EXHIBIT 4.3
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939. THIS DEBENTURE MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT. ADDITIONALLY, THE TRANSFER OF THIS DEBENTURE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6 OF THE DEBENTURE PURCHASE
AGREEMENT PURSUANT TO WHICH THIS DEBENTURE WAS PURCHASED AND NO TRANSFER OF THIS
DEBENTURE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
Floating Rate Convertible Debenture Due 2003
________, 1999
CHS Electronics, Inc., a Florida corporation (the "Company"),
for value received, hereby promises to pay to the order of
Computer Associates International, Inc. or registered assigns, the
principal amount of
U.S. $_____________
on May 31, 2003 (or, if such day is not a business day (as defined in Section 9
below), the next succeeding business day) (the "Maturity Date"). The outstanding
principal amount of this Debenture shall bear interest from and including the
date hereof (the "Closing Date") to but excluding the Maturity Date (or, if a
Conversion Notice (as defined below) has been delivered pursuant to Section
3(a), the Conversion Date (as defined below)), for each Interest Period (as
defined below) applicable thereto, at a rate per annum (calculated on the basis
of the actual number of days elapsed over a year of 360 days) equal to the
Applicable Rate for such Interest Period. "Applicable Rate" means, for any day
during any Interest Period, the LIBOR Rate from time to time in effect plus
2.00%.
Interest shall be paid semi-annually in arrears on each Interest Payment Date by
wire transfer to the account of each holder of a Debenture (a "Holder")
specified in writing to the Company. "Interest Period" means each period
beginning on and including an Interest Payment Date (or in the case of the first
Interest Period, the Closing Date) and ending on but excluding the immediately
succeeding Interest Payment Date (or in the case of the last Interest Payment
Date, the Maturity Date (or, if a Conversion Notice has been delivered pursuant
to Section 3(a), the
Conversion Date)). "Interest Payment Date" means the last business day of
November and May of each year commencing on November 30, 1999.
The outstanding principal amount of this Debenture (together
with accrued interest thereon) shall be payable to the Holder on the Maturity
Date in lawful money of the United States by wire transfer of immediately
available funds to such account as the Holder shall specify in writing to the
Company.
SECTION 1. THE DEBENTURES. This Debenture is one of the
Debentures of the Company which are being issued in the aggregate principal
amount of $50,000,000 and are designated as "Floating Rate Convertible
Debentures Due 2003" (the "Debentures"). This Debenture was issued pursuant to
the terms of a Debenture Purchase Agreement, dated as of May 26, 1999 (the
"Purchase Agreement"), between the Company and Computer Associates
International, Inc. (the "Purchaser").
SECTION 2. (Reserved)
SECTION 3. CONVERSION. (a) At the option of the Holder, at any
time, subject to Section 3(e), the Debentures, in whole or in part, may be
converted on the Conversion Date (as defined below) at the principal amount
thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock, including the
associated Rights (as defined in the Debenture Purchase Agreement), at the
Conversion Price (as defined below), in effect at the time of conversion. The
price at which the number of shares of Common Stock to be delivered shall be
determined upon conversion shall be $5.50 per share of Common Stock (the
"Conversion Price"). The Conversion Price shall be adjusted in certain instances
as provided in this Debenture, including paragraph (d) of this Section 3.
(b) If the Holder elects to convert the Debentures, the Holder
shall provide written notice (the "Conversion Notice") to the Company (at the
Company's address) which states that the Holder elects to convert such
Debenture. In order to exchange the securities, the Holder shall surrender the
Debentures, duly endorsed or assigned to the Company or in blank. Subject to
Section 3(e), each conversion shall be deemed to have been effected immediately
prior to the close of business on the date the Holder delivers the Conversion
Notice (the "Conversion Date"). If such day is not a business day, and a day on
which the principal national securities exchange or market quotation system on
which the Common Stock is then listed or admitted for trading is open (a
"Trading Day"), then such conversion will be deemed to have been effected on the
next succeeding Trading Day. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver the certificates
representing the number of full shares of Common Stock, including the associated
Rights, issuable upon conversion, together with payment in lieu of any fraction
of a share, as provided in Section 3(c).
(c) No fractional shares of Common Stock shall be issued upon
conversion of Debentures. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Debenture, the Company shall
pay a cash adjustment in respect
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of such fraction in an amount equal to the same fraction of the market price per
share of Common Stock at the close of business on the Conversion Date.
(d) The Conversion Price shall be subject to the following
adjustments:
(i) If, on any Conversion Date, the average closing price of
the Common Stock during the twenty trading days immediately preceding
the Conversion Date is less than the Conversion Price ($5.50, before
any anti-dilution adjustments pursuant to this Agreement including
Section 3(d)(ii)-(vii)), then the Conversion Price shall be reduced to
such average closing price (the "Market Conversion Price"). Adjustments
to the Conversion Price pursuant to this subsection (i) are referred to
as "Market Adjustments"; all other adjustments to the Conversion Price
provided in this Debenture are "Anti-Dilution Adjustments".
(ii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of shares
of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iii) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in
Common Stock, the Conversion Price in effect at the opening of business
on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination.
(iv) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Conversion
Price, the Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such rights or warrants shall be adjusted to such
subscription or purchase price, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination.
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(v) In case the Company shall issue Common Stock (other than
shares of Common Stock issued upon exercise of rights, options and
warrants outstanding as of the date hereof), or rights, options or
warrants convertible into, or exchangeable or exercisable for, Common
Stock to any third party, or shall reprice or adjust the conversion,
exchange or exercise price of rights, options or warrants outstanding
as of the date hereof, at or to a price per share of Common Stock less
than the Conversion Price, the Conversion Price in effect at the
opening of business on the day following the date of such issuance,
repricing or adjustment shall be adjusted to such issue, conversion,
exchange or exercise price or, in the case of a repricing or
adjustment, such conversion, exchange or exercise price as so adjusted,
such reduction to become effective immediately after the opening of
business on the day following the date of such issuance, repricing or
adjustment, as the case may be, provided, no such adjustment shall be
made with respect to: (A) up to 3,833,333 shares of Common Stock to be
issued for $3 per share in connection with CHS's acquisition of SIS
Distribution Ltd.; (B) up to 2,653,000 shares of Common Stock to be
issued for $3 per share in connection with CHS's acquisition of Micro
Informatica Corp.; or (C) shares of Common Stock or Preferred Stock
issued pursuant to the Rights Agreement.
(vi) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (including securities, but excluding any rights
or warrants referred to in clause (iv) of this Section, any dividend or
distribution paid in cash out of the retained earnings of the Company
and any dividend or distribution referred to in clause (iii) of this
Section), the Conversion Price in effect at the opening of business on
the date fixed for the determination of stockholders entitled to
receive such distribution shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution
by a fraction of which the numerator shall be the Conversion Price on
the date fixed for such determination less the then fair market value
of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator
shall be such Conversion Price, such adjustment to become effective
immediately prior to the opening of business on the day following the
date fixed for such determination.
(vii) The reclassification of Common Stock into securities
including other than Common Stock shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders
of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of clause (vi) of this Section), and
(B) a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective" or "the day upon
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which such combination becomes effective", as the case may be, and "the
day upon which such subdivision or combination becomes effective"
within the meaning of clause (ii) of this Section).
(e) If the Holder elects to convert the Debenture and deliver
a Conversion Notice to the Company which provides for conversion at a
Conversion Price which is lower than the initial Conversion Price, as
adjusted only for Anti-Dilution Adjustments, then the Company shall
have the right to redeem the Debenture intended to be converted 60 days
after delivery of the Conversion Notice. The Closing of the redemption,
if any, shall occur on the sixtieth day following delivery of the
Conversion Notice. During the sixty day period the Holder shall have
the right at any time to rescind the Conversion Notice by written
notice to the Company; and consequently such redemption shall
automatically be terminated.
(f) Whenever the Conversion Price is adjusted pursuant to
Section 3(d):
(i) the Company shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Company setting forth the
adjusted Conversion Price showing in reasonable detail the facts upon
which such adjustment is based; and
(ii) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall
forthwith be prepared, and as soon as practicable after it is prepared
(together with a copy of the certificate referred to in clause (i)
above), such notice shall be mailed by the Company to all Holders.
The term "Person" shall mean an individual, a company, a partnership, a limited
liability company, a trust, an unincorporated association or any other entity or
organization, including, without limitation, a government or political
subdivision or an agency, instrumentality or official thereof.
(g) Notwithstanding anything to the contrary set forth in the
Debentures, unless and until the Company's stockholders have approved the
transactions contemplated by the Purchase Agreement, the Debentures and the
Warrants, the Company shall not be obligated to issue more than the number of
shares of Common Stock permitted under the rules of the New York Stock Exchange
(as adjusted to reflect stock dividends, stock splits, recapitalization,
reorganization, stock exchange or other combination) (the "NYSE Limit") upon
conversion of the Debentures and/or exercise of the Warrants, on a combined
basis. If, on any Conversion Date, the Debentures are converted into a number of
shares of Common Stock that is less than the number of shares that the
Debentures would have been convertible into had the NYSE Limit not been in
effect, the Company shall, within sixty days after such Conversion Date, pay to
the Holder by wire transfer of immediately available funds an amount equal to
the product of (1) the excess of (A) such number of shares that would have been
issued upon such conversion had such limitation not been in effect over (B) such
number of shares that were being issued upon such conversion and (2) the closing
price of the Common Stock on the trading day immediately
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preceding the Conversion Date; provided that the amount paid pursuant to this
sentence shall be applied to repay the unpaid balance of the Debentures which
was unable to be converted pursuant to the NYSE Limit.
(h) If (i) the Holder (A) elects to convert this Debenture as
provided herein; and (B) is unable to convert all of the outstanding principal
of the Debenture because of the NYSE Limit; and (ii) the Company fails to pay in
full the amount required to be paid by the Company to the Holder pursuant to
Section 3(f), then the Company shall call a meeting of its shareholders (the
"Special Meeting") for the purpose of approving the Purchase Agreement, the
Debenture and the Warrants (the "Transaction Documents") including without
limitation, the Holder's acquisition of CHS Common Stock in excess of the NYSE
Limit ("Excess Shares"), all in accordance with Section 312.03 of the Rules of
the NYSE. The Special Meeting shall be held within 120 days after the Company's
receipt of the Conversion Notice subject to compliance with SEC proxy
regulations. Notwithstanding anything to the contrary set forth in the
Debentures, in no event shall the CHS Board of Directors be required to
recommend to CHS shareholders that they approve, at the Special Meeting, the
Holder's acquisition of Excess Shares. If at the Special Meeting the CHS
shareholders fail to approve the Transaction Documents as provided hereby, then
(a) CHS shall be required to pay the Holder, in addition to the outstanding
principal due under the Debenture, the Make-Whole Amount defined below, (b)
Holder shall not acquire any Excess Shares, and, (c) the shareholders' failure
to approve the Transaction Documents shall not affect the Holders' (1) rights to
acquire, own or vote any shares of CHS Common Stock within the NYSE Limit or (2)
other rights under the Transaction Documents.
"Make-Whole Amount" means an amount equal to the excess of (x) the amount of
interest that would have been due on the original outstanding principal amount
of the Debentures from the date of issuance through and including the Conversion
Date and for such unpaid amount from the Conversion Date through the payment
date had the Applicable Rate been equal to 21%, over (y) the amount of interest
that was actually due and paid on the applicable outstanding principal amount of
the Debentures for such periods.
(i) The Company shall at all times reserve and keep
available, free from any pre-emptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of Debentures and the
exercise of the Warrants, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Debentures and Warrants (but in
no event less than 11,579,054 shares).
(j) The Company will pay any and all transfer, documentary and
similar taxes or charges that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of Debentures pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Debenture or Debentures to
be converted, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
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(k) The Company covenants that all shares of Common Stock
which may be issued upon conversion of Debentures will upon issue be fully paid
and nonassessable and, except as provided in Section 3(j), the Company will pay
all taxes, liens and charges with respect to the issue thereof.
(l) All Debentures that have been converted shall be promptly
delivered to the Company to be canceled by the Company.
SECTION 4. EXCHANGE OR REPLACEMENT OF DEBENTURES. (a) The
Holder of any Debenture, at such Holder's option may in person or by duly
authorized attorney surrender such Debenture for exchange, at the office or
agency of the Company maintained pursuant to Section 6(a) of this Debenture, and
receive in exchange therefor a new Debenture in the same principal amount as the
outstanding principal amount of the Debenture so surrendered and bearing
interest at the same annual rate as the Debenture so surrendered, each such new
Debenture to be dated as of the most recent Interest Payment Date on the
Debenture so surrendered and to be in such outstanding principal amount and
payable to such person or persons, or order, as such Holder may designate in
writing; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any new Debenture in a name other than that of the Holder of the
Debenture surrendered in exchange therefor; PROVIDED, FURTHER, HOWEVER, that the
Company shall not be required to so register the transfer unless the conditions
for transfer in the Purchase Agreement have been satisfied. The Holder shall
give to the Company 10 days' prior written notice of such Holder's intention to
make such exchange.
(b) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft or destruction, mutilation of any Debenture and (in case of
loss, theft or destruction) of indemnity satisfactory to it, and upon surrender
and cancellation of such Debenture, if mutilated, the Company will execute and
deliver in lieu of such Debenture a new Debenture of like tenor. Any such new
Debenture shall be dated as of the most recent Interest Payment Date on the
Debenture in lieu of which such new Debenture is executed and delivered. The
term "outstanding" when used in this Debenture with reference to the Debentures
as of any particular time shall not include (i) any Debenture in lieu of which a
new Debenture has been executed and delivered by the Company in accordance with
the provisions of this Section and (ii) any Debenture held or beneficially owned
by the Company or any of its affiliates.
SECTION 5. AMENDMENTS AND WAIVERS. With the written consent of
the Holders of at least 51% of the aggregate outstanding principal amount of the
Debentures at the time outstanding, any covenant, agreement or condition
contained in the Debentures may be waived (either generally or in a particular
instance and either retroactively or prospectively), or such Holders, and the
Company may from time to time enter into agreements for the purpose of amending
any covenant, agreement or condition of the Debentures or changing in any manner
the rights of the holders of the Debentures or the Company; PROVIDED, HOWEVER,
that:
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(i) no such amendment or waiver shall change the Maturity Date
of this Debenture or reduce the rate or extend the time of payment of
interest hereon, or reduce the amount of the payment of interest
hereon, or reduce the amount of the principal hereof, or modify any of
the provisions of this Debenture with respect to the payment hereof,
without in any such case the consent of the Holder of this outstanding
Debenture; and
(ii) no such waiver shall extend or affect any obligation not
expressly waived or impair any right consequent thereon.
Any such amendment or waiver shall be binding upon each future
Holder of this Debenture and upon the Company, whether or not such Debenture
shall have been marked to indicate such amendment or waiver, but any Debenture
issued thereafter shall bear a notation referring to any such amendment or
continuing waiver.
SECTION 6. COVENANTS.
(a) The Company shall maintain an office where notices,
presentations and demands to or upon the Company in respect of Debentures,
including those relative to conversion of the Debentures, may be given.
(b) The Company shall keep at such office a register at its
expense, which shall provide for the registration and transfer of Debentures.
The Company and any agent of the Company may treat the person in whose name any
Debenture is registered as the Holder of such Debenture for the purpose of
receiving payment of the principal and interest on such Debenture and for all
other purposes, whether or not such Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
(c) The Company agrees that so long as any of the Debentures
are outstanding, it shall not directly or indirectly (i) declare or pay any
dividend (other than a stock dividend) or make any distribution on its capital
stock or to the holders of its capital stock, (ii) purchase, redeem or otherwise
acquire or retire for value, or permit any of the Subsidiaries to, directly or
indirectly, purchase, redeem or otherwise acquire or retire for value, any such
capital stock (or options, warrants or other rights to acquire such capital
stock), (iii) except as provided under this Debenture, or required by the
Indenture dated as of April 9, 1998 by and among the Company, certain of its
subsidiaries and the Chase Manhattan Bank as Trustee relating to $200,000,000
principal amount of 9 7/8% Senior Notes due 2005 (the "Indenture"), redeem,
repurchase, defease (including, but not limited to, in-substance or legal
defeasance) or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, Indebtedness of
the Company which is PARI PASSU or subordinate (whether pursuant to its terms or
by operation of law) in right of payment to the Debentures and which is
scheduled to mature (after giving effect to any and all options to extend the
maturity thereof) on or after the maturity date of such Debentures (after giving
effect to any and all options to extend the maturity thereof).
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(d) The Company agrees that as long as any of the Debentures
are outstanding, it shall not (i) consolidate with or merge into any other
Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or
any substantial part of the assets of the Company and the Subsidiaries, taken as
a whole, to any other Person unless (A) the successor formed by such
consolidation or the survivor of such merger or the Person that acquires by
conveyance, transfer or lease all or any substantial part of the assets of the
Company and the Subsidiaries as an entirety, as the case may be, shall be a
solvent corporation organized and existing under the laws of the United States
or any State thereof (including the District of Columbia), and, if the Company
is not such corporation, such corporation shall have executed and delivered to
each holder of any Debentures its assumption of the due and punctual performance
and observance of each covenant and condition of the Purchase Agreement and the
Debentures and (B) immediately after giving effect to such transaction, no Event
of Default and no condition or event which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default, shall
have occurred and be continuing.
(e) The Company agrees that so long as any of the Debentures
are outstanding, neither the Company nor any of the Subsidiaries will in any
manner, directly or indirectly, incur or be liable in respect of any
Indebtedness senior to or ranking PARI PASSU with the Debentures, except:
(i) Indebtedness of the Company represented by the Debentures;
(ii) Indebtedness of the Company existing as of May 26, 1999;
(iii) other Indebtedness permitted by the Indenture, but which
shall not be senior to or rank ahead of the Debenture; and
(iv) extensions, refinancings, amendments and modifications of
any Indebtedness described in clause (ii) above, PROVIDED that the
principal amount of such Indebtedness is not increased.
"Indebtedness" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (v) all reimbursement obligations of such Person (whether contingent
or otherwise) in respect of letters of credit, banker's acceptances, surety or
other bonds and similar instruments, (vi) all obligations of such Person to
purchase securities (or other property) which arise out of or in connection with
the sale of the same or substantially similar securities or property, (vii) all
Indebtedness of others secured by a Lien (as defined below) on any asset of such
Person, whether or not such Indebtedness is
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assumed by such Person, and (viii) all Indebtedness of others guaranteed by such
Person or for which such Person is otherwise contingently liable.
(f) The Company agrees that so long as any of the Debentures
are outstanding, neither the Company nor any of the Subsidiaries shall create,
incur, assume or suffer to exist any mortgage, deed of trust, security interest,
lien or other encumbrance (each, a "Lien") upon any of its properties or assets,
whether now owned or hereafter acquired, except Liens in favor of holders of the
Debentures and Permitted Liens (as defined below).
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceeding promptly instituted and diligently conducted and for which a reserve
or other appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; PROVIDED that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
6.6 of the Indenture, (1) to finance the cost (including the cost of design,
development, construction, acquisition, installation or integration) of the item
of property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the completion
of construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item and any
proceeds thereof; (vii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or
assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or
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on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
PROVIDED that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired
and any proceeds thereof; (xii) Liens in favor of the Company or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does not
give rise to an Event of Default; (xiv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xv)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are either within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case securing
Indebtedness under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements or
arrangements designed solely to protect the Company or any of its Restricted
Subsidiaries from fluctuations in interest rates, currencies or the price of
commodities; (xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
in accordance with the past practices of the Company and its Restricted
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables, including related intangible assets and proceeds thereof. All
defined terms in this definition shall have the meanings set forth in the
Indenture.
(g) The Company shall deliver (by overnight courier) to each
Holder promptly following the occurrence thereof written notice of (i) an Event
of Default or of any condition or event which, after notice, lapse of time, or
both, could constitute an Event of Default, and (ii) the commencement of any
action, suit, claim, investigation or legal or administrative or arbitration
proceeding which could have a material adverse affect on the Company
Subsidiaries taken as a whole.
SECTION 7. VOTING RIGHTS. Holders of the Debentures holding at
least a majority of the aggregate principal amount outstanding under the
Debentures shall have the right, voting as a class, to designate one director to
serve on the CHS Board of Directors. The initial director shall be elected to
the Board of Directors by the Board of Directors promptly after receipt of
written notice from the Holder of a majority in interest of the outstanding
Debentures. Thereafter, so long as the Debentures remain outstanding, upon
expiration of such director's three year term, the Company's Board of Directors
shall nominate such director (or a replacement designated by Holders of a
majority in interest of the outstanding Debentures), shall use their best
efforts to cause the Company's shareholders to vote their shares to elect such
person as a director, and shall vote their own shares in favor of the election
of such person. During such time as the Debentures remain outstanding, the
Company shall maintain Directors and Officers Liability Insurance in an amount
of at least $20 million.
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SECTION 8. EVENTS OF DEFAULT.
(a) The following shall constitute an "Event of Default" under
the Debentures:
(i) the Company shall fail to pay when due any principal of or
interest on any Debenture or any other amount payable under the
Debentures or the Purchase Agreement;
(ii) the Company shall fail to observe or perform any covenant
contained in Section 6;
(iii) the Company shall fail to observe or perform any
covenant or agreement contained in the Debentures, the Warrants or the
Purchase Agreement (other than those covered by clause (i) or (ii)
above) for 15 days after written notice thereof has been given to the
Company;
(iv) any representation, warranty, certification or statement
made by the Company in the Purchase Agreement, in the Debentures or in
the Warrants or in any certificate, financial statement or other
document delivered pursuant to the Purchase Agreement or the Debentures
shall prove to have been incorrect in any material respect when made;
(v) the Company or any of its subsidiaries shall fail to make
any payment in respect of any Material Indebtedness (as defined below)
when due or within any applicable grace period;
(vi) any event or condition shall occur which (A) results in
the acceleration of the maturity of any Material Indebtedness or (B)
enables (or, with the giving of notice or lapse of time or both, would
enable) the holder of such Indebtedness or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(vii) the Company or any of its subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
(viii) an involuntary case or other proceeding shall be
commenced against the Company or any of its subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian
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or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any of its subsidiaries
under the federal bankruptcy laws as now or hereafter in effect;
(ix) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $100,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c) (5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of
$200,000;
(x) Except as permitted by the Agreement a judgment or order
for the payment of money in excess of $1,000,000 shall be rendered
against the Company or any of its subsidiaries and such judgment or
order shall continue unsatisfied and unstayed for a period of 30
business days; or
(xi) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
(other than the Purchaser and its affiliates) after the date hereof
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 20% or more of the outstanding shares of common stock of the
Company; or individuals who were directors of the Company as of the
date hereof (together with any new director whose election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination was previously
so approved) shall cease for any reason to constitute a majority of the
board of directors of the Company (a "Change of Control").
For purposes of this Section, "Material Indebtedness" means
Indebtedness (other than the Debentures) of the Company or one or more of any
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal amount exceeding $10,000,000; provided that such term shall
not include the Indebtedness described on Schedule 3(n) of the Company
Disclosure Letter for so long as none of the following has occurred: (i) any
holder of such Indebtedness shall have either accelerated such Indebtedness or
commenced any enforcement action with respect thereto, (ii) any holder of such
Indebtedness shall have ceased to waive any default under such Senior
Indebtedness arising out of such failure to pay any
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Indebtedness described on Schedule 3(n) and (iii) the aggregate dollar amount of
all such outstanding Indebtedness specified on Schedule 3(n) (other than fees,
interest or penalties thereon) shall have increased above the level so
specified. As used herein, the terms "ERISA", "ERISA Group", "Material Plan",
"Multiemployer Plan" and "PBGC" have the meanings set forth in the Purchase
Agreement.
(b) In case of the happening of an Event of Default, then, and
in every such happening and at any time thereafter during the continuance of
such Event of Default, the Holders of at least 51% in interest of Debentures at
the time outstanding may, by written notice to the Company, declare the
Debentures to be forthwith due and payable, whereupon the Debentures shall
become forthwith due and payable, both as to the outstanding principal amount
thereof and accrued interest thereon, without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or therein to the contrary notwithstanding; PROVIDED that in
the case of any of the Events of Default specified in Section 7(a)(vii) or
7(a)(viii) above with respect to the Company, without any notice to the Company
or any other act by the Holders, the Debentures shall become forthwith due and
payable, both as to the outstanding principal amount thereof and accrued
interest thereon, without presentment, demand, protest, or other notice of any
kind, all of which are hereby expressly waived, anything contained herein or
therein to the contrary notwithstanding.
(c) In case an Event of Default shall have occurred and be
continuing, then, (i) the Holders of at least 51% in interest of the Debentures
at the time outstanding may proceed to protect and enforce such Holders' rights
either by suit in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in the Purchase Agreement or
the Debentures or in aid of the exercise of any power granted in the Purchase
Agreement or in the Debentures, or proceed to enforce the payment of the
Debentures or to enforce any other legal or equitable right of the Holders of
the Debentures and (ii) the interest rate per annum with respect to any
Debenture shall, for each day that such Event of Default exists, be
automatically increased to a rate per annum equal to the sum of (A) 3% plus (B)
the prime rate of interest as announced from time to time by Credit Suisse First
Boston Corporation for such day. Any overdue principal of or interest on this
Debenture and any overdue amount payable hereunder or under the Purchase
Agreement shall bear interest, payable on demand, and in lawful money of the
United States, for each day until paid at the rate per annum specified in clause
(ii) of the immediately preceding sentence. No remedy herein conferred hereunder
is intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by statute or
otherwise. No course of dealing between the Company or any of its subsidiaries
and any Holder of Debentures or any delay on the part of any Holder of
Debentures in exercising any rights hereunder shall operate as a waiver of any
rights of any such person hereunder or under the Purchase Agreement.
SECTION 9. EXTENSION OF MATURITY. Should the principal of or
interest on this Debenture become due and payable on other than a business day,
the maturity thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon at the rate per
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annum (calculated on the basis of the actual number of days elapsed over a year
of 360 days) herein specified during such extension. The term "business day"
shall mean any day that is not a Saturday, Sunday or legal holiday in the State
of New York.
SECTION 10. GOVERNING LAW. THIS DEBENTURE SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
SECTION 11. CONSENT TO JURISDICTION. EACH OF THE HOLDER AND
THE COMPANY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THE DEBENTURES OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
OF THE HOLDER AND THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE HOLDER AND THE COMPANY CONSENT TO THE SERVICE OF PROCESS IN
ANY SUCH PROCEEDING BY THE DELIVERY (BY OVERNIGHT COURIER) TO IT AT ITS ADDRESS
SPECIFIED IN SECTION 9(C) OF THE PURCHASE AGREEMENT (OR IN THE CASE OF A HOLDER
OTHER THAN THE PURCHASER, TO ITS ADDRESS AS IT APPEARS IN THE REGISTER
MAINTAINED BY THE COMPANY). EACH OF THE HOLDER AND THE COMPANY FURTHER AGREES
THAT A FINAL JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE AND BINDING AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.
SECTION 12. WAIVER OF JURY TRIAL. EACH OF THE HOLDER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE DEBENTURES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
CHS Electronics, Inc.
By:
--------------------------------
Name: Xxxxxxx Xxxxxxxxxxx
Title: Chief Officer-Mergers and
Acquisitions
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[FORM OF TRANSFER NOTICE]
For value received _______________ hereby sells, assigns and transfers
unto _________________, whose social security or other identifying number is
_____________________ and whose address (including postal zip code) is and does
hereby irrevocably constitute and appoint _________________ attorney to transfer
the said Debenture of the within named Company with full power of substitution
in the premises.
Dated: ____________
___________________
Transferor
NOTICE: The Signature to this Notice must correspond with the name as written
upon the face of this Debenture and every particular, without alteration or
enlargement or any change whatever.
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