the Board will carefully consider any request by the Participant that
Holding repurchase the Participant's Shares at a price determined in accordance
with the applicable Subscrip tion Agreement, but Holding shall have no
obligation to repurchase such Shares.
Section 9. Take-Along Rights
-----------------------------
9.1. Take-Along Notice. Unless otherwise provided in the
-----------------
Subscription Agreement or otherwise determined by the Board, so long as the C&D
Fund holds a number of shares of Common Stock equal to at least one-third of the
Common Stock originally purchased by the C&D Fund at the closing of the
acquisition of the Company (exclusive of shares purchased under the Capital Call
Agreement, dated as of February 28, 1994, among Holding, the C&D Fund and
Barclays Business Credit, Inc.), if the C&D Fund intends to effect a sale of all
of its shares of Common Stock to a third party (a "100% Buyer") and elects to
exercise its rights under this Section 9, the C&D Fund shall deliver written
notice (a "Take-Along Notice") to the Participant, which notice shall (a) state
(i) that the C&D Fund wishes to exercise its
10
<PAGE>
rights under this Section 9 with respect to such transfer, (ii) the name and
address of the 100% Buyer, (iii) the per share amount and form of consideration
the C&D Fund proposes to receive for its shares of Common Stock and (iv) the
terms and conditions of payment of such consideration and all other material
terms and conditions of such transfer, (b) contain an offer (the "Take-Along
Offer") by the 100% Buyer to purchase from the Participant all of its Shares on
and subject to the same terms and conditions offered to the C&D Fund and (c)
state the anticipated time and place of the closing of the purchase and sale of
the shares (a "Section 9 Closing"), which (subject to such terms and conditions)
shall occur not fewer than five (5) days nor more than ninety (90) days after
the date such Take-Along Notice is delivered, provided that if such Section 9
--------
Closing shall not occur prior to the expiration of such 90-day period, the C&D
Fund shall be entitled to deliver another Take-Along Notice with respect to such
Take-Along Offer.
9.2. Conditions to Take-Along. Unless otherwise provided in the
------------------------
Subscription Agreement or otherwise determined by the Board, upon delivery of a
Take-Along Notice, the Participant shall have the obligation to transfer all of
its Shares pursuant to the Take-Along Offer, as the same may be modified from
time to time, provided that the C&D Fund transfers all of its Shares to the 100%
Buyer at the Section 9 Closing.
9.3. Remedies. Unless otherwise provided in the Subscription
--------
Agreement or otherwise determined by the Board, the Participant shall
acknowledge that the C&D Fund would be irreparably damaged in the event of a
breach or a threatened breach by the Participant of any of its obligations under
this Section 9 and the Participant shall agree that, in the event of a breach or
a threatened breach by the Participant of any such obligation, the C&D Fund
shall, in addition to any other rights and remedies available to it, in respect
of such breach, be entitled to an injunction from a court of competent
jurisdiction granting it specific performance by the Participant of its
obligations under this Section 9.
11
<PAGE>
Section 10. Amendment, Modification,
and Termination of the Plan
-------------------------------------
The Board at any time may terminate or suspend the Plan, and from
time to time may amend or modify the Plan. No amendment, modification,
termination or suspension of the Plan shall in any manner adversely affect the
rights of any Participant with respect to any Shares purchased hereunder by such
Participant prior to such action unless such Participant consents. Shareholder
approval of any such amendment, modification, termination or suspension shall be
obtained to the extent mandated by applicable law, or if otherwise deemed
appropriate by the Board.
Section 11. Miscellaneous Provisions
-------------------------------------
11.1. Public Offering. Unless otherwise provided in the
---------------
Subscription Agreement or otherwise determined by the Board, (a) in the event
that a Public Offering has been consummated, neither Holding nor the C&D Fund
shall have any rights or obligations to purchase Shares from the Participant as
contemplated by Sections 7 and 8, nor shall any Participant have any obligation
to sell his Shares as contemplated by Section 9, and (b) Section 7 shall not
apply to a sale of Shares that is part of a Public Offering.
11.2. No Guarantee of Employment or Participation. Nothing in
-------------------------------------------
the Plan or in any Subscription Agreement shall interfere with or limit in any
way the right of Hold ing, the Company or any Subsidiary to terminate any
Participant's employment at any time, or confer upon any Participant any right
to continue in the employ of Holding, the Company or any Subsidiary. No Employee
shall have a right to be selected as a Participant.
11.3. Indemnification. Each person who is or
---------------
shall have been a member of the Board or any committee of
the Board shall be indemnified and held harmless by the
Company and Holding to the fullest extent permitted by law
12
<PAGE>
from and against any and all losses, costs, liabilities and expenses (including
any related attorneys' fees and advances thereof) in connection with, based upon
or arising or resulting from any claim, action, suit or proceeding to which he
may be made a party or in which he may be involved by reason of any action taken
or failure to act under the Plan and from and against any and all amounts paid
by him in settlement thereof, with Holding's approval, or paid by him in
satisfaction of any judgment in any such action, suit or proceeding against him,
provided that he shall give Holding an opportunity, at its own expense, to
- --------
defend the same before he undertakes to defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under Holding's or the Company's Certificate of Incorporation or
By-laws, by contract, as a matter of law, or otherwise.
11.4. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of Holding, the Company or any Subsidiary to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner that is not expressly authorized under the Plan.
11.5. Requirements of Law. The offer, sale and issuance of shares
-------------------
of Common Stock pursuant to the Plan shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required. No such offers or sales shall
be made under the Plan, and no shares of Common Stock shall be issued under the
Plan, if such offer, sale or issuance would result in a violation of applicable
law, including the federal securities laws and any applicable state securities
laws.
11.6. Freedom of Action. Subject to Section 10, nothing in the
-----------------
Plan or any Subscription Agreement shall be construed as limiting or preventing
Holding, the Company or any Subsidiary from taking any action that it deems
appropriate or in its best interest.
13
<PAGE>
11.7. Term of Plan. The Plan shall be effective as of the
------------
Effective Date. The Plan shall continue in effect, unless sooner terminated
pursuant to Section 10, until the earlier of the fifth anniversary of the
Effective Date and the date on which all shares of Common Stock to be offered
pursuant to Section 5 of the Plan have been issued.
11.8. No Voting Rights. Except as otherwise required by law, no
----------------
Participant under the Plan shall have any right to vote on any matter submitted
to Holding's stockholders until such time as he has purchased shares of Common
Stock under the Plan and become a stockholder of Holding.
11.9. Governing Law. The Plan, and all agreements hereunder,
-------------
shall be governed by and construed in accordance with the law of the State of
New York, regardless of the law that might be applied under principles of
conflict of laws, except to the extent that the corporate law of the State of
Delaware specifically and mandatorily applies.
14
<PAGE>
EXHIBIT 10.2
FORM OF
STOCK SUBSCRIPTION AGREEMENT
----------------------------
STOCK SUBSCRIPTION AGREEMENT, dated as of December 20, 1996, between
CDW Holding Corporation, a Delaware corporation (the "Company"), and the
Purchaser whose name appears on the signature page hereof (the "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to an Asset Acquisition Agreement, dated as of
February 15, 1994 (the "Acquisition Agreement"), between the Company and
Westinghouse Electric Corporation, a Pennsylvania corporation ("Westinghouse"),
the Company agreed to acquire substantially all of the assets and assume certain
of the liabilities of the unincorporated division of Westinghouse known as
Westinghouse Electric Supply Company or WESCO (the "Business") from Westinghouse
(the "Acquisition") and the Acquisition was consummated on February 28, 1994;
WHEREAS, since the Acquisition, the Business has been operated through
WESCO Distribution, Inc., a wholly-owned subsidiary of the Company ("WESCO");
WHEREAS, pursuant to the Company's Stock Purchase Plan for officers
and key employees of the Company or any subsidiary thereof (the "Plan"), the
Board of Directors of the Company (the "Board") has granted to the Purchaser the
right to purchase the aggregate number of shares of Class A Common Stock, par
value $.01 per share ("Common Stock"), of the Company set forth on the signature
page hereof (each a "Share" and, collectively, the "Shares") at a purchase price
of $195.40 per Share; and
<PAGE>
WHEREAS, the terms of the offering of the Shares and certain other
shares of Common Stock being made on the date hereof (the "Offering") are set
forth in a Confidential Offering Memorandum, dated December 11, 1996 (the
"Offering Memorandum"), a copy of which has been furnished to the Purchaser;
NOW, THEREFORE, to implement the foregoing and in consideration of the
mutual agreements contained herein, the parties hereto hereby agree as follows:
1. Purchase and Sale of Common Stock.
---------------------------------
(a) Purchase of Common Stock. Subject to all of the terms and
------------------------
conditions of this Agreement and the Plan, the Purchaser hereby subscribes for
and shall purchase, and the Company shall sell to the Purchaser, the Shares at a
purchase price of $195.40 per Share at the Closing provided for in Section 2(a)
hereof. Notwithstanding anything in this Agreement to the contrary, the Company
shall have no obligation to sell any Common Stock to (i) any person who will not
-
be an employee of the Company or a direct or indirect subsidiary of the Company
immediately following the Closing at which such Common Stock is to be sold or
(ii) any person who is a resident of a jurisdiction in which the sale of Common
- ---
Stock to him would constitute a violation of the securities, "blue sky" or other
laws of such jurisdiction.
(b) Consideration. Subject to all of the terms and conditions of
-------------
this Agreement and the Plan, the Purchaser shall deliver to the Company at the
Closing referred to in Section 2(a) hereof immediately available funds in the
amount of the aggregate purchase price set forth on the signature page hereof.
2. Closing.
-------
(a) Time and Place. Except as otherwise mutually agreed by the
--------------
Company and the Purchaser, the closing (the "Closing") of the transaction
contemplated by this Agreement shall be held at the offices of WESCO
Distribution, Inc.,
2
<PAGE>
Commerce Court, Suite 700, Four Station Square, Pittsburgh, Pennsylvania at
10:00 a.m. (Pittsburgh time) on December 20, 1996.
(b) Closing. At the Closing, (i) the Company shall deliver to the
------- -
Purchaser a stock certificate registered in such Purchaser's name and
representing the number of Shares set forth on the signature page hereof, which
certificate shall bear the legends set forth in Section 3(b), and (ii) the
--
Purchaser shall deliver to the Company immediately available funds in the amount
of the aggregate purchase price set forth on the signature page hereof.
3. Purchaser's Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Investment Intention. The Purchaser represents and warrants that
--------------------
he is acquiring the Shares solely for his own account for investment and not
with a view to or for sale in connection with any distribution thereof. The
Purchaser agrees that he will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any of the Shares (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of any
Shares), except in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder, and in compliance with applicable
state securities or "blue sky" laws. The Purchaser further understands,
acknowledges and agrees that none of the Shares may be transferred, sold,
pledged, hypothecated or otherwise disposed of (i) unless the provisions of
-
Sections 4 through 8 hereof, inclusive, shall have been complied with or have
expired, (ii) unless (A) such disposition is pursuant to an effective
-- -
registration statement under the Securities Act, (B) the Purchaser shall have
-
delivered to the Company an opinion of counsel, which opinion and counsel shall
be reasonably satisfactory to the Company, to the effect that such disposition
is exempt from the provisions of Section 5 of the Securities Act or (C) a no-
-
action letter from the Commission, reasonably satisfactory to the Company, shall
have
3
<PAGE>
been obtained with respect to such disposition and (iii) unless such
---
disposition is pursuant to registration under any applicable state securities
laws or an exemption therefrom.
(b) Legends. The Purchaser acknowledges that the certificate or
-------
certificates representing the Shares shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED AS OF
DECEMBER 20, 1996, AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED
BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. THE SHARES REPRESENTED
BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFITS OF AND ARE BOUND BY THE
OBLIGATIONS SET FORTH IN A REGISTRATION AND PARTICIPATION AGREEMENT, DATED
AS OF FEBRUARY 28, 1994, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE
COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
(i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
- -
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) THE HOLDER HEREOF SHALL
-
HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SUCH ACT OR
(C) A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION,
-
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, SHALL HAVE BEEN
OBTAINED WITH RESPECT
4
<PAGE>
TO SUCH DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO REGISTRATION
--
UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM."
(c) Securities Law Matters. The Purchaser ac knowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
-
Securities Act or qualified under any state securities or "blue sky" laws, (ii)
--
it is not anticipated that there will be any public market for the Shares, (iii)
---
the Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Securities Act and such state laws or an exemption from
registration is available, (iv) Rule 144 promulgated under the Securities Act
--
("Rule 144") is not presently available with respect to the sales of any
securities of the Company and the Company has made no covenant to make Rule 144
available, (v) when and if the Shares may be disposed of without registration in
-
reliance upon Rule 144, such disposition can be made only in limited amounts in
accordance with the terms and conditions of such Rule, (vi) the Company does not
--
plan to file reports with the Commission or make public information concerning
the Company available unless required to do so by law or by the terms of its
Financing Agreements (as hereinafter defined), (vii) if the exemption afforded
---
by Rule 144 is not available, sales of the Shares may be difficult to effect
because of the absence of public information concerning the Company, (viii) a
----
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Shares and (ix) a notation shall be made in the
--
appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and, if the Company should
in the future engage the services of a stock transfer agent, appropriate stop-
transfer restrictions will be issued to such transfer agent with respect to the
Shares.
(d) Compliance with Rule 144. If any of the Shares are to be
------------------------
disposed of in accordance with Rule 144, the Purchaser shall transmit to the
Company an executed copy
5
<PAGE>
of Form 144 (if required by Rule 144) no later than the time such form is
required to be transmitted to the Commission for filing and such other
documentation as the Company may reasonably require to assure compliance with
Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) the financial situation of the Purchaser is such that he can afford to bear
-
the economic risk of holding the Shares for an indefinite period and (ii) he can
--
afford to suffer the complete loss of his investment in the Shares.
(f) Questionnaire. The Purchaser agrees that he will furnish such
-------------
documents and comply with such reasonable requests of the Company as may be
necessary to substantiate his status as a qualifying investor in connection with
the private offering of the Shares to the Purchaser and the other purchasers in
the Offering. The Purchaser represents and warrants that all information
contained in such documents and any other written materials concerning the
status of the Purchaser furnished by the Purchaser to the Company in connection
with such requests will be true, correct and complete in all material respects.
(g) Access to Information. The Purchaser represents and warrants
---------------------
that (i) he has carefully reviewed the Offering Memorandum and the other
-
materials furnished to the Purchaser in connection with the transaction
contemplated hereby (including but not limited to the Plan), (ii) he has been
--
granted the opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of the
purchase of the Shares and to obtain any additional information that he deems
necessary to verify the accuracy of the information contained in such materials,
(iii) his knowledge and experience in financial and business matters is such
---
that he is capable of evaluating the risks of the investment in the Shares, and
(iv) he is, and will be at the time of the Closing, an officer or key employee
--
of the Company, WESCO or a subsidiary of either thereof.
6
<PAGE>
(h) Registration; Restrictions on Sale upon Public Offering. The
-------------------------------------------------------
Purchaser shall be entitled to the rights and subject to the obligations created
under the Registration and Participation Agreement, dated as of February 28,
1994 (the "Registration Agreement"), among the Company, The Clayton & Dubilier
Private Equity Fund IV Limited Partnership (the "C&D Fund"), Westinghouse and
Roy W. Haley. The Shares shall be entitled to the benefits of the Registration
Agreement applicable to Registrable Securities (as defined therein). The
Purchaser agrees that, in the event that the Company files a registration
statement under the Securities Act with respect to an underwritten public
offering of any shares of its capital stock, the Purchaser will not effect any
public sale or distribution of any shares of the Common Stock (other than as
part of such underwritten public offering) during the 20 days prior to and the
180 days after the effective date of such registration statement.
(i) Section 83(b) Election. The Purchaser agrees that, within 20
----------------------
days of the Closing, he shall give notice to the Company as to whether or not he
has made an election pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended, with respect to the Shares purchased at such Closing, and
acknowledges that he will be solely responsible for any and all tax liabilities
payable by him in connection with his receipt of the Shares or attributable to
his making or failing to make such an election.
4. Restrictions on Disposition of Shares. Neither the Purchaser nor
-------------------------------------
any of his heirs or representatives shall sell, assign, transfer, pledge or
otherwise directly or indirectly dispose of or encumber any of the Shares to or
with any other person, firm, trust, association, corporation or entity
(including, without limitation, transfers to any other holder of the Company's
capital stock, dispositions by gift, by will, by a corporation as a distribution
in liquidation and by operation of law other than a transfer of Shares by
operation of law to the estate of the Purchaser upon the death of the Purchaser,
provided that such estate shall be bound by all provisions of this Agreement)
- --------
except as provided in Sections 5 through 8 hereof, inclusive, or in
7
<PAGE>
Section 4 of the Registration Agreement. The restrictions contained in this
Section 4 shall terminate in the event that an underwritten public offering of
the Common Stock led by one or more underwriters at least one of which is an
underwriter of nationally recognized standing (a "Public Offering") has been
consummated and shall not apply to a sale to the underwriters as part of a
Public Offering.
5. Options of the Company and the C&D Fund Upon Proposed Disposition.
-----------------------------------------------------------------
(a) Rights of First Refusal. If the Purchaser desires to accept an
-----------------------
offer (which must be in writing and for cash, be irrevocable by its terms for at
least 60 days and be a bona fide offer as determined in good faith by the Board
or the Executive Committee thereof) from any prospective purchaser to purchase
all or any part of the Shares at any time owned by him, he shall give notice in
writing to the Company and the C&D Fund (i) designating the number of Shares
-
proposed to be sold, (ii) naming the prospective purchaser of such Shares and
--
(iii) specifying the price (the "Offer Price") at and terms (the "Offer Terms")
- ----
upon which he desires to sell the same. During the 30-day period following
receipt of such notice by the Company and the C&D Fund (the "First Refusal
Period"), the Company shall have the right to purchase from the Purchaser all
(but not less than all) of the Shares specified in such notice, at the Offer
Price and on the Offer Terms. The Company hereby undertakes to use reasonable
efforts to act as promptly as practicable following such notice to determine
whether it shall elect to exercise such right. If the Company fails to exercise
such rights within the First Refusal Period, the C&D Fund shall have the right
to purchase all (but not less than all) of the Shares specified in such notice,
at the Offer Price and on the Offer Terms, at any time during the period
beginning at the earlier of (x) the end of the First Refusal Period and (y) the
- -
date of receipt by the C&D Fund of written notice that the Company has elected
not to exercise its rights and ending 30 days thereafter (the "Second Refusal
Period"). The rights provided hereunder shall be exercised by written notice to
the Purchaser given at any
8
<PAGE>
time during the applicable period. If such right is exercised, the Company or
the C&D Fund, as the case may be, shall deliver to the Purchaser a certified or
bank check for the Offer Price, payable to the order of the Purchaser, against
delivery of certificates or other instruments representing the Shares so
purchased, appropriately endorsed by the Purchaser. If such right shall not have
been exercised prior to the expiration of the Second Refusal Period, then at any
time during the 60 days following the expiration of the Second Refusal Period,
the Purchaser may sell such Shares to (but only to) the intended purchaser named
in his notice to the Company and the C&D Fund at the Offer Price and on the
Offer Terms specified in such notice, free of all restrictions or obligations
imposed by, and free of any rights or benefits set forth in, Sections 5 through
8, inclusive, of this Agreement, provided that such intended purchaser shall
--------
have agreed in writing, pursuant to an instrument of assumption satisfactory in
substance and form to the Company, to make and be bound by the representations,
warranties and covenants set forth in Section 3 hereof, other than those set
forth in Sections 3(g) and 3(i). The right of the Purchaser to sell Shares set
forth in this Section 5(a), subject to the rights of first refusal set forth in
this Section 5(a), shall be suspended during the Option Periods referred to in
Section 6 hereof, but the provisions of Section 6 shall not otherwise restrict
the ability of the Purchaser to sell the Shares, whether before or after such
Option Periods, pursuant to the terms and subject to the restrictions set forth
in this Section 5(a).
(b) Public Offering. In the event that a Public Offering has been
---------------
consummated, neither the Company nor the C&D Fund shall have any rights to
purchase the Shares from the Purchaser pursuant to this Section 5. This Section
5 shall not apply to a sale to the underwriters as part of a Public Offering.
9
<PAGE>
6. Options Effective on Termination of Employment or Unforeseen
------------------------------------------------------------
Personal Hardship of the Purchaser.
- ----------------------------------
(a) Termination of Employment. If the Purchaser's Active Employment
-------------------------
with the Company and any direct and indirect subsidiaries of the Company that
employ the Purchaser is terminated for any reason whatsoever the Company shall
have an option to purchase all (but not less than all) of the Shares then held
by the Purchaser (or, if his Active Employment was terminated by his death, his
estate) and shall have 30 days from the date of the Purchaser's termination
(such 30-day period being hereinafter referred to as the "First Option Period")
during which to give notice in writing to the Purchaser (or his estate) of its
election to exercise or not to exercise such option. The Company hereby
undertakes to use reasonable efforts to act as promptly as practicable following
such termination to make such election. If the Company fails to give notice
that it intends to exercise such option within the First Option Period, the C&D
Fund shall have the right to purchase all (but not less than all) of the Shares
then held by the Purchaser (or his estate) and shall have until the expiration
of the earlier of (x) 30 days following the end of the First Option Period, or
-
(y) 30 days from the date of receipt by the C&D Fund of written notice that the
- --
Company does not intend to exercise such option (such 30-day period being
hereinafter referred to as the "Second Option Period"), to give notice in
writing to the Purchaser (or his estate) of the C&D Fund's exercise of its
option. If the options of the Company and the C&D Fund to purchase Shares
granted in this subsection are not exercised as provided herein (other than as a
result of Section 11 hereof), the Purchaser (or his estate) shall be entitled
to retain the Shares which could have been acquired on exercise thereof, subject
to all of the provisions of this Agreement (including, without limitation,
Section 5(a)). If the Company and the C&D Fund have failed to exercise their
respective options pursuant to this Section 6(a) within the time periods
specified herein, and if the Purchaser's Active Employment with each of the
Company and any direct and indirect subsidiaries of the Company that employ the
Purchaser is terminated (A) by such
-
10
<PAGE>
employer or employers without Cause, (B) by the Purchaser by Retirement at
-
Normal Retirement Age, or (C) by reason of Permanent Disability or death,
-
then on notice from the Purchaser (or his estate) in writing and delivered to
the Company within 30 days following the end of the Second Option Period, the
Company shall purchase all (but not less than all) of the Shares then held by
the Purchaser (or his estate). All purchases pursuant to this Section 6(a) by
the Company or the C&D Fund shall be for a purchase price and in the manner
prescribed by Section 7 hereof.
(b) Unforeseen Personal Hardship. In the event that the Purchaser,
----------------------------
while in the employment of the Company or any direct or indirect subsidiary of
the Company, experiences Unforeseen Personal Hardship, the Board will carefully
consider any request by the Purchaser that the Company repurchase the Pur-
chaser's Shares at a price determined in accordance with Section 7 hereof, but
the Company shall have no obligation to repurchase such Shares. The Board shall
consider such request with respect to Unforeseen Personal Hardship as soon as
practicable after receipt by the Company of a written request by the
Purchaser, such request to include sufficient details of the Purchaser's
Unforeseen Personal Hardship to permit the Board to review the request and the
circumstances in an informed manner.
(c) Certain Definitions. As used in this Agreement the following
-------------------
terms shall have the following meanings:
(i) "Active Employment" shall mean active employment with the Company
-----------------
or any direct or indirect subsidiary of the Company.
(ii) "Cause" shall mean (A) the willful failure by the Purchaser
----- -
substantially to perform his employment-related duties (other than any such
failure due to physical or mental illness) after a demand for substantial
performance is delivered to the Purchaser by the Board, which notice
identifies the manner in which the Board believes that the Purchaser has
not substantially performed his employment-related duties, (B) the engaging
-
11
<PAGE>
by the Purchaser in willful and serious misconduct that is injurious to the
Company or any of its affiliates, (C) the conviction of the Purchaser of,
-
or the entering by the Purchaser of a plea of nolo contendere to, a crime
---- ----------
that constitutes a felony, (D) the material or willful breach (including
-
but not limited to the material or willful failure to cure a breach) by the
Purchaser of any written covenant or agreement with the Company or any of
its affiliates not to disclose any information pertaining to the Company or
any of its affiliates or not to compete or interfere with the Company or
any of its affiliates or (E) the material or willful breach (including but
-
not limited to the material or willful failure to cure a breach) by the
Purchaser of his obligations pursuant to Section 8 hereof.
(iii) "Retirement at Normal Retirement Age" shall mean retirement at
-----------------------------------
age 65 or later.
(iv) "Permanent Disability" shall mean a physical or mental disability
--------------------
or infirmity that prevents the performance of such Purchaser's employment-
related duties lasting (or likely to last, based on competent medical
evidence presented to the Board) for a continuous period of six months or
longer. The Board's reasoned and good faith judgment of Permanent
Disability shall be final and shall be based on such competent medical
evidence as shall be presented to it by the Purchaser or by any physician
or group of physicians or other competent medical expert employed by the
Purchaser or the Company to advise the Board.
(v) "Unforeseen Personal Hardship" shall mean financial hardship
----------------------------
arising from (x) extraordinary medical expenses or other expenses directly
-
related to illness or disability of the Purchaser, a member of the
Purchaser's immediate family or one of the Purchaser's parents or (y)
-
payments necessary or required to prevent the eviction of Purchaser from
Purchaser's principal residence or foreclosure on the mortgage on that
12
<PAGE>
residence. The Board's reasoned and good faith determination of Unforeseen
Personal Hardship shall be binding on the Company and the Purchaser.
(d) Notice of Termination. The Company shall give written notice of
---------------------
any termination of the Purchaser's Active Employment with each of the Company
and any direct or indirect subsidiaries of the Company that employ the Purchaser
to the C&D Fund, except that if such termination (if other than as a result of
death) is by the Purchaser, the Purchaser shall give written notice of such
termination to the Company and the Company shall give written notice of such
termination to the C&D Fund.
(e) Public Offering. In the event that a Public Offering has been
---------------
consummated, the provisions of this Section 6 shall terminate and cease to have
any further effect.
7. Determination of the Purchase Price; Manner of Payment.
------------------------------------------------------
(a) Purchase Price. For the purposes of any purchase of the Shares
--------------
pursuant to Section 6, and subject to Section 11(c), the purchase price per
Share to be paid to the Purchaser (or his estate) for each Share (the "Purchase
Price") shall be the fair market value (the "Fair Market Value") of such Share
as of the effective date of the termination of employment that gives rise to the
right or obligation to purchase, provided that if the Purchaser's employment is
--------
terminated by the Company or any of its direct or indirect subsidiaries for
Cause, the Purchase Price for such Share shall be the lesser of (i) the Fair
-
Market Value of such Share as of the effective date of the termination of
employment that gives rise to the right or obligation to repurchase and (ii) the
--
price at which the Purchaser purchased such Share from the Company. Whenever
determination of the Fair Market Value of the Shares is required by this
Agreement, such Fair Market Value shall be such amount as is determined in good
faith by the Board. In making a determination of Fair Market Value, the Board
shall give due consideration to such factors as it deems appropriate, including,
13
<PAGE>
without limitation, the earnings and certain other financial and operating
information of the Company in recent periods, the potential value of the Company
as a whole, the future prospects of the Company and the industries in which it
competes, the history and management of the Company, the general condition of
the securities markets, the fair market value of securities of companies engaged
in businesses similar to those of the Company and a valuation of the Shares,
which shall be performed as promptly as practicable following the first business
day of the 1996 fiscal year of the Company and each subsequent fiscal year by an
independent valuation firm chosen by the Board. The determination of Fair
Market Value will not give effect to any restrictions on transfer of the Shares
or the fact that such Shares would represent a minority interest in the Company.
The Fair Market Value as determined in good faith by the Board and in the
absence of fraud shall be binding and conclusive upon all parties hereto and the
C&D Fund, and in any event the Purchaser agrees to accept and shall not
challenge any determination of Fair Market Value made by the Board prior to the
Company's receipt of the valuation of the Shares to be delivered in the 1996
fiscal year, so long as the Fair Market Value thus determined is at least equal
to the purchase price paid by the Purchaser for the Shares. If the Company
subdivides (by any stock split, stock dividend or otherwise) the Common Stock
into a greater number of shares, or combines (by reverse stock split or
otherwise) the Common Stock into a smaller number of shares after the Board
shall have determined the Purchase Price for the Shares (without taking into
consideration such subdivision or combination) and prior to the consummation of
the purchase, the Purchase Price (including any minimum or maximum Purchase
Price specified herein or in effect as a result of a prior adjustment) shall be
appropriately adjusted to reflect such subdivision or combination, and the
Board's determination as to any such adjustment in good faith shall be binding
and conclusive on all parties hereto and the C&D Fund.
(b) Payment. Subject to Section 11 hereof, the completion of a
-------
purchase pursuant to Section 6 or 8(c) hereof shall take place at the principal
office of the Company
14
<PAGE>
on the tenth business day following (i) the receipt by the Purchaser of the
-
notice of the C&D Fund or the Company, as the case may be, of its exercise of
its option to purchase pursuant to Section 6(a) or 8(c) or (ii) the Company's
--
receipt of notice by the Purchaser of the election to sell Shares pursuant to
Section 6(a) or (iii) the Board's determination (which shall be delivered
---
to the Purchaser) that it is willing and able to purchase Shares as a result of
Unforeseen Personal Hardship pursuant to Section 6(b). The Purchase Price
shall be paid by delivery to the Purchaser of a certified or bank check for the
Purchase Price payable to the order of the Purchaser, against delivery of
certificates or other instruments representing the Shares so purchased,
appropriately endorsed by the Purchaser, free and clear of all security
interests, liens, claims, encumbrances, charges, options, restrictions on
transfer, proxies and voting and other agreements of whatever nature.
(c) Application of the Purchase Price to Certain Loans. The
--------------------------------------------------
Purchaser agrees that the Company and the C&D Fund shall be entitled to apply
any amounts to be paid by the Company or the C&D Fund, as the case may be, to
repurchase Shares pursuant to Section 5, 6 or 8(c) hereof to discharge any
indebtedness of the Purchaser to the Company or any of its direct or indirect
subsidiaries, or indebtedness that is guaranteed by the Company or any of its
direct or indirect subsidiaries, including, without limitation, any indebtedness
of the Purchaser incurred to purchase the Shares.
8. Take-Along Rights.
-----------------
(a) Take-Along Notice. So long as the C&D Fund holds a number of
-----------------
shares of Common Stock equal to at least one-third of the Common Stock
originally purchased by the C&D Fund at the Closing of the Acquisition
(exclusive of shares purchased under the Capital Call Agreement, dated as of
February 28, 1994, among the Company, the C&D Fund and Barclays Business Credit,
Inc.) if the C&D Fund intends to effect a sale of all of its shares of Common
Stock to a third party (a "100% Buyer") and elects to exercise its
15
<PAGE>
rights under this Section 8, the C&D Fund shall deliver written notice (a "Take-
Along Notice") to the Purchaser, which notice shall (a) state (i) that the C&D
- -
Fund wishes to exercise its rights under this Section 8 with respect to such
transfer, (ii) the name and address of the 100% Buyer, (iii) the per share
-- ---
amount and form of consideration the C&D Fund proposes to receive for its shares
of Common Stock and (iv) the terms and conditions of payment of such
--
consideration and all other material terms and conditions of such transfer, (b)
-
contain an offer (the "Take-Along Offer") by the 100% Buyer to purchase from the
Purchaser all of its Shares on and subject to the same terms and conditions
offered to the C&D Fund and (c) state the anticipated time and place of the
-
closing of the purchase and sale of the shares (a "Section 8 Closing"), which
(subject to such terms and conditions) shall occur not fewer than five (5) days
nor more than ninety (90) days after the date such Take-Along Notice is
delivered, provided that if such Section 8 Closing shall not occur prior to the
--------
expiration of such 90-day period, the C&D Fund shall be entitled to deliver
another Take-Along Notice with respect to such Take-Along Offer.
(b) Conditions to Take-Along. Upon delivery of a Take-Along Notice,
------------------------
the Purchaser shall have the obligation to transfer all of the Shares pursuant
to the Take-Along Offer, as the same may be modified from time to time, provided
--------
that the C&D Fund transfers all of its Shares to the 100% Buyer at the Section 8
Closing. Within 10 days of receipt of the Take-Along Notice, the Purchaser
shall (i) execute and deliver to the C&D Fund a power of attorney and a letter
-
of transmittal and custody agreement in favor of, and in form and substance
satisfactory to, the C&D Fund constituting the C&D Fund, Clayton, Dubilier &
Rice, Inc. or one or more of their respective affiliates designated by the C&D
Fund (the "Custodian") the true and lawful attorney-in-fact and custodian for
the Purchaser, with full power of substitution, and authorizing the Custodian to
take such actions as the Custodian may deem necessary or appropriate to effect
the sale and transfer of the Shares to the 100% Buyer, upon receipt of the
purchase price therefor at the Section 8 Closing, free and clear of all security
interests,
16
<PAGE>
liens, claims, encumbrances, charges, options, restrictions on transfer, proxies
and voting and other agreements of whatever nature, and to take such other
action as may be necessary or appropriate in connection with such sale, in
cluding consenting to any amendments, waivers, modifications or supplements
to the terms of the sale (provided that the C&D Fund also so consents, and
--------
sells and transfers its Shares on the same terms as so amended, waived, modified
or supplemented) and (ii) deliver to the C&D Fund certificates representing the
--
Shares, together with all necessary duly executed stock powers.
(c) Remedies. The Purchaser acknowledges that the C&D Fund would be
--------
irreparably damaged in the event of a breach or a threatened breach by the
Purchaser of any of its obligations under this Section 8 and the Purchaser
agrees that, in the event of a breach or a threatened breach by the Purchaser of
any such obligation, the C&D Fund shall, in addition to any other rights and
remedies available to it, in respect of such breach, be entitled to an
injunction from a court of competent jurisdiction granting it specific
performance by the Purchaser of its obligations under this Section 8. In the
event that the C&D Fund shall file suit to enforce the covenants contained in
this Section 8 (or obtain any other remedy in respect of any breach thereof),
the prevailing party in the suit shall be entitled to recover, in addition to
all other damages to which it may be entitled, the costs incurred by such party
in conducting the suit, including reasonable attorney's fees and expenses. In
the event that, following a breach or a threatened breach by the Purchaser of
the provisions of this Section 8, the C&D Fund does not obtain an injunction
granting it specific performance of the Purchaser's obligations under this
Section 8 in connection with such proposed sale prior to the time the C&D Fund
completes the sale of its shares or, in its sole discretion, abandons such sale,
then the Company shall have the option to purchase the Shares from the Purchaser
at a purchase price per Share equal to the lesser of (i) the Fair Market Value
-
of such Share as of the date of the breach or threatened breach that gives rise
to the right to repurchase
17
<PAGE>
and (ii) the price at which the Purchaser purchased such Share from the Company.
-- --
(d) Public Offering. In the event that a Public Offering has been
---------------
consummated, the provisions of this Section 8 shall terminate and cease to have
further effect.
9. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Purchaser that (a) the Company has been duly
-
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
-
delivered by the Company and constitutes a valid and legally binding obligation
of the Company enforceable against the Company in accordance with its terms, and
(c) the Shares, when issued, delivered and paid for in accordance with the terms
-
hereof, will be duly and validly issued, fully paid and nonassessable, and free
and clear of any liens or encumbrances other than those created pursuant to this
Agreement, or otherwise in connection with the transactions contemplated hereby.
10. Covenants of the Company.
------------------------
(a) Rule 144. The Company agrees that at all times after it has
--------
filed a registration statement pursuant to the requirements of the Securities
Act or Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), relating to any class of equity securities of the Company
(other than any Special Registration, as defined in the Registration and
Participation Agreement), it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to file
such reports, it will, upon the request of the Purchaser, make publicly
available such information as necessary to permit sales pursuant to Rule 144
under the Securities Act), and will take such further action as the Purchaser
may reasonably request, all to the extent required from time to time to enable
the Purchaser to sell Shares without registration under the Securities Act
within
18
<PAGE>
the limitation of the exemptions provided by (i) Rule 144, as such Rule
-
may be amended from time to time, or (ii) any successor rule or regulation
--
hereafter adopted by the Commission.
(b) State Securities Laws. The Company agrees to use its best
---------------------
efforts to comply with all state securities or "blue sky" laws applicable to the
sale of the Shares to the Purchaser, provided that the Company shall not be
--------
obligated to qualify or register the Shares under any such law or to qualify as
a foreign corporation or file any consent to service of process under the laws
of any jurisdiction or subject itself to taxation as doing business in any such
jurisdiction.
11. Certain Restrictions on Repurchases.
-----------------------------------
(a) Financing Agreements, etc. Notwithstanding any other provision
-------------------------
of this Agreement, the Company shall not be permitted or obligated to repurchase
any Shares from the Purchaser if (i) such repurchase would result in a violation
-
of the terms or provisions of, or result in a default or an event of default
under, (A) the Credit Facility, dated as of February 24, 1995 as the same may be
-
amended, modified or supplemented from time to time (the "Credit Facility"),
among WESCO, the banks named therein, Barclays Bank PLC, as administrative agent
and Shawmut Capital Corporation, as collateral agent, (B) any indenture to be
-
entered into with respect to debt securities to be issued by WESCO in connection
with or subsequent to the Acquisition as the same may be amended, modified or
supplemented from time to time (an "Indenture"), (C) any other financing or
-
security agreement or document entered into in connection with the Acquisition,
or the financing of the Acquisition or in connection with the operations of the
Company or its subsidiaries from time to time, as each may be amended, modified
or supplemented from time to time (the Credit Facility, any Indenture, and
such other agreements and documents, are hereinafter referred to as the
"Financing Agreements"), or (ii) such repurchase would violate any of the terms
--
or provisions of the Certificate of Incorporation of the Company, or (iii) the
---
19
<PAGE>
Company has no funds legally available therefor under the General Corporation
Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a repurchase by the
-------------------
Company otherwise permitted or required under Section 6(a) or 8(c) is prevented
solely by the terms of Section 11(a), (i) such repurchase will be postponed
-
and will take place without the application of further conditions or impediments
(other than as set forth in Section 7 hereof or in this Section 11) at the first
opportunity thereafter when the Company has funds legally available therefor and
when such repurchase will not result in any default, event of default or
violation under any of the Financing Agreements or in a violation of any term or
provision of the Certificate of Incorporation of the Company and (ii) such
--
repurchase obligation shall rank against other similar repurchase obligations
with respect to shares of Common Stock or options in respect thereof according
to priority in time of (A) the effective date of the termination of employment
-
in connection with any repurchase obligation arising pursuant to an exercise of
the option of the Company under Section 6(a), or (B) as to any repurchase
-
obligation arising pursuant to an exercise of any purchaser's right to require a
repurchase under Section 6(a), the date upon which the Company receives written
notice of such exercise, provided that any such repurchase obligations as to
--------
which a common date determines priority under clause (A) or (B) above shall be
of equal priority and shall share pro rata in any repurchase payments made
pursuant to clause (i) above and provided, further, that (x) any repurchase
-------- ------- -
commitment arising from Permanent Disability, death or Retirement at Normal
Retirement Age or any repurchase commitment made by the Board pursuant to
Section 6(b) shall have priority over any other repurchase obligation and (y)
-
all Section references in this clause (ii) shall be deemed to refer to the
corresponding Section of this Agreement and to any similar provision of any
other Management Stock Subscription Agreement or management stock option
agreement to which the Company is or becomes a party.
20
<PAGE>
(c) Purchase Price Adjustment. In the event that a repurchase of
-------------------------
Shares from the Purchaser is delayed pursuant to this Section 11, the purchase
price per Share when the repurchase of such Shares eventually takes place as
contemplated by Section 11(b) shall be the sum of (i) the Purchase Price de-
-
termined in accordance with Section 7 or 8(c) hereof at the time that the
repurchase of such Shares would have occurred but for the operation of this
Section 11, plus (ii) an amount equal to interest on such Purchase Price for the
--
period from the date on which the completion of the repurchase would have taken
place but for the operation of this Section 10 to the date on which such
repurchase actually takes place (the "Delay Period") at a rate equal to the
weighted average cost of the Company's bank indebtedness obligations
outstanding during the Delay Period.
12. Miscellaneous.
-------------
(a) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such mail delivery, to the Company, the C&D Fund or
the Purchaser, as the case may be, at the following addresses or to such other
address as the Company, the C&D Fund or the Purchaser, as the case may be,
shall specify by notice to the others:
(i) if to the Company, to it at:
CDW Holding Corporation
c/o WESCO Distribution, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Attention: Chairman
---------
21
<PAGE>
(ii) if to the Purchaser, to the Purchaser at the address set forth on
the signature page hereof.
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
---------
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Attention: Alberto Cribiore
---------
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
---------
The C&D Fund also shall be given a copy of any notice or other communication
between the Purchaser and the Company under this Agreement at its address as set
forth above.
(b) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
the parties to this Agreement and their respective successors and assigns and
shall inure to the benefit of the parties to the Agreement, the C&D Fund and
their respective successors and assigns. Except as provided in Sections 4
through 8, inclusive, nothing in this
22
<PAGE>
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement, the C&D Fund or their
respective successors or assigns any legal or equitable right, remedy or claim
under or in respect of any agreement or any provision contained herein.
(c) Waiver; Amendment.
-----------------
(i) Waiver. Any party hereto or beneficiary hereof may by written
------
notice to the other parties (A) extend the time for the performance of any
-
of the obligations or other actions of the other parties under this
Agreement, (B) waive compliance with any of the conditions or covenants of
-
the other parties contained in this Agreement and (C) waive or modify
-
performance of any of the obligations of the other parties under this
Agreement, provided that any waiver of the provisions of Sections 4 through
--------
8, inclusive, must be consented to in writing by the C&D Fund. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf
of any party or beneficiary, shall be deemed to constitute a waiver by the
party or beneficiary taking such action of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto or beneficiary hereof of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach and no failure by a party or
beneficiary to exercise any right or privilege hereunder shall be deemed a
waiver of such party's or beneficiary's rights or privileges hereunder or
shall be deemed a waiver of such party's or beneficiary's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
---------
supplemented orally, but only by a written instrument executed by the
Purchaser and the Company, and (in the case of any amendment modification
23
<PAGE>
or supplement to or affecting Section 8 hereof, or that adversely affects
the rights of the C&D Fund hereunder) consented to by the C&D Fund in
writing.
(d) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or the Purchaser without the prior written consent of
the other parties and the C&D Fund. The C&D Fund may assign from time to time
all or any portion of its rights under Sections 4 through 8 hereof to one or
more persons or other entities designated by it.
(e) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflict of laws, except to the
extent that the corporate law of the State of Delaware specifically and
mandatorily applies.
(f) Section and Other Headings, etc. The section and other headings
-------------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(h) Delegation by the Board. All of the powers, duties and
-----------------------
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
24
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first above written.
CDW HOLDING CORPORATION
By:___________________________
Name:
Title:
THE PURCHASER:
By:___________________________
Name:
Attorney-in-Fact
Address of the Purchaser:
Total Number of Shares
of Common Stock to be
Purchased: 860
Total Cash Purchase
Price: $168,044.00
25
<PAGE>
EXHIBIT 10.3
CDW HOLDING CORPORATION STOCK OPTION PLAN
-----------------------------------------
Section 1. Purpose
-------------------
The purpose of this CDW Holding Corporation Stock Option Plan is to
foster and promote the long-term financial success of Holding and the Company
and to increase materially stockholder value by (a) motivating superior
-
performance by participants in the Plan, (b) providing participants in the
-
Plan with an ownership interest in Holding and (c) enabling the Company to
-
attract and retain the services of an outstanding management team upon whose
judgment, interest and special effort the successful conduct of its operations
is largely dependent.
Section 2. Definitions
-----------------------
2.1. Definitions. Whenever used herein, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Alternative Option" has the meaning given in Section 8.2.
(b) "Board" means the Board of Directors of Holding.
(c) "C&D Fund" means The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership, and any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(d) "Cause" means (i) the willful failure by the Participant to
-
perform substantially his employment-related duties (other than any such
failure due to physical or mental illness) after a demand for substantial
performance is delivered to the Participant by the Board, which notice
identifies the manner in which the
<PAGE>
Participant has not substantially performed his employment-related
duties, (ii) the Participant's engaging in serious misconduct that is
--
injurious to Holding, the Company or any Subsidiary, (iii) the
---
Participant's having been convicted of, or entered a plea of guilty or nolo
----
contendere to, a crime that constitutes a felony, (iv) the breach by the
---------- --
Participant of any written covenant or agreement with Holding, the Company
or any Subsidiary not to disclose any information pertaining to Holding,
the Company or any Subsidiary or not to compete or interfere with Holding,
the Company or any Subsidiary or (v) the breach by the Participant of his
-
obligation pursuant to Section 8 of his Management Stock Subscription
Agreement.
(e) "Change in Control" means the first to occur of the following
events after the Effective Date:
(i) the acquisition by any person, entity or "group" (as defined
in Section 13(d) of the Securities Exchange Act of 1934, as
amended), other than Holding, the Company, the Subsidiaries, any
employee benefit plan of Holding, the Company or the
Subsidiaries, or the C&D Fund, of 50% or more of the combined
voting power of Holding's or the Company's then outstanding
voting securities;
(ii) the merger or consolidation of Holding or the Company, as a
result of which persons who were stockholders of Holding or the
Company, as the case may be, immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly or
indirectly, more than 50% of the combined voting power entitled
to vote generally in the election of directors of the merged or
consolidated company;
(iii) the liquidation or dissolution of Holding or the Company;
and
2
<PAGE>
(iv) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company to one
or more persons or entities that are not, immediately prior to
such sale, transfer or other disposition, affiliates of Holding
or the Company.
(f) "Change in Control Price" means the price per share of Common
Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Board if any part of the
offered price is payable other than in cash).
(g) "Committee" means the Compensation Committee of the Board (or such
other committee of the Board which shall have jurisdiction over the
compensation of officers). If at any time no Committee shall be in office,
the Board shall perform the functions of the Committee.
(h) "Common Stock" means the Class A Common Stock, par value $.01 per
share, of Holding.
(i) "Company" means WESCO Distribution, Inc., a Delaware corporation
formerly named CDW Acquisition Corporation, and any successor thereto.
(j) "Effective Date" means February 28, 1994.
(k) "Employee" means any executive or senior officer or other
executive or key employee of Holding, the Company or any Subsidiary.
(l) "Fair Market Value" means, as of any date, the fair market value
on such date per share of Common Stock as determined in good faith by the
Board. In making a determination of Fair Market Value, the Board shall
give due consideration for such factors as it deems appropriate, including,
without limitation, the earnings and certain other financial and operating
3
<PAGE>
information of the Company in recent periods, the potential value of the
Company as a whole, the future prospects of the Company and the industries
in which it competes, the history and management of the Company, the
general condition of the securities markets, the fair market value of
securities of companies engaged in businesses similar to those of the
Company and a valuation of the Shares, which shall be performed as
promptly as practicable following the first business day of the 1995 fiscal
year and each subsequent fiscal year by an independent valuation firm
chosen by the Board. The determination of Fair Market Value will not give
effect to any restrictions on transfer of the Shares or the fact that such
Shares would represent a minority interest in Holding.
(m) "Grant Date" means, with respect to any Option, the date on which
such Option is granted pursuant to the Plan.
(n) "Holding" means CDW Holding Corporation, a Delaware corporation,
and any successor thereto.
(o) "Involuntary Termination" means a termination by the New Employer
for any reason.
(p) "New Employer" means the Participant's employer, or the parent or
a subsidiary of such employer, immediately following a Change in Control.
(q) "Option" means the right granted pursuant to the Plan to purchase
one share of Common Stock at a price determined in accordance with Section
6.2.
(r) "Option Agreement" means an agreement between Holding and the
Participant embodying the terms of any Options granted hereunder, which
agreement shall, unless the Committee otherwise determines, be
substantially in the form attached hereto as Exhibit A.
4
<PAGE>
(s) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(t) "Permanent Disability" means a physical or mental disability or
infirmity that prevents the performance of a Participant's employment-
related duties lasting (or likely to last, based on competent medical
evidence presented to the Board) for a period of six months or longer. The
Board's reasoned and good faith judgment of Permanent Disability shall be
final and shall be based on such competent medical evidence as shall be
presented to it by such Participant or by any physician or group of
physicians or other competent medical expert employed by the Participant or
the Company to advise the Board.
(u) "Plan" means this CDW Holding Corporation Stock Option Plan.
(v) "Public Offering" means the first day as of which sales of Common
Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock.
(w) "Retirement" means a Participant's retirement at or after age 65.
(x) "Extraordinary Termination" has the meaning given in Section 7.1.
(y) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by the
Company or Holding.
2.2. Gender and Number. Except when otherwise indicated by the
-----------------
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
5
<PAGE>
Section 3. Eligibility and Participation
-----------------------------------------
Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan. The selection of an Employee as a
Participant shall neither entitle such Employee to nor disqualify such Employee
from participation in any other award or incentive plan.
Section 4. Powers of the Committee
-----------------------------------
4.1. Power to Grant. The Committee shall determine the Participants
--------------
to whom Options shall be granted and the terms and conditions of any and all
Options granted to Participants, provided that nothing in the Plan shall limit
--------
the right of members of the Committee who are Employees to receive awards
hereunder.
4.2. Administration. The Committee shall be responsible for the
--------------
administration of the Plan. Any authority exercised by the Committee under
the Plan shall be exercised by the Committee in its sole discretion. Subject
to the terms of the Plan, the Committee, by majority action thereof, is
authorized to prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, to provide for conditions and assurances deemed
necessary or advisable to protect the interests of Holding and the Company,
and to make all other determinations necessary or advisable for the
administration and interpretation of the Plan in order to carry out its
provisions and purposes. Determinations, interpretations or other actions
made or taken by the Committee pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons.
6
<PAGE>
Section 5. Options Subject to Plan
-----------------------------------
5.1. Number. Subject to the provisions of Sections 5.2 and 5.3, the
------
maximum number of Options (and the maximum number of shares of Common Stock
subject to Options) granted under the Plan may not exceed 156,000. The shares
of Common Stock to be delivered upon the exercise of Options granted under the
Plan may consist, in whole or in part, of treasury Common Stock or authorized
but unissued Common Stock, not reserved for any other purpose.
5.2. Cancelled, Terminated or Forfeited Options. Any Option which for
------------------------------------------
any reason is cancelled, terminated or otherwise forfeited, in whole or in part,
without having been exercised, shall again be available for grant under the
Plan.
5.3. Adjustment in Capitalization. The number and class of Options
----------------------------
(and the number of shares of Common Stock available for issuance upon exercise
of such Options) granted under the Plan, and the number, class and exercise
price of any outstanding Options (and the number of shares of Common Stock
subject to outstanding Options), may be adjusted by the Board, in its sole
discretion, if it shall deem such an adjustment to be necessary or appropriate
to reflect any Common Stock dividend, stock split or share combination or any
recapitalization, merger, consolidation, exchange of shares, liquidation or
dissolution of Holding.
Section 6. Terms of Options
----------------------------
6.1. Grant of Options. Options may be granted to Participants at
----------------
such time or times as shall be determined by the Committee. Each Option granted
to a Participant shall be evidenced by an Option Agreement that shall specify
the exercise price at which a share of Common Stock may be purchased pursuant
to such Option, the duration of such Option and such other terms consistent with
the Plan as the Committee shall determine, including customary
representations,
7
<PAGE>
warranties and covenants with respect to securities law matters. Unless
otherwise determined by the Committee at the Grant Date, such Option Agreement
shall also state that the holder thereof is entitled to the benefits of and
bound by the obligations set forth in the Registration and Participation
Agreement, dated as of February 28, 1994, among Holding and certain stockholders
of Holding, to the extent set forth therein. Such Option Agreement shall,
unless the Committee otherwise determines, be substantially in the form attached
hereto as Exhibit A.
6.2. Exercise Price. The exercise price per share of Common Stock to
--------------
be purchased upon exercise of an Option shall be determined by the Committee but
shall not be less than the Fair Market Value on the Grant Date.
6.3. Exercise of Options. Unless otherwise determined by the
-------------------
Committee at the Grant Date, 20% of any Options granted to a Participant at any
time shall become exercisable on each of the first five anniversaries of the
Grant Date of such Options, provided that 100% of such Options shall become
--------
exercisable to the extent provided in Section 8.1 and that the Committee may
accelerate the exercisability of any Option, all Options or any class of
Options, at any time and from time to time. On or before the date upon which
any Employee will exercise any Option, Holding and such Employee shall enter
into a Management Stock Subscription Agreement substantially in the form
attached hereto as Exhibit B. Notwithstanding any other provision of the Plan,
each Option shall terminate and shall not be exercisable on or after the tenth
anniversary of the Grant Date of such Option.
6.4. Payment. The Committee shall establish procedures governing the
-------
exercise of Options, which procedures shall generally require that written
notice of the exercise thereof be given and that the exercise price thereof be
paid in full in cash or cash equivalents, including by personal check, at the
time of exercise. If so determined by the Committee in its sole discretion at
or after the
8
<PAGE>
Grant Date, the exercise price of any Options exercised after there has been a
Public Offering may be paid in full or in part in the form of shares of Common
Stock already owned by the Participant, based on the Fair Market Value of such
Common Stock on the date of exercise. As soon as practicable after receipt of
a written exercise notice and payment in full of the exercise price of any
exercisable Options, Holding shall deliver to the Participant a certificate or
certificates representing the shares of Common Stock acquired upon the exercise
thereof.
Section 7. Termination of Employment
-------------------------------------
7.1. Extraordinary Termination. Unless otherwise provided in the
-------------------------
Option Agreement or otherwise determined by the Committee at the Grant Date, in
the event that a Participant's employment with Holding, the Company and the
Subsidiaries terminates by reason of the Participant's death, Permanent
Disability or Retirement (each an "Extraordinary Termination") then any Options
held by the Participant and then exercisable shall remain exercisable solely
until the first to occur of (i) the first anniversary of the Participant's
-
termination of employment or (ii) the expiration of the term of the Option. Any
--
Options held by the Participant that are not exercisable at the date of the
Extraordinary Termination shall terminate and be cancelled immediately upon such
Extraordinary Termination, and any Options described in the preceding sentence
that are not exercised within the period described in such sentence shall
terminate and be cancelled upon the expiration of such period.
7.2. Termination for Cause. Unless otherwise provided in the Option
---------------------
Agreement or otherwise determined by the Committee at or after the Grant Date,
in the event that a Participant's employment with Holding, the Company and the
Subsidiaries is terminated for Cause, any Options held by such Participant
(whether or not then exercisable) shall terminate and be cancelled immediately
upon such termination of employment.
9
<PAGE>
7.3. Other Termination of Employment. Unless otherwise provided in
-------------------------------
the Option Agreement or otherwise determined by the Committee at or after the
Grant Date, in the event that a Participant's employment with Holding, the
Company and the Subsidiaries terminates for any reason other than (i) an
-
Extraordinary Termination or (ii) for Cause, any Options held by such
--
Participant that are exercisable as of the date of such termination shall remain
exercisable for a period of 60 days (or, if shorter, during the remaining term
of the Options). Any Options held by the Participant that are not exercisable at
the date of the Participant's termination of employment shall terminate and be
cancelled immediately upon such termination, and any Options described in the
preceding sentence that are not exercised within the period described in such
sentence shall terminate and be cancelled upon the expiration of such period.
7.4. Certain Rights upon Termination of Employment Prior to Public
--------------------------------------------------------------
Offering. Unless otherwise determined by the Committee at the Grant Date, the
- --------
Committee shall provide in each Option Agreement governing Options granted
hereunder that (a) Holding or the Company and the C&D Fund shall have successive
-
rights to purchase any exercisable Options from the Participant upon the
termination of his employment prior to a Public Offering and (b) the
-
Participant may require Holding to repurchase his then exercisable Options upon
the termination of the Participant's employment (i) due to an Extraordinary
-
Termination prior to a Public Offering or (ii) by Holding, the Company or any
--
Subsidiary other than for Cause prior to a Public Offering, in each case for a
purchase price per Option equal to the excess, if any, of (x) the Fair Market
-
Value on the date of termination over (y) the exercise price per share of Common
-
Stock pursuant to such Options, and upon such additional terms and conditions as
are set forth in Section 4 of the Option Agreement attached hereto as Exhibit A.
The foregoing right of a Participant to require Holding to repurchase any
exercisable Options shall be subject to the Company having the ability to do so
under the terms of its financing arrangements and under Delaware law.
10
<PAGE>
Section 8. Change in Control
-----------------------------
8.1. Accelerated Vesting and Payment. Unless the Committee shall
-------------------------------
otherwise determine in the manner set forth in Section 8.2, in the event of a
Change in Control, each Option shall be cancelled in exchange for a payment in
cash of an amount equal to the excess, if any, of the Change in Control Price
over the exercise price for such Option.
8.2. Alternative Options. Notwithstanding Section 8.1, no
-------------------
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to any Option if the Committee reasonably
determines in good faith, prior to the occurrence of a Change in Control, that
such Option shall be honored or assumed, or new rights substituted therefor
(such honored, assumed or substituted Option being hereinafter referred to as
an "Alternative Option") by the New Employer, provided that any such
--------
Alternative Option must:
(a) provide the Participant that held such Option with rights and
entitlements substantially equivalent to or better than the rights, terms
and conditions applicable under such Option, including, but not limited to,
an identical or better exercise and vesting schedule, identical or better
timing and methods of payment and, if the Alternative Options or the
securities underlying them are not publicly traded, identical or better
rights to require Holding or the New Employer to repurchase the Alternative
Options;
(b) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control); and
(c) have terms and conditions which provide that in the event that
such Participant suffers an Involuntary Termination within two years
following a Change in Control:
11
<PAGE>
(i) any conditions on such Participant's rights under, or any
restrictions on transfer or exercisability applicable to, each such
Alternative Option shall be waived or shall lapse, as the case may
be; or
(ii) such Participant shall have the right to surrender such
Alternative Option within 30 days following such termination in
exchange for a payment in cash equal to the excess of the Fair Market
Value of the equity security subject to the Alternative Option over
the price, if any, that such Participant would be required to pay to
exercise such Alternative Option.
Section 9. Amendment, Modification, and
----------------------------------------
Termination of the Plan
-----------------------
The Board at any time may terminate or suspend the Plan, and from time
to time may amend or modify the Plan. No amendment, modification, termination or
suspension of the Plan shall in any manner adversely affect any Option
theretofore granted under the Plan, without the consent of the Participant
holding such Option. Shareholder approval of any such amendment, modification,
termination or suspension shall be obtained to the extent mandated by applicable
law, or if otherwise deemed appropriate by the Committee.
Section 10. Miscellaneous Provisions
-------------------------------------
10.1. Nontransferability of Awards. No Options granted under the
----------------------------
Plan may be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution and provided that the deceased Participant's beneficiary or the
representative of his estate acknowledges and agrees in writing, in a form
reasonably acceptable to Holding, to be bound by the provisions of the Plan
(including
12
<PAGE>
the purchase rights described in Section 7.4) and the Option Agreement covering
such Options as if such beneficiary or estate were the Participant. All rights
with respect to Options granted to a Participant under the Plan shall be
exercisable during his life-time by such Participant only. Following a
Participant's death, all rights with respect to Options that were exercisable at
the time of such Participant's death and have not terminated shall be
exercised by his designated beneficiary or by his estate.
10.2. Beneficiary Designation. Each Participant under the Plan may
-----------------------
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) by whom any right under the Plan is to be
exercised in case of his death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably prescribed
by the Committee, and will be effective only when filed by the Participant in
writing with the Committee during his lifetime.
10.3. No Guarantee of Employment or Participation. Nothing in the
-------------------------------------------
Plan or in any Option Agreement shall interfere with or limit in any way the
right of Holding, the Company or any Subsidiary to terminate any Participant's
employment at any time, or confer upon any Participant any right to continue in
the employ of Holding, the Company or any Subsidiary. No Employee shall have a
right to be selected as a Participant or, having been so selected, to receive
any Options.
10.4. Tax Withholding. The Company or the Subsidiary employing a
---------------
Participant shall have the power to withhold, or to require such Participant to
remit to the Company or such Subsidiary, subject to such other arrangements as
the Committee may set forth in the Option Agreement to which such Participant is
a party, an amount sufficient to satisfy all federal, state, local and foreign
withholding tax requirements in respect of any Option granted under the Plan.
13
<PAGE>
10.5. Indemnification. Each person who is or shall have been a
---------------
member of the Committee, the Board or any other committee of the Board shall be
indemnified and held harmless by the Company and Holding to the fullest extent
permitted by law from and against any and all losses, costs, liabilities and
expenses (including any related attorneys' fees and advances thereof) in
connection with, based upon or arising or resulting from any claim, action, suit
or proceeding to which he may be made a party or in which he may be involved
by reason of any action taken or failure to act under or in connection with the
Plan and from and against any and all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit or proceeding against him, provided that he shall give the
--------
Company an opportunity, at its own expense, to defend the same before he
undertakes to defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under Holding's
or the Company's Certificate of Incorporation or By-laws, by contract, as a
matter of law, or otherwise.
10.6. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of Holding, the Company or any Subsidiary to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner that is not expressly authorized under the Plan.
10.7. Requirements of Law. The granting of Options and the issuance
-------------------
of shares of Common Stock pursuant to such Options shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. No
Options shall be granted under the Plan, and no shares of Common Stock shall be
issued upon exercise of any Options granted under the Plan, if such grant or
exercise would result in a violation of applicable law, including the federal
securities laws and any applicable state securities laws.
14
<PAGE>
10.8. Freedom of Action. Subject to Section 9, nothing in the Plan
-----------------
or any Option Agreement shall be construed as limiting or preventing Holding,
the Company or any Subsidiary from taking any action that it deems appropriate
or in its best interest.
10.9. Term of Plan. The Plan shall be effective as of the Effective
------------
Date. The Plan shall continue in effect, unless sooner terminated pursuant to
Section 9, until the tenth anniversary of the Effective Date. The provisions of
the Plan, however, shall continue thereafter to govern all outstanding Options
theretofore granted.
10.10. No Voting Rights. Except as otherwise required by law, no
----------------
Participant holding any Options granted under the Plan shall have any right, in
respect of such Options, to vote on any matter submitted to Holding's
stockholders until such time as the shares of Common Stock issuable upon
exercise of such Options have been so issued.
10.11. Governing Law. The Plan, and all agreements hereunder, shall
-------------
be construed in accordance with and governed by the laws of the State of New
York, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies.
15
<PAGE>
EXHIBIT 10.4
FORM OF
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of December 31, 1996, between CDW
Holding Corporation, a Delaware corporation (the "Company"), and the Grantee
whose name appears on the signature page hereof (the "Grantee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company (the "Board") has
designated the Compensation and Benefits Committee of the Board (the
"Committee") to administer the Company's Stock Option Plan for Branch Employees
(the "Plan"); and
WHEREAS, the Board has determined to grant to the Grantee, under the
Plan, a non-qualified stock option to purchase the aggregate number of shares of
its Class A Common Stock, par value $.01 per share (the "Common Stock") set
forth on the signature page hereof (the "Shares") at an exercise price of
$195.40 per Share;
NOW, THEREFORE, to evidence the stock option so granted, and to set
forth its terms and conditions under the Plan, the Company and the Grantee
hereby agree as follows:
1. Confirmation of Grant; Option Price. The Company hereby grants
-----------------------------------
to the Grantee, effective as of the date hereof, an option (the "Option") to
purchase the Shares at an option price of $195.40 per share (the "Option
Price"). The Option is not intended to be an incentive stock option under the
U.S. Internal Revenue Code of 1986, as amended. This Agreement is subordinate
to, and the terms and conditions of the Option granted hereunder are subject to,
the terms and conditions of the Plan.
<PAGE>
2. Exercisability. Except as otherwise provided in this Agreement,
--------------
the Option shall become available for exercise, subject to the provisions
hereof, in one-third installments on each of the first, third and fifth
anniversaries of the date of this Agreement, provided that the Committee may
--------
accelerate the exercisability of any Option, all Options or any class of
Options, at any time and from time to time. Shares eligible for purchase may
thereafter be purchased, subject to the provisions hereof, and pursuant to and
subject to the provisions contained in the Management Stock Subscription
Agreement (as defined in Section 5) related to such Shares, at any time and from
time to time on or after such anniversary until the date one day prior to the
date on which the Option terminates.
3. Termination of Option.
---------------------
(a) Normal Termination Date. Unless an earlier termination date is
-----------------------
specified in Section 3(b), the Option shall terminate on the tenth anniversary
of the date hereof (the "Normal Termination Date").
(b) Early Termination. If the Grantee's Active Employment (as defined
-----------------
below) is voluntarily or involuntarily termination for any reason whatsoever
prior to the Normal Termination Date, any portion of the Option that has not
become exercisable on or before the effective date of such termination of
employment shall terminate on such effective date. Any portion of the Option
that has become exercisable on or before the date of the Grantee's termination
of Active Employment shall, subject to the provisions of Section 4(c), remain
exercisable for whichever of the following periods is applicable, and if not
exercised within such period, shall terminate upon the expiration of such
period: (i) if the Grantee's Active Employment is terminated by reason of the
-
Grantee's death, Permanent Disability or Retirement at Normal Retirement Age
(each an "Extraordinary Termination"), then any Options held by the Grantee
and then exercisable shall remain exercisable solely until the first to occur of
(A) the first anniversary of the Grantee's
-
2
<PAGE>
termination of employment or (B) the expiration of the term of the Option, and
-
(ii) if the Grantee's Active Employment is terminated for any reason other than
--
an Extraordinary Termination or for Cause, then any then exercisable Options
held by such Grantee shall remain exercisable for a period of sixty days after
the earlier of (x) the expiration of the Second Purchase Period (as defined in
-
Section 4(c)(i)) and (y) receipt by the Grantee of written notice that The
-
Clayton & Dubilier Private Equity Fund IV Limited Partnership (the "C&D Fund")
does not intend to exercise its right to purchase pursuant to Section 4(c)(i).
Notwithstanding anything else contained in this Agreement, if the Grantee's
Active Employment is terminated by the Company for Cause, then all Options
(whether or not then exercisable) shall terminate and be canceled immediately
upon such termination, regardless of whether then exercisable. Nothing in this
Agreement shall be deemed to confer on the Grantee any right to continue in the
employ of the Company or any of its direct or indirect subsidiaries, or to
interfere with or limit in any way the right of the Company or any of its direct
or indirect subsidiaries to terminate such employment at any time.
4. Restrictions on Exercise; Non-Transferability of Option;
--------------------------------------------------------
Repurchase of Option.
- --------------------
(a) Restrictions on Exercise. The Option may be exercised only with
------------------------
respect to full shares of Common Stock. No fractional shares of Common Stock
shall be issued. Notwithstanding any other provision of this Agreement, the
Option may not be exercised in whole or in part, and no certificates
representing Shares shall be delivered, (i) unless all requisite approvals and
-
consents of any governmental authority of any kind having jurisdiction over
the exercise of options shall have been secured, (ii) unless the purchase of the
--
Shares upon the exercise of the Option shall be exempt from registration under
applicable U.S. federal and state securities laws, and applicable non-U.S.
securities laws, or the Shares shall have been registered under such laws, (iii)
---
unless all applicable U.S. federal, state
3
<PAGE>
and local and non-U.S. tax withholding requirements shall have been satisfied
and (iv) if such exercise would result in a violation of the terms or provisions
--
of or a default or an event of default under any of the Financing Agreements (as
such term is defined in Section 9). The Company shall use commercially
reasonable efforts to obtain the consents and approvals referred to in clause
(i) of the preceding sentence, to satisfy the withholding requirements referred
to in clause (iii) of the preceding sentence and to obtain the consent of the
parties to the Financing Agreements referred to in clause (iv) of the preceding
sentence so as to permit the Option to be exercised.
(b) Non-Transferability of Option. Except as contemplated by Section
-----------------------------
4(c), the Option may be exercised only by the Grantee or by his estate. Except
as contemplated by Section 4(c), the Option is not assignable or transferable,
in whole or in part, and it may not, directly or indirectly, be offered,
transferred, sold, pledged, assigned, alienated, hypothecated or otherwise
disposed of or encumbered (including without limitation by gift, operation of
law or otherwise) other than by will or by the laws of descent and distribution
to the estate of the Grantee upon his death, provided that the deceased
Grantee's beneficiary or the representative of his estate shall acknowledge and
agree in writing, in a form reasonably acceptable to the Company, to be bound by
the provisions of this Agreement and the Plan as if such beneficiary or the
estate were the Grantee.
(c) Repurchase of Option on Termination of Employment.
-------------------------------------------------
(i) Termination of Employment. If the Grantee's Active
-------------------------
Employment is terminated for any reason, the Company or WESCO shall have an
option to purchase all (but not less than all) of the portion of the Option
that is exercisable on the effective date of termination of Active
Employment (the "Covered Option"), and shall have 30 days from the date
of the
4
<PAGE>
Grantee's termination (the "First Purchase Period") during which to give
notice in writing to the Grantee (or if his Active Employment was
terminated by his death, his estate) of its election to exercise or not to
exercise such right to purchase the Covered Option. The Company and WESCO
hereby undertake to use reasonable efforts to act as promptly as
practicable following such termination to make such election. If the
Company or WESCO fails to give notice that it intends to exercise its right
to purchase the Covered Option within the First Purchase Period, the C&D
Fund shall have the right to purchase the Covered Option and shall have
until the expiration of the earlier of (x) 30 days following the end of the
-
First Purchase Period, or (y) 30 days from the date of receipt by the C&D
-
Fund of written notice that neither the Company nor WESCO does not intend
to exercise such right (the "Second Purchase Period"), to give notice in
writing to the Grantee (or his estate) of the C&D Fund's exercise of its
right to purchase the Covered Option. If the rights to purchase the
Covered Option of the Company and the C&D Fund granted in this subsection
are not exercised as provided herein, the Grantee (or his estate) shall
be entitled to retain the Covered Option, subject to all of the provisions
of this Agreement.
(ii) Purchase Price, etc. All purchases pursuant to this
-------------------
Section 4(c) by the Company or the C&D Fund shall be for a purchase price
and in the manner prescribed by Sections 4(g), (h) and (i).
(d) Certain Definitions. As used in this Agreement the following
-------------------
terms shall have the following meanings:
(i) "Active Employment" shall mean active employment with the
-----------------
Company or any direct or indirect subsidiary of the Company.
(ii) "Cause" shall mean (A) the willful failure by the Grantee
----- -
substantially to perform his
5
<PAGE>
employment-related duties (other than any such failure due to physical or
mental illness) after a demand for substantial performance is delivered to
the Grantee by the Director of Human Resources, which notice identifies
the manner in which the Director of Human Resources, believes that the
Grantee has not substantially performed his employment-related duties, (B)
-
the engaging by the Grantee in willful and serious misconduct that is
injurious to the Company or any of its affiliates, (C) the conviction of
-
the Grantee of, or the entering by the Grantee of a plea of nolo contendere
---- ----------
to, a crime that constitutes a felony, or (D) the breach (including but not
-
limited to the material or willful failure to cure a breach) by the
Grantee of any written covenant or agreement with the Company or any of its
affiliates not to disclose any information pertaining to the Company or any
of its affiliates or not to compete or interfere with the Company or any of
its affiliates.
(iii) "Retirement at Normal Retirement Age" shall mean retirement
-----------------------------------
at age 65 or later.
(iv) "Permanent Disability" shall mean a physical or mental
--------------------
disability or infirmity that prevents the performance of such Grantee's
employment-related duties lasting (or likely to last, based on competent
medical evidence presented to the Director of Human Resources) for a
continuous period of six months or longer. The Director of Human
Resource's reasoned and good faith judgment of Permanent Disability shall
be final, binding and conclusive on all parties hereto and shall be based
on such competent medical evidence as shall be presented to it by the
Grantee or by any physician or group of physicians or other competent
medical expert employed by the Grantee or the Company to advise the
Director of Human Resources.
(e) Notice of Termination. The Company shall give written notice of
---------------------
any termination of the Grantee's
6
<PAGE>
Active Employment to the C&D Fund, except that if such termination (if other
than as a result of death) is by the Grantee, the Grantee shall give written
notice of such termination to the Company and the Company shall give written
notice of such termination to the C&D Fund.
(f) Public Offering. In the event that an underwritten public
---------------
offering in the Untied States of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally recognized
standing (a "Public Offering") has been consummated, neither the Company nor
the C&D Fund shall have any rights to purchase the Covered Option pursuant to
this Section 4.
(g) Purchase Price. Subject to Section 9(c), the purchase price to be
--------------
paid to the Grantee (or his estate) for the Covered Option (the "Purchase
Price") shall be equal to the difference between (A) the fair market value (the
-
"Fair Market Value") of the Shares which may be purchased upon exercise of the
Covered Option as of the effective date of the termination of employment that
gives rise to the right to repurchase and (B) the aggregate exercise price of
-
the Covered Option. Whenever determination of the Fair Market Value of the
Shares is required by this Agreement, such Fair Market Value shall be such
amount as is determined in good faith by the Board. In making a determination
of Fair Market Value, the Board shall give due consideration to such factors as
it deems appropriate, including, without limitation, the earnings and certain
other financial and operating information of the Company in recent periods,
the potential value of the Company as a whole, the future prospects of the
Company and the industries in which it competes, the history and management of
the Company, the general condition of the securities markets, the fair market
value of securities of companies engaged in businesses similar to those of the
Company and a valuation of the Shares. The valuation that is in effect as of
December 31, 1996, which was prepared by an independent valuation firm chosen by
the Board, shall be used to determine the Purchase Price. The determination of
Fair Market Value will not give
7
<PAGE>
effect to any restrictions on transfer of the Shares or the fact that such
Shares would represent a minority interest in the Company. The Fair Market Value
as determined in good faith by the Board in the absence of fraud shall be
binding and conclusive upon all parties hereto and the C&D Fund, and in any
event the Grantee agrees to accept and shall not challenge any determination of
Fair Market Value made by the Board, so long as the Fair Market Value thus
determined is at least equal to $195.40 per share. If the Company subdivides (by
any stock split, stock dividend or otherwise) the Common Stock into a greater
number of shares, or combines (by reverse stock split or otherwise) the Common
Stock into a smaller number of shares after the Board shall have determined the
Purchase Price for the Shares (without taking into consideration such
subdivision or combination) and prior to the consummation of the purchase, the
Purchase Price shall be appropriately adjusted to reflect such subdivision or
combination, and the Board's determination as to any such adjustment in good
faith shall be binding and conclusive on all parties hereto and the C&D Fund.
(h) Payment. Subject to Section 9, the completion of a purchase
-------
pursuant to this Section 4 shall take place at the principal office of the
Company on the tenth business day following the receipt by the Grantee of the
C&D Fund's or the Company's notice of its exercise of the right to purchase the
Covered Option pursuant to Section 4(c). The Purchase Price shall be paid by
delivery to the Grantee of a certified or bank check for the Purchase Price
payable to the order of the Grantee, against delivery of such instruments as the
Company may reasonably request signed by the Grantee, free and clear of all
security interests, liens, claims, encumbrances, charges, options, restrictions
on transfer, proxies and voting and other agreements of whatever nature.
(i) Application of the Purchase Price to Certain Loans. The Grantee
--------------------------------------------------
agrees that the Company and the C&D Fund shall be entitled to apply any amounts
to be paid by the Company or the C&D Fund, as the case may be, to repurchase
8
<PAGE>
the Covered Option pursuant to this Section 4 to discharge any indebtedness of
the Grantee to the Company or any of its direct or indirect subsidiaries, or
indebtedness that is guaranteed by the Company or any of its direct or indirect
subsidiaries, including, but not limited to, any indebtedness of the Grantee
incurred to purchase any shares of Common Stock.
(j) Withholding. Whenever Shares are to be issued pursuant to the
-----------
Option, the Company may require the recipient of the Shares to remit to the
Company an amount sufficient to satisfy any applicable U.S. federal, state and
local and non-U.S. tax withholding requirements. In the event any cash is paid
to the Grantee pursuant to this Section 4, the Company shall have the right to
withhold an amount from such payment sufficient to satisfy any applicable U.S.
federal, state and local and non-U.S. tax withholding requirements. If shares
of Common Stock are traded on a U.S. national securities exchange or bid and ask
prices for shares of Common Stock are quoted on the Nasdaq National Market
("NASDAQ") operated by the National Association of Securities Dealers, Inc., the
Company may, if requested by the Grantee, withhold shares to satisfy applicable
withholding requirements, subject to the provisions of the Plan and any rules
adopted by the Board or the Committee regarding compliance with applicable law,
including, but not limited to, Section 16(b) of the U.S. Securities Exchange Act
of 1934, as amended (the "Exchange Act").
5. Manner of Exercise. To the extent that the Option shall have
------------------
become and remains exercisable as provided in Section 2 and subject to such
reasonable administrative regulations as the Board or the Committee may have
adopted, the Option may be exercised, in whole or in part, by notice to the
Secretary of the Company in writing given 15 business days prior to the date on
which the Grantee will so exercise the Option (the "Exercise Date"), specifying
the number of Shares with respect to which the Option is being exercised (the
"Exercise Shares") and the Exercise Date, provided that if shares of Common
Stock are traded on a U.S. national
9
<PAGE>
securities exchange or bid and ask prices for shares of Common Stock are quoted
over NASDAQ, notice may be given five business days before the Exercise Date. On
or before the Exercise Date, the Company and the Grantee shall enter into a
Management Stock Subscription Agreement (the "Management Stock Subscription
Agreement") substantially in the form attached hereto as Annex 1, or in such
other form as may be agreed upon by the Company and the Grantee, such Management
Stock Subscription Agreement to contain (unless a Pubic Offering shall have
occurred prior to the Exercise Date) provisions corresponding to Section 4(c)
hereof. In accordance with the Management Stock Subscription Agreement, (a) on
-
or before the Exercise Date, the Grantee shall deliver to the Company full
payment for the Exercise Shares in United States dollars in cash, or cash
equivalent satisfactory to the Company, and in an amount equal to the product
of the number of Exercise Shares and $195.40 (the "Exercise Price") and (b) on
-
the Exercise Date, the Company shall deliver to WESCO to hold on behalf of the
Grantee a certificate or certificates representing the Exercise Shares,
registered in the name of the Grantee. If shares of Common Stock are traded on a
U.S. national securities exchange or bid and ask prices for shares of Common
Stock are quoted over NASDAQ, the Grantee may, in lieu of cash, tender shares of
Common Stock having a market price on the Exercise Date equal to the Exercise
Price or may deliver a combination of cash and shares of Common Stock having a
market price equal to the difference between the Exercise Price and the amount
of such cash as payment of the Exercise Price, subject to such rules and
regulations as may be adopted by the Board or the Committee to provide for the
compliance of such payment procedure with applicable law, including Section
16(b) of the Exchange Act. The Company may require the Grantee to furnish or
execute such other documents as the Company shall reasonably deem necessary (i)
-
to evidence such exercise, (ii) to determine whether registration is then
--
required under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and (iii) to comply with or satisfy the requirements of the Securities
---
Act, applicable state or non-U.S. securities laws or any other law. Prior to a
public
10
<PAGE>
offering, Holding shall deliver to WESCO to hold on behalf of the Grantee, a
certificate or certificates representing the shares of Common Stock acquired
upon the exercise thereof.
6. Grantee's Representations, Warranties and Covenants.
---------------------------------------------------
(a) Investment Intention. The Grantee represents and warrants that
--------------------
the Option has been, and any Exercise Shares will be, acquired by him solely for
his own account for investment and not with a view to or for sale in connection
with any distribution thereof. The Grantee agrees that he will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
all or any portion of the Option or any of the Exercise Shares (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge of all or any
portion of the Option or any of the Exercise Shares), except in compliance with
the Securities Act and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder, and in compliance with applicable
state securities or "blue sky" laws. The Grantee further understands,
acknowledges and agrees that none of the Shares may be transferred, sold,
pledged, hypothecated or otherwise disposed of unless the provisions of the
related Management Stock Subscription Agreement shall have been complied with or
have expired.
(b) Legend. The Grantee acknowledges that any certificate
------
representing the Exercise Shares shall bear an appropriate legend, which will
include, without limitation, the following language:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED AS OF
___________________, AND NEITHER THIS CERTIFICATE NOR THE SHARES
REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF SUCH MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT, A COPY OF WHICH IS ON
11
<PAGE>
FILE WITH THE SECRETARY OF THE COMPANY. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO THE BENEFITS OF AND ARE BOUND BY THE
OBLIGATIONS SET FORTH IN A REGISTRATION AND PARTICIPATION AGREEMENT, DATED
AS OF FEBRUARY 28, 1994, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE
COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT
BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
(i)(A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
- -
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) THE HOLDER HEREOF SHALL
-
HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SUCH
ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION,
-
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, SHALL HAVE BEEN
OBTAINED WITH RESPECT TO SUCH DISPOSITION AND (ii) SUCH DISPOSITION IS
--
PURSUANT TO REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM."
(c) Securities Law Matters. The Grantee acknowledges receipt of
----------------------
advice from the Company that (i) the Exercise Shares have not been registered
-
under the Securities Act or qualified under any state securities or "blue sky"
laws, (ii) it is not anticipated that there will be any public market for the
--
Exercise Shares, (iii) the Exercise Shares must be held indefinitely and the
---
Grantee must continue to bear the economic risk of the investment in the
Exercise Shares unless the Exercise Shares are subsequently registered under the
Securities Act and such state laws or an exemption from registration is
available, (iv) Rule 144 under the Securities Act ("Rule 144") is not presently
--
12
<PAGE>
available with respect to the sales of any securities of the Company and the
Company has made no covenant to make Rule 144 available, (v) when and if the
-
Exercise Shares may be disposed of without registration in reliance upon Rule
144, such disposition can be made only in limited amounts in accordance with the
terms and conditions of such Rule, (vi) the Company does not plan to file
--
reports with the Commission or make public information concerning the Company
available unless required to do so by law or by the terms of its Financing
Agreements (as hereinafter defined), (vii) if the exception afforded by Rule 144
---
is not available, sales of the Exercise Shares may be difficult to effect
because of the absence of public information concerning the Company, (viii) a
----
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Exercise Shares and (ix) a notation shall be
--
made in the appropriate records of the Company indicating that the Exercise
Shares are subject to restrictions on transfer set forth in this Agreement and,
if the Company should in the future engage the services of a stock transfer
agent, appropriate stop-transfer restrictions will be issued to such transfer
agent with respect to the Exercise Shares.
(d) Compliance with Rule 144. If any of the Exercise Shares are to be
------------------------
disposed of in accordance with Rule 144 under the Securities Act, the Grantee
shall transmit to the Company an executed copy of Form 144 (if required by
Rule 144) no later than the time such form is required to be transmitted to the
Commission for filing and such other documentation as the Company may reasonably
require to assure compliance with Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Grantee covenants that he will not
--------------------
exercise all or any portion of the Option unless (i) the financial situation of
-
the Grantee is such that he can afford to bear the economic risk of holding the
Exercise Shares for an indefinite period and (ii) he can afford to suffer the
--
complete loss of his investment in the Exercise Shares.
13
<PAGE>
(f) Registration; Restrictions on Sale upon Public Offering. In
-------------------------------------------------------
respect of any Shares purchased upon exercise of all or any portion of the
Option, the Grantee shall be entitled to the rights and subject to the
obligations created under the Registration and Participation Agreement, dated as
of February 28, 1994 as the same may be amended, modified or supplemented from
time to time (the "Registration Agreement"), among the Company and certain
stockholders of the Company, to the extent set forth therein. Such Shares
shall be entitled to the benefits of the Registration Agreement applicable to
Registrable Securities (as defined therein). The Grantee agrees that, in the
event that the Company files a registration statement under the Securities Act
with respect to an underwritten public offering of any shares of its capital
stock, the Grantee will not effect any public sale or distribution of any shares
of the Common Stock (other than as part of such underwritten public offering)
during the 20 days prior to and the 180 days after the effective date of such
registration statement.
(g) Section 83(b) Election. The Grantee agrees that, within 20 days
----------------------
of any Exercise Date, he shall give notice to the Company as to whether or not
he has made an election pursuant to Section 83(b) of the Internal Revenue Code
of 1986, as amended, with respect to the Exercise Shares purchased on such date,
and acknowledges that he will be solely responsible for any and all tax
liabilities payable by him in connection with his receipt of the Exercise
Shares or attributable to his making or failing to make such an election.
7. Representations and Warranties of the Company. The Company
----------------------------------------------
represents and warrants to the Grantee that (a) the Company has been duly
-
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed
-
and delivered by the Company and constitutes a valid and legally binding
obligation of the Company enforceable against the Company in accordance with its
terms,
14
<PAGE>
and (c) the Shares, when issued, delivered and paid for, upon exercise of the
-
Option in accordance with the terms hereof and the Management Stock Subscription
Agreement, will be duly authorized, validly issued, fully paid and non-
assessable, and free and clear of any liens or encumbrances other than those
created pursuant to this Agreement, the Management Stock Subscription Agreement
or otherwise in connection with the transactions contemplated hereby.
8. Change in Control
-----------------
(a) Accelerated Vesting and Payment. Unless the Committee shall
-------------------------------
otherwise determine in the manner set forth in Section 8(b), in the event of a
Change in Control, the Option shall be canceled in exchange for a payment in
cash of an amount equal to the excess, if any, of the Change in Control Price
over the exercise price for the Option.
(b) Alternative Options. Notwithstanding Section 8(a), no
-------------------
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to the Option if the Committee reasonably
determines in good faith, prior to the occurrence of a Change in Control, that
the Option shall be honored or assumed, or new rights substituted therefor (such
honored, assumed or substituted Option being hereinafter referred to as an
"Alternative Option") by the New Employer, provided that any such Alternative
--------
Option must:
(i) provide the Grantee with rights and entitlements substantially
equivalent to or better than the rights, terms and conditions applicable
under the Option, including, but not limited to, an identical or better
exercise and vesting schedule, identical or better timing and methods of
payment and, if the Alternative Options or the securities underlying them
are not publicly traded, identical or better rights to require the Company
or the New Employer to repurchase the Alternative Options;
15
<PAGE>
(ii) have substantially equivalent economic value to the Option
(determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the event that
the Grantee suffers an Involuntary Termination within two years following a
Change in Control:
(A) any conditions on the Grantee's rights under, or any
-
restrictions on transfer or exercisability applicable to, each such
Alternative Option shall be waived or shall lapse, as the case may be;
or
(B) the Grantee shall have the right to surrender such
-
Alternative Option within 30 days following such termination in
exchange for a payment in cash equal to the excess of the Fair Market
Value of the equity security subject to the Alternative Option over
the price, if any, that the Grantee would be required to pay to
exercise such Alternative Option.
(c) Certain Definitions.
-------------------
(i) "Change in Control" means the first to occur of the following
events after the date hereof:
(A) the acquisition by any person, entity or "group" (as
-
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended), other than the Company, WESCO, the Subsidiaries, any
employee benefit plan of the Company, WESCO or the Subsidiaries, or
the C&D Fund, of 50% or more of the combined voting power of the
Company's or WESCO's then outstanding voting securities;
(B) the merger or consolidation of the Company or WESCO as a
-
result of which persons who
16
<PAGE>
were stockholders of the Company or WESCO, as the case may be,
immediately prior to such merger of consolidation, do not, immediately
thereafter, own, directly or indirectly, more than 50% of the combined
voting power entitled to vote generally in the election of directors
of the merged or consolidated company;
(C) the liquidation or dissolution of the Company or WESCO;
-
and
(D) the sale, transfer or other disposition of all or
-
substantially all of the assets of the Company or WESCO to one or more
persons or entities that are not, immediately prior to such sale,
transfer or other disposition, affiliates of the Company or WESCO.
(ii) "Change in Control Price" means the price per share of Common
Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Board of Directors if any
part of the offered price is payable other than in cash).
(iii) "Involuntary Termination" means a termination by the New
Employer for any reason.
(iv) "New Employer" means the Grantee's employer, or the parent or a
subsidiary of such employer, immediately following a Change in Control.
(v) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by WESCO or
the Company.
9. Certain Restrictions on Repurchases.
-----------------------------------
(a) Financing Agreements, etc. Notwithstanding any other provision
-------------------------
of this Agreement, the Company shall not
17
<PAGE>
be permitted to repurchase the Option from the Grantee if (i) such repurchase
-
would result in a violation of the terms or provisions of, or result in a
default or an event of default under, (A) the Credit Facility, dated as of
-
February 24, 1995 as the same may be amended, modified or supplemented from time
to time (the "Credit Facility"), among WESCO, the lenders party thereto,
Barclays Bank PLC, as administrative agent and Shawmut Capital Corporation, as
collateral agent and (B) any indenture to be entered into with respect to debt
-
securities to be issued by WESCO in connection with or subsequent to the
Acquisition as the same may be amended, modified or supplemented from time to
time (an "Indenture") or (C) any other financing or security agreement or
-
document entered into in connection with the Acquisition, or the financing of
the Acquisition or in connection with the operations of the Company or its
subsidiaries from time to time as each may be amended, modified or supplemented
from time to time (the Credit Facility, any Indenture and such other agreements
and documents, are hereinafter referred to as the "Financing Agreements"), or
(ii) such repurchase would violate any of the terms or provisions of the
--
Certificate of Incorporation of the Company, or (iii) the Company has no funds
---
legally available therefor under the General Corporation Law of the State of
Delaware.
(b) Delay of Repurchase. In the event that a repurchase by the
-------------------
Company otherwise permitted under Section 4(c) is prevented solely by the
terms of Section 9(a), (i) such repurchase will be postponed and will take place
-
without the application of further conditions or impediments (other than as set
forth in Section 4 hereof or in this Section 9) at the first opportunity
thereafter when the Company has funds legally available therefor and when such
repurchase will not result in any default, event of default or violation under
any of the Financing Agreements or in a violation of any term or provision of
the Certificate of Incorporation of the Company and (ii) such repurchase
--
commitment shall rank against other similar repurchase commitments with respect
to shares of Common Stock or options in
18
<PAGE>
respect thereof according to priority in time of the effective date of the
termination of employment in connection with any repurchase pursuant to an
exercise of the option of the Company under Section 4(c)(i), the date upon which
the Company receives written notice of such exercise, provided that any such
--------
repurchases as to which a common date determines priority under this clause
(ii) shall be of equal priority and shall share pro rata in any repurchase
payments made pursuant to clause (i) above and provided, further, that (x) any
-------- -------
repurchase commitment arising from Permanent Disability, death or Retirement at
Normal Retirement Age or, in the case of shares of Common Stock, any repurchase
commitment made by the Board pursuant to Section 6(b) of the Management Stock
Subscription Agreement shall have priority over any other repurchase commitment
and (y) all Section references in this clause (ii) shall be deemed to refer to
-
the corresponding Section of this Agreement or the Management Stock
Subscription Agreement, as the case may be, and to any similar provision of any
other management stock option or stock subscription agreement to which the
Company is or becomes a party.
(c) Purchase Price Adjustment. In the event that a repurchase of the
-------------------------
Covered Option from the Grantee is delayed pursuant to this Section 9, the
purchase price for such option when the repurchase of such option eventually
takes place as contemplated by Section 9(b) shall be the sum of (i) the Purchase
-
Price of such Covered Option determined in accordance with Section 4(g) at the
time that the repurchase of such Option would have occurred but for the
operation of this Section 9, plus (ii) an amount equal to interest on such
--
Purchase Price for the period from the date on which the completion of the
repurchase would have taken place but for the operation of this Section 9 to the
date on which such repurchase actually takes place (the "Delay Period") at a
rate equal to the weighted average cost of the Company's bank indebtedness
obligations outstanding during the Delay Period.
19
<PAGE>
10. No Rights as Stockholder. The Grantee shall have no voting or
------------------------
other rights as a stockholder of the Company with respect to any Shares
covered by the Option until the exercise of the Option and the issuance of a
certificate or certificates to him for such Shares. No adjustment shall be made
for dividends or other rights for which the record date is prior to the issuance
of such certificate or certificates.
11. Capital Adjustments. The number and price of the Shares
-------------------
covered by the Option shall be proportionately adjusted to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. Subject to any required action by the stock
holders of the Company and Section 8 hereof, in any merger, consolidation,
reorganization, exchange of shares, liquidation or dissolution, the Option
shall pertain to the securities and other property, if any, that a holder of
the number of shares of Common Stock covered by the Option would have been
entitled to receive in connection with such event.
12. Miscellaneous.
-------------
(a) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to the Company, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to such other address
as the Company, the C&D Fund or the Grantee, as the case may be, shall specify
by notice to the others:
20
<PAGE>
(i) if to the Company, to it at:
CDW Holding Corporation
c/o WESCO Distribution, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Attention: Chairman
---------
(ii) if to the Grantee, to the Grantee at the address set forth on the
signature page hereof.
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
---------
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof.
Copies of any notice or other communication given under this Agreement shall
also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Attention: William Barbe
---------
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
---------
21
<PAGE>
The C&D Fund also shall be given a copy of any notice or other communication
between the Grantee and the Company under this Agreement at its address as set
forth above.
(b) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Except as provided in Section 4, nothing in this
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect
of any agreement or any provision contained herein.
(c) Waiver; Amendment.
-----------------
(i) Waiver. Any party hereto or beneficiary hereof, may, by written
------
notice to the other parties (A) extend the time for the performance of any
-
of the obligations or other actions of the other parties under this
Agreement, (B) waive compliance with any of the conditions or covenants of
-
the other parties contained in this Agreement and (C) waive or modify
-
performance of any of the obligations of the other parties under this
Agreement, provided that any waiver of the provisions of Section 4 must be
--------
consented to in writing by the C&D Fund. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party or
beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by any
party hereto or beneficiary hereof of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by a party or beneficiary to exercise any
right or privilege hereunder shall be deemed a waiver of such party's or
beneficiary's rights or privileges hereunder or shall
22
<PAGE>
be deemed a waiver of such party's or beneficiary's rights to exercise the
same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
---------
supplemented orally, but only by a written instrument executed by the
Grantee and the Company, and (in the case of any amendment, modification
or supplement that adversely affects the rights of the C&D Fund hereunder)
must be consented to by the C&D Fund in writing.
(d) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or, by reason hereof shall be
assignable by the Company or the Grantee without the prior written consent of
the other parties and the C&D Fund. The C&D Fund may assign from time to time
all or any portion of its rights under Section 4 to one or more persons or other
entities designated by it.
(e) Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the law of the State of New York, regardless of the law that
might be applied under principles of conflict of laws, except to the extent
that the corporate law of the State of Delaware specifically and mandatorily
applies.
(f) Section and Other Headings, etc. The section and other headings
--------------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement. In this Agreement all
references to "dollars" or "$" are to United States dollars.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(h) Delegation by the Board. All of the powers, duties and
-----------------------
responsibilities of the Board specified in this
23
<PAGE>
Agreement may, to the full extent permitted by applicable law, be exercised and
performed by any duly constituted committee thereof to the extent authorized by
the Board to exercise and perform such powers, duties and responsibilities.
IN WITNESS WHEREOF, the Company and the Grantee have executed this
Agreement as of the date first above written.
CDW HOLDING CORPORATION
By: /s/
------------------------------------
Name: Richard J. Marshuetz
Title: Vice President,
Chief Financial &
Administrative Officer
THE GRANTEE:
By: /s/
------------------------------------
Name:
Address of the Grantee:
1700 Enfield Street
Fort Collins, CO 80526
Total Number of Shares
of Common Stock for the
Purchase of Which an
Option Has Been Granted: 100
24
<PAGE>
EXHIBIT 10.5
FIRST PERFORMANCE PERIOD
------------------------
Draft-- April 9, 1997
CDW HOLDING CORPORATION STOCK
OPTION PLAN FOR BRANCH EMPLOYEES
--------------------------------
Section 1. Purpose
------------------
The purpose of this CDW Holding Corporation Stock Option Plan for
Branch Employees is to foster and promote the long-term financial success of
Holding and the Company and to increase materially stockholder value by (a)
-
motivating superior performance by participants in the Plan, (b) providing
-
participants in the Plan with an ownership interest in Holding and (c) enabling
-
the Company to attract and retain the services of an outstanding branch
management team upon whose judgment, interest and special effort the successful
conduct of its operations is largely dependent.
Section 2. Definitions
----------------------
2.1. Definitions. Whenever used herein, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Alternative Option" has the meaning given in Section 8.2.
(b) "Board" means the Board of Directors of Holding.
(c) "Branch" means (i) an operating unit of the Company identified as
-
a separate branch by the Company or (ii) the branch or division where a
--
Selected Participant performs services.
(d) "Branch Allocation" means, with respect to an Eligible Branch,
the number of Options allocated to such Eligible Branch for the Performance
Period.
<PAGE>
Options shall be allocated to an Eligible Branch, if at all, at the sole
discretion of the Committee.
(e) "C&D Fund" means The Clayton & Dubilier Private Equity Fund IV
Limited Partnership, a Connecticut limited partnership, and any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(f) "Cause" means (i) the willful failure by the Participant to
-
perform substantially his employment-related duties (other than any such
failure due to physical or mental illness) after a demand for substantial
performance is delivered to the Participant by the Director of Human
Resources, which notice identifies the manner in which the Participant has
not substantially performed his employment-related duties, (ii) the
--
Participant's engaging in serious misconduct that is injurious to Holding,
the Company or any Subsidiary, (iii) the Participant's having been
---
convicted of, or entered a plea of guilty or nolo contendere to, a crime
---- ----------
that constitutes a felony or (iv) the breach by the Participant of any
--
written covenant or agreement with Holding, the Company or any Subsidiary
not to disclose any information pertaining to Holding, the Company or any
Subsidiary or not to compete or interfere with Holding, the Company or any
Subsidiary.
(g) "Change in Control" means the first to occur of the following
events after the Effective Date:
(i) the acquisition by any person, entity or "group" (as defined
in Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than Holding, the Company, the Subsidiaries, any employee
benefit plan of Holding, the Company or the Subsidiaries, or the C&D
Fund, of 50% or more of the combined voting power of Holding's or the
Company's then outstanding voting securities;
2
<PAGE>
(ii) the merger or consolidation of Holding or the Company, as
a result of which persons who were stockholders of Holding or the
Company, as the case may be, immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly or
indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the merged or
consolidated company;
(iii) the liquidation or dissolution of Holding or the Company;
and
(iv) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company to one or
more persons or entities that are not, immediately prior to such
sale, transfer or other disposition, affiliates of Holding or the
Company.
(h) "Change in Control Price" means the price per share of Common
Stock offered in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Board if any part of the
offered price is payable other than in cash).
(i) "Committee" means the Compensation and Benefits Committee of the
Board (or such other committee of the Board which shall have jurisdiction
over the compensation of officers and other employees). If at any time no
Committee shall be in office, the Board shall perform the functions of the
Committee.
(j) "Common Stock" means the Class A Common Stock, par value $.01 per
share, of Holding.
(k) "Company" means WESCO Distribution, Inc., a Delaware corporation
formerly named CDW Acquisition Corporation, and any successor thereto.
3
<PAGE>
(l) "Effective Date" means February 28, 1994.
(m) "Eligible Branch" means, with respect to a Performance Period, a
Branch that has, in the sole discretion of the Committee, achieved each of
the Performance Objectives during the Performance Period.
(n) "Employee" means (i) the Branch Manager, (ii) the District
- --
Administrative Manager, (iii) the Branch Administrative Manager, (iv) the
--- --
Area Branch Supervisor, (v) the Sales Manager, (vi) any other key employee
- --
of each Branch and (vii) any Selected Participant.
---
(o) "Extraordinary Termination" has the meaning given in Section 7.1.
(p) "Fair Market Value" means, as of any date, the fair market value
on such date per share of Common Stock as determined in good faith by the
Board. In making a determination of Fair Market Value, the Board shall
give due consideration for such factors as it deems appropriate, including,
without limitation, the earnings and certain other financial and operating
information of the Company in recent periods, the potential value of the
Company as a whole, the future prospects of the Company and the industries
in which it competes, the history and management of the Company, the
general condition of the securities markets, the fair market value of
securities of companies engaged in businesses similar to those of the
Company and a valuation of the Common Stock, which shall be performed as
promptly as practicable following the first business day of the 1997 fiscal
year and each subsequent fiscal year by an independent valuation firm
chosen by the Board. The determination of Fair Market Value will not give
effect to any restrictions on transfer of the shares of Common Stock or the
fact that such shares would represent a minority interest in Holding.
4
<PAGE>
(q) "Grant Date" means, with respect to any Option, the date on which
an Option is granted hereunder, which shall be as soon as practicable
following the last day of the Performance Period.
(r) "Holding" means CDW Holding Corporation, a Delaware corporation,
and any successor thereto.
(s) "Involuntary Termination" means a termination by the New Employer
for any reason.
(t) "New Employer" means the Participant's employer, or the parent or
a subsidiary of such employer, immediately following a Change in Control.
(u) "Option" means the right granted pursuant to the Plan to purchase
one share of Common Stock at a price determined in accordance with Section
6.2. All Options granted under the Plan will be non-qualified stock
options.
(v) "Option Agreement" means an agreement between Holding and the
Participant embodying the terms of any Options granted hereunder, which
agreement shall, unless the Committee otherwise determines, be
substantially in the form attached hereto as Exhibit A.
(w) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(x) "Performance Objectives" means, with respect to a Branch, such
objectives as the Committee, in its sole discretion, determines to be a
significant improvement in various business criteria, which shall include
but not necessarily be limited to significant improvements in income before
taxes and billing margins during the Performance Period.
5
<PAGE>
(y) "Performance Period" means the Performance Period commencing on
February 28, 1994 and ending on December 31, 1996.
(z) "Permanent Disability" means a physical or mental disability or
infirmity that prevents the performance of a Participant's employment-
related duties lasting (or likely to last, based on competent medical
evidence presented to the Director of Human Resources) for a period of six
months or longer. The Director of Human Resources' reasoned and good faith
judgment of Permanent Disability shall be final and shall be based on such
competent medical evidence as shall be presented to it by such Participant
or by any physician or group of physicians or other competent medical
expert employed by the Participant or the Company to advise the Director of
Human Resources.
(aa) "Plan" means this CDW Holding Corporation Stock Option Plan for
Branch Employees.
(bb) "Public Offering" means the first day as of which sales of
Common Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is of nationally recognized standing.
(cc) "Retirement" means a Participant's retirement at or after age
65.
(dd) "Selected Participant" means (i) a manager in a non-qualifying
-
Branch or (ii) a designated employee outside the branch structure that
--
contributes significantly to the branch and billing margins and growth,
both as determined at the sole discretion of the Committee.
6
<PAGE>
(ee) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by the
Company or Holding.
2.2. Gender and Number. Except when otherwise indicated by the
-----------------
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
Section 3. Eligibility and Participation
-----------------------------------------
Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan with respect to the Performance Period
under the Plan, as specified by the Committee, provided that the aggregate
--------
number of Employees selected to receive one or more grants of Options under the
Plan shall not exceed 150 unless the Committee determines that Holding may grant
Options under the Plan to more than 150 Employees without being subject to any
registration requirements under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended. The selection of an Employee as a
Participant shall neither entitle such Employee to nor disqualify such Employee
from participation in any other award or incentive plan.
Section 4. Powers of the Committee
-----------------------------------
4.1. Power to Grant. The Committee shall determine the Participants
--------------
to whom Options shall be granted and the terms and conditions of any and all
Options granted to Participants, provided that all such determinations of the
--------
Committee shall be made in accordance with the terms of the Plan.
4.2. Administration. The Committee shall be responsible for the
--------------
administration of the Plan. Any authority exercised by the Committee under
the Plan shall be exercised by the Committee in its sole discretion.
Subject to
7
<PAGE>
the terms of the Plan, the Committee, by majority action thereof, is authorized
to prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, to provide for conditions and assurances deemed
necessary or advisable to protect the interests of Holding and the Company, and
to make all other determinations necessary or advisable for the administration
and interpretation of the Plan in order to carry out its provisions and
purposes. Determinations, interpretations or other actions made or taken by the
Committee pursuant to the provisions of the Plan shall be final, binding and
conclusive for all purposes and upon all persons.
Section 5. Options Subject to Plan
-----------------------------------
5.1. Number. Subject to the provisions of Sections 5.2 and 5.3, the
------
maximum number of Options (and the maximum number of shares of Common Stock
subject to Options) granted under the Plan may not exceed 25,000. The shares of
Common Stock to be delivered upon the exercise of Options granted under the Plan
may consist, in whole or in part, of treasury Common Stock or authorized but
unissued Common Stock, not reserved for any other purpose.
5.2. Canceled, Terminated or Forfeited Options. Any Option which for
-----------------------------------------
any reason is canceled, terminated or otherwise forfeited, in whole or in part,
without having been exercised (and any shares of Common Stock then subject to
such Option), shall again be available for grant under the Plan on any
subsequent Grant Date.
5.3. Adjustment in Capitalization. The number and class of Options
----------------------------
(and the number of shares of Common Stock available for issuance upon exercise
of such Options) granted under the Plan, and the number, class and exercise
price of any outstanding Options (and the number and class of shares of Common
Stock subject to outstanding Options), may be adjusted by the Board, in its sole
discretion, if it shall deem such an adjustment to be necessary or appropriate
to reflect any Common Stock dividend, stock split or share
8
<PAGE>
combination or any recapitalization, merger, consolidation, exchange of shares,
liquidation or dissolution of Holding.
Section 6. Terms of Options
----------------------------
6.1. Grant of Options. (a) As soon as practicable following the end
----------------
of the Performance Period, the Committee shall determine (i) those Branches that
-
have achieved the Performance Objectives and, accordingly, qualify as Eligible
Branches for the Performance Period, (ii) the Branch Allocation of each Eligible
--
Branch for the Performance Period, (iii) the Participants to whom Options will
---
be granted, and the number of Options to be granted to each such Participant,
with respect to the Performance Period and (iv) the Selected Participants to
--
whom Options will be granted, and the number of Options to be granted to each
such Selected Participant, with respect to the Performance Period, provided that
--------
(x) Options may be granted only to Participants who, on the last day of the
-
Performance Period, are employed by Holding, the Company or any Subsidiary at an
Eligible Branch and (y) the aggregate number of Options granted to Participants
-
employed at any one Eligible Branch shall not exceed such Eligible Branch's
Branch Allocation.
(b) Each Option granted to a Participant shall be evidenced by an
Option Agreement that shall specify the exercise price at which a share of
Common Stock may be purchased pursuant to such Option, the duration of
such Option and such other terms consistent with the Plan as the Committee
shall determine, including customary representations, warranties and covenants
with respect to securities law matters. Such Option Agreement shall, unless the
Committee otherwise determines, be substantially in the form attached hereto as
Exhibit A.
6.2. Exercise Price. The exercise price per share of Common Stock to
--------------
be purchased upon exercise of an Option shall be not be less than the greatest
of (a) the Fair Market Value as of the last date of the Performance
9
<PAGE>
Period, (b) the Fair Market Value as of the Grant Date or (c) $100.
- -
6.3. Exercise of Options. Unless otherwise determined by the
-------------------
Committee at the Grant Date, one-third of any Options granted to a Participant
at any time shall become vested and, subject to Section 10.4, exercisable on
each of the first, third and fifth anniversaries of the Grant Date of such
Options, provided that 100% of such Options shall become vested to the extent
--------
provided in Section 8.1 and, provided further, that the Committee may accelerate
-------- -------
the vesting or exercisability of any Option, all Options or any class of
Options, at any time and from time to time. On or before the date upon which
any Employee will exercise any Option, Holding and such Employee shall enter
into a Management Stock Subscription Agreement substantially in the form
attached hereto as Exhibit B. Notwithstanding any other provision of the Plan,
each Option shall terminate and shall not be exercisable on or after the tenth
anniversary of the Grant Date of such Option.
6.4. Payment. The Committee shall establish procedures governing the
-------
exercise of Options, which procedures shall generally require that written
notice of the exercise thereof be given and that the exercise price thereof be
paid in full in cash or cash equivalents, including by personal check, at the
time of exercise. If so determined by the Committee in its sole discretion at or
after the Grant Date, the exercise price of any Options exercised after there
has been a Public Offering may be paid in full or in part in the form of shares
of Common Stock already owned by the Participant for at least six months, based
on the Fair Market Value of such Common Stock on the date of exercise. As soon
as practicable after receipt of a written exercise notice and payment in full of
the exercise price of any exercisable Options prior to a Public Offering,
subject to Section 10.4, Holding shall deliver to WESCO to hold on behalf of the
Participant, a certificate or certificates representing the shares of Common
Stock acquired upon the exercise thereof.
10
<PAGE>
Section 7. Termination of Employment
-------------------------------------
7.1. Extraordinary Termination. Unless otherwise provided in the
-------------------------
Option Agreement or otherwise determined by the Committee at or after the Grant
Date, in the event that a Participant's employment with Holding, the Company and
the Subsidiaries terminates by reason of the Participant's death, Permanent
Disability or Retirement (each an "Extraordinary Termination"), then any Options
held by the Participant and then vested and exercisable shall remain exercisable
(subject to Section 10.4) solely until the first to occur of (i) the first
-
anniversary of the Participant's termination of employment or (ii) the
--
expiration of the term of the Option. Any Options held by the Participant that
are not then vested and exercisable at the date of the Extraordinary Termination
shall terminate and be canceled immediately upon such Extraordinary Termination,
and any Options described in the preceding sentence that are not exercised
within the period described in such sentence shall terminate and be canceled
upon the expiration of such period.
7.2. Termination for Cause. Unless otherwise provided in the Option
---------------------
Agreement or otherwise determined by the Committee at or after the Grant Date,
in the event that a Participant's employment with Holding, the Company and the
Subsidiaries is terminated for Cause, any Options held by such Participant
(whether or not then vested or exercisable) shall terminate and be canceled
immediately upon such termination of employment.
7.3. Other Termination of Employment. Unless otherwise provided in
-------------------------------
the Option Agreement or otherwise determined by the Committee at or after the
Grant Date, in the event that a Participant's employment with Holding, the
Company and the Subsidiaries terminates for any reason other than (i) an
-
Extraordinary Termination or (ii) for Cause, any Options held by such
--
Participant that are vested and exercisable as of the date of such termination
shall remain exercisable (subject to Section 10.4) for a period of 60
11
<PAGE>
days (or, if shorter, during the remaining term of the Options). Any Options
held by the Participant that are not vested and exercisable at the date of the
Participant's termination of employment shall terminate and be canceled
immediately upon such termination, and any Options described in the preceding
sentence that are not exercised within the period described in such sentence
shall terminate and be canceled upon the expiration of such period.
7.4. Certain Rights upon Termination of Employment Prior to
------------------------------------------------------
Public Offering. Unless otherwise determined by the Committee at the Grant
- ---------------
Date, the Committee shall provide in each Option Agreement governing Options
granted hereunder that Holding or the Company and the C&D Fund shall have
successive rights to purchase any exercisable Options from the Participant upon
the termination of his employment prior to a Public Offering, for a purchase
price per Option equal to the excess, if any, of (x) the Fair Market Value on
-
the date of termination over (y) the exercise price per share of Common Stock
-
pursuant to such Option, and upon such additional terms and conditions as are
set forth in Section 4 of the Option Agreement attached hereto as Exhibit A.
Section 8. Change in Control
----------------------------
8.1. Accelerated Vesting and Payment. Unless the Committee shall
-------------------------------
otherwise determine in the manner set forth in Section 8.2, in the event of a
Change in Control, each Option shall be canceled in exchange for a payment in
cash of an amount equal to the excess, if any, of the Change in Control Price
over the exercise price for such Option.
8.2. Alternative Options. Notwithstanding Section 8.1, no
-------------------
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to any Option if the Committee reasonably
determines in good faith, prior to the occurrence of a Change in Control, that
such Option shall be honored or assumed, or new rights substituted therefor
(such honored, assumed or substituted Option being hereinafter referred to as
an "Alter-
12
<PAGE>
native Option") by the New Employer, provided that any such Alternative Option
--------
must:
(a) provide the Participant that held such Option with rights and
entitlements substantially equivalent to or better than the rights, terms
and conditions applicable under such Option, including, but not limited to,
an identical or better exercise and vesting schedule, identical or better
timing and methods of payment and, if the Alternative Options or the
securities underlying them are not publicly traded, identical or better
rights to require Holding or the New Employer to repurchase the Alternative
Options;
(b) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control); and
(c) have terms and conditions which provide that in the event that
such Participant suffers an Involuntary Termination within two years
following a Change in Control:
(i) any conditions on such Participant's rights under, or any
restrictions on transfer or exercisability applicable to, each such
Alternative Option shall be waived or shall lapse, as the case may
be; or
(ii) such Participant shall have the right to surrender such
Alternative Option within 30 days following such termination in
exchange for a payment in cash equal to the excess of the Fair Market
Value of the equity security subject to the Alternative Option over
the price, if any, that such Participant would be required to pay to
exercise such Alternative Option.
13
<PAGE>
Section 9. Amendment, Modification, and
----------------------------------------
Termination of the Plan
-----------------------
The Board at any time may terminate or suspend the Plan, and from time
to time may amend or modify the Plan. No amendment, modification, termination or
suspension of the Plan shall in any manner adversely affect any Option there-
tofore granted under the Plan, without the consent of the Participant holding
such Option. Shareholder approval of any such amendment, modification,
termination or suspension shall be obtained to the extent mandated by applicable
law, or if otherwise deemed appropriate by the Committee.
Section 10. Miscellaneous Provisions
-------------------------------------
10.1. Nontransferability of Awards. Except as contemplated by Section
----------------------------
7.4, no Options granted under the Plan may be sold, transferred, pledged,
assigned, encumbered or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution and provided that the deceased
Participant's beneficiary or the representative of his estate acknowledges and
agrees in writing, in a form reasonably acceptable to Holding, to be bound by
the provisions of the Plan (including the purchase rights described in Section
7.4) and the Option Agreement covering such Options as if such beneficiary or
estate were the Participant. All rights with respect to Options granted to a
Participant under the Plan shall be exercisable during his lifetime by such
Participant only. Following a Participant's death, all rights with respect to
Options that were exercisable at the time of such Participant's death and have
not terminated shall be exercisable by his designated beneficiary or by his
estate.
10.2. Beneficiary Designation. Each Participant under the Plan may
-----------------------
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) by whom any right under the Plan is to be
exercised in case of his death. Each designation will revoke all prior
designations by the same Participant, shall be in a
14
<PAGE>
form reasonably prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime.
10.3. No Guarantee of Employment or Participation. Nothing in the
-------------------------------------------
Plan or in any Option Agreement shall interfere with or limit in any way the
right of Holding, the Company or any Subsidiary to terminate any Participant's
employment at any time, or confer upon any Participant any right to continue in
the employ of Holding, the Company or any Subsidiary. No Employee shall have a
right to be selected as a Participant or, having been so selected, to receive
any Options.
10.4. Tax Withholding. The Company or the Subsidiary employing a
---------------
Participant shall have the power to withhold, or to require such Participant to
remit to the Company or such Subsidiary, subject to such other arrangements as
the Committee may set forth in the Option Agreement to which such Participant is
a party, an amount sufficient to satisfy all federal, state, local and foreign
withholding tax requirements in respect of any Option granted under the Plan.
10.5. Indemnification. Each person who is or shall have been a member
---------------
of the Committee, the Board or any other committee of the Board shall be
indemnified and held harmless by the Company and Holding to the fullest extent
permitted by law from and against any and all losses, costs, liabilities and
expenses (including any related attorneys' fees and advances thereof) in
connection with, based upon or arising or resulting from any claim, action, suit
or proceeding to which he may be made a party or in which he may be involved
by reason of any action taken or failure to act under or in connection with the
Plan and from and against any and all amounts paid by him in settlement thereof,
with the Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit or proceeding against him, provided that he shall give the
--------
Company an opportunity, at its own expense, to defend the same before he
undertakes
15
<PAGE>
to defend it on his own behalf. The foregoing right of indemnification shall not
be exclusive and shall be independent of any other rights of indemnification to
which such persons may be entitled under Holding's or the Company's Certificate
of Incorporation or By-laws, by contract, as a matter of law, or otherwise.
10.6. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of Holding, the Company or any Subsidiary to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner that is not expressly authorized under the Plan.
10.7. Requirements of Law. The granting of Options and the issuance
-------------------
of shares of Common Stock pursuant to such Options shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. No
Options shall be granted under the Plan, and no shares of Common Stock shall be
issued upon exercise of any Options granted under the Plan, if such grant or
exercise would result in a violation of applicable law, including the federal
securities laws and any applicable state securities laws.
10.8. Freedom of Action. Subject to Section 9, nothing in the Plan or
-----------------
any Option Agreement shall be construed as limiting or preventing Holding, the
Company or any Subsidiary from taking any action that it deems appropriate or in
its best interest.
10.9. Term of Plan. The Plan shall be effective as of the Effective
------------
Date. The Plan shall continue in effect, unless sooner terminated pursuant to
Section 9, until the tenth anniversary of the Effective Date. The provisions of
the Plan, however, shall continue thereafter to govern all outstanding Options
theretofore granted.
10.10. No Voting Rights. Except as otherwise required by law, no
----------------
Participant holding any Options granted
16
<PAGE>
under the Plan shall have any right, in respect of such Options, to vote on any
matter submitted to Holding's stockholders until such time as the shares of
Common Stock issuable upon exercise of such Options have been so issued.
10.11. Governing Law. The Plan, and all agreements hereunder, shall
-------------
be construed in accordance with and governed by the laws of the State of New
York, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies.
17
<PAGE>
EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT, dated as of February 28, 1994 (the
"Agreement"), among CDW Holding Corporation, a Delaware corporation ("Holding"),
CDW Acquisition Corporation, a Delaware corporation to be renamed WESCO
Distribution, Inc. (the "Company"), Clayton, Dubilier & Rice, Inc., a Delaware
corporation ("CD&R"), and The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership (together with any other
investment vehicle managed by CD&R, the "C&D Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the C&D Fund is managed by CD&R, and the general partner of
the C&D Fund is Clayton & Dubilier Associates IV Limited Partnership, a
Connecticut limited partnership (together with any general partner of any other
investment vehicle managed by CD&R, "C&D Associates");
WHEREAS, CD&R has organized Holding, Holding's wholly owned subsidiary
the Company, and the Company's wholly owned subsidiary CDW Canada Acquisition
Inc., an Ontario corporation ("CDW Canada"), to acquire substantially all of the
assets of, and to assume certain of the liabilities of, the Westinghouse
Electric Supply Company business of Westinghouse Electric Corporation, a
Pennsylvania corporation ("Westinghouse"), and Westinghouse Canada, Inc., a
Canadian corporation ("Westinghouse Canada"), pursuant to the Asset Acquisition
Agreement, dated as of February 15, 1994, between Holding and Westinghouse (such
transactions being hereinafter referred to as the "Acquisition");
<PAGE>
WHEREAS, for the purpose of financing the Acquisition, (a) Holding
-
is offering and selling 950,000 shares of its Class A Common Stock, par value
$.01 per share (the "Equity Offering"), (b) Holding is offering and issuing
-
and/or selling to Westinghouse a guaranteed first mortgage note due February 28,
2001 in the initial amount of $45 million (the "U.S. Note") and (c) CDW Canada
-
is offering and issuing and/or selling to Westinghouse Canada, Inc., a Canadian
corporation ("Westinghouse Canada"), a guaranteed first mortgage note due
February 28, 2001 in the original principal amount of C$6,757,250 million (the
"Canadian Note", and together with the U.S. Note, the "Notes").
WHEREAS, at the closing of the Acquisition Holding will cause the
Company (i) to assume all of Holding's obligations under the U.S. Note and (ii)
- --
to cause the Company's wholly owned subsidiary CDW Realco, Inc. ("Realco") (a)
-
to assume all of the Company's obligations under the U.S. Note and (b) upon
-
surrender by Westinghouse of the U.S. Note, execute and deliver to Westinghouse
in exchange therefor a guaranteed first mortgage note due February 28, 2001 in
the initial amount of $45 million (the "Realco Note");
WHEREAS, (i) the Company will execute and deliver a guarantee of the
-
U.S. Note (the "Buyer Note Guarantee"), (ii) upon the issuance of the Realco
--
Note by Realco, Holding and the Company will execute and deliver a guarantee of
the Realco Note (the "Realco Note Guarantee") and (iii) Holding, the Company and
---
Realco will execute and deliver a guarantee of the Canadian Note (the "Canadian
Note Guarantee");
WHEREAS, the C&D Fund will purchase capital stock of Holding pursuant
to the Equity Offering, becoming the majority stockholder of Holding;
WHEREAS, Holding, the Company or one or more of their respective
Subsidiaries (as defined below) from time
2
<PAGE>
to time in the future (a) may offer and sell or cause to be offered and sold
-
equity or debt securities (such offerings and sales, together with the Equity
Offering and the offering and the issuance and/or sale of the Notes, the Buyer
Note Guarantee, the Realco Note Guarantee and the Canadian Note Guarantee, being
hereinafter referred to as the "Securities Offerings"), including without
limitation (i) offerings of shares of capital stock of Holding and/or options to
-
purchase such shares to employees, directors, managers and consultants of and to
Holding and the Company (a "Management Offering"), and (ii) one or more
--
offerings of debt securities for the purpose of refinancing the Notes or for
other corporate purposes, and (b) may repurchase, redeem or otherwise acquire
-
certain securities of Holding, the Company or one or more of their respective
Subsidiaries (any such repurchase or redemption being referred to herein as a
"Redemption");
WHEREAS, the parties hereto recognize the possibility that claims
might be made against and liabilities incurred by CD&R, the C&D Fund, C&D
Associates or related persons or affiliates under applicable securities laws or
otherwise in connection with the Securities Offerings, or relating to other
actions or omissions of or by Holding and the Company, or relating to the
provision by CD&R of management consulting, monitoring and financial advisory
services to Holding and the Company, and the parties hereto accordingly wish to
provide for CD&R, the C&D Fund, C&D Associates and related persons and
affiliates to be indemnified in respect of any such claims and liabilities; and
WHEREAS, the parties hereto recognize that claims might be made
against and liabilities incurred by directors and officers of Holding and the
Company in connection with their acting in such capacity, and accordingly wish
to provide for such directors and officers to be indemnified to
3
<PAGE>
the fullest extent permitted by law in respect of any such claims and
liabilities;
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual agreements and covenants and provisions herein set forth, the parties
hereto hereby agree as follows:
1. Definitions.
-----------
(a) "Claim" means, with respect to any Indemnitee, any claim against
such Indemnitee involving any Obligation with respect to which such Indemnitee
may be entitled to be defended and indemnified by Holding or the Company under
this Agreement.
(b) "Consulting Agreement" means the Consulting Agreement, dated as of
the date hereof, among Holding, the Company and CD&R, as the same may be
amended, waived, modified or supplemented from time to time.
(c) "Indemnitee" means each of CD&R, the C&D Fund, C&D Associates and
their respective directors, officers, partners, employees, agents, advisors,
representatives and controlling persons (within the meaning of the Securities
Act of 1933, as amended (the "Securities Act")) and each other person who is or
becomes a director or an officer of Holding or the Company.
(d) "Obligations" means, collectively, any and all claims,
obligations, liabilities, causes of actions, actions, suits, proceedings,
investigations, judgments, decrees, losses, damages, fees, costs and expenses
(including without limitation interest, penalties and fees and disbursements
of attorneys, accountants, investment bankers and other professional advisors),
in each case whether incurred, arising or existing with respect to third parties
or otherwise at any time or from time to time.
4
<PAGE>
(e) "Related Document" means any agreement, certificate, instrument or
other document to which Holding or the Company may be a party or by which it or
any of its properties or assets may be bound or affected from time to time
relating in any way to any Securities Offering or any of the transactions
contemplated thereby, including without limitation, in each case as the same may
be amended, modified, waived or supplemented from time to time, (A) any
-
registration statement filed by or on behalf of Holding or the Company with the
Securities and Exchange Commission (the "Commission") in connection with any
Securities Offering, including all exhibits, financial statements and schedules
appended thereto, and any submissions to the Commission in connection therewith,
(B) any prospectus, preliminary or otherwise, included in such registration
-
statements or otherwise filed by or on behalf of Holding or the Company in
connection with any Securities Offering or used to offer or confirm sales of
their respective securities in any Securities Offering, (C) any private
-
placement or offering memorandum or circular, or other information or materials
distributed by or on behalf of Holding, the Company or any placement agent,
initial purchaser or underwriter in connection with any Securities Offering, (D)
-
any federal, state or foreign securities law or other governmental or regulatory
filings or applications made in connection with any Securities Offering, the
Acquisition or any of the transactions contemplated thereby, (E) any
-
underwriting, subscription, purchase, option or registration rights agreement or
plan entered into or adopted by Holding or the Company in connection with any
Securities Offering or (F) any purchase, repurchase, redemption or other
-
agreement entered into by Holding or the Company in connection with any
Redemption.
(f) "Subsidiary" means each corporation or other person or entity in
which Holding or the Company owns or controls, directly or indirectly, capital
stock or other
5
<PAGE>
equity interests representing at least 50% of the outstanding voting stock or
other equity interests.
2. Indemnification.
---------------
(a) Each of Holding and the Company, jointly and severally, agrees to
indemnify, defend and hold harmless each Indemnitee:
(i) from and against any and all Obligations in any way resulting
from, arising out of or in connection with, based upon or relating to (A)
-
the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any other applicable securities or other laws, in
connection with any Securities Offering, any Related Document or any of the
transactions contemplated thereby, (B) any other action or failure to act
-
of Holding, the Company, any Subsidiary or any of their predecessors,
whether such action or failure has occurred or is yet to occur or (C)
-
except to the extent that any such Obligation is found in a final judgment
by a court of competent jurisdiction to have resulted from the gross
negligence or intentional misconduct of CD&R, the performance by CD&R of
management consulting, monitoring, financial advisory or other services for
Holding or the Company (whether pursuant to the Consulting Agreement or
otherwise); and
(ii) to the fullest extent permitted by Delaware law, from and
against any and all Obligations in any way resulting from, arising out of
or in connection with, based upon or relating to (A) the fact that such
-
Indemnitee is or was a director or an officer of Holding or the Company, as
the case may be, or is or was serving at the request of such corporation as
a director, officer, employee or agent of or advisor or consultant to
another corporation, partnership, joint venture, trust or other enterprise
or (B) any breach or
-
6
<PAGE>
alleged breach by such Indemnitee of his or her fiduciary duty as a
director or an officer of Holding or the Company, as the case may be;
in each case including but not limited to any and all fees, costs and expenses
(including without limitation fees and disbursements of attorneys) incurred by
or on behalf of any Indemnitee in asserting, exercising or enforcing any of its
rights, powers, privileges or remedies in respect of this Agreement or the
Consulting Agreement.
(b) Without in any way limiting the foregoing Section 2(a), each of
Holding and the Company agrees, jointly and severally, to indemnify, defend and
hold harmless each Indemnitee from and against any and all Obligations resulting
from, arising out of or in connection with, based upon or relating to
liabilities under the Securities Act, the Exchange Act or any other applicable
securities or other laws, rules or regulations in connection with (i) the
-
inaccuracy or breach of or default under any representation, warranty, covenant
or agreement in any Related Document, (ii) any untrue statement or alleged
--
untrue statement of a material fact contained in any Related Document or (iii)
---
any omission or alleged omission to state in any Related Document a material
fact required to be stated therein or necessary to make the statements therein
not misleading. Notwithstanding the foregoing, neither Holding nor the Company
shall be obligated to indemnify such Indemnitee from and against any such
Obligation to the extent that such Obligation arises out of or is based upon an
untrue statement or omission made in such Related Document in reliance upon and
in conformity with written information furnished to Holding or the Company, as
the case may be, in an instrument duly executed by such Indemnitee and
specifically stating that it is for use in the preparation of such Related
Document.
3. Contribution.
------------
7
<PAGE>
(a) Except to the extent that Section 3(b) is applicable, if for any
reason the indemnity provided for in Section 2(a) is unavailable or is
insufficient to hold harmless any Indemnitee from any of the Obligations covered
by such indemnity, then Holding and the Company, jointly and severally, shall
contribute to the amount paid or payable by such Indemnitee as a result of such
Obligation in such proportion as is appropriate to reflect (i) the relative
-
fault of each of Holding, the Company and their Subsidiaries, on the one hand,
and such Indemnitee, on the other, in connection with the state of facts giving
rise to such Obligation, (ii) if such Obligation results from, arises out of, is
--
based upon or relates to any Securities Offering, the relative benefits received
by each of Holding, the Company and their Subsidiaries, on the one hand, and
such Indemnitee, on the other, from such Securities Offering and (iii) if
---
required by applicable law, any other relevant equitable considerations.
(b) If for any reason the indemnity specifically provided for in
Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee
from any of the Obligations covered by such indemnity, then Holding and the
Company,jointly and severally, shall contribute to the amount paid or payable by
such Indemnitee as a result of such Obligation in such proportion as is
appropriate to reflect (i) the relative fault of each of Holding, the Company
-
and their Subsidiaries, on the one hand, and such Indemnitee, on the other, in
connection with the information contained in or omitted from any Related
Document, which inclusion or omission resulted in the inaccuracy or breach of or
default under any representation, warranty, covenant or agreement therein, or
which information is or is alleged to be untrue, required to be stated therein
or necessary to make the statements therein not misleading, (ii) the relative
--
benefits received by Holding, the Company and their Subsidiaries, on the one
hand, and such Indemnitee, on the other, from such Securities Offering and (iii)
---
if required
8
<PAGE>
by applicable law, any other relevant equitable considerations.
(c) For purposes of Section 3(a), the relative fault of each of
Holding, the Company and their Subsidiaries, on the one hand, and of the
Indemnitee, on the other, shall be determined by reference to, among other
things, their respective relative intent, knowledge, access to information and
opportunity to correct the state of facts giving rise to such Obligation. For
purposes of Section 3(b), the relative fault of each of Holding, the Company and
their Subsidiaries, on the one hand, and of the Indemnitee, on the other, shall
be determined by reference to, among other things, (i) whether the included or
-
omitted information relates to information supplied by Holding, the Company or a
Subsidiary, on the one hand, or by such Indemnitee, on the other, and (ii) their
--
respective relative intent, knowledge, access to information and opportunity to
correct such inaccuracy, breach, default, untrue or alleged untrue statement, or
omission or alleged omission. For purposes of Section 3(a) or 3(b), the
relative benefits received by each of Holding, the Company and their
Subsidiaries, on the one hand, and the Indemnitee, on the other, shall be
determined by weighing the direct monetary proceeds to Holding, the Company and
their Subsidiaries, on the one hand, and such Indemnitee, on the other, from
such Securities Offering.
(d) The parties hereto acknowledge and agree that it would not be just
and equitable if contributions pursuant to Section 3(a) or 3(b) were determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in such respective
Section. Holding and the Company shall not be liable under Section 3(a) or
3(b), as applicable, for contribution to the amount paid or payable by any
Indemnitee except to the extent and under such circumstances as Holding or the
Company would have been
9
<PAGE>
liable to indemnify, defend and hold harmless such Indemnitee under the
corresponding Section 2(a) or 2(b), as applicable, if such indemnity were
enforceable under applicable law. No Indemnitee shall be entitled to
contribution from Holding or the Company with respect to any Obligation covered
by the indemnity specifically provided for in Section 2(b) in the event that
such Indemnitee is finally determined to be guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
in connection with such Obligation and Holding and the Company are not guilty of
such fraudulent misrepresentation.
4. Indemnification Procedures.
--------------------------
(a) Whenever any Indemnitee shall have actual knowledge of the
reasonable likelihood of the assertion of a Claim, CD&R (acting on its own
behalf or, if requested by any such Indemnitee other than itself, on behalf of
such Indemnitee) or such Indemnitee shall notify Holding or the Company, as the
case may be, in writing of the Claim (the "Notice of Claim") with reasonable
promptness after such Indemnitee has such knowledge relating to such Claim and
has notified CD&R thereof. The Notice of Claim shall specify all material facts
known to CD&R (or if given by such Indemnitee, such Indemnitee) that give rise
to such Claim and the monetary amount or an estimate of the monetary amount of
the Obligation involved if CD&R (or if given by such Indemnitee, such
Indemnitee) has knowledge of such amount or a reasonable basis for making such
an estimate. The failure to give such Notice of Claim shall not relieve Holding
and the Company of their respective indemnification obligations under this
Agreement except to the extent that such omission results in a failure of actual
notice to them and they are materially injured as a result of the failure to
give such Notice of Claim. Holding and the Company shall, at their expense,
undertake the defense of such Claim with attorneys of their own choosing
satisfactory in all re-
10
<PAGE>
spects to CD&R. CD&R may participate in such defense with counsel of CD&R's
choosing at the expense of Holding and the Company. In the event that none of
Holding and the Company undertakes the defense of the Claim within a reasonable
time after CD&R has given the Notice of Claim, CD&R may, at the expense of
Holding and the Company and after giving notice to Holding and the Company of
such action, undertake the defense of the Claim and compromise or settle the
Claim, all for the account of and at the risk of Holding and the Company. In the
defense of any Claim, Holding and the Company shall not, except with the consent
of CD&R, consent to entry of any judgment or enter into any settlement that
includes any injunctive or other non-monetary relief, or that does not include
as an unconditional term thereof the giving by the person or persons asserting
such Claim to each Indemnitee of a release from all liability with respect to
such Claim. In each case, CD&R and each other Indemnitee seeking indemnification
hereunder will cooperate with Holding and the Company, so long as Holding and
the Company are conducting the defense of the Claim, in the preparation for and
the prosecution of the defense of such Claim, including making available
evidence within the control of CD&R or such Indemnitee, as the case may be, and
persons needed as witnesses who are employed by CD&R or such Indemnitee, as the
case may be, in each case as reasonably needed for such defense and at cost,
which cost, to the extent reasonably incurred, shall be paid by Holding and the
Company.
(b) Holding and the Company hereby agree to advance costs and
expenses, including attorney's fees, incurred by CD&R (acting on its own behalf
or, if requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or any Indemnitee in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of CD&R
or such Indemnitee to repay amounts so advanced if it shall ultimately be
determined that CD&R or such Indemnitee is not entitled to
11
<PAGE>
be indemnified by Holding and the Company as authorized by this Agreement.
(c) CD&R shall notify Holding and the Company in writing of the amount
of any Claim actually paid by CD&R (the "Notice of Payment"). The amount of any
Claim actually paid by CD&R shall bear simple interest at the rate equal to the
prime rate most recently set forth in The Wall Street Journal as of the date of
-----------------------
such payment plus 2% per annum, from the date Holding or the Company receives
the Notice of Payment to the date on which Holding or the Company shall repay
the amount of such Claim plus interest thereon to CD&R.
5. Certain Covenants. Holding agrees to cause the Company to
-----------------
perform its obligations under this Agreement. The rights of each Indemnitee to
be indemnified under any other agreement, document, certificate or instrument or
applicable law are independent of and in addition to any rights of such
Indemnitee to be indemnified under this Agreement. The rights of each
Indemnitee and the obligations of Holding and the Company hereunder shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnitee. Each of Holding and the Company shall maintain the State of
Delaware as its state of incorporation and shall implement and maintain in full
force and effect any and all corporate charter and by-law provisions that may be
necessary or appropriate to enable it to carry out its obligations hereunder to
the fullest extent permitted by Delaware corporate law, including without
limitation a provision of its certificate of incorporation eliminating liability
of a director for breach of fiduciary duty to the fullest extent permitted by
Section 102(b)(7) (or any successor section thereto) of the General Corporation
Law of the State of Delaware, as it may be amended from time to time.
12
<PAGE>
6. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be delivered by certified or registered mail (first
class postage prepaid and return receipt requested), telecopier, overnight
courier or hand delivery, as follows:
(a) if to the Company, to:
WESCO Distribution, Inc.
One Riverfront Center
Pittsburgh, Pennsylvania 15222
Attention: Secretary
---------
Telecopier: (412) 642-3467
(b) if to Holding, to it care of the Company at the address set forth
above
(c) if to CD&R, to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Attention: Alberto Cribiore
---------
Telecopier: (212) 752-7629
(d) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Joseph L. Rice, III
---------
Telecopier: (203) 661-0544
or to such other address or such other person as Holding, the Company, CD&R or
the C&D Fund, as the case may be, shall have designated by notice to the other
parties hereto. All communications hereunder shall be effective upon receipt by
13
<PAGE>
the party to which they are addressed. A copy of any notice or other
communication given under this Agreement shall also be given to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David Brittenham, Esq.
---------
Telecopier: (212) 909-6836
7. Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the law of the State of New
York, regardless of the law that might be applied under principles of conflict
of laws, except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies, in which case such law shall apply.
8. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
9. Miscellaneous. The headings contained in this Agreement are for
-------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement shall be binding upon and
inure to the benefit of each party hereto and its successors and permitted
assigns, and each other Indemnitee, but neither this Agreement nor any right,
interest or obligation hereunder shall be assigned, whether by operation of law
or otherwise, by Holding or the Company without the prior written consent of
CD&R and the C&D Fund. This Agreement is not intended to confer any right or
remedy hereunder upon any person other than each of the parties hereto and their
respective successors and permitted assigns and each other Indemnitee. No
amendment, modification, supplement or
14
<PAGE>
discharge of this Agreement, and no waiver hereunder shall be valid and binding
unless set forth in writing and duly executed by the party or other Indemnitee
against whom enforcement of the amendment, modification, supplement or discharge
is sought. Neither the waiver by any of the parties hereto or any other
Indemnitee of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any party hereto or any other Indemnitee on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, powers or privilege hereunder, shall be construed as a
waiver of any other breach or default of a similar nature, or as a waiver of any
provisions hereof, or any rights, powers or privileges hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party or other Indemnitee may otherwise have at law or in
equity or otherwise. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by their authorized representatives as of the date first above
written.
CDW HOLDING CORPORATION
By: /s/ Alexander F. Brigham
--------------------------------
Name: Alexander F. Brigham
Title: Vice President and
Assistant Secretary
CDW ACQUISITION CORPORATION
(to be renamed WESCO Distribution,
Inc.)
By: /s/ William A. Barbe
--------------------------------
Name: William A. Barbe
Title: Vice President and
Secretary
CLAYTON, DUBILIER & RICE, INC.
By: /s/ Alberto Cribiore
--------------------------------
Name: Alberto Cribiore
Title: Vice President
THE CLAYTON & DUBILIER PRIVATE
EQUITY FUND IV LIMITED
PARTNERSHIP
By: Clayton & Dubilier
16
<PAGE>
Associates IV Limited
Partnership, the General Partner
By: /s/ Alberto Cribiore
----------------------------
a general partner
17
<PAGE>
EXHIBIT 10.8
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT, dated as of February 28, 1994, between
Westinghouse Electric Corporation, a Pennsylvania corporation (the "Seller"),
and CDW Holding Corporation, a Delaware corporation (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller and the Buyer have entered into an Asset
Acquisition Agreement, dated as of February 15, 1994 (the "Asset Acquisition
Agreement", capitalized terms used herein without definition having the
respective meanings given in the Asset Acquisition Agreement); and
WHEREAS, the Asset Acquisition Agreement provides that the Seller
shall enter into a non-competition agreement with the Buyer;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and provisions herein contained, the parties hereto agree
as follows:
1. Non-Competition. The Seller shall not, and shall not permit any
---------------
of its Affiliates to, for a period of five years from the date of this
Agreement, own and operate a Chain of Branches, provided that nothing herein
--------
shall prohibit the Seller or any of its Affiliates from:
(a) maintaining and continuing in accordance with current and past
practice the operations of the internal organizations and
divisions of the Seller and any of its current Affiliates
identified on Schedule A;
(b) continuing to own any shares of capital stock, partnership or
other equity interests in any Person owned by the Seller or any
of
<PAGE>
its Affiliates as of the date of this Agreement;
(c) acquiring shares of capital stock, partnership or other equity
interests in any Person that is engaged in the ownership and
operation of a Chain of Branches, provided that such interests
are minority interests of 5% or less;
(d) acquiring shares of capital stock, partnership or other equity
interests in any Person provided that the annual revenues of such
Person from the ownership and operation of a Chain of Branches
did not exceed 10% of such Person's total revenues on a
consolidated basis for the last complete fiscal year prior to the
acquisition, provided that if such Person is or becomes an
--------
Affiliate of the Seller and such annual revenues thereafter
exceed 10% of such Person's total revenues, the Seller shall
cause such Person to use all commercially reasonably efforts to
cease its ownership and operation of such Chain of Branches on
commercially reasonably terms as soon as practicable; and
(e) acquiring shares of capital stock, partnership or other equity
interests in any Person with annual revenues from the ownership
and operation of a Chain of Branches constituting 10% or more of
such Person's total revenues on a consolidated basis for the last
complete fiscal year prior to the acquisition, provided that such
--------
Person becomes an Affiliate of the Seller as a result of such
acquisition and that the Seller shall cause such Person to use
all commercially reasonably efforts to cease its ownership and
operation of such Chain of Branches on
2
<PAGE>
commercially reasonable terms as soon as practicable.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Affiliate" - of a Person, means a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person, provided that the term "Affiliate" shall
not include any Plan. "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a person,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.
"Branch" - a whole sale distributor of Electrical Products, other than
any wholesale distributor (a) solely of Electrical Products of the type
-
manufactured by the Seller or any of its current Affiliates, (b) whose wholesale
-
distribution of Electrical Products is solely ancillary to the provision of
services or (c) whose wholesale distribution of Electrical Products arises
-
solely out of the repair, refurbishment and resale of used electrical
products.
"Chain" - a network of 10 or more locations in North America or a
network of three or more locations in any standard metropolitan statistical area
in North America.
"Electrical Products" - any product (a) of the type typically sold by
-
the Business on or prior to the Closing Date and (b) to the extent not covered
-
under the preceding clause (a), sold under or associated with the Cutler-Hammer
trademark and available to the Business under the WESCO Distributor Agreement
for sale on or prior to the Closing Date.
3
<PAGE>
2. Severability. If any provision of this Agreement is inoperative
------------
or unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, Sections or
subsections of this Agreement shall not affect the remaining portions of this
Agreement.
3. Notices. All notices and other communications made in
-------
connection with this Agreement shall be in writing. Any notice or other
communication in connection herewith shall be deemed duly given (a) two Business
-
Days after it is sent by express, registered or certified mail, return receipt
requested, postage prepaid or (b) one Business Day after it is sent by
-
overnight courier, in every case, addressed as follows:
(i) if to the Company or the C&D Fund:
CDW Holding Corporation
c/o The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, CT 06830
Telecopy: (203) 661-0544
Telephone: (203) 661-3998
Attention: Clayton & Dubilier Associates IV
Limited Partnership, attention: Joseph L.
Rice, III, a general partner
4
<PAGE>
with a copy to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Telecopy: (212) 752-7629
Telephone: (212) 355-0740
Attention: Alberto Cribiore
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Telephone: (212) 909-6000
Attention: Steven Ostner, Esq.
(ii) if to Westinghouse,
Westinghouse Electric Corporation
Westinghouse Building
Gateway Center
11 Stanwix Center
Pittsburgh, PA 15222
Telecopy: (412) 642-3393
Telephone: (412) 244-2000
Attention: Thomas P. Costello,
Group President
with a copy to the attention
of Louis J. Briskman, General Counsel
(telecopy: (412) 642-5671)
or, in each case, at such other address as may be specified in writing to the
other parties hereto. Any party may give any notice or other communication in
connection herewith using any other means (including, without limitation,
personal delivery, messenger service, telecopy, telex or ordinary mail), but
no such notice or other communication shall
5
<PAGE>
be deemed to have been duly given unless and until it is actually received by
the individual for whom it is intended.
4. Headings. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
5. Entire Agreement. This Agreement, together with the Acquisition
----------------
Agreements and the Collateral Agreements, constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
6. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
7. Governing Law. This Agreement shall be governed in all
-------------
respects, including, but not limited to, as to validity, interpretation and
effect, by the internal laws of the State of New York, without giving effect to
the conflict of laws rules thereof.
8. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
9. Assignment. This Agreement shall not be assignable by the
----------
Buyer without the prior written consent of the Seller or by the Seller without
the prior written consent of the Buyer, provided that the Buyer may assign this
--------
Agreement (a) to any other Buyer Party as contemplated by Article II of the
-
Acquisition Agreement, (b) to any lender to the Buyer or any Subsidiary or
-
Affiliate thereof as security for obligations to such lender in respect of the
financing arrangements entered into in connection with the transactions
contemplated hereby and any refinancings, ex-
6
<PAGE>
tensions, refundings or renewals thereof or (c) subsequent to the Closing, to
-
any transferee of all or substantially all of the assets of the Business that
executes a written assumption of the obligations of the Buyer Parties under the
Acquisition Agreement, the Canadian Asset Purchase Agreement and the Collateral
Agreements (other than the Option Agreement and the Registration and
Participation Agreement).
10. No Third Party Beneficiaries. Nothing in this Agreement shall
----------------------------
confer any rights upon any person or entity other than the Buyer Parties and
their respective heirs, successors and permitted assigns.
11. Amendment; Waivers. No amendment, modification or discharge of
------------------
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time.
12. Consent to Jurisdiction. Each party irrevocably submits to the
-----------------------
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
-
York County, and (b) the United States District Court for the Southern District
-
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby (and agrees not
to commence any such suit, action or proceeding except in such courts). Each
party further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any such suit, action or proceeding.
Each party irrevocably and unconditionally waives any objection to the laying of
venue of any such suit, action or proceeding in (i) the Supreme Court of the
-
State of New York, New York County, and (ii) the United States District Court
--
for the Southern District of New York, that
7
<PAGE>
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
13. Waiver of Jury Trial. Each party hereby waives, to the fullest
--------------------
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding arising out of this Agreement or any
transaction contemplated hereby. Each party (a) certifies that no
-
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
-
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 13.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
CDW HOLDING CORPORATION
By /s/ Alexander F. Brigham
--------------------------
Name: Alexander F. Brigham
Title: Vice President &
Assistant Secretary
WESTINGHOUSE ELECTRIC
CORPORATION
By /s/ Richard T. O'Connor
-------------------------
Name: Richard T. O'Connor
Title: Assistant Treasurer
8
<PAGE>
SCHEDULE A
Energy Systems Business Unit
Power Generation Business Unit
Knoll Group Inc.
9
<PAGE>
EXHIBIT 10.9
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), amending
and restating that certain Employment Agreement made by and between the parties
hereto as of February 15, 1990, is made and entered into as of the 2nd day of
April, 1996, by and between EESCO, INC., a Delaware corporation (the "Company"),
and STANLEY C. WEISS, an individual resident of Illinois ("Executive").
WITNESSETH:
WHEREAS, Executive presently serves as Chairman and Chief Executive
Officer of the Company under the terms and conditions of an Employment Agreement
by and between the parties hereto dated as of February 15, 1990 (the "Original
Agreement"); and
WHEREAS, it is a condition to the acquisition (the "Stock Purchase"),
pursuant to a Stock Purchase Agreement dated as of March 12, 1996, of EESCO
EQUITY CORPORATION, an Illinois corporation of which the Company is a
subsidiary, that the Original Agreement be amended and restated to reflect
Executive's employment by the Company as an Executive Vice President, and
Executive desires to continue to serve the Company in that capacity under the
terms and conditions hereinafter provided;
NOW, THEREFORE, the Company and the Executive, each intending to be
legally bound, hereby mutually covenant and agree that the Original Agreement is
hereby amended and restated effective as of the closing of the Stock Purchase as
follows:
1. Employment and Term. The Company hereby employs the Executive as
-------------------
Executive Vice President for the term commencing on the date hereof and
continuing until December 31, 1998, and the Executive hereby accepts such
<PAGE>
employment, subject to earlier termination in accordance with Section 5.
2. Position and Duties. During the period of his employment as
-------------------
provided in Section 1 hereof, the Executive shall serve as an Executive Vice
President of the Company reporting to the President and Chief Executive Officer
of the Company, and shall have such duties as may be reasonably assigned to him
from time to time.
3. Compensation.
------------
(a) For his services performed pursuant to this Agreement, during the
period of employment as provided in Section 1 hereof, the Company shall pay the
Executive a base salary at the rate of $300,000 per annum ("Base Salary"),
payable in accordance with the Company's regular payroll practices.
(b) In addition to the Base Salary to be paid to the Executive
pursuant to Section 3(a) and subject to eligibility requirements, during the
period of his employment as provided in Section 1 hereof the Executive shall be
entitled to participate in all general pension, medical, hospitalization,
disability, insurance, travel and automobile expense reimbursement and club
membership programs and practices or similar plans and programs maintained by
the Company for its salaried employees and shall be afforded such other employee
benefits as are from time to time generally afforded salaried employees of the
Company. Except as provided in Section 3(c), the Executive's participation in
the Company's employee benefit programs and practices shall be on the same basis
as the participation of the other salaried employees of the Company and in
accordance with the Company's usual policies and practices.
2
<PAGE>
(c) (i) During each fiscal year of the Company during the term of
this Agreement, the Executive shall have the opportunity to earn an incentive
bonus not to exceed 75% of his Base Salary of $300,000 (the "Incentive Bonus").
Incentive Bonus shall be earned for any fiscal year based on the attainment of
annual goals set by the Company for the performance, profitability and business
growth of the Company, as defined annually by the Company and with the weight
given to each factor determined annually by the Company. Incentive Bonus earned
for any fiscal year shall be paid to the Executive within sixty (60) days of the
end of such fiscal year.
(ii) Whether or not the Executive continues to be employed hereunder,
from the date of this Agreement through December 31, 1998, the Company shall
maintain life insurance on Executive's life, the beneficiary of which shall be
as designated by Executive from time to time, in an amount equal to $800,000.
Whether or not the Executive has continued his employment hereunder, beginning
January 1, 1999, the Company shall for a period of ten years provide $1,000,000
of term life insurance coverage to the Executive.
(iii) The Executive shall be permitted to continue to use his current
Company-provided automobile until the earlier of the expiration of the term of
the lease of said automobile or the expiration of the term of this Agreement, at
which time, if the Executive is alive, the Company shall provide the Executive
with clear title to such automobile.
(iv) The Executive shall be entitled to four (4) weeks of paid
vacation annually.
(v) The Company shall reimburse the Executive annually during the
term of this Agreement for documented professional expenses rendered to
Executive for accounting, legal and/or financial advice, such amount not to
exceed $6,000.
3
<PAGE>
(vi) In the event of employment termination (regardless of reason),
the Company shall pay Executive an amount (including a 40% tax gross-up) that
may be used at Executive's option to cover continuation of medical benefits
through COBRA for the group medical plan in place for the Executive and his
spouse at the time of termination. The payment shall be equivalent to the
amount required at the premium rate in effect on the termination date for 18
months of COBRA continuation. If the Executive and/or his spouse elects medical
coverage under Medicare, COBRA coverage will cease and the Company will have no
further obligation to Executive for any further medical coverage for Executive
and/or his spouse.
(vii) Any club membership benefit provided by the Company shall
include payments for monthly membership dues and business-related expenses, but
shall not include payment of any special assessments.
(d) The Company will reimburse Executive for all reasonable and
necessary expenses incurred by Executive on behalf of the Company in accordance
with the standard policies of the Company.
(e) In the event of a permitted assignment of this Agreement by the
Company in accordance with the provisions of Section 8 hereof, this Agreement
shall be interpreted so that (i) reference to employee benefit plans, programs
-
and arrangements of the Company shall mean such plans, programs and arrangements
of such assignee, (ii) the Executive shall be credited, for purposes of any such
--
plans, programs or arrangements of such assignee, with years of service equal to
the number of whole years he was employed by the Company and (iii) the
---
Executive's obligations under Section 4 hereof shall run equally to the Company,
if it is still in existence, and such assignee; provided, however, that the
-------- -------
Executive shall have no obligation under Section 4(c) hereof with respect to any
business of which he was not aware during his employment hereunder.
4
<PAGE>
4. Covenants of the Executive. In order to induce the Company to
--------------------------
enter into this Agreement, the Executive hereby agrees as follows:
(a) Confidentiality. Except with the consent of or as directed by the
---------------
Company's management or as may be required by law, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any private, secret, proprietary or
confidential information regarding the Company, its assets, business, customers,
plans, processes, costs, prices or finances.
(b) Records. All papers, books, and records of every kind and
-------
description relating to the business and affairs of the Company, whether or not
prepared by the Executive, and in whatever form they may exist, whether
confidential or not, including any and all copies thereof, shall be the sole and
exclusive property of the Company, and the Executive shall surrender them to the
Company at any time upon request by the Board.
(c) Non-Competition/Non-Solicitation. The Executive shall not, (i)
-------------------------------- -
while employed by the Company or (ii) regardless of whether the Executive is so
--
employed, during the period of his employment by the Company hereunder and for
five (5) years after the termination or expiration of this Agreement, in the
United States of America by himself or in partnership or as an equity owner or
in conjunction with, or as an employee, agent, consultant, unpaid adviser,
manager or director of any other person, business, firm, corporation or other
entity, either directly or indirectly, (A) undertake or carry on or be engaged
-
or have any financial or other interest in, or in any other manner advise or
assist any person, firm, corporation or other entity engaged or interested in,
any business in which the Company is engaged, or in which the Company is
actively planning to engage, to the knowledge of the Executive acquired during
the term of his employment, or (B) solicit
-
5
<PAGE>
or contact any customer, vendor or employee of the Company for any commercial
purpose detrimental to the Company.
(d) Assignment of Ownership. The Executive hereby assigns to the
-----------------------
Company, its successors and assigns, his entire right, title and interest in and
to all ideas, conceptions, discoveries and/or inventions, whether patentable or
not, and whether developed by the Executive alone or jointly with others, which
are conceived, made, or developed during the course of his employment and relate
in any way to the research, product development or business of the Company
(collectively, "Ideas"). All Ideas of the Executive made within one (1) year
following the date of termination of his employment shall be presumed to have
been made as a result of his employment with the Company and are hereby assigned
to the Company. The Executive shall execute, from time to time, such
supplemental assignments and other documents in favor of the Company for any and
all such Ideas.
(e) Enforcement. The Executive agrees and warrants that the covenants
-----------
contained herein are reasonable, that valid consideration has been received
therefor and that the agreements set forth herein are the result of arm's-length
negotiations between the parties hereto. The Executive recognizes that the
provisions of this Section 4 are vitally important to the continuing welfare of
the Company and that any violation of this Section 4 will adversely affect the
financial interest of the Company. The Executive accordingly acknowledges that
money damages construe an inadequate remedy for any violation of this Section 4.
In the event of any such violation by the Executive, the Company, in addition to
any other remedies it may have, shall have the right to an injunction to compel
specific performance thereof or to restrain any action by the Executive in
violation of this Section 4. The Executive further agrees that a judgment for
specific performance of this Section 4 may be entered against him, without the
necessity of proving actual damages. It is the desire of the parties that the
provisions of this Section 4 be
6
<PAGE>
enforced to the fullest extent permissible under the law and public policies in
each jurisdiction in which enforcement might be sought. Accordingly, without in
any way limiting the general applicability of Section 9, if any particular
portion of this Section 4 shall ever be adjudicated as invalid or unenforceable,
or if the application thereof to any party or circumstance shall be adjudicated
to be prohibited by or invalid under such laws or public policies, such portion
of this Section 4 shall be deemed deleted, such deletion to apply only with
respect to the operation of this Section 4 in the particular jurisdiction so
adjudicating on the parties and under the circumstances as to which so
adjudicated and only to the minimum extent so required.
5. Termination. (a) By the Company. This Agreement shall terminate
----------- --------------
upon the Executive's death or Disability (as hereinafter defined). In addition,
the Company may discharge the Executive from his employment with the Company
hereunder and cause this Agreement to be terminated at any time for Cause (as
hereinafter defined). Any discharge of the Executive for Cause, and the
effective date thereof, shall be communicated to the Executive in writing.
(b) By Executive. Executive shall have the right to resign at any
------------
time for Good Reason and in that event shall be entitled to payment of his Base
Salary for the remainder of the term of this Agreement, and shall be bound by
the provision of Section 4(c) solely through December 31, 1998.
(c) Certain Definitions. For purposes of this Agreement:
-------------------
(i) The term "Cause" shall mean any of the following:
(a) the Executive's commission in the reasonable opinion of the
Company, of a criminal, fraudulent or dishonest act with respect to
the
7
<PAGE>
Company, the Company's customers, or the Company's vendors; or
(b) the Executive's violation of any policy of the Company known
to the Executive, provided that the Company gives the Executive
written notice specifying the violation and provides him with twenty
(20) days to correct or remedy such violation; or
(c) the Executive's willful misconduct or gross negligence or
gross disregard of his duties of performance under this Agreement,
provided that the Company gives the Executive written notice
specifying the failure and provides him with twenty (20) days to
correct such conduct or action (it being understood that failure to
meet the financial budget targets set by the Company shall not
continue a cause for termination under this clause).
(ii) The term "Disability" shall mean any physical or mental disease
or disability which, in the opinion of two licensed physicians, renders the
Executive incapable of performing his principal duties required to be
performed by him under this Agreement and such disease or disability
continues to render him incapable of performing such duties for a
continuous period of six months, provided, however, that two periods of
-------- -------
disability separated by fewer than thirty (30) days of continuous service
shall be deemed to be one continuous period of disability. Of the two
licensed physicians, one shall be Executive's personal physician and the
other shall be a physician selected by the Company, provided, however, that
-------- -------
if such two physicians cannot agree, they shall nominate, by mutual
agreement, an additional physician, whose opinion shall be final, to
examine Executive.
(iii) The term "Good Reason" shall mean:
8
<PAGE>
(a) Except with his written approval, Executive is removed from
the position set forth in Section 1 of this Agreement, his
responsibilities are significantly reduced, he is assigned duties
inconsistent with such position, or he is assigned to a primary
location for fulfilling his obligations outside the Chicago area; or
(b) the Company materially breaches any provision of this
Agreement and such breach is not cured within 20 days of the
Executive's written notice to the Company identifying the breach; or
(c) without the Executive's written consent, the Company assigns
this Agreement in a manner not permitted under Section 8 of this
Agreement.
6. Entire Agreement. This Agreement constitutes and expresses the
----------------
entire agreement of the parties with respect to the subject matter hereof and
supersedes and cancels all prior negotiations, discussions, agreements and
understandings relating to such subject matter.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Company, to:
EESCO, Inc.
3939 South Karlov Avenue
Chicago, IL 60632
9
<PAGE>
(b) to the Executive, to:
Stanley C. Weiss
2924 Washington
Wilmetta, IL 60091
(c) with a copy to:
Neal White, Esquire
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606-5096
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Binding Effect and Benefit. This Agreement may not be assigned
--------------------------
by either party, whether by operation of law or otherwise, without the prior
written consent of the other party, except that any right, title or interest of
the Company arising out of this Agreement may be assigned to any corporation
controlling, controlled by, or under common control with the Company; provided,
--------
however, that no such assignment shall relieve the Company or any permitted
- -------
assignee of its obligations hereunder without the express written consent of the
Executive. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legatees,
devisees, personal representatives, successors and assigns.
9. Severability. If any provision of this Agreement shall be
------------
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgement shall not affect, impair or invalidate the
remainder of this Agreement.
10. Further Assurances. Each party agrees to cooperate with the
------------------
other, and to execute and deliver, or cause to be executed and delivered, all
such other instruments and documents, and to take all such other
10
<PAGE>
actions as may be reasonably requested of it from time to time, in order to
effectuate the provisions and purposes of this Agreement.
11. Amendment. This Agreement can be amended or modified only by a
---------
written agreement of the parties hereto.
12. Withholding. The Company shall be entitled to withhold from
-----------
payments due hereunder any required federal, state or local withholding or other
taxes.
13. Counterparts. This Agreement may be executed by the parties
------------
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
14. Jurisdiction and Applicable Law. Jurisdiction over disputes with
-------------------------------
regard to this Agreement shall be exclusively in the courts of the State of
Illinois and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of Illinois other than the conflict
of laws provisions of such laws.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
EESCO, INC.
By: /s/ S.R.M.
-------------------------------------
Title: President
----------------------------------
EXECUTIVE:
By: /s/ Stanley Weiss
-------------------------------------
11
<PAGE>
EXHIBIT 10.10
OFFICE LEASE AGREEMENT
BETWEEN
COMMERCE COURT PROPERTY HOLDING TRUST, Landlord
AND
WESCO DISTRIBUTION, INC., Tenant
DATED: May 24, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PARTIES..................................................................... 1
SCHEDULE OF LEASE TERMS..................................................... 1
PREMISES.................................................................... 1
TERM AND POSSESSION......................................................... 2
COMPLETION OF IMPROVEMENTS.................................................. 3
RENT........................................................................ 3
SECURITY DEPOSIT............................................................ 4
ADDITIONAL RENT............................................................. 4
LATE RENTAL PAYMENTS........................................................12
USE OF PREMISES - RULES & REGULATIONS.......................................12
ALTERATIONS AND ADDITIONS...................................................12
BUILDING SERVICES...........................................................14
ASSIGNMENT AND SUBLETTING...................................................17
INSPECTION..................................................................18
REPAIRS.....................................................................19
SURRENDER OF PREMISES.......................................................20
INDEMNIFICATION AND LIABILITY...............................................20
INSURANCE...................................................................21
DAMAGE AND DESTRUCTION......................................................22
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
CONDEMNATION.............................23
SUBORDINATION AND ATTORNMENT.............24
ESTOPPEL CERTIFICATES....................25
DEFAULT..................................25
ACCELERATED RENT.........................26
REMEDIES.................................26
CONFESSION OF JUDGMENT AND EJECTMENT.....27
WAIVER...................................27
QUIET ENJOYMENT..........................28
UNAVOIDABLE DELAY........................28
SUCCESSORS AND MULTIPLE PARTIES..........28
GOVERNING LAW............................29
SEPARABILITY.............................29
CAPTIONS.................................29
GENDER...................................29
NOTICES..................................29
BROKERS..................................30
LEASE NOT AN OFFER.......................30
RENT CONTROL.............................30
LANDLORD'S EXCULPATORY...................30
RELOCATION OF TENANT.....................31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
COMPLIANCE WITH LAWS.....................31
EXHIBITS.................................31
MODIFICATIONS............................32
HOLDOVER BY TENANT.......................32
RENEWAL OPTIONS..........................32
ABATEMENT................................33
MOVE-IN AND MOVING ALLOWANCE.............34
DESIGN ALLOWANCE.........................34
PARKING SPACES...........................35
SATELLITE TERMINAL.......................35
HAZARDOUS MATERIALS......................36
RIGHT OF FIRST OFFER.....................37
OPTION SPACE.............................38
</TABLE>
Exhibit A - Description of Property
Exhibit B - Work Letter Agreement
Exhibit C - Rules and Regulations
Exhibit D - Housekeeping Specification
Exhibit E - Description of Option Space
iii
<PAGE>
SCHEDULE OF LEASE TERMS
-----------------------
1. TENANT: WESCO Distribution, Inc., having an office at One Riverfront
Center, Pittsburgh, Pennsylvania 15222.
2. PREMISES: The premises shown on Exhibit A, initialed and attached hereto,
being part of the 6th floor and part of the 7th floor of the
Building. The square foot area of the Premises will for all
purposes be deemed to be 53,504 square feet of rentable area.
3. TERM: September 1, 1995 ("Commencement Date") to August 31, 2002
("Expiration Date"), together with any extension of renewal
thereof.
4. RENT: (a) Total Minimum Rent: $6,741,504 payable in equal monthly
installments as follows:
<TABLE>
<CAPTION>
COST PER
RENTABLE SQUARE
MONTH(S) MONTHLY INSTALLMENT FOOT PER ANNUM
<S> <C> <C>
September 1, 1995
through August 31, 2002 $ 80,256 $ 18.00
</TABLE>
Total Minimum Rent and the monthly installments thereof shall be subject to
Paragraph 46 of this Lease.
(b) Additional Rent: as set forth in Lease.
5. SECURITY DEPOSIT: Not applicable.
6. TENANT'S PROPORTIONATE SHARE: 16.21% (53,504 sq.ft./330,109 sq. ft.)
(300,109 square feet is the rentable square footage of the office portion
of the Building.)
7. BASE YEAR: 1995.
8. USE OF PREMISES: General office use.
<PAGE>
9. ADDRESS FOR PAYMENT OF RENT: Commerce Court Property Holding Trust
c/o Management Office
Four Station Square
Pittsburgh, Pennsylvania 15219
10. BROKERS INVOLVED IN LEASE: Grubb & Ellis and Pennsylvania Commercial
Real Estate, Inc.
Landlord's initials:
/s/
- --------------------------------------
Tenant's initials:
/s/
- --------------------------------------
2
<PAGE>
COMMERCE COURT BUILDING
LEASE
PARTIES
-------
1. THIS LEASE is made and entered into this ____ day of May, 1995, by and
between COMMERCE COURT PROPERTY HOLDING TRUST, a Pennsylvania business
trust, having an office at c/o Management Office, Commerce Court Building,
Four Station Square, Suite 760, Pittsburgh, Pennsylvania 15219
("Landlord"), and the tenant ("Tenant") referred to in Paragraph 1 of the
Schedule of Lease Terms which is annexed to the front of this Lease
("Schedule of Lease Terms").
SCHEDULE OF LEASE TERMS
-----------------------
2. Landlord and Tenant agree that the Schedule of Lease Terms (including
without limitation all defined terms used therein) is hereby incorporated
by reference into this Lease and that the provisions are binding on
Landlord and Tenant. In the event of any discrepancy, inconsistency or
ambiguity between the Schedule of Lease Terms and any other provision of
this Lease, the Schedule of Lease Terms shall govern.
PREMISES
--------
3. Landlord hereby leases to Tenant, and Tenant hereby takes and hires from
Landlord the Premises (as defined in the Schedule of Lease Terms) for the
Term and upon the conditions and agreements set forth in this Lease, which
Premises are located in the Commerce Court Building, Four Station Square,
City of Pittsburgh, Allegheny County, Pennsylvania 15219 (said Commerce
Court Building, together with all or any portion thereof, being referred to
herein as the "Building"). The parties hereby agree that the number of
rentable square feet in the Premises is set forth on the Schedule of Lease
Terms. The Tenant acknowledges and agrees that (a) the square feet of
rentable area in the Premises is greater than the square feet of "usable
area" in the Premises, (b) the rent for the Premises has been calculated
based upon the square feet of rentable area in the Premises (and not upon
the square feet of usable area in the Premises), and (c) the square feet of
rentable area in the Premises set forth on the Schedule of Lease
<PAGE>
Terms will for all purposes be deemed to be the square feet of rentable
area in the Premises.
Tenant shall have the right to use the fire stairs between the 6th and 7th
floor portions of the Premises as a communicating stairwell (i.e. Tenant's
employees may utilize such stairwell to walk between the floors), provided
that as part of the work to be performed by Tenant pursuant to the Work
Agreement (as hereinafter defined), Tenant shall install and maintain card
readers (or other reasonably acceptable security systems) as a security
device on the doors on the 6th and 7th floors of the Building leading to
and from the eastern stairwell adjacent to the freight elevators in the
Building. Such card readers and Tenant's use of the fire stairwell must be
in compliance with all applicable health, fire and safety laws, rules and
regulations and Landlord's insurance company requirements.
TERM AND POSSESSION
-------------------
4. The Term shall commence on the Commencement Date (as defined in the
Schedule of Lease Terms) and end at 5:00 o'clock p.m. on the Expiration
Date (as defined in the Schedule of Lease Terms), unless sooner terminated
or extended as may be hereinafter provided.
If Landlord fails i) to tender possession of the Premises on or before the
Commencement Date, or ii) to timely substantially complete the work to be
performed by Landlord pursuant to subparagraph (a) of the Work Agreement
("Landlord's Work"), for any reason other than an omission, delay or
default caused by Tenant or Tenant's agents, then the Abatement Period (as
defined in Paragraph 46 hereof) and the Term shall be extended on a day-by-
day basis for each day that Landlord does not so tender possession of the
Premises or timely substantially complete Landlord's Work. Tenant hereby
accepts such abatement and extension of the Term in full settlement of any
and all claims Tenant may have against Landlord arising from Landlord's
failure to tender possession on the Commencement Date or to timely
substantially complete Landlord's Work. Additionally, such day-for-day
extension of the Abatement Period and Term shall apply for each day beyond
September 1, 1995, but in no event beyond September 30, 1995, that Tenant
has been unable to substantially complete the Tenant Improvements (as
defined in the Work Agreement). Notwithstanding the foregoing, in the event
that the Landlord fails to tender possession of the Premises to Tenant,
with Landlord's Work substantially completed, on or before October 1, 1995,
for any reason other than an omission, delay or default caused by i) Tenant
or Tenant's agents, or ii) one of the matters described in Paragraph 29
hereof,
2
<PAGE>
Tenant shall have the right, by providing written notice to Landlord after
such date but prior to the Premises becoming available for occupancy, to
cancel this Lease whereupon this Lease shall become null and void and each
party shall be relieved of any further liability to the other. For purposes
hereof, the timely substantial completion of Landlord's Work shall be
determined in accordance with a schedule to be agreed upon by Landlord and
Tenant promptly following execution hereof by both parties.
Tenant, by its taking possession of the Premises for purposes of occupying
the same for use as a business office [(but not, for purposes of performing
the Tenant Improvements (as defined in the Work Agreement)], thereby
acknowledges that it has inspected the Premises and any improvements made
pursuant to the Work Agreement described in Paragraph 5 hereof and thereby
accepts the Premises and any such improvements in their then present
condition and as suited for the use intended by Tenant, subject to the
repair by Landlord of any latent defects in Landlord's Work.
COMPLETION OF IMPROVEMENTS
--------------------------
5. Contemporaneously with the execution of this Lease, Landlord and Tenant
have entered into an agreement setting forth the improvements to be made to
the Premises (the "Work Agreement"), attached hereto as Exhibit B and
incorporated by reference herein. Title to the improvements shall vest in
the Landlord immediately upon installation on the Premises.
RENT
----
6. Tenant shall pay to Landlord the Total Minimum Rent (as defined in the
Schedule of Lease Terms). The Total Minimum Rent shall be paid in the
monthly installments set forth on the Schedule of Lease Terms, each such
monthly installment being payable on or before the first business day of
each calendar month in advance and without demand, counterclaim (unless
Tenant would lose its legal right to bring such counterclaim against
Landlord as a result of making such rental payment) or offset, beginning on
the Commencement Date and continuing until the Expiration Date. In the
event the Commencement Date is a day other than the first business day of a
calendar month, Tenant shall pay to Landlord, on or before the Commencement
Date, a pro rata portion of the monthly installment of Total Minimum Rent
to be based on the number of days remaining in such partial month after the
Commencement Date.
3
<PAGE>
Tenant shall also pay to Landlord, in addition to the Total Minimum Rent,
in monthly installments, each such monthly installment being payable on or
before the first business day of each calendar month, any and all sums of
money, charges or other amounts required to be paid by Tenant to Landlord
or to another person under this Lease, including, but not limited to, the
amounts payable pursuant to Paragraph 8 of this Lease (collectively,
"Additional Rent") (the Total Minimum Rent, together with all Additional
Rent, being collectively defined as "Rent"). Non-payment of Additional Rent
when due shall, at Landlord's option, constitute a default under this Lease
to the same extent, and shall entitle the Landlord to the same remedies, as
non-payment of Total Minimum Rent.
All payments of Rent shall be mailed to the address set forth in the
Schedule of Lease Terms, or to such other address as Landlord from time to
time shall designate by written notice to Tenant.
SECURITY DEPOSIT
----------------
7. INTENTIONALLY OMITTED.
ADDITIONAL RENT
---------------
8. During each calendar year or portion thereof included in the Term, Tenant
shall pay to Landlord as Additional Rent Tenant's Proportionate Share of
any increase in the following items over (i) the amount paid or accrued by
Landlord for such items in the Base Year, plus (ii) for calendar years
after 1996, the amount of the 1996 Additional Rent Abatement (as defined in
subparagraph 46(b) hereof), if any.
(1) Operating Expenses (as defined in subparagraph (b) hereof); and
(2) Taxes (as defined in subparagraph (c) hereof).
Commencing on January 1, 1996, Landlord and Tenant agree that Tenant shall
pay monthly in advance, during the Term on the same day that Rent is paid,
an amount equal to one-twelfth of Landlord's estimate of the Operating
Expenses and Taxes for such following calendar year. Landlord shall make
an estimate of the Operating Expenses and Taxes and notify the Tenant.
4
<PAGE>
On or before May 1, 1997 and thereafter on or before May 1 of each year of
the Term, Landlord shall provide Tenant a statement setting forth the
actual Operating Expenses and Taxes for the preceding calendar year
("Operating Expense Statement") and a proposed operating budget for such
matters for the current calendar year. The Operating Expense Statement
shall be certified as true and accurate by Landlord and shall be
accompanied by a breakdown of Operating Expenses and Taxes with such
supporting detail as shall reasonably be requested in writing by Tenant.
Within 30 days after delivery of such statement to Tenant, an adjustment
shall thereupon be made between Landlord and Tenant to reflect any
difference between Tenant's payment hereunder and the actual Operating
Expenses and Taxes for the preceding calendar year and payment shall be
made in accordance with the last sentence of this grammatical paragraph.
Failure of Landlord to provide such estimates and statements on a timely
basis shall not in any way constitute a waiver of Landlord's entitlement to
receive such payments, except that Tenant shall not be required to make any
payments of Operating Expenses and Taxes requested by Landlord pursuant to
a requested adjustment if Landlord has not substantially complied with its
obligations pursuant to this grammatical paragraph on or before July 31 of
the year in which such adjustment is requested. The foregoing shall not
relieve Tenant of its obligation to pay Total Minimum Rent or any portion
of Additional Rent, except the portion of Additional Rent that may be
requested pursuant to an adjustment request made by Landlord in the year in
which Landlord has substantially failed to fulfill its obligations
hereunder in accordance with the provisions of this grammatical paragraph.
In no event, however, shall the monthly rent paid by Tenant be less than
the Rent due pursuant to Paragraph 6 of this Lease and Paragraph 4 of the
Schedule of Lease Terms. In the event that the Operating Expense Statement
discloses that the Additional Rent paid by Tenant as Tenant's Proportionate
Share of Operating Expenses and Taxes is greater or less than the amount
actually incurred, the appropriate party shall reimburse the other for such
amount within thirty (30) days after the receipt of such statement.
The Operating Expenses and Taxes due under the terms and conditions of this
Lease shall be payable by Tenant without any setoff or deduction.
If the Building is less than 95% occupied during 1995 or any calendar year
thereafter during the Term, Landlord shall adjust the Operating Expenses
(including any management fees) for 1995 or such following calendar year on
the basis of a 95% occupancy rate of all rentable area in the Building, for
the purposes for which such areas have been constructed, without regard to
any
5
<PAGE>
abatements, curtailments or reductions in rent reserved under any lease or
any portion of the Building.
For purposes of this Paragraph 8, the following terms shall have the
following meanings:
(a) "Base Year" shall mean the year set forth as the Base Year on the
Schedule of Lease Terms.
(b) "Operating Expenses" shall mean all expenses, costs and disbursements
of every kind and nature which Landlord shall pay or become obligated
to pay because of, or in connection with, the management and operation
of the Building and the land upon which it is situated (the "Land"),
allocable in the reasonable discretion of Landlord to the office
premises of the Building, including but not limited to:
(1) Wages and salaries of all employees equal to or below the level
of Building Manager engaged in operation and maintenance or
security of the Building, including taxes, insurance and benefits
related thereto;
(2) All supplies and materials used in the operation and maintenance
of the Building;
(3) Cost of all utilities for the Building, including the cost of
water and power, heating, lighting, air conditioning and
ventilating for the Building, all at Landlord's cost for the
same;
(4) Cost of all maintenance and service agreements for the Building
and the equipment therein, including alarm service, window
cleaning, elevator maintenance and janitorial service;
(5) Cost of all insurance relating to the Building which Landlord is
required to maintain hereunder or which Landlord reasonably deems
is prudent to maintain;
(6) Cost of repairs and general maintenance (excluding repairs and
general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and alterations attributable solely to
tenants of the Building other than Tenant);
6
<PAGE>
(7) Subject to the items specifically excluded below, the cost of any
capital improvements which are intended to reduce Operating
Expenses, which cost, together with interest on the unamortized
balance at the prime rate of interest as announced from time to
time by Mellon Bank, N.A. (the "Prime Rate") or such higher rate
as may have been reasonably paid by Landlord on funds borrowed
for the purpose of constructing such capital improvements, shall
be amortized over the useful life or economic life thereof as
shall be determined in accordance with generally accepted
accounting standards consistently applied;
(8) Any common area and other costs allocable to the office premises
of the Building payable to the Pittsburgh History and Landmarks
Foundation (the "Foundation") as provided in the Reciprocal
Easement and Operating Agreement in effect between Landlord and
the Foundation dated May 19, 1981;
(9) A management fee for the current or any future manager of the
Building (the "Manager"), but not in excess of 4% of the annual
gross rentals for the Building, excluding leasing or brokerage
fees;
(10) Such other costs and expenses as would be construed as operating
expenses by a reasonably prudent owner or operator of a first-
class building in the City of Pittsburgh.
Anything in this Lease to the contrary notwithstanding, there shall be
excluded from Operating Expenses the following items, all determined in
accordance with generally accepted accounting principles:
(1) Repairs or other work occasioned by fire, windstorm, other acts
of God or other casualty of any insurance nature, or by the
exercise of eminent domain;
(2) Marketing costs, leasing commissions, brokerage fees, attorneys'
fees, costs and disbursements and other expenses incurred in
connection with negotiations or disputes with tenants, other
occupants, or prospective tenants;
(3) The costs of renovating or otherwise improving or decorating,
painting or redecorating space (other than common areas) for
7
<PAGE>
tenants or other occupants, including permit, license and
inspection costs for such renovations and improvements;
(4) Landlord's costs for electricity and other services that are sold
to tenants and for which Landlord is entitled to a specific
reimbursement by tenants as an additional charge;
(5) Costs of a capital nature, including but not limited to capital
improvements, capital repairs, capital equipment and capital
tools, and alterations which are considered capital improvements
and replacements, except depreciation for costs of capital
improvements, repairs, equipment, etc. that are made or purchased
for the purpose of reducing Operating Expenses or complying with
Legal Requirements (as hereinafter defined);
(6) Expenses in connection with services or other benefits of a type
provided to another tenant which are not provided to Tenant;
(7) Costs incurred due to violation by Landlord or any other tenant
of the terms and conditions of any lease;
(8) Amounts paid to any party, including a division or affiliate of
Landlord providing materials, services, labor, or equipment to
the extent that such costs exceed the competitive costs of such
materials, services, labor or equipment were they provided by an
unaffiliated party in any arms-length transaction;
(9) Costs incurred in connection with compliance with handicap, life,
fire and safety codes;
(10) Costs incurred in curing a violation of environmental laws
regarding the storage, use or disposal or hazardous materials or
substances (as defined by applicable laws);
(11) Costs of such nature as to be already included in the management
fee paid by Landlord for the Building;
(12) Bad debt loss, rent loss, or reserves for either of them;
8
<PAGE>
(13) Financing costs, including points, commitment fees, broker's
fees, legal fees, and mortgage interest and amortization
payments;
(14) Costs for sculpture, paintings or other objects of art in excess
of amounts typically spent for such items in office buildings of
comparable quality in the competitive area of the Building;
(15) Costs, fines or penalties incurred by Landlord due to violations
of any Legal Requirements;
(16) Lease payments for rented equipment, the cost of which equipment
would constitute a capital expenditure if the equipment were
purchased, except equipment leased for the purpose of reducing
Operating Expenses or complying with Legal Requirements;
(17) The cost of Building lobby upgrades, upgrades to common areas of
the Building, costs of reconstruction of ceilings, costs of
sprinklers, HVAC or abatement of hazardous materials or any costs
incurred to bring the Building into compliance with the ADA (as
hereinafter defined).
Landlord further agrees that since one of the purposes of the Operating
Expense provision in this Lease is to allow Landlord to require Tenant to
pay for the costs attributable to its Premises, Landlord agrees that (i)
Landlord will not collect or be entitled to collect Operating Expenses from
all of its tenants in an amount which is in excess of 100 percent of the
Operating Expenses actually paid by Landlord in connection with the
operation of the Building, and (ii) Landlord shall make no profit from the
collection of Operating Expenses from tenants.
Taking into account the different Operating Expenses for the Building
tenants, if for any calendar year commencing with 1996, the total increases
charged to the Building tenants exceeds 100% of the actual increase in
expenses paid by Landlord over the Operating Expenses for the Base Year,
then Tenant's Proportionate Share of the amount in excess of 100 percent
shall be returned to the Tenant as a credit against monthly Rent paid
hereunder.
(c) "Taxes" shall mean all federal, state and local governmental taxes,
assessments, and charges (including transit or transit district taxes
or assessments) of every kind or nature, whether general, special,
ordinary or extraordinary, which Landlord shall pay or become
obligated to pay
9
<PAGE>
because of or in connection with the ownership, leasing, management,
control, occupancy or operation of the Building or the Land (including
without limitation all real estate taxes attributable to the Building and
the Land), allocable in the reasonable discretion of Landlord to the office
premises of the Building, or any tax against Landlord on rents and/or
additional rents from the Building (including without limitation the
Pittsburgh Business Privilege Tax) and/or of the personal property,
fixtures, machinery, equipment, systems and apparatus located therein or
used in connection therewith (including any rental or similar taxes levied
in lieu of or in addition to general real and/or personal property taxes)
applicable to the Building. For purposes hereof, Taxes for any year shall
be Taxes which are due for payment or paid in that year, rather than Taxes
which are assessed or become a lien during such year. There shall be
included in Taxes for any year the amount of all reasonable fees, costs and
expenses (including reasonable attorney's fees) paid by Landlord during
such year in seeking or obtaining any refund or reduction of Taxes. The
term "real estate taxes" shall mean all taxes and assessments, including
special assessments, levied, assessed or imposed at any time by any
governmental authority upon or against the Land and the Building, and also
any tax or assessment levied, assessed or imposed at any time by any
governmental authority in connection with the receipt of income or rents
from said Land and Building to the extent that same shall be in lieu of
(and/or in lieu of an increase in) all or a portion of any of the aforesaid
taxes or assessments upon or against the Land and Building. The term "real
estate taxes" shall also include any taxes not presently in effect which
may hereafter be assessed and levied by any governmental body or other
authority against the Land, Building or Premises. If an assessment payable
in installments is levied against the Land or Building, Taxes for any year
shall include only the installment of such assessment and any interest
payable or paid during such year, and the cost of any assessments shall be
amortized over the useful life (determined in accordance with generally
accepted accounting principals) of the improvement for which such
assessment was made. Taxes shall not include any federal, state or local
sales, use, franchise, capital stock, inheritance, general income, gift or
estate taxes, except that if a change occurs in the method of taxation
resulting in whole or in part in the substitution of any such taxes, or any
other assessment, for any Taxes as above defined, such substitution taxes
or assessments shall be included in Taxes. Any refund paid to Landlord with
respect to Taxes for a particular year within the Term shall be
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promptly passed along to Tenant on a pro-rata basis (equal to Tenant's
Proportionate Share thereof).
(d) "Tenant's Proportionate Share" shall for all purposes be deemed to be
the percentage set forth on the Schedule of Lease Terms.
Landlord and Tenant acknowledge that the amount of Additional Rent payable by
Tenant in accordance with this Paragraph 8 could decrease from one calendar year
during the Term to the next calendar year, but that in no event, however, shall
any monthly installment of Rent paid by Tenant during any such year be less than
that specified by Paragraph 6 of this Lease and Paragraph 4 of the Schedule of
Lease Terms.
Landlord agrees to maintain records of all costs reimbursable by Tenant under
the terms of this Lease. All such records shall be maintained in accordance
with generally accepted accounting practices and shall be retained for a period
of one (1) year following the date on which such costs were charged to Tenant.
Tenant shall have the right, through its representatives, to examine, copy and
audit such records at all reasonable times. Each Operating Expense Statement
shall be conclusive and binding upon Tenant unless, within one (1) year after
the date of such Operating Expense Statement, Tenant shall notify Landlord that
it disputes the correctness of Operating Expense Statement, specifying the
respects in which the Operating Expense Statement is claimed to be incorrect.
Pending the determination of such dispute by agreement or otherwise, Tenant
shall pay Additional Rent in accordance with the applicable Operating Expense
Statement, and such payment shall be without prejudice to the position of
Tenant. If the dispute shall be determined in favor of Tenant, Landlord shall
forthwith pay to Tenant the amount of the overpayment by Tenant of Additional
Rent resulting from compliance with Landlord's Operating Expense Statement, and,
if the amount of overpayment is in excess of 5% of the total Operating Expenses
paid by Tenant for such year, Landlord shall also pay to Tenant interest on the
amount of such overpayment from the date of overpayment by Tenant at three
percent (3%) above the prevailing prime rate where the Property is located. If
there is a dispute as to any Operating Expense Statement, either party may refer
the matter in dispute to an independent accounting firm selected by both parties
whose decision shall be binding. If the parties cannot agree upon an
independent accounting firm within thirty (30) days after request by either
party, then either party may seek arbitration in accordance with the rules of
the American Arbitration Association. The fees and expenses of the accounting
firm or the arbitrators shall be borne by the unsuccessful party.
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LATE RENTAL PAYMENTS
--------------------
9. If Tenant fails to pay the Rent due pursuant to Paragraphs 6 and 8 hereof
by the fifth day of any calendar month, or if any other Additional Rent due
under and pursuant to this Lease is not paid on or before the due date
thereof, then Tenant shall pay in addition to the Rent due a late charge
equal to 5% of the Rent then due. Furthermore, if the Rent is not then
paid within 25 days of the due date thereof, Tenant shall pay interest at
the rate (the "Default Rate") equal to the lesser of the (i) highest rate
permitted by law or (ii) 2% per annum above the Prime Rate expressed in
terms of an annual percentage on any Rent which is not paid when due, said
interest to run from the 15th day following the due date thereof until such
Rent is paid.
USE OF PREMISES - RULES & REGULATIONS
-------------------------------------
10. Tenant shall use and occupy the Premises solely for the purpose(s) set
forth on the Schedule of Lease Terms. Tenant shall not use or occupy the
Premises for any other purpose or business without the prior written
consent of Landlord, which shall not be unreasonably withheld or delayed.
Tenant shall observe and comply with the Rules and Regulations, initialed
and attached hereto as Exhibit C and made a part hereof. All such Rules
and Regulations shall apply to Tenant and its employees, agents, licensees,
invitees, sub-tenants and contractors. Any material breach of the Rules
and Regulations hereunder shall, at Landlord's option, constitute a default
under this Lease to the same extent, and shall entitle the Landlord to the
same remedies, as any other default hereunder. Without limitation of any
of the other Rules and Regulations, Tenant agrees that it shall not exceed
the floor load limit of the Building of 150 pounds per square foot.
Landlord agrees that it shall use diligent efforts to enforce the Rules and
Regulations uniformly against all tenants in the Building.
ALTERATIONS AND ADDITIONS
-------------------------
11. (a) Tenant may, at its own expense, and without Landlord's prior consent,
make such changes, alterations, additions or improvements to the
Premises ("Alterations") and install such Tenant Property (as
hereinafter defined) in the Premises as will, in the judgment of
Tenant, better adapt the same for its purposes, provided that Tenant
must obtain Landlord's prior written consent for any structural or
mechanical alterations, which consent shall not be unreasonably
withheld, delayed or qualified.
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(b) All Alterations made by Tenant (other than Tenant's trade fixtures)
shall become, upon expiration of this Lease, the property of Landlord
and shall remain on the Premises, subject to the provisions of
subparagraph 11(e) hereof. Not later than thirty (30) days after the
expiration of the Term, Tenant shall remove all Tenant Property and
repair any damage to the Premises caused by such removal, except for
ordinary wear and tear. For purposes hereof, "Tenant Property" shall
mean Tenant's personal property, furniture, furnishings, signs,
telecommunication equipment, equipment and trade fixtures.
(c) Tenant shall comply with all applicable laws, ordinances, rules,
regulations (including those of Landlord) and codes arising out of
Tenant's activities under this Paragraph 11.
(d) Tenant shall defend, indemnify and save Landlord harmless (including
reasonable attorneys' fees and other costs of defense) from any and
all mechanic's liens placed on the Premises or the Building arising
out of Tenant's activities under this Paragraph 11. Without
limitation of the foregoing, Tenant shall not permit any mechanics' or
materialmen's liens to be filed against the fee of the Premises or
against Landlord's interest in the Premises by reason of work, labor,
services or materials supplied or claimed to have been supplied to
Tenant or anyone holding the Premises through or under Tenant, whether
prior or subsequent to the Commencement Date. If any such mechanics'
or materialmen's liens shall at any time be filed against the Premises
as a result of any alterations, additions, improvements, repairs or
installations performed by or on behalf of Tenant, and Tenant shall
fail to remove same (by bonding or otherwise) within 15 days of the
date Tenant receives notice of the same, it shall constitute a breach
of this Lease.
(e) Anything in this Lease to the contrary notwithstanding, Tenant shall
not be required at any time to remove from the Premises, or restore
(i) any Alterations made with Landlord's consent unless Landlord at
the time it gives such consent expressly requires in writing removal
or restoration of such Alterations; (ii) any of the work described on
Exhibit B; or (iii) any partitions, provided these are cut off or
capped in accordance with applicable codes.
(f) If alterations have been made in corridors, reception rooms or
toilets, or additional toilets, stairways or other facilities have
been installed, or if
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otherwise rentable area has been used for such facilities, the Tenant
will, at the expiration or sooner termination of the Term, if required
by the Landlord or its agent, pay for restoring the area so altered by
Tenant to the form typical in the Building.
(g) Tenant agrees to repair any damage to the Premises caused by, or in
connection with, the removal of any articles of personal property,
business or trade fixtures, alterations, improvements and
installations, including, without limitation thereto, repairing the
floor and patching and painting the walls where required by Landlord
to Landlord's reasonable satisfaction.
BUILDING SERVICES
-----------------
12. Landlord shall provide, within its standards on each item, the following
services and facilities:
(a) Air conditioning, ventilation and heating through the systems of the
Building, Monday through Friday of each week (except legal holidays)
from the hours of 7:00 A.M. to 6:00 P.M. and Saturday from 8:00 A.M.
to 1:00 P.M. ("Normal Business Hours"). For purposes hereof "legal
holidays" mean New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Landlord has the capability
of providing HVAC in half-floor increments. Tenant shall give
Landlord 4 hours notice in the event Tenant desires HVAC outside
Normal Business Hours and Tenant shall pay Landlord its cost for the
same at the then current market rate (Landlord and Tenant acknowledge
and agree that said market rate on the date of execution of this Lease
is $50.00 per hour per floor. In determining such market rate in the
future, Landlord shall use a basis substantially identical to that
used to determine the market rate on the date of execution hereof).
(b) Electric current for Building standard level of illumination using
standard lighting fixtures of Landlord's choice and for ordinary small
business equipment and fixtures, such as, but not limited to,
typewriters, pencil sharpeners, copiers, desk calculators and other
standard personal and office computers connected to the Building's
standard duplex electrical receptacles; and Landlord shall replace
light globes and/or fluorescent tubes in the standard lighting
fixtures initially installed in the Premises by Landlord. The
standard consumption of electricity used in the Premises
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shall be a total connected load (lighting and power) of 4.0 watts per
square foot of any given space or room. If Tenant desires to install
any electrical equipment in addition to the aforesaid or an amount of
equipment which is more than an ordinary executive office amount of
such equipment or if Tenant uses more than the aforesaid standard
consumption of electricity, then the monthly payments of Additional
Rent shall be appropriately increased to reflect the additional
electric consumption caused thereby based upon an electrical survey
procured by Landlord, at the expense of Tenant, provided, however,
that nothing herein shall be construed to require Landlord to furnish
such additional electric current. Tenant acknowledges and agrees that
its computer room shall be separately metered, which shall be done at
Tenant's cost and expense. Upon receiving prior written approval from
Landlord, which shall not be unreasonably withheld or delayed, Tenant
may install, at Tenant's cost, supplemental HVAC systems for the
Premises. Tenant shall pay the actual cost for i) electrical usage for
separately metered supplemental HVAC, and ii) the commercially
reasonable and typical maintenance cost of such supplemental HVAC.
Landlord shall be responsible for contracting for the maintenance of
such HVAC system.
(c) Continuous elevator service during regular business days and normal
business hours, and subject to call at all other times.
(d) Cleaning service as set forth on Exhibit D attached hereto and made a
part hereof.
(e) Security procedures and systems consistent with other first-class
office buildings in the City of Pittsburgh.
(f) Tenant shall be allowed, subject to the reasonable approval of
Landlord, to use Tenant's standard graphics, at Tenant's sole cost and
expense, at the entrance to the Premises. Throughout the Term, Tenant
shall be provided with 3 lines in the Building's directory in the
lobby.
Landlord shall not be liable in damages or otherwise for delay or failure
in furnishing any of the foregoing services or facilities, where such delay
or failure is excusable pursuant to the provisions of Paragraph 29 hereof.
In no event shall such delay or failure, regardless of cause, constitute an
eviction of Tenant or termination of this Lease. Tenant shall be permitted
to abate its Rent payments to the extent such delay or failure in
furnishing the foregoing services is caused by
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Landlord's negligence or intentional misconduct and results in a
substantial portion of the Premises not being useable for their intended
purposes by Tenant for five (5) consecutive days. The Rent shall abate only
for the period of time beyond such five (5) day period and for that portion
of the Premises that is so rendered unusable by Tenant.
For all utility or other services requested by Tenant, which are not
specifically included in this Paragraph 12, Tenant shall pay as Additional
Rent to Landlord Landlord's established charges for such services;
provided, however, that with respect to air conditioning, ventilation or
heating provided to the Tenant, at its request, other than during the hours
set forth above, Tenant shall pay as Additional Rent the then current
market rate for the same (which shall be limited to Landlord's actual
utility cost, depreciation and labor costs associated therewith).
Tenant acknowledges that Landlord shall not provide telephone or
telecommunication services to Tenant. Further, Tenant acknowledges that
Landlord has made no representations or warranties as to the general
fitness of the Building cable, including, but not limited to, telephone
wires, telephone lines, telecommunications cable, riser equipment,
individual pairs and all associated equipment and facilities (the "Cable"),
and Landlord does not and will not warrant the uninterrupted or unimpaired
transmission of messages, data or other signals. To the extent not
prohibited by law, Tenant agrees that Landlord, Landlord's beneficiaries
and their respective partners, affiliates, officers, agents, servants and
employees shall not be liable to Tenant or other persons for any and all
injury, loss or damage, including, but not limited to, lost profits and
economic damages resulting from interruption or failure of the transmission
of messages, data or other signals, whether such interruption or failure is
due to the happening of any occurrence, event or accident in or about the
Building, including the Premises, or due to any act or neglect of any
person other than Landlord, including, but not limited to, Tenant or any
occupant of the Building. Tenant shall not, without the prior written
consent of Landlord, which shall not be unreasonably withheld, alter,
modify or in any way change existing telecommunication equipment or
facilities, including, but not limited to, any addition to or modification
of existing wire closet conditions, or install or cause to be installed any
telecommunications equipment which is in addition to that equipment present
prior to the Commencement Date. At Landlord's request, Tenant shall
furnish to Landlord a detailed description of any additional
telecommunications equipment requested to be installed and an assessment of
the impact upon the Cable and Premises due to the installation of such
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telecommunications equipment and facilities. Tenant further agrees to
indemnify Landlord for any and all damage to the Building and Premises
caused by such installation of telephone equipment and facilities, and upon
request of Landlord, agrees to remove any and all installed equipment and
facilities upon termination of the Lease, whether by expiration of the Term
or otherwise.
ASSIGNMENT AND SUBLETTING
-------------------------
13. Tenant, for itself, its successors, legal representatives and assigns,
expressly covenants that Tenant shall not, either voluntarily or by
operation of law, assign, transfer, mortgage or otherwise encumber this
Lease or sublet the Premises or permit any part thereof to be used or
occupied by anyone other than Tenant or Tenant's employees, without the
prior written consent of Landlord, which shall not be unreasonably
withheld. Tenant may, nevertheless, assign this Lease or sublet the
Premises at any time to a subsidiary or affiliated company without
obtaining Landlord's consent. In the event of any such assignment or
sublet to a subsidiary or affiliated company of Tenant the assignee,
subtenant or surviving corporation shall be deemed the assignee of all
Tenant's rights and obligations under this Lease, provided that Tenant
shall promptly notify Landlord of such assignment or sublet, of the name of
the new tenant and its address, and shall confirm in such notice, which
shall be subscribed by the new tenant, that the new tenant shall have
assumed all of Tenant's obligations hereunder and that such assignment or
sublet shall not be deemed in any manner whatsoever to relieve Tenant of
any of its obligations hereunder. In the event of any assignment or
sublease, no such assignment or sublease shall be deemed a waiver of the
requirements of Landlord's consent to any subsequent assignment or
sublease, and any such consent, if given by Landlord, shall not release
Tenant from its obligations under this Lease unless consented to by
Landlord.
In the event Tenant should desire to assign this Lease or sublet the
Premises or any part hereof except as provided in the preceding paragraph,
Tenant shall give Landlord written notice at least 10 business days in
advance of the date on which Tenant desires to make such assignment or
sublease, which notice shall specify: (a) the name, address and business of
the proposed assignee or sublessee, (b) the amount and location of the
space in the Premises affected, (c) the proposed effective date and
duration of the subletting or assignment, and (d) the proposed rental to be
paid to Tenant by such sublessee or assignee. Landlord shall then have a
period of 10 days following receipt of such notice within which to notify
Tenant in writing that Landlord elects either (i) to terminate this Lease
as to the space so affected as of the date so specified by Tenant, in which
event Tenant will
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on that date be relieved of all future obligations to pay Rent or any other
obligations arising under this Lease as to such space; or (ii) to permit
Tenant to assign or sublet such space, in which event if the proposed
rental rate between Tenant and sublessee is greater than the rental rate of
the Lease, then 50% of such excess rental, after deduction of reasonable
leasing costs, costs of tenant improvements incurred for the sublessee and
commissions actually paid by Tenant in connection with such subletting,
shall be deemed Additional Rent owed by Tenant to Landlord under this
Lease, and the amount of such excess, including any subsequent increases
due to escalation or otherwise, shall be paid by Tenant to Landlord in the
same manner that Tenant pays the Rent hereunder and in addition thereto; or
(iii) provided that Landlord has a reasonable basis for objecting to the
particular subtenant, to withhold consent to Tenant's assignment or
subleasing such space and to continue this Lease in full force and effect
as to the entire Premises. If Landlord should fail to notify Tenant in
writing of such election within said 10 business day period, Landlord shall
be deemed to have elected option (ii) above.
In the event that Tenant lets only a portion of the Premises, Tenant shall
be responsible for paying all costs and expenses incurred in connection
with dividing the Premises into separate suites.
INSPECTION
----------
14. Landlord, its employees, servants and agents shall have the right to enter
the Premises at all reasonable times for the purpose of examining or
inspecting the Premises to see that Tenant is complying with all of its
obligations hereunder, showing the same to prospective purchasers,
mortgagees or tenants of the Building (Landlord shall show the Premises to
prospective tenants of the Premises only during the 180 day period
preceding the expiration of the Term), performing janitorial and cleaning
services, and making such alterations, repairs, improvements or additions
to the Premises or to the Building as Landlord may deem necessary or
desirable, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction of Tenant in whole or in part, and the Rent reserved shall in no
way abate while said alterations, repairs, improvements or additions are
being made, by reason of loss or interruption of business of Tenant, or
otherwise, provided that such work is diligently prosecuted to completion
by Landlord in a workmanlike fashion. If representatives of Tenant shall
not be present to open and permit entry into the Premises at any time when
such entry by Landlord is necessary or permitted hereunder, Landlord may
enter by means of a master key
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(or forcibly in the event of an emergency) without liability to Tenant and
without such entry constituting an eviction of Tenant or termination of
this Lease. Landlord agrees to use reasonable efforts to notify Tenant in
advance of Landlord's intention to enter the Premises in accordance with
this Paragraph 14, except in emergency situations. Landlord shall use
reasonable efforts to minimize interference with Tenant's business in the
exercise of Landlord's rights pursuant to this Paragraph 14, and shall use
reasonable efforts to give Tenant prior notice of its intention to enter
the Premises in non-emergency situations, and subsequent notice respecting
entries of Landlord that occur in Tenant's absence.
REPAIRS
-------
15. During the Term, Landlord shall, at its sole expense, perform with
reasonable diligence and promptness and in a good and workmanlike manner
all maintenance, repairs and replacements reasonably deemed necessary by
Landlord to (i) the structural components of the Building, including the
roof, exterior walls, bearing walls, support beams, foundations, columns,
exterior doors and windows and lateral support to the Building; (ii) assure
watertightness of the Building, including the Premises (including caulking
of the flashings) and repairs to the roof, curtain walls, windows, and
skylights, if required, to assure watertightness; (iii) the plumbing, fire
sprinkler, heating, ventilation and air conditioning systems and electrical
lines and equipment associated therewith, including elevators; (iv) the
common areas of the Building, including its lighting systems; (v) exterior
improvements to the Building, including walkways, shrubbery and
landscaping, if any and (vi) glass cleaning and replacements; provided,
however, that Landlord shall pursue with reasonable diligence such repairs
after Landlord becomes aware, or that Landlord should have become aware
through the exercise of reasonable diligence or receipt of written notice
from Tenant that such repair is needed. In no event shall Landlord be
obligated under this Paragraph to repair any damage caused by any act,
omission or negligence of Tenant or its employees, agents, invitees,
licensees, subtenants or contractors.
Except as Landlord is obligated for repairs as provided hereinabove, Tenant
shall make, at its sole cost and expense, all repairs necessary to maintain
the Premises and shall keep the Premises and the fixtures therein neat and
in orderly condition. If Tenant refuses or neglects to make such repairs,
or fails to diligently prosecute the same to completion, after written
notice from Landlord of the need therefor, Landlord may make such repairs
at the expense of Tenant and Tenant shall pay as Additional Rent Landlord's
cost to make such repair.
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Landlord shall not be liable by reason of any injury to, or interference
with, Tenant's business arising from the making of any repairs,
alterations, additions or improvements in or to the Premises or the
Building or to any appurtenances or equipment therein. There shall be no
abatement of Rent because of such repairs, alterations, additions or
improvements, except as provided in Paragraph 19 hereof and except if such
repairs, etc. are necessitated by Landlord's negligence or intentional
misconduct and result in a substantial portion of the Premises not being
usable for their intended purposes by Tenant for 5 consecutive days. The
Rent shall abate only for the period of time beyond such five (5) day
period and for that portion of the Premises that is so rendered unusable by
Tenant.
Notwithstanding any other provisions herein, Landlord shall not be liable
to Tenant for any damage to Tenant's furniture, fixtures or other
personalty occasioned by plumbing, electrical, gas, water, steam or other
utility pipes, systems or facilities or by the bursting, stopping, leaking
or running of any tank, sprinkler, washstand, water closet or pipes in or
about the Premises or the Building, or for any damage to the same
occasioned by water, snow or ice being upon or coming through or around the
roof or any flashing, window, skylight, vent, door, or the like unless
directly resulting from Landlord's negligence or intentional misconduct.
Landlord shall not be liable to Tenant for any negligent act or omission of
Tenant nor shall Landlord be liable to Tenant for any damage arising out of
any acts or neglect of other tenants of the Building, occupants of the
Building, occupants of adjacent property or the public.
SURRENDER OF PREMISES
---------------------
16. Tenant shall surrender the Premises to Landlord at the expiration or sooner
termination of the Term in the condition specified in Paragraph 11 hereof
without notice of any kind, and Tenant waives all right to any such notice
as may be in effect in Pennsylvania, including, without limitation, the
Landlord and Tenant Act of 1951, as amended. The provisions of this
Paragraph shall survive the expiration or sooner termination of this Lease.
INDEMNIFICATION AND LIABILITY
-----------------------------
17. Each party shall defend, indemnify and save harmless the other against all
claims, liabilities, losses, damages, costs and expenses (including
reasonable attorneys' fees and other costs of defense) because of injury,
including death, to any person, or damage or loss of any kind to any
property caused by the negligence or
20
<PAGE>
misconduct of such party, its agents, employees or contractors, or by such
party's failure to perform its obligations under this Lease.
INSURANCE
---------
18. (a) Landlord shall maintain, at its expense, during the Term, with solvent
and responsible companies, fire insurance, with standard "all risk"
coverage for the Building. Such coverage shall equal one hundred
percent (100%) of the replacement cost of the Building (including,
without limitation, improvements made pursuant to the Work Agreement),
as determined by Landlord in its sole and absolute discretion
exclusive of architectural and engineering fees, excavation, footings
and foundations.
(b) Landlord shall maintain, at its expense, during the Term, with solvent
and responsible companies, comprehensive general liability insurance
covering injuries occurring on the Property, which shall provide for a
combined coverage for bodily injury and property damage in an amount
not less than Three Million Dollars ($3,000,000).
(c) Tenant shall maintain, at its expense, during the Term, with solvent
and responsible companies, comprehensive general liability insurance
for the Premises in a combined coverage for bodily injury and property
damage in an amount not less than Three Million Dollars ($3,000,000).
Tenant shall name Landlord, and any mortgagee of which Landlord has
advised Tenant, as additional insureds under such policy.
(d) Tenant shall maintain, at its expense, during the Term, with solvent
and responsible companies, all risks insurance including extended
coverage endorsement for such additional perils as Landlord shall
reasonably require from time to time in respect of Tenant's fixtures,
Tenant's furnishings, Tenant's equipment, and such other property of
Tenant in the Premises as Landlord may from time to time require. The
aforesaid policy or policies shall be written with insurance limits of
not less than the full replacement cost thereof, on a stated amount
basis, subject only to such deductibles and exclusions as Landlord may
approve, which approval shall not be unreasonably withheld.
(e) The policy or policies evidencing such insurance for paragraphs 18(a),
(b), (c) and (d) shall provide that they may not be cancelled or
amended without fifteen (15) days prior written notice being given to
the party for
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<PAGE>
whose benefit such insurance has been obtained. Prior to the
Commencement Date, each party shall submit to the other insurance
certificates demonstrating the required policies are in effect.
(f) Tenant shall not keep or use in or upon the Premises any article which
may be prohibited by any insurance policy in force from time to time
covering the Premises or the Building. If the occupancy of the
Premises, the conduct of business in the Premises or any act or
omission of Tenant in the Premises, causes or results in any increase
in premiums for the insurance carried from time to time by Landlord
with respect to the Building, Tenant shall pay to Landlord as Rent
forthwith on demand the cost of any increase in premiums.
(g) The parties release each other and their respective authorized
representatives from any claims for damage to the Building or the
Premises that are caused by or result from risks insured against under
any risk or fire insurance policies carried by either of the parties.
Each party to the extent possible shall obtain, for each policy of
insurance, provisions permitting waiver of any claims against the
other party for loss or damage within the scope of the insurance and
each party to the extent permitted, for itself and its insurer, waives
all such insured claims against the other party. Any liability that
either party may have against the other shall be limited to the amount
that exceeds the amount of insurance proceeds received by the
indemnified party.
DAMAGE AND DESTRUCTION
----------------------
19. If and whenever both (i) all or 20% or more of the rentable area of the
Building, or 20% or more of the rentable area of the Premises shall be
damaged or destroyed by any cause or in the reasonable opinion of Landlord
the Building is rendered unsafe, whether or not the Premises are affected
thereby, and (ii) in Landlord's reasonable opinion the Building or the
Premises cannot with the exercise of reasonable diligence be repaired,
restored or rebuilt within a period of 180 days after the happening of such
damage or destruction, Landlord or Tenant may terminate this Lease upon 60
days' notice given within 30 days after the happening of such damage or
destruction and upon the expiration of the 60 day notice period Tenant
shall surrender the Premises to Landlord and Rent shall be apportioned to
the date of such termination.
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If and whenever the Premises are damaged or destroyed by any cause and this
Lease shall not have been terminated by Landlord, Landlord shall with all
reasonable diligence make the repairs specified in Paragraph 15 hereof and
Tenant shall with all reasonable diligence and at its sole expense make all
other repairs and do all other items of work which are necessary properly
to complete the Premises for use and occupancy by Tenant. All such repairs
and work by Tenant shall be carried out in accordance with the requirements
of Paragraph 11 hereof.
If, as a result of any damage or destruction to the Premises which Landlord
is obligated to repair under the provisions of Paragraph 15 hereof
(including the Tenant Improvements to be made pursuant to the Work
Agreement) and which is not merely an interruption of or interference with
any utility, service or access, the Premises are rendered in whole or in
part unfit for use and occupancy by Tenant, then during the period
following the occurrence of such damage or destruction and ending upon the
earlier of:
(a) the date on which the repairs to the Premises which Landlord is
obligated to make as aforesaid are completed sufficiently to enable
Tenant to commence the repairs it is obligated to make and Tenant has
had a reasonable period of time within which its repairs could have
been completed with due diligence; and
(b) the date on which the proceeds of any loss of rental income insurance
attributable to any shortfall in Rent from the Premises is no longer
paid to Landlord;
Rent shall abate in the same proportion that that part of the rentable area
of the Premises which is incapable of use is to the rentable area of the
Premises.
CONDEMNATION
------------
20. If the whole of the Premises shall be condemned or taken either permanently
or temporarily for any public or quasi-public use or purpose, under any
statute or by right of eminent domain, or by private purchase in lieu
thereof, then and in that event, the Term shall cease and terminate from
the date of possession of the Premises by such condemning authority, and
Tenant shall have no claims against Landlord for the value of any unexpired
Term, and shall release unto Landlord any such claim it may have against
the condemnor, except to the extent set forth in the last sentence of this
Paragraph 20. In the event that 20% or more of the
23
<PAGE>
Building or 20% or more of the rentable area of the Premises shall be so
taken, Landlord may elect to terminate this Lease from the date of title
vesting in such proceeding or purchase, or Landlord may elect to repair and
restore, at its own expense, the portion not taken and thereafter the Rent
shall be reduced proportionately (i.e. based on the ratio that the square
feet of rentable area in the Premises immediately prior to such
condemnation bears to the square feet of rentable area in the Premises
remaining thereafter). If 20% or more of the Building or 20% or more of the
rentable area of the Premises shall be so taken, Tenant may cancel and
terminate this Lease effective as of the date possession of such portion
condemned shall be taken by such condemning authority, provided that such
option to cancel is exercised within 60 days of the receipt of notice by
Tenant to the effect that such condemnation exceeds 20% of the Building or
20% of the rentable area of the Premises.
In the event the Premises or any part thereof shall be permanently taken or
condemned or transferred by agreement in lieu of condemnation for any
public or quasi-public use or purpose by any competent authority, the
entire compensation award therefor, both leasehold and reversion, shall
belong to Landlord without any deduction therefrom for any present or
future estate of Tenant, and Tenant hereby assigns to Landlord all its
right, title and interest to any such award. Tenant shall execute all
documents required to evidence such result. Tenant shall, however, be
entitled to claim, prove and receive in such condemnation proceedings such
award as may be allowed for moving expenses, stationery costs, fixtures and
other equipment installed by it but only if or to the extent such award
shall be in addition to the award for the Land and the Building and other
improvements (or portions thereof) forming part of the Premises.
SUBORDINATION AND ATTORNMENT
----------------------------
21. Landlord represents that there currently is no mortgage encumbering the
Building. Landlord is hereby vested with full power and authority to
subordinate Tenant's interest hereunder to the lien of any mortgage which
may hereafter be placed on the Building and to all renewals, modifications,
consolidations and replacement of such mortgage. As a condition to the
subordination of Tenant's interest hereunder to any future mortgage
encumbering the Building, Landlord shall obtain and deliver to Tenant from
any future mortgagee a written non-disturbance agreement in recordable form
providing that so long as Tenant performs all of the terms, covenants and
conditions of this Lease and agrees to attorn to the mortgagee or purchaser
at a foreclosure sale, Tenant's rights under this Lease shall not be
disturbed and shall remain in full force and effect for the
24
<PAGE>
Term, and Tenant shall not be named or joined by the holder of any mortgage
in any action or proceeding to foreclose thereunder.
ESTOPPEL CERTIFICATES
---------------------
22. Tenant and Landlord shall, at any time and from time to time, within 15
days following receipt of written request from the other, execute,
acknowledge and deliver to the other a written statement certifying that
this Lease is in full force and effect and unmodified (or, if modified,
stating the nature of such modification), certifying the date to which the
rent reserved hereunder has been paid, and certifying that there are not,
to such party's knowledge, any uncured defaults on the part of the other
hereunder, or specifying such defaults if any are claimed. Any such
statement given by Tenant may be relied upon by any prospective purchaser
or mortgagee of all or any part of the Building or Land. Tenant's failure
to deliver such statement within the said 15 day period shall be conclusive
upon Tenant that this Lease is in full force and effect and unmodified (or,
if modified, stating the nature of such modification), and that there are
no uncured defaults in Landlord's performance hereunder.
DEFAULT
-------
23. The occurrence of any of the following shall, at Landlord's option,
constitute a material default and breach of this Lease by Tenant:
(a) A failure by Tenant to pay the Rent reserved herein, or to make any
other payment required to be made by Tenant hereunder, where such
failure continues for 10 days after Landlord provides Tenant with
written notice of such failure;
(b) A failure by Tenant to observe and perform any other provisions or
covenants of this Lease to be observed or performed by Tenant, where
such failure continues for 30 days after receipt of written notice
thereof from Landlord to Tenant, provided, however, that if the nature
of the default is such that the same cannot reasonably be cured within
such 30 day period, Tenant shall not be deemed to be in default if
Tenant shall within such period commence such cure and thereafter
diligently prosecute the same to completion;
(c) The making by Tenant of any assignment for the benefit of creditors;
the adjudication that Tenant is bankrupt or insolvent; the filing by
or against
25
<PAGE>
Tenant of a petition to have Tenant adjudged a bankrupt or a petition
for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is
dismissed within 60 days after the filing thereof); the appointment of
a trustee or receiver to take possession of substantially all of
Tenant's assets located in the Premises or of Tenant's interest in
this Lease (unless possession is restored to Tenant within 30 days
after such appointment); or the attachment, execution or levy against,
or other judicial seizure of, substantially all of Tenant's interest
in this Lease (unless the same is discharged within 30 days after
issuance thereof).
ACCELERATED RENT
----------------
24. In the event of any default or breach of this Lease by Tenant as set forth
in Paragraph 23 hereof, the Rent reserved herein for the entire unexpired
portion of the Term shall, at Landlord's option, thereupon immediately
become due and payable; discounted to the then present value at the
discount rate of the Federal Reserve Bank having jurisdiction over
Pittsburgh, Pennsylvania in effect at the time of the default. In
determining the amount of any future payments due Landlord due to increases
in Taxes and Operating Expenses, Landlord may make such determination based
upon the amount of Taxes and Operating Expenses paid by Tenant for the
calendar year immediately prior to such default. Tenant shall be obligated
for such accelerated Rent regardless of which, if any, of the remedies
provided in Paragraph 25 hereof or provided by law Landlord elects to
pursue.
REMEDIES
--------
25. In the event of any default or breach of this Lease by Tenant as set forth
in Paragraph 23 hereof, Landlord, at its option, may terminate this Lease
upon and by giving written notice of termination to Tenant, or Landlord,
without terminating this Lease, may at any time after such default or
breach, without notice or demand additional to that provided in Paragraph
23 hereof, and without limiting Landlord in the exercise of any other right
or remedy which Landlord may have by reason of such default or breach
(other than the aforesaid right of termination) exercise any one or more of
the remedies hereinafter provided in this Paragraph or as otherwise
provided by law, all of such remedies (whether provided herein or by law)
being cumulative and not exclusive:
(a) Landlord may perform for the account of Tenant any defaulted term or
covenant on Tenant's part to be observed or performed, and recover as
26
<PAGE>
Rent any expenditures made and the amount of any obligations incurred
in connection therewith.
(b) Subject to applicable law, Landlord may enter the Premises (without
thereby incurring any liability to Tenant unless Landlord is negligent
and without such entry being constituted an eviction of Tenant or
termination of this Lease) and take possession of the Premises at any
time and from time to time to let the Premises or any part thereof for
the account of Tenant, for such terms, upon such conditions and at
such rental as Landlord may deem reasonable and proper. In the event
of such reletting, (i) Landlord shall receive and collect the rent
therefrom and shall first apply such rent against such expenses as
Landlord may have incurred in recovering possession of the Premises,
placing the same in good order and condition, altering or repairing
(in a commercially reasonable manner) the same for reletting, and such
other expenses, commissions and charges, including reasonable
attorneys' fees and real estate commissions, which Landlord may have
paid or incurred in connection with such repossession and reletting,
and then shall apply such rent against the accelerated Rent, and (ii)
Landlord may execute any lease in connection with such reletting, and
the tenant of such reletting shall be under no obligation to see to
the application by Landlord of any rent collected by Landlord.
(c) The parties hereto hereby waive their right to require a trial (or
determination of fact) by jury in any action or proceeding or
counterclaim between the parties in any way connected with this Lease,
the relationship of Landlord and Tenant, Tenant's use or occupancy of
the Premises, and/or any claim of injury or damage.
CONFESSION OF JUDGMENT AND EJECTMENT
------------------------------------
26. INTENTIONALLY DELETED
WAIVER
------
27. The failure or delay on the part of either party to enforce or exercise at
any time any of the provisions, rights or remedies in this Lease shall in
no way be construed to be a waiver thereof, nor in any way to affect the
validity of this Lease or any part hereof, or the right of the party to
thereafter enforce each and every such provision, right or remedy. No
waiver of any breach of this Lease shall be held to be a waiver of any
other or subsequent breach. The receipt by
27
<PAGE>
Landlord of Rent at a time when the Rent is in default under this Lease
shall not be construed as a waiver of such default, unless the payment
fully remedies the default. The receipt by Landlord of a lesser amount than
the Rent due shall not be construed to be other than a payment on account
of the Rent then due, nor shall any statement on Tenant's check or any
letter accompanying Tenant's check be deemed an accord and satisfaction,
and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of the Rent due or to pursue any other remedies
provided in this Lease. No act or thing done by Landlord or Landlord's
agents or employees during the Term shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept such a surrender
shall be valid unless in writing and signed by Landlord.
QUIET ENJOYMENT
---------------
28. If and so long as Tenant pays the Rent reserved hereunder and observes and
performs all of the covenants, conditions and provisions on Tenant's part
to be observed and performed hereunder, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises for the entire Term hereof,
subject nevertheless to all of the provisions of this Lease including, but
not limited to, all mortgages, encumbrances and other matters and things
referred to in Paragraph 20 hereof.
UNAVOIDABLE DELAY
-----------------
29. In the event that either party shall be delayed or hindered in, or
prevented from, the performance of any work, service or other act required
under this Lease to be performed by the party and such delay or hindrance
is due to strikes, lockouts, acts of God, governmental restrictions, enemy
act, civil commotion, unavoidable fire or other casualty, or other causes
of a like nature beyond the control of the party so delayed or hindered,
then performance of such work, service, or other act shall be excused for
the reasonable period of such delay and the period for the performance of
such work or other act shall be extended for a period equivalent to the
period of such delay. In no event shall such delay constitute a
termination of this Lease. The provisions of this Paragraph shall not
operate to excuse Tenant from the prompt payment of Rent.
SUCCESSORS AND MULTIPLE PARTIES
-------------------------------
30. The respective rights and obligations provided in this Lease shall bind and
shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors and permitted assigns; provided,
however, that no rights shall inure to
28
<PAGE>
the benefit of any successor of Tenant unless Landlord's written consent
(which consent shall not be unreasonably withheld or delayed) for the
transfer to such successor has first been obtained as provided in Paragraph
13 hereof. If at anytime the Tenant shall include more than one person or
entity, the obligations of all such persons or, entities shall be joint and
several. In the event that this Lease is executed by any partner on behalf
of a partnership, this Lease shall be a binding obligation upon all
partners of such partnership.
GOVERNING LAW
-------------
31. This Lease shall be construed, governed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania, without giving effect to the
principles of conflicts of laws in effect in the Commonwealth of
Pennsylvania. Landlord and Tenant consent to the jurisdiction and venue of
the state and if permissible under federal law, federal courts situated in
Allegheny County, Pennsylvania.
SEPARABILITY
------------
32. If any provision of this Lease shall be held to be invalid, void or
unenforceable, the remaining provisions hereof shall in no way be affected
or impaired and such remaining provisions shall remain in full force and
effect.
CAPTIONS
--------
33. Marginal captions, titles of exhibits and riders to this Lease, are for
convenience and reference only and are in no way to be construed as
defining, limiting or modifying the scope or intent of the various
provisions of this Lease.
GENDER
------
34. As used in this Lease, the word "person" shall mean and include, where
appropriate, an individual, corporation, partnership or other entity; the
plural shall be substituted for the singular, and the singular for the
plural, where appropriate; and words of any gender shall mean to include
any other gender.
NOTICES
-------
35. Any bill, statement, notice or communication required or permitted
hereunder shall be deemed sufficiently given if sent by certified mail, or
by hand delivery or
29
<PAGE>
telecopy, with confirmation in writing sent by certified mail, addressed as
follows:
To Landlord: Commerce Court Property Holding Trust
c/o Management Office Commerce Court Building
Four Station Square, Suite 760
Pittsburgh, Pennsylvania 15219
Facsimile No. (412) 642-6617
To Tenant: At address set forth in Paragraph 1 of Schedule of Lease
Terms or addressed to Tenant at the Premises after the
Commencement Date
Facsimile No. (412) 642-5095
Either party may change its address by written notice so given to the
other. Notice shall be deemed given when mailed, except that a notice of
change of address shall be deemed effective when received.
BROKERS
-------
36. Tenant represents and warrants that in this transaction it has dealt with
no real estate broker other than the brokers identified in the Schedule of
Lease Terms, and that no one has or will represent it in this transaction
other than aforesaid.
LEASE NOT AN OFFER
------------------
37. The submission of this Lease to Tenant should not be construed as an offer,
nor shall the Tenant have any rights with respect thereto unless and until
Landlord shall execute a copy of this Lease and deliver the same to Tenant.
RENT CONTROL
------------
38. INTENTIONALLY DELETED
LANDLORD'S EXCULPATORY
----------------------
39. Anything contained in the foregoing to the contrary notwithstanding, Tenant
agrees that it shall look solely to the estate and property of the Landlord
in the Land and Building of which the Premises form a part, for the
collection of any judgment (or other judicial process) requiring the
payment of money by Landlord, in the event of any default or breach by
Landlord with respect to any of
30
<PAGE>
the terms, covenants and conditions of this Lease to be observed and/or
performed by Landlord, and no other property or assets of Landlord shall
become subject to levy, execution, attachment or other enforcement
procedures for the satisfaction of Tenant's remedies. If the Land and
Building of which the Premises form a part are transferred or conveyed,
Landlord shall be relieved of all covenants and obligations under this
Lease thereafter accruing and Tenant shall look to such transferee
thereafter.
RELOCATION OF TENANT
--------------------
40. INTENTIONALLY DELETED
COMPLIANCE WITH LAWS
--------------------
41. Tenant shall, at its expense, comply with all laws, orders, ordinances,
regulations and rules of all governmental authorities having jurisdiction
and the Insurance Advisory organization (collectively, "Legal
Requirements") with respect to the particular manner in which Tenant shall
use or occupy the Premises, as opposed to office use generally. Tenant
shall give Landlord prompt notice of any violation or recommendation of
change of which it shall have received notice. Tenant shall not do or
permit to be done any act or thing which will invalidate or be in conflict
with any certificate of occupancy in effect for the Premises.
Landlord certifies to Tenant that to the best of Landlord's knowledge, the
public or common areas of the Building comply with the Americans With
Disabilities Act of 1990 (the "ADA"). Landlord agrees that it shall be
responsible for any portions of the public or common areas of the Building
that do not comply with all Legal Requirements (including the ADA). Tenant
hereby accepts responsibility for the compliance of the Premises with the
ADA from and after the Commencement Date.
EXHIBITS
--------
42. Attached to this Lease and made part hereof, and initialed on behalf of
both parties simultaneously with the execution of this Lease are Exhibits A
to D, inclusive, and the Schedule of Lease Terms.
31
<PAGE>
MODIFICATIONS
-------------
43. This Lease, including the Exhibits and the Schedule of Lease Terms,
contains all the agreements, conditions, understandings, representations
and warranties made between the parties hereto with respect to the subject
matter hereof and may not be modified orally or in any manner other than by
an agreement in writing signed by both parties hereto or their respective
successors in interest.
HOLDOVER BY TENANT
------------------
44. In the event Tenant lawfully remains in possession of the Premises after
the expiration of the Term or any renewal thereof, and without the
execution of a new lease, Tenant, at the sole option of the Landlord, shall
be deemed to be occupying the Premises from month-to-month; provided,
however that Tenant shall continue to pay monthly installments of Total
Minimum Rent as set forth on the Schedule of Lease Terms and that all the
terms and conditions of this Lease shall continue for the period during
which such holdover tenancy exists, and Tenant shall comply therewith.
RENEWAL OPTIONS
---------------
45. (a) If this Lease shall not have been terminated pursuant to any
provisions hereof, and Tenant shall not have defaulted hereunder
beyond any applicable cure period, then Tenant may, at Tenant's
option, extend the Term for two additional successive terms of five
(5) years each (an "Option Term" or the "Option Terms"). Tenant must
exercise its options to extend this Lease by giving Landlord written
notice thereof (the "Renewal Notice") at least 240 days prior to (a)
the Expiration Date (in the case of the exercise of the first Option
Term), and (b) the expiration of the first Option Term (in the case of
the exercise of the second Option Term). Upon the giving by Tenant to
Landlord of the Renewal Notice with respect to a particular Option
Term and compliance by Tenant with the provisions of this Paragraph
and the failure of Tenant to exercise its rights with respect to a
particular Option Term as provided in subparagraph (b) hereof, the
Term of this Lease shall be deemed to be automatically extended for
such Option Term upon all of the covenants, agreements, terms,
provisions, and conditions set forth in this Lease, except that the
Total Minimum Rent for the Premises set forth in Paragraph 4 of the
Schedule of Lease Terms shall be 95% of the then prevailing rate per
annum for comparable space in the Building for
32
<PAGE>
renewals with a five-year term. Landlord agrees to give Tenant written
notice (the "Rental Rate Notice") of such prevailing rate per annum
(as determined by Landlord in good faith) for a particular Option Term
not less than 60 days after Landlord receives the Renewal Notice for
such Option Term.
(b) Notwithstanding the provisions of subparagraph (a) hereof, Tenant
shall have the right to revoke its exercise of an extension of this
Lease for a particular Option Term within thirty (30) days of its
receipt of the Rental Rate Notice for such Option Term.
(c) During the Option Terms, Tenant shall continue to pay Additional Rent.
The Base Year during the first Option Term shall be the Calendar Year
2002, and during the second Option Term, the Calendar Year 2007.
(d) Tenant may not renew the Lease for the second of the Option Terms
unless Tenant has elected to renew the Lease for the first Option
Term, and has not exercised its rights pursuant to subparagraph (b)
hereof with respect to the first Option Term.
ABATEMENT
---------
46. (a) Notwithstanding anything to the contrary in Paragraph 4 of the
Schedule of Lease Terms, monthly installments of Total Minimum Rent
shall be abated for the following months only: September through
December 1995, plus any period prior to September 1995 that Tenant may
occupy the Premises (the "Abatement Period"). The Abatement Period
shall be extended day for day for each day that the Premises are not
ready for occupancy by Tenant solely by reason of Landlord's failure
to perform its obligations under the Work Agreement. If Tenant shall
default hereunder and fail to cure said default within any applicable
grace period, while the Abatement Period is in effect, the Abatement
Period shall thereupon terminate and Tenant shall commence paying
monthly installments of Total Minimum Rent hereunder (without limiting
Landlord's remedies hereunder, at law, in equity or otherwise). In
addition, if Tenant shall default hereunder and fail to cure said
default within any applicable grace period, Tenant shall upon demand
pay Landlord the amount of Total Minimum Rent theretofore abated,
multiplied by a fraction, the numerator of which is the number of
months then remaining in the Term at the time of the default and the
denominator of which is the total number of months
33
<PAGE>
in the Term (without limiting Landlord's remedies hereunder, at law,
in equity or otherwise).
(b) Tenant shall not be responsible for paying for Additional Rent
attributable to increases in Operating Expenses and Taxes in the 1996
calendar year over the amount of such items in the Base Year to the
extent (but only to the extent) that such increases exceed 5% of the
amount of the Operating Expenses and Taxes in the Base Year i.e., if
such increases in the 1996 Calendar Year exceed 5% of the Operating
Expenses and Taxes in the Base Year, the Tenant shall be responsible
for paying such 5% increase for the 1996 Calendar Year, but not in
excess of such amount. The foregoing limitation shall apply to the
1996 Calendar Year only. (The dollar amount of Additional Rent for
which Tenant is relieved of responsibility for paying in 1996 pursuant
to this subparagraph 46(b) is herein referred to as the "1996
Additional Rent Abatement").
MOVE-IN AND MOVING ALLOWANCE
----------------------------
47. When Tenant takes occupancy of the Premises and executes and delivers to
Landlord an estoppel certificate in accordance with Paragraph 22 hereof,
Landlord, within 30 days of the later to occur of such events, shall
provide Tenant with an allowance for the costs and expenses of moving which
shall be a sum that is equal to the number of rentable square feet in the
Premises multiplied by $2.00 per rentable square foot (i.e. $107,008). Any
portion of such $107,008 allowance that is not used by Tenant as a moving
allowance may be added to the design allowance to be provided to Tenant in
accordance with Paragraph 48 hereof.
DESIGN ALLOWANCE
----------------
48. When Tenant executes and delivers the Lease to Landlord and submits written
invoices to Landlord and such other backup information as Landlord may
reasonably request, Landlord shall provide Tenant with an allowance for the
cost and expense of the preparation of Tenant's plans, construction
drawings and engineering drawings which shall be a sum that is equal to the
number of rentable square feet in the Premises multiplied by $2.25 per
rentable square foot (i.e. $120,384). Tenant's architect will be
responsible for stamping Tenant's final working drawings and construction
documents.
34
<PAGE>
PARKING SPACES
--------------
49. Pursuant to that certain Reciprocal Easement and Operating Agreement by and
between Pittsburgh History and Landmarks Foundation and Commerce Court
Associates dated May 19, 1981, as amended, Landlord has allocated to it a
certain number of parking spaces located either in the parking garage or on
surface lots related to the Building. Although allocated, these parking
spaces must be rented from Pittsburgh History Landmarks Foundation directly
by employees of Tenant. The parking spaces are and shall be subject to
certain rules and regulations which Pittsburgh History & Landmarks
Foundation shall promulgate from time to time.
SATELLITE TERMINAL
------------------
50. Tenant shall be permitted to install as its personal property, at its sole
cost and expense, a satellite dish, microwave antenna and other related
equipment (collectively, the "Terminal") on the roof of the Building for
its exclusive use in a location mutually acceptable to Landlord and Tenant,
so long as the Terminal complies with any and all applicable laws, rules
and regulations, including, without limitation, structural standards and
safety requirements of the Building. The method of installation shall be
acceptable to Landlord, and Tenant shall be responsible for, and procure at
its sole cost and expense, any permits or zoning variances necessary for
the installation and operation of said Terminal. Landlord shall cooperate
with Tenant, at Tenant's sole cost and expense, in the procurement of
necessary permits or zoning variances and shall execute all documents
reasonably required to obtain necessary permits or zoning variances. At
the end of the Term (as extended or renewed, if applicable) Tenant, if
directed to do so by Landlord, shall remove the Terminal and any and all of
the necessary wiring and equipment concurrent therewith, and shall restore
the portion of the roof which may have been damaged by removal of the
Terminal to the condition which existed prior to the installation, normal
wear and tear excepted.
In the event Landlord contemplates roof repairs or requires access which
requires temporary removal or relocation of the Terminal, or which may
result in an interruption in Tenant's telecommunication services, Landlord
shall formally notify Tenant at least thirty (30) business days prior to
such contemplated work in order to allow Tenant to make other arrangements
for such services. The cost of removal and reinstallation of the Terminal
shall be borne by Tenant.
Tenant or its agents or representatives shall, at all times during business
hours, with advance notice to Landlord and with a building engineer or
security guard
35
<PAGE>
providing access, be permitted access to the roof, common equipment rooms,
common telephone rooms and condensers for purposes of examination and
repair of the Terminal and any wiring or equipment incident thereto. Tenant
acknowledges and agrees that Tenant's access to the roof is restricted due
to other tenant equipment and services.
Tenant shall not be required to pay rent for roof space for the Terminal,
provided, however, Tenant shall pay and be fully responsible for, inter
alia, all costs related to any and all utilities used by Tenant in
connection with the Terminal, any and all construction costs associated
with the Terminal and any necessary insurance which may be required.
Tenant agrees to carry such insurance on the Terminal as shall reasonably
be requested by Landlord.
HAZARDOUS MATERIALS
-------------------
51. (a) Landlord certifies that to the best of its knowledge, there are no
hazardous substances located in or on the Premises and that there has
been no violation of any law governing hazardous substances with
respect to the Premises or the Building. Because of the inability to
properly access the soil beneath the Building ("subbasement soils"),
Landlord has been unable to conduct proper studies of the presence or
absence of hazardous substances in the subbasement soil. Tests of the
shallow subbasement soils indicate levels of lead higher than typical
background levels, probably as a result of the existence of a railroad
line on the site prior to the original construction of the Building
(circa 1900). Because of the lack of access to the soils beneath the
Building, which are essentially encapsulated (and the fact that the
lead levels appear to be consistent with those found on comparable
properties constructed on former railroad or industrial sites),
Landlord believes that if such substances do exist in the subbasement
soils, they present no threat whatsoever to tenants or occupants of
the Building or others.
(b) Tenant agrees to comply with all applicable environmental laws, rules
and regulations insofar as they pertain solely to the particular
manner in which Tenant shall use the Premises.
(c) Tenant shall not generate, store, transport, treat, dispose of or use
on the Premises hazardous or toxic substances or wastes as defined
under any
36
<PAGE>
applicable federal, state, county, or local law or regulation
("Hazardous Substances"), except that Tenant's use on the Premises of
cleaning supplies, copying fluids, other office and maintenance
supplies and other substances normally and customarily used by tenants
of space similar to the Premises shall not be deemed a violation of
this Paragraph 51(c).
(d) Each of Landlord and Tenant agrees to indemnify, defend and save
harmless the other from any breach of the indemnifying party's
certifications, duties, or obligations under this Paragraph 51.
RIGHT OF FIRST OFFER
--------------------
52. (a) Subject to the provisions of Subparagraph 52(b) hereof, during the
Term, or any extension thereof, Tenant shall have a right of first
offer, as herein specified, to lease all space on the seventh (7th)
floor of the Building not contained in the Premises as of the date
hereof (the "Right of First Refusal Space"). If, during such
specified period (and subject to Subparagraph 52(b) hereof) Landlord
desires to lease all or any portion of the Right of First Refusal
Space, Landlord will provide Tenant with a written notice specifying
the date of availability and the market terms for the Right of First
Refusal Space. Tenant will respond to Landlord in writing within ten
(10) days of the Landlord's notice if it elects to lease the Right of
First Refusal Space. The terms and provisions for the Right of First
Refusal Space shall be the same as set forth in this Lease except that
the Total Minimum Rent for the Right of First Refusal Space shall be
equal to the Total Minimum Rent that Tenant is then paying (on a per
square foot basis) for the Premises. Landlord shall provide
improvements to and improvement allowances for the Right of First
Refusal Space consistent with those provided pursuant to the Work
Agreement, prorated, however, based on the amount of time that will be
remaining in the Term when the Right of First Refusal Space becomes
available for occupancy by Tenant as compared to the original length
of the Term (i.e. - 84 months). Tenant shall pay Additional Rent for
the Right of First Refusal Space on a basis substantially identical to
that for which Tenant is responsible for paying for the Premises in
accordance with this Lease at such time. If Tenant fails to notify
Landlord within such ten (10) day period of Tenant's exercise of its
right of first offer, Tenant shall be, deemed to have waived its right
of first offer and Landlord shall be free to lease the Right of First
Refusal Space to a third party pursuant to the terms and conditions of
the offer, or, in the event that a particular third party does not
lease the space
37
<PAGE>
in question, to subsequent third parties. The foregoing shall not
relieve Landlord from its obligation to offer any of the Right of
First Refusal Space to Tenant that previously has not been offered to
Tenant.
(b) Landlord's obligations and Tenant's rights pursuant to Subparagraph
52(a) hereof shall be subject to the rights for certain portions of
the Right of First Refusal Space currently held by UNUM Life Insurance
Company of America ("UNUM"). Without limitation of the foregoing,
Landlord shall have no obligation to offer or lease portions of the
Right of First Refusal Space to Tenant and Tenant shall have no rights
with respect to such portions thereto, if such portions of the Right
of First Refusal Space are offered and leased to UNUM pursuant to
UNUM's option to renew or option to expand as contained in UNUM's
existing lease. Landlord agrees that it shall provide UNUM with no
extension or renewal rights beyond those contained in UNUM's existing
lease, without first offering the particular space to Tenant in
accordance with Subparagraph 52(a) hereof.
OPTION SPACE
------------
53. Tenant shall have the option, as hereinafter provided, to lease 6,865
square feet of space on the 6th floor of the Building as identified on
Exhibit "E" attached hereto and made a part hereof (the "Option Space").
Tenant must exercise its rights with respect to the Option Space by
providing Landlord written notice thereof within 10 business days of the
execution hereof by Tenant. The Option Space shall be leased upon the same
terms and conditions as those set forth herein for the Premises, except
that the timing for completion of the Landlord's Work in the Option Space
shall be as agreed to by Landlord and Tenant following the exercise by
Tenant of its rights with respect to the Option Space, and the rentable
area of the Premises, the Rent, Tenant's Proportionate Share, and the
inducements to Tenant described in Paragraphs 47 and 48 hereof and in the
Work Agreement shall be increased accordingly (based on the square footage
of the Option Space). If Tenant elects to lease the Option Space as herein
provided, Landlord and Tenant shall execute an amendment to this Lease to
reflect the addition of the Option Space to the Premises and the
appropriate (based on the square footage of the Option Space) increase in
the Rent, Tenant's Proportionate Share, and the inducements to Tenant
described in Paragraphs 47 and 48 hereof and in the Work Agreement that
shall occur as a result thereof. If Tenant does not elect to lease the
Option Space within 10 business days of the execution hereof by Tenant, all
of Tenant's rights with respect to the Option Space shall expire and Tenant
shall have no further rights with respect thereto.
38
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this
Lease as of the day and year first above written.
LANDLORD:
ATTEST: COMMERCE COURT PROPERTY
HOLDING TRUST
By__________________________ By /s/ Robert E. J.
----------------------------
TENANT:
ATTEST: WESCO Distribution, Inc.
By /s/ Mark Keough By /s/ Roy W. Haley
------------------------- ----------------------------
39
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
<PAGE>
[7th FLOOR PLAN]
<PAGE>
[6th FLOOR PLAN]
<PAGE>
EXHIBIT B
COMMERCE COURT PROPERTY HOLDING TRUST
Commerce Court Building
Pittsburgh, Pennsylvania 15219
Date: May __, 1995
WORK AGREEMENT
WESCO Distribution, Inc.
One Riverfront Center
Pittsburgh, PA 15222
Re: 53,504 Rentable Square Feet on the 6th and 7th Floors, Commerce
Court Building Lease, dated May __, 1995.
Gentlemen:
You ("Tenant") and we ("Landlord") are executing, simultaneously with
this Work Letter Agreement, a written lease (the "Lease") covering the space
referred to above (the "Premises").
To induce Tenant to enter into the Lease (which is hereby incorporated
by reference to the extent that the provisions of this Work Letter Agreement may
apply thereto) and in consideration of the mutual covenants hereinafter
contained, Landlord and Tenant mutually agree as follows:
(a) Landlord shall provide at Landlord's cost the above ceiling
improvements and modifications (to include grid, tiles, parabolic lighting,
sprinkler, and HVAC systems and other improvements) specified as "Landlord's
Work" in the Ceiling Specification Schedule and Electrical Requirements attached
hereto as Schedule I (the "Above Ceiling Improvements"). In addition to the
Above Ceiling Improvements, Landlord shall demolish the improvements in the
Premises existing immediately prior to
<PAGE>
the date hereof (the "Demolition") at Landlord's expense. Landlord shall deliver
the Premises, with the Demolition substantially completed, to Tenant within
thirty days of the execution of the Lease by Landlord. Landlord shall begin the
Above Ceiling Improvements after substantial completion of the Demolition and
shall reasonably cooperate with Tenant's contractor (and Tenant agrees to
reasonably cooperate and to require its contractor to reasonably cooperate with
Landlord) in order to use all reasonable efforts to assure a timely completion
of the Above Ceiling Improvements and the work to be completed by Tenant's
contractor pursuant to this Work Letter Agreement by August 25, 1995.
(b) Subject to the limitations hereinafter set forth, Landlord hereby
agrees to provide Tenant with an allowance for the cost of constructing the
Tenant Improvements (as hereinafter defined) as follows:
(i) Landlord shall pay Tenant in the manner hereinafter set
forth an amount equal to, but in no event to exceed, Twenty Dollars
($20.00) for each of the 53,504 rentable square feet comprising the
Premises (i.e. ONE MILLION SEVENTY THOUSAND EIGHTY DOLLARS ($1,070,080) in
the aggregate) for the cost of the construction of the Tenant Improvements,
including all license and permit fees relating thereto (the "Tenant
Improvement Allowance"). Landlord makes no representation or warranty as to
whether the Tenant Improvement Allowance is sufficient to cover the entire
cost of completing the Tenant Improvements. In the event that the cost of
completing the Tenant Improvements exceeds the Tenant Improvement
Allowance, the amount of such excess cost shall be the sole and exclusive
responsibility of Tenant and shall, as an additional obligation of Tenant
under this Lease, be paid by Tenant as and when due.
(ii) The Tenant Improvement Allowance shall be paid by Landlord
to Tenant in accordance with the procedures for "Progress Payments" set
forth in Article 5 of the American Institute of Architects document A101
"Standard Form of Agreement Between Owner and Contractor" as completed by
and between Tenant, as owner, and Tenant's Contractors (as hereinafter
defined) or pursuant to such other procedure for payment as Landlord and
Tenant may from time to time mutually approve in advance.
(c) Tenant shall submit to Landlord for Landlord's review and
approval, the following architectural and construction drawings and
specifications prepared by Tenant's designated design consultant, the employment
of which Landlord
2
<PAGE>
must approve (the "Consultant"), for the construction of Tenant's improvements
to the Premises:
(i) one preliminary set of 1/8 inch scale architectural
drawings and specifications for Tenant's partition layout, reflected
ceiling plan, telephone and electrical outlets and preliminary finish
schedule for the work to be done by Landlord or Tenant pursuant to this
Work Agreement hereof; and
(ii) One revision of the preliminary set described in (i) above,
complete, finished and detailed 1/8 inch scale architectural drawings and
specifications for Tenant's partition layout, reflected ceiling plan,
telephone and electrical outlets, and including all built-ins.
(iii) Detailed schedule of Tenant finishes specifying paint,
wall covering, carpet and base selections; and
(iv) Completion schedule for the work to be done by or on behalf
of Tenant in connection with the construction of the Tenant Improvements.
(The plans and drawings listed as items (i) through (iv) of this
Paragraph (b) are hereinafter referred to as the "Tenant Improvement Plans" and
reference herein to "Tenant Improvements" shall mean all work to be done in the
Premises by or on behalf of Tenant pursuant to the Tenant Improvement Plans or
otherwise. Landlord hereby approves Tenant's use of Bohlin Cywinski Jackson and
RCF Engineering as Consultants for the Tenant Improvements.
(d) The Tenant Improvement Plans and the Tenant Improvements shall be
consistent with Landlord's Building Standard Tenant Area Finishes and Materials
(hereinafter the "Standards"), a copy of which is attached hereto as Schedule
II; provided, however, that Tenant may deviate from the Standards for the Tenant
Improvements if (i) the deviations are not of a lesser quality than the
Standards; (ii) the deviations conform to and comply with all applicable
governmental regulations and all necessary governmental permits and approvals
have been secured by Tenant; (iii) the deviations do not require Building
service beyond the level normally provided to other tenants in the Building and
do not overload the floors or other structural components of the Building; and
(iv) Landlord has determined in its sole discretion that the deviations are of a
nature and quality consistent with other leased space in the Building. Landlord
agrees that no fee will be charged for (i) reviewing the Tenant Improvement
Plans; (ii) electricity used by the Tenant during the construction period and
(iii) any general conditions, overhead or other fees for construction of the
Premises.
3
<PAGE>
(e) Tenant shall have the right to hire the contractors (hereinafter
referred to as "Contractors"), subject to Landlord's prior approval. Upon
approval by Landlord of Tenant's Improvement Plans and Tenant's Contractors,
Tenant shall promptly commence with the construction of the Tenant Improvements
and thereafter diligently prosecute the same to completion such that Tenant may
occupy the Premises on the Commencement Date hereof. All Tenant Improvements
shall be in full compliance with the Americans With Disabilities Act of 1990.
(f) Tenant acknowledges Landlord's need to maintain certain control
over the planning, construction and completion of the Tenant Improvements in
light of Tenant's use of a third-party Contractor. Accordingly, notwithstanding
any other provision of the Lease or this Work Agreement, Landlord and Tenant
agree as follows:
(i) All architects, engineers, contractors, plans,
specifications, and drawings relating to the Tenant Improvements or to the
design or construction thereof shall be subject to the prior review and
approval of Landlord.
(ii) Tenant's Contractors must perform in such a manner as to
not cause or permit to be caused a material default or breach of any term,
condition, rule or regulation of this Lease by Tenant.
(iii) Tenant and Contractors shall maintain at all times during
the construction of the Tenant Improvements and for the benefit of
Landlord, its officers and employees, such insurance as Landlord may
reasonably require including, without limitation, such worker's
compensation and other similar insurance as is required under the laws of
the Commonwealth of Pennsylvania or any political subdivision thereof.
(iv) Tenant shall deliver or cause to be delivered to Landlord,
complete copies of all contracts for the construction of the Tenant
Improvements or for any portion thereof, prior to execution thereof by
Tenant. Thereafter, but prior to the commencement of such construction,
Tenant shall deliver to Landlord copies of executed originals of such
construction contracts.
(v) Tenant shall deliver or cause to be delivered to Landlord
prior to the commencement of construction of any of the Tenant
Improvements, (A) certificates or other evidence reasonably satisfactory to
Landlord of such insurance as is required hereunder; (B) evidence that any
and all governmental permits and licenses required for the construction of
the Tenant Improvements
4
<PAGE>
have been duly secured and remain in full force and effect; and (C) such
other similar assurances which Landlord may reasonably require from time to
time.
(vi) All construction activities relating to the Tenant
Improvements shall be coordinated by and subject to the reasonable overall
supervision and oversight of Landlord or its agent.
(vii) To the extent that Tenant pays directly, or causes to be
paid, any Contractors, supplier or materialmen, Landlord may from time to
time require from Tenant evidence of payment to all such parties during the
course of construction of the Tenant Improvements and at the completion
thereof.
(viii) Landlord may, at its option, at any time and from time to
time, inspect all construction upon the Premises. In the event that any
said construction does not comply with the Tenant Improvement Plans,
Landlord shall, within twenty four (24) hours of Landlord's inspection,
notify Tenant in writing of such non-compliance, including the specifics
thereof, whereupon Landlord may require the same to be removed and
reconstructed to so comply.
(g) During the construction period and prior to the date upon which
Tenant takes possession of the Premises, (i) Landlord shall inspect the Premises
and all improvements comprising the Tenant Improvements made to the Premises by
Tenant to reasonably determine that they are satisfactory, except Punch List
items, except for such latent defects, if any, as would not be discovered by a
reasonable, diligently conducted inspection of the Premises ("Latent Defects");
and (ii) Tenant shall execute a certificate as to the confirmation of the
Commencement Date and the Expiration Date of the Term. Tenant's failure to
deliver the certificate within thirty (30) days after the Commencement Date
shall be conclusive upon Tenant that the Commencement Date and Expiration Date
shall be those dates set forth in this Lease. Landlord's failure to approve the
construction of the Tenant Improvements shall not in and of itself constitute an
eviction, in whole or in part, entitle Tenant to any abatement or diminution of
Rent, relieve Tenant of any of its obligations under this Lease or impose any
liability upon Landlord to Tenant or its agents or contractors by reason
thereof.
(h) In order to commence and complete all Tenant Improvements as
efficiently and expeditiously as is reasonably possible, Landlord and Tenant
agree to cooperate with each other with respect to the scheduling, coordination
and performance of their respective work to be performed upon the Premises.
5
<PAGE>
(i) Any portion of the Tenant Improvement Allowance that is not
utilized by Tenant in accordance with this Work Agreement, at Tenant's election,
may be added to the move-in and moving allowance provided to Tenant pursuant to
Paragraph 47 of the Lease, or as a credit against rental obligations arising
immediately after Tenant's abatement period expires as specified in Paragraph 46
of the Lease.
(j) Change orders for the Tenant Improvements shall be treated by
Landlord and Tenant comparable to other work to be performed by Tenant in
accordance herewith.
(k) Neither Landlord nor Tenant shall unreasonably withhold or delay
its consent or approval to the extent its consent or approval is required under
the terms of this letter.
If the foregoing correctly sets forth our understanding, kindly
acknowledge your approval in the space provided below for that purpose.
Yours very truly,
COMMERCE COURT PROPERTY
HOLDING TRUST
By________________________
Agreed to and Accepted this day ___
day of May, 1995.
WESCO Distribution, Inc.
By: _______________________________
Title: ____________________________
6
<PAGE>
SCHEDULE I
COMMERCE COURT
HVAC SYSTEMS "FIT-OUT" SCOPE
MAY 17, 1995
DESIGN CRITERIA SPECIFIC TO COMMERCE COURT
- ------------------------------------------
Improvements indicated on this Schedule I shall be provided by Landlord at
Landlord's sole expense except as specifically noted.
OVERVIEW
- --------
The Landlord shall provide a complete heating, ventilating and air conditioning,
system "fit-out" for the Tenant. Systems will be designed in strict accordance
with applicable codes. The present base building system consists of two dual
duct air handlers, located at the opposite corners of each floor and ducted to
hot and cold dual duct distribution ductwork serving perimeter zones. Cooling
only ductwork is provided to interior zones. Temperature in all zones is
modulated by variable volume air boxes. The air handling units are served by a
central chilled water and hot water system. The system is designed to provide
.83/CFM usable square foot at 50 Degrees F.
The Tenant shall provide performance criteria for air quantities to be provided
at all terminal points in the HVAC system, based on Tenant's engineering
analysis of proposed occupancy loads. The Tenant shall provide at Tenant's cost
final design of the system and Landlord shall provide at Landlord's cost
installation and modification of the base building system to comply with these
design criteria and the following general specification:
Office Areas
- ------------
HVAC: General office area shall be served by variable air volume terminals
- ----
supply ductwork, and return air via ceiling plenum. The ductwork system will be
concealed. Supply air diffusers presently installed shall be utilized along all
Page 1 of 8
<PAGE>
COMMERCE COURT
HVAC SYSTEMS CRITERIA
MAY 17, 1995
exterior walls. Relocation of some existing interior diffusers to perimeter
locations will be required.
Perimeter office/zones: (15 foot deep zone from exterior wall) shall utilize
- ----------------------
dual duct, variable volume boxes for zone control. Supply air shall be
distributed via medium pressure hot and cold ductwork to variable air volume
boxes and via low pressure ductwork to perimeter linear diffusers.
Interior open office areas: (all areas not included in perimeter office/zones
- --------------------------
above) shall be served by variable air volume boxes. Supply air shall be ducted
via medium pressure ductwork to variable air volume boxes and low pressure
ductwork to adjustable face 2 x 2 lay-in diffusers. Return air shall be via
light fixtures into the ceiling plenum area.
At Tenant's Expense (The Following Items 1. through 4.):
- -------------------------------------------------------
1. The computer room shall be cooled by a separate air cooled supplemental air
-------------
conditioning system provided by Tenant.
2. Separate and complete exhaust systems shall be provided to exhaust lunch
room and toilet rooms (including janitor's closet).
3. If zone control is required in excess of the number of vav boxes provided in
Item I, Page 4 of 7, the Tenant shall be responsible for the cost.
4. Items 1 and 3, from Page 3 of 7, Section G.
Tenant may improve the Premises above and below the ceiling in addition to the
Landlord's Work and Tenant's Work identified herein at Tenant's Expense with
Landlord's approval which approval shall not be unreasonably withheld,
conditioned or delayed.
Page 2 of 8
<PAGE>
COMMERCE COURT
HVAC SYSTEMS CRITERIA
MAY 17, 1995
GENERAL DESIGN CRITERIA FOR ANY LOCATION
- ----------------------------------------
1. HVAC
A. Outside Design Conditions
1. Summer: 91 Degrees F DB, 72 Degrees F WB
2. Winter: 0 Degrees F DB
B. Indoor Design Conditions
1. Summer: 75 Degrees F DB
55% relative humidity, Max.
2. Winter: 72 Degrees F
C. Minimum Outside Air Rate: 20 c.f.m. of outside air per person.
D. Lighting Heat Gain per usable square foot
1. Office Area
a. Private Offices 2 watts/usable square foot
b. Conference Rooms 2 watts/usable square foot
c. Toilet Rooms 2 watts/usable square foot
d. Open Offices 2 watts/usable square foot
e. Waiting/Recep. 2 watts/usable square foot
f. Storage Rooms 1 watt/usable square foot
g. Computer Room 2 watts/usable square foot
h. Lunch Room 2 watts/usable square foot
i. Work Rooms 3 watts/usable square foot
E. Miscellaneous Heat Gain
1. Areas
a. Computer Room 30 watts/usable square foot*
b. Storage Rooms 1.5 watts/usable square foot
c. Open Office Areas 2 watts/usable square foot
d. Private Offices 2 watts/usable square foot
Page 3 of 8
<PAGE>
COMMERCE COURT
HVAC SYSTEMS CRITERIA
MAY 17, 1995
e. Work Rooms 2 watts/usable square foot
*Tenant shall install at Tenant's cost a separate air conditioning system within
the computer room. Power to the computer room and computer room HVAC shall be
separately metered. The meter shall be provided by Tenant at Tenant's cost.
The HVAC system shall accommodate an average of 4 watts/usable square foot over
the entire demised premises.
F. Occupancy
1. Areas
a. Conference Rooms 1 person/15 square feet
b. Open Office Areas 1 person/225 square feet
c. Lobby 6 people
d. Corridors I person/400 square feet
e. Storage 1 person/800 square feet
f Lunchroom 1 person/25 square feet
g. Closed Office Area 1 person/100 square feet
h. Work Rooms 1 person/225 square feet
G. Ventilation and/or Exhaust Air Rate
1. Provide 400 c.f.m. cabinet exhaust fan and duct systems in
conference rooms, with adjustable, wall mounted speed control.
Duct outlet into return air plenum at Tenant's expense.
2. A minimum of 20 c.f.m. per person outside air.
3. Any smoking area or food preparation area or areas with noxious
fumes shall be exhausted directly to the outside, not the return
air ifenum, at Tenant's expense.
H. Sound and Vibration Control shall follow ASHRAE Guidelines for Sound
and Vibration Control. The resulting noise levels created by the base
building mechanical systems shall not exceed the NC Values established
below:
Page 4 of 8
<PAGE>
COMMERCE COURT
HVAC SYSTEMS CRITERIA
MAY 17, 1995
1. Areas NC
-----
a. Conference Rooms 30
b. Private Offices 35
C. Open Office Areas 40
d. Halls and Corridors 45
e. Computer/Proposal 45
Installation of conference rooms or private offices immediately adjacent to the
fan/mechanical rooms may not be within the above tolerances.
I. Automatic Temperature Control: The following temperature control zones
shall be provided with separate automatic temperature control:
Landlord shall provide 40 vav boxes within the entire demised
premises.
J. Air Circulation
1. Open Areas: Air diffusers shall be designed to serve 400 usable
square feet per Device.
2. Closed Office Areas: Maximum of 150 usable square feet per
presently installed or relocated linear diffusers.
K. Diffusers
Landlord shall provide Tenant, at Landlord's expense, with the
following quality and type of diffusers in quantities not to exceed one (1)
for every 400 usable square feet of interior area:
1. 2x2 - lay-in diffusers - square louvered face, steel construction
with: offwhite enamel finish, volume damper, control grid and
lay-in panel-Tuttle & Bailey Inc, type DME.
2. Supply diffusers presently installed within the Premises.
3. Return grille - fixed horizontal steel bars with off-white enamel
finish, volume damper - 42 degree deflection blades, overlap
margin - Tuttle & Bailey Inc, type T70D at Tenant's expense.
Page 5 of 8
<PAGE>
COMMERCE COURT
HVAC SYSTEMS CRITERIA
MAY 17, 1995
SPRINKLERS
- ----------
Landlord shall sprinkler the premises using concealed heads at Landlord's sole
cost and will be installed per application to accommodate Tenant's plan. Tenant
must supply plans of their demised premises not later than May 19, 1995. If
plans are not received by said date, sprinklers will be installed at a quantity
of one (1) head for 196 usable square foot. Any changes thereafter will be at
the Tenant's expense. Any pre-action or other fire suppression system required
by Tenant will be at Tenant's expense,.
CEILING TILE
- ------------
Ceiling Tile Specification:
Landlord shall provide Tenant with the ceiling tile specified below or an
equivalent allowance:
Manufacturer: USG
2 x 4 tiles for use with the existing 15/16" exposed grid
High NRC Millennia for use in open office areas and corridors.
Number: 76201
Edge: SLT - Shadow Line Tapered
Millennia: For all other enclosed spaces
Number: 76705
Edge: SLT - Shadow Line Tapered
Page 6 of 8
<PAGE>
PERFORMANCE SPECIFICATION
WESCO OFFICE RELOCATION
COMMERCE COURT, 7TH FLOOR
EXISTING FACILITIES
- -------------------
1. There are two electrical closets on the seventh floor serving from the
south east and south west areas of the building. Each closet has a 480/277
volt, 3-phase, 4-wire, 400 ampere power panel and a 208/120 volt, 3-phase,
4-wire, 400 ampere power panel. The feeders serving these panels also
serve similar panelboards on the fifth and sixth floor riser.
2. The Commerce Court allowance per tenant area is 4 watts per usable square
foot.
3. Included in the e.g. space are two 480 volt feeders serving a 45 KVA and 50
KVA, 480 to 208/120V step down transformer. Both of these feeders are
metered separately from the tenant allowance. The 45 KVA = transformer and
two 225 ampere, 208/120 volt, 3-phase, 4-wire panelboards are located in
the present tele-communication room. The 50 KVA transformer and one 225
ampere, 208/120 volt, 3-phase, 4-wire panelboard are located in the closet
in the present lounge area.
4. There is a 600 ampere, 3 pole enclosed circuit breaker and associated 600
ampere, 480/277 volt panelboard in a corridor along the east side of the
atrium. There is also a 100 ampere panel next the 600 ampere panel. The
600 ampere panel does not have feeder connected to it. These panels and
circuit breaker will be removed by Landlord at Landlord's expense.
5. There is a 600 ampere, 3 pole enclosed circuit break in another corridor
along the east side of the atrium. There is a 600 ampere 3-phase, 4-wire
panelboard 'TE' that served Liebert units for the past tenant. There is
also a 100 ampere, 120/240 volt, single phase. 3 wire panelboard 'TD' next
to panel 'TE'. Tenant will reuse this equipment at no cost to Tenant.
6. There are two telephone closets serving the floor at the southeast and at
the north west areas of the floor. There is also a telephone riser in the
present telecommunications room of the previous tenant. There is a
combination of fiber optic and copper wiring in the closets. Tenant shall
gain access to telephone lines at the Bell Telephone point of demarcation.
Page 7 of 8
<PAGE>
PERFORMANCE SPECIFICATION
WESCO OFFICE RELOCATION
COMMERCE COURT, 7TH FLOOR
WESCO REQUIREMENTS
- ------------------
1. For a typical office with a high concentration of personal computers and
video display terminals, the electrical load may be in the range of 1.5 to
2.5 watts per square feet.
2. The illumination of the general office areas shall be approximately 65 foot
candles maintained, utilizing 18 cell parabolic three (3) tube light with
integral air return. The lighting load should be approximately 1.5 to 2.0
watts per square feet utilizing T8 type lamps and electronic ballasts.
Lights shall be disbursed at an average of one per 90 usable square feet at
Landlord's cost.
3. Tenant shall furnish and install approximately 1,100 linear feet of cable
tray, with Landlord's cooperation while Landlord performs Landlord's
ceiling work, above the finished ceiling from the computer room along the
outside perimeter office and a run around the center core area. The cable
tray shall be heavy duty aluminum, 6-inch inside depth, minimum 18-inches
wide. Cable tray to be provided by Tenant.
4. The existing 208/120 volt power panels in the electrical closets shall be
modified at Tenant's expense replacing single pole circuit breakers with
225 ampere, 3-pole circuit breakers to service sub-panelboards in the
office areas. The sub-panelboards shall have panel level surge protection,
provided by Tenant.
5. The computer room shall be supplied through an uninterruptable power supply
system fed from the tenant metered feeders at Tenant's expense.
6. The lighting branch circuit wiring shall be supplied from the 480/277 volt
building system panelboards.
7. Data/communication wiring shall be plenum type furnished and installed at
Tenant's expense.
Page 8 of 8
<PAGE>
COMMERCE COURT BUILDING
BUILDING STANDARD TENANT AREA
FINISHES & MATERIALS
PARTITIONS:
Interior partitions shall be ceiling height, 5/8" drywall on 3-5/8" metal studs
spaced at 2411 o.c.
Demising partitions, not exceeding 10% of the aggregate allowance, shall be 5/8"
drywall type, "XI, drywall on 3-5/8" metal studs placed at 241, o.c. with 1-1/2
sound attenuating batt installation from the floor to the underside of the floor
above.
DOOR OPENINGS:
Interior doors shall be 7' 2", solid core wood, prefinished rotary sawn Red Oak,
with painted hollow metal frame.
Corridor doors shall be 7' 2", "C" or "B" label wood prefinished, rotary sawn
Red Oak with painted hollow metal frame. Fire ratings to be provided as
required by applicable code.
DOOR HARDWARE: Each interior door to be provided with one and one-half pair of
plain butt hinges 45OTBB with building standard latch set "8U15". Each corridor
door to be provided with one and one-half pair of plain butt hinges 45OTBB with
building standard cylinder deadbolt lock set and exposed door closer.
CEILINGS: Ceilings to be mechanically suspended 2 x 4, lay-in acoustical tile.
FLOOR: Reinforced concrete slab with 350 psf live load.
FLOOR COVERING: Installed floor covering to be equal to or greater than $11.25
per square yard. Base of 4" rubber at all exterior walls, columns and
partitions.
PAINTING: All drywall surfaces shall be painted with two coats paint from
building standard color selection. Doors and trim which are not prefinished
shall be painted with two coats paint.
WINDOW DRESSING: Thin-lined venetian blinds on all exterior windows.
Schedule II-1.
<PAGE>
ELECTRIC SERVICE: The service capacity of electricity at the electric closets
shall be 4 watts average per square foot.
LIGHTING: 2" x 4' recessed, full return-air troffer parabolic fixtures provided
in the ratio of one fixture per 90 usable square feet of ceiling area.
HVAC: A complete heating, ventilating and air conditioning system utilizing
perimeter radiation and interior variable volume air handling and cooling
designed to allow for a maximum of 4 watts of electricity (lighting and power)
per square foot in any given space or room, an average population density of one
person for each 150 usable square feet, and a total connected load for office
equipment and appliances not in excess of two volt-amperes per usable square
foot. Balancing of such system shall take place within a reasonable time after
occupancy and it is understood that installation of the system shall be deemed
completed prior to such balancing.
SUBSTITUTIONS: Other approved materials, equipment and fixtures may be
substituted by Tenant for those specified as building standard, provided that
any extra cost thereof, including overhead and handling fees, shall be payable
in full upon billing.
OMISSIONS: With approval, building standard materials, equipment and fixtures
may be omitted or otherwise provided as required by Tenant in less than allowed
quantities in which event a credit shall be granted for the omitted items or
quantities against the cost of approved substitutions or additions. No cash
credits shall be given.
Schedule II-2.
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
OF THE COMMERCE COURT BUILDING
COMMERCE COURT
RULES AND REGULATIONS
DEFINITIONS: Wherever in these rules and regulations the word "Tenant" is used,
it shall be taken to apply to and include Tenant and his agents, employees,
invitees, licensees, subtenants and contractors, and is to be deemed of such
number and sender as the circumstances require. The word "Premises" is to be
taken to include the space covered by this Lease. The word "Landlord" shall be
taken to include the employees and agents of Landlord.
CONSTRUCTION: The streets, sidewalks, entrances, halls, passages, elevators,
stair ways and other common area provided by Landlord shall not be obstructed
by Tenant or Landlord or used by them for any other purpose than for ingress and
egress.
WASHROOMS: Toilet rooms, water closets and other water apparatus shall not be
used for any purposes other than those for which they were constructed.
INSURANCE REGULATIONS: Tenant shall not do anything in the Premises, or bring
or keep anything therein, which will in any way increase or tend to increase the
risk of fire or the rate of fire insurance, or which will conflict with the
regulations of the fire department or the fire laws, or with any insurance
policy on the Building or any part thereof, or with any law, ordinance, rule or
regulation affecting the occupancy and use of the rooms, now existing or
hereafter enacted or promulgated by any governmental authority or by the
National Fire Protection Association and the Insurance Service Office of
Pennsylvania or similar organizations.
GENERAL PROHIBITIONS: In order to insure proper use and care of the Premises,
Tenant shall not:
(a) Keep animals or birds in the Premises.
(b) Use the Premises as sleeping apartments.
(c) Allow any sign, advertisement or notice to be fixed to the Building, inside
or outside, without Landlord's consent.
Exhibit C-1
<PAGE>
(d) Make improper noises or disturbances of any kind; play or operate any
musical instrument, radio or television without consent of Landlord, or
otherwise do anything to disturb other tenants or tend to injure the reputation
of the Building.
(e) Mark or defile elevators, water closets, toilet rooms, walls, windows,
doors or any other part of the Building.
(f) Place anything on the outside of the Building, including room setbacks,
window ledges and other projections; or drop anything from the windows,
stairways or parapets; or place trash or other matter in the halls, stairways,
elevators or light wells of the Building.
(g) Cover or obstruct any window, skylight, door or transom that admits light.
(h) Fasten any article, drill holes, drive nails or screws into the walls,
floors, woodwork or partitions; nor shall the same be painted, papered or
otherwise covered or in any way marked or broken without consent of Landlord,
except that pictures and other items may be hung on the walls of the Premises
consistent with those typically contained in first class office buildings.
(i) Operate any machinery other than small office equipment.
(j) Interfere with the heating or cooling apparatus.
(k) Allow anyone but Landlord's employees to clean rooms.
(1) Leave the Premises without locking doors and extinguishing all lights.
(m) Install any shades, blinds or awnings without consent of Landlord.
(n) Use any electric heating device without permission of Landlord.
(o) Install call boxes or any kind of wire in or on the Building without
Landlord's permission and direction.
(p) Manufacture any commodity or prepare or dispense any foods or beverages,
tobacco, drugs, flowers or other commodities or articles without the consent of
Landlord, other than is typically permitted in other first class office
buildings.
(q) Secure duplicate keys for rooms or toilets, except from Landlord.
Exhibit C-2
<PAGE>
(r) Give his employees or other persons permission to go upon the roof of the
Building without the consent of Landlord.
(s) Place door mats in public corridors without consent of Landlord, which
consent shall not be unreasonably withheld or delayed.
PUBLICITY: Tenant shall not use the name of the Building in any way in
connection with his business except as the address thereof. Landlord shall also
have the right to prohibit any advertising by Tenant which, in its opinion,
tends to impair the reputation of the Building or its desirability as a building
for offices; and upon written notice from Landlord, Tenant shall refrain from or
discontinue such advertising. Signs on interior glass doors will be painted
only by the person designated by Landlord, the cost of the painting to be paid
by Landlord.
RECIPROCAL EASEMENT AGREEMENT: Tenant shall not use the Premises in any way
which will be in violation of the Reciprocal Easement and Operating Agreement
dated May 19, 1981 between the Pittsburgh History & Landmarks Foundation and
Landlord.
MOVING OF EQUIPMENT: Landlord reserves the right to designate the reasonable
time when and the method whereby freight, small office equipment, furniture,
safes or other like articles may be brought into, moved or removed from the
Building or rooms, and to designate the location for temporary disposition of
such items. In no event shall any of the foregoing items be taken from the
Premises for the purpose of removing same from the Building without the express
consent of both Landlord and Tenant. Tenant agrees that it shall not exceed the
floor load limit in the Building of 150 pounds per square foot.
PUBLIC ENTRANCE: Landlord reserves the right to exclude the general public from
the Building upon such days and at such hours as in Landlord's judgment will be
for the best interest of the Building and its tenant. Persons entering the
Building after 6:00 PM on business days and at all times on Saturday, Sunday and
holidays must sign the register maintained for that purpose.
REGULATION CHANGES: Landlord shall have the right to make such other and
further reasonable rules and regulations as in the judgment of Landlord, may
from time to time be needful for the safety, appearance, care and cleanliness of
the Building and for the preservation of good order therein so long as such
rules and regulations do not unreasonably interfere with Tenant's access to and
permitted use of the Premises and such rules and regulations, to the extent
practicable, apply uniformly to all tenants in the Building. Landlord shall not
be responsible to Tenant for any violation of rules and regulations by other
tenants.
Exhibit C-3
<PAGE>
EXHIBIT D
HOUSEKEEPING SPECIFICATION
COMMERCE COURT
CLEANING OF RETAIL AREA
Night Cleaning of Retail Areas, All Building Entrances, Elevator Lobbies, and
All Other Public Areas.
1. Sweep, damp mop and buff pavers nightly. Refinish with a complete strip on
an as needed basis dictated by Oxford Development Company, but not less
than once per quarter.
2. Wipe down all metal surfaces at entrances, railings, columns, elevator
lobbies and elevators nightly with appropriate cleaning products.
3. All wall surfaces excluding high work are to be dusted nightly using
approved method to remove fingerprints and smudges.
4. High dust and wash glass elevator exteriors including surrounding
partitions weekly.
5. All exterior and interior cigarette urns or trash receptacles are to be
cleaned continuously. Clean sand and/or plastic receptacle liners as
required. This includes the public telephone area.
6. Rain mats will be appropriately placed when needed and when not in use
stored in designated areas. Such mats shall be stored and ready for use in
a clean condition.
7. Lobby console and directory shall be cleaned as required daily to maintain
a clean appearance.
8. Telephones are to be cleaned and disinfected a minimum of two times per day
including weekends.
9. Any debris found in the fountain is to be removed immediately, day and
night.
Exhibit D-1
<PAGE>
Monthly Retail Cleaning:
1. All high work including dusting, spot cleaning and dusting HVAC diffusers.
GENERAL CLEANING
Nightly Office Cleaning:
1. Sweep or dust mop all hard surface flooring/1/ to insure dust free floors,
with special attention to hard to reach areas. Remove all gum and foreign
matter on sight.
2. Spot mop hard surface floors for spills, smears and foot tracks.
3. Vacuum all carpeted traffic areas in offices and public corridors.
4. Spot clean carpeting where necessary and possible.
5. Empty and dust all wastebaskets and disposal receptacles, wash ashtrays and
install new liners as necessary.
6. Collect and remove recyclable paper, computer paper, cardboard and non-
recyclables. All recyclable materials should be placed in the designated
holding area.
7. Dust clean all horizontal surfaces such as desks, leather and vinyl chairs,
credenzas, files, window sills, chair rails, pictures (within reach) and
tables. Contractor's personnel shall not disturb papers on desks, files,
tables, or stacked on the floor and shall not dust computer screens or
keyboards.
8. All telephones are to be washed and disinfected nightly.
9. Spot clean entrance door glass, walls around light switches, door frames
and glass partitions.
10. Wash clean and polish all water fountains.
11. Police and maintain elevator cabs, polish doors and tracks and vacuum or
mop floors.
____________________
/1/. Hard Surface Flooring - Freight elevator lobbies, vending/lunch areas,
computer rooms and mailrooms.
Exhibit D-2
<PAGE>
12. When work is completed, lights are to be turned off, all doors found locked
are to be re-locked, freight elevator lobby doors and floors secured.
Weekly Office Cleaning:
1. Wash reception area glass to all tenant spaces.
2. Polish all brass at entrance doors and kick plates on bottom of all doors.
3. Vacuum entire carpeted area using a crevasse tool where necessary.
4. Mop clean hard surface floors.
5. Dust elevator jambs and polish tracks, door openings and cabs.
6. Mop clean all computer room floors, changing water solutions frequently.
Floors are not to be saturated-water should not penetrate into the air
space below.
7. Clean and polish furniture including desks, chairs, credenzas and cabinets.
No dusting, polishing, or spraying of cleaning products is to be done on
any computer equipment.
Monthly Office Cleaning:
1. Dust all areas not done regularly including, but not limited to, cove base,
HVAC diffusers, thermostats and all corners of the office.
Note: Any special cleaning requests by tenants, such as carpet extraction,
bonnet cleaning of carpet, dishwashing, kitchen cleaning, refrigerator
cleaning, etc., is to be directed to and coordinated by Oxford Development
Company. Contractor shall not schedule directly with or invoice directly
to Commerce Court tenants.
RESTROOMS
Nightly Cleaning Service:
1. Sweep, wet mop and disinfect all flooring including base.
2. Wash and disinfect all basins, bowls and urinals.
3. Scrub and wash clean underneath sinks, bowls and urinals.
Exhibit D-3
<PAGE>
4. Wash and polish all mirrors, powder shelves and brightwork, including drain
pipes under the counter top.
5. Wash and disinfect both sides of all toilet seats.
6. Spot clean walls, partitions and entry doors.
7. Replace roll tissue, hand towels, hand soap, sanitary products and waxed
paper bags.
8. Remove all trash and disposed feminine hygiene products.
9. Dust clean tops of all partitions and wall mounted dispensers.
Monthly Cleaning Service:
1. Spray wax and buff floors.
Quarterly Service:
1. Strip and machine scrub flooring, reseal, apply two coats of wax and buff.
2. Thoroughly wash partitions.
3. Wash all ceramic tile walls.
DAY CLEANING DUTIES:
Adequate personnel shall be assigned to perform the following services and any
additional duties as directed by the building manager.
Day Porter:
1. Check all public areas constantly, both interior and exterior, picking up
all foreign matter on site.
2. All exterior and interior cigarette urns or trash receptacles are to be
cleaned continuously. Clean sand and/or plastic receptacle liners as
required. This includes the public telephone area.
Exhibit D-4
<PAGE>
3. Police floors in men's restrooms; to be checked a minimum of twice daily
(morning and afternoon). Spot clean fixtures and under urinals, and re-
stock paper products as needed.
4. Police stairways (sweep and damp mop weekly).
5. Rain mats will be appropriately placed when needed and when not in use
stored in designated areas. Such mats shall be stored and ready for use in
a clean condition.
6. Any debris found in the fountain is to be removed immediately, day and
night.
7. Move furniture, make deliveries and attend to other duties as requested by
Oxford Development Company.
Day Matron:
1. Police floors in all ladies restrooms; to be checked a minimum of twice
daily (morning and afternoon). Spot clean fixtures and re-stock paper
products as needed.
2. All wall surfaces are to be spot cleaned removing all fingerprints and
smudges. Telephones are to be cleaned and disinfected a minimum of two
times per day including weekends.
3. Any debris found in the fountain is to be removed immediately, day and
night.
4. Attend to other duties as requested by Oxford Development Company.
5. The day matron will be responsible for the collection of money from and the
re-stocking of sanitary napkin machines. All monies are to be returned to
Oxford Development Company along with a re-stocking inventory list provided
by Oxford Development Company.
Freight Elevator Operator:
1. Operate freight elevator for vendors, tenants, cleaners, engineers, etc.
2. Sign in and out all deliveries including company name, individual name and
destination on freight log provided by Oxford Development Company.
Exhibit D-5
<PAGE>
3. Maintain freight elevator and elevator lobbies daily sweeping and mopping
as needed on all floors.
4. Maintain loading dock area; police all papers, boxes and debris; sweep
daily and hose down as needed (but no less than once per week weather
permitting). Remove all debris under and around the trash compactor and any
dumpsters at the dock.
5. Remove snow and ice from dock area as soon as possible and use snow melting
chemicals provided by Oxford Development Company.
The "loading dock" is that area between Bobby Rubino's service entrance and
Roy Rogers service entrance from the building out to Carson Street.
Night Cleaning of Building Services Areas:
1. Slop sink rooms, storage rooms, locker rooms, employee toilet rooms, and
lunch rooms are to be kept neat, clean and orderly at all times. Walls,
lockers, and floors shall be cleaned, washed, and/or waxed as required.
2. Freight elevator areas are to be kept neat, clean, and orderly at all
times.
3. Resilient floor surfaces in service corridors are to be washed nightly,
buffed weekly, and stripped and refinished bimonthly.
4. All wall surfaces in service corridors are to be dusted weekly.
Fingerprints, graffiti, and smudges are to be removed as required.
5. High dust or wash all air conditioning ceiling fixtures once a year.
6. Loading dock and trash room area to be swept daily and floor areas hosed
down as required. Wall surfaces are to be cleaned weekly. Overhead
equipment dusted yearly.
WINDOW CLEANING:
Exterior windows in the Building shall be cleaned on a basis consistent with
other first class office buildings in the Pittsburgh area.
Exhibit D-6
<PAGE>
[EXHIBIT "E" 6th FLOOR PLAN]
Exhibit E-1
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE (the "Amendment") is made as of the ___
day of June, 1995 by and between COMMERCE COURT PROPERTY HOLDINGS TRUST, a
Pennsylvania business trust (the "Landlord")
A N D
WESCO DISTRIBUTION, INC., a Delaware corporation (the "Tenant").
WHEREAS, Landlord and Tenant are parties to that certain Office Lease
Agreement dated May 24, 1995 (the "Lease"), with respect to space in the
Commerce Court Building, Four Station Square, City of Pittsburgh, Allegheny
County, Pennsylvania (the "Building"); and
WHEREAS, the Lease, in Paragraph 53 thereof, provides Tenant with an
option to lease an additional 6,865 square feet of leasable area on the 6th
floor of the Building, which space is described on Exhibit "E" to the Lease as
"Vacant" (the "Option Space"), with such option being exercisable within ten
business days of the execution of the Lease by Tenant; and
<PAGE>
WHEREAS, by written notification dated June 2, 1995, Tenant notified
Landlord of its intention to exercise its option to lease the additional space;
and
WHEREAS, Landlord and Tenant desire to amend the Lease as hereinafter
provided, to reflect the additional space to be leased by Tenant.
NOW THEREFORE, in consideration of the mutual covenants and premises
contained herein and in the Lease, the parties hereto, intending to be legally
bound do hereby covenant and agree as follows:
1. DEFINED TERMS. All terms used herein, and not otherwise defined,
-------------
have the same meaning ascribed to them in the Lease. Any terms which are used
in this Amendment and which are defined in this Amendment shall have the
meanings ascribed to them herein.
2. PREMISES. The Option Space shall be added to the Premises,
--------
effective October 1, 1995. Notwithstanding anything contained in the Lease
(including, without limitation, the Schedule of Lease Terms) to the contrary,
effective October 1, 1995, the square foot area of the Premises will for all
purposes be deemed to be 60,369 square feet of rentable area. Accordingly,
effective October 1, 1995, each reference in
2
<PAGE>
the Lease to "53,504 square feet of rentable area" shall be deleted and "60,369
square of rentable area" shall be substituted in its stead.
3. DELIVERY OF OPTION SPACE. Landlord shall deliver possession of
------------------------
the Option Space to Tenant, with Landlord's Work substantially completed, on or
before October 1, 1995. The third sentence of the second grammatical paragraph
of Paragraph 4 of the Lease shall not apply with respect to the Option Space.
4. RENT. Paragraph 4 of the Schedule of Lease Terms hereby is
----
deleted in its entirety and the following shall be
substituted in its stead:
4. RENT: (a) Total Minimum Rent: $7,596,196.50 payable in equal
monthly installments as follows:
<TABLE>
<CAPTION>
COST PER RENTABLE
SQUARE FOOT PER
MONTH(S) MONTHLY ANNUM
<S> <C> <C>
September 1995 $80,256 $18.00
October 1, 1995
through August 31,
2002 $90,553.90 $18.00
</TABLE>
Total Minimum Rent and the monthly installments thereof shall be
subject to Paragraph 46 of this Lease.
(b) Additional Rent: as set forth in Lease.
3
<PAGE>
5. PROPORTIONATE SHARE. Paragraph 6 of the Schedule of Lease Terms
-------------------
hereby is deleted in its entirety and the following shall be substituted in its
stead:
6. TENANT'S PROPORTIONATE SHARE: 18.29% (60,369 sq.ft./330,109 sq.
ft.) (330,109 square feet is the rentable square footage of the
office portion of the Building.)
6. MOVE-IN AND MOVING ALLOWANCE. Notwithstanding anything contained
----------------------------
in Paragraph 47 of the Lease to the contrary, Tenant's allowance for the costs
and expenses of moving as set forth in Paragraph 47 of the Lease shall be
$120,738. Accordingly, each reference in Paragraph 47 of the Lease to Tenant's
moving allowance of "$107,008" shall be deleted and "$120,738" shall be
substituted in its stead.
7. DESIGN ALLOWANCE. Notwithstanding anything contained in
----------------
Paragraph 48 of the Lease to the contrary, Tenant's allowance for the cost and
expense of the preparation of Tenant's plans, construction drawings and
engineering drawings, as set forth in Paragraph 48 of the Lease, shall be
$135,830.25. Accordingly, the reference in Paragraph 48 of the Lease to
Tenant's design allowance of "$128,384" shall be deleted and "$135,830.25" shall
be substituted in its stead.
8. TENANT IMPROVEMENT ALLOWANCE. Notwithstanding anything contained
----------------------------
in the Work Agreement to the contrary, the Tenant Improvement Allowance shall be
$1,207,380. Accordingly, the reference in Paragraph (b)(i) of the
4
<PAGE>
Work Agreement to the Tenant Improvement Allowance of "ONE MILLION SEVENTY
THOUSAND EIGHTY DOLLARS ($1,070,080)" shall be deleted and "ONE MILLION TWO
HUNDRED SEVEN THOUSAND THREE HUNDRED AND EIGHTY DOLLARS ($1,207,380)" shall be
substituted in its stead.
9. ADDITIONAL RENTAL ABATEMENT. Without limitation of the
---------------------------
provisions of Paragraph 46 of the Lease, the Abatement Period shall apply with
respect to the Option Space for the months of October, November and December
1995. Additionally, Tenant shall be entitled to a credit of $10,297.50 as an
abatement against the Total Minimum Rent due for January 1996 (resulting in a
monthly installment of Total Minimum Rent in the amount of $80,256 being due for
the month of January 1996). The abatement period for the Option Space (at the
rate of $338.55 per day) shall be extended for a day-for-day basis for each day
that the Option Space is not ready for occupancy by the Tenant after September
30, 1995 solely by reason of Landlord's failure to (a) have substantially
completed the Landlord's Work in the Option Space by October 1, 1995 or, to (b)
otherwise deliver the Option Space to Tenant by October 1, 1995.
10. NO FURTHER OBLIGATIONS. Landlord shall have no further
----------------------
obligations with respect to Paragraph 53 of the Lease except as specifically set
forth in this First Amendment to Lease and said Paragraph 53 hereby is deleted.
5
<PAGE>
11. WORK AGREEMENT. Schedule I to the Work Letter, Exhibit 8,
--------------
Paragraph I states that "Landlord shall provide 40 VAV boxes within the entire
demised premises" or one box per 1,337.60 square feet of rentable area. As a
result of the addition of the Option Space, Landlord shall provide 45 VAV boxes
within the entire demised premises.
12. SAVING CLAUSE. Except as specifically provided herein, the
-------------
Lease, as amended by this First Amendment to Lease, shall remain unmodified and
in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to
be executed the day and year first above written.
LANDLORD:
WITNESS: COMMERCE COURT PROPERTY
HOLDING TRUST
/s/ Judith P. Wisnieusli By: /s/
- -------------------------- -------------------------------
TENANT:
WITNESS: ESCO Distribution, Inc.
/s/ Mark Keough By: /s/ R. J. Marchuetz
- -------------------------- -------------------------------
6
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
THIS SECOND AMENDMENT TO LEASE (the "Second Amendment") is made as of
the 29th day of December, 1995, by and between COMMERCE COURT PROPERTY HOLDING
TRUST, a Pennsylvania business trust (the "Landlord") and WESCO DISTRIBUTION,
INC. (the "Tenant").
WHEREAS, Landlord and Tenant are parties to that certain lease
agreement dated May 24, 1995, as amended by that certain First Amendment to
Lease dated June, 1995 (the Amendment, together with the Lease, shall hereafter
be referred to as the "Lease"), with respect to certain premises (the
"Premises") in the Commerce Court Building, Four Station Square, Pittsburgh,
Pennsylvania (the "Building");
WHEREAS, Landlord and Tenant desire, among other things, to change the
date on which Tenant shall commence paying monthly installments of Total Minimum
Rent and to extend the Term of the Lease as hereinafter provided.
NOW THEREFORE, in consideration of the mutual covenants and premises
contained herein and in the Lease, the parties hereto, intending to be legally
bound, do hereby covenant and agree as follows:
1
<PAGE>
1. DEFINED TERMS. All terms used herein, and not otherwise defined,
-------------
have the same meanings ascribed to them in the Lease. Any terms which are used
in the Lease or in this Second Amendment, which are defined in this Second
Amendment, shall have the meanings ascribed to them herein.
2. TERM. Landlord and Tenant agree that Item #3 on the Schedule of
----
Lease Terms is amended so that the phrase "August 31, 2002" is hereby deleted
and the phrase "October 31, 2002" is substituted in lieu thereof.
3. ABATEMENT OF RENT. Landlord and Tenant agree that on page 33, in
-----------------
the fifth line of Paragraph 46(a) of the Lease, the words "December, 1995" are
hereby deleted and the words "February, 1996" are substituted in lieu thereof.
2
<PAGE>
4. SAVING CLAUSE. Except as otherwise specifically provided herein,
-------------
the Lease, as amended, shall remain as heretofore.
IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to
be executed the day and year first above written.
WITNESS: COMMERCE COURT PROPERTY
HOLDING TRUST
Landlord
/s/ Judith P. Wisnieusli By: /s/
- -------------------------- ----------------------------
Title: Secretary
------------------------
WITNESS/ATTEST: WESCO DISTRIBUTION, INC.
Tenant
By: /s/ R. J. Marchuetz
__________________________ ----------------------------
Title: Vice President, Chief Financial
-------------------------------
and Administrative Officer
--------------------------
3
<PAGE>
EXHIBIT 10.11
LEASE
1. LEASE. The E.T. Hermann and Jane D. Hermann 1978 Living Trust ("Lessor")
leases to Westinghouse Electric Corporation ("Lessee"), and Lessee hires from
Lessor, on the terms, covenants and conditions set forth herein, the premises
(the "Premises") described in the following Schedule:
LEASE SCHEDULE
1.1. DESCRIPTION OF PREMISES: A 196,800 square foot portion of Building Number
8 (total square feet of the building is 404,280) with a street address of 1161
E. Glendale Ave., Sparks, Nevada as shown on Exhibit A.
1.2. NUMBER OF PARKING SPACES: 40, designated as provided in the site plan
delivered to Lessee.
1.3. BASE MONTHLY RENT: $39,360.00.
1.4. PREPAID MONTHLY RENT: $78,720.00, as first and last months' rent
hereunder.
1.5. RENT COMMENCEMENT DATE: July 1, 1992, or on the date Lessee's business
within the Premises becomes operational, which shall include the date on which
Lessee commences to store any of Lessee's product on the Premises, whichever
first occurs.
1.6. DATE OF INITIAL CPI ADJUSTMENT: June 31, 1997.
1.7. MONTHS BETWEEN CPI ADJUSTMENTS: 60 months.
1.8. LEASE TERM: 60 months.
Lease Commencement Date: July 1, 1992, or on the date Lessor's
business within the Premises becomes operational, whichever first occurs.
Lease Termination Date: June 31, 1997.
1.9. EXTENSION OPTION(S): Total Number of Options: 3
FIRST OPTION: Commencement Date: July 1, 1997.
Termination Date: June 31, 2002.
SECOND OPTION: Commencement Date: July 1, 2002.
Termination Date: June 31, 2007.
<PAGE>
THIRD OPTION: Commencement Date: July 1, 2007.
Termination Date: June 31, 2012.
1.10. SECURITY DEPOSIT: None.
1.11. USE OF PREMISES: Warehouse Distribution Center of electrical supplies.
1.12. SERVICES TO BE PROVIDED BY LESSOR: None.
1.13. LEASEHOLD IMPROVEMENTS TO BE PROVIDED BY LESSOR: See Exhibit B.
1.14. TAXES: Percent of building occupied by Lessee: 48.7%
1.15. LESSOR'S BROKER: None
1.16. LESSEE'S BROKER: Trammell Crow Company.
1.17. EXHIBITS: The following named Exhibits are attached hereto and
incorporated by this reference: Exhibit A-Leased Premises, Exhibit B-Leasehold
Improvements.
2. MONTHLY RENT. Lessee agrees to pay the prepaid monthly rent specified in
Section 1.4 upon execution of this Lease and thereafter agrees to pay the
monthly rent specified in Section 1.3, subject to any first months' prepaid rent
specified in Section 1.4, commencing on the first day of the month following the
rent commencement date specified in Section 1.5 and monthly thereafter during
the term and the term of any extension options(s) specified in Section 1.9 which
are exercised as provided in Section 7. Lessee agrees to pay the monthly rent to
Lessor on the rent commencement date and thereafter in advance on the first day
of each month in lawful money of the United States of America, without deduction
or offset. Rent shall be payable to Lessor at 901 East Glendale Avenue, Sparks,
Nevada 89431 or such other place as Lessor may from time to time designate in
writing. In the event the rent commencement date is not the first day of a
month, or the applicable termination date is not the last day of a mouth, a
prorated monthly installment shall be paid for the fractional months during
which this Lease commences or terminates, or both.
3. CPI RENT ADJUSTMENT. The base monthly rent specified in Section 1.3 shall
be adjusted commencing on the initial CPI adjustment date specified in Section
1.6 and thereafter on the same day as the initial CPI adjustment date which is
the number of months specified in Section 1.7 after the previous adjustment
date, using the CPI adjustment formula specified in Section 3.1.
3.1. CPI ADJUSTMENT FORMULA. The numerical base for computing the CPI
adjustment to the base monthly rent is the Consumer Price Index, San
Francisco/Oakland Area-All Urban Consumers, All Items, published by the United
States Department of Labor, Bureau of Labor Statistics ("Index"), which is
published for the date closest preceding the lease commencement date specified
in Section 1.8 ("Beginning Index"). If the Index published for the date closest
preceding the date by which written notice of the exercise of an option to
extend the term is required pursuant to Section 7 ("Extension Index") has
increased over the Beginning Index, the monthly rent for the following period
commencing on the commencement date of the extended term until the next
commencement date of an extended term shall be established by multiplying the
base monthly rent specified in Section 1.3 by a fraction, the numerator of which
is the Extension Index and the denominator of which is the Beginning Index. In
no case shall the adjusted base monthly rent be less than the base monthly rent,
as increased pursuant to the application of this Section 3, then in effect nor
shall the adjusted base monthly rent exceed the base monthly rent which
Pacific Freeport Industrial Park Page 2
(Westinghouse Electric Corporation)
<PAGE>
would be due and payable based on the assumption that the CPI increased by 4%
annually, and was compounded annually (i.e. a total increase of 21.67% for each
five (5) year period).
3.2. LATE PUBLICATION OF EXTENSION INDEX. [INTENTIONALLY OMITTED]
3.3. CHANGED OR DISCONTINUED INDEX. If the Index is changed so that the
base year differs from that which is published for the date closest preceding
the lease commencement date specified in Section 1.8, the Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised during the term, such other replacement government index
or computation reasonably chosen by Lessor shall be used in order to obtain
substantially the same result as would have been obtained as if the Index had
not been discontinued or revised.
4. SECURITY DEPOSIT. [INTENTIONALLY OMITTED]
5. LATE PAYMENT. Lessee acknowledges that late payment by Lessee to Lessor of
rent and other sums due under this Lease will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges. Accordingly, if any installment of rent or other sum
due from Lessee shall not be received by Lessor within five (5) days after such
amount shall be due, Lessee shall pay to Lessor a late charge equal to five (5%)
percent of the overdue amount. The parties hereby agree that a five percent
(5%) late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of the late payment by Lessee; provided, however that
Lessee shall not be obligated to pay the foregoing late charge unless and until
Lessee has failed to pay the rent or the other sums when due to Lessor on five
(5) prior occasions and Lessor has given notice to Lessee on five (5) such
occasions that the rent or other payments were not received when due.
Acceptance of the five percent (5%) late charge by Lessor shall in no event
constitute a waiver of Lessee's default with respect to any overdue amounts, nor
prevent Lessor from exercising any of the other rights and remedies granted to
Lessor under this Lease.
Rent, all other sums due under this Lease and advances made by Lessor,
not paid by Lessee when due, shall bear interest from time to time at the lower
of (a) the Prime Rate in effect from time to time plus five percent (5%) per
annum or (b) eighteen percent (18%) per annum from the due date until paid or
(c) the highest rate permitted by law. Payment of such interest shall not excuse
or cure any default by Lessee under this Lease.
6. LEASE TERM. The Lease Term is specified in Section 1.8, commencing on the
lease commencement date specified in Section 1.8 and ending, subject to any
extension options granted pursuant to Section 7, on the lease termination date
specified in Section 1.8.
7. OPTION(S) TO EXTEND LEASE TERM. The Lessor hereby grants the option to
extend the Lease Term upon all the terms, covenants and conditions contained in
this Lease for the number of extension period(s) specified in Section 1.9 and
for the period for each extension option specified in Section 1.9, in no event
to extend beyond the last termination date specified in Section 1.9. The Lessee
may exercise each option granted upon written notice delivered to the Lessor six
(6) months prior to the applicable termination date of the then current Lease
Term, provided that (a) the Lessee shall not be in default of a material
obligation under this Lease beyond any applicable cure periods, and (b) the
Lessee shall be in possession of the Premises for the use specified in Section
1.11. In the event that the Lessee is in default of any material obligation of
the Lessee under this Lease beyond any applicable cure periods on the date the
extended Lease Term is to commence, then, at the Lessor's option, the extension
shall not commence and this Lease shall thereupon terminate. In the event the
extended Lease Term does not commence, (except if the result of a force majeure
or the default of the Lessor) whether due to the Lessee's failure to give a
timely notice or otherwise, any and all options to extend shall automatically
become invalid and of no further force or effect.
Pacific Freeport Industrial Park Page 3
(Westinghouse Electric Corporation)
<PAGE>
8. PARKING. Lessee shall be entitled to use the number of parking spaces
specified and designated as provided in Section 1.2. Lessee agrees that
vehicles of Lessee or Lessee's employees and invitees shall not park in
driveways nor occupy parking spaces or other areas reserved for any use such as
visitors, delivery, loading, or other tenants.
9. POSSESSION. If Lessor is unable to deliver possession of the Premises to
Lessee on the lease commencement date specified in Section 1.8 for any reason
whatsoever, this Lease shall not be void or voidable for a period of sixty (60)
days thereafter, nor shall Lessor be liable to Lessee for any loss or damage
resulting therefrom, but the rent shall abate until the Lessor delivers
possession of the Premises to Lessee. If Lessor is unable to deliver possession
of the Premises within sixty (60) days after the lease commencement date
specified in Section 1.8, this Lease may be terminated by Lessee by written
notice to Lessor at any time thereafter prior to date possession is delivered to
Lessee. Lessor agrees that Lessee, upon paying the rent and observing all
terms, covenants and conditions of this Lease shall peaceably and quietly have,
hold and enjoy the Premises against any adverse claim of Lessor, or any party
claiming under Lessor, during the Lease Term. In the event that Lessor permits
Lessee to occupy the Premises prior to the lease commencement date specified in
Section 1.8, the Lessee's occupancy shall be subject to all terms, covenants and
conditions of this Lease. The early occupancy by Lessee, as contemplated by
Section 49, shall not advance the lease termination date.
10. USE. Lessee shall use the Premises solely for the purpose specified in
Section 1.11, and for no other purpose without the prior written consent of
Lessor.
10.1. NUISANCE. Lessee shall not use the Premises or the Common Area,
and shall insure that Lessee's employees and visitors do not use the Premises or
the Common Area, in any manner which interferes with the peaceful enjoyment of
the building of which the Premises are a part or the Common Area by other
lessees, their respective employees and invitees. Lessee shall not, and shall
not permit, the placing of litter in or about the building of which the Premises
are a part or the Common Area (except in dumpsters designated for Lessee's use
by Lessor) and shall not permit any animal, motorcycle, or road vehicle to be
brought into or kept within the Premises.
10.2. OUTSIDE STORAGE. No materials, supplies, equipment, finished
products, or semi-finished products, raw materials, or articles of any nature
shall be stored upon or permitted to remain on any portion of the Common Area or
of the building of which the Premises are a part, excepting only the Premises or
except with the prior written consent of the Lessor.
10.3. HAZARDOUS MATERIALS.
(a) Lessee shall not and Lessee shall not permit any of Lessee's
agents, invitees or employees to, release or threaten to release any
"oil,""hazardous material", "hazardous wastes" or "hazardous substances" (the
"Hazardous Materials") as those terms are defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et
--
seq., as amended, the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
- ----
(S)6901 et seq., as amended, and regulations adopted thereunder or under any
state or local law, rule or regulation regarding Hazardous Materials (the
"Hazardous Materials Laws") on or into the Premises, the Common Area or any
portion of the real property of which the Premises are a part, including
easements appurtenant thereto. Lessee shall not and Lessee shall not permit
Lessee's agents and employees to, transport, treat, store or dispose of any
Hazardous Materials in such a manner as to violate, or result in potential
liabilities under any Hazardous Materials Laws. Lessee shall not, and shall not
permit any of Lessee's agents and employees to, transport, treat, store or
dispose of any gunpowder, dynamite, gasoline, except as normally stored in
vehicles, etc., or other explosive material on or to the Premises, the Common
Area or any portion of the real property of which the Premises are a part.
(b) Lessor shall indemnify and hold harmless Lessee from and
against any claims, demands, or losses resulting from or arising out of the
presence of any Hazardous Material on, in or under the Premises prior to
Lessee's occupancy, including but not limited to, soil and/or groundwater
contamination.
Pacific Freeport Industrial Park Page 4
(Westinghouse Electric Corporation)
<PAGE>
Lessor shall indemnify and hold Lessee harmless from and against
any claims, demands, or losses resulting from or arising out of the presence of
any hazardous substances, oil or petroleum product or residue of any other
substance or material actionable under federal, state or local law, regulation
or ordinance, present on, in or under the Premises prior to Lessee's occupancy,
including but not limited to, soil and/or groundwater contamination.
10.4. WATER USE. Waste, excessive use or unusual use of water shall not
be allowed.
10.5. WASTE. Lessee agrees that Lessee will not commit or suffer any
waste of the Premises.
11. COMMON AREA. The lease of the Premises to the Lessee includes the use in
common with others entitled thereto of the Common Area, subject however to the
terms, covenants and conditions of this Lease and to reasonable rules and
regulations for the use thereof as prescribed pursuant to Section 45.
12. SERVICES. Lessee shall pay for all sewer, water, heat, telephone,
electricity, air conditioning, gas, burglar and/or fire alarm, and other
utilities supplied to the Premises together with any taxes thereon, other than
those services set forth in Section 1.12 as Lessor's responsibility, which
responsibility shall exist in Lessor only so long as Lessee is not in default of
this Lease. The electricity and gas service to the Premises are separately
metered. Lessee shall pay a reasonable proportion based on the square feet
leased of all charges jointly metered with other premises. Lessor shall not be
liable to Lessee or to any other party for injury to Lessee's business, loss of
income therefrom, or any claim, injury, or damage of any kind whatsoever which
may arise or accrue in case of the interruption of the supply of water, heat,
telephone, electricity, air conditioning, gas, burglar and/or fire alarm, or
other utility, caused by accident, failure of power supply, repairs, strikes,
fire, flood, act of God, or on account of any defect of the Premises or the
building of which the Premises are a part, nor shall any such interruption be
grounds for termination of this Lease provided Lessor exercises reasonable
diligence to remedy such interruption.
13. CONDITION OF PREMISES. Lessee's taking possession of the Premises and
occupying the Premises for thirty (30) days without giving written notice to
Lessor within the thirty (30) day period of any defect (excluding only latent or
hidden defects which could not be discovered in the exercise of Lessee's
reasonable diligence) in the Premises shall be conclusive evidence as against
Lessee that the Premises were in good order and satisfactory condition when
Lessee took possession of the Premises. No promise to alter, remodel, or
improve the Premises or the building of which the Premises are a part and no
representation respecting the condition of the Premises or the building of which
the Premises are a part, have been made by Lessor to Lessee, unless the promise
or representation is set forth in a writing signed by the Lessor. Lessee waives
all right to make repairs at the Lessor's expense, or to deduct the cost of
repairs from the rent.
Lessee hereby accepts the Premises subject to all applicable zoning,
municipal, county and state laws, ordinances governing and regulating the use of
the Premises, and accepts this Lease subject thereto and to all matters
disclosed thereby. Lessee acknowledges that neither Lessor nor Lessor's agent,
if any, has made any representation or warranty as to the suitability of the
Premises for the conduct of Lessee's business. Lessor warrants that the
Premises are in compliance with all current laws, ordinances, regulations and
codes and there is no asbestos on the Premises.
14. ALTERATIONS.
(a) Lessee shall have, upon notice to Lessor but without Lessor's
consent, the right to make such alterations, additions, or improvements in or to
the Premises as it shall consider necessary or desirable for the conduct of its
business, the cost of which in each case does not exceed $5,000.00 (excepting
any work requiring roof penetrations regardless of the cost of such work). All
other alterations, additions, or improvements (including any work requiring roof
penetrations regardless of the cost of such work) shall not be made without
first obtaining the written consent of Lessor, which consent shall not be
unreasonably withheld or delayed.
Pacific Freeport Industrial Park Page 5
(Westinghouse Electric Corporation)
<PAGE>
All such work shall be done in a good and workmanlike manner, and
the structural integrity of any building shall be not impaired, and that no
liens shall attach to the Premises by reasons thereof. Upon the termination of
this Lease, such alterations, additions, or improvements shall, at the option of
the Lessor, (1) become the property of Lessor, or (2) be removed by the Lessee
provided that any part of the Premises affected by such removal shall be
restored to its original condition, reasonable wear and tear excepted.
(b) Lessee shall have the right to install in or place on the
Premises such fixtures, machines, tools, or other equipment (including but not
limited to trade fixtures, lighting fixtures, water coolers, and air
conditioning equipment) as it may choose. Such fixtures, machines, tools, or
other equipment shall at all times remain the personal property of Lessee
regardless of the manner or degree of attachment thereof to the Premises and may
be removed at any time by Lessee whether at the termination of this Lease or
otherwise; provided, however, that any part of the Premises affected by such
removal shall be restored to its original condition, reasonable wear and tear
excepted.
(c) Notwithstanding whether Lessor's consent is required for any
alteration, addition, improvement or change to the Premises, Lessee specifically
agrees that Lessee will not make any penetration whatsoever into the floor of
the building of which the Premises are a part unless and until Lessor shall have
specifically agreed to the placement of any such penetration.
15. LESSEE'S REPAIR OBLIGATIONS. Lessee shall, at Lessee's sole expense, keep
the Premises in good order, condition, and repair during the Lease Term,
including without limitation the replacement of all broken glass with glass of
the same size and quality under the supervision and with the approval of Lessor,
and the maintenance of all skylights and doors, except for damage caused by any
negligent act or omission, or intentional misconduct, of Lessor, Lessor's agents
and employees. If Lessee does not make repairs promptly and adequately, Lessor
may (upon such continued failure after ten (10) days written notice), but need
not, make repairs, and Lessee shall pay promptly the reasonable cost thereof.
At any time or times, Lessor, either voluntarily or pursuant to governmental
requirement, may, at Lessor's sole expense, make repairs, alterations, or
improvements in or to the Premises or the building of which the Premises are a
part, and during such operations Lessor may close entrances, doors, corridors,
elevators, or other facilities, all without any liability to Lessee by reason of
interference, inconvenience, or annoyance; provided that Lessee shall have
access to the Premises sufficient for conduct of Lessee's business. In the
event Lessee requests that repairs, alterations, decorating, or other work in
the Premises be made during periods other than ordinary business hours, Lessee
shall pay Lessor for overtime and other additional expenses incurred by Lessor
because of such requests. Lessor, or Lessor's agents or representatives, may
come into and upon Premises at all reasonable times, or any time in case of
emergency, for purposes of examining the Premises.
Lessee shall repair any damage occasioned by the moving of freight,
furniture or other objects into, within, or from the building of which the
Premises are a part.
16. LESSOR'S REPAIR OBLIGATIONS. Lessor shall, at Lessor's sole expense, keep
the foundations, the exterior walls, floors, and the roof, including skylights,
of the building of which the Premises are a part, all plumbing, sewer, gas and
electrical systems from within the interior walls and floors of the Premises to
the utility provider, and all Common Area in good order, condition and repair
during the Lease Term and for two years from occupancy Lessors warrants all
leasehold improvements, subject to the terms, covenants and conditions Section
42 hereof, and except for damage caused by any negligent act or omission, or
intentional misconduct, of Lessee, Lessee's agents, and employees or invitees.
17. LIENS. Lessee agrees to keep the Premises and the property on which the
Premises are located free from any liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee, except if performed by
Lessor. In the event liens are filed as a result of Lessee's work, then Lessee
shall promptly cause the same to be released or satisfied in full within ten
(10) days of the date of such filing.
Pacific Freeport Industrial Park Page 6
(Westinghouse Electric Corporation)
<PAGE>
18. INDEMNIFICATION. Lessee waives all claims against Lessor and hereby
releases Lessor for damages to property, or to goods, wares and merchandise
stored in, upon, or about the Premises, and for injuries to persons in, upon, or
about the Premises from any cause arising at any time, unless the damage or
injury was caused by the negligent act or omission, or intentional misconduct,
of Lessor. Lessee agrees to indemnify and hold Lessor harmless from and on
account of any damage or injury to any person or property arising from the use
of the Premises by Lessee or from the failure of Lessee to keep the Premises in
good condition as provided in Section 15, unless such damage or injury was
caused by the negligent act or omission, or intentional misconduct, of Lessor.
Lessor shall not be liable to Lessee for any damage because of any negligent act
or omission, or intentional misconduct, of any co-tenant or other occupant of
the same building of which the Premises are a part, or by any owner or occupant
of adjoining or contiguous property, nor for overflow, breakage, or leakage of
water, steam, gas, or electricity from pipes, wires, or otherwise. Lessee shall
pay for all damage to the building of which the Premises are a part and to the
tenants and occupants thereof caused by the misuse or neglect of the Premises by
Lessee or Lessee's invitees.
19. INSURANCE REQUIRED OF LESSEE. Lessee, at Lessee's sole expense, shall
provide and keep in force during the Lease Term and for the benefit of both
Lessor and Lessee general commercial liability insurance policies with a
recognized casualty insurance company qualified to do business in Nevada
protecting Lessee against any and all liability occasioned by the use,
occupancy, disuse or condition of the Premises, improvements thereto, adjoining
areas or ways or otherwise, in an initial amount of not less than Two Million
Dollars ($2,000,000.00) per occurrence such insurance shall further name Lessor
as an additional insured. Lessee agrees to furnish certificates of insurance to
Lessor naming Lessor as Additional Insured. A certificate of the policy,
together with evidence of payment of premiums, shall be deposited with the
Lessor on or prior to the lease commencement date, and on renewal of the policy
not less than thirty (30) days before expiration of the policy. All the
insurance required under this Section 19 shall (a) be issued as a primary
policy; and (b) contain an endorsement requiring thirty (30) days written notice
from the insurance company to both parties and Lessor's lender before
cancellation or change in the coverage, scope, or amount of any policy. The
limits of the insurance shall not limit the liability of the Lessee under this
Lease.
Lessee shall not use or keep on the Premises any article which Lessor's
insurance carrier terms as hazardous and which tends to increase Lessor's rate
of insurance. Lessee agrees that Lessor and Lessor's insurance carrier may make
regular or unannounced inspections of the Premises and Lessee agrees to protect
the Premises in accordance with the insurance carrier's engineering standards
and recommendations.
20. INSURANCE REQUIRED OF LESSOR. Lessor agrees to carry fire and casualty
insurance during the Lease Term insuring Lessor's interest in the Premises for
the full replacement value thereof. Lessor shall have no obligation to insure
against loss or damage to Lessee's leasehold improvements, fixtures, furniture,
or other personal property in or about the Premises. Lessee shall have no
interest in the proceeds of any insurance insuring Lessor's interest. Lessee
shall pay Lessee's pro rata share of the fire and casualty insurance premiums to
the Lessor monthly in advance as additional rent commencing on the lease
commencement date specified in Section 1.8 and continuing on the first day of
each month thereafter for the remainder of this Lease. Lessee's pro rata share
of the insurance cost shall be measured by the percentage of the building
occupied by Lessee as specified in Section 1.14.
21. SUBROGATION. Lessor and Lessee hereby waive all claims they may have and
all rights of subrogation which their respective insurers might have under all
policies of insurance now existing or hereafter purchased during the Lease Term
by either Lessor or Lessee, respectively, for any damage or loss covered by such
policies to the Premises or any portion thereof, or which could be covered by
all risk insurance, or Lessee's leasehold improvements, furniture, fixtures,
personal property, business, or operations in or about the Premises. Lessee and
Lessor shall, upon obtaining the policies of insurance required under this
Section 21, give notice to their respective insurance carriers that the
foregoing mutual waiver of subrogation is contained in this Lease. This waiver
of subrogation shall be effective as to any insurance policy.
Pacific Freeport Industrial Park Page 7
(Westinghouse Electric Corporation)
<PAGE>
22. PERSONAL PROPERTY TAXES. Lessee shall pay before delinquency all taxes,
assessments, license fees and other charges that are levied and assessed against
Lessee's personal property installed or located in or on the Premises, and that
become payable during the Lease Term. On demand by Lessor, Lessee shall furnish
Lessor with satisfactory evidence of these payments.
23. REAL PROPERTY TAXES. Lessee shall pay to Lessor as additional rent
Lessee's pro rata share, based upon the percentage of the building occupied by
Lessee as set forth in Section 1.14, of all Real Property Taxes, as defined
below, levied and assessed against the real property of which the Premises are a
part. Since Lessor is required to pay real property taxes in quarterly
installments in advance for each annual fiscal tax year, the Lessee's share of
the Real Property Taxes shall be payable in quarterly installments in advance,
commencing on the lease commencement date, and continuing on the first day of
each calendar quarter thereafter for the remainder of this Lease.
The term "Real Property Taxes," as used in this Section 23, means any
form of assessment, license fee, rent tax, levy, penalty (other than income,
inheritance or estate tax) imposed by any authority having the direct or
indirect power to tax, including any city, county, state or federal government,
or any school, agricultural, lighting, drainage or improvement district, as
against any legal or equitable interest of Lessor in the Premises or in the real
property of which the Premises are a part, as against Lessor's right to rent or
gross receipts therefrom, or as against Lessor's business of leasing the
Premises and Lessee shall pay Lessee's pro rata share of any and all charges
which may be imposed by governmental regulations or authorities. Nothing herein
to the contrary shall require Lessee to pay any portion of any tax on Lessor's
gross income or any franchise tax or any estate gift or inheritance tax.
Any failure to pay the quarterly installments of Real Property Taxes
shall be deemed a failure to pay rent and shall constitute a default of this
Lease. Lessor and Lessee agree that in collecting Lessee's quarterly
installments of Real Property Taxes, Lessor does not act as trustee for Lessee
or any other person. Lessor acts only as a creditor of Lessee in collecting the
quarterly installments of Real Property Taxes. Lessor may commingle the
installments of Real Property Taxes with Lessor's general funds and shall pay no
interest on them. Lessee's liability to pay Real Property Taxes shall be
prorated on the basis of a 365-day year to account for any fractional portion of
a fiscal tax year included in the Lease Term at its commencement and
termination. Lessee shall be considered the owner during the Lease Term of any
leasehold improvements installed at Lessee's expense, and any such leasehold
improvements may be assessed to Lessee for property tax purposes.
24. DESTRUCTION. In the event of a partial destruction of the Premises or the
building of which the Premises are a part during the Lease Term from a cause
which is insured under Lessor's fire and extended coverage insurance, Lessor
shall forthwith repair the same, provided such repairs can reasonably be made
within one hundred twenty (120) days under the laws and regulations of the
state, county, federal, or municipal authorities, but such partial destruction
shall not annul or void this Lease, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs interferes with the business carried on by Lessee on the Premises.
If such repairs cannot be made within one hundred twenty (120) days, or
if the Premises are destroyed to the extent of more than 33-1/3 % of the then
current replacement cost thereof, either Lessor or Lessee may terminate this
Lease by giving written notice to the other party within thirty (30) days after
the damage occurs. If this Lease is not terminated, Lessor shall make such
repairs within a reasonable time with this Lease continuing in full force and
effect and the rent proportionately reduced while the repairs are being made.
If the Premises or the building of which the Premises are a part are
partially destroyed or damaged during the last three (3) months of the Lease
Term, or any renewal thereof, Lessor may elect to terminate this Lease as of the
date of occurrence of such damage by giving written notice of termination to
Lessee within thirty (30) days after the damage occurs.
Pacific Freeport Industrial Park Page 8
(Westinghouse Electric Corporation)
<PAGE>
In the event the building of which the Premises are a part is destroyed
to the extent of more than 33-1/3% of the then current replacement cost thereof,
Lessor may elect to terminate this Lease by giving written notice of termination
to Lessee within thirty (30) days after damage occurs, regardless of whether the
Premises are damaged or whether the repairs can reasonably be made within one
hundred twenty (120) days. A total destruction of the Premises or the building
of which the Premises are a part shall terminate this Lease.
In the event of termination of this Lease pursuant to any of the terms,
covenants and conditions of this Section 24, rent and Lessee's portion of any
property taxes and insurance costs shall be apportioned on a per diem basis and
shall be paid to the date of the casualty. In no event shall Lessor be liable
to Lessee for any damages resulting to Lessee from the happening of such
casualty or from the repairing or reconstruction of the Premises or of the
building, or from the termination of this Lease as herein provided, nor shall
Lessee be relieved thereby or in any such event from Lessee's obligations under
this Lease except to the extent and upon the conditions expressly stated in this
Section 24.
25. EMINENT DOMAIN. If the whole or any substantial part of the Premises or
the building of which the Premises are a part shall be taken or condemned by any
competent authority for any public use or purpose, the Lease Term shall end
upon, and not before, the date when the possession of the part so taken shall be
required for such use or purpose. Rent shall be apportioned as of the date of
such termination. Lessee shall be entitled to receive any damages awarded by
the court for leasehold improvements installed at Lessee's expense and the
expenses of Lessee's relocation or business interruption if so awarded and
designated by the court. The entire balance of the award shall be the property
of Lessor.
26. ASSIGNMENT AND SUBLETTING. Lessee shall not directly or indirectly assign,
hypothecate or encumber this Lease, or any interest herein, and shall not sublet
the Premises or any part thereof, or any right or privilege appurtenant thereto,
or suffer any other person (excepting only Lessee's agents and employees) to
occupy or use the Premises, or any portion thereof, without the prior written
consent of Lessor, and a consent to one assignment, hypothecation, encumbrance,
subletting, occupation, or use by any other person shall not be deemed to be a
consent to any subsequent assignment, hypothecation, encumbrance, subletting,
occupation, or use by any other person. Any such assignment, hypothecation,
encumbrance, subletting, occupation or use without such consent shall be void,
and shall, at the option of Lessor, terminate this Lease. Any transfer or
assignment of this Lease by operation of law without the written consent of
Lessor shall make this Lease voidable at the option of Lessor.
Lessor will not unreasonably withhold or delay Lessor's consent to an
assignment or subletting by Lessee, provided that (a) the assignee or sublessee
proposes to use the Premises for the same use as is set forth in Section 1.11;
(b) the proposed use is not injurious to the Premises and will not disturb other
tenants of Lessor in the building of which the Premises are a part or immediate
vicinity; and (c) the assignee or sublessee executes and delivers to Lessor a
written assumption of this Lease in form acceptable to Lessor.
Notwithstanding the foregoing, Lessee shall have the right to assign
this Lease or to sublet the Premises or any part thereof to any entity
controlled, controlling or under common control with Lessee or the purchaser of
the business (by merger or acquisition) of the business conducted on the
Premises without the consent of Lessor, provided, however, that no such
assignment or subletting shall relieve Lessee of its duty to perform fully all
of the agreements, covenants, and conditions set forth in this Lease. Lessee
shall promptly advise Lessor of any such permitted assignment or subletting and
of the name and address of the assignee or subtenant, as the case may be.
Regardless of Lessor's consent, no subletting or assignment shall
release Lessee or Lessee's obligation or alter the primary liability of Lessee
to pay any rent and to perform all other obligations to be performed by Lessee
under this Lease. The acceptance of any rent by Lessor from any other person
shall not be deemed to be a waiver by Lessor of any term, covenant or condition
of this Lease. Every assignment or sublease shall recite that it is and shall be
subject and subordinate
Pacific Freeport Industrial Park Page 9
(Westinghouse Electric Corporation)
<PAGE>
to the terms, covenants and conditions of this Lease, and the termination of
this Lease shall constitute a termination of every such assignment or sublease.
27. SUBORDINATION. The rights of Lessee under this Lease shall be and they are
subject and subordinate at all times to the lien of any mortgage or deed of
trust, now or hereafter in force against the Premises and the property of which
the Premises are a part, and to all advances made or hereafter to be made upon
the security thereof, and Lessee shall execute such further instruments
subordinating this Lease to the lien of any such encumbrance, as shall be
requested by Lessor, provided the holder of such encumbrance agrees to recognize
Lessee's interest under this Lease if Lessee is not then in default.
If any mortgagee or beneficiary elects to have this Lease superior to
its mortgage or deed of trust and gives notice of such fact to Lessee, then this
Lease shall be deemed superior to the lien of any such encumbrance, whether this
Lease or a memorandum thereof is dated or recorded before or after said
encumbrance.
As a condition to the effectiveness of this Lease, Lessor shall further
secure a nondisturbance and attornment agreement in favor of Lessee in
reasonable form from the current mortgagee or lien holder or any future
mortgagee or lien holder on the building which shall provide that as long as
Lessee is not in default in the payment of rental or any other covenants or
conditions of the lease, the rights of Lessee under the lease shall not be
terminated and the possession of Lessee shall not be disturbed by Lessor or any
mortgagee or ground Lessor or by any proceedings regarding the debt which any
such mortgage or ground lease secures.
28. SIGNS. Lessee shall not place any signs, lettering, marks, photographs, or
any other material whatsoever, on the interior or exterior of the doors,
windows, hallways, or any other place, in, on, or about the Premises, the
building of which the Premises are a part, or its appurtenances, without
Lessor's prior written approval, which approval shall not be unreasonably
withheld or delayed, of the size, style, design, color, material, manner of
applying or fastening, and location thereof.
29. DEFAULT.
(a) If Lessee shall fail to pay any rent to Lessor when the same
is due and payable under the terms of this Lease and such default shall continue
for a period of ten (10) days after written notice thereof has been given to
Lessee by Lessor, or if the Lessee shall fail to perform any other duty or
obligation imposed upon it by this Lease and such default shall continue for a
period of thirty (30) days after written notice thereof has been given to Lessee
by Lessor, or if the Lessee shall be adjudged bankrupt, or shall make a general
assignment for the benefit of its creditors, or if a receiver of any property of
Lessee in or upon the Premises be appointed in any actions, suit, or proceeding
by or against Lessee and such appointment shall not be vacated or annulled
within sixty (60) days, or if the interest of Lessee in the Premises shall be
sold under execution or other legal process, then and in any such event Lessor
shall have the right to enter upon the Premises and again have, repossess, and
enjoy the same as if this Lease had not been made, and thereupon this Lease
shall terminate without prejudice, however, to the right of Lessor to recover
from Lessee all rent due and unpaid up to the time of such re-entry. In the
event of any such default and re-entry, Lessor shall have the right to relet the
Premises for the remainder of the then existing term whether such term be the
initial term of this Lease or any renewed or extended term, for the highest rent
then obtainable, and to recover from Lessee the difference between the rent
reserved by this Lease and the amount obtained through such reletting less the
costs and expenses reasonably incurred by Lessor in such reletting.
(b) If Lessor shall fail to perform any duty or obligation imposed
upon it by this Lease and such default shall continue for a period of thirty
(30) days after written notice thereof has been given by Lessee, then and in
such event Lessee may, at its option, terminate this Lease without prejudice to
is right to recover appropriate damages from Lessor. Upon termination of the
lease pursuant to this provision, all obligations of Lessee arising under this
Lease, including payment of rent, shall cease.
Pacific Freeport Industrial Park Page 10
(Westinghouse Electric Corporation)
<PAGE>
30. ABANDONMENT. Lessee shall not abandon or surrender the Premises during the
Lease Term, and if Lessee does or is dispossessed by process of law, or
otherwise, any personal property belonging to Lessee left on the Premises shall
be deemed to be abandoned at the option of Lessor.
31. REMOVAL OF PROPERTY UPON TERMINATION. At any time Lessee may, and, prior
to the applicable termination date of the Lease Term, Lessee shall remove from
the Premises furniture, equipment, other personal property and any trade
fixtures installed by Lessee or at Lessee's expense. Lessee shall not remove
any trade fixtures installed by Lessor or Lessor's expense or any other fixtures
or leasehold improvements without Lessor's prior written consent: provided,
however, that upon Lessor's written request, Lessee shall remove such trade
fixture, other fixtures and leasehold improvements. Lessee shall repair any
damage to the Premises caused by removal of any property and shall restore the
Premises to its condition at the lease commencement date, less reasonable wear
and tear. All removal and restoration shall be accomplished at Lessee's sole
expense prior to the end of the Lease Term.
32. REMOVAL, STORAGE AND LIEN OF PROPERTY UPON DEFAULT. [Intentionally Omitted]
33. SURRENDER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing subleases or subtenancies, or may, at
the option of Lessor, operate as an assignment to Lessor of any or all such
subleases or subtenancies.
34. LESSOR'S CONVEYANCE. Lessor may convey its interest in the Premises and
all or any portion of the Common Area. From and after the date of such
conveyance, Lessor shall be released and discharged from any and all obligations
under this Lease, excepting those obligations previously accrued.
35. WAIVER. The waiver by Lessor of any breach of any term, covenant or
condition of this Lease shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition of this Lease. The subsequent acceptance of rent under
this Lease by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this Lease, other than the
failure of Lessee to pay the particular rent so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such rent.
36. HOLDING OVER. Any holding over after the applicable termination date, with
the consent of Lessor, shall be construed to be a tenancy from month to month on
the same terms, covenants and conditions specified herein so far as applicable
but shall not be deemed to constitute an extension or renewal of this Lease.
During any period of holding over the monthly rent shall be the then monthly
rent in effect, provided however that in the event such holding over continues
for a period of two (2) months, the monthly rent shall be increased by twenty
percent (20%) over the then monthly rent in effect.
37. ATTORNEY'S FEES. If either party becomes a party to litigation concerning
this Lease by reason of any act or omission of the other party or its authorized
representatives, and not by any act or omission of the party that becomes a
party to that litigation or any act or omission of its authorized
representatives, the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorney's fees and
court costs incurred by it in the litigation. If any action at law or in equity
shall be brought to recover any rent under this Lease, or for or on account of
any breach of or to enforce or interpret any of the terms, covenants or
conditions of this Lease, or for the recovery of the possession of the Premises,
the prevailing party in any final judgment, or the nondismissing party in the
event of a dismissal without prejudice, shall be entitled to the full cost of
all reasonable expenses, including all court costs and reasonable attorney's
fees paid or incurred in good faith.
38. REMEDIES. All of the remedies herein provided are cumulative, and in
addition to and not in lieu of the remedies provided by law, and the exercise of
one remedy shall not preclude the exercise of any other remedy.
Pacific Freeport Industrial Park Page 11
(Westinghouse Electric Corporation)
<PAGE>
39. NOTICES. All notices to be given to Lessee shall be given in writing, and
sent by certified mail, return receipt requested, addressed to Lessee at the
address set forth below Lessee's signature. Notice to Lessor shall be given in
writing and sent by certified mail, return receipt requested, addressed to
Lessor at the address to which the rent is paid.
40. COMMISSION. Lessor and Lessee each represent and warrant to the other that
they have not dealt with any broker, finder or agent in connection with this
Lease except as disclosed in Section 1.15. Notwithstanding that Trammel Crow
Company has acted as Lessee's agent in connection with this Lease, Lessor agrees
to pay Trammel Crow Company a brokerage commission as set forth in the separate
agreement between Lessor and Trammell Crow Company. Lessor and Lessee each
agree to defend, hold harmless and indemnify the other from and against any and
all costs, damages, expenses (including without limitation attorney's fees and
court costs), suits (whether arising in tort or contract), liability for any
compensation, commissions, damages (punitive or otherwise), fees, finder's fees,
or charges claimed by any broker, finder or agent with respect to this Lease or
the negotiations thereof in breach of the representations and warranties of this
Section 40.
41. LAWS. Lessee shall comply and will cause all Lessee's employees to comply,
at Lessee's sole expense, with any and all local, county, state and federal
ordinances, regulations and laws applicable to the Premises and Lessee's
activities on and about the Premises. Lessee will not conduct or permit to be
conducted on the Premises or the Common Area any business which is forbidden or
prohibited by any local, county, state or federal ordinance, regulation or law.
42. COMMON AREA MAINTENANCE EXPENSE. Lessee shall pay to Lessor as additional
rent Lessee's pro rata share based upon the percentage of the building occupied
by Lessee as set forth in Section 1.14, of the Common Area Expenses as defined
below. The Lessee's share of the Common Area Expenses shall be payable in
monthly installments in advance commencing on the lease commencement date, and
continuing on the first day of each calendar month for the remainder of this
Lease. Lessor may adjust the monthly Common Area Expenses charged at the
beginning of any month on the basis of Lessor's actual cost or reasonably
anticipated costs.
If Lessee's share of Common Area Expenses for a Lease Year exceeds the
payments made by Lessee, Lessee shall pay to Lessor the deficiency within ten
(10) days after receipt of a statement showing the total Common Area Expense for
the Lease Year, Lessee's share of Common Area Expenses, Lessor shall pay Lessee
the excess at the time Lessor furnishes the statement to Lessee.
The term "Common Area Expenses" means any or all of the following
incurred by Lessor with respect to the building of which the Premises are a part
and all adjacent property owned by Lessor: Cost of electricity, steam, gas, oil,
sewer, water, burglar and/or fire alarm, other utility charges, building and
cleaning supplies, repairs, maintenance, capital expenditures required to meet
changed governmental regulations, cleaning and janitorial services, servicing of
equipment, license, permit, inspection fees, common area expenses and
allowances, and service contracts with independent contractors.
The term "Lease Year," as used in this Section 42, means the period of
twelve (12) months or less commencing with the lease commencement date and
ending on the following December 31st, and each successive period of twelve (12)
months thereafter during the term, and the final period of twelve (12) months or
less commencing with the January 1st immediately preceding the applicable
termination date.
43. LESSOR ACCESS. For a period commencing ninety (90) days prior to the end
of the Lease Term, Lessor may have reasonable access to the Premises for the
purpose of exhibiting the same to prospective lessees and to post any usual "For
Lease" signs upon the Premises. During the Lease Term, the Lessor may have
reasonable access to the Premises for the purposes of exhibiting the same to
prospective purchasers and to post "For Sale" signs upon the Premises.
Pacific Freeport Industrial Park Page 12
(Westinghouse Electric Corporation)
<PAGE>
44. LOCKS. No additional lock or locks shall be placed by Lessee on any door
unless written consent of Lessor shall first have been obtained. Two keys to all
doors will be furnished by Lessor. All keys shall be surrendered to Lessor on
the applicable termination date or any sooner termination.
45. RULES. Lessor reserves the right to make such reasonable rules and
regulations, including parking regulations, as in Lessor's judgment may from
time to time be necessary for the safety, care, cleanliness and orderly
operation of the Premises and the Common Area, and which rules and regulations
are expressly made a part hereof, and with which Lessee agrees to comply.
Lessee agrees to require Lessee's employees to abide by any such rules and
regulations, including parking regulations, provided such rules and regulations
do not change, alter, add to or delete from the terms and conditions of this
Lease. Lessor agrees to enforce such rules in a uniform and non-discriminatory
manner.
46. DEFINITIONS.
46.1. COMMON AREA. The term "Common Area" means all areas and facilities
outside the Premises and within the exterior boundaries of the property owned by
Lessor of which the Premises are a part, which are presently provided and
designated by Lessor for the general use of Lessee and other Lessees of the
Lessor and their respective authorized representatives and invitees. Common
areas include, without limitation, employee parking areas, customer parking
areas, service roads, loading facilities, pedestrian walkways and patios,
landscaped areas, sidewalks, plazas, throughways, roads and other facilities
located on the real property owned by Lessor of which the Premises are a part.
46.2. PRIME RATE. The term "Prime Rate" means the "prime," "reference"
or "base" rate on corporate loans at large U.S. money center banks as published
from time to time by the Wall Street Journal. In the event two or more such
rates are published, the term "prime rate" shall mean the highest rate
published.
47. GENERAL PROVISIONS.
This Lease contains all the terms, covenants and conditions agreed to by
Lessor and Lessee and it may not be modified orally or in any manner other than
by an agreement in writing signed by Lessor and Lessee or their respective
successors in interest. No prior agreement or understanding pertaining to any
matter concerning this Lease shall be effective unless incorporated herein.
The terms, covenants and conditions of this Lease, subject to the terms,
covenants and conditions of this Lease applicable to subletting and assignment,
shall apply to and bind the heirs, successors, executors, administrators,
sublessees and assigns of the parties.
The captions and section descriptions of this Lease are for convenience
only and are not part of this Lease and do not in any way limit or amplify the
terms, covenants and conditions of this Lease.
This Lease shall be governed by and construed in accordance with the
laws of the State of Nevada.
Time is of the essence as to all of the terms, covenants and conditions
of this Lease.
Lessee shall not record this Lease. Any such recordation shall be a
material breach under this Lease and shall, at Lessor's option, terminate this
Lease.
48. PACIFIC FREEPORT WAREHOUSE COMPANY. Lessor and Lessee acknowledge and
agree that Pacific Freeport Warehouse Company acts as the agent of Lessor in
connection with Lessor's negotiation and performance of this Lease unless
Pacific Freeport Industrial Park Page 13
(Westinghouse Electric Corporation)
<PAGE>
and until Lessee shall have received a written notice from Lessor stating that
Pacific Freeport Warehouse Company no longer acts as Lessor's agent with respect
to this Lease.
49. EARLY OCCUPANCY. Lessor hereby grants to Lessee the right and license to
enter upon and possess the Premises on and after January 1, 1992 for the purpose
of the construction and installation of such tenant improvements and trade
fixtures as may have been consented to by Lessor. Lessee's entry and possession
shall be on all the terms and conditions of this Lease, including the payment of
all utilities, insurance, taxes and other amounts payable by Lessee pursuant to
this Lease; provided, however, that the base monthly rent specified in Section
1.3 shall not commence until the rent commencement date specified in Section
1.5; further provided, however, that any monthly rent to be paid upon execution
of this Lease shall nonetheless be immediately due and payable.
50. FIRST OPTION TO LEASE ADJACENT SPACE. Provided Lessee has faithfully
performed all terms and conditions of the Lease and is not otherwise in default,
Lessor and Lessee agree that Lessee shall have the first option to lease the
abutting 134,400 sq. ft. of warehouse space in Building 8 (the "Option Space")
upon the expiration of the term of the existing lease with Thrifty Corporation
("Thrifty"). Lessor discloses, and Lessee acknowledges that the initial term of
the Thrifty lease expires June 1, 1994, and that Lessor has granted Thrifty the
right to extend the term of the lease for two (2) one (1) year periods ending,
respectively, on June 1, 1995, and June 1, 1996. The option granted herein
shall be subject to the options granted to Thrifty to renew its lease for the
Option Space. In the event Thrifty fails to give timely notice to Lessor that
it exercises its option to renew or, if Thrifty has exercised its final option,
after January 1, 1996, Lessor shall give Lessee written notice that the Option
Space will become available for lease to Lessee and the date thereof. Lessee
shall have the right to exercise the option granted in this Section 50 for a
period of thirty (30) days following such notice. In the event Lessee does not
notify Lessor of its exercise of such option within such thirty (30) day period,
the option granted in this Section 50 shall become immediately null and void.
In the event Lessee shall have timely exercised the option granted in
this Section 50, the Lessor and Lessee shall execute an addendum to this Lease
which shall become effective upon the date stated in Lessor's notice and which
shall provide that the Option Space shall be leased to Lessee pursuant to all
the terms and conditions of this Lease as if such space had been initially
leased to Lessee hereunder, excepting only that the monthly rent shall be
increased as provided below. On the effective date, the monthly rent which
Lessee is then obligated to pay under this Lease shall be increased by the
amount equal to the monthly rent payable under this Lease immediately prior to
the effective date (calculated on a per square foot per month basis) times the
number of square feet of the Option Space. Thereafter, the monthly rent,
including the rent for the Option Space, shall be adjusted as provided in
Section 3.
51. FIRST OPTION TO LEASE SPACE IN BUILDING. Provided Lessee has faithfully
performed all terms and conditions of the Lease and is not otherwise in default,
Lessor and Lessee agree that Lessee shall have the first option to lease any
other available warehouse space which Lessor intends to lease and which is
located within Building 8 (the "Market Rate Space") during the term of this
Lease. In the event Lessor determines to lease any Market Rate Space, Lessor
shall first offer to lease ("Lessor's Offer") such space to Lessee at a rate
equal to the prevailing market rate for similar space in the geographic area in
which Building 8 is located as determined by Lessor in good faith commencing on
a date stated which is not sooner than thirty (30) days nor later than six (6)
months after the date of Lessor's Offer.
In the event Lessee gives notice of acceptance of Lessor's Offer within
the five (5) day period following Lessor's Offer, Lessor and Lessee shall
execute an addendum to this Lease which shall become effective upon the date
stated in Lessor's Offer and which shall provides that the Market Rate Space
shall become a part of this Lease as if such space had been initially leased to
Lessee hereunder, excepting only the monthly rent which shall be increased as
provided below. On the effective date, the monthly rent which Lessee is then
obligated to pay under this Lease shall be increased by the amount equal to the
monthly rent payable under this Lease immediately prior to the effective date
(calculated on a per square foot per month basis) times the number of square
feet of the Market Rate Space. Thereafter, the monthly rent, including the rent
for the Market Rate
Pacific Freeport Industrial Park Page 14
(Westinghouse Electric Corporation)
<PAGE>
Space, shall be adjusted as provided in Section 3. In the event Lessee does not
notify Lessor of its acceptance of such offer within such five (5) day period,
the option granted in this Section 50 shall become immediately null and void.
52. PERSONAL RIGHTS. The rights granted in Section 50 and in Section 51 shall
be deemed to be personal to the Lessee, and if the Lessee subleases any portion
of the Premises or assigns or transfers any interest under this Lease prior to
the exercise of the option herein contemplated, the same shall lapse, except in
the case of subletting or assignment not requiring consent hereunder.
EXECUTED as of the 1st day of April, 1992.
LESSOR: E.T. HERMANN AND JANE D. HERMANN 1978 LIVING TRUST
By /s/ E.T. Hermann Trustee
-----------------------------------------
LESSEE: WESTINGHOUSE ELECTRIC CORPORATION
ADDRESS FOR NOTICES:
By /s/ Alan J. Meilinger
______________________________ ----------------------------
Name: A.J. Meilinger
______________________________ -------------------------
Its: Vice President
______________________________ --------------------------
By /s/ E. O. Pearson
----------------------------
Name: E.O. Pearson
------------------------
Its: Assistant Secretary
-------------------------
Pacific Freeport Industrial Park Page 15
(Westinghouse Electric Corporation)
<PAGE>
EXHIBIT "A"
-----------
LEASED PREMISES
<PAGE>
EXHIBIT "B"
-----------
LEASEHOLD IMPROVEMENTS
----------------------
for
Lease dated April 1, 1992 between E.T. Hermann and Jane D. Hermann 1978 Living
Trust ("Lessor") and Westinghouse Electric Corporation ("Lessee"/WESCO) for
196,800 sq. ft. premises/facility located at 1161 E. Glendale Avenue, Sparks,
NV.
This Exhibit consists of the following items (attached):
. Sheets: "1 of 7" thru "7 of 7" - all dated 1/24/92 and titled "Sparks, NV-
WDC" (SCHEME "A" GROUND FLOOR WDC OFFICES AND SCHEME "B" - MEZZANINE FLOOR
WDC OFFICES).
. Drawings:
---------
. Drawing - Office Scheme/Layout "A" (no date) (location in warehouse).
. Drawing - Office Scheme/Layout "A" (no date) "Floor Plan" -
1/8"=1'.0".
. Drawing - Office Scheme/Layout "A" (no date) "Reflected Ceiling Plan"
- 1/8"-1'.0".
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) (Ground Floor
Entrance/Elevator-Plan)
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) "North Section"
(Plan)
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) "South Section"
(Plan)
The Lessor shall be responsible for the construction of all leasehold
improvements indicated herein as provided "by LESSOR" in strict accordance with
---------------------------------------
the "Construction Documents" - drawings and specifications prepared specifically
for the site and building via registered architect/engineer, as required by
local and state law, from the "Sheets/Drawings" listed above (attached). All
drawings and specifications intended for use as "Construction Documents" and/or
for construction purposes, and any changes/revisions to same or in field to the
construction are to "reviewed with" and "approved by" the WESCO Facilities
--------------- ----------------
Department prior to the construction.
- ----------
/s/ E.T. Hermaan Trustee
1
<PAGE>
EXHIBIT "B"
----------
LEASEHOLD IMPROVEMENTS
----------------------
WESCO - SPARKS, NV - WDC
------------------------
The Lessor shall also be responsible for certain maintenance,
approvals/verifications, etc. of proposed "tenant provided" leasehold
improvements/equipment installations - warehouse equipment included, as
indicated herein and on the "Sheets"/"Drawings" listed above (attached).
The following items are included as clarifications/exceptions to the
"Sheets"/"Drawings" listed above (attached).
. SHEETS: 1 of 7 thru 7 of 7:
. Scheme "A" - Ground Floor WDC Offices
-------------------------------------
. Office area (approximately 5,280 sq. ft.) included:
"Section" to be deleted in its entirety.
. Warehouse area includes:
"Section" to be revised as noted below. All items not noted
-------------------------------------- ---
as revised or listed below remain as work included under
------
Scheme "B" (but indicated under Scheme "A") and provided "by
Lessor".
. Amend "paragraph" reading - "full height gypsum drywall
demising wall..." to include: "demising walls completed as
required (by code/lease) by Lessor".
. Amend "paragraph" reading - "fire protection system..." to
include: "all work, except required for rack/bin warehouse
equipment, by Lessor. Fire protection system to be existing
- 0.33 GPM over 3,000/sf with any code required update by
Lessor. Fire extinguishers to be Lessee's responsibility."
. Amend "paragraph" reading - "repair existing concrete
floor..." to include: "all work by Lessor".
. Amend "paragraph" reading - "electrical service..." to
include/read: "electrical service shall be a minimum of 800
AMP, 480 volt, 3 phase, 4 wire - for total/combined office-
warehouse area all work by Lessor".
. Amend "paragraph" reading - "two toilet/restrooms" to
include/read: "two existing toilet/restrooms at northwest
area of warehouse shall be rehabilitated to comply with
A.D.A. handicapped requirements and all other applicable
codes. 20 warehouse employees. All work by Lessor".
. Amend "paragraph" reading - "existing concrete floor
slab...." to include/read: "existing concrete floor slab
capacity designed and constructed
2
<PAGE>
EXHIBIT "B"
-----------
LEASEHOLD IMPROVEMENTS
----------------------
WESCO - SPARKS, NV - WDC
------------------------
to 250 P.S.F. - Lessor verified via structural engineer.
Lessor via structural engineer shall approve all warehouse
equipment installation layouts -including field coordination
of legs/anchors with existing reinforcement -approvals to be
made with reasonable promptness and within reasonable
perimeters of WESCO's intended use of the space. All work by
Lessor".
. Delete "paragraph" reading - "installation of protective
piping around sprinkler..."
. Amend "paragraph" reading - "all miscellaneous
constructions..." to include/read: "interior existing chain
link fence at southwest area of warehouse to be removed and
floor patched. All work by Lessor".
. Delete "paragraph" reading - "lighting under existing
mezzanine..."
. Amend "paragraph" reading - "all exterior chain link
fence..." to read: remove all existing chain link fence at
---
west truck apron - parking area (including four planters)
and patch all surfaces according to match adjacent existing
pavement. Install protective ballards around existing fire
hydrant (1) and post indicator valves (2) as required.
Existing chain link fence at east truck apron to remain -
rehabilitate to first class condition. All work by Lessor".
---
. Amend "paragraph" reading - "all existing exterior
pavement..." to include: "all work by Lessor".
. Amend "paragraph" reading - "thirty-six existing dock truck
height(s) positions..." to read: "Thirty-six existing dock
truck height(s) positions - twenty at west wall and sixteen
at east wall, are to be rehabilitated to good working order.
Items included: dock revelers, dock lips. bumpers, seals*,
overhead canopies, overhead doors and bituminous/concrete
aprons (east and west). All work by Lessor."
"Lessor shall provide Lessee upon receipt of invoices
therefor up to a $4,000.00 allowance for Lessee's
replacement of existing seals.
. Other - Office-Warehouse/SiteArea(s) Improvements:
"Section" to be deleted in its entirety with the following
---------------------------------------
exceptions:
. Amend "paragraph" reading - "warehouse to be
ventilated..." to include/read: "warehouse to be
ventilated to meet local/state code. All work by
Lessor".
3
<PAGE>
EXHIBIT "B"
-----------
LEASEHOLD IMPROVEMENTS
----------------------
WESCO - SPARKS, NV - WDC
------------------------
. Remove existing chain link fence at west truck apron -
parking area and patch all surfaces accordingly to
match adjacent existing. Existing chain link fence at
each truck apron to remain - see notes under warehouse
regarding rehabilitation.
. Scheme "B" - Mezzanine Floor WDC Offices
----------------------------------------
. Office Area (approximately 9,600 sq. ft.) includes:
"Section" to be revised as noted below. All items not
-------------------------------------- ---
noted as revised or listed below remain as work
included under Scheme "B" and provided by Lessor".
. Amend "paragraph" reading - "area to be
repainted..." to include/read: "area to be
repainted throughout - following proper repair,
patching, preparation, etc. One coat application
on existing painted surfaces and one primer coat
with two coats on new/unpainted surfaces -complete
coverage required on all surfaces. "Touch-up" work
not to be noticeable. All work by Lessor".
---
. Amend "paragraph" reading - "existing carpet to be
removed..." to include/read: "existing carpet to
be removed throughout. New 32 oz. loop carpet to
be installed at these areas (where existing) and
at new reception area. Installation to only be
made on properly prepared substrate. Carpet to be
'approved by WESCO Facilities Department' - one
---------------------------
color/type to be selected and installed
throughout. All work by Lessor".
. Amend "paragraph" reading - "existing HVAC
system..." to include: "telephone/WESCOM room to
be adequately ventilated with separated controlled
system/duct supply-return. All work by Lessor".
. Amend "paragraph" reading - "all work to conform
---
to A.D.A regulations..." to read: "all work to
---
conform to current published A.D.A. regulations,
which are scheduled to become effective on or
before July 26, 1994, and other applicable codes,
etc. Existing hardware, handrails, open stair to
ground floor ('rated' enclosure may be required -
verify via current codes and provide as required),
plumbing fixtures, etc. to be made conforming.
Installation of new elevator to be installed near
north stair per revised office layout and in
compliance with A.D.A. requirement as
4
<PAGE>
EXHIBIT "B"
-----------
LEASEHOLD IMPROVEMENTS
----------------------
WESCO - SPARKS, NV - WDC
------------------------
mentioned above (size accordingly, etc.) Existing
fire protection system - sprinklers, hose
cabinets. extinguishers (cabinets), etc. shall be
made to conform to all applicable codes/
---
regulations (including N.F.P.A.). All work by
---
Lessor".
. Delete "paragraph" reading - "provide exterior
window..."
. Delete "paragraph" reading - "relocate existing
window..."
. Warehouse Area includes:
"Section" to remain with the following exception: Add
------------------------------------------------
notation: "All work by Lessor".
. Other - Office-Warehouse/site area(s) improvements:
"Section" to be deleted in its entirety.
----------------------------------------
. Drawing - Office Scheme/Layout "A" (no date) (location in
warehouse)
"Drawing" to be deleted in its entirety.
----------------------------------------
. Drawing - Office Scheme/Layout "A" (no date) "Floor Plan"
1/8"=1'0"
"Drawing" to be deleted in its entirety.
----------------------------------------
. Drawing - Office Scheme/Layout "A" (no date) "Reflected Ceiling
Plan" -1/8"=1'0"
"Drawing" to be deleted in its entirety.
----------------------------------------
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) (Ground Floor
Entrance/ Elevator Plan)
"Drawing" to be amended to include: "all work by Lessor".
---------------------------------------------------------
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) "North
Section" (Plan)
"Drawing" to be amended to include: "all work by Lessor".
---------------------------------------------------------
. Drawing - Office Scheme/Layout "B" (rev. 1/24/92) "South
Section" (Plan)
"Drawing" to be amended to include: "all work by Lessor".
---------------------------------------------------------
5
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
SCHEME "A" - GROUND FLOOR, WDC OFFICES
--------------------------------------
OFFICE AREA (APPROXIMATELY 5,280 SQ. FT.) INCLUDES:
. New main office entrance on west wall (access road/Spalding Way) with
exterior steps and handicapped ramp from southwest parking area.
. 9'-0" high acoustic tile ceilings throughout - with 9" batt insulation.
. Use of existing exit door at south wall (near existing warehouse toilets -
to be altered for office use).
. Main entrance vestibule (at new west wall door - aluminum storefront frame
with glass to match other existing). New exterior canopy (to match other
existing above new door and step/ramp landing).
. Telephone Room and WESCOM Room, both with controlled power ventilation to
warehouse (sound reduction system).
. Manager's office, Administrative Manager's office, conference room (with
separate HVAC control), lunch room (with flush plastic laminate finished
base and wall cabinets - S.S. sink).
. Handicapped electric water cooler.
. Men's and women's toilet rooms (handicapped accessible) for 20 employees -
fixtures: two water closets each room, one urinal at men's, and two
lavatories each room.
. Heating, ventilation and air conditioning throughout - normal office loads
(see conference room, telephone room and WESCOM room notes for additional
requirements/considerations). Exhaust toilet rooms.
. Fire protection system - 0.35 GPM over 3,000 sq. ft. and
extinguishers/hose per code.
. Recessed fluorescent lighting with parabolic lens - design in accordance
with the following:
<TABLE>
<CAPTION>
AREA AVG MAINTAINED FOOTCANDLES
---- --------------------------
<S> <C>
Offices and conference rooms 70 - 80
Toilets and corridors 25 - 35
Mechanical spaces and storage 25 - 35
Warehouse 25 - 35
Roadways, walkways and parking 1/2 - 1
Trucking and dock area (exterior) 2 - 3
</TABLE>
1 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
. Gypsum wallboard partitions throughout - 5/8" gypsum wallboard on metal
studs (16" p.c.) with sound attenuation batt insulation in all partitions
around/separating toilet rooms and partitions separating office-warehouse
areas, all partitions to extend 6" above ceilings.
---
. All office areas to receive 32 oz. loop carpet, except: vestibule,
telephone room, WESCOM room, and toilet rooms - all of which shall receive
1/8" thick vinyl composition floor tile (no checkerboard pattern - all
-- ---
grain same direction).
. All interior doors to be solid core wood - stained.
---
. All computer power receptacles - duplex type with isolated ground (one CRT
---
per work station and maximum 6 CRTs/work stations per 20 AMP circuit).
Note: maximum 2 printers per 20 AMP circuit.
----
. Provide raceways within walls/partitions for computer data cable (cable
and installation by WESCO) -1" conduit for CRT's and 2" for printers.
. All work to comply with all applicable local, state and federal codes and
---
regulations, fire underwriter's requirements, Occupational Safety and
Health Act, and The American With Disabilities Act.
WAREHOUSE AREA INCLUDES:
. Full height gypsum drywall demising wall - rated per code (minimum 1 hr.
rated/listed assembly). Seal/firestop at roof deck and all penetrations per
rated assembly requirements.
. Fire protection system (except in rack/bin warehouse equipment) - 0.35 GPM
over 3,000 sq. ft. and extinguishers/hoses per code.
. Repair existing concrete floor and joints throughout, clean (including all
---
tape/paint markings) and seal floor throughout - sealer product shall be
backed with minimum five year warranty against "dusting" of floor surface.
. Electrical service shall be a minimum of 1,000 AMP, 480 volt, 3 phase, 4
wire (based on 800 KVA) -for total/combined warehouse-office area (196,800
sq. ft. approximately). See office area notes for lighting levels.
. Two toilet/restrooms, each with lavatory, urinal and watercloset - one
restroom shall comply with handicapped requirements, locations in warehouse
as approved by WESCO, restrooms to comply with all applicable codes - 20
warehouse employees.
. Existing concrete floor slab capacity designed and constructed to 250
P.S.F. lessor via structural engineer, lessor shall approve all warehouse
equipment installation layouts including coordination of
2 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
legs/anchors with reinforcement - approvals to be made with reasonable
promptness and within reasonable perimeters of the WESCO's intended use of
space.
. Installation of protective piping around sprinkler piping at south wall -
similar to other piping in place at other sprinkler locations.
. All miscellaneous construction, not intended for use by WESCO and not code
required, to be removed from warehouse - including existing chain link
fence.
. Lighting under existing mezzanine area (soffit mounted) to be upgraded to
that required for warehouse (see lighting level requirements under office
area).
. All existing exterior chain link fence to be rehabilitated to first class
condition.
. All existing exterior pavement/*/ to be repaired to first class condition-
repair and fill all cracks, seal surfaces, etc.
/*/Includes: aprons, parking areas, curbs, walks, steps and ramps.
. Thirty-six existing dock truck height(s) positions - twenty at west wall
and sixteen at east wall, are to be rehabilitated to good working order.
Items included: dock levelers, dock lips, bumpers, seals*, overhead
canopies, overhead doors and bituminous/concrete aprons (east and west).
/*/Replacement required - existing worn out.
OTHER - OFFICE, WAREHOUSE/SITE AREA(S) IMPROVEMENTS:
. Warehouse to be ventilated via a controlled powered system (minimum 6 air
changes per hour). Ventilation system shall be roof/wall mounted units with
ability to circulate inside air -with or without outside air. All wall
penetrations shall be via approved louver (color approved by WESCO) with no
other exterior mounted system components.
. Warehouse ventilation system shall be able to be extended to accommodate a
two level (ground floor with mezzanine level - each approximately 18,000
sq. ft.) bin area.
. Truck restraints to be installed at all dock positions (aprons slope away
from building walls). Restraints to be electrically operated automatic type
with signal lights as manufactured by "Kelly Rite-Hite" or WESCO approved
equal.
. All exposed gypsum wall board within warehouse - mezzanine walls and
support column enclosures, tenant demising wall, existing toilet rooms to
remain, etc. Color as approved by WESCO.
3 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
. Remove existing chain link fence at west truck apron - parking area and
patch all surfaces accordingly to match adjacent existing. Existing chain
link fence at each truck apron to remain - see notes under warehouse
regarding rehabilitation.
. Extend all existing concrete truck landing gear pads to accommodate
conventional 45 FT semi-trailers - extension to be to 45 FT from face of
dock and be engineered reinforced concrete.
. Remove existing dock levelers at west wall and install new dock levelers
(20) with 35,000 pound capacity, new levelers to be hydraulic type with
security lips and manufactured by "Kelly Rite-Hite" or other WESCO approved
manufacturer.
. Existing trucker's lounge at east dock to be rehabilitated to first class
condition - cleaned, painted, HVAC rehabilitated/replaced.
. New trucker's lounge at west dock to be constructed at south or north end
of dock. New truck lounge to include:
Restroom with water closet, urinal and lavatory - partitioned.
Lounge approximately 12 FT x 20 FT
Vestibule with separate exterior entrance (new with concrete steps) -
H.M. door and frame.
Warehouse office 12 FT x 10 FT.
4 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
SCHEME "B" - MEZZANINE FLOOR WDC OFFICE
---------------------------------------
OFFICE AREA (APPROXIMATELY 9,600 SQ. FT.) INCLUDES:
. See revised Scheme "B" drawings attached for office layout.
. Entire office, mezzanine area to be rehabilitated to first class condition
for use by WESCO as the Administrative Office for its Distribution Center.
Basic rehabilitation work to consist of the following:
. Area to be thoroughly cleaned throughout.
. Are to be repainted throughout - following proper repair, patching
preparation, etc.
. Existing tile floor areas to remain, except at men's and women's
toilet/restrooms which is to be removed (saved for patching at other
areas where tile is to remain). Where existing tile is to remain, the
tile is to be repaired where damaged, stripped, cleaned, and waxed
(prior to building/office area turn over to WESCO). Existing tile to
be retained/revised in accordance with applicable codes, regulations,
etc. - testing/abatement responsibility of lessor. Copy of
reports/results to be furnished to WESCO.
. Existing acoustical ceiling tile and suspension system to be
thoroughly cleaned throughout. All damaged tile units are to be
replaced with good existing units from other areas to minimize color
difference, etc. - other areas then to receive new tile throughout
that specific area, suspension system to be repaired/replaced. New
ceiling tile to match that of existing areas (where tile is to remain)
to be installed at new reception area and new office near mezzanine
level elevator landing.
. Existing carpet to be removed throughout. New 32 oz. carpet to be
installed following proper preparation substrate/concrete floor slab.
Carpet to be approved by WESCO - one color/type to be selected and
used throughout.
. Existing lighting fixtures to be replaced, repaired, refinished,
relamped, etc. New fixtures to match existing to be installed at new
reception area, new office (near elevator at mezzanine landing), new
ground floor corridor to new elevator.
. Provide duplex receptacles as indicated on revised drawing for Scheme
"B." Existing electrical devices that remain are to be functional -
otherwise device to be removed and wall patched. New devices to be
installed where existing devices are not reasonably available. New 20
AMP, 120 volt circuits with isolated grounds to be provided for CRT
locations at work stations - maximum of 6 CRTs or 2 printers per
circuit. Provide minimum 1" conduit, within walls/partitions where
required to easily install data cable for CRTs/printers - data cable
only, supplied and installed by WESCO.
5 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
. Existing men's and women's toilet/restrooms to be updated to conform
to A.D.A. requirements present/to become effective and other
applicable handicapped codes, etc. Each restroom to have minimum two
waterclosets and two lavatories - one site of which is to conform to
handicapped requirements. Men's restroom to also have one urinal.
Existing electrical water cooler in corridor near restrooms to be
replaced with new "Westinghouse" electric water cooler - handicapped
conforming. Restrooms to also receive normal accessories: soap
dispensers, etc.
. Existing janitor's room to have sanitary system repaired and truck
dock soffit patched. Existing hot water tank to be replaced. Two
painted plywood shelves with mop holder to be installed at west wall.
. Existing HVAC system to be fully reconditioned, including a
replacement of existing controls presently not functioning with equal
new devices, new grilles and diffusers are to be installed throughout.
Existing system has apparent direct draft problems (suspended plastic
sheet diffusers) - this condition is to be checked and completely
alleviated (via diffuser type change, ductwork modifications, etc.).
. All work to conform A.D.A. regulations, present and to become
---
effective, and other applicable codes, etc. Existing hardware,
handrrails, open stair to ground floor (rated enclosure required -
verify and provide if required), plumbing fixtures, etc. to be made
conforming. Installation of new elevator to be installed near existing
north stair per revised office layout and in compliance with A.D.A.
regulations, present and to become effective (size accordingly).
. Provide exterior windows at the conference room (2) and lunchroom (4)
as indicated on revised Scheme "B" drawings.
. Relocate existing window at south wall of manager's office to
east/warehouse wall.
. Verify existing mezzanine dock soffit (floor, warehouse walls sound
insulated - install attenuation as required).
WAREHOUSE AREA INCLUDES: ALL WORK AS INDICATED FOR SCHEME "A"
---
OTHER - OFFICE, WAREHOUSE/SITE AREA(S) IMPROVEMENTS: ALL WORK AS INDICATED FOR
---
SCHEME "A" WITH THE FOLLOWING EXCEPTIONS:
. Existing office area at south wall to be removed, including toilet-
locker area.
. Installation of new overhead door at west end of south wall (3rd bay
in). Door to be 14 FT wide x 14 FT high. Also included with this work
are a new mandoor adjacent to the new overhead door, a new concrete
truck apron/drive from street with new depressed curb cut.
6 of 7
<PAGE>
EXHIBIT "B" CONTINUED
---------------------
SPARKS NV - WDC LEASEHOLD IMPROVEMENTS
----------------------
1/24/92
. Remove existing planting area, island at street (Kleppe Lane) east of
existing overhead door in south wall and extend existing truck
apron/drive into this area (with new depressed curb). Also remove
existing raised section of curb at southeast corner of property along
Kleppe Lane and replace with depressed curb.
. Install new locker room are for 20 warehouse employees in conjunction
with the proposed (section "A" OTHER WAREHOUSE IMPROVEMENTS) new
trucker's lounge at west dock.
7 of 7
<PAGE>
VIA CERTIFIED MAIL
December 13, 1996
Utah State Retirement Fund
c/o Trammell Crow Company
990 East Greg Street
Sparks, NV 89431
Attention: Par Tolles
Re: WESCO 6228, Sparks, NV
Exercise of Lease Option
Dear Mr. Tolles:
Under the terms of a Lease Agreement dated April 1, 1992, for 196,800 square
feet of office and warehouse space at the above referenced premises, WESCO
Distribution, Inc. ("WESCO") a Delaware corporation, successor in interest to
Westinghouse Electric Supply Company, a former division of Westinghouse Electric
Corporation has the option to renew for a term of five (5) years the
--------------
aforementioned lease by giving you one hundred eighty (180) days written notice
of its intention to renew.
You are hereby notified that WESCO elects to renew said lease for a term of five
(5) years upon the same covenants, agreements and conditions as those contained
in said lease. The annual rental rate shall increase by the percentage increase
in the CPI from July 1, 1992 to June 30, 1997 for the period July 1, 1997 to
June 30, 2002.
Please acknowledge receipt of this notice by signing and returning the attached
copy of this letter to:
WESCO Distribution, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, PA 15219
Attention: Real Estate Department
<PAGE>
Utah State Retirement Fund
Page Two
December 13, 1996
Thank you for your attention with this matter.
Sincerely,
WESCO DISTRIBUTION, INC.
By:/s/ R.J. Marshuetz
------------------
Richard J. Marshuetz
Vice President, Chief Financial and
Administrative Officer
RECEIPT ACKNOWLEDGED
Utah State Retirement Fund
c/o Trammell Crow Company
By: /s/ Luis A. Belmonte
-------------------------------------
Luis A. Belmonte
------------------------------------
Printed Name
Title: Agent
----------------------------------
Date: 4/25/97
----------------------------------
cc: Jeff Kramp
Mark Good
Certifed Z220 964 441
-----------
<PAGE>
July 18, 1995
VIA FAX AND OVERNIGHT EXPRESS
Utah State Retirement Fund
c/o Trammell Crow Company
990 East Greg Street
Sparks, Nevada 89431
ATTN: Par Tolles
RE: Lease dated April 1, 1992 by and between E.T. Hermann and Jane Hermann
1978 Living Trust and Westinghouse Electric Corporation for space
located at 1161 East Glendale Avenue, Sparks, Nevada, within the Sierra
Commerce Park (formerly the Pacific Freeport Industrial Park).
Dear Par:
The undersigned hereby waives the option set forth in Paragraph 51 of the above-
referenced Lease with regard to Lessor's lease of the 73,080 square feet of
space located at 1101 East Glendale Avenue, Sparks, Nevada to Rubbermaid
Cleaning Products Inc. (fomerly Empire Brush, Inc.). Such waiver is only for the
aforementioned Rubbermaid Cleaning Products Inc. Lease and the undersigned does
not waive its first option right for such space in the event such space again
becomes available during the Term of our Lease.
Date: 7/19/95 Wesco Distribution Inc. (Formerly known
as Westinghouse Electric Corporation)
By: /s/ Jeffrey B. Kramp
------------------------------------
Name: Jeffrey B. Kramp
-----------------------------------
Its: Secretary and General Counsel
------------------------------------
<PAGE>
EXHIBIT 10.12
AGREEMENT OF LEASE
AGREEMENT OF LEASE made this 4th day of September, 1997 by and between THE
BUNCHER COMPANY (hereinafter called "Landlord"), a Pennsylvania corporation
having its principal place of business in the __________, Allegheny County,
Pennsylvania and WESCO Distribution, Inc. (hereinafter called "Tenant"), a
Delaware corporation having its principal place of business in the City of
Pittsburgh, Allegheny County, Pennsylvania.
WHEREAS, Landlord has full right and power to lease pursuant hereto a
certain parcel of land (the "Premises") more particularly described in and/or
shown outlined in red on Exhibit A attached hereto, upon which is erected a
building containing approximately 58,499 square feet of space and known as 2528
Lovi Road, Freedom, PA 15042 and other improvements incidental thereto (which
building portion and other incidental improvements are hereinafter called the
"Improvements"); and
WHEREAS, Landlord desires to lease to Tenant and Tenant desires to take and
hire from Landlord the Premises and the Improvements. (The Premises and the
Improvements are sometimes hereinafter collectively called the "Leased
Premises".)
NOW, THEREFORE, WITNESSETH, That Landlord hereby demises and leases unto
Tenant, and Tenant hereby takes and hires from Landlord the Leased Premises,
subject to the terms and conditions hereof.
Term. TO HAVE AND TO HOLD the Leased Premises unto Tenant for a term of
----
five (5) years commencing at 12:01 A.M. on October 1, 1997 (the "Commencement
Date") and ending at 11:59 P.M. on September 30, 2002; subject nevertheless, to
the following covenants and conditions which Landlord and Tenant respectively
covenant and agree to keep and perform.
1. Rent. See Rider Item #3.
----
2. Taxes. See Rider Item #7. Tenant will pay to Landlord on demand and
-----
as additional rental hereunder all real estate taxes (including taxes levied or
assessed in lieu of or as a substitution for real estate taxes) imposed,
assessed or levied upon or against the Leased Premises during the term of this
Lease.
In addition, Tenant will pay to Landlord on demand as additional rental
hereunder, each and every item of expense in the nature of a tax or imposition
for the payment of which Landlord is or shall become liable by reason of
Landlord's estate or interest in the
<PAGE>
Leased Premises, or any portion thereof, including without limiting the
generality thereof all personal property taxes, sales taxes, excise taxes, use
and occupancy taxes, whether or not the same are now customarily levied or
enacted and regardless of whether the same shall be general or special, foreseen
or unforeseen, provided the same shall be (i) levied or assessed against
Landlord or Tenant in connection with the Leased Premises, or any portion
thereof, or (ii) levied, assessed or imposed upon or against, or which shall be
measured by, any rents or rental income, as such, payable to Landlord, provided,
however, that Tenant shall not be obligated hereunder to pay any of the
following:
a. any estate, inheritance, devolution, succession, transfer, legacy
or gift tax which may be imposed upon or with respect to any transfer of
Landlord's interest in the Leased Premises; or
b. any net income tax levied upon or against Landlord's income from
all sources.
3. Use. Tenant will use and occupy the Leased Premises only for office,
---
storage and distribution of Tenant's electrical products and other lawful uses
consistent with existing uses of the Tri-County Commerce Park and will not
create, permit or maintain any nuisance thereon. Tenant will not use or occupy
or suffer or permit the Leased Premises or any part thereof to be used or
occupied for (a) any purpose contrary to law or the rules or regulations of any
governmental authority having jurisdiction over the Leased Premises (b) any
purpose which in the reasonable judgment of Landlord is hazardous or detrimental
to persons or property.
4. Maintenance and Repair. See Rider Item #4. Tenant will at Tenant's
----------------------
sole cost and expense keep the Leased Premises and all equipment and personal
property of Landlord therein in good order, condition and repair, damage by
insured casualty excepted. If Tenant fails or refuses to keep the Leased
Premises in good order, condition and repair as aforesaid, Landlord may do so,
and charge the cost thereof to Tenant to be collected as additional rental
hereunder.
Landlord shall, during the term of this Lease, at its sole cost and expense
and as promptly as is reasonable under the circumstances, make all needed
structural repairs (exclusive of painting) to the Improvements upon receipt
of notice from Tenant of the need for such repairs, unless the need for such
repairs was caused by the wrongful act or negligence of Tenant, in which event
Tenant shall promptly make such repairs at Tenant's sole cost and expense.
Structural repairs shall mean only repairs to the roof, exterior walls, rain
conductors, floors, foundations and steel frame of the Improvements and the
utility service lines running from the main line to the Building. Structural
repairs shall be
2
<PAGE>
deemed to be needed when the failure to make same will result in a hazard to
persons or property and/or cause a significant impairment to Tenant's use of the
Leased Premises for the purposes set forth in section 3 hereof.
5. Alterations. Tenant will not make or permit to be made any
-----------
alterations, improvements and additions to the Leased Premises or any part
thereof except by and with the prior written consent of Landlord, which consent
shall not be unreasonably withheld. All alterations, improvements and additions
to the Leased Premises shall be made in accordance with all applicable laws and
shall at once when made or installed be deemed to have attached to the freehold
and to have become the property of Landlord and except as provided in section 12
of this Lease shall remain for the benefit of Landlord at the end of the term of
this Lease or other expiration of this Lease in as good order and condition as
they were when installed, reasonable wear and tear and damage by insured
casualty excepted; provided, however, if at the time of such alterations, the
parties hereto agreed that such alterations were to be removed at the
termination of this Lease, Tenant shall at Tenant's sole cost and expense
promptly remove the alterations, improvements and additions which were placed in
the Leased Premises by Tenant and which are designated in said notice and repair
any damage occasioned by such removal and restore the Leased Premises to the
condition in which they were prior to such alterations, improvements or
additions, reasonable wear excepted, and in default thereof Landlord may effect
said removals and repairs at Tenant's expense. In the event of making such
alterations, improvements and additions as herein provided, Tenant further will
indemnify and save harmless Landlord from all reasonable expense, liens, claims
or damages or injuries to either persons or property arising out of, or
resulting from the undertaking, making or removal of said alterations, additions
and improvements.
6. Assignment and Subletting. See Rider Item #5. Tenant shall not
-------------------------
assign this Lease or sublet the whole or any part of the Leased Premises or
permit any other persons to occupy same without the prior written consent of
Landlord. Landlord shall not unreasonably withhold such consent. Any such
assignment or subletting, even with the consent of Landlord, shall not relieve
Tenant from liability for payment of rent or other sums herein provided or from
the obligation to keep and be bound by the terms, conditions and covenants of
this Lease. The acceptance by Landlord of rent from any other person shall not
be deemed to be a waiver of any of the provisions of this Lease or to be a
consent to the assignment of this Lease or subletting of the Leased Premises.
Any transfer of this Lease from Tenant by merger, consolidation or
liquidation shall constitute an assignment of this Lease and shall require the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed.
3
<PAGE>
An assignment for the benefit of creditors or by operation of law shall
not be effective to transfer any rights to an assignee without the prior written
consent of the Landlord first having been obtained.
7. Utilities. Tenant will pay for all public and private utility
---------
services, including water and sewer rentals, used or consumed on or in
connection with the Leased Premises. Electric and gas shall be separately
metered, water and sewer to be submetered and invoiced to Tenant by Landlord.
8. Insurance. See Rider Item #6. During the term of this Lease, Tenant
---------
will at Tenant's sole cost and expense maintain with insurance companies
satisfactory to Landlord comprehensive public liability and property damage
insurance with respect to the Leased Premises, with minimum limits of $1,000,000
with respect to the death or injury of one person, and $2,000,000 with respect
to the death or injury of two or more persons and $200,000 with respect to
property damage. Such insurance coverage shall be endorsed to include the
contractual liability assumed by Tenant under section 9 hereof.
Prior to the Commencement Date, Tenant shall furnish to Landlord
certificates evidencing the comprehensive public liability insurance and
property damage coverage as provided in this section 8 above, said certificates
and policies to contain the standard 10 day notification clause to Landlord and
Landlord's mortgagee in the event of change of cancellation of insurance
coverage, and shall name Landlord as an additional insured.
9. Indemnity. See Rider Item #8. Tenant will protect and save and keep
---------
Landlord forever harmless and indemnified against and from any penalty or damage
or charges imposed for any violation of any law or ordinance, whether occasioned
by the neglect of Tenant or those holding under Tenant, and Tenant will at all
times protect, indemnify and save and keep harmless Landlord against and from
all claims, loss, cost, damage or expense arising out of or from any accident or
other occurrence on or about the Leased Premises causing injury to any person or
property whomsoever or whatsoever, and will protect, indemnify, save and keep
harmless Landlord against and from any and all claims and against and from any
and all loss, cost, damage, or expense arising out of any failure of Tenant in
any respect to comply with and perform all the requirements and provisions of
this Lease.
10. Surrender. Tenant will deliver up and surrender to Landlord
---------
possession of the Leased Premises upon expiration of the term of this Lease or
upon the earlier termination of this Lease, broom clean and in as good condition
and repair as the same shall be at the commencement of the term of this Lease,
ordinary wear and tear and damage by insured
4
<PAGE>
casualty excepted. Tenant hereby waives any notice now or hereafter required by
law with respect to vacating at the termination of any tenancy.
11. Access to Leased Premises. Tenant will permit Landlord or Landlord's
-------------------------
agents to inspect or examine the Leased Premises at any reasonable time upon
reasonable advanced notice and permit Landlord to make such repairs to the
Leased Premises as Landlord may deem necessary for preservation of the Leased
Premises and which Tenant has failed so to make without the same being construed
as an eviction of Tenant in whole or in part, and the rent shall in no wise
abate while such repairs, alterations, improvements or additions are being made
by reason of loss or interruption of the business of Tenant because of the
prosecution of such work. Landlord shall diligently perform all work referenced
herein.
Landlord shall have the right to enter upon the Leased Premises at any
reasonable time and from time to time during the term of this Lease for the
purpose of exhibiting the same to prospective purchasers and for a period
commencing 180 days prior to the end of the term of this Lease for the purpose
of exhibiting the same to prospective tenants. During said 180-day period
Landlord may place signs in or upon the Leased Premises to indicate that same
are for rent or sale, which signs shall not be removed, obliterated or hidden by
Tenant. Landlord's signs shall not obstruct Tenant's signs.
12. Tenant's Property. All fixtures, equipment and other property placed
-----------------
or installed in or on the Leased Premises by Tenant and designed for and used in
the conduct of Tenant's business in the Leased Premises, shall at all times be
and remain the property of Tenant. Tenant will at Tenant's sole cost and
expense remove all such equipment, fixtures and other property from the Leased
Premises prior to the termination of this Lease and Tenant will at Tenant's
cost and expense repair any and all damage to the Leased Premises caused or
occasioned by the installation or removal of said fixtures, equipment or other
property. Any and all such equipment, fixtures and other property which shall
remain on the Leased Premises for more than five (5) days after the termination
of this Lease, shall at Landlord's option be deemed abandoned by Tenant and
become the sole property of Landlord, or may be removed by Landlord in which
case Tenant shall pay or reimburse Landlord for the reasonable cost of such
removal and of repairing any and all damage to the Leased Premises caused
thereby.
13. Signs. Tenant may install at Tenant's own cost and expense an
-----
appropriate sign or signs on the Leased Premises referring to Tenant's business
or services; provided, however, that the size, type and location of any such
sign shall comply with all applicable laws and governmental rules, regulations
and restrictions and shall be subject to Landlord's approval, which approval
shall not be unreasonably withheld or delayed.
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14. Condemnation of the Leased Premises. If the Leased Premises or any
-----------------------------------
part thereof shall be taken or condemned either permanently or temporarily for
any public use or purpose by any competent authority in condemnation proceedings
or by any right of eminent domain, the entire compensation award thereof, both
leasehold and reversion, shall belong to the Landlord without any deduction
therefrom for any present or future estate of Tenant, and Tenant hereby assigns
to Landlord all its right, title and interest to any such award. Tenant shall,
however, be entitled to claim, prove and receive in such condemnation
proceedings such award as may be allowed for moving and relocation expenses,
fixtures and other equipment installed by Tenant, but only if such award shall
be in addition to the award for the Leased Premises.
If substantially all of the Leased Premises shall be taken as aforesaid or
if any such taking shall render the Leased Premises unfit for the conduct of
Tenant's business, then this Lease shall terminate and shall become null and
void from the time possession thereof is required for public use, and from that
date the parties hereto shall be released from all further obligations
hereunder.
If only a portion of the Leased Premises shall be so taken or condemned,
which taking shall not materially render the Leased Premises unfit for the
conduct of Tenant's business, then Landlord at its own expense shall with all
reasonable dispatch repair and restore the portion not affected by the taking
and this Lease shall continue in full force and effect except that the rental
shall be equitably and proportionately reduced.
15. Damage or Destruction. See Rider Item #15. If, during the term of
---------------------
this Lease, the Improvements are so damaged or destroyed by insured casualty so
as to render the Improvements unfit for occupancy by Tenant for the purposes set
forth in section 3 of this Lease, and if the Improvements cannot in the sole
judgment of Landlord be repaired, restored or rebuilt within five (5) months
from the happening of such damage or destruction, then Landlord or Tenant may
terminate this Lease as of the date of such damage by giving the other notice in
writing with respect thereto within thirty (30) days from the date of such
happening. In such case, rental hereunder shall abate as of the date of such
damage or destruction and Landlord shall be entitled to retain all insurance
proceeds resulting from such damage or destruction. Landlord shall refund to
Tenant any unearned rent paid in advance and Tenant shall as expeditiously as is
reasonable under the circumstances remove such of its property as it is required
to remove under the provisions of section 12 hereof and shall surrender the
Leased Premises to Landlord who may enter upon and repossess the same, and all
further liability Tenant and Landlord hereunder shall thereupon cease.
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In the event any such damage to or destruction of the Improvements can in
the sole judgment of Landlord be repaired within a period of five (5) months
after the happening thereof, Landlord shall repair, restore or rebuild the
Improvements and Tenant's Improvement with all reasonable dispatch and in a good
workmanlike manner, and this Lease shall not be affected in any manner, except
that the liability of Tenant for rent shall be suspended for the period during
which such repair, restoration or rebuilding is being made. However, if the
damage is such as not to render the Improvements totally unfit for the occupancy
by Tenant for the purposes set forth in section 3 of this Lease, Landlord shall
repair the Improvements with all reasonable dispatch and rentals hereunder shall
abate pro rata to the extent that portions of the Leased Premises are not
available for use by Tenant. In either situation provided for in this paragraph,
Landlord shall be entitled to receive and retain all insurance proceeds
resulting from such damage or destruction.
Notwithstanding the foregoing provisions of this section 15, if the
Improvements shall be destroyed or in the judgment of Landlord substantially
damaged by insured casualty during the last two (2) years of the term of this
Lease, Landlord may, within 30 days after the occurrence of such damage or
destruction, cancel and terminate this Lease by giving written notice to Tenant,
and if such notice is given, this Lease shall expire as of the date of such
destruction with the same effect as though that date was the date of the
expiration of the term of this Lease, rental hereunder shall abate as of the
date of such damage or destruction, Landlord shall be entitled to retain all
insurance proceeds resulting from such damage or destruction, Landlord shall
refund to Tenant any unearned rent paid in advance, and Tenant shall as
expeditiously as is reasonable under the circumstances remove such of its
property as it is required to remove under the provisions of section 12 hereof
and shall surrender the Leased Premises to Landlord who may enter upon and
repossess the same, and all further liability Tenant and Landlord hereunder
shall thereupon cease. If this Lease is not so cancelled and terminated, the
provisions of the foregoing paragraphs of this section 15 shall control.
16. Default and Remedies. See Rider Item #16. All rights and remedies
--------------------
of Landlord herein enumerated shall be cumulative, and none shall exclude any
other rights or remedies allowed by law. Tenant covenants and agrees that if
any of the following events of default occur, that is, if:
a. Tenant shall fail, neglect or refuse to pay any rent or sums
payable hereunder as rent at the time and in the amount as herein
provided, or to pay any other monies agreed by it to be paid promptly when
and as the same shall become due and payable under the terms hereof, or if
Tenant shall fail to keep and maintain in full force and effect the
insurance required under section 8 of this Lease, and if
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any such default should continue for a period of more than 10 days after
notice thereof by Landlord to Tenant; or
b. Tenant commit waste thereon, or any execution be issued against
a substantial part of Tenant's assets or bankruptcy, receivership or
insolvency proceedings be instituted by or against Tenant or an assignment
made by Tenant for the benefit of creditors, or Tenant shall fail, neglect
or refuse to keep and perform any of the other covenants, conditions,
stipulations or agreements herein contained and covenanted and agreed to be
kept and performed by it, and in the event any such failure, neglect or
refusal shall continue for a period of more than 30 days after notice
thereof is given in writing to Tenant by Landlord, provided, however, that
if the cause for giving such notice involves the making of repairs or other
matters reasonably requiring a longer period of time than the period of
such notice, Tenant shall be deemed to have complied with such notice so
long as it has commenced to comply with said notice within the period set
forth in the notice and is diligently prosecuting compliance of said notice
or has taken the proper steps or proceedings under the circumstances to
prevent the seizure, destruction, alteration or other interference with
said Leased Premises by reason of non-compliance with the requirements of
any law or ordinance or with the rules, regulations or directions of any
governmental authority, as the case may be;
then the present value of the entire rental for the balance of the term of this
Lease discounted at 8% per annum shall at the option of Landlord at once become
due and payable as if by the terms of this Lease it is payable in advance, and
if not so paid the Tenant does hereby authorize and fully empower Landlord to
cancel or annul this Lease at once and in compliance with the laws of
Pennsylvania to re-enter and take possession of the Leased Premises immediately,
without any previous notice of intention to re-enter, and to remove all persons
and their property therefrom, and to use such assists in effecting and
perfecting such removal of Tenant as may be necessary and advisable to recover
at once first and exclusive possession of the Leased Premises, without being
deemed guilty of any manner of trespass and without prejudice to any remedies
which might otherwise be used by Landlord, in which event this Lease shall
terminate and Tenant shall indemnify Landlord against all unavoidable loss of
rent which Landlord may incur by reason of such termination during the residue
of the term of this Lease.
Landlord may, however, at its option at any time and after such default or
violation of condition or covenant, in compliance with the laws of Pennsylvania,
re-enter and take possession of the Leased Premises without such re-entry
working a forfeiture of the rents to be paid and the covenants, agreements and
conditions to be kept and performed by Tenant for the term of this Lease. In
such event Landlord shall have the right, but not the
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obligation, to divide or subdivide the Leased Premises in any manner Landlord
may determine and make reasonable efforts to lease or let the same or portions
hereof for such periods of time and at such rentals and for such use and upon
such covenants and conditions as Landlord may elect, applying the net rentals
from such letting first to the payment of Landlord's reasonable expenses
incurred in dispossessing Tenant and the reasonable cost and expense of making
such improvements in the Leased Premises as may be necessary in order to enable
Landlord to re-let the same, and to the payment of any reasonable brokerage
commissions or other necessary expenses of Landlord in connection with such re-
letting. The balance, if any, shall be applied by Landlord from time to time on
account of the payments due or payable by Tenant hereunder, with the right
reserved to Landlord to bring such action or proceedings for the recovery of any
deficits remaining unpaid as Landlord may deem desirable from time to time,
without being obligated to await the end of the Term for the final determination
of Tenant's account. Any balance remaining, however, after full payment and
liquidation of Landlord's account as aforesaid shall be paid to Tenant, with the
right reserved to Landlord at any time to give notice in writing to Tenant of
Landlord's election to cancel and terminate this Lease, and the giving of such
notice in writing to Tenant of Landlord's election to cancel and terminate this
Lease and the simultaneous payment by Landlord to Tenant of any credit balance
in Tenant's favor that may at the time be owing to Tenant shall constitute a
final and effective cancellation and termination of the Lease and the obligation
hereunder on the part of either party to the other.
17. Confession of Judgment.
----------------------
18. Hold Over. If Tenant shall remain in possession of the Leased
---------
Premises after the expiration of the term of this Lease with the prior written
consent of Landlord, then Tenant shall be deemed a tenant of the Leased Premises
from month to month at the same rental and subject to all of the terms and
provisions hereof, except only as to the term of this Lease.
19. Quiet Enjoyment. If Tenant pays rental and other charges herein
---------------
provided and shall perform all of the covenants and agreements herein stipulated
to be performed on the Tenant's part, Tenant shall, at all times during the term
of this Lease, have the peaceable and quiet enjoyment and possession of the
Leased Premises without any manner of hindrance from Landlord or any persons
lawfully claiming through Landlord, except as to any portion of the Leased
Premises as may be taken under the power of eminent domain.
20. Notices. All notices, demands and requests which may be or are
-------
required to be given hereunder shall be given in writing and shall be deemed to
have been duly given
9
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as of the date of receipt or refusal of mailing if sent by postage prepaid,
first class, United States registered or certified mail, return receipt
requested or by personal messenger, evidenced by written receipt, to each of the
parties at the following places, or to such other places as either party hereto
may for itself designate in writing from time to time for the purpose of
receiving notices hereunder:
THE BUNCHER COMPANY WESCO DISTRIBUTION, INC.
c/o Buncher Management Agency, Inc. Commerce Court, Suite 700
5600 Forward Avenue Four Station Square
P.O. Box 81930 Pittsburgh, PA 15219
Pittsburgh, PA 15217-0930 Attn: Real Estate Manager
22. Entire Agreement. This Lease constitutes and contains the entire and
----------------
only agreement between the parties, and supersedes and cancels any and all pre-
existing agreements and understandings between the parties relating to the
subject matter hereof. No representation, inducement, promise, condition or
warranty not set forth herein has been made or relied upon by either party.
23. Subordination. This Lease is subject and subordinate to all ground
-------------
or underlying leases and to all mortgages which may now or hereafter affect the
Leased Premises, and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and no
further instrument of subordination shall be required; however, in confirmation
of such subordination Tenant shall execute promptly any certificate to that
effect upon reasonable request by Landlord.
24. Limitation of Landlord. Notwithstanding the provisions hereof, the
----------------------
term "Landlord" as used in this Lease means only the holder, for the time being,
of Landlord's interest under this Lease so that in the event of any transfer of
title to the Leased Premises to a party assuming Landlord's obligations
hereunder Landlord shall be and hereby is entirely freed and relieved of all
obligations of Landlord hereunder accruing after such transfer, and it shall be
deemed without further agreement between the parties that such grantee,
transferee or assignee has assumed and agreed to observe and perform all
obligations of Landlord hereunder arising during the period it is the holder of
Landlord's interest hereunder.
25. Force Majeure. Landlord shall not be liable to Tenant and shall not
-------------
be in default under this Lease in any manner by reason of delay in performance
of any covenant or condition in this Lease, if any such delay is caused by
present or future governmental
10
<PAGE>
regulations, restrictions, strikes, lockouts, unusual unavailability of
materials or labor, severe adverse weather conditions, or by any other reason or
reasons, whether similar or not to foregoing, which delays are beyond the
reasonable control of Landlord, provided that Landlord shall use Landlord's best
efforts to overcome the same.
26. Attachments. Attached to this Lease and made a part hereof, and
-----------
initialed on behalf of both parties simultaneously with the execution of this
Lease, are Exhibits A through C inclusive, and Rider pages 1 through 10
inclusive.
27. Governing Law. This Lease shall be construed, governed and enforced
-------------
in accordance with the laws of the Commonwealth of Pennsylvania.
28. Separability. If any term or provision of this Lease, or the
------------
application thereof to any party or circumstance, shall to any extent be invalid
or unenforceable, the remainder of this Lease, or the application of such term
or provision to parties or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
29. Cumulative Remedies. The specified remedies to which Landlord or
-------------------
Tenant may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
Landlord or Tenant may be lawfully entitled in case of any breach by Landlord or
Tenant of any provision of this Lease. Failure of Landlord or Tenant to insist
in any one or more cases upon the strict performance of any of the covenants of
this Lease shall not be construed as a waiver or a relinquishment for the future
of such covenant. A receipt by Landlord of rent with knowledge of the breach of
any covenant hereof shall not be deemed a waiver of such breach, and no waiver
by Landlord or any provision of this Lease shall be deemed to have been made
unless expressed in writing and signed by Landlord. In addition to the other
remedies in this Lease provided, Landlord or Tenant shall be entitled to the
restraint by injunction of the violation, or attempted or threatened violation,
of any of the covenants, conditions or provisions of this Lease. Nothing in
this Lease shall give either party the right to terminate this Lease except as
otherwise specifically set forth in this Lease.
30. Amendments. This Lease may be amended, modified, renewed, extended,
----------
cancelled or terminated only by a written instrument duly executed by both of
the parties hereto.
31. Provisions Construed As Covenants. All the provisions of this Lease,
---------------------------------
insofar as they are applicable to either or both of the parties hereto, shall be
taken and construed
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as the covenant or covenants of such party or parties respectively to do or
perform the thing or act specified or not to do the act or thing inhibited.
32. Binding Effect. The provisions of this Lease shall be binding upon
--------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; subject, nevertheless, to the restrictions on assignment
by Tenant as set forth in section 6 hereof and to the provisions of section 24
hereof.
33. Reservations Roads and Utilities. Landlord reserves for itself and
--------------------------------
all tenants, the use of access roads and of utilities, and the right to make
additional connections, as Landlord may deem necessary, without unreasonable
interference with the operations of Tenant.
34. Acceptance of possession of the Leased Premises or opening the same
for business shall be conclusive evidence that the Leased Premises are and were
in good order and condition on the Commencement Date.
35. Tenant shall have the non-exclusive right to the use of the fifty
(50) foot driveway in the area shaded in green on Exhibit A attached hereto
which driveway may be used in common with Landlord, Tenant and other respective
tenants, their employees, invitees and business visitors for pedestrian and
vehicular traffic.
WITNESS the due execution hereof.
ATTEST: THE BUNCHER COMPANY
/s/ By /s/
- -------------------------- -----------------------------
Secretary President
ATTEST: WESCO DISTRIBUTION, INC.
/s/ By /s/
- -------------------------- -----------------------------
Assistant Secretary Steven A. Burleson, Treasurer
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<PAGE>
RIDER TO
AGREEMENT OF LEASE DATED
SEPTEMBER 4, 1997 BY AND BETWEEN
THE BUNCHER COMPANY, AS LANDLORD, AND
WESCO DISTRIBUTION, INC., AS TENANT
This Rider is attached to and made a part of the Agreement of Lease
referred to above. To the extent any inconsistencies exist between the
provisions of this Rider and the foregoing printed portions of the Agreement of
Lease referred to above, the provisions of this Rider shall govern. All terms
defined in the foregoing printed provisions of the Agreement of Lease shall have
the same meanings herein as in the foregoing printed provisions unless otherwise
set forth herein. The term "this Lease" shall mean the foregoing printed
provisions as modified, amended and/or supplemented by this Rider.
1. TERMINATION OF EXISTING LEASE: Tenant is presently leasing other
property of Landlord under that certain Agreement of Lease dated June 30, 1997
(the "Old Lease"). The Old Lease and the term thereof shall terminate seven (7)
days after the Commencement Date or the Beginning Date, if applicable, as though
such date was the scheduled expiration date of the Old Lease except Tenant shall
have no obligation for the payment of rental under the Old Lease for the seven
(7) day period after the Commencement Date or the Beginning Date, if applicable,
of this Lease.
2. COMPLETION: (A) Landlord shall use Landlord's best efforts to
substantially complete, at Landlord's cost and expense, the tenant improvements
described on Exhibit B attached hereto and made a part hereof (the "Tenant
Improvements") prior to the Commencement Date. If the Tenant Improvements are
not so completed, this Lease shall remain in full force and effect except that
rental, taxes, insurance, utility payments and other sums due as additional
rental under this Lease shall not commence until the seventh (7th) day
(hereinafter known as the "Beginning Date") after Landlord has provided written
notice to Tenant ("Letter Amendment") setting
<PAGE>
forth (i) that the Tenant Improvements are substantially completed and the
Leased Premises are ready for occupancy, (ii) that a certificate of occupancy
has been issued by the applicable governmental authorities, (iii) the actual
Beginning Date, the actual Commencement Date and expiration date of the term of
this Lease, and (iv) subject to paragraph 3 of this Rider, the dates and amounts
of the rental payments due hereunder. The Letter Amendment when issued as
provided herein shall be incorporated into and made a part of this Lease. If the
Beginning Date is other than the first day of a month, Tenant shall pay to
Landlord as rental the sum of $601.02 for each day from the Beginning Date to
the first day of the month following the Beginning Date, and the initial term
shall run for a full sixty (60) months from the first day of the month following
the Beginning Date so as to end on the last day of the sixtieth (60th) full
month after the Beginning Date.
(B) If the Tenant Improvements are substantially completed more than
seven (7) days prior to the scheduled Commencement Date, the Beginning Date
shall be the seventh (7th) day after Tenant has been notified that the Tenant
Improvements are so completed and there shall be no change in the Commencement
Date or the expiration date as set forth in the printed portion of this Lease.
Tenant shall pay to Landlord as rental for the Leased Premises the sum of
$601.02 for each day from the Beginning Date to the Commencement Date.
All terms and conditions of this Lease shall be effective from the
Beginning Date as though the term of this Lease had commenced on the Beginning
Date except that the expiration date of the initial term shall be as provided
above in this paragraph.
3. RENTAL: Tenant shall pay to Landlord as rental for the Leased Premises
the following amounts at the following times:
(A) On the first day of the first full calendar month of the initial term
of this Lease following the
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Beginning Date, if applicable, Tenant shall pay to Landlord as rental
for the Leased Premises the per diem rental, if any, as set forth in
paragraph 2(A) and paragraph 2(B) of this Rider.
(B) Beginning on October 1, 1997, or if later, on the first day of the
first (lst) full calendar month of the initial term of this Lease
(i.e., the first day of the month following the Beginning Date), and
on the first day of each calendar month thereafter until October 1,
1999, or the first day of the twenty-fifth (25th) full calendar month
following the Beginning Date, if applicable, Tenant shall pay to
Landlord as monthly rental for the Leased Premises the amount of
$18,280.94.
(C) Beginning on October 1, 1999 or on the first day of the twenty-fifth
(25th) full calendar month of the initial term of this Lease following
the Beginning Date, if applicable, and on the first day of each
calendar month thereafter until October 1, 2000 or the first day of
the thirty-seventh (37th) full calendar month following the Beginning
Date, if applicable, Tenant shall pay to Landlord as monthly rental
for the Leased Premises the amount of $19,499.67.
(D) Beginning on October 1, 2000, or on the first day of the thirty-
seventh (37th) full calendar month of the initial term of this Lease
following the Beginning Date, if applicable, and on the first day of
each calendar month thereafter during the remainder of the initial
term of this Lease, Tenant shall pay to Landlord as monthly rental for
the Leased Premises the amount of $20,718.40.
The rentals as determined under 3(B), 3(C) and 3(D) above shall be payable
in advance, without demand, deduction or set off. All rentals and other sums
payable hereunder shall be paid to Landlord's agent, Buncher Management Agency,
Inc.,
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5600 Forward Avenue, P.0. Box #81930, Pittsburgh, Pennsylvania 15217-0930 or at
such other place or to such other person as may be designated by Landlord in
writing.
4. MAINTENANCE AND REPAIR: During the term of this Lease, Tenant, at its
sole cost and expense, shall procure a satisfactory maintenance contract with an
authorized service company for the HVAC equipment serving the Leased Premises
and keep records of service to the HVAC system for Landlord's review.
Landlord will assign to Tenant at the commencement of the term of this
Lease, the benefits of all assignable manufacturer's warranties, if any,
covering the equipment serving the Leased Premises and will grant to Tenant a
one (1) year warranty of the workmanship and materials installed by Landlord
from any defects unless caused by lack of maintenance by Tenant or any act or
negligence of Tenant or those acting under Tenant.
Tenant understands and acknowledges that the Leased Premises is a part of a
commerce park being developed by Landlord. Landlord reserves the right to
institute reasonable rules and regulations governing the maintenance of the
Leased Premises and the commerce park which Tenant agrees to observe.
In addition to Tenant's obligation for maintenance and repair of the Leased
Premises as set forth in the first paragraph of section 4 of the printed portion
of this Lease, Tenant shall, at Tenant's sole cost and expense, comply with all
governmental laws and regulations, including but not limited to local, state,
federal administrative requirements and regulations, relating to Tenant's use
and occupancy of the Leased Premises and the business conducted therein and
thereon including without limitations compliance with laws relating to
accessibility to, usability by and discrimination against disabled individuals.
5. ASSIGNMENT AND SUBLETTING: Notwithstanding any provision to the
contrary contained in section 6 of the
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<PAGE>
printed portion of this Lease, Tenant may without Landlord's consent assign this
Lease or sublet the Leased Premises or any part thereof to any subsidiary or
affiliate of Tenant provided Tenant notifies Landlord in writing of its
intention to so assign or sublet. For the purpose of this paragraph 5, the terms
"subsidiary and affiliate" shall be defined as any corporation or entity which
controls Tenant, is controlled by Tenant or is under the common control with
Tenant by the same parent corporation or other entity, or any corporation into
which Tenant may be merged or consolidated or which purchases all or
substantially all of the assets of Tenant.
6. INSURANCE: Tenant and Landlord agree that the Leased Premises is a
portion of Landlord's building (the "Building"), more particularly shown on
Exhibit A attached hereto.
Landlord shall maintain fire and extended coverage insurance on the
Building for its replacement value in such amounts as Landlord may from time to
time reasonably determine. Within fifteen (15) days after Landlord provides to
Tenant supporting documentation of the reasonable cost of insuring the Building,
Tenant will pay to Landlord as additional rental hereunder, Tenant's pro rata
share of the insurance premium paid or payable by Landlord for so insuring the
Building. Tenant's pro rata share of such insurance premium shall be based on
the number of square feet of space in the Building portion of the Leased
Premises to the number of square feet of space in the Building as the same may
exist from time to time. As currently calculated, Tenant's pro rata share is
determined as follows: i.e., 58,499 square feet divided by 99,475 square feet or
58.81%. In addition, Tenant shall be liable for any increase in such insurance
premiums resulting from Tenant's use of the Leased Premises. Tenant shall be
responsible for insuring against any loss to Tenant's own fixtures and contents
in or about the Leased Premises. If the Leased Premises is damaged as a result
of an insured risk, Tenant shall be responsible for its proportionate share of
the deductible portion of Landlord's insurance coverage which deductible is
currently $1,000.00.
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<PAGE>
In addition to the insurance requirements set forth in section 8 of the
printed portion of this Lease, Tenant shall maintain during the term of this
Lease or any extension thereof worker's compensation and employee's liability
insurance at the statutory limits on its employees at the leased Premises and
shall indemnify and hold harmless Landlord from and against any and all expenses
connected with claims made by Tenant's employees for injuries incurred at the
Leased Premises.
7. TAXES: The parties hereto acknowledge that the assessment for real
estate taxes for the Leased Premises is included in the assessment for all
buildings and the entire land area (collectively hereinafter called the
"Property") of which the Leased Premises is a part. The Property is more
particularly identified on the tax records as Parcel Number 69-165-0155-000.
Tenant shall pay to Landlord its allocated share of the real estate taxes
on the Property as the same shall be determined by Landlord from time to time
during the term of the Lease.
Upon the execution of this Lease by the parties hereto, Landlord shall make
application to the Beaver County and the Freedom Area School District for
abatement of real estate taxes under the existing regulations of each named body
pursuant to the Local Economic Revitalization Tax Assistant Act. The present
rate of tax abatement for each named body is set forth on Exhibit C attached
hereto and made a part hereof. Tenant shall receive the benefit of the tax
abatement, if any, as approved by each named body.
Landlord shall provide Tenant at the time of invoice, supporting
documentation of Tenant's allocable share of the real estate taxes.
8. LANDLORD'S INDEMNITY: Landlord shall, indemnify, hold harmless and
defend Tenant from and against any and all costs, expenses, liabilities,
injuries, losses, damages, suits,
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actions, fines, penalties, claims, or demands of any kind which are asserted by
or on behalf of any person, arising out of or in any way connected with any
accident, death or personal injury, or damage to property, that shall occur in
or about the Leased Premises which results from or is caused by the sole
negligence or willful misconduct of Landlord, its employees, contractors, agents
or invitees.
9. HAZARDOUS SUBSTANCES: Tenant shall not cause, permit or allow any
Hazardous Substance to be generated, emitted, discharged, released or disposed
of, on, in or from the Leased Premises by Tenant, Tenant's agents, employees,
contractors, invitees or those holding under Tenant. Tenant shall comply with
all Environmental Laws governing or relating to the generation, transportation,
use, storage, emission, discharge, release, threatened release or disposal of
Hazardous Substances with respect to the use and occupancy of the Leased
Premises or the condition thereof. Without limitation of the foregoing, if
Tenant causes, permits or allows the emission, discharge, release, threatened
release or disposal of any Hazardous Substance from, on or in the Leased
Premises (hereinafter called the "Contamination") in violation of any
Environmental Laws, Tenant shall promptly, at its sole cost and expense, take
any and all actions necessary to remediate and/or remove Contamination and to
comply with the Environmental Laws.
Tenant shall defend, indemnify and hold Landlord harmless from and against
all claims, damages, remedial or removal actions or obligations, fines,
judgments, liens, penalties, costs, expenses, diminished property value, lost or
diminished rental revenue, liabilities or losses of any kind asserted against,
or suffered or incurred by, Tenant and/or Landlord resulting directly or
indirectly from the presence, generation, transportation, use, storage,
emission, discharge, release, threatened release or disposal of Hazardous
Substances on, in or from the Leased Premises, provided, however, that Tenant's
indemnity hereunder shall not extend to Contamination existing on the Leased
Premises prior to the date of this Lease and for Contamination of the Leased
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Premises directly attributable to or Contamination caused by landlord or any
unrelated third party without the consent or knowledge of Tenant or under
Tenant's control. The provisions of the foregoing sentence shall survive the
termination of this Lease.
Landlord shall defend, indemnify and hold Tenant harmless from and against
all claims, damages, remedial or removal actions or obligations, fines,
judgments, liens, penalties, costs, expenses, diminished property value, lost or
diminished rental revenue, liabilities or losses of any kind asserted against,
or suffered or incurred by Tenant resulting directly or indirectly from the
presence, generation, transportation, use, storage, emission, discharge,
release, threatened release or disposal of Hazardous Substances on, in or from
the Leased Premises by Landlord, its employees, agents or authorized
representatives or resulting from Landlord's construction, use or occupancy of
the Leased Premises. The provisions of the foregoing sentence shall survive the
termination of this Lease.
As used herein, the term "Hazardous Substance" or "Hazardous Substances"
shall mean any and all substances or materials which are defined as or listed as
"hazardous materials", "toxic substances", "hazardous air pollutants", "toxic
pollutants", "pollutants", and/or "contaminants" as those terms are used,
defined or listed under any Environmental Laws. As used herein the term
"Hazardous Substance" shall also include any petroleum product, including
gasoline, diesel fuel, motor oil and waste oil.
As used herein the term "Environmental Laws" shall mean any federal, state
or local law, statute, ordinance, rule, order, regulation, injunction, writ or
decree now or hereafter existing which governs or otherwise relates to the
generation, transportation, use, storage, emission, discharge, release,
threatened release or disposal of Hazardous Substances including, without
limitation, the Resource, Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
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Transportation Act, the Toxic Substances Control Act, the Clean Air Act and the
Clean Water Act.
10. RENEWAL OPTION: Tenant shall have the right and option to extend the
initial term of the Lease for one (1) additional term of five (5) years (the
"Renewal Term") to commence immediately following the expiration of the initial
term. Tenant may exercise the right for the Renewal Term only by delivering to
Landlord written notice of Tenant's exercise of such right no less than one (1)
year prior to the expiration of the initial term. The terms and conditions of
this Lease shall continue in full force and effect for the Renewal Term, except
that the monthly rental for the Renewal Term shall be determined pursuant to the
following formula:
Monthly Rental = $19,499.67 X CPI in effect on the
for the Renewal expiration date of the
Term initial term
Divided by __________________________
CPI on October 1, 1997
Notwithstanding the result of the above calculation, the monthly rental for
the Renewal Term shall not be less than $20,718.40 per month.
The CPI, as referred to herein, means the Consumer Price Index for all
Urban Consumers 1984=100 relating to the Pittsburgh Metropolitan area, as issued
by the Bureau of Labor Statistics of the United States Department of Labor, or
any successor to the function thereof. In the event of the conversion of the
CPI to a different standard reference base or any other revision thereof, the
determination hereunder shall be made with the use of such Bureau of Labor
Statistics or successor to the functions thereof or in the absence of the
publication of such conversion factor, such formula or table as the parties
shall mutually designate.
The foregoing option and right to extend the term of this Lease for the
Renewal Term as herein provided is subject to (i) Tenant's timely exercise of
this option as herein
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provided, (ii) WESCO Distribution, Inc., or its subsidiary or affiliate
themselves being in full possession of the Leased Premises one (1) year prior to
the expiration date of the Extended Term and at the commencement of the Renewal
Term and (iii) Tenant not being in material default at the time of the exercise
of such option or at the commencement of the Renewal Term. If Tenant does not
satisfy conditions (ii) and (iii) above, Landlord at its option may terminate
this Lease effective on the day preceding the commencement of the Renewal Term.
11. BROKERAGE: Except as provided below, Landlord and Tenant each hereby
warrants to the other that no real estate broker has been involved in this
transaction on its behalf and that no finder's fees or real estate commissions
have been earned by any third party. Tenant agrees to indemnify Landlord and
Landlord hereby agrees to indemnify Tenant for any liability or claims for
commissions or fees arising from a breach of this warranty. The only real estate
broker involved in this transaction is Galbreath Company, whose commissions or
fees with respect to this transaction, shall be paid by Landlord.
12. TERMINATION BY TENANT: Tenant shall have a one time right during the
initial term of this Lease to terminate this Lease and the term thereof on the
later of March 31, 2000 or the last day of the thirtieth (30th) full month of
the term of the Lease (the "Early Out Date") by providing Landlord with not less
than six (6) months' prior written notice of its intention to so terminate this
Lease and the payment to Landlord not less than three (3) months prior to the
Early Out Date, the amount of $116,998.02. Upon the timely giving of notice and
the payment of the said amount, this Lease and the term thereof shall terminate
on the Early Out Date as though said date was the scheduled date for the
expiration of the term of this Lease.
13. PARKING: Tenant shall have the exclusive right to the use of the
parking areas located within the Leased
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Premises as shown outlined in red on Exhibit A attached hereto.
14. COMMON AREA MAINTENANCE: A. Landlord shall, at its sole cost and
expense (i) maintain in reasonably good condition and repair, when necessary as
determined by Landlord, the driveway shown shaded in green on Exhibit A and the
parking lots shown on Exhibit A attached hereto located on the Property and (ii)
maintain the landscape areas located within the Property but not included in
Tenant's Leased Premises or in the Leased Premises of other Tenants in the
Building. The driveway, the parking lots and the landscape areas are
collectively hereinafter called the "Common Areas".
Tenant shall pay to Landlord a monthly charge (the "CAM Charge"), as
reasonably determined from time to time by Landlord, being Tenant's allocable
share of the Common Area Expense, as hereinafter defined, to reimburse Landlord
for Tenant's allocable share of Landlord's costs of maintaining the Common
Areas. As used herein, "Common Area Expenses" shall mean all reasonable costs
and expenses incurred by Landlord of whatever nature for maintaining the Common
Area including but not limited to a reasonable reserve for the replacement of
the asphalt surfaces of the Common Areas. All capital repairs and replacements
shall be amortized in accordance with GAAP.
Beginning on the Commencement Date, Tenant shall pay to Landlord, as
additional rental, a CAM Charge of $731.24 per month (said amount being
Landlord's estimate of Common Area Expenses allocable to Tenant for 1997). The
CAM Charge shall be subject to adjustment at the end of each calendar year
during the term of the Lease based upon the actual Common Area Expenses incurred
by Landlord during the previous calendar year and an estimate of Common Area
Expenses for the ensuing calendar year.
Landlord shall provide Tenant within sixty (60) days after each calendar
year proper documentation to support said CAM Charge and the Common Area
Expenses.
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B. ADJUSTMENT MECHANISM: During each calendar year following the first
calendar year, but no later than sixty (60) days following each calendar year,
Landlord shall submit a statement supported by reasonable documentation setting
forth the amount of the Common Area Expenses and Tenant's allocable share of the
Common Area Expenses and the difference if any between the amount actually owed
by Tenant and the amount actually paid by Tenant in accordance with this
paragraph 14. Landlord agrees to keep books and records documenting Common Area
Expenses. Tenant shall have the right for a period of one (1) year after
Landlord has submitted said statements, at Tenant's cost, to inspect Landlord's
statement of Common Area Expenses after reasonable notice during normal
operating hours. If Tenant owes Landlord the difference, Tenant shall pay the
difference as additional rental within thirty (30) days of billing by Landlord.
If Landlord owes Tenant the difference, Tenant shall receive a credit for such
amount against Tenant's next ensuing monthly CAM Charge payments. Tenant's
covenant to pay Tenant's allocable share of the Common Area Expenses for the
term of this Lease or any extension thereof shall survive the expiration or
early termination of this Lease.
15. DAMAGE OR DESTRUCTION: Notwithstanding the provisions of section 15
of the printed portion of this Lease, if the Improvements shall be destroyed or
in the judgment of Landlord substantially damaged by insured casualty during the
last year of the term of this Lease, and in Landlord's sole reasonable judgment
cannot be repaired or restored within ninety (90) days after the happening of
such event, then either party may, within thirty (30) days after the occurrence
of such damage or destruction, cancel and terminate this Lease by giving written
notice to the other, and if such notice is given, this Lease shall expire as of
the date of such destruction with the same effect as though that date was the
date of the expiration of the term of this Lease, rental hereunder shall abate
as of the date of such damage or destruction, Landlord shall be entitled to
retain all insurance proceeds resulting from such damage or destruction,
Landlord shall refund to Tenant any unearned rent paid in
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advance, and Tenant shall as expeditiously as is reasonable under the
circumstances remove such of its property as it is required to remove under the
provisions of section 12 hereof and shall surrender the Leased Premises to
Landlord who may enter upon and repossess the same, and all further liability by
Tenant and Landlord hereunder shall thereupon cease. If this Lease is not so
canceled and terminated, the provisions of the foregoing paragraphs of section
15 shall control.
16. DEFAULTS AND REMEDIES: If Landlord fails to perform any of the
covenants and conditions of this Lease to be kept, observed or performed by
Landlord, and such failure shall not have been cured within thirty (30) days
after notice and demand, or in the event the default is of such a nature that it
cannot be cured within thirty (30) days and Landlord has not taken reasonable
steps to cure said default, then, Tenant shall have the right to exercise any
and all rights and remedies available to it at law or in equity, including, but
not limited to, the right to enjoin a breach or threatened breach of this Lease
in a court of competent jurisdiction.
WITNESS the due execution hereof as of the date of the foregoing Agreement
of Lease.
ATTEST: THE BUNCHER COMPANY
/s/ /s/
- ------------------------ ---------------------------
Exec. Vice Pres. & President
Secretary
(Corporate Seal)
ATTEST: WESCO DISTRIBUTION, INC.
/s/ /s/
- ------------------------ ---------------------------
Assistant Secretary Steven A. Burleson, Treasurer
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FIRST AMENDMENT TO AGREEMENT OF LEASE
MADE THIS 24TH DAY OF SEPTEMBER, 1997
BY AND BETWEEN
THE BUNCHER COMPANY (hereinafter called "Landlord"), a Pennsylvania
corporation having its principal place of business in Allegheny County,
Pennsylvania
AND
WESCO DISTRIBUTION, INC. (hereinafter called "Tenant"), a Delaware
corporation having its principal place of business in the City of Pittsburgh,
Allegheny County, Pennsylvania
WHEREAS, the parties hereto have entered into a certain Agreement of Lease
(the "Lease") dated September 4, 1997 covering certain property located in the
Township of New Sewickley, Beaver County, Pennsylvania and more particularly
described in the Lease (the "Leased Premises"); and
WHEREAS, all terms defined in the Lease and used herein shall have the same
meaning herein as in the Lease unless otherwise provided herein; and
WHEREAS, the parties desire to amend the Lease to (i) provide that Landlord
shall perform or cause to perform certain additional work (the "Additional
Improvements") in or about the Leased Premises and (ii) increase the monthly
rental for the Leased Premises to amortize the cost of the Additional
Improvements over the initial term of the Lease.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound, the parties hereto promise, covenant and agree as follows:
1. COMPLETION OF ADDITIONAL IMPROVEMENTS: Landlord shall, at its sole
cost and expense, complete the Additional Improvements to the Leased Premises on
or before the
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Commencement Date or Beginning Date, if applicable, of the Lease. As used
herein the Additional Improvements shall include (i) the construction of a
concrete ramp at the drive-in door and (ii) the installation of one (1) 110 volt
duplex outlet at each of the following column locations in the warehouse, i.e.,
columns: C-5, C-11, F-5 and F-11.
2. AMORTIZATION PAYMENTS: Beginning on the Commencement Date or on the
first day of the first full calendar month of the initial term of the Lease
following the Beginning Date, if applicable, and on the first day of each
calendar month thereafter during the initial term of the Lease, Tenant shall pay
to Landlord as additional rental in addition to rental and other sums otherwise
payable under the Lease, the amount of $353.79 per month which amount represents
the amount required to amortize the agreed upon cost of the Additional
Improvements, including interest, over the initial term of the Lease. If Tenant
exercises its right to terminate the Lease as provided under paragraph 12 of the
Rider to Agreement of Lease, Tenant shall pay to Landlord three (3) months prior
to the Early Out Date the amount of $9,299.39 (the unamortized cost of the
Additional Improvements at the end of the thirtieth (30th) month of the initial
term of the Lease), in
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addition to all other sums payable by Tenant as set forth in the Lease.
3. Except as amended and supplemented hereby, all terms and conditions of
the Lease shall remain in full force and effect.
WITNESS the due execution hereof as of the date of the foregoing Agreement
of Lease.
ATTEST: THE BUNCHER COMPANY
/s/ /s/
- ----------------------------- -----------------------------
Exec. V.P. & Secretary President
(Corporate Seal)
ATTEST: WESCO DISTRIBUTION, INC.
/s/ /s/
- ----------------------------- -----------------------------
Assistant Secretary Steven A. Burleson, Treasurer
(Corporate Seal)
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<PAGE>
EXHIBIT 10.13
AGREEMENT OF LEASE
BETWEEN: ATLANTIC CONSTRUCTION INC., a company duly incorporated
under the law, herein acting and represented by David
Rosenberg, its President, hereunto duly authorized as he
declares,
(hereinafter referred to as "Landlord")
AND: WESCO DISTRIBUTION CANADA INC., a body politic and
corporate, duly incorporated under the Law, and having an
office in the City of Pittsburgh, State of Pennsylvania,
U.S.A., located at Riverfront Center, herein acting and
represented by Roy W. Haley, its President and Chief
Executive Officer duly authorized as he declares,
(hereinafter referred to as "Tenant")
1. DESCRIPTION AND LEASE OF PREMISES
The Landlord in consideration of the rentals and other obligations of the
Tenant herein set forth, hereby leases to the Tenant, the latter accepting, the
location bearing civic number 1330 Trans Canada Highway, Dorval, Quebec,
consisting of an area of approximately ninety-seven thousand (97,000) square
feet and the land upon which it is erected, the whole as outlined on the plan
hereto attached as Schedule "A" (hereinafter referred to as the "Leased
Premises").
The building containing the Leased Premises (hereinafter referred to as the
"Building") is situated on the emplacement described in Schedule "B" hereto
attached.
Landlord will, within thirty (30) days after the occupation of the Leased
Premises by the Tenant, furnish the latter with a certificate of its architect
attesting to the area of the Leased Premises. Said certificate shall be based
on outside measurements and shall be final and binding upon the parties hereto.
<PAGE>
2. TERM OF LEASE
The Term of this Lease shall commence on September 16, 1994 and shall
terminate on the last day of July 1999 unless sooner terminated under the
provisions hereof (hereinafter referred to as the "Term").
3. USE OF PROPERTY
Tenant covenants that the Leased Premises shall be used solely for the
purpose of office space and warehousing and for no other purpose. Storage shall
be permitted outside the Leased Premises on the Thirty-five thousand (35,000)
square feet of yard space on the south side of the Leased Premises during the
Term.
Notwithstanding the foregoing, Landlord shall have the right to reclaim the yard
space without financial penalty on thirty (30) days written notice to the Tenant
of its need for the yard space. All such storage shall be in conformity with
municipal regulations.
4. RENTAL ON NET RETURN BASIS
It is intended that the Base Rent provided for in this Lease shall be an
absolute net return to Landlord for the Term of this Lease, free of any and all
costs, expenses of any nature whatsoever, taxes and charges with respect to the
Leased Premises, other than any income or profit taxes which may be levied
against Landlord and any interest or amortization charges of Landlord in respect
of any hypothecs and except as otherwise herein stipulated.
5. BASE RENT
Subject to and under reserve of the terms and conditions contained in
Article 46.3 and Schedule D hereof, Tenant covenants and agrees to pay to
Landlord in lawful money of Canada without deduction, abatement or set off, an
annual Base Rent as follows:
a) During the first three (3) years of the Term a sum of Three hundred
fifteen thousand dollars ($315,000.00) payable in equal consecutive
monthly installments of Twenty-six thousand two hundred and fifty
dollars ($26,250.00) each;
b) During the last two (2) years of the Term a sum of Three hundred
thirty-seven thousand five hundred dollars ($337,500.00) payable in
equal consecutive monthly
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installments of Twenty-eight thousand one hundred twenty-five dollars
($28,125.00) each, the whole without deduction, abatement or set-off
and payable in advance on the first (1st) day of each month during the
Term, with the applicable Goods and Services Taxes and Quebec Sales
Taxes and any other similar taxes which may be levied in the future by
any governmental authority (hereinafter referred to as the "Base
Rent").
Such Base Rent has been calculated on an area of Ninety thousand (90,000)
square feet which area the parties irrevocably agree to use for the calculation
of Base Rent.
The Base Rent and other charges as herein provided shall be paid to
Landlord and/or its nominee at the office of the Landlord, 7077 ave. du Parc,
Suite 600, Montreal, Quebec H3N lX7, or at such other place in Canada as shall
be designated by Landlord in writing to Tenant.
Should the Tenant continue to occupy the Leased Premises after the expiry
of the Term without a written agreement, there shall be no tacit renewal and the
Tenant shall pay the Landlord Base Rent and other charges for the period of
occupancy as set out in this Lease plus fifty percent (50%) thereof, without
prejudice to such further damage claims as may be available to the Landlord
against the Tenant. However, the Tenant is not to have the right to such
occupancy beyond the expiry of the Term.
6. ADDITIONAL RENTAL
Subject to and under reserve of the terms and conditions contained in Article
46.3 and Schedule D hereof and without limiting the obligations of Tenant, the
Tenant shall pay its proportionate share of the following items, which
Proportionate Share is the product of the fraction of which the area of the
Leased Premises is the numerator and the total Leasable area of the Building is
the Denominator (hereinafter referred to as the "Proportionate Share"):
A) TAXES
Within thirty (30) days of receipt by Tenant of proof of payment by the Landlord
and a written statement of the taxes set out in this paragraph the Tenant will
in each and every year during the term of this Lease pay to the Landlord,
whether they be special or general, its Proportionate Share of all property
taxes, municipal taxes, school taxes, surtax on non-residential immoveables,
ecclesiastical taxes, rates including local improvement rates, duties and
assessments and any tax on capital pertaining to the Leased Premises that may be
levied, rated, charged or assessed against the Building and/or all equipment and
facilities thereon or therein, and/or the land and appurtenant land on which the
Building is situated and/or any property on or in the Building owned or brought
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<PAGE>
thereon or therein by Landlord or Tenant, and their respective officers, agents,
employees, servants, visitors or licensees and/or Tenant in respect thereof,
whether such taxes, rates, duties or assessments are charged by a municipal,
school or any other body of competent jurisdiction. Upon payment by the Tenant
as provided for in this paragraph, the Landlord will pay and will indemnify and
keep indemnified the Tenant from and against any and every tax, rate, charge,
duty and assessment referred to in this paragraph with respect to the Building
and the lands appurtenant thereto.
The Tenant shall be solely responsible to pay its share of municipal
surtaxes on non-residential immoveables that may be levied, charged, rated or
assessed against the Building. Landlord may from time to time, or at any time,
in its reasonable discretion revise its method for charging for such surtax,
based either on the proportion allotted by the Municipality or based on the
Tenant's Proportionate Share.
The foregoing taxes in respect of the first and last years of the Term shall be
adjusted between Landlord and Tenant.
B) OTHER EXPENSES
The Tenant shall pay its Proportionate Share of:
i) the expense required to keep the exterior of the Leased Premises in
good order and condition and to keep the sidewalks, curbs, lawns and
grounds in and about the Leased Premises in good condition, clean and
free of snow and ice and properly landscaped.
ii) the reasonable cost of all goods and services furnished, employed or
utilized in the operation, administration, maintenance, repair,
supervision and management of the Building and of the common areas;
iii) the salaries, wages and costs related to fringe benefits and pension
plan benefits of the employees of the Landlord exclusively engaged in
the operation, administration, maintenance, repair, supervision and
management of the Building;
iv) the reasonable cost of modifications, improvements and additions to
the Building and to the equipment thereof as well as the equipment or
specialized services necessary for the establishment, in the Building,
of energy conservation measures, when, in the opinion of the Landlord
and the Tenant, these costs are likely to reduce the operating
expenses of the Building or improve the welfare or the security of the
tenants of the Building or when the foregoing are required by law.
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<PAGE>
v) the capital cost, reasonably calculated according to a method of
depreciation reasonably determined by the Landlord, of work or of
equipment required for the operation, administration, maintenance,
repair, supervision, management, modification or improvement of the
Building or the common areas or of energy conservation measures as
well as interest as hereinafter stipulated.
vi) the reasonable expenses incurred to redo, improve, modify or increase
the insulation of the Building when, in the opinion of an expert in
such matters, such expenses may reduce the electricity costs or gas
consumed in the Leased Premises;
vii) the sprinkler maintenance and its monitoring alarm connection with a
central security company;
viii) the reasonable cost of works, replacements or of repairs made to the
Building, except those relating to the structure and roof of the
Building which shall be paid by the Landlord, unless caused by the
fault or negligence of the Tenant or by those for whom it is in law
responsible. The term "structure" means the foundations and the frame
of the Building. Tenant shall, also, not be responsible for any
repairs of capital nature to the Building which for the purpose
hereof shall be repairs of a replacement nature which give
significant added value to the Building.
ix) Insurance
---------
During the whole of the Term, the Tenant will pay its Proportionate Share
of all premiums with respect to insurance to be placed by Landlord on the
Building and described as follows:
i) Fire, Extended Coverage and Malicious Damage insurance for the
full replacement cost of the Building, improvements and equipment
and in addition upon the full annual rental income thereof.
ii) Broad boiler and Unfired Pressure Vessels insurance, including
Repair or Replacement and rental income coverages in an amount
reasonably satisfactory to Landlord;
iii) such other insurance as institutional lenders may require or as
it may be or may become customary for owners of property to carry
as respects loss of or damage to the Leased Premises or liability
arising therefrom, specifically including any insurance required
by reason of the introduction by or on behalf of Tenant, and/or
its sub-tenants of any radioactive materials or substances into
the Leased Premises.
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<PAGE>
All policies of insurance shall contain a provision of cross liability or
severability of interest as between the Landlord and the Tenant. All other
policies referred to above shall contain a waiver of subrogation rights
which the Landlord's insurers may have against the Tenant, the Tenant's
insurers and persons under the Tenant's care and control. The Landlord
hereby releases and waives any and all claims against the Tenant and those
for whom the Tenant is in law responsible with respect to the occurrences
insured against by the Landlord hereunder. The Landlord shall from time to
time furnish the Tenant with certified copies of all insurance policies and
the renewals thereof upon request.
Tenant will pay the amount of any increase in insurance premiums on the
whole of the Building of which the Leased Premises form part if such
increase is caused by Tenant's operations in the Leased Premises, or
anything brought therein by Tenant.
The following shall not be included in the operating expenses, such cost to
be assumed by the Landlord exclusively:
i) any repairs to the roof or any structural repairs to the Building;
ii) any repairs of a capital nature to the Building and the land;
iii) any modification or improvement to the Building and the land unless
same has been previously approved by the Tenant it being understood
that the Tenant may withhold such approval without necessity of
justification, and the whole subject to article 6 (v), 6 (vii) and 6
(ix) hereof.
iv) any repairs to the tile floor of the warehouse area;
Items due pursuant to this article 6 hereunder shall also be paid to
Landlord by Tenant Thirty (30) days after receipt of Landlord's invoice for
same.
7. METHOD OF PAYMENT
Notwithstanding anything to the contrary hereinabove contained, the
Landlord may, at its reasonable option, instead of billing individually for
taxes and other items to be paid by the Tenant, as hereinabove stipulated,
estimate the amounts payable by the Tenant under the provisions of this Lease
for such periods as the Landlord may determine, the Tenant hereby agreeing to
pay to the Landlord such amounts in monthly instalments in advance during said
period together with the rental payments as hereinabove provided. At the
expiration of the period of which such estimated payments have been made, the
Landlord shall furnish to the Tenant a certified statement showing
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<PAGE>
in reasonable details the actual amount required to be paid under the provisions
hereof. If the amounts actually due by the Tenant for such period exceed the
amount so collected by the Landlord, the Tenant shall pay same within thirty
(30) days after receipt of billings therefore, and if the amounts due by the
Tenant for the said period are less than the amount actually collected by the
Landlord, then the Landlord shall credit same to the next ensuing payments
becoming due by the Tenant to the Landlord.
All sums due by the Tenant to the Landlord in virtue of this Lease will be
considered as rent for all legal purpose.
8. DIRECT PAYMENTS
a) PAYMENT FOR BUSINESS TAX, LICENCES ETC.
Tenant shall be responsible for and pay all business taxes, and similar
taxes levied with respect to the Leased Premises as well as the costs of
any licences and permits required by the Tenant.
b) INSURANCE
Tenant covenants that nothing will be done or omitted to be done
whereby any policy shall be cancelled or the Leased Premises rendered
uninsurable.
Throughout the term of this Lease and any renewal thereof, the Tenant
shall take out and keep in force:
(i) comprehensive general liability insurance with respect to the
business carried on in or from the Leased Premises and the use
and occupancy thereof for bodily injury and death and damage to
the property of others in an amount of at least two million
dollars ($2,000,000.00) for each occurrence or such greater
amount as the Landlord may from time to time reasonably require;
(ii) all risks insurance including the perils of fire, extended
coverage, leakage from sprinkler and other fire protective
devices, earthquake, collapse and flood in respect to furniture,
equipment, inventory and stock-in-trade, fixtures and leasehold
improvements located within the Leased Premises and such other
property located in or forming part of the Leased Premises,
including all mechanical or electrical systems (or portions
thereof) installed
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by the Tenant in the Leased Premises, the whole for the full
replacement cost (without depreciation) in each such instance.
(iii) if any boiler or pressure vessel is operated in the Leased
Premises, boiler and pressure vessel insurance with respect
thereto;
(iv) glass and plate-glass insurance to the full replacement cost
thereof;
(v) such additional insurance as the Landlord, acting reasonably,
may from time to time require.
All policies of insurance shall provide that they will not be canceled
or permitted to lapse unless the insurer notifies the Landlord in writing
at least thirty (30) days prior to the date of cancellation or lapse. Each
such policy shall name the Landlord and any other party reasonably required
by the Landlord as an additional insured as its interest may appear. Each
comprehensive general liability insurance policy will contain a provision
of cross-liability or severability of interest as between the Landlord and
the Tenant. All other policies referred to above shall contain a waiver of
subrogation rights which the Tenant's insurers may have against the
Landlord, the Landlord's insurers and persons under the Landlord's care and
control. The Tenant hereby releases and waives any and all claims against
the Landlord and those for whom the Landlord is in law responsible with
respect to occurrences required to be insured against by the Tenant
hereunder. The Tenant shall from time to time furnish the Landlord with
certificates of insurance policies and the renewals thereof.
The Landlord hereby releases and waives any and all claims against the
Tenant and those for whom the Tenant is in law responsible with respect to
occurrences required to be insured against by the Landlord hereunder.
Should the Tenant fail to take out or keep in force such insurance,
the Landlord will have the right to do so and to pay the premiums therefore
and in such event the Tenant shall repay to the Landlord the amount paid as
premiums as additional rent within thirty (30) days after receipt of
invoice.
c) UTILITIES
Subject to and under reserve of the terms and conditions contained in
Schedule D hereof, the Tenant shall pay for the consumption in the Leased
Premises of electricity, water, heat, gas and for telephone, pest control
and garbage removal services, and all public utilities with respect to the
Leased Premises, directly to the utility companies levying said charges.
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The Tenant shall, at its cost, suitably heat the Leased Premises
during the customary heating season. The Landlord represents and warrants
to the Tenant that all heating equipment presently located in the Leased
Premises is in good working order during the Term subject to regular
maintenance thereof.
Notwithstanding anything contained in this article 8, should any of the
expenses presently billed to the Tenant be invoiced to the Landlord in future
the Tenant agrees to immediately reimburse the Landlord for these expenses.
9. FAILURE OF TENANT TO PERFORM
If Tenant fails to pay any taxes, rates, insurance premiums, charges or
debts which it owes or has herein covenanted to pay, Landlord may pay the same
and shall be entitled to charge the sums so paid to Tenant who shall pay them
within thirty (30) days after receipt of invoice and Landlord. In addition to
any other rights, Landlord shall have the same remedies and may take the same
steps for the recovery of all such sums as it might have and take for the
recovery of rent in arrears under the terms of this Lease; all arrears of rent
and any monies paid to Landlord hereunder shall bear interest from the date of
default at the rate equal to that charged by the Toronto Dominion Bank in
Montreal to its most credit worthy commercial customers plus five percent (5%)
per annum.
10. DEFAULT
Without prejudice to all of the rights and recourses available to the
Landlord, the following shall be considered defaults under the terms of this
Lease:
(a) in the event that Tenant shall be in default under any provision of
this Lease providing for the payment of Base Rent or additional rent
or any other charges, after fifteen (15) days written notice to the
Tenant from the Landlord;
(b) in the event that Tenant shall be adjudicated a bankrupt or make any
general assignment for the benefit of creditors, or take, or attempt
to take, the benefit of any insolvency or Bankruptcy Act, or if a
petition in bankruptcy shall be maintained against Tenant, or if a
receiver or trustee be appointed to the property of Tenant, or any
part thereof, or any execution be issued pursuant to a judgment,
rendered against Tenant or pursuant to this Lease in which such event
shall not be discharged within thirty (30) days;
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(c) in the event that Tenant shall be in default in observing any covenant
herein contained and/or performing any of its obligations contained in
this Lease (other than a default in the payment of rent or additional
rent) and such default shall continue for fifteen (15) days after
written notice specifying such default shall have been given to Tenant
by Landlord and provided Tenant has not started to remedy such default
and to diligently pursue such remedial action within said delay.
In the event of any default under the terms of this Lease, the Landlord
without prejudice to any rights or remedies it may have hereunder or by law
shall have the right to terminate this Lease forthwith upon written notice given
to Tenant by Landlord. Tenant upon such a termination of this Lease shall
thereupon quit and surrender the Leased Premises to Landlord and Landlord, its
agents and servants may immediately or at any time thereafter, re-enter the
Leased Premises and dispossess Tenant, and remove any and all persons and any or
all property therefrom whether by summary dispossession proceedings or by any
suitable action or proceeding at law, or by force or otherwise without being
liable to prosecution or damages therefore.
In case of any termination, or in case Tenant, in the absence of such
termination, shall be dispossessed by or at the instance of Landlord in any
lawful manner, whether by force or otherwise, Base Rent and Additional Rent for
the then current month and for the next six (6) months succeeding the date of
such termination or dispossession shall immediately become due and payable (as
accelerated rent) and this Lease shall immediately, at the reasonable option of
the Landlord, become forfeited and terminated, and the Landlord may, without
notice of any form of legal process, forthwith re-enter upon and take possession
of the Leased Premises and remove the Tenant's effects therefrom, the whole
without prejudice to and under reserve of all of the rights and recourses of the
Landlord to claim any and all losses and damages sustained by the Landlord by
reason of and arising from any default of the Tenant.
Landlord will use its best efforts to mitigate damages in the event of a
default by the Tenant.
11. SIGNS
Landlord shall have the right at all times during the term of this Lease to
place upon the Leased Premises a notice of reasonable dimensions and reasonably
placed, so as not to interfere with the business of Tenant, stating that the
Building is for sale and for six (6) months prior to the termination of this
Lease, Landlord shall have the right to place upon the Leased Premises a similar
notice that the Leased Premises are for rent and Tenant will not remove such
notice or knowingly permit same to be removed.
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Tenant shall have the right to place any signs, advertisements, notices or
posters inside or outside the Leased Premises for the purposes of Tenant's
operations in and from the Leased Premises, the whole subject to Landlord's
consent which consent shall not be unreasonably withheld or delayed.
All such signs shall comply with the lawful requirements of municipal and
governmental authorities.
Neither the Tenant or anyone other than the Landlord will have the right to
place any signs for rent, sublet, etc. on the outside or inside of the Leased
Premises or on any adjacent building or property belonging to the Landlord.
The Tenant shall have the right at any time to list the Leased Premises or
any part thereof with any broker or agent for purposes of subleasing same.
12. EXHIBITION OF PREMISES
Landlord shall have the right, at any time upon twenty-four (24) hour
notice to the Tenant, during business hours, to exhibit the Leased Premises to
any prospective lender or purchaser or to any prospective Tenant during the last
Nine (9) months of the Term.
13. MAINTENANCE AND REPAIRS
Notwithstanding the provisions of the Civil code of Quebec, the Tenant, at its
own expense, shall operate, maintain and keep the Leased Premises including all
facilities, equipment and services, both inside and outside, available to the
Tenant exclusively, in such good order and condition, as they would be kept by a
careful owner, and shall promptly, if known, make all needed repairs and
replacements to the Leased Premises, which a careful owner would make,
including, without limitations, the water, gas, drain and sewer connections,
pipes and mains, electrical wiring, water closets, sinks and accessories
thereof, and all equipment belonging to or connected with the Leased Premises or
used in its operation, including the heating and air conditioning systems
therein.
The Tenant undertakes to obtain and pay for such maintenance, repair, and
replacement service and/or insurance contracts with respect to the foregoing;
the whole without prejudice to the other obligations of the Tenant with respect
to same. The Tenant shall forward, upon request, to the Landlord copies of such
contracts and evidence of renewals thereof during the continuance of this Lease.
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Notwithstanding the other provisions of this article, Tenant shall not be
responsible for the execution of and the payment of any repairs to the roof, any
structural repairs, any repairs of a capital nature and any repair to the tile
floors in the warehouse area unless caused by fault of the Tenant or by those
for whom it is in law responsible.
14. SUBLETTING AND ASSIGNMENT
Subject to the provisions hereinafter detailed, the Tenant shall have the
right to sublet the Leased Premises or assign its rights in the present Lease
with the consent of the Landlord which consent shall not be unreasonably
withheld or delayed and provided that the Leased Premises are utilized only for
the purposes stipulated in article 3 hereof. Notwithstanding such subletting
and assignment, the Tenant shall remain solidarily liable with such sublessee or
assignee for the performance of all the terms and conditions of the present
Lease.
It is understood and agreed that notwithstanding the terms of Article 1873
of the Civil Code of Quebec any such assignment consented to by the Landlord
shall in no way acquit the Tenant of its obligations stipulated in this Lease.
Sales aggregating fifty percent (50%) or more of the capital issued voting
stock of Tenant (if Tenant is a non-public corporation) or transfers aggregating
fifty percent (50%) or more of Tenant's partnership shall be deemed to be an
assignment of this Lease. As used in the foregoing sentence, the word "Tenant"
shall also mean any entity which has guaranteed Tenant's obligations under this
Lease and the prohibition hereof shall be applicable to any sales or transfers
of the stock or partnership interest of said guarantor.
Notwithstanding anything to the contrary in this Section 14, so long as
Wesco Distribution Inc. is Tenant under this Lease, is not in default of any of
the terms and conditions hereof, and has fully and faithfully performed all of
the terms and conditions of the Lease, Tenant shall have the right to assign
this Lease without Landlord's consent, at any time during the Term of this
Lease, to the purchaser in connection with the sale by Tenant of all or
substantially all of its assets, provided: (i) the net assets of the assignee
corporation shall not be less than the net assets of Tenant at the time of the
signing of this Lease; (ii) the assignee corporation provides Landlord with
audited financial statements certifying such net assets; (iii) such assignment
does not adversely affect the quality and type of business operation which
Tenant has conducted theretofore; and (iv) such assignee shall assume in
writing, on a form acceptable to Landlord, all of Tenant's obligations hereunder
and Tenant shall provide Landlord with a copy of such assumption/assignment
document.
Tenant shall remain solidarily liable with any such assignee.
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Tenant shall pay Landlord a fee of Three hundred dollars ($300.00) in
connection with the sublease or assignment hereunder.
15. INSPECTION AND REPAIR
Landlord and its agents shall have the right, at all reasonable times and
upon prior reasonable notice save in the event of an emergency during the Term
of this Lease to enter the Leased Premises to examine the condition thereof and
to ascertain whether Tenant is performing its obligations hereunder, and Tenant
shall make any repairs which Landlord deems reasonably necessary as a result of
such examination through professional tradesmen approved by the Landlord which
approval may not be unreasonably withheld. If Tenant fails to make any such
repairs within a maximum of Ten (10) days or less if Landlord deems reasonably
necessary after notice from Landlord requesting Tenant to do so, provided that
such repairs may reasonably be made within the said period, or Tenant has not
diligently commenced to pursue same, Landlord may, without prejudice to any
other rights or remedies it may have, make such repairs and charge the cost
thereof to Tenant. Nothing in this Clause shall be construed to obligate or
require Landlord to make any repairs but Landlord shall have the right at any
time to make any emergency repairs without notice to Tenant and charge the
reasonable cost thereof to Tenant. Any costs chargeable to Tenant hereunder
shall be payable within thirty (30) days after receipt of invoice as additional
rent and shall bear interest at the rate herein above mentioned.
16. DESTRUCTION OF PREMISES
Provided, and it is hereby expressly agreed that if and whenever during the
Term hereby leased, the Building or the portion of the Building hereby leased
shall be destroyed or damaged by fire, lightning or tempest, or any of the other
perils insured against under the provisions hereunder, then and in every such
event:
(a) If the damage or destruction is such that the portion of the Building
hereby leased, or the Building, is rendered wholly or partially unfit
for occupancy or it is impossible or unsafe to use and occupy it and
if in either event the damage, in the reasonable opinion of Landlord's
architect to be given to Tenant within thirty (30) days of the
happening of such damage or destruction, cannot be repaired with
reasonable diligence within one hundred and twenty (120) days from the
happening of such damage or destruction, then either Landlord or
Tenant may within Five (5) days next succeeding the giving of the
Landlord's architect's opinion as aforesaid, terminate this Lease by
giving to the other notice in writing of such termination, in which
event this Lease and the term hereby leased shall cease and be at an
end as of
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the date of such destruction or damage and the rent and all other
payments for which Tenant is liable under the terms of this Lease
shall be apportioned and paid in full to the date of such destruction
or damage; in the event that neither Landlord or Tenant so terminate
this Lease, the Landlord shall repair the said Building with all
reasonable speed and the rent hereby reserved shall abate from the
date of the happening of the damage until the damage shall be made
good to the extent of enabling Tenant to use and occupy the Leased
Premises in Tenant's reasonable opinion;
(b) If the damage be such that the portion of the Building hereby leased
is wholly unfit for occupancy, or if it is impossible or unsafe to use
or occupy it but if in either event the damage, in the reasonable
opinion of Landlord's architect, to be given to Tenant within thirty
(30) days from the happening of such damage, can be repaired with
reasonable diligence within one hundred and twenty (120) days of the
happening of such damage, then the rent hereby reserved shall abate
from the date of the happening of such damage until the damage shall
be made good to the extent of enabling Tenant to use and occupy the
Leased Premises and Landlord shall repair the damage with all
reasonable speed;
(c) If, in the opinion of the Landlord's architect, the damage can be made
good, as aforesaid, within one hundred and twenty (120) days of the
happening of such destruction or damage and the damage is such that
the portion of the Building leased is capable of being partially used
for the purposes for which it is hereby leased, then until such damage
has been repaired the rent shall abate in the proportion that the part
of the portion of the Building leased is rendered unfit for occupancy
bears to the whole of the said portion of the Building leased and
Landlord shall repair the damage with all reasonable speed.
Should any mortgage creditor who may have an interest in any insurance
proceeds refuse to permit the use of such proceeds for the repair, replacement,
rebuilding and/or restoration as hereinabove provided and for the payment of
amounts expended for such purposes, then the Landlord's obligation to repair or
rebuild as provided for hereinabove shall cease and shall be null and void and
the Lease shall be canceled effective as of the date of the damage, unless, the
Landlord, at the Landlord's sole option, chooses to repair or rebuild.
17. IMPROVEMENTS AND ALTERATIONS
The Tenant shall not make any alterations or repairs to the Leased
Premises, or any other part of the Building, or wires, pipes or other services
to be run into the Building without first
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obtaining the written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed. Any amounts owing under the terms of this
Article shall be payable on demand as additional rent.
However in the event that the Landlord shall grant permission to the Tenant
to execute the said work for its own account (which permission shall be
reasonably determined by the Landlord), then the said work shall be subject to
the following conditions:
(i) Tenant shall furnish to Landlord plans and specifications showing in
reasonably complete detail the work proposed to be carried out and the
estimated cost thereof and Landlord shall approve or reject such plans
and specifications within fifteen (15) days after receipt of the same. If
such plans and specifications are approved, all work shall be carried out
in compliance therewith.
(ii) The value of the Leased Premises shall not, as a result of any work
proposed to be carried out by Tenant, be less than the value of the
Leased Premises before the commencement of such work and Landlord shall
be the sole judge of such value.
(iii) All work shall be carried out with reasonable dispatch and in a good
workmanlike manner and in compliance with all applicable permits,
authorizations and building and zoning by-laws and with all regulations
and requirements of all competent authorities having jurisdiction over
the Leased Premises.
(iv) The Leased Premises and the Building shall at all times be free of all
legal hypothecs (construction) and any charges whatsoever.
(v) If the cost of any work shall be in excess of Five thousand dollars
($5,000.00) as reasonably estimated by Tenant, Landlord may require
Tenant to furnish security satisfactory to Landlord guaranteeing the
completion of the work and the payment of the cost thereof free and clear
of all privileges and charges of any nature whatsoever.
(vi) Tenant shall maintain Workmen's Compensation insurance covering all
persons employed in connection with the work and shall produce evidence
of such insurance to Landlord and shall also maintain such general
liability insurance for the protection of Landlord and Tenant as Landlord
may require.
All work whether executed by the Landlord or the Tenant, whether
structural or not, when completed, shall be comprised in, and form part of the
Leased Premises and shall be subject to all the provisions of this Lease and
Tenant shall not have any right to claim compensation therefore. At the
expiration of this Lease, Tenant shall be required to repair any damage to the
Leased
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Premises caused by removing any of its personal property, reasonable wear and
tear and casualty damage excepted.
18. EXPIRATION OF LEASE
The Tenant shall at the expiration or earlier termination of the term of
this Lease peaceably surrender and yield up unto the Landlord the Leased
Premises together with all buildings, alterations, replacements, additions,
erections, and improvements (leasehold or otherwise), including, but not limited
to electrical installations, electric or other fixtures, offices, partitions,
divisions, air-conditioning and heating equipment, paneling, built-in furniture,
wall-to-wall carpets, carpets or other floor coverings, attached cabinets, or
other attached equipment, wiring, switches, meters, meter boxes and
transformers, which at any time during the term hereof shall be placed, made,
installed, fixed or attached therein or thereon by the Tenant, in good repair
and condition, subject to reasonable wear and tear only, and without any
compensation whatsoever being allowed to the Tenant for same.
Tenant hereby renounces any right to terminate the Lease in accordance with
the terms of article 1605 of the Civil Code of Quebec.
19. COMPLIANCE WITH LAWS AND REGULATIONS
The Tenant shall, at its own expense, promptly comply with the requirements
of every applicable statute, law and ordinance and with every applicable lawful
regulation in relation to its use or occupation of the Leased Premises or with
respect to any equipment found therein or with respect to any requirements of
the Landlord's insurers. The Landlord certifies and warrants to the Tenant that
the Leased Premises are in compliance with all applicable laws, ordinances,
rules, orders and regulations of any governmental authority or regulatory body
with jurisdiction thereof or any applicable insurance rating agency and that
there is no pollutant or contaminants in the Building or the land at the
commencement of the Term of this Lease and that said Building and land comply
with the environmental laws, regulations and policies applicable thereto.
20. INDEMNIFICATION
Except if caused directly by the negligence or negligent acts of the
Landlord, its employees, agents and invitees, the Landlord shall not be liable
nor responsible in any way for any injury of any nature whatsoever that may be
suffered or sustained by the Tenant or any employee, agent or customer of the
Tenant or any other person who may be upon the Leased Premises or for any loss
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of or damages to any property belonging to the Tenant or to its employees or to
any other person while such property is on the Leased Premises and, in
particular (but without limiting the generality of the foregoing) the Landlord
shall not be liable for any damage or damages of any nature whatsoever to any
such property caused by the failure to supply adequate drainage, snow or ice
removal, or by reason of the interruption of any public utility or service or in
the event of steam, water, rain or snow which may leak into, issue, or flow from
any part of the Building or from the water, steam, sprinkler, or drainage pipes
or plumbing works of the same, or from any other place or quarter or for any
damage caused by anything done or omitted by any Tenant, but the Landlord shall
use all reasonable diligence to remedy such condition, failure or interruption
of the service when not directly or indirectly attributable to the Tenant, after
notice of same, when it is within its power and obligation to do so. Nor shall
the Tenant be entitled to any abatement of Base Rent or Additional Rent in
respect of any such condition, failure or interruption of service.
The Tenant will indemnify and save harmless the Landlord from and against
all fines, liability, damages, suits, claims, demands and actions of any kind or
nature which the Landlord shall or may become liable for or suffer by reason of
any breach, violation or non-performance by the Tenant of any covenant, term or
provision hereof or by reason of any injury (including death resulting at any
time therefrom) or damage to property occasioned to or suffered by any person or
persons including the Landlord by reason of any such breach, violation or non-
performance or of any wrongful act, neglect or default on the part of the Tenant
or any of its employees, officers, agents, or invitees.
21. ASSIGNMENT BY LANDLORD AND SUBORDINATION
Landlord declares that it may assign its rights under this Lease to a
lending institution as collateral security for a loan made to Landlord and in
the event that such an assignment is given and executed by Landlord and
notification thereof is given to Tenant by or on behalf of Landlord, it is
expressly agreed between Landlord and Tenant that this Lease shall not be
canceled or modified for any reason whatsoever without the consent in writing of
such lending institution.
Tenant hereby covenants and agrees that it will, if and whenever reasonably
required by Landlord and, at Landlord's expense, consent to and become a party
to any instrument or instruments permitting the Landlord to hypothecate or
otherwise encumber the Building of which the Leased Premises form part and to
subordinate this Lease to any hypothec or security document, provided Tenant
receives satisfactory confirmation of the full respect of its rights under this
Lease by anyone benefitting from said subordination.
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22. EXPROPRIATION
If the whole or any part of the Building shall be expropriated or taken in
any manner for any public or quasi-public use or purpose, Landlord may at its
option, terminate this Lease by giving notice in writing to Tenant that the term
hereof shall expire upon the day when possession is required for such purpose,
and in the event of such expiration, Landlord shall have no liability to Tenant
of any nature, without prejudice to Tenant's claim against the expropriating
authority.
23. EXTENSIONS
The Landlord shall have the right at its option and from time to time
during the Lease Term to make extensions and/or additions and/or to add one (1)
or more additional floors or storeys onto all or part of the Building comprising
the Leased Premises.
Notwithstanding anything to the contrary in the foregoing, Landlord shall
use its best efforts not to interfere with access or visibility of the Leased
Premises during the construction of any such extensions or additions.
In the event the Landlord exercises said option, the Tenant agrees to
permit the Landlord to install and/or extend and/or add the required
improvements including supports, beams, wiring, piping, stairways, elevators,
ramps, vents, ducts, shafts and openings and the like and to close all windows
and openings which may be required to be closed as a consequence of such
construction, the whole without any claims for disturbance and/or inconveniences
and the like which may be caused to the Tenant, provided always that the
required work is carried out within a reasonable delay and that this article
shall not absolve or release the Landlord from liability in respect for damages
or any loss caused to the Tenant as a consequence of any wilful act of the
Landlord, its employees or representatives as a consequence of said additions
and/or extensions and provided that the Tenant shall be granted a proportionate
reduction in rent as compensation for loss of use of its inside floor space
(during the period and for the area of loss of use only). All of the foregoing
without any other claims by the Tenant against the Landlord for damages and loss
of use.
24. PUBLICATION
The Tenant shall have the right to publish the Lease, at its cost, which
Summary shall not contain any financial information whatsoever. Tenant shall,
prior to publication, furnish Landlord with a draft copy of the text of said
Summary, for its approval, which approval shall not be unreasonably withheld.
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In addition, Tenant shall, at its own cost, at the expiration of the Term,
radiate the publication of the Lease from the Land Register.
25. FLOOR LOADING
Tenant shall not bring upon the Leased Premises or any part thereof any
machinery, equipment, article or thing that by reason of its weight or size
might damage the Leased Premises and will not at any time overload the floors of
the Leased Premises and if any damage is caused to the Leased Premises by any
machinery, equipment, article or thing or by overloading or by any act, neglect
or misuse on the part of Tenant or any of its invitees, agents or employees or
any person having business with Tenant, Tenant will forthwith pay to Landlord
any damages incurred by the latter.
26. PERMITS, ETC.
Tenant declares that it has and/or will obtain all necessary permits or licenses
in connection with the operation of its business in the Leased Premises and
further recognizes that it has no claim against the Landlord with respect to the
issuance of such permits or licenses.
27. INTERIOR AND EXTERIOR AREAS
The keeping of pets on the Leased Premises is prohibited.
The Tenant shall not use any part of the exterior parking and loading areas
or any other areas outside the Leased Premises for any purpose other than
parking, shipping or receiving in the areas designated by the Landlord for same
except as defined in Section 3.
28. DISTURBANCE
Notwithstanding anything to the contrary stipulated in the present Lease,
the Tenant will not hold the Landlord in any way responsible for any damages or
annoyance which the Tenant may sustain through the fault of any tenant who
occupies any premises adjacent to, near, above or under the Leased Premises or
from any person the Tenant allows to use or have access to the Leased Premises,
and renounces any claims it may have against the Landlord pursuant to Articles
1859 and 1861 of the Civil Code of Quebec.
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29. ODOURS
The Tenant warrants that no noxious odours or dust or noise will emanate
from the Leased Premises as a result of the operations conducted by the Tenant
therein. Accordingly, the Tenant agrees that should such noxious odour, dust,
or noise condition exist, it will at its own cost and expense take such steps as
may be necessary to rectify the same after written notice from the Landlord.
Should the Tenant fail to commence to do so within seven (7) days or less in an
emergency situation and complete the same within a reasonable time, the Landlord
shall have the right to take reasonable measures to correct the situation and
the Landlord shall be entitled to recover the cost plus fifteen percent (15%)
administration thereof from the Tenant within thirty (30) days of receipt of
invoice. Such cost shall be considered as additional rental hereunder.
30. ENVIRONMENTAL MATTERS
During the term hereof, Tenant obliges itself to forthwith take, at its
cost, all necessary precautions for the purposes of conforming with all laws,
by-laws, ordinances and regulations of federal, provincial and municipal
authorities relating to environmental matters and more specifically, but without
restricting the generality of the foregoing, those relating to the protection of
water, air and soil from pollution or contamination of any form whatsoever.
Landlord warrants and declares that it has complied with all laws and
regulations related to environmental matters and that no toxic wastes or
contaminants are to be found or stored in or about the Leased Premises and shall
indemnify and save Tenant harmless in connection with same.
Notwithstanding anything herein contained and without restricting the
generality of the preceding paragraph, Tenant obliges itself to indemnify,
exonerate and save the Landlord free and harmless with respect to all claims,
actions, suits for loss of life, personal and property damages, or for any other
losses or injuries which may result in whole or in part from the use,
fabrication or presence in the Leased Premises of any substance, product, or
contaminant or the exercise of any act or activity exposing the Landlord to a
claim in connection with the foregoing provided said substance, product or
contaminant is found on the Leased Premises by reason of Tenant's fault or
negligence or that of its employees, agents or invitees.
31. BROKERAGE COMMISSION
As part of the consideration for the granting of this Lease, Landlord and
Tenant mutually represent and warrant to each other that no broker or agent
negotiated or was instrumental in negotiating or consummating this Lease other
than Axxa Realties Inc. whose commission shall be
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paid by Landlord. Any commissions due to another broker shall be paid by the
party having retained the services of said other broker.
32. LIQUIDATION SALES, ETC.
The Tenant undertakes not to carry out or permit a bankruptcy or
liquidation sale or war surplus goods, insurance salvage stock or auction in or
from the Leased Premises. The Tenant acknowledges that a violation of the
present clause will cause irreparable injury to the Landlord and consents to the
Landlord enforcing the present clause by way of interim and interlocutory
injunction, without prejudice to such other rights as the Landlord may have
under the circumstances.
33. RULES AND REGULATIONS
The rules and regulations attached hereto as Schedule "C" form part hereof and
may be reasonably amended from time to time by the Landlord.
34. WAIVER
The failure of Landlord or Tenant to insist upon the strict performance of any
of the agreements, terms, covenants and conditions hereof shall not be deemed a
waiver of any rights or remedies that Landlord or Tenant may have and shall not
be deemed a waiver of any subsequent breach or default in any such agreements,
terms, covenants and conditions.
35. NOTICES AND DEMANDS
Any notice or demand given by Landlord to Tenant shall be deemed to be duly
given when served upon Tenant personally or when mailed to Tenant by registered
or certified mail or overnight courier, at the address of the Leased Premises.
Tenant elects domicile at the Leased Premises for the purpose of service of
all notices, writ of summons or other legal documents in any suit at law, action
or proceeding, which Landlord may take under this Lease.
Any notice or demand given by Tenant to Landlord shall be deemed to be duly
given when served upon Landlord personally, or when mailed to Landlord by
registered or certified mail or
21
<PAGE>
overnight courier, at the address designated by Landlord for purposes of payment
of the rent hereunder.
Copies of any notice or demand hereunder, other than legal proceedings,
shall also be sent as aforesaid to Tenant's head office at:
Wesco Business Unit
One Riverfront Center
Pittsburgh, PA U.S.A. 15222
36. DESCRIPTIVE READINGS
The descriptive headings of this Lease are inserted for convenience and
reference only and do not constitute a part of this Lease.
37. INTERPRETATION
This Lease shall be construed and governed by the laws of the Province of
Quebec. Should any of the provisions of this Lease and/or its conditions be
illegal or not enforceable under the laws of the Province of Quebec, same shall
be considered severable and the Lease and its conditions shall remain in force
and be binding upon the parties as though the said provision or provisions had
never been included.
Words importing the singular number only shall include the plural and vice-
versa and words importing the masculine gender shall include the feminine gender
and words importing persons shall include firms and unless the contrary
intention appears the words "Landlord" and "Tenant" wherever they appear in this
Lease shall mean respectively "Landlord, its executors, administrators,
successors and/or assigns" and "Tenant", its executors, administrators,
successors and/or assigns" and if there is more than one Tenant or Landlord or
the Tenant or Landlord is a female person or a corporation this Lease shall be
read with all grammatical changes appropriate by reason thereof; and all
covenants, liabilities and obligations shall be solidarity.
38. PRIOR AGREEMENTS
The present Lease cancels and supersedes any and all prior leases and
agreements, written or otherwise, entered into by the Landlord and the Tenant
regarding the Leased Premises. This
22
<PAGE>
Lease, the schedules thereof and such rules and regulations as may be adopted
and promulgated by the Landlord from time to time constitute the entire
agreement between the parties.
39. CONDITION OF LEASED PREMISES/LANDLORD'S WORK
The Tenant declares having examined the Leased Premises and is satisfied
and content therewith, and agrees to take said Leased Premises in their present
state and condition that is "AS IS" with the exception of latent defects and the
representations and warranties provided herein, save that the Landlord shall
execute, at its own cost, the work set forth in Schedule E hereof in the Leased
Premises, which shall be executed in accordance with Landlord's present existing
building standards, the whole to be completed by September 16, 1994.
40. SECURITY DEPOSIT
As additional security for the faithful and prompt performance of its
obligations hereunder, Tenant has concurrently with the execution of the Lease,
paid to Landlord, the sum of Sixty-one thousand nine hundred fifty-three dollars
and three cents ($61,953.03) of which Twenty-six thousand two hundred forty
dollars ($26,240.00) plus G.S.T. and Q.S.T. thereof shall be applied to Basic
Rental due for the month of November 1994 and the balance to constitute a
security deposit which may be applied by Landlord for the purpose of curing any
default or defaults of Tenant hereunder, in which event, Tenant shall replenish
the Security Deposit in full by promptly paying to Landlord the amount so
applied. If tenant has not defaulted hereunder, and Landlord has not applied the
Security Deposit to cure a default, or Landlord has applied the Security Deposit
to a default and Tenant has replenished the same, then the Security Deposit or
any remaining portion thereof, shall be paid to Tenant after the termination of
this Lease. The Security Deposit shall not be deemed an advance payment of rent
or a measure of Landlord's damages for any default hereunder by Tenant. During
the Term, interest shall accrue on the Security Deposit or on any balance
thereof not credited to any Base Rent or applied to cure a default hereunder at
a rate equal to that paid by the Bank of Montreal on long term deposits as of
September 16, 1994 and such interest shall be remitted to the Tenant at the end
of the Term.
41. SPECIAL CONDITIONS
41.1 RIGHT OF FIRST REFUSAL
Should the Landlord during the Term receive an offer satisfactory to it, to
lease the land adjacent to the Building and consisting of approximately
Thirty-five thousand (35,000)
23
<PAGE>
square feet, Landlord shall forthwith advise Tenant in writing of same,
specifying all terms and conditions contained in said offer and remitting a
certified true copy of said offer to Tenant. After receipt of the said
notice, Tenant shall have a delay of thirty (30) days to advise Landlord as
to whether or not it is prepared to lease the Land in accordance with the
terms and conditions contained in the above mentioned notice. In the event
the Tenant accepts to lease within the said delay, it shall execute an
Addendum to Lease for the Land, within fifteen (15) days after reception by
the Landlord of Tenant's acceptance.
41.2 FLOOR TILES
Tenant shall not be responsible for any damages caused to the floor tiles
in the warehouse area.
41.3 FREE RENT
The Tenant shall not be obliged to pay any Base Rent for the first three
(3) months of the Term and for the last month thereof, however the Tenant
shall be responsible for the Additional Rent due to pursuant to Article 6
and the Direct Payments due pursuant to Article 8 hereof, subject to and
under reserve of the terms and conditions contained in Schedule D.
42. LANGUAGE
The parties hereto acknowledge and confirm that they have requested that
the present agreement and all notices and communication so contemplated hereby
be drafted in the English Language.
Les parties aux presentes reconnaissent et conferment qu'ils ont exige que la
presente convention ainsi que tous avis et communications y afferents soient
rediges dans la langue anglaise.
24
<PAGE>
IN WITNESS WHEREOF, LANDLORD AND TENANT HAVE DULY EXECUTED AND SIGNED THESE
PRESENTS ON THE DATE AND PLACE HEREINAFTER MENTIONED.
MONTREAL, this _____ day of ____________, 1995.
ATLANTIC CONSTRUCTION INC.
(The "Landlord")
________________________________ Per:_______________________________
Witness David Rosenberg
President
________________________________
Witness
MONTREAL, this _____ day of ____________, 1995.
WESCO DISTRIBUTION CANADA INC.
(the "Tenant")
/s/ Per: /s/ Richard J. Marshuetz
- -------------------------------- -------------------------------
Witness Richard J. Marshuetz
________________________________
Witness
25
<PAGE>
SCHEDULE "A"
PLAN OF THE LEASED PREMISES
[FLOOR PLAN]
<PAGE>
SCHEDULE "B"
CADASTRAL DESCRIPTION
Subdivision number four of original lot number ninety (90-4) on the Official
Plan and Book of Reference of the Parish of Pointe-Claire, registration
division of Montreal, with building thereon erected bearing civic number 1330
Trans Canada Highway, Dorval, Quebec;
<PAGE>
SCHEDULE "C"
RULES AND REGULATIONS
The Tenant shall observe the following provisions regulating the use and
occupation of the Leased Premises and of the Common Areas:
1. keep the windows of the Leased Premises clean;
2. promptly replace, at its expense, any cracked or broken windows by windows
of the same nature and quality;
3. keep, at its cost, the Leased Premises clean and in a good state and ensure
the absence of insects, rodents or other vermin;
4. keep all refuse, waste or rubbish in such containers which the Landlord
deems as acceptable and in a location it determines;
5. not to place or keep any article or merchandise in the Common Areas;
6. not to permit any undue accumulation of rubbish, waste or refuse in the
Leased Premises and in the Common Areas;
7. not to permit the parking of delivery vehicles in such a manner as to
hinder the use of the exterior Common Areas;
8. not to use the plumbing installations for other purposes other than for
which they were destined and not to discard any toxic substance whatsoever
therein;
9. not to use, make or keep in the Leased Premises any product, substance or
contaminant which risks the Landlord of being exposed to any claim
whatsoever;
10. in order to facilitate snow removal, not to park any vehicle overnight on
the parking lot from the first (1st) day of November to the first (1st) day
of April. Any vehicles left on the parking lot overnight shall be removed,
unless prior written authorization has been given by the Landlord;
11. provide to the Landlord a list of emergency telephone numbers so that the
Tenant may be contacted seven (7) days a week;
<PAGE>
12. not to obstruct or disrupt the operation of the heating, ventilation and
air conditioning systems serving the Leased Premises.
2
<PAGE>
SCHEDULE "D"
NET RENT SUMMARY
----------------
<TABLE>
<CAPTION>
YEARS DATES AREA (SQ.FT.) RATE/SQ.FT. MONTHLY DUE
- -------- ------------------------------------ ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
1 - 3 September 16 - December 15, 1994 63,000 $0.00 $ 0.00
December 16 - December 31, 1994 63,000 $3.50 $ 9,187.50
27,000 $3.50 $ 3,937.50
January 1, 1995 - July 31, 1997 90,000 $3.50 $26,250.00
4 - 5 August 1, 1997 - June 30, 1999 90,000 $3.75 $28,125.00
July 1, 1999 - July 31, 1999 90,000 $0.00 $ 0.00
</TABLE>
OPERATING EXPENSE SUMMARY
-------------------------
<TABLE>
<CAPTION>
TOTAL BUILDING
DATES OPERATING EXPENSES
- ---------------------------------- -----------------------------------------
<S> <C>
August 1 - August 15, 1994 72.2%*
August 16, 1994 - July 31, 1999 100%
* calculated as follows: 70,000 sq. ft. = 72.2%
--------------
97,000 sq. ft.
</TABLE>
<PAGE>
SCHEDULE "E"
LANDLORD'S WORK
OFFICE AREA
- -----------
- Demolition of all existing office areas on both ground floor and
mezzanine, open walls to warehouse save and except for a maximum of
5,000 sq.ft. of office area adjacent to the main entrance of the
building;
The 5,000 sq.ft. of office area mentioned above shall be finished as
follows:
- HVAC in good working order;
- Clean and/or replace carpet where necessary;
- Paint with one (1) primer coat and one (1) finish coat of first
quality paint;
- Provide two (2) Executive Offices;
- one (1) kitchen;
- Two (2) bathrooms;
- One (1) stationary room;
- Balance of finished office open area;
WAREHOUSE "A" FRONT 48,000 SQUARE FEET
- --------------------------------------
- Raise all lighting fixtures (in good working order);
- Remove all air conditioning equipment;
- Demolition all existing interior walls to provide clear open warehouse
except in front of shipping docks;
- Provide cafeteria and washrooms on mezzanine (existing);
- Clean and sweep warehouse;
WAREHOUSE "B" 27,000 SQUARE FEET SOUTHERN SECTION OF BUILDING
- -------------------------------------------------------------
- Re-install drive in on southern wall;
- Demolition all interior walls except in front of shipping docks;
- Remove all air-conditioning equipment;
- Open maximum of 80 linear feet of block wall between warehouse "A" and
warehouse "B" (Tenant choice of location);
- Raise lighting fixtures (in good working order);
- Clean and sweep warehouse;
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF
CDW HOLDING CORPORATION
AS OF MARCH 10, 1998
-------------------------
State/Jurisdiction
Name of Incorporation
- ---- ------------------
WESCO Distribution, Inc. Delaware
WESCO Distribution - Canada, Inc. Ontario
CDW Realco, Inc. Delaware
WESCO International, Inc. Barbados
WESCO Distribution de Mexico, C.V. Mexico
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-43225) of our reports dated February 6, 1998, except for Note 18, as
to which the date is February 13, 1998, on our audits of the financial
statements and financial statement schedule of CDW Holding Corporation and
subsidiaries. We also consent to the references to our firm under the captions
"Experts" and "Selected Financial Data."
/s/ COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
March 10, 1998
