Exhibit 10.25
AMENDMENT
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT ("AMENDMENT") dated as of
March 29, 2002 and effective as of January 1, 2002 by and between BSC Group,
Inc. f/k/a Xxxxxxxx Supply Company, Inc. ("SELLER") and WESCO Distribution, Inc.
("BUYER").
WHEREAS, Buyer and Seller previously entered into that certain Asset
Purchase Agreement dated September 11, 1998 (the "ASSET PURCHASE AGREEMENT");
WHEREAS, Section 7.7 of the Asset Purchase Agreement provides that it
may be amended at any time after the Closing Date in a written agreement signed
by Buyer and Seller; and
WHEREAS, Buyer and Seller now desire to clarify and amend the Asset
Purchase Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the premises and respective
covenants contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. CONSIDERATION PAID.
------------------
On April 1, 2002, Buyer shall pay to Seller the sum of Ten Million
Dollars ($10,000,000.00).
2. AMENDMENTS.
----------
(i) SECTION 1.5(c)
--------------
Section 1.5(c) is amended and restated to read in its entirety
as follows:
(c) ADDITIONAL PURCHASE AMOUNT.
--------------------------
During the period beginning June 7, 1999 and
continuing on June 7 of each year thereafter until June 7, 2005 (June 7, 1999
and each June 7 thereafter referred to as an "ADDITIONAL PURCHASE AMOUNT PAYMENT
DATE"), Buyer shall pay to Seller an amount consisting of (i) $30,000,000.00
representing the 1999 Additional Purchase Amount, as defined herein, (ii) the
Current Year Additional Purchase Formula Amount, as defined herein, for calendar
years 1999, 2000 and 2001, if any, and (iii) the Current Year Modified
Additional Purchase Formula Amount, as defined herein (collectively the
"ADDITIONAL PURCHASE AMOUNT") of up to an aggregate of One Hundred Ten Million
Dollars ($110,000,000.00), subject to the amount of any adjustments made under
Section 1.6 hereof, payable as follows:
(i) On June 7, 1999, subject to any
adjustments under Section 1.6 hereof, Buyer shall pay Seller an amount equal to
the lesser of (x) Thirty Million Dollars ($30,000,000.00), or (y) an amount
equal to the sum of (i) the EBITDA of Seller for the
period beginning January 1, 1998, and ending on the Closing Date multiplied by
eight plus (ii) the EBITDA of the Xxxxxxxx Division for calendar year 1998,
multiplied by eight, LESS the Closing Purchase Amount (such payment referred to
as the "1999 ADDITIONAL PURCHASE AMOUNT"). Seller acknowledges receipt of
$30,000,000.00 in satisfaction of the 1999 Additional Payment Amount.
(ii) On June 7, 2000, June 7, 2001 and
June 7, 2002, Buyer shall pay Seller an amount (the "CURRENT YEAR ADDITIONAL
PURCHASE FORMULA AMOUNT") equal to the lesser of (x) One Hundred Ten Million
Dollars ($110,000,000.00) less the sum of the Adjusted Additional Purchase
Amounts for all prior years or (y) an amount determined pursuant to the
following formula (the "ADDITIONAL PURCHASE AMOUNT FORMULA"):
(A x B) - C
For purposes of the Additional Purchase Amount Formula, A is the EBITDA of the
Xxxxxxxx Division for the immediately preceding calendar year, B is the Value
Multiple, and C is equal to the sum of the Closing Purchase Amount plus the
aggregate of all prior years' Adjusted Additional Purchase Amount. The Current
Year Additional Purchase Formula Amount shall be paid pursuant to the terms of
Section 1.5(c)(v). Seller acknowledges Buyer has no obligation to make any
payments of Current Year Additional Purchase Formula Amounts for calendar years
1999, 2000 and 2001.
(iii) On June 7, 2003 and each June 7
thereafter until the earlier of (x) June 7, 2005 or (y) the date on which the
sum of the Adjusted Additional Purchase Amounts shall equal One Hundred Ten
Million Dollars ($110,000,000.00) Buyer shall pay Seller an amount (the "CURRENT
YEAR MODIFIED ADDITIONAL PURCHASE FORMULA AMOUNT") equal to the lesser of (x)
One Hundred Ten Million Dollars ($110,000,000.00) less the sum of the Adjusted
Additional Purchase Amounts for all prior years or (y) an amount determined
pursuant to the following formula (the "MODIFIED ADDITIONAL PURCHASE AMOUNT
FORMULA"):
(A x B) - C
For purposes of the Modified Additional Purchase Amount Formula, A is the EBITDA
of the Xxxxxxxx Division for the immediately preceding calendar year, B is eight
and C is equal to the sum of the Closing Purchase Amount plus the aggregate of
all prior years' Adjusted Additional Purchase Amounts. The Current Year Modified
Additional Purchase Formula Amount shall be paid pursuant to the terms of
Section 1.5(c)(v) hereof.
(iv) Buyer shall cause a nationally
recognized, independent accounting firm to certify audited balance sheets and
related statements of income and stockholders' equity and cash flows for
calendar year 1998 taking into account the results of (i) the Seller for the
period beginning January 1, 1998 and ending on the Closing Balance Sheet Date
and (ii) the Xxxxxxxx Division for calendar year 1998, each in accordance with
GAAP (the "GAAP FINANCIAL STATEMENTS") and the terms of the Agreement and the
Memorandum of Understanding by not later than March 31, 1999. Buyer shall have
GAAP Financial Statements prepared by March 31 on each successive year that
Seller may be entitled to receive payments in respect of the Additional Purchase
Amount and shall follow the provisions of this Section
-2-
1.5(c)(iv) with respect thereto. An independent auditor selected by Seller will
be allowed to observe at Seller's cost the audits to the extent requested by
Seller.
By not later than the fifth (5th) business day
after such independent accountants certify the GAAP Financial Statements, Buyer
shall make and deliver a copy of the GAAP Financial Statements and a draft
determination of EBITDA in accordance with this Agreement (the "EBITDA
STATEMENT") to Seller.
Upon and after its receipt of the GAAP Financial
Statements and the EBITDA Statement, Seller and its representatives shall
consult with Buyer and its accountants with respect to the GAAP Financial
Statements and the EBITDA Statement, shall be given an opportunity to review
Buyer's accountant's workpapers relating to the preparation thereof and shall be
given access to such information, including the financial books and records of
the Xxxxxxxx Division and Buyer's accountants, as is reasonably necessary to
perform such examination and review.
In the event that Seller disagrees in any
respect with the EBITDA Statement, Seller shall deliver to Buyer within thirty
(30) days after Seller's receipt of the EBITDA Statement from Buyer, a written
notice (the "OBJECTION NOTICE") specifying the matters to which it objects and
the basis for such disagreement (together with any authority or documentation
supporting its position). In the event no such Objection Notice is timely
delivered to Buyer, the EBITDA Statement shall be deemed the final determination
of EBITDA as of such thirtieth (30th) day after delivery of the EBITDA Statement
by Buyer (the "FINAL DETERMINATION OF EBITDA").
In the event that Buyer timely receives an
Objection Notice and the parties are unable to resolve the disagreement
specified in the Objection Notice within ten (10) business days after receipt by
Buyer thereof, the disagreement shall be submitted to an independent public
accounting firm mutually acceptable to Buyer and Seller (the "RESOLUTION
ACCOUNTANT").
The Resolution Accountant shall follow such
procedures, as it deems appropriate for obtaining the necessary information in
considering the respective positions of Buyer and Seller. The Resolution
Accountant shall have the right to review all accounting records relevant to the
EBITDA Statement. The Resolution Accountant shall render its determination on
the disagreement submitted to it within ten (10) days of submission of the
disagreement by Buyer and Seller. The Resolution Accountant's determination
shall be final, conclusive and binding upon Buyer and Seller. The EBITDA
Statement, as and when adjusted to reflect the Resolution Accountant's
resolution of any disagreement between Buyer and Seller, if any, shall be deemed
the Final Determination of EBITDA on the date that the Resolution Accountant
delivers its determination to Buyer.
Fees and expenses for the Resolution Accountant
(i) shall be paid by the Seller if the EBITDA Statement is affirmed by the
Resolution Accountant or (ii) shall be apportioned between Buyer and Seller if
the Resolution Accountant determines that Final Determination of EBITDA exceeds
the amount of the EBITDA Statement. Such apportionment shall be made so that
Buyer shall pay the amount resulting when the fees and expenses are
-3-
multiplied by a fraction (not to exceed one), the numerator of which is equal to
the difference between the Final Determination of EBITDA and the EBITDA
Statement and the denominator of which is equal to the difference between the
Seller's assertion of EBITDA and the EBITDA Statement; and Seller shall pay the
remainder.
(v) The 1999 Additional Purchase Amount, the
amount of any Current Year Additional Purchase Formula Amount and the amount of
any Current Year Modified Additional Purchase Formula Amount shall be paid in
immediately available funds, in an amount equal to the lesser of (a) Thirty
Million Dollars ($30,000,000.00) or (b) the Additional Purchase Cash Flow Amount
with the balance, if any, to be evidenced by a promissory note, payable to
Seller or one or more designees of Seller in substantially the same form as
attached hereto as Appendix I (the "ADDITIONAL PURCHASE AMOUNT NOTE"). Buyer and
Seller agree that cash payments of Additional Purchase Amounts will be permitted
only to the extent that such cash payments are permitted under Buyer's bank
credit agreement and the terms of Buyer's publicly traded bonds. To the extent
Buyer is unable to pay the cash portion of an Additional Purchase Amount Buyer
shall provide evidence reasonably satisfactory to Seller of any inability to
make such cash payments, and shall issue to Seller (or one or more designees of
Seller), an Additional Purchase Amount Note in the amount of such unpaid cash
portion. Appendix II hereto sets forth all material restrictions under Buyer's
bank credit agreements and publicly traded bonds on Buyer's ability to make such
cash payments as of the date hereof. Buyer shall use its good faith efforts to
minimize the scope and applicability of such current and future restrictions. If
Buyer or WESCO International, Inc. ("WESCO INTERNATIONAL") becomes a Public
Entity on or prior to March 31 immediately preceding the Additional Purchase
Amount Payment Date, then Seller may elect to receive up to fifty percent (50%)
of the 1999 Additional Purchase Amount or the Current Year Additional Purchase
Formula Amount, as the case may be, in the form of shares of Public Entity
Stock. For purposes of this Agreement, the Additional Purchase Cash Flow Amount
shall be equal to Thirty Million Dollars ($30,000,000.00) reduced by the amount
of principal payable to Seller in the current year under one or more outstanding
Additional Purchase Amount Notes. The number of shares of Public Entity Stock to
be issued to Seller shall be determined by dividing the amount of the 1999
Additional Purchase Amount or the Current Year Additional Purchase Formula
Amount, as the case may be, to be paid in Public Entity Stock by the lower of
(x) the closing price of the Public Entity Stock on the first business day
immediately preceding the Election Date or (y) the average closing price of the
Public Entity Stock for the thirty (30) calendar days immediately preceding the
Election Date (such Public Entity Stock price referred to herein as the
"ADDITIONAL PURCHASE AMOUNT STOCK PRICE").
(vi) Seller shall elect to receive payments
of Additional Purchase Amount in shares of Public Entity Stock, if permitted in
this Section 1.5, by delivering written notice to Buyer on a date during the
period beginning on April 1 and ending on the later of (x) April 30, or (y) the
date on which EBITDA is finally determined pursuant to Section 1.5(c)(iv) (the
date of receipt of such notice by Buyer the "ELECTION DATE") immediately
preceding an Additional Purchase Amount Payment Date, specifying the amount of
the 1999 Additional Purchase Amount or the Current Year Additional Purchase
Formula Amount, as the case may be, that Seller elects to receive in the form of
Public Entity Stock, subject to Section 1.5(c)(v). Following the delivery of the
aforementioned notice, Seller shall execute a stock subscription agreement in
substantially the form attached on Exhibit J (the "STOCK SUBSCRIPTION
AGREEMENT") and the Stock Restriction Agreement.
-4-
(ii) SECTION 7.14(a)
---------------
The term "ACCELERATED ADDITIONAL PURCHASE AMOUNT" is amended
and restated in its entirety as follows:
"ACCELERATED ADDITIONAL PURCHASE AMOUNT" shall mean an amount
equal to the following; as applicable:
(i) With respect to the Promissory Note, if the
Accelerated Additional Payment Date occurs on or after the Maturity Date of the
Promissory Note and the Promissory Note has been paid or otherwise finally
determined, then zero. If the Accelerated Additional Payment Date occurs prior
to the Maturity Date of the Promissory Note, and
(x) the Promissory Note has been converted into the
right to receive shares of Public Entity Stock in accordance
with its terms, then Buyer shall transfer such shares of
Public Entity Stock to Seller on the Change of Control Payment
Date, or
(y) the Promissory Note has not been converted into
the right to receive shares of Public Entity Stock, then an
amount equal to (A) the unpaid principal amount of the
Promissory Note reduced by (B) the unpaid principal amount of
the Promissory Note multiplied by the Change of Control
Discount Factor; plus
(ii) With respect to the 1999 Additional Purchase Amount, if
the Accelerated Additional Payment Date occurs on or after June 7, 1999 and the
1999 Additional Purchase Amount has been paid or otherwise finally determined,
then zero. If the Accelerated Additional Payment Date occurs prior to June 7,
1999, then an amount equal to (A) the maximum amount of the 1999 Additional
Purchase Amount reduced by (B) the maximum amount of the 1999 Additional
Purchase Amount multiplied by the Change of Control Discount Factor; plus the
amount provided in clause (iii) or (iv) as applicable;
(iii) With respect to the Additional Purchase Amounts payable
as a result of (x) an Accelerated Additional Purchase Event which arises from a
Change of Control which occurs in calendar year 2002, then fifty percent (50%)
of the maximum amount of all unearned and unpaid Adjusted Additional Payment
Amounts, (y) an Accelerated Additional Purchase Event which arises from a Change
of Control which occurs in calendar year 2003, then forty percent (40%) of the
maximum amount of all unearned and unpaid Adjusted Additional Payment Amounts or
(z) an Accelerated Additional Purchase Event which arises from a Change of
Control which occurs in calendar year 2004, then thirty percent (30%) of the
maximum amount of all unearned and unpaid Adjusted Additional Payment Amounts
(For purposes of determining the applicable percentages payable under this
section (iii), a Change of Control shall be deemed to have occurred during the
year in which a binding agreement with respect thereto shall have been entered
into, regardless of whether the Change of Control shall have occurred during
such year or in a subsequent year);
-5-
(iv) With respect to the Additional Purchase Amounts which are
payable as a result of (A) an Accelerated Additional Purchase Event caused by a
termination of Xxxxxx Xxxxxxxxx'x employment with WESCO as a result of a
Resignation for Good Reason (as defined in the Employment Agreement) then ninety
percent (90%) of the maximum amount of all unearned and unpaid Adjusted
Additional Payment Amounts, or (B) an Accelerated Additional Purchase Event
caused by a termination of Xxxxxx Xxxxxxxxx'x employment with WESCO as a result
of a termination without Cause (as defined in the Employment Agreement), then
one hundred percent (100%) of the maximum amount of all unearned and unpaid
Adjusted Additional Payment Amounts; or
(v) Buyer's payment of an Accelerated Additional Purchase
Amount shall not affect Buyer's obligation, if any, to make a payment in respect
of the Current Year Modified Purchase Formula Amount in respect of the calendar
year immediately preceding the event giving rise to such accelerated additional
purchase amount payment pursuant to Section 1.5(c) hereof.
The term "ADJUSTED ADDITIONAL PURCHASE AMOUNT" is amended and
restated in its entirety as follows:
"ADJUSTED ADDITIONAL PURCHASE AMOUNT" means the 1999
Additional Purchase Amount, the Current Year Additional Purchase Formula Amounts
and the Current Year Modified Additional Purchase Formula Amounts in each case
without reduction by the amount of any adjustments to the purchase price under
Section 1.6 hereof to the extent not set off against the Promissory Note, if
any.
The term "EBITDA" is amended and restated in its entirety as
follows:
"EBITDA" means the operating earnings of Seller or the
Xxxxxxxx Division, as the case may be, before interest expense, taxes,
depreciation and amortization, determined in accordance with the following
provisions:
(i) Except as otherwise stated in this Agreement, EBITDA and
its components will be calculated in compliance with GAAP, and in accordance
with the specific accounting policies, methods and prior practices employed by
Seller applied on a consistent basis. The calculation of EBITDA will be
unaffected by either the accounting practices and policies of Buyer or by
generally accepted accounting principles first applicable to Seller or the
Xxxxxxxx Division after December 31, 1997.
(ii) The EBITDA calculation shall:
(1) Exclude any foreign exchange gains or losses;
(2) Exclude any and all acquisition costs and other
costs related to this Agreement, including, but not limited to, extra
auditing and accounting fees, legal fees, and due diligence costs,
except as provided by the Memorandum of Understanding;
-6-
(3) Exclude any and all expense allocations from
Buyer or any Buyer Affiliate, including, but not limited to, corporate
overhead allocations and pushdown accounting costs, except as provided
by the Memorandum of Understanding;
(4) Exclude any and all debt costs including, without
limitation, interest expense, amortization or capitalized debt costs,
debt restructuring costs, debt acquisition costs, any prepayment fees
and prepayment penalties and any other debt-related fees and penalties
of any kind;
(5) Exclude any compensation paid to Xxxxxx Xxxxxxxxx
in excess of $100,000;
(6) To the extent that the average annual book value
of the Xxxxxxxx Division's inventory, calculated on the last business
day of each month of each calendar year, exceeds $26.0 million, then
EBITDA shall be reduced by an inventory investment finance charge in an
amount equal to ten percent (10%) times the amount such average annual
inventory book value exceeds $26.0 million;
(7) To the extent that the Xxxxxxxx Division's
capital expenditures exceed $1,500,000.00 during any calendar year,
EBITDA shall be reduced by an amount equal to 25% of the amount of
capital expenditures in excess of $1,500,000.00 provided, however, that
capital expenditure projects presented to and separately approved by
the Chief Executive Officer of Buyer shall be excluded in determining
the amount of capital expenditures of the Xxxxxxxx Division. The amount
of capital expenditures for calendar year 2002 shall be determined by
annualizing the capital expenditures of the Xxxxxxxx Division for the
period beginning on the date hereof and ending on December 31, 2002;
and
(8) In the event that the parties agree to transfer
acquired integrated supply businesses, existing integrated supply
customers or existing business units of Buyer to the Xxxxxxxx Division,
then the parties will develop a mutually agreed plan to adjust the
EBITDA of the Xxxxxxxx Division upward or downward to reflect the
financial performance of such acquired integrated supply businesses,
integrated supply customers and/or business units.
(iii) Amortization excluded from EBITDA shall be amortization
of goodwill and any covenants not to compete, all debt issuance costs
(including, without limitation, any interest rate caps or hedging costs), and
any amortization related to the transactions contemplated herein.
3. CAPITALIZED TERMS.
------------------
Unless expressly defined herein, capitalized terms used herein shall be
the meaning ascribed hereto in the Asset Purchase Agreement.
-7-
4. AFFIRMATION.
------------
Except as expressly provided in this Amendment, the other terms,
conditions and agreements of the Asset Purchase Agreement are hereby ratified,
affirmed and confirmed in all respects.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their duly authorized officers, all as of the day and year
first above written.
WESCO DISTRIBUTION, INC.
By: /s/ Xxxxxxx Van Oss
----------------------------------------
Title: Vice President and
-------------------------------------
Chief Financial Officer
-------------------------------------
BSC GROUP, INC.
By: /s/ Xxx Xxxxxxxxx
-----------------------------------------
Title: Chief Executive Officer
-------------------------------------
SOLELY AS TO SECTIONS 5.8 AND 5.10 OF THE
ASSET PURCHASE AGREEMENT:
WESCO INTERNATIONAL, INC.
By: /s/ Xxxxxxx Van Oss
----------------------------------------
Title: Vice President and
-------------------------------------
Chief Financial Officer
-------------------------------------
SOLELY AS TO SECTIONS 5.1, 5.2, 5.3 AND 5.4
OF THE ASSET PURCHASE AGREEMENT:
/s/ Xxxxxx Xxxxxxxxx
--------------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxx Xxxxxxxxx
--------------------------------------------
Xxx Xxxxxxxxx
-8-
