-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NPeVAlPFahvzGe2FC6QpL8Ljkz8yIAOSJXpePmEajC6wA2cyXqSemnJCvfBah9kR bVYOFA0JgNrG+m5r9HnKaw== 0000950152-98-005392.txt : 19980619 0000950152-98-005392.hdr.sgml : 19980618 ACCESSION NUMBER: 0000950152-98-005392 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980617 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-05734 FILM NUMBER: 98649982 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 MAIL ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 - -----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M/bC0ItwZVovT+KUfcXLQCihhCh7zz0IhFPpHQfoVW6ZYnAHBN2qWarAVnBAj+j9 711SwvjhwXW2VHyZFg7bzQ== 0000950152-98-005392.txt : 19980618 0000950152-98-005392.hdr.sgml : 19980618 ACCESSION NUMBER: 0000950152-98-005392 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980617 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER STANDARD ELECTRONICS INC CENTRAL INDEX KEY: 0000078749 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 340907152 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-05734 FILM NUMBER: 98649982 BUSINESS ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 BUSINESS PHONE: 2165873600 MAIL ADDRESS: STREET 1: 4800 E 131ST ST CITY: CLEVELAND STATE: OH ZIP: 44105 10-K405 1 PIONEER-STANDARD ELECTRONICS, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File No. 0-5734 PIONEER-STANDARD ELECTRONICS, INC. (Exact name of registrant as specified in its charter) Ohio 34-0907152 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 4800 East 131st Street, Cleveland, Ohio 44105 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (216) 587-3600 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Shares, without par value Common Share Purchase Rights Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K Annual Report or any amendment to this Form 10-K. [X] The aggregate market value of voting shares of the Registrant held by non-affiliates was $338,900,407 as of June 12, 1998, computed on the basis of the last reported sale price per share ($11.188) of such shares on The Nasdaq Stock Market. Common Shares held by each officer, Director and person who owns or may be deemed to own 10% or more of the outstanding Common Shares have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of June 12, 1998, the Registrant had the following number of Common Shares outstanding: 31,128,554. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 28, 1998 are incorporated by reference into Part III of this Form 10-K. Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended March 31, 1998 are incorporated by reference into Parts II and IV of this Form 10-K. Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 1998. PART I ITEM 1. BUSINESS (a) Pioneer-Standard Electronics, Inc. was organized as an Ohio corporation in 1963 and maintains its principal office at 4800 East 131st Street, Cleveland, Ohio 44105 (telephone number (216) 587-3600). On June 1, 1994, Pioneer-Standard Canada Inc., a newly-formed Canadian subsidiary of the Company, purchased from United Westburne Inc., a Canadian corporation, certain of the assets and assumed certain liabilities of Westburne's Zentronics Division, which the Company believes is one of the largest distributors of electronic components and computer products in Canada. On November 30, 1995, the Company acquired Pioneer/Technologies Group Inc., a Maryland corporation ("Technologies"). And, on March 31, 1998, the Company acquired Dickens Data Systems, Inc., a Georgia corporation ("Dickens Data"). There have not been any material changes in the nature of the business done by the Company since April 1, 1996. Except as otherwise stated, the term "Company" as used herein shall mean Pioneer-Standard Electronics, Inc. and its wholly-owned subsidiaries. RECENT ACQUISITIONS - Dickens Data Systems, Inc. In order to continue the growth of its distribution of IBM products, the Company has acquired all the outstanding capital stock of Dickens Data on March 31, 1998. Dickens Data is a leading reseller, distributor and systems integrator of products and services for mid-range computer systems. Dickens Data is one of IBM's largest distributors of mid-range computer systems and had total sales approximating $346 million in 1997. The Company believes the acquisition of Dickens Data will expand the Company's customer base and product offerings and enhance the Company's ability to take advantage of growth opportunities in the mid-range computer systems market. World Peace Industries Co., Ltd. As part of the Company's strategy to gain entry into new markets, in November 1997 the Company purchased a minority equity interest in World Peace Industries Co., Ltd. ("WPI") of Taiwan. The Company believes that its investment in WPI will provide the Company with access to an extensive distribution network in the Asia-Pacific region. Headquartered in Taipei, WPI has offices in countries throughout the region, including Singapore, South Korea, Thailand, Malaysia, mainland China and Hong Kong. 1 3 Eurodis Electron PLC. In April 1998, the Company purchased a minority equity interest in Eurodis Electron PLC ("Eurodis"), a European distributor of electronic components. This purchase and a related support and cooperation agreement with Eurodis further the Company's growth strategy by offering it access to what the Company believes is a very broad industrial electronics components market as well as one of the world's largest telecommunications markets. Headquartered near London, Eurodis employs 1,100 people in 13 countries and has operating centers in the United Kingdom, Austria, the Netherlands, Belgium, France, Germany, Italy, Switzerland and Eastern Europe. (b) The Company is engaged in the international distribution of a broad range of industrial and end-user electronics components and computer systems products manufactured by others, which business comprises only one basic industry segment. (c) The following is a description of various aspects of the Company's business: INDUSTRIAL AND END-USER DISTRIBUTION - The Company is an international distributor of a broad range of electronics components and computer products manufactured by others. These products are sold to original equipment manufacturers, value-added resellers, research laboratories, government agencies and end-users, including manufacturing companies, and service and other non-manufacturing organizations. These products are classified into three broad categories: semiconductors; computer products; and interconnect, passive and electromechanical components. During fiscal 1998, semiconductor products accounted for 36% of the Company's sales compared with 41% in 1997 and 38% in 1996. These products include microprocessors, memory devices, programmable logic devices, analog and digital integrated circuits and other semiconductor devices. During fiscal 1998, computer products accounted for 44% of the Company's sales compared with 39% in 1997 and 40% in 1996. These products include mid-range computer systems and high-end platforms, storage subsystems, software, servers, computers (primarily mini and personal), display terminals and networking products. During fiscal 1998, interconnect, passive and electromechanical products accounted for 19% of the Company's sales, compared with 17% in 1997 and 20% in 1996. These products include capacitors, connectors, resistors, switches and power conditioning equipment. As a part of its distributor operations, the Company provides value-added services including point of use inventory management, systems integration, just-in-time kitting operations, turnkey assembly, memory and logic device programming, connector and cable assemblies to customer specifications, power products integration and networking expertise. Sales amounts for these services are included among the three broad categories discussed above. Miscellaneous products accounted for 1% of sales in 1998, 3% of sales in 1997 and 2% of sales in 1996. PRODUCTS DISTRIBUTED AND SOURCES OF SUPPLY - The Company is a leading distributor of a broad range of industrial and end-user components and computer products supplied by more than 100 manufacturers. A majority of the Company's revenues comes from products sourced by 2 4 relatively few suppliers. During the 1998 fiscal year, products purchased from the Company's five largest suppliers accounted for 68% of total sales volume, with Digital Equipment Corporation (29%) and Intel Corporation (18%) being the largest two suppliers. The loss of any one of the top five suppliers and/or a combination of certain other suppliers could have a material adverse effect on the Company's sales and earnings unless alternative products manufactured by others are available to the Company. The majority of the products sold by the Company are purchased pursuant to distributor agreements which generally provide for inventory return privileges by the Company upon cancellation of a distributor agreement. The distributor agreements also typically provide protection to the Company for product obsolescence and price erosion. The Company believes it has good relationships with its suppliers. CUSTOMERS - The Company serves over 24,000 customers in many major markets of North America. No single customer accounted for more than five percent of the Company's total sales for the fiscal year 1998. BACKLOG - The Company historically has not had a significant backlog of orders, although some shipments may be scheduled for delivery over an extended period of time. There was not a significant backlog during the last fiscal year. COMPETITION - The sale and distribution of industrial electronic components and computer products are highly competitive, primarily with respect to price and product availability, but also with respect to service, variety and availability of products carried, number of locations and promptness of service. Many of the distributors with which the Company competes are regional or local distributors. However, several of the Company's strongest competitors have national and international distribution businesses. The Company also experiences competition from manufacturers, including some of the Company's suppliers, who may sell directly to the industrial and end-user account base. EMPLOYEES - As of March 31, 1998, the Company had 2,333 employees. The Company is not a party to any collective bargaining agreement, has had no strikes or work stoppages and considers its employee relations to be excellent. (d) The Company distributes its products in the United States and Canada. Export sales are not a significant portion of the Company's sales. 3 5 ITEM 2. PROPERTIES The Company owns the 87,000 square foot facility, located in Cleveland, Ohio, that houses its corporate headquarters and the 106,000 square foot facility, located in Twinsburg, Ohio, that houses its corporate distribution center. The Company's operations occupy a total of approximately 1,232,500 square feet, with the majority, approximately 1,112,300 square feet, devoted to product distribution facilities. Of the approximately 1,232,500 square feet occupied, 252,700 square feet are owned and 979,800 square feet are occupied under operating leases. The Company's facilities of 100,000 square feet or larger, as of March 31, 1998, are set forth in the table below. APPROXIMATE SQUARE FEET LEASED OR LOCATION TYPE OF FACILITY OF FLOOR SPACE OWNED - - -------- ---------------- ----------------------- --------- Gaithersburg, Maryland Distribution 102,600 Leased Solon, Ohio Distribution 174,000 Leased Twinsburg, Ohio Distribution 106,000 Owned The Company's major leases contain renewal options for periods of up to ten years. For information concerning the Company's rental obligations, see Note 4 (Leases) of Notes to Financial Statements of the Company. The Company believes that its distribution and office facilities are well maintained and suitable for the operations of the Company. ITEM 3. LEGAL PROCEEDINGS As of March 31, 1998, the Company was not a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the last quarter of its fiscal year ended March 31, 1998. 4 6 EXECUTIVE OFFICERS OF THE COMPANY (1) The name, age and positions of each executive officer of the Company as of June 1, 1998 are as follows: Name Age Position ---- --- -------- James L. Bayman 61 Chairman of the Board of the Company since April 1, 1996 and Chief Executive Officer of the Company since April 3, 1995. President of the Company from June, 1984 to April 29, 1997. Chief Operating Officer of the Company from June, 1984 to April 3, 1995. Arthur Rhein 52 President and Chief Operating Officer of the Company since April 29, 1997; Senior Vice President of the Company from 1993 to April 29, 1997 and Vice President - Marketing of the Company from 1986 to 1993. John V. Goodger 62 Vice President, Treasurer and Assistant Secretary of the Company since 1990. Prior thereto, Vice President, Treasurer and Assistant Secretary of Ferro Corporation from 1987 to 1990 and Vice President and Treasurer of Ferro Corporation from 1984 to 1990. William A. Papenbrock 59 Secretary of the Company since 1986. Partner of the law firm of Calfee, Halter & Griswold LLP (2). ---------- (1) The description of Executive Officers called for in this Item is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K. (2) The law firm of Calfee, Halter & Griswold LLP serves as counsel to the Company. There is no relationship by blood, marriage or adoption among the above-listed officers. Messrs. Bayman, Rhein and Goodger hold office until terminated as set forth in their employment agreements. Mr. Papenbrock holds office until his successor is elected by the Board of Directors. 5 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Shares, without par value, are traded on The Nasdaq Stock Market. Common Share prices are quoted daily under the symbol "PIOS." The high and low sales prices for the Common Shares, the cash dividends paid on the Common Shares and additional information for each quarter of the two most recent fiscal years required by this Item are set forth at page 35 of the Company's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. Cash dividends are payable quarterly upon authorization by the Board of Directors. Regular payment dates are the first day of August, November, February and May. The Company maintains a Dividend Reinvestment Plan whereby cash dividends and a maximum of an additional $5,000 per month may be invested in the Company's Common Shares at no commission cost. On April 25, 1989, the Company adopted a Common Share Purchase Rights Plan. For further information about the Common Share Purchase Rights Plan, see Note 7 (Shareholders' Equity) of Notes to Financial Statements of the Company. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is set forth at page 36 of the Company's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth at pages 18 through 22 of the Company's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth at pages 23 through 34 of the Company's 1998 Annual Report to Shareholders, which information is incorporated herein by reference. 6 8 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by this Item as to the Directors of the Company appearing under the caption "Election of Directors" in the Company's Proxy Statement to be used in connection with the Company's 1998 Annual Meeting of Shareholders to be held on July 28, 1998 (the "1998 Proxy Statement") is incorporated herein by reference. Information required by this Item as to the executive officers of the Company is included in Part I of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Company's 1998 Proxy Statement under the caption "Compensation of Executive Officers," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Company's 1998 Proxy Statement under the caption "Share Ownership," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Company's 1998 Proxy Statement under the caption "Compensation of Executive Officers - Certain Transactions," which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) FINANCIAL STATEMENTS. The following consolidated financial statements of the Company and its subsidiaries and the report of independent auditors thereon, included in the Company's 1998 Annual Report to Shareholders on pages 23 through 34, are incorporated by reference in Item 8 of this Annual Report on Form 10-K: 7 9 Consolidated Balance Sheets as of March 31, 1998 and 1997 For the years ended March 31, 1998, 1997 and 1996: Consolidated Statements of Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Auditors Quarterly financial data, included in the Company's 1998 Annual Report to Shareholders at page 34, are incorporated by reference in Item 8 of this Annual Report on Form 10-K. (2) FINANCIAL STATEMENT SCHEDULES. The following consolidated financial statement schedule of the Company and its subsidiaries and the report of independent auditors thereon are filed as part of this Annual Report on Form 10-K, and should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries included in the Company's 1998 Annual Report to Shareholders: Report of Independent Auditors Schedule II -- Valuation and Qualifying Accounts for the years ended March 31, 1998, 1997 and 1996 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. (3) EXHIBITS See the Index to Exhibits at page E-1 of this Form 10-K. (b) REPORTS ON FORM 8-K The following reports on Form 8-K were filed during the fourth quarter of fiscal 1998: (1) A Current Report on Form 8-K, dated February 25, 1998, was filed on February 26, 1998 to report the Company's adoption of the Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," and the impact of SFAS No. 128 on the Company's presentation of its earnings per share. (2) A Current Report on Form 8-K, dated February 27, 1998, was filed on March 2, 1998 and amended on April 13, 1998 to report the Company's acquisition of Dickens Data Systems, Inc. 8 10 (3) A Current Report on Form 8-K, dated March 3, 1998, was filed on March 3, 1998 to report the announcement of the Company's expectations regarding sales and earnings per share for the fiscal quarter ending March 31, 1998. 9 11 SIGNATURES Pursuant to the requirements of the Sec. Exch. Act of 1934, Pioneer-Standard Electronics, Inc. has duly caused this Form 10-K Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, June 16, 1998. PIONEER-STANDARD ELECTRONICS, INC. By /s/ John V. Goodger ------------------------------------- John V. Goodger POWER OF ATTORNEY Each person whose signature appears below appoints William A. Papenbrock and Edward W. Moore, and each and either of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Report on Form 10-K for the 1998 fiscal year, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Sec. Exch. Act of 1934, this Form 10-K Report has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ James L. Bayman Chairman, Chief Executive June 16, 1998 - - ----------------------------- Officer and Director James L. Bayman (Principal Executive Officer) /s/ Arthur Rhein President, Chief Operating June 16, 1998 - - ----------------------------- Officer and Director Arthur Rhein /s/ John V. Goodger Vice President, Treasurer June 16, 1998 - - ----------------------------- and Assistant Secretary John V. Goodger (Principal Financial and Accounting Officer) /s/ Charles F. Christ Director June 16, 1998 - - ----------------------------- Charles F. Christ 10 12 /s/ Frederick A. Downey Director June 16, 1998 - - ----------------------------- Frederick A. Downey /s/ Victor Gelb Director June 16, 1998 - - ----------------------------- Victor Gelb /s/Gordon E. Heffern Director June 16, 1998 - - ----------------------------- Gordon E. Heffern /s/ Edwin Z. Singer Director June 16, 1998 - - ----------------------------- Edwin Z. Singer /s/ Thomas C. Sullivan Director June 16, 1998 - - ----------------------------- Thomas C. Sullivan /s/ Karl E. Ware Director June 16, 1998 - - ----------------------------- Karl E. Ware 11 13 REPORT OF INDEPENDENT AUDITORS Shareholders and the Board of Directors Pioneer-Standard Electronics, Inc. We have audited the consolidated financial statements of Pioneer-Standard Electronics, Inc. as of March 31, 1998 and 1997, and for each of the three years in the period ended March 31, 1998 and have issued our report thereon dated May 5, 1998, incorporated by reference in this Annual Report (Form 10-K). Our audits also included the consolidated financial statement schedule of Pioneer-Standard Electronics, Inc. as of March 31, 1998 and 1997 and for each of the three years in the period ended March 31, 1998, listed in item 14(a) of this Annual Report (Form 10-K). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Cleveland, Ohio May 5, 1998 14 Pioneer-Standard Electronics, Inc. Schedule II - Valuation and Qualifying Accounts Years Ended March 31, 1998, 1997 and 1996
Balance at Charged to cost Other Deductions-net Balance at the beginning of and expenses of write-offs end of period period (net recoveries) 1998 Allowance for doubtful accounts 7,541,000 (803,000) (1,060,000) 7,798,000 Inventory valuation reserve 6,659,000 2,031,000 3,029,000 5,661,000 1997 Allowance for doubtful accounts 8,982,000 193,000 (366,000) 7,541,000 Inventory valuation reserve 8,777,000 957,000 3,105,000 8,659,000 1996 Allowance for doubtful accounts 4,606,000 940,000 2,195,000 759,000 6,982,000 Inventory valuation reserve 3,416,000 1,489,000 5,534,000 1,662,000 8,777,000
(1) Amount for Pioneer/Technologies Group purchased November 30, 1995. 15 Pioneer-Standard Electronics, Inc. Exhibit Index Exhibit No. Description - - ----------- ----------- 3(a) Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734). (b) Amended Code of Regulations, as amended, of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734). 4(a) Rights Agreement, dated as of April 25, 1989, by and between the Company and AmeriTrust Company National Association, which is incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Reg. No. 333-26697). (b) Amendment No. 1 to Rights Agreement, dated as of May 16, 1997, by and between Pioneer-Standard Electronics, Inc. and National City Bank, which is incorporated herein by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (File No. 0-5734). (c) Note Purchase Agreement, dated as of October 31, 1990, by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-3 (Reg. No. 333-26697). (d) Amendment No. 1 to Note Purchase Agreement, dated as of November 1, 1991, by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the year ended March 31, 1993 (File No. 0-5734). 16 Exhibit No. Description - - ----------- ----------- (e) Amendment No. 2 to Note Purchase Agreement, dated as of November 30, 1995, by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference to Exhibit 4(a) to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 (File No. 0-5734). (f) Amendment No. 3 to Note Purchase Agreement, dated as of August 12, 1996 by and between the Company and Teachers Insurance and Annuity Association of America, which is incorporated herein by reference to Exhibit 4(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (File No. 0-5734). (g) Amendment No. 4 to Note Purchase Agreement, dated as of March 23, 1998 by and between the Company and Teachers Insurance and Annuity Association of America. (h) Amendment No. 5 to Note Purchase Agreement, dated as of March 23, 1998 by and between the Company and Teachers Insurance and Annuity Association of America. (i) Amendment No. 6 to Note Purchase Agreement, dated as of March 31, 1998 by and between the Company and Teachers Insurance and Annuity Association of America. (j) Indenture, dated as of August 1, 1996, by and between the Company and Star Bank, N.A., as Trustee, which is incorporated herein by reference to Exhibit 4(g) to the Company's Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734). (k) Share Subscription Agreement and Trust, effective July 2, 1996, by and between the Company and Wachovia Bank of North Carolina, N.A., which is incorporated herein by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-3 (Reg. No. 333-07665). (l) Certificate of Trust of Pioneer-Standard Financial Trust, dated February 27, 1998. 17 Exhibit No. Description - - ----------- ----------- (m) Amended and Restated Trust Agreement among Pioneer-Standard Electronics, Inc., as Depositor, Wilmington Trust Company, as Property Trustee and Delaware Trustee, and the Administrative Trustees named therein, dated as of March 23, 1998. (n) Junior Subordinated Indenture, dated March 23, 1998, between the Company and Wilmington Trust, as trustee. (o) First Supplemental Indenture, dated March 23, 1998, between the Company and Wilmington Trust, as trustee. (p) Form of 6 3/4% Convertible Preferred Securities (Included in Exhibit 4(m)). (q) Form of Series A 6 3/4% Junior Convertible Subordinated Debentures (Included in Exhibit 4(o)). (r) Guarantee Agreement, dated March 23, 1998, between the Company and Wilmington Trust, as guarantee trustee. (p) Agreement and Plan of Merger, dated as of January 15, 1998, by and among Dickens Data Systems, Inc., the Selling Shareholders named therein, Pioneer-Standard Electronics, Inc. and Pioneer-Standard of Georgia, Inc., which is incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K for February 27, 1998 (File No. 0-5734). (Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.) *10(a) Retirement Agreement, effective March 31, 1996, by and between the Company and Preston B. Heller, Jr., which is incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 (File No. 0-5734). 18 Exhibit No. Description - - ----------- ----------- *(b) Employment Agreement, dated July 29, 1997, by and between the Company and James L. Bayman, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734). *(c) Employment Agreement, dated July 29, 1997, by and between the Company and Arthur Rhein, which is incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734). *(d) Employment Agreement, dated July 29, 1997, by and between the Company and Robert E. Danielson, which is incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734). *(e) Employment Agreement, dated July 29, 1997, by and between the Company and John V. Goodger, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as amended on March 18, 1998 (File No. 0-5734). *(f) The Company's 1982 Incentive Stock Option Plan, as amended, which is incorporated by reference to Exhibit 3(e) to the Company's Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 0-5734). *(g) The Company's Amended and Restated 1991 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.1 to the Company's Form S-8 Registration Statement (Reg. No. 33-53329). *(h) The Company's Amended 1995 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 99.1 to the Company's Form S-8 Registration Statement (Reg. No. 333-07143). 19 Exhibit No. Description - - ----------- ----------- (i) Registration Rights Agreement, March 23, 1998, among the Company, Wilmington Trust, Lazard Freres & Co. LLC, Cleary Gull Reiland & McDevitt Inc., and McDonald & Company Securities, Inc., as initial purchasers. (j) Credit Agreement, dated as of March 27, 1998, among Pioneer-Standard Electronics, Inc., National City Bank, the several lending institutions party to the agreement and National City Bank, as Agent. (k) First Amendment to Credit Agreement, dated as of May 1, 1998, by and among Pioneer-Standard Electronics, Inc., the several lending institutions party to the agreement and National City Bank, as Agent. 13 1998 Annual Report to Shareholders. 21 Subsidiaries of the Registrant. 23 Consent of Ernst & Young LLP, Independent Auditors. 27 Financial Data Schedule. 99(a) Certificate of Insurance Policy, effective November 1, 1997, between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc. 99(b) Forms of Amended and Restated Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers, which are incorporated herein by reference to Exhibit 99(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 (File No. 0-5734). - - ---------- *Denotes a management contract or compensatory plan or arrangement. EX-4.G 2 EXHIBIT 4(G) 1 EXHIBIT 4(g) AMENDMENT NO. 4 TO NOTE PURCHASE AGREEMENT This Amendment No. 4 to Note Purchase Agreement (this "Amendment") is entered into as of March 23, 1998 by PIONEER-STANDARD ELECTRONICS, INC. (the "Company") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the "Noteholder"). PRELIMINARY STATEMENT. WHEREAS, the Company and the Noteholder have entered into a Note Purchase Agreement, dated as of October 31, 1990 (the "Original Purchase Agreement"), pursuant to which, at a closing held on November 2, 1990, the Noteholder purchased $20,000,000 in aggregate principal amount of the Company's 9.79% Senior Notes due November 1, 2000 (the "Notes"), which Original Purchase Agreement has been amended by that certain Amendment No 1 to Note Purchase Agreement, dated as of November 1, 1991, that certain Amendment No. 2 to Note Purchase Agreement, dated as of November 30, 1995, and that certain Amendment No. 3 to Note Purchase Agreement, dated as of August 12, 1996 (as so amended, the "Purchase Agreement"). The Noteholder was the sole purchaser and remains the sole record and beneficial owner of the Notes. Capitalized terms used herein and not otherwise defined herein are used with the meanings assigned thereto in the Purchase Agreement. WHEREAS, the Company acknowledges that since August 1, 1997, the Company has been in Default under the terms of the Purchase Agreement because it engaged in transactions described in Section 2.4 herein, prior to the execution by the Noteholder of this Amendment No. 4 (the "Default"). WHEREAS, on the terms and subject to the conditions set forth in this Amendment, and as an inducement to the Noteholder to waive the Company's Default acknowledged herein, the Company and the Noteholder desire to amend the Purchase Agreement as set forth below. NOW, THEREFORE, the Company and the Noteholder agree as follows: SECTION 1. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Noteholder as follows: Sec. 1.1 REPRESENTATIONS AND WARRANTIES IN PURCHASE AGREEMENT. The representations and warranties with respect to the Company contained in the Purchase Agreement are true and correct in all material respects and the Noteholder shall be entitled to 2 rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. Sec. 1.2 REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The representations and warranties with respect to the Company contained in the Credit Agreement and in any document, certificate or instrument delivered pursuant to the Credit Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. Sec. 1.3 REPRESENTATIONS AND WARRANTIES IN SUBORDINATION AGREEMENT. The representations and warranties with respect to the Company contained in the Subordination Agreement and in any document, certificate or instrument delivered pursuant to the Subordination Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 2. AMENDMENTS TO THE PURCHASE AGREEMENT. The Purchase Agreement is hereby amended in the following respects: Sec. 2.1. AMENDMENT TO SEC. 9.15 OF THE PURCHASE AGREEMENT. Sec. 9.15 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Sec. 9.15 in lieu thereof: Sec. 9.15 MERGER; SALE OF ASSETS. Other than the Reorganization, the Initial Receivables Transfer or any Additional Receivables Transfer, neither the Company nor any Restricted Subsidiary will enter into any merger, consolidation, reorganization or liquidation or transfer or otherwise dispose of all or a Substantial Portion of its property or business, unless approved in advance by the holders of at least 66-2/3% in aggregate unpaid principal amount of the Notes then Outstanding. Sec. 2.2. AMENDMENT OF SEC. 9.24 TO THE PURCHASE AGREEMENT. Sec. 9.24 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following Sec. 9.24 in lieu thereof: Sec. 9.24 INVESTMENT AND LOAN LINK. Neither the Company nor any Restricted Subsidiary, together or individually, directly or indirectly, in any instance or in the aggregate over time may: (a) invest in any manner more than $10,800,000 in Pioneer/Canada or (b) loan more than an aggregate principal amount of (i) $25,000,000 to Pioneer/Canada; (ii) $55,000,000 to Pioneer/Maryland; (iv) 2 3 $85,000,000 to Limited Partnership; (v) $15,000,000 to Pioneer/Minnesota; and (vi) $10,000,000 to Pioneer/Illinois. Sec. 2.3 AMENDMENT TO SEC. 12.1 OF THE PURCHASE AGREEMENT. The following definitions are hereby added to Sec. 12.1 of the Purchase Agreement, to be inserted therein in the appropriate alphabetical order: The term "Amendment No. 4" shall mean Amendment No. 4 to Note Purchase Agreement dated as of March 23, 1998 between the Company and the Noteholder. The term "Subordination Agreement" shall mean the Subordination Agreement dated as of June 30, 1997 among Limited Partnership, the Company, certain lenders, National City Bank, as agent for such lenders, and executed effective as of March 23, 1998 by the Noteholder. The term "Initial Receivables Transfer" shall mean the receivables transfer of the Company to Pioneer LP in a maximum amount not to exceed $90,000,000, as described in Item 6 of Exhibit C hereto. The term "Additional Receivables Transfer" shall mean any of the one or more transfers of additional receivables of the Company to Pioneer LP in a maximum aggregate amount not to exceed $30,000,000, as described in Item 6 of Exhibit C hereto. Sec. 2.4. AMENDMENT TO EXHIBIT C TO THE PURCHASE AGREEMENT. Exhibit C to the Purchase Agreement is hereby amended by adding the following Item 6 thereto: 6. DESCRIPTION OF INITIAL RECEIVABLES TRANSFER AND ADDITIONAL RECEIVABLES TRANSFER Pursuant to the restructuring of Pioneer-Standard Electronics, Inc. (the "Company"), the Company transferred approximately, but not in excess of, $90,000,000 in accounts receivables (the "Receivables") to Pioneer-Standard Electronics, Ltd. ("Pioneer LP"), its wholly-owned subsidiary (the "Initial Receivables Transfer"). The Initial Receivables Transfer occurred on August 1, 1997 and was a capital contribution to Pioneer LP. At the completion of the Initial Receivables Transfer, Pioneer LP owns the Receivables and the proceeds to be collected from the Receivables. Subsequent to the Initial Receivables Transfer, Pioneer LP paid the Company a servicing fee to collect the Receivables on behalf of Pioneer LP. Pioneer LP then loaned the Company, on a daily basis, as the cash is collected from customers, the proceeds of the Receivables. The Receivables transferred as part of the Initial Receivables Transfer were collected and loaned back to the Company within the fifty-day period commencing with the Initial Receivables Transfer. 3 4 After such fifty-day elapsed, a $90,000,000 loan from Pioneer LP to the Company will be outstanding and is evidenced by a demand note. The Company also will have the right to perform one or more additional transfers of accounts receivables (the "Additional Receivables") to Pioneer LP (each, an "Additional Receivables Transfer") in an aggregate amount not to exceed $30,000,000. Upon the completion of any Additional Receivables Transfer, Pioneer LP will own the Additional Receivables and the proceeds to be collected from the Additional Receivables. Subsequent to any Additional Receivables Transfer, Pioneer LP will pay the Company a servicing fee to collect the Additional Receivables on behalf of Pioneer LP. Pioneer LP will then loan to the Company, on a daily basis, as the cash is collected from customers, the proceeds of the Additional Receivables. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall not be effective unless and until each party hereto shall have executed and delivered an original counterpart hereof and the following conditions shall been satisfied or waived: Sec. 3.1 OPINIONS OF COUNSEL FOR THE COMPANY. The Noteholder and its special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the date hereof, in form and substance satisfactory to the Noteholder and its special counsel, relating to the due authorization, execution and delivery by the Company of this Amendment and the enforceability against the Company of this Amendment, in accordance with its terms. Sec. 3.2 SUBORDINATION AGREEMENT. The Subordination Agreement and all other agreements, documents, certificates or instruments delivered in connection therewith shall have been reduced to writing and furnished to the Noteholder and its special counsel, and the Subordination Agreement and such other agreements, documents, certificates and instruments (collectively, "Documents") shall be in form and substance satisfactory to the Noteholder and its special counsel. The Noteholder and its special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the date hereof, in form and substance satisfactory to the Noteholder and its special counsel, relating to the due authorization, execution and delivery by the Company and Pioneer LP of the subordination Agreement and the enforceability against the Company and Pioneer LP of the Subordination Agreement, in accordance with its terms. The Noteholder shall also have received an Officer's Certificate of the Company certifying that attached thereto are true, correct and complete copies of a fully executed Subordination Agreement and such other Documents, that such Documents constitute the only other agreements between such parties relating to the transactions contemplated by the Subordination Agreement, and that the Subordination Agreement and each other Document is in full force and effect without any term or condition thereof having been amended, modified or waived. 4 5 SECTION 4. WAIVER OF DEFAULT. Sec. 4.1. The Noteholder hereby waives the Default by the Company as acknowledged herein. SECTION 5. MISCELLANEOUS Sec. 5.1. CROSS-REFERENCES. References in this Amendment to any Section (or "Sec.") are, unless otherwise specified, to such Section (or "Sec.") of this Amendment. Sec. 5.2. INSTRUMENT PURSUANT TO PURCHASE AGREEMENT. This Amendment is executed pursuant to Sec. 13.4 of the Purchase Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Purchase Agreement. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Purchase Agreement and the Notes shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Purchase Agreement or the Notes or of any term or provision of any other document or of any transaction or further action on the part of the Company which would require the consent of any Noteholder under the Purchase Agreement. Sec. 5.3. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Sec. 5.4. COUNTERPARTS. This Amendment may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. Sec. 5.5. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the law of the State of New York. 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers duly authorized thereunto as of the date and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ------------------------------------- Title: Vice President, Treasurer and Assistant Secretary TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Authorized Officer ------------------------------------- 6 EX-4.H 3 EXHIBIT 4(H) 1 EXHIBIT 4(h) AMENDMENT NO.5 TO NOTE PURCHASE AGREEMENT This Amendment No.5 to Note Purchase Agreement (this "Amendment") is entered into as of March 23, 1998 by PIONEER-STANDARD ELECTRONICS, INC. (the "Company") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the "Noteholder"). PRELIMINARY STATEMENT. WHEREAS, the Company and the Noteholder have entered into a Note Purchase Agreement, dated as of October 31, 1990 (the "Original Purchase Agreement"), pursuant to which, at a closing held on November 2, 1990, the Noteholder purchased $20,000,000 in aggregate principal amount of the Company's 9.79% Senior Notes due November 1, 2000 (the "Notes"), which Original Purchase Agreement has been amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of November 1, 1991, that certain Amendment No. 2 to Note Purchase Agreement, dated as of November 30, 1995, that certain Amendment No. 3 to Note Purchase Agreement, dated as of August 12, 1996, and that certain Amendment No. 4 to Note Purchase Agreement, dated as of March 23, 1998 (as so amended, the "Purchase Agreement"). The Noteholder was the sole purchaser and remains the sole record and beneficial owner of the Notes. Capitalized terms used herein and not otherwise defined herein are used with the meanings assigned thereto in the Purchase Agreement. WHEREAS, on the terms and subject to the conditions set forth in this Amendment, and as an inducement to the Noteholder to consent to the Company's offering of the Convertible Debentures (as defined herein) and certain other actions, the Company and the Noteholder desire to amend the Purchase Agreement as set forth below. NOW, THEREFORE, the Company and the Noteholder agree as follows: SECTION 1. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Noteholder as follows: SECTION 1.1. REPRESENTATIONS AND WARRANTIES IN PURCHASE AGREEMENT. The representations and warranties with respect to the Company contained in the Purchase Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. 2 SECTION 1.2. REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The representations and warranties with respect to the Company contained in the Credit Agreement and in any document, certificate or instrument delivered pursuant to the Credit Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 1.3. REPRESENTATIONS AND WARRANTIES IN SUBORDINATION AGREEMENT. The representations and warranties with respect to the Company contained in the Subordination Agreement and in any document, certificate or instrument delivered pursuant to the Subordination Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 2. AMENDMENTS TO THE PURCHASE AGREEMENT. The Purchase Agreement is hereby amended in the following respects: SECTION 2.1. ADDITION OF SECTION 9.25 TO THE PURCHASE AGREEMENT. The following new Section 9.25 shall be added to the Purchase Agreement: Section 9.25 AMENDMENT OF CONVERTIBLE DEBENTURES. The Company will not amend or otherwise modify the terms or provisions of the Convertible Debentures or the Junior Subordinated Indenture or First Supplemental Indenture executed by the Company in connection with the issuance of the Convertible Debentures; provided, however, the Company is permitted to enter into supplemental indentures permitted pursuant to Section 9.1(h) or (i) of the Junior Subordinated Indenture. Section 2.2. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Indebtedness" in its entirety and substituting the following new definition in lieu thereof: The term "INDEBTEDNESS", with respect to any Person, shall mean and include the aggregate amount of, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all obligations or liabilities of others secured by a Lien on any Asset owned by such Person, irrespective of whether such obligation or liability is assumed, to the extent of the lesser of such obligation or liability or the fair 2 3 market value of such Asset; (e) all obligations of such Person to pay the deferred purchase price of Assets or services, exclusive of trade and other payables which, by their terms, are due and payable within ninety (90) calendar days of the creation thereof and are not overdue or are being properly and expeditiously contested in good faith by appropriate proceedings, so long as appropriate reserves have been established and the use by such Person of any Assets involved has not been materially interfered with; (f) any liability (whether contingent or not) in respect of unfunded vested accrued benefits under any Pension Plan which is subject to Title IV of ERISA; (g) all liabilities of such Person in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); and (h) any Guaranty of Indebtedness described in any of clauses (a) through (g) above, including reimbursement obligations in respect of letters of credit; provided, however, that Indebtedness shall not include any Guaranty (i) by the Company of Indebtedness of a Restricted Subsidiary or (ii) by a Restricted Subsidiary of Indebtedness of another Restricted Subsidiary; and provided, further, that, for purposes of any determination of whether Short-Term Indebtedness shall be permitted under Section 9.17 hereof, or whether Consolidated Funded Indebtedness shall be permitted under Section 9.20 hereof, (i) no Guaranty shall be treated as Indebtedness to the extent that the obligation guaranteed thereby is Indebtedness, and (ii) the obligations of the Company to make payments of principal and interest on the Convertible Debentures shall not be treated as Indebtedness; and, provided, further, that Indebtedness shall not include any Guaranty by the Company or a Restricted Subsidiary of the Indebtedness of another Person if (i) treating such Guaranty as Indebtedness would result in a violation of Section 9.20 hereof at the time the Company or such Restricted Subsidiary becomes liable therefor, (ii) the Company elects (and evidences such election by prompt written notice thereof to each holder of a Note) to treat such Guaranty as a Restricted Investment and (iii) treated as a Restricted Investment, the incurrence of such Guaranty can be effected in compliance with Section 9.19 hereof. 3 4 SECTION 2.3. AMENDMENT OF SECTION 12.1 TO THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Total Capitalization"" in its entirety and substituting the following new definition in lieu thereof: The term "TOTAL CAPITALIZATION" shall mean the sum of (i) Consolidated Funded Indebtedness, plus (ii) Consolidated Shareholders' Equity, plus (iii) the aggregate principal amount of the Convertible Debentures then outstanding, but only to the extent that Consolidated Shareholders' Equity does not include the Trust Preferred Securities. SECTION 2.4. FURTHER AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. The following definitions are hereby added to Section 12.1 of the Purchase Agreement, to be inserted therein in the appropriate alphabetical order: The term "Amendment No.5" shall mean Amendment No. 5 to Note Purchase Agreement dated as of March 23, 1998 between the Company and the Noteholder. The term "CONVERTIBLE DEBENTURES" shall mean the Series A 6 3/4% Junior Convertible Subordinated Debentures of the Company, due March 31, 2028, issued in an aggregate original principal amount of up to $150,000,000, under that certain Junior Subordinated Indenture, dated as of March 23, 1998, of the Company to Wilmington Trust Company, as trustee, as supplemented by that certain First Supplemental Indenture, dated as of March 23, 1998, of the Company to Wilmington Trust Company, as trustee. The term "TRUST PREFERRED SECURITIES" shall mean the up to 2,875,000 6 3/4% Convertible Trust Preferred Securities of the Pioneer-Standard Financial Trust, a Delaware statutory business trust, offered pursuant to the Offering Memorandum dated March 18, 1998. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall not be effective unless and until each party hereto shall have executed and delivered an original counterpart hereof and the following conditions shall have been satisfied or waived: SECTION 3.1. OPINIONS OF COUNSEL FOR THE COMPANY. The Noteholder and its special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the date hereof, in form and substance 4 5 satisfactory to the Noteholder and its special counsel, relating to the due authorization, execution and delivery by the Company of this Amendment and the enforceability against the Company of this Amendment, in accordance with its terms. SECTION 3.2. AMENDMENT FEE. In consideration for its agreement to enter into this Amendment, the Noteholder shall have received a payment in immediately available funds in the amount of Twenty-one Thousand Four Hundred Dollars ($21,400). SECTION 4. MISCELLANEOUS. SECTION 4.1. CROSS-REFERENCES. References in this Amendment to any Section (or "Section") are, unless otherwise specified, to such Section (or "Section") of this Amendment. SECTION 4.2. INSTRUMENT PURSUANT TO PURCHASE AGREEMENT. This Amendment is executed pursuant to 13.4 of the Purchase Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Purchase Agreement. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Purchase Agreement and the Notes shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Purchase Agreement or the Notes or of any term or provision of any other document or of any transaction or further action on the part of the Company which would require the consent of any Noteholder under the Purchase Agreement. SECTION 4.3. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION 4.4. COUNTERPARTS. This Amendment may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. SECTION 4.5. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the law of the State of New York. 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers duly authorized thereunto as of the date and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ------------------------------------- Title: Vice President, Treasurer and Assistant Secretary TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Authorized Officer ------------------------------------- 6 EX-4.I 4 EXHIBIT 4(I) 1 EXHIBIT 4(i) AMENDMENT NO. 6 TO NOTE PURCHASE AGREEMENT This Amendment No. 6 to Note Purchase Agreement (this "Amendment") is entered into as of March 31, 1998 by PIONEER-STANDARD ELECTRONICS, INC. (the "Company") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the "Noteholder"). PRELIMINARY STATEMENT. 1. WHEREAS, the Company and the Noteholder have entered into a Note Purchase Agreement, dated as of October 31, 1990 (the "Original Purchase Agreement"), pursuant to which, at a closing held on November 2, 1990, the Noteholder purchased $20,000,000 in aggregate principal amount of the Company's 9.79% Senior Notes due November 1, 2000 (the "Notes"), which Original Purchase Agreement has been amended by that certain Amendment No. 1 to Note Purchase Agreement, dated as of November 1, 1991, that certain Amendment No. 2 to Note Purchase Agreement, dated as of November 30, 1995, that certain Amendment No. 3 to Note Purchase Agreement, dated as of August 12, 1996, that certain Amendment No. 4 to Note Purchase Agreement, dated as of March 23, 1998, and that certain Amendment No. 5 to Note Purchase Agreement, dated as of March 23, 1998 (as so amended, the "Purchase Agreement"). The Noteholder was the sole purchaser and remains the sole record and beneficial owner of the Notes. Capitalized terms used herein and not otherwise defined herein are used with the meanings assigned thereto in the Purchase Agreement. 2. WHEREAS, the Company now owns one hundred percent (100%) of the outstanding capital stock of Pioneer-Standard of Georgia, Inc., a Georgia corporation ("Pioneer/Georgia"), and, as of the date of this Amendment, Pioneer/Georgia will merge with and into Dickens Data Systems, Inc., a Georgia corporation ("Dickens"), with the survivor of the Merger, Dickens, becoming the wholly-owned subsidiary of the Company and being designated as a "Restricted Subsidiary" under the Purchase Agreement. 3. WHEREAS, the Company has entered into that certain Credit Agreement with certain lenders, including, without limitation, National City Bank, a national banking association, as agent thereunder (the "Credit Agreement"), pursuant to which the Company may borrow up to $260,000,000 in the aggregate. 4. WHEREAS, as of the date of this Amendment, the Company will enter into that certain Agreement for Inventory Financing with IBM Credit Corporation, a Delaware corporation ("IBM Credit"), pursuant to which IBM Credit will provide interest-free financing for a period of up to seventy-five (75) days for the purchase by the Company of certain inventory. 1 2 5. WHEREAS, on the terms and subject to the conditions set forth in this Amendment, and as an inducement to the Noteholder to consent to the Company's acquisition of Dickens and certain other actions, the Company and the Noteholder desire to amend the Purchase Agreement as set forth below. NOW, THEREFORE, the Company and the Noteholder agree as follows: SECTION 1. GENERAL REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Noteholder as follows: SECTION 1.1. REPRESENTATIONS AND WARRANTIES IN PURCHASE AGREEMENT. The representations and warranties with respect to the Company contained in the Purchase Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 1.2. REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The representations and warranties with respect to the Company contained in the Credit Agreement and in any document, certificate or instrument delivered pursuant to the Credit Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 1.3. REPRESENTATIONS AND WARRANTIES IN SUBORDINATION AGREEMENT. The representations and warranties with respect to the Company contained in the Subordination Agreement and in any document, certificate or instrument delivered pursuant to the Subordination Agreement are true and correct in all material respects and the Noteholder shall be entitled to rely on such representations and warranties as if they were made to the Noteholder in this Amendment as of the date hereof. SECTION 2. AMENDMENTS TO THE PURCHASE AGREEMENT. The Purchase Agreement is hereby amended in the following respects: SECTION 2.1. AMENDMENT TO SECTION 9.15 TO THE PURCHASE AGREEMENT. Section 9.15 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.15 in lieu thereof: SECTION 9.15 MERGER: SALE OF ASSETS. Neither the Company nor any Restricted Subsidiary will enter into any merger, consolidation, reorganization or liquidation or transfer or otherwise dispose of all or a Substantial Portion of its property or business, unless approved in advance by the holders of at least 66- 2 3 2/3% in aggregate principal amount of the Notes then outstanding; provided, however, (i) any Restricted Subsidiary may merge into the Company, (ii) any Restricted Subsidiary may merge into another Restricted Subsidiary of which the Company owns, directly or indirectly, the same percentage of outstanding stock, (iii) any Restricted Subsidiary may transfer assets to another Restricted Subsidiary of which the Company owns, directly or indirectly, the same percentage of outstanding stock, and (iv) Pioneer/Georgia may enter into the Dickens Merger. SECTION 2.2. AMENDMENT TO SECTION 9.24 TO THE PURCHASE AGREEMENT. Section 9.24 of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting the following new Section 9.24 in lieu thereof: SECTION 9.24 INVESTMENT AND LOAN LIMIT. Neither the Company nor any Restricted Subsidiary, together or individually, directly or indirectly, in any instance or in the aggregate over time, may invest in or loan to the following respective Subsidiaries, except as provided in columns II and IV below: Subsidiaries of Pioneer-Standard Electronics, Inc.
I II III IV Current ------- Subsidiary Equity Investment Additional Current Loans Maximum ---------- ----------------- ---------- ------------- ------- (as of 12/31/97) Equity Investment (as of 12/31/97) Permitted Loans ---------------- ----------------- ---------------- --------------- 1. Pioneer-Standard of Maryland, Inc. $38,000,000 $1,000,000 $34,000,000 $60,000,000 2. Pioneer-Standard Canada Inc. $4,300,000 $6,000,000(1) $20,000,000 $35,000,000 3. Pioneer-Standard FSC, Inc. Less than -0- -0- $1,000,000 $100,000 4. Pioneer-Standard Illinois, Inc. $4,000,000 $1,000,000 -0- $10,000,000 5. Pioneer-Standard Minnesota, Inc. $12,000,000 $1,000,000 ($8,000,000) $10,000,000 6. Pioneer-Standard Electronics, Ltd. $144,000,000 $1,000,000 $7,000,000 $20,000,000 7. Pioneer Standard Georgia, Inc. $125,000,000 -0- -0- -0- (Projected)(2) 8. Dickens Data Systems, Inc. $125,000,000 $15,000,000 -0- $85,000,000(4) (Projected)(3) 9. Dickens Services Group, a $2,500,000 (5) $5,000,000 -0- $5,000,000
(1) Includes a $3,000,000 equity investment made in March, 1998. (2) Projected amount of investment necessary to consummate anticipated merger into Dickens Data Systems, Inc., effective March 31, 1998. (3) Projected investment necessary to become a Subsidiary of Borrower, effective March 31, 1998. (4) Amount does not include that portion of Borrower's Indebtedness for Borrowed Money under the Agreement for Inventory Financing which is attributable to Dickens Data Systems, Inc. (5) Investment necessary to become a Subsidiary of Borrower, effective March 31, 1998. 3 4 Pioneer-Standard Company, LLC 10. Pioneer-Standard Financial Trust $4,500,000(6) -0- -0- -0- SECTION 2.3. ADDITION OF SECTION 9.26 TO THE PURCHASE AGREEMENT. The following new Section 9.26 shall be added to the Purchase Agreement: SECTION 9.26 EXECUTION OF NON-BORROWING AND NON-PLEDGE AGREEMENT. The Company shall cause Dickens, immediately upon the effectiveness of the Dickens Merger, to become a Restricted Subsidiary hereunder and to execute and deliver a Non-Borrowing and Non-Pledge Agreement to the Noteholder. SECTION 2.4. AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Indebtedness" in its entirety and substituting the following new definition in lieu thereof: The term "INDEBTEDNESS", with respect to any Person, shall mean and include the aggregate amount of, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all obligations or liabilities of others secured by a Lien on any Asset owned by such Person, irrespective of whether such obligation or liability is assumed, to the extent of the lesser of such obligation or liability or the fair market value of such Asset; (e) all obligations of such Person to pay the deferred purchase price of Assets or services, exclusive of trade and other payables which, by their terms, are due and payable within ninety (90) calendar days of the creation thereof and are not overdue or are being properly and expeditiously contested in good faith by appropriate proceedings, so long as appropriate reserves have been established and the use by such Person of any Assets involved has not been materially interfered with; (f) any liability (whether contingent or not) in respect of unfunded vested accrued benefits under any Pension Plan which is subject to Title IV of ERISA; (g) all liabilities of such Person in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); and (h) any Guaranty of Indebtedness described in any of clauses (a) through (g) above, including reimbursement obligations in respect of letters of credit; provided, however, that Indebtedness shall not include any Guaranty (i) by the Company of Indebtedness of a Restricted Subsidiary or (ii) by a Restricted Subsidiary of Indebtedness of another Restricted Subsidiary; and provided, further, that, for purposes of any determination of whether Short-Term Indebtedness shall be permitted under Section 9.17 hereof, or - - ---------------------------------------- (6) Investment made on March 23, 1998 4 5 whether Consolidated Funded Indebtedness shall be permitted under Section 9.20 hereof, (i) no Guaranty shall be treated as Indebtedness to the extent that the obligation guaranteed thereby is Indebtedness, (ii) the obligations of the Company to make payments of principal and interest on the Convertible Debentures shall not be treated as Indebtedness, and (iii) the obligations of the Company owing to IBM Credit Corporation under the Agreement for Inventory Financing shall not be treated as Indebtedness to the extent that any such obligations are, by their terms, not due and owing for at least forty-five (45) days, but in no event more than seventy-five (75) days, after the date of invoice therefor and are not otherwise interest-bearing; and, provided, further, that Indebtedness shall not include any Guaranty by the Company or a Restricted Subsidiary of the Indebtedness of another Person if (i) treating such Guaranty as Indebtedness would result in a violation of Section 9.20 hereof at the time the Company or such Restricted Subsidiary becomes liable therefor, (ii) the Company elects (and evidences such election by prompt written notice thereof to each holder of a Note) to treat such Guaranty as a Restricted Investment and (iii) treated as a Restricted Investment, the incurrence of such Guaranty can be effected in compliance with Section 9.19 hereof. SECTION 2.5. AMENDMENT TO SECTION 12.1 TO THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby amended by deleting the definition of "Credit Agreement" in its entirety and substituting the following new definition in lieu thereof: The term "CREDIT AGREEMENT" shall mean that certain Credit Agreement among the Company and certain Lenders, including, without limitation, National City Bank, a national banking association, as agent thereunder, pursuant to which the Company may borrow up to $260,000,000 in the aggregate. SECTION 2.6. AMENDMENT TO SECTION 12.1 TO THE PURCHASE AGREEMENT. Section 12.1 of the Purchase Agreement is hereby further amended by deleting the definition of "Subordination Agreement" in its entirety and substituting the following new definition in lieu thereof: The term "SUBORDINATION AGREEMENT" shall mean that certain Subordination Agreement dated as of March 27, 1998, among Limited Partnership, the Company, certain Lenders, National City Bank, as agent for such Lenders, the Noteholder and Star Bank, N.A., as trustee with respect to a debt offering of the Company, and executed effective as of March 31, 1998, by the Noteholder. SECTION 2.7. FURTHER AMENDMENT TO SECTION 12.1 OF THE PURCHASE AGREEMENT. The following definitions are hereby added to Section 12.1 of the Purchase Agreement, to be inserted therein in the appropriate alphabetical order: 5 6 The term "AGREEMENT FOR INVENTORY FINANCING" shall mean the Agreement for Inventory Financing, dated as of March 31, 1998, by and between IBM Credit Corporation and the Company as in effect on such date without any amendment thereof. The term "AMENDMENT NO. 6" shall mean Amendment No. 6 to Note Purchase Agreement dated as of March 31, 1998 between the Company and the Noteholder. The term "DICKENS" shall mean Dickens Data Systems, Inc., a Georgia corporation. The term "DICKENS MERGER" shall mean the merger whereby Pioneer/Georgia will acquire Dickens via a reverse cash-out merger with Dickens being the survivor. The term "PIONEER/GEORGIA" shall mean Pioneer-Standard of Georgia, Inc. a Georgia corporation. SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall not be effective unless and until each party hereto shall have executed and delivered an original counterpart hereof and the following conditions shall have been satisfied or waived: SECTION 3.1. OPINIONS OF COUNSEL FOR THE COMPANY. The Noteholder and its special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the date hereof, in form and substance satisfactory to the Noteholder and its special counsel, relating to the due authorization, execution and delivery by the Company of this Amendment and the enforceability against the Company of this Amendment, in accordance with its terms. SECTION 3.2. SUBORDINATION AGREEMENT. The Subordination Agreement and all other agreements, documents, certificates or instruments delivered in connection therewith shall have been reduced to writing and furnished to the Noteholder and its special counsel, and the Subordination Agreement and such other agreements, documents, certificates and instruments (collectively, "Documents") shall be in form and substance satisfactory to the Noteholder and its special counsel. The Noteholder and its special counsel shall have received from Calfee, Halter & Griswold, Cleveland, Ohio, special counsel for the Company, an opinion, dated the date hereof, in form and substance satisfactory to the Noteholder and its special counsel, relating to the due authorization, execution and delivery by the Company and Pioneer LP of the Subordination Agreement and the enforceability thereof in accordance with its terms. The Noteholder shall also have received an Officer's Certificate of the Company certifying that attached thereto are 6 7 true, correct and complete copies of a fully executed Subordination Agreement and such other Documents, that such Documents constitute the only other agreements between such parties relating to the transactions contemplated by the Subordination Agreement, and that the Subordination Agreement and each other Document is in full force and effect without any term or condition thereof having been amended, modified or waived. SECTION 3.3. AMENDMENT FEE. In consideration for its agreement to enter into this Amendment, the Noteholder shall have received a payment in immediately available funds in the amount of Twenty-one Thousand Four Hundred Dollars ($21,400). SECTION 3.3. COUNSEL FEES. The Company shall have paid the reasonable fees and disbursements of the Noteholder's special counsel, Orrick, Herrington & Sutcliffe LLP in accordance with a statement of such counsel rendered to the Company (with the understanding that a supplemental statement for reasonable fees and disbursements subsequently incurred is to be rendered at a later date). SECTION 4. MISCELLANEOUS. SECTION 4.1. NO CONSENT, NO WAIVER. Notwithstanding the execution by the Company of an Intercreditor Agreement dated as of March 31, 1998, by and between National City Bank (for itself and as agent for other lending institutions) and IBM Credit Corporation, and acknowledged and consented to by the Company (the "Intercreditor Agreement"), the provisions of the Intercreditor Agreement and the execution by the Noteholder of this Amendment No. 6 shall not constitute the Noteholder' 5 consent to the Intercreditor Agreement nor a waiver by the Noteholder of any of the Company's covenants contained in Section 9 of the Purchase Agreement. SECTION 4.2. CROSS-REFERENCES. References in this Amendment to any Section (or "Section") are, unless otherwise specified, to such Section (or "Section") of this Amendment. SECTION 4.3. INSTRUMENT PURSUANT TO PURCHASE AGREEMENT. This Amendment is executed pursuant to Section 13.4 of the Purchase Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Purchase Agreement. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Purchase Agreement and the Notes shall remain unamended and unwaived. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Purchase Agreement or the Notes or of any term or provision of any other document or of any transaction or further action on the part of the Company which would require the consent of any Noteholder under the Purchase Agreement. SECTION 4.4. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 7 8 SECTION 4.5. COUNTERPARTS. This Amendment may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original but all of which shall constitute together but one and the same instrument. SECTION 4.6. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the law of the State of New York. 8 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers duly authorized thereunto as of the date and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ------------------------------------- Title: Vice President, Treasurer and Assistant Secretary TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Authorized Officer ------------------------------------- 9 EX-4.L 5 EXHIBIT 4(L) 1 Exhibit 4(l) CERTIFICATE OF TRUST OF PIONEER-STANDARD FINANCIAL TRUST THIS Certificate of Trust of Pioneer-Standard Financial Trust (the "Trust"), dated as of February 27, 1998 is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 DEL. C. (section)3801, ET SEQ). 1. NAME. The name of the business trust formed hereby is Pioneer- Standard Financial Trust. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. WILMINGTON TRUST COMPANY not in its individual capacity but solely as trustee of the Trust By: /s/ Donald G. MacKelcan ---------------------------------------- Name: DONALD G. MACKELCAN Title: ASSISTANT VICE PRESIDENT JOHN V. GOODGER, not in his individual capacity but solely as trustee of the Trust By: /s/ John V. Goodger ---------------------------------------- EX-4.M 6 EXHIBIT 4(M) 1 Exhibit 4(m) [EXECUTION COPY] ADVANCE \d 72" AMENDED AND RESTATED TRUST AGREEMENT AMONG PIONEER-STANDARD ELECTRONICS, INC. AS DEPOSITOR, WILMINGTON TRUST COMPANY AS PROPERTY TRUSTEE AND AS DELAWARE TRUSTEE AND THE ADMINISTRATIVE TRUSTEES NAMED HEREIN DATED AS OF MARCH 23, 1998 PIONEER-STANDARD FINANCIAL TRUST TABLE OF CONTENTS PAGE TOC \f ARTICLE 1 DEFINED TERMS SECTION 1.1. Definitions 2 ARTICLE 2 ESTABLISHMENT OF THE TRUST SECTION 2.1. Name 14 SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business 14 SECTION 2.3. Organizational Expenses 14 SECTION 2.4. Issuance of the Preferred Securities 14 2 SECTION 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures 15 SECTION 2.6. Declaration of Trust 15 SECTION 2.7. Authorization to Enter into Certain Transactions 16 SECTION 2.8. Assets of Trust 20 SECTION 2.9. Title to Trust Property 20 ARTICLE 3 PAYMENT ACCOUNT SECTION 3.1. Payment Account 20 ARTICLE 4 DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION SECTION 4.1. Distributions 21 SECTION 4.2. Redemption 22 SECTION 4.3. Conversion 24 SECTION 4.4. Special Event Exchange or Redemption 27 SECTION 4.5. Subordination of Common Securities 29 SECTION 4.6. Payment Procedures. 29 SECTION 4.7. Tax Returns and Reports 29 SECTION 4.8. Payment of Taxes, Duties, Etc. of the Trust 30 SECTION 4.9. Payments under Indenture 30 ARTICLE 5 TRUST SECURITIES CERTIFICATES SECTION 5.1. Initial Ownership 30 SECTION 5.2. The Trust Securities Certificates 30 SECTION 5.3. Delivery of Trust Securities Certificates 31 SECTION 5.4. Registration of Transfer and Exchange of Preferred Securities; Restrictions on Transfer 31 SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates 37 SECTION 5.6. Persons Deemed Securityholders 37 SECTION 5.7. Access to List of Securityholders' Names and Addresses 38 SECTION 5.8. Maintenance of Office or Agency 38 SECTION 5.9. Appointment of Paying Agent 38 SECTION 5.10. Ownership of Common Securities by Depositor 39 SECTION 5.11. Global Securities; Non-Global Securities; Common Securities Certificate 39 SECTION 5.12. Notices to Clearing Agency 41 SECTION 5.13. Definitive Preferred Securities Certificates 41 SECTION 5.14. Rights of Securityholders 41 SECTION 5.15. Restrictive Legends 42 ARTICLE 6 ACT OF SECURITYHOLDERS; MEETINGS; VOTING 3 SECTION 6.1. Limitations on Voting Rights 43 SECTION 6.2. Notice of Meetings 45 SECTION 6.3. Meetings of Securityholders 45 SECTION 6.4. Voting Rights 46 SECTION 6.5. Proxies, Etc 46 SECTION 6.6. Securityholder Action by Written Consent 46 SECTION 6.7. Record Date for Voting and Other Purposes 46 SECTION 6.8. Acts of Securityholders 47 SECTION 6.9. Inspection of Records 48 ARTICLE 7 REPRESENTATIONS AND WARRANTIES SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware Trustee 48 SECTION 7.2. Representations and Warranties of Depositor 49 ARTICLE 8 THE TRUSTEES SECTION 8.1. Certain Duties and Responsibilities 50 SECTION 8.2. Notice of Defaults 52 SECTION 8.3. Certain Rights of Property Trustee 54 SECTION 8.4. Not Responsible for Recitals or Issuance of Securities 56 SECTION 8.5. May Hold Securities 56 SECTION 8.6. Compensation; Indemnity; Fees 56 SECTION 8.7. Property Trustee Required; Eligibility of Trustees 57 SECTION 8.8. Conflicting Interests 58 SECTION 8.9. Resignation and Removal; Appointment of Successor 58 SECTION 8.10. Acceptance of Appointment by Successor 60 SECTION 8.11. Merger, Conversion, Consolidation or Succession to Business 61 SECTION 8.12. Preferential Collection of Claims Against Depositor or Trust 61 SECTION 8.13. Reports by Property Trustee 61 SECTION 8.14. Reports to the Property Trustee 62 SECTION 8.15. Evidence of Compliance with Conditions Precedent 62 SECTION 8.16. Number of Trustees 62 SECTION 8.17. Delegation of Power 63 ARTICLE 9 DISSOLUTION, LIQUIDATION AND MERGER SECTION 9.1. Dissolution upon Expiration Date 63 SECTION 9.2. Early Dissolution 63 SECTION 9.3. Dissolution 64 SECTION 9.4. Liquidation 64 SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of the Trust 65 4 ARTICLE 10 MISCELLANEOUS PROVISIONS SECTION 10.1. Limitation of Rights of Securityholders 67 SECTION 10.2. Amendment 67 SECTION 10.3. Separability 68 SECTION 10.4. Governing Law 68 SECTION 10.5. Payments Due on Non-Business Day 69 SECTION 10.6. Successors 69 SECTION 10.7. Headings 69 SECTION 10.8. Reports, Notices and Demands 69 SECTION 10.9. Agreement Not to Petition 70 SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act 70 SECTION 10.11. Acceptance of Terms of Trust Agreement, Guarantee and Indenture 70 SECTION 10.12. Counterparts 71 ARTICLE 11 REGISTRATION RIGHTS SECTION 11.1. Registration Rights 71 EXHIBIT A -- Certificate of Trust of Pioneer-Standard Financial Trust EXHIBIT B -- Form of Certificate Depositary Agreement EXHIBIT C -- Form of Common Securities of Pioneer-Standard Financial Trust EXHIBIT D -- Form of Preferred Securities of Pioneer-Standard Financial Trust EXHIBIT E -- Form of Regulation S Certificate EXHIBIT F -- Form of Restricted Securities Certificate EXHIBIT G -- Form of Unrestricted Securities Certificate EXHIBIT H -- Notice of Conversion PIONEER-STANDARD FINANCIAL TRUST* Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939: TRUST INDENTURE TRUST AGREEMENT ACT SECTION SECTION Section 310(a)(1) 8.7 (a)(2) 8.7 5 (a)(3) Not Applicable (a)(4) 2.7(a)(ii) (b) 8.8 Section 311 (a) 8.12 (b) 8.12 Section 312 (a) 5.7 (b) 5.7 (c) 5.7 Section 313 (a) 8.13(a) (c) 10.8 (d) 8.13(c) (a)(4) 8.13(b) (b) 8.13(b) Section 314 (a) 8.14 (b) Not Applicable (c)(1) 8.15 (c)(2) 8.15 (c)(3) Not Applicable (d) Not Applicable (e) 1.1, 8.15 Section 315 (a) 8.1(a), 8.3(a) (b) 8.2, 10.8 (c) 8.1(a) (d) 8.1, 8.3 (e) Not Applicable Section 316 (a) Not Applicable (a)(1)(A) Not Applicable (a)(1)(B) Not Applicable (a)(2) Not Applicable (b) Not Applicable (c) 6.7 Section 317 (a)(1) Not Applicable (b) 5.9 Section 318 (a) 10.10 * Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 23, 1998 among (i) Pioneer-Standard Electronics, Inc., an Ohio corporation (including any successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as property trustee (in such capacity, the "Property Trustee" and, in its personal capacity and not in its capacity as Property Trustee, the "Bank"), (iii) the Bank, as Delaware trustee (in such capacity, the "Delaware Trustee"), (iv) John V. Goodger, an individual, James L. Bayman, an individual, and Arthur Rhein, an individual, each of whose address is c/o Pioneer-Standard Electronics, Inc., 4800 East 131st Street, Cleveland, Ohio 44105, each, 6 an "Administrative Trustee" and, collectively, the "Administrative Trustees" and, collectively with the Property Trustee and Delaware Trustee, the "Trustees") and (iv) the several Holders as hereinafter defined. W I T N E S S E T H: WHEREAS, the Depositor and certain of the Trustees have heretofore duly declared and created a business trust pursuant to the Delaware Business Trust Act by the entering into of that certain Trust Agreement, dated as of February 27, 1998 (the "Original Trust Agreement"), and by the execution and filing by certain of the Trustees with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on February 27, 1998, attached as Exhibit A (the "Certificate of Trust"), for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in the Debentures (as defined herein); and WHEREAS, the parties hereto desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance and sale of the Common Securities (as defined herein) by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities by the Trust pursuant to the Purchase Agreement (each as defined herein) and (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Holders of the Trust Securities, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE 1 DEFINED TERMS SECTION 1.1 Definitions For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; 7 unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to the Trust Securities, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on the Debentures. "Additional Sums" means, with respect to the Trust Securities, the amount of Additional Sums (as defined in the Indenture) paid by the Depositor on the Debentures. "Administrative Trustee" means each of John V. Goodger, James L. Bayman and Arthur Rhein, each solely in his capacity as Administrative Trustee of the Trust and not in his individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor in interest in such capacity, or any successor administrative trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, provided, however that an Affiliate of the Depositor shall be deemed not to include the Trust. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Certificate or beneficial interest therein, the rules and procedures of Euroclear and Cedel, and of the Clearing Agency for such security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: the entry of a decree or order by a court having jurisdiction in the premises judging such Person as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such 8 Person under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or the institution by such Person of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.9. "Board of Directors" means either the board of directors of the Depositor or any committee of that board duly authorized to act hereunder. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Property Trustee or the corporate trust office of the Debenture Trustee, is closed for business. "Certificate Depositary Agreement" means the agreement among the Trust, the Depositor and The Depository Trust Company, as the initial Clearing Agency, dated as of the Closing Date, relating to the Trust Securities Certificates substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "Certificate of Trust" has the meaning specified in the recitals to this Trust Agreement. "Certificated Preferred Security" has the meaning specified in Section 5.2. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The Depository Trust Company will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency 9 effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the Initial Closing Date (as defined in the Purchase Agreement), which date is also the date of execution and delivery of this Trust Agreement. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount with respect to the assets of the Trust of $50 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Stock" means common shares, without par value, of the Depositor. "Conversion Agent" has the meaning specified in Section 4.3. "Conversion Date" has the meaning specified in Section 4.3. "Conversion Price" has the meaning specified in Section 4.3. "Corporate Trust Office" means the principal corporate trust office of the Property Trustee at which at any particular time its corporate trust business shall be administered, which office at the date hereof is located at 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. "Current Market Price", with respect to Common Stock, means for any day the last reported sale price, regular way, on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on NASDAQ, or, if Common Stock is not quoted or admitted to trading on NASDAQ on such day, on the principal national securities exchange on which Common Stock is listed or admitted to trading, if Common Stock is listed on a national securities exchange, or, if Common Stock is not listed or admitted to trading on any such national securities exchange, on the principal quotation system on which Common Stock may be listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of Common Stock in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available in such manner, as 1 10 furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Directors. "Debenture Event of Default" means an "Event of Default" as defined in the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture and the First Supplemental Indenture, the date fixed for redemption thereof under the Indenture. "Debenture Trustee" means Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as trustee under the Indenture and the First Supplemental Indenture until a successor is appointed under the Indenture and the First Supplemental Indenture, and thereafter such successor trustee. "Debentures" means all of the Depositor's Series A 6 3/4% junior convertible subordinated debentures, due March 31, 2028, $148,200,000 aggregate principal amount, issued pursuant to the Indenture and the First Supplemental Indenture. "Definitive Preferred Securities Certificates" means either or both (as the context requires) of (a) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.11(b) and (b) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (ss.) 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means the Person identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Delaware trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Direct Action" has the meaning specified in Section 6.8. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "Early Dissolution Event" has the meaning specified in Section 9.2. 11 "Event of Default" means the occurrence of a Debenture Event of Default, whatever the reason for such Debenture Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. "Exchange Notice" has the meaning specified in Section 4.4(b). "Expiration Date" has the meaning specified in Section 9.1. "First Supplemental Indenture" means the First Supplemental Indenture to the Indenture, dated as of March 23, 1998, between the Depositor and the Debenture Trustee. "Global Certificate" means a Preferred Security that is registered in the Securities Register in the name of a Clearing Agency or a nominee thereof, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.11, including the Restricted Global Certificate and the Regulation S Global Certificate,. "Guarantee" means the Guarantee Agreement executed and delivered by the Depositor and Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as guarantee trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Preferred Securities, as amended from time to time. "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person shall be a beneficial owner within the meaning of the Delaware Business Trust Act. "Indenture" means the Junior Subordinated Indenture, dated as of March 23, 1998 between the Depositor and the Debenture Trustee, as amended or supplemented from time to time with respect to the Debentures. "Investment Company Event" means the receipt by the Property Trustee, on behalf of the Trust, of an Opinion of Counsel, rendered by a law firm having a national tax and securities practice (which Opinion of Counsel shall not have been rescinded by such law firm), to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under this Trust Agreement. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of 12 trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Liquidation Amount" means an amount with respect to the assets of the Trust equal to $50 per Trust Security. "Liquidation Date" means each date on which Debentures or cash are to be distributed to Holders of Trust Securities in connection with a dissolution and liquidation of the Trust pursuant to Section 9.4(a). "Liquidation Distribution" has the meaning specified in Section 9.4(d). "NASDAQ" means the Nasdaq National Market. "1940 Act" means the Investment Company Act of 1940, as amended. "Notice of Conversion" means the notice given by a Holder of Preferred Securities or Common Securities to the Conversion Agent directing the Conversion Agent to exchange such Preferred Securities or Common Securities, as the case may be, for Debentures and to convert such Debentures into Common Stock on behalf of such Holder. Such notice shall be substantially in the form set forth in Exhibit H. "Offering Memorandum" means the confidential offering memorandum, dated as of March 18, 1998, relating to the offering of the Preferred Securities by the Trust, as amended or supplemented from time to time. "Officers' Certificate" means a certificate signed by (i) the Chairman of the Board, a Vice Chairman, the President or a Vice President, and by (ii) the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, of the Depositor, and delivered to a Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 8.15 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: a statement that each officer signing the Officers' Certificate has read the covenant of condition and the definitions relating thereto; a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; a statement that each officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and a statement as to whether, in the opinion of each such officer, such 13 condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Trust, the Property Trustee or the Depositor, and who may be an employee of any thereof, and who shall be reasonably acceptable to the Property Trustee. Any Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: a statement that each individual signing the Opinion of Counsel has read the covenant or condition and the definitions relating thereto; a brief statement of the nature and scope of the examination or investigation undertaken by each individual in rendering the Opinion of Counsel; a statement that each individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. "Optional Redemption Price" means with respect to the Preferred Securities (except as set forth below with respect to redemption upon the occurrence of a Tax Event), the following percentages of the Liquidation Amounts thereof, plus accumulated and unpaid Distributions, if any, to the date fixed for redemption if redeemed during the twelve-month period commencing March 31 in each of the following years indicated: Year Redemption Price Year Redemption Price 2002 104.050% 2006 101.350% 14 2003 103.375% 2007 100.675% 2004 102.700% 2008 and thereafter 100.000% 2005 102.025% In the event of a redemption of Trust Securities upon the occurrence of a Tax Event, Trust Securities shall be redeemed at the redemption price of $50 per Trust Security and all accumulated and unpaid Distributions, if any, to the date fixed for redemption. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: Trust Securities theretofore canceled by the Securities Registrar or delivered to the Securities Registrar for cancellation or tendered for conversion; Trust Securities for whose payment or redemption money in the necessary 15 amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Trust Securities; provided that, if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; Trust Securities which have been exchanged for Debentures pursuant to Section 4.4; and Trust Securities which have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Section 5.5; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Trust Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Trust Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be fully protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Trust Securities that a Responsible Officer of the Property Trustee or the Delaware Trustee, or an individual Administrative Trustee, as the case may be, actually knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the Outstanding Trust Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Trust Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Securities Registrar the pledgee's right so to act with respect to such Trust Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Owner" means each Person who is the beneficial owner of an interest in a Global Certificate as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.9. "Payment Account" means a segregated non-interest bearing corporate trust account maintained by the Property Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee shall make payments to the Securityholders in accordance with Section 4.1. "Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. 16 "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit D. "Preferred Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount with respect to the assets of the Trust of $50 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Purchase Agreement" means the Purchase Agreement, dated as of March 18, 1998 among the Trust, the Depositor and the Initial Purchasers named therein. "Redemption Date" means, with respect to any Trust Security to be redeemed, each Debenture Redemption Date. "Redemption Price" means, with respect to any Trust Security, $50 per Trust Security, plus accumulated and unpaid Distributions (including any Additional Sums) to the date of redemption. "Registration Rights Agreement" means the Registration Rights Agreement, dated March 23, 1998, among the Depositor, the Trust, and the Initial Purchasers named in the Purchase Agreement. "Regulation S Certificate" means a certificate substantially in the form set forth in Exhibit E. "Regulation S Global Certificate" has the meaning specified in Section 5.2. "Regulation S Legend" has the meaning specified in Section 5.15(b). "Regulation S Preferred Security" has the meaning specified in Section 5.2. Such term includes the Regulation S Global Certificate. "Relevant Trustee" has the meaning specified in Section 8.9. "Responsible Officer" means any officer assigned to the Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Property Trustee or the Delaware Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Trust 17 Agreement, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Global Certificate" has the meaning specified in Section 5.2. "Restricted Period" means, with respect to the Preferred Securities, the one-year period, and with respect to the Debentures or the Common Stock issuable on conversion of the Preferred Securities, the 40-day period, in either case following the last original issue date of the Preferred Securities (including any Preferred Securities issued to cover overallotments). "Restricted Securities" means all Preferred Securities required pursuant to Section 5.4(c) to bear any Restricted Securities Legend. Such term includes the Restricted Global Certificate. "Restricted Securities Certificate" means a certificate substantially in the form set forth in Exhibit F. "Restricted Securities Legend" has the meaning specified in Section 5.15(a). "Rule 144A Preferred Securities" has the meaning specified in Section 5.2. "Securities Act" means the Securities Act of 1933, as amended. "Securities Act Legend" means a Restricted Securities Legend or a Regulation S Legend. "Securities Register" and "Securities Registrar"shall have the respective meanings specified in Section 5.4. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Business Trust Act. "Special Event" means a Tax Event or an Investment Company Event. "Successor Property Trustee" has the meaning specified in Section 8.9(b). "Successor Delaware Trustee" has the meaning specified in Section 8.9(c). "Successor Securities" has the meaning specified in Section 9.5. "Super Majority" has the meaning specified in Section 8.2. 18 "Tax Event" means the receipt by the Property Trustee, on behalf of the Trust, of an Opinion of Counsel, rendered by a law firm having a national tax and securities practice (which Opinion of Counsel shall not have been rescinded by such law firm), to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under this Trust Agreement and does not pertain to the use of the proceeds of the issuance of the Debentures, there is more than an insubstantial risk in each case after the date thereof that (i) the Trust is, or will be within 90 days of the date thereof, subject to United State Federal income tax with respect to income received or accrued on the Debentures, (ii) interest payable by the Depositor on the Debentures (other than interest payable by delivery of Common Stock pursuant to exercise of a conversion right by a Holder of Preferred Securities) is not, or will not be, within 90 days of the date thereof, deductible, in whole or in part, for United States Federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than de minimis amount of other taxes, duties, assessments or other governmental charges. "Trust" means the Delaware business trust continued hereby and identified on the cover page of this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing to be held by the Property Trustee pursuant to the terms of this Trust Agreement for the benefit of the Securityholders. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities 19 Certificates, the Global Certificates or the Certificated Preferred Securities. "Trustees" means, collectively, the Property Trustee, the Delaware Trustee and the Administrative Trustees. "Unrestricted Securities Certificate" means a certificate substantially in the form set forth in Exhibit G. ARTICLE 2 ESTABLISHMENT OF THE TRUST SECTION 2.1 Name The Trust continued hereby shall be known as "Pioneer-Standard Financial Trust", as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.2 Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is 4800 East 131st Street, Cleveland, Ohio 44105. SECTION 2.3 Organizational Expenses. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 2.4. Issuance of the Preferred Securities. The Depositor on behalf of the Trust executed and delivered the Purchase Agreement. On the Closing Date and on any other date Preferred Securities and Common Securities are sold pursuant to the overallotment option granted in the Purchase Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2 and deliver to the Initial Purchasers named in the Purchase Agreement Preferred Securities Certificates representing the Preferred Securities purchased by the Initial Purchasers pursuant to the Purchase Agreement, against receipt of the aggregate purchase price of such Preferred Securities which the Administrative Trustees shall promptly 20 deliver to the Property Trustee. The aggregate number of Preferred Securities outstanding at any time shall not exceed 2,500,000, plus up to an additional 375,000 Preferred Securities solely to cover overallotments, as provided for in the Purchase Agreement. SECTION 2.5 Issuance of the Common Securities; Subscription and Purchase of Debentures. (a) On the Closing Date and on any other date Preferred Securities and Common Securities are sold pursuant to the overallotment option granted in the Purchase Agreement, the Depositor will purchase all of the Common Securities issued by the Trust, in an aggregate amount at least equal to 3% of the capital of the Trust, at the same time as the Preferred Securities are sold, and an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2 and deliver to the Depositor Common Securities Certificates registered in the name of the Depositor, against receipt of the aggregate purchase price of such Common Securities from the Depositor. The aggregate number of Common Securities outstanding at any time shall not exceed 78,000, plus up to an additional 11,000 Common Securities to meet the capital requirements of the Trust in the event of an issuance of additional Preferred Securities pursuant to the overallotment option contained in the Purchase Agreement. (b) Contemporaneously with the sale of Trust Securities described in Section 2.4 and 2.5(a), the Administrative Trustees, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee (in its capacity as such) and having an aggregate principal amount equal to the Liquidation Amount of the Trust Securities sold and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor an equivalent sum of money. SECTION 2.6 Declaration of Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures, (b) to distribute the Trust's income as provided in this Trust Agreement and (c) to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, mortgage or pledge any of its assets or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States Federal income tax purposes as a grantor trust. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Trust and the Securityholders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall not be entitled to exercise any powers, 21 nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act. SECTION 2.7 Authorization to Enter into Certain Transactions. The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in Section 2.6 and paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Trustees shall have the exclusive power, duty and the authority to cause the Trust to engage in the following activities: As among the Trustees, each Administrative Trustee, acting singly or collectively, shall have the power and authority to act on behalf of the Trust with respect to the following matters: to issue and sell the Trust Securities including, without limitation, to prepare the Offering Memorandum and any amendment thereto, provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided, further, that there shall be no interests in the Trust other than the Trust Securities, and the issuance of Trust Securities shall be limited to simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date and any other date Preferred Securities and Common Securities are sold pursuant to the overallotment option granted to the Initial Purchasers named in the Purchase Agreement, subject to the issuance of Trust Securities pursuant to Section 5.5 and Successor Securities pursuant to Section 9.5; to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Registration Rights Agreement and the Certificate Depositary Agreement and such other agreements as may be necessary or incidental to the purposes and function of the Trust (and, with respect to the Purchase Agreement, to cause the Trust to perform such agreement on behalf of the Trust); to assist in the registration of the Preferred Securities under the Securities Act, and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; to assist in the listing of the Preferred Securities upon such securities exchange or exchanges, if any, as shall be determined by the Depositor and the registration of the Preferred Securities under the Securities Exchange Act of 1934, as amended, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing (only to the extent that such listing or registration is requested by the Depositor); to appoint a Paying Agent and a Securities Registrar in accordance 22 with this Trust Agreement; to the extent provided in this Trust Agreement, to wind up the affairs of and liquidate the Trust and prepare, execute and file the certificate of cancellation with the Secretary of State of the State of Delaware; unless otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute on behalf of the Trust any documents that the Administrative Trustees have the power to execute pursuant to this Trust Agreement; and to take any action incidental to the foregoing as the Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement including, but not limited to: causing the Trust not to be deemed to be an investment company required to be registered under the 1940 Act; causing the Trust to be classified for United States Federal income tax purposes as a grantor trust; and cooperating with the Depositor to ensure that the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes; provided that such action does not adversely affect in any material respect the interests of Securityholders except as otherwise provided in Section 10.2(a). As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: the establishment of the Payment Account; the receipt of and taking title to the Debentures; the collection of interest, principal and any other payments made in respect of the Debentures in the Payment Account; the distribution from the Trust Property of amounts owed to the Securityholders in respect of the Trust Securities; the exercise of all of the rights, powers and privileges of a holder of the Debentures; the sending of notices of default, other notices and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; the distribution of the Trust Property in accordance with the terms 23 of this Trust Agreement; to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust; after an Event of Default, the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); subject to this Section 2.7(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 2.7(a)(i); and to act as Paying Agent and/or Securities Registrar to the extent appointed as such hereunder. So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transactions except as expressly provided herein or contemplated hereby. In particular, the Trust shall not, and the Trustees shall not and shall cause the Trust not to (i) invest any proceeds received by the Trust from holding the Debentures (rather, the Trustees shall distribute all such proceeds to the Securityholders pursuant to the terms of this Trust Agreement and the Trust Securities), acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States Federal income tax purposes, (iv) make any loans or incur any indebtedness for borrowed money or issue any other debt, (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property, (vi) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Trust Securities in any way whatsoever except as permitted by the terms of this Trust Agreement, or (vii) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Trust Securities. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following actions (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): 24 to file by the Trust with the Commission and to execute on behalf of the Trust a registration statement on the appropriate form in relation to the Preferred Securities, including any amendments thereto; to determine the States and foreign jurisdictions in which to take appropriate action to qualify or register for resale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States and foreign jurisdictions; to the extent necessary, to prepare for filing by the Trust with the Commission and to execute on behalf of the Trust a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, including any amendments thereto (it being understood that neither the Trust nor the Depositor has any obligation under the Indenture, the Purchase Agreement or the Trust Agreement to register any Trust Securities under the Securities Exchange Act of 1934, as amended or to list any Trust Securities on any securities exchange); to negotiate, and to execute and deliver, on behalf of the Trust, the Purchase Agreement; and any other actions necessary or incidental to carry out any of the foregoing activities. Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as a corporation for United States Federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes. In this respect, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in their discretion to be necessary or desirable for such purposes, so long as such action does not adversely affect in any material respect the interests of the Holders of the Preferred Securities except as otherwise provided in Section 10.2(a). SECTION 2.8 Assets of Trust. The assets of the Trust shall consist of only the Trust Property. SECTION 2.9 Title to Trust Property 25 Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Trust and the Securityholders in accordance with this Trust Agreement. The Securityholders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. ARTICLE 3 PAYMENT ACCOUNT SECTION 3.1 Payment Account On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE 4 DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION SECTION 4.1 Distributions Distributions on the Trust Securities shall be cumulative, and shall accumulate from the date of original issuance, or the most recent Distribution Date (as defined herein) and, except in the event that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to the First Supplemental Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on June 30, 1998 (which dates correspond to the interest payment dates on the Debentures), when, as and if available for payment by the Property Trustee, as further described in paragraph (c) of this Section 4.1. If any date on which Distributions are otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distributions shall be made on the next succeeding day which is a Business Day (and no interest shall accrue for the period from and after such date until the next succeeding Business Day) except that, if such Business Day is in the next succeeding calendar year, 26 payment of such Distribution shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date (each date on which Distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). The Trust Securities represent undivided beneficial interests in the Trust Property, and the Distributions on the Trust Securities shall be payable at a rate of 6 3/4% per annum of the Liquidation Amount of the Trust Securities, such rate being the rate of interest payable on the Debentures to be held by the Property Trustee. The amount of Distributions payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. For periods less than a full month, Distributions shall reflect interest on Debentures computed on the basis of the actual number of elapsed days based on a 360-day year. The amount of Distributions payable for any period shall include the Additional Amounts, if any. Distributions on the Trust Securities shall be made by the Property Trustee from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the date which is the fifteenth day (whether or not a Business Day) next preceding such Distribution Date. SECTION 4.2 Redemption Upon an optional redemption (as set forth in the First Supplemental Indenture) of Debentures, the proceeds from such redemption shall be applied to redeem Trust Securities having an aggregate Liquidation Amount equal to the aggregate principal amount of the Debentures so redeemed by the Depositor, including pursuant to Section 4.4, at the Optional Redemption Price, and upon a mandatory redemption (as set forth in the First Supplemental Indenture) of Debentures, the proceeds from such redemption shall be applied to redeem Trust Securities, having an aggregate Liquidation Amount equal to the aggregate principal amount of the Debentures so redeemed by the Depositor, at the Redemption Price. The Trust may not redeem fewer than all the Outstanding Trust Securities unless all accumulated and unpaid Distributions have been paid on all Trust Securities for all quarterly Distribution periods terminating on or prior to the date of redemption. Notice of redemption (which notice will be irrevocable) shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to the Depositor and each Holder of Trust Securities to be redeemed, at such Holder's address as it appears in the Securities Register. All notices of redemption shall state: the Redemption Date; 27 the Redemption Price or the Optional Redemption Price, as the case may be; the record date for the determination of Holders entitled to receive payment of the Redemption Price or Optional Redemption Price, as the case may be, as provided in Section 4.2(d); the CUSIP number; if less than all of the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; the Conversion Price and that a Holder of Preferred Securities who desires to convert such Preferred Securities called for redemption must satisfy the requirements for conversion contained in Section 4.3 below; that on the Redemption Date the Redemption Price or the Optional Redemption Price, as the case may be, will become due and payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after said date; and the place or places where such Trust Securities are to be surrendered for payment of the Redemption Price or the Optional Redemption Price, as the case may be. The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price or the Optional Redemption Price, as the case may be, with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price or the Optional Redemption Price, as the case may be, shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price or the Optional Redemption Price, as the case may be. If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee will, so long as and to the extent the Preferred Securities are in book-entry-only form, irrevocably deposit with the Clearing Agency for the Preferred Securities funds sufficient to pay the Redemption Price or the Optional Redemption Price, as the case may be, and will give the Clearing Agency irrevocable instructions and authority to pay or credit, pursuant to its procedures, the Redemption Price or the Optional Redemption Price, as the case may be, to the Holders thereof. If the Preferred Securities are no longer in book-entry-only form, the Property Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price or the Optional Redemption Price, as the case may be, on such Preferred Securities held in certificated form and will give the 28 Paying Agent irrevocable instructions and authority to pay the Redemption Price or the Optional Redemption Price, as the case may be, to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then, upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption will cease, except (i) the right of such Securityholders to receive the Redemption Price or the Optional Redemption Price, as the case may be, but without interest, and (ii) the right to convert such Preferred Securities into Common Stock in the manner provided in Section 4.3 through the close of business on the Redemption Date; and such Trust Securities will cease to be Outstanding. In the event that any date on which any Redemption Price or the Optional Redemption Price, as the case may be, is payable is not a Business Day, then payment of the Redemption Price or the Optional Redemption Price, as the case may be, payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. Payment of the Redemption Price or the Optional Redemption Price, as the case may be, shall be made to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the date which is the fifteenth day (whether or not a Business Day) preceding such Redemption Date. If less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Preferred Securities that are to be redeemed. The particular Preferred Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by lot or by such other method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $50 or an integral multiple of $50 in excess thereof) of the Liquidation Amount of the Preferred Securities. The Property Trustee shall promptly notify the Securities Registrar and the Conversion Agent in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed; it being understood that, in the case of Preferred Securities registered in the name of and held of record by the Clearing Agency (or any successor) or any nominee, the distribution of the proceeds of such redemption will be made in accordance with the procedures of the Clearing Agency or its nominee. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed. In the event of any redemption in part, the Trust shall not be 29 required to (i) issue, register the transfer of or register the exchange of any Preferred Security during a period beginning at the opening of business 15 days before any selection for redemption of Preferred Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of Preferred Securities to be so redeemed or (ii) register the transfer of or register the exchange of any Preferred Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Preferred Securities being redeemed in part. (f) In the event of any redemption, the Trust shall not be required to issue, register the transfer of or register the exchange of any Preferred Security during a period beginning at the opening of business 15 days before any Redemption Date and ending at the close of business on such Redemption Date. SECTION 4.3 Conversion. The Holders of Trust Securities, subject to the limitations set forth in this Section, shall have the right, at their option, to cause the Conversion Agent to convert Trust Securities, on behalf of the converting Holders, into shares of Common Stock in the manner described herein on and subject to the following terms and conditions: (a) The Trust Securities will be convertible into fully paid and nonassessable shares of Common Stock pursuant to the Holder's direction to the Conversion Agent to exchange such Trust Securities for a portion of the Debentures having a principal amount equal to the aggregate Liquidation Amount of such Trust Securities, and immediately convert such amount of Debentures into fully paid and nonassessable shares of Common Stock at an initial rate of 3.1746 shares of Common Stock for each Trust Security (which is equivalent to a conversion price of approximately $15.75 per share of Common Stock), subject to certain adjustments set forth in the First Supplemental Indenture (as so adjusted, "Conversion Price"). (b) In order to convert Trust Securities into Common Stock, the Holder of such Trust Securities shall submit to the Conversion Agent an irrevocable Notice of Conversion to convert Trust Securities on behalf of such Holder, together, if the Trust Securities are in certificated form, with such certificates. The Notice of Conversion shall (i) set forth the number of Trust Securities to be converted and the name or names, if other than the Holder, in which the shares of Common Stock should be issued and (ii) direct the Conversion Agent (a) to exchange such Trust Securities for a portion of the Debentures held by the Property Trustee (at the rate of exchange specified in the preceding paragraph) and (b) to immediately convert such Debentures, on behalf of such Holder, into Common Stock (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Property Trustee in writing of the Holder's election to exchange Trust Securities for a portion of the Debentures held by the Property Trustee and the Property Trustee shall, upon receipt of such written notice, deliver to the Conversion Agent the appropriate principal amount of Debentures for exchange in accordance with this Section; provided, however, that so long as any Preferred Securities 30 remain Outstanding, the Trust shall not convert any Debentures except pursuant to a Notice of Conversion delivered to the Conversion Agent by a Holder of Preferred Securities. The Conversion Agent shall thereupon notify the Depositor of the Holder's election to convert such Debentures into shares of Common Stock. Holders of Trust Securities at the close of business on a Distribution payment record date will be entitled to receive the Distribution paid on such Trust Securities on the corresponding Distribution Date notwithstanding the conversion of such Trust Securities on or following such record date but prior to such Distribution Date. Except as provided above, neither the Trust nor the Depositor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions whether or not in arrears accumulated on the Trust Securities surrendered for conversion, or on account of any accrued and unpaid dividends on the shares of Common Stock issued upon such conversion. Trust Securities submitted for conversion prior to the expiration of conversion rights as provided in Section 4.3(c) shall be deemed to have been converted immediately prior to the close of business on the day on which an irrevocable Notice of Conversion relating to such Trust Securities is received by the Conversion Agent in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive the Common Stock issuable upon conversion of the Debentures shall be treated for all purposes as the record holder or holders of such Common Stock on the date of conversion. As promptly as practicable on or after the Conversion Date, the Depositor shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the Notice of Conversion and the Conversion Agent shall distribute such certificate or certificates to such Person or Persons. (c) The conversion rights of holders of the Debentures and the corresponding conversion rights of Holders of Trust Securities shall expire at the close of business on the date set for redemption of the Trust Securities upon the mandatory or optional redemption of the Debentures. (d) Each Holder of a Trust Security by its acceptance thereof initially appoints Wilmington Trust Company not in its individual capacity but solely as conversion agent (the "Conversion Agent") for the purpose of effecting the conversion of Trust Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Trust Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Trust Securities from time to time for Debentures held by the Trust in connection with the conversion of such Trust Securities in accordance with this Section and (ii) to convert all or a portion of the Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Section and to deliver to the Property Trustee any new Debenture or Debentures for any resulting unconverted principal amount delivered to the Conversion Agent by the Debenture Trustee. 31 (e) No fractional shares of Common Stock will be issued as a result of conversion, but, in lieu thereof, such fractional interest will be paid in cash by the Depositor to the Conversion Agent in an amount equal to the Current Market Price of the fractional share of the Common Stock, and the Conversion Agent will in turn make such payment to the Holder or Holders of Trust Securities so converted. (f) Nothing in this Section 4.3 shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Trust Securities or as set forth in this Trust Agreement or otherwise required of the Property Trustee or the Trust to pay any amounts on account of such withholdings. SECTION 4.4 Special Event Exchange or Redemption. If a Special Event shall occur and be continuing, the Property Trustee shall direct the Conversion Agent to exchange all Outstanding Trust Securities for Debentures having a principal amount equal to the aggregate Liquidation Amount of the Trust Securities to be exchanged and with accrued interest in an amount equal to any unpaid Distribution (including any Additional Amounts) on the Trust Securities; provided, however, that, in the case of a Tax Event, the Depositor shall have the right to (i) direct that less than all, or none, as appropriate, of the Trust Securities be so exchanged if and for so long as the Depositor shall have elected to pay any Additional Sums (as defined in the Indenture) such that the amount received by Holders of Trust Securities not so exchanged in respect of Distributions and other distributions are not reduced as a result of such Tax Event, and shall not have revoked any such election or failed to make such payments or (ii) cause the Trust Securities to be redeemed in the manner set forth below. If a Tax Event shall occur and be continuing, the Depositor shall have the right, upon not less than 30 nor more than 60 days' notice, to redeem the Debentures, in accordance with the provisions of Section 4.2 in whole or in part, for cash upon the later of (i) 90 days following the occurrence of such Tax Event or (ii) March 31, 2002. Promptly following such redemption, Trust Securities with an aggregate Liquidation Amount equal to the aggregate principal amount of the Debentures so redeemed will be redeemed by the Trust at the Optional Redemption Price applicable in the event of a redemption upon the occurrence of a Tax Event on a pro rata basis. Notice of any exchange pursuant to this Section 4.4 (an "Exchange Notice") of the Trust Securities, which Exchange Notice shall be irrevocable, will be given by the Property Trustee by first-class mail to the Depositor and to each record Holder of Trust Securities to be exchanged not fewer than 30 nor more than 60 days prior to the date fixed for exchange thereof. For purposes of the calculation of the date of exchange and the dates on which notices are given pursuant to this paragraph (b), an Exchange Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to each Holder. Each Exchange Notice shall be addressed to each Holder of Trust Securities at the address of such Holder appearing in the books and records of the Trust. Each Exchange Notice shall state: (A) the exchange date; (B) the aggregate Liquidation Amount and any unpaid Distributions (including any Additional Amounts) on the Trust Securities to be exchanged and the aggregate principal 32 amount and any accrued interest on the Debentures to be exchanged therefor; (C) that on the exchange date the Trust Securities to be so exchanged shall be exchanged for Debentures and that Distributions on the Trust Securities so exchanged will cease to accumulate on and after said date; (D) the record date for the determination of Holders of Trust Securities to be exchanged as provided in Section 4.4(g); and (E) the identity of the Conversion Agent, if any, and the place or places where each Trust Securities Certificate to be exchanged is to be surrendered in exchange for Debentures. No defect in the Exchange Notice or in the mailing thereof with respect to any Trust Security shall affect the validity of the exchange proceedings for any other Trust Security. In the event that fewer than all the Outstanding Preferred Securities are to be exchanged, then, on the exchange date, (i) if all of the Outstanding Preferred Securities are represented by Definitive Preferred Securities Certificates, the particular Preferred Securities to be exchanged will be selected by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption or exchange on a pro rata basis, (ii) if all of the Outstanding Preferred Securities are represented by Global Certificates, the Property Trustee shall provide for the selection for exchange of a portion of the Global Certificate representing beneficial interests therein on a pro rata basis and (iii) if Outstanding Trust Securities are represented by both Definitive Preferred Securities Certificates and Global Certificates, the Property Trustee shall select the portion of the Global Certificate representing the beneficial interests therein and the particular Outstanding Preferred Securities represented by Definitive Preferred Securities Certificates to be exchanged on a pro rata basis. In the case of clause (ii) or (iii) above, the particular Global Certificates to be exchanged shall be selected in accordance with the applicable rules and procedures for the Clearing Agency in whose name, or whose nominee's name, such Global Certificate is then held. Any Preferred Securities Certificate that is to be exchanged only in part shall be surrendered with due endorsement or by a written instrument of transfer fully executed by the Holder thereof (or its attorney duly authorized in writing) and the Trust shall prepare and deliver to such Holder, without service charge, a new Preferred Securities Certificate or Certificates in aggregate stated Liquidation Amount equal to, and in exchange for, the unredeemed portion of the Preferred Securities Certificate so surrendered. The Common Securities shall be exchanged in a similar manner. In the event of an exchange pursuant to this Section 4.4, on the date fixed for any such exchange, (i) if the Preferred Securities are represented by Global Certificates, the Clearing Agency or its nominee, as the record Holder of the Preferred Securities, will exchange through the Conversion Agent the Global Certificate representing the Preferred Securities to be exchanged for a registered Global Certificate or certificates representing the Debentures to be delivered upon such exchange, (ii) if the Preferred Securities are represented by Definitive Preferred Securities Certificates, the certificates representing the Preferred Securities to be so exchanged will be deemed to represent Debentures having a principal amount equal to the aggregate stated Liquidation Amount of such Preferred Securities until such certificates are presented to the Conversion Agent for exchange for definitive certificates representing Debentures and (iii) all rights of the Holders of the Preferred Securities so exchanged will cease, except for the right of such Holders to receive Debentures. The Common Securities shall be 33 exchanged in a similar manner. Each Holder, by becoming a party to this Trust Agreement, pursuant to Section 10.11 of this Trust Agreement will be deemed to have agreed to be bound by these exchange provisions in regard to the exchange of Trust Securities for Debentures pursuant to the terms described above. Nothing in this Section 4.4 shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Trust Securities or as set forth in this Trust Agreement or otherwise require the Property Trustee or the Trust to pay any amounts on account of such withholdings. An exchange of Trust Securities for Debentures pursuant to this Section 4.4 shall be made to Holders of Trust Securities as they appear on the Securities Register for Trust Securities on the relevant record date, which shall be the date which is the fifteenth day (whether or not a Business Day) preceding the exchange date. SECTION 4.5 Subordination of Common Securities. Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price or Optional Redemption Price, as the case may be, of, the Trust Securities, as applicable, shall be made pro rata based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date an Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or the Redemption Price or Optional Redemption Price, as the case may be, of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price or Optional Redemption Price, as the case may be, the full amount of such Redemption Price or Optional Redemption Price, as the case may be, on all Outstanding Preferred Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Amounts, if applicable) on, or the Redemption Price or Optional Redemption Price, as the case may be, of, Preferred Securities then due and payable. SECTION 4.6 Payment Procedures. Payments in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds, in accordance with the Certificate Depositary Agreement, on the applicable Distribution Dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holder of the Common Securities. 34 SECTION 4.7 Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States Federal, State and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared or filed) Form 1041 or the appropriate Internal Revenue Service form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder a Form 1099 or the appropriate Internal Revenue Service form required to be furnished to such Securityholder or the information required to be provided on such form. The Administrative Trustees shall provide the Depositor with a copy of all such returns, reports and schedules promptly after such filing or furnishing. The Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. SECTION 4.8 Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee, upon receipt of written notice from the Depositor or the Administrative Trustees, shall promptly pay from such Additional Sums any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. SECTION 4.9 Payments under Indenture. Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder (or any Owner with respect thereto) has directly received pursuant to Section 5.8 of the Indenture in accordance with the terms of Section 6.8 hereof. ARTICLE 5 TRUST SECURITIES CERTIFICATES SECTION 5.1 Initial Ownership Upon the creation of the Trust and until the issuance of the Trust Securities, and at any time during which no Trust Securities are Outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 5.2 The Trust Securities Certificates. The Preferred Securities Certificates shall be issued in minimum denominations of $50 35 Liquidation Amount and integral multiples of $50 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $50 Liquidation Amount and integral multiples thereof. The consideration received by the Trust for the issuance of the Trust Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. Preferred Securities initially sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act ("Rule 144A Preferred Securities") initially will be represented by one or more certificates in registered, global form (collectively, the "Restricted Global Certificate"). Preferred Securities initially sold in offshore transactions in reliance on Regulation S under the Securities Act ("Regulation S Preferred Securities") initially will be represented by one or more certificates in registered, global form (collectively, the "Regulation S Global Certificate"). Preferred Securities initially transferred, in accordance with Section 5.4, in a manner exempt from the registration requirements of the Securities Act will be exchanged for Preferred Securities in registered, certificated form (the "Certificated Preferred Securities"). The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee and authenticated by the Property Trustee. Trust Securities Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.4. SECTION 5.3 Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, to be executed on behalf of the Trust and delivered to or upon the written order of the Depositor, signed by its Chairman of the Board, any Vice Chairman, its President, any Senior Vice President or any Vice President, Treasurer or Assistant Treasurer or Controller without further corporate action by the Depositor, in authorized denominations. A Trust Security Certificate shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Trust Security Certificate has been authenticated under this Trust Agreement. Upon a written order of the Trust signed by one Administrative Trustee, the Property Trustee shall authenticate the Trust Security Certificates for original issue. The Property Trustee may appoint an authenticating agent acceptable to the Administrative Trustees to authenticate Trust Security Certificates. An authenticating 36 agent may authenticate Trust Security Certificates whenever the Property Trustee may do so. Each reference in this Trust Agreement to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Depositor or an Affiliate with respect to the authentication of Trust Securities. SECTION 5.4 Registration of Transfer and Exchange of Preferred Securities; Restrictions on Transfer. The Securities Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.8, a register in which, subject to such reasonable regulations as it may prescribe, the Securities Registrar shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. Such register is herein sometimes referred to as the "Securities Register". The Property Trustee shall be the initial "Securities Registrar". Subject to the other provisions of this Trust Agreement regarding restrictions on transfer, upon surrender for registration of transfer of any Preferred Securities Certificate at an office or agency of the Securities Registrar designated pursuant to Section 5.8 for such purpose, an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates of any authorized denominations and of a like aggregate Liquidation Amount and bearing such restrictive legends as may be required by this Trust Agreement. At the option of the Holder, and subject to the other provisions of this Section 5.4, Preferred Securities may be exchanged for other Preferred Securities of any authorized denomination and of a like Liquidation Amount, upon surrender of the Preferred Securities Certificates to be exchanged at any such office or agency. Whenever any Preferred Securities Certificates are so surrendered for exchange, an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee shall authenticate and deliver, the Preferred Securities Certificates which the Holder making the exchange is entitled to receive. All Preferred Securities issued upon any registration of transfer or exchange of Preferred Securities shall be entitled to the same benefits under this Trust Agreement, as the Preferred Securities surrendered upon such registration of transfer or exchange. Every Preferred Security Certificate presented or surrendered for registration of transfer or for exchange shall (if so requested by the Depositor or the Securities Registrar) be duly endorsed, or be accompanied by a written instrument of 37 transfer in form satisfactory to the Depositor and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. Certain Transfers and Exchanges. Notwithstanding any other provision of this Trust Agreement or the Preferred Securities, transfers and exchanges of Preferred Securities and beneficial interests in a Global Certificate of the kinds specified in this Section 5.4(b) shall be made only in accordance with this Section 5.4(b). Restricted Global Certificate to Regulation S Global Certificate. If the owner of a beneficial interest in the Restricted Global Certificate wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Regulation S Global Certificate, such transfer may be effected in accordance with the provisions of this Clause (b)(i) and Clause (b)(vi) below and subject to the Applicable Procedures. Upon receipt by the Property Trustee, as Securities Registrar, of (A) a written order given by the Clearing Agency or its authorized representative directing that a beneficial interest in the Regulation S Global Certificate in a specified Liquidation Amount (or number of Preferred Securities) be credited to a specified participant's account and that a beneficial interest in the Restricted Global Certificate in an equal Liquidation Amount (or number of Preferred Securities) be debited from another specified participant's account and (B) a Regulation S Certificate, satisfactory to the Property Trustee and duly executed by the owner of such beneficial interest in the Restricted Global Certificate or his attorney duly authorized in writing, then the Property Trustee, as Securities Registrar but subject to Clause (b)(vi) below, shall reduce the share number of the Restricted Global Certificate and increase the share number of the Regulation S Global Certificate by such specified Liquidation Amount (or number of Preferred Securities) as provided in Section 5.11(b). Regulation S Global Certificate to Restricted Global Certificate. If the owner of a beneficial interest in the Regulation S Global Certificate wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Restricted Global Certificate, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Property Trustee, as Securities Registrar, of (A) a written order given by the Clearing Agency or its authorized representative directing that a beneficial interest in the Restricted Global Certificate in a specified Liquidation Amount (or number of Preferred Securities) be credited to a specified participant's account and that a beneficial interest in the Regulation S Global Certificate in an equal Liquidation Amount (or number of Preferred Securities) be debited from another specified participant's account and (B) if such transfer is to occur during the Restricted Period, a Restricted Securities Certificate, satisfactory to the Property Trustee and duly executed by the owner of such beneficial interest in the Regulation S Global Certificate or his attorney duly authorized 38 in writing, then the Property Trustee, as Securities Registrar, shall reduce the Liquidation Amount (or number of Preferred Securities) of the Regulation S Global Certificate and increase the Liquidation Amount of (or number of Preferred Securities represented by) the Restricted Global Certificate by such specified Liquidation Amount (or number of securities) as provided in Section 5.11(b). Restricted Non-Global Certificate to Restricted Global Certificate or Regulation S Global Certificate. If the Holder of a Restricted Security (other than a Global Certificate) wishes at any time to transfer all or any portion of such Restricted Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Certificate or the Regulation S Global Certificate, such transfer may be effected only in accordance with the provisions of this Clause (b)(iii) and Clause (b)(vi) below and subject to the Applicable Procedures. Upon receipt by the Property Trustee, as Securities Registrar, of (A) such Restricted Security as provided in Section 5.4(a) and written instructions satisfactory to the Property Trustee directing that a beneficial interest in the Restricted Global Certificate or Regulation S Global Certificate in a specified Liquidation Amount (or number of Preferred Securities) not greater than the amount of such Preferred Security be credited to a specified participant's account and (B) a Restricted Securities Certificate if the specified account is to be credited with a beneficial interest in the Restricted Global Certificate, or a Regulation S Certificate, if the specified account is to be credited with a beneficial interest in the Regulation S Global Certificate, in either case satisfactory to the Property Trustee and duly executed by such Holder or his attorney duly authorized in writing, then the Property Trustee, as Securities Registrar but subject to Clause (b)(vi) below, shall cancel such Restricted Security (and issue a new Restricted Security in respect of any untransferred portion thereof) as provided in Section 5.4(a) and increase the Liquidation Amount of (or number of Preferred Securities represented by) the Restricted Global Certificate or the Regulation S Global Certificate, as the case may be, by the specified Liquidation Amount (or number of securities) as provided in Section 5.11(b). Regulation S Non-Global Certificate to Restricted Global Certificate or Regulation S Global Certificate. If the Holder of a Regulation S Preferred Security (other than a Global Certificate) wishes at any time to transfer all or any portion of such Regulation S Security to a Person who wishes to acquire the same in the form of a beneficial interest in the Restricted Global Certificate or the Regulation S Global Certificate, such transfer may be effected only in accordance with this Clause (b)(iv) and Clause (b)(vi) below and subject to the Applicable Procedures. Upon receipt by the Property Trustee, as Securities Registrar, of (A) such Regulation S Security as provided in Section 5.4(a) and written instructions satisfactory to the Property Trustee directing that a beneficial interest in the Restricted Global Certificate or Regulation S Global Certificate in a specified Liquidation Amount (or number of Preferred Securities) not greater than the amount of such Preferred Security be credited to a specified participant's account and (B) if the transfer is to occur during the Restricted Period and the specified account is to be credited with a beneficial interest in the Restricted Global Certificate, a Restricted Securities Certificate satisfactory to the Property Trustee and duly executed by such Holder or his attorney duly authorized in writing then the Property Trustee, as 39 Securities Registrar but subject to Clause (b)(vi) below, shall cancel such Regulation S Preferred Security (and issue a new Regulation S Preferred Security in respect of any untransferred portion thereof) as provided in Section 5.4(a) and increase the Liquidation Amount of (or number of Preferred Securities represented by) the Restricted Global Certificate or the Regulation S Global Certificate, as the case may be, by the specified Liquidation Amount (or number of securities) as provided in Section 5.11(b). Non-Global Certificate to Non-Global Certificate. A Preferred Security that is not a Global Certificate may be transferred, in whole or in part, to a Person who takes delivery in the form of another Preferred Security that is not a Global Certificate as provided in Section 5.11, provided that, if the Preferred Security to be transferred in whole or in part is a Restricted Security, or is a Regulation S Preferred Security and the transfer is to occur during the Restricted Period, then the Property Trustee shall have received (A) a Restricted Securities Certificate, satisfactory to the Property Trustee and duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Restricted Security, or (B) a Regulation S Certificate, satisfactory to the Property Trustee and duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Regulation S Preferred Security (subject in every case to Section 5.4(c)). Regulation S Global Certificate to be Held Through Euroclear or Cedel during Restricted Period. The Depositor shall use its best efforts to cause the Clearing Agency to ensure that, until the expiration of the Restricted Period, beneficial interests in the Regulation S Global Certificate may be held only in or through accounts maintained at the Clearing Agency by Euroclear or Cedel (or by participants acting for the account thereof), and no Person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account; provided that this Clause (b)(vi) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) or (iv) above. Securities Act Legends. Rule 144A Preferred Securities, Certificated Preferred Securities and their respective Successor Securities shall bear a Restricted Securities Legend as set forth in Section 5.15, and the Regulation S Preferred Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following: subject to the following Clauses of this Section 5.4(c), a Preferred Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Certificate or any portion thereof shall bear the Securities Act Legend borne by such Global Certificate while represented thereby; subject to the following Clauses of this Section 5.4(c), a new Preferred Security which is not a Global Certificate and is issued in exchange for another Preferred Security (including, a Global Certificate) or any portion thereof, upon transfer or otherwise, shall bear the Securities Act Legend borne by such other Preferred Security, 40 provided that, if such new Preferred Security is required pursuant to Section 5.4(b)(v) to be issued in the form of a Restricted Security, it shall bear a Restricted Securities Legend and, if such new Preferred Security is so required to be issued in the form of a Regulation S Preferred Security, it shall bear a Regulation S Legend; any Preferred Securities which are sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act, together with their Successor Securities shall not bear a Securities Act Legend; the Depositor shall inform the Property Trustee in writing of the effective date of any such registration statement registering the Preferred Securities under the Securities Act and shall notify the Property Trustee at any time when prospectuses may not be delivered with respect to Preferred Securities to be sold pursuant to such registration statement. The Property Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned registration statement; at any time after the Preferred Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Preferred Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Preferred Security (other than a Global Certificate) or any portion thereof which bears such a legend if the Property Trustee has received an Unrestricted Securities Certificate, satisfactory to the Property Trustee and duly executed by the Holder of such legended Preferred Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee shall authenticate and deliver such a new Preferred Security in exchange for or in lieu of such other Preferred Security as provided in this Article 5; a new Preferred Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Preferred Security (other than a Global Certificate) or any portion thereof which bears such a legend if, in the Depositor's judgment, placing such a legend upon such new Preferred Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee, at the written direction of the Depositor, shall authenticate and deliver such a new Preferred Security as provided in this Article 5; and notwithstanding the foregoing provisions of this Section 5.4(c), a Successor Security of a Preferred Security that does not bear a particular form of Securities Act Legend shall not bear such form of legend unless the Depositor has reasonable cause to believe that such Successor Security is a "restricted security" within the meaning of Rule 144 under the Securities Act, in which case an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee, at the written direction of the Depositor, shall authenticate and deliver a new Preferred Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article 5. 41 SECTION 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute and make available for authentication and delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicative Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 5.6 Persons Deemed Securityholders. The Property Trustee and the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Property Trustee nor the Securities Registrar shall be bound by any notice to the contrary. SECTION 5.7 Access to List of Securityholders' Names and Addresses. The Administrative Trustees or the Depositor shall furnish or cause to be furnished (unless the Property Trustee is acting as Securities Registrar with respect to the Trust Securities under the Trust Agreement) a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date (a) to the Property Trustee, quarterly at least five Business Days before each Distribution Date, and (b) to the Property Trustee, promptly after receipt by the Depositor of a written request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement, in each case to the extent such information is in the possession or control of the Administrative Trustees or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee in its capacity as Securities Registrar. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Trustee shall be as provided in the Trust Indenture Act, except to the extent Section 3819 of the Delaware Business Trust Act would require greater access to such 42 information, in which case the latter shall apply. Each Holder, by receiving and holding a Trust Securities Certificate, and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 5.8 Maintenance of Office or Agency. The Securities Registrar shall maintain in Wilmington, Delaware an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer, exchange or conversion and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Securities Registrar initially designates the Corporate Trust Office of the Property Trustee as its principal corporate trust office for such purposes. The Securities Registrar shall give prompt written notice to the Depositor and to the Securityholders of any change in the location of the Securities Register or any such office or agency. SECTION 5.9 Appointment of Paying Agent. In the event that the Preferred Securities are not in book-entry form only, the Trust shall maintain in Wilmington, Delaware, an office or agency (the "Paying Agent") where the Preferred Securities may be presented for payment. The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent shall initially be the Property Trustee, and any co-paying agent chosen by the Property Trustee and acceptable to the Administrative Trustees and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee and the Depositor. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). Each successor Paying Agent or any additional Paying Agent shall agree with the Trustees that, as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to each Securityholder. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in 43 this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 5.10 Ownership of Common Securities by Depositor. On the Closing Date, as provided in Section 2.5, the Depositor shall acquire beneficial and record ownership of the Common Securities. The Depositor has covenanted in the Indenture to maintain directly or indirectly 100% ownership of the Common Securities, provided that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities. To the fullest extent permitted by law, any attempted transfer of the Common Securities in violation of that covenant shall be void. The Administrative Trustees shall cause each Common Securities Certificate to contain a legend stating, "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO AN ENTITY WHOLLY OWNED BY PIONEER-STANDARD ELECTRONICS, INC. OR TO CERTAIN SUCCESSORS OF PIONEER-STANDARD ELECTRONICS, INC." SECTION 5.11 Global Securities; Non-Global Securities; Common Securities Certificate. Each Global Certificate authenticated under this Trust Agreement shall be registered in the name of the Clearing Agency designated by the Depositor for such Global Certificate or a nominee thereof and delivered to such Clearing Agency or a nominee thereof or custodian therefor, and each such Global Certificate shall constitute a Preferred Security for all purposes of this Trust Agreement. If a Global Certificate is to be exchanged for Certificated Preferred Securities or canceled in whole, it shall be surrendered by or on behalf of the Clearing Agency, its nominee or custodian to the Property Trustee, as Securities Registrar, for exchange or cancellation as provided in this Article 5. If any Global Certificate is to be exchanged for Certificated Preferred Securities or canceled in part, or if another Preferred Security is to be exchanged in whole or in part for a beneficial interest in any Global Certificate, in each case, as provided in Section 5.4, then either (i) such Global Certificate shall be so surrendered for exchange or cancellation as provided in this Article 5 or (ii) the principal amount thereof (or number of Preferred Securities represented thereby) shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of (or number of securities represented by) such Certificated Preferred Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Property Trustee, as Securities Registrar, whereupon the Property Trustee, in accordance with the Applicable Procedures, shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Certificate, an Administrative Trustee shall execute on behalf of the Trust by manual or facsimile signature, and the Property Trustee shall, subject to Section 5.4 and as otherwise provided in this Article 5, authenticate and deliver 44 any Preferred Securities issuable in exchange for such Global Certificate (or any portion thereof) to or upon the written order of, and registered in such names as may be directed by, the Clearing Agency or its authorized representative. Upon the request of the Property Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Depositor shall promptly make available to the Property Trustee a reasonable supply of Preferred Securities that are not in the form of Global Certificates. The Property Trustee shall be entitled to conclusively rely upon any order, direction or request of the Clearing Agency or its authorized representative which is given or made pursuant to this Article 5 if such order, direction or request is given or made in accordance with the Applicable Procedures. Every Preferred Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Certificate or any portion thereof, whether pursuant to this Article 5 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Certificate, unless such Preferred Security is registered in the name of a Person other than the Clearing Agency for such Global Certificate or a nominee thereof. The Clearing Agency or its nominee, as registered owner of a Global Certificate, shall be the Holder of such Global Certificate for all purposes under this Trust Agreement and the Preferred Securities, and Owners of beneficial interests in a Global Certificate shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such Owner's beneficial interest in a Global Certificate will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Clearing Agency or its nominee or its participants and such Owners of beneficial interests in a Global Certificate will not be considered the Owners or Holders of such Global Certificate for any purpose of this Trust Agreement or the Preferred Securities. A single Common Securities Certificate representing the Common Securities shall initially be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 5.12 Notices to Clearing Agency. To the extent that a notice or other communication to the Owners is required under this Trust Agreement, unless and until Definitive Preferred Securities Certificates shall have been issued to Owners pursuant to Section 5.13, the Trustees shall give all such notices and communications specified herein to be given to Owners or Holders to the Clearing Agency, and shall have no obligations to provide notices directly to the Owners. SECTION 5.13 Definitive Preferred Securities Certificates. Notwithstanding any other provision in this Trust Agreement, no Global Certificate may be exchanged in whole or in part for Certificated Preferred Securities or for any Preferred Securities registered, and no transfer of a Global Certificate in whole or in part 45 may be registered, in the name of any Person other than the Clearing Agency for such Global Certificate or a nominee thereof unless (i) such Clearing Agency (A) has notified the Trust and the Depositor that it is unwilling or unable to continue as Clearing Agency for such Global Certificate or (B) has ceased to be a clearing agency registered as such under the Securities Exchange Act of 1934, as amended, and in either case the Trust and the Depositor thereupon fail to appoint a successor Clearing Agency, (ii) the Trust and the Depositor, at their option, notify the Property Trustee in writing that they elect to cause the issuance of the Preferred Securities in certificated form or (iii) there shall have occurred and be continuing an Event of Default; after the occurrence and continuation of an Event of Default, the Holders of a majority in aggregate Liquidation Amount of the Preferred Securities may notify the Property Trustee in writing that they elect to cause the issuance of Preferred Securities in certificated form. In all cases, Certificated Preferred Securities delivered in exchange for any Global Certificate or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Clearing Agency (in accordance with its customary procedures) and the Property Trustee, as Securities Registrar, will make an appropriate adjustment in its records to reflect a decrease in the liquidation preference of the relevant Global Certificate. SECTION 5.14 Rights of Securityholders. The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and, when issued and delivered to Securityholders against payment of the purchase price therefor, will be fully paid and nonassessable undivided beneficial interests in the assets of the Trust. The Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 5.15 Restrictive Legends. The Restricted Global Certificate and the Certificated Preferred Securities shall bear the following legend (the "Restricted Securities Legend") unless the Depositor determines otherwise in accordance with applicable law: "THE PREFERRED SECURITIES EVIDENCED HEREBY, THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR, THE SHARES OF COMPANY COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED SECURITIES AND THE DEBENTURES AND THE GUARANTEE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES 46 ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE TRANSFEROR AND ANY PERSON ACTING ON BEHALF OF SUCH TRANSFEROR REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS." The Regulation S Preferred Securities shall bear the following legend (the "Regulation S Legend") unless the Depositor determines otherwise in accordance with the applicable law: "THE PREFERRED SECURITIES EVIDENCED HEREBY, THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR, THE SHARES OF COMPANY COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED SECURITIES AND THE DEBENTURES, AND THE GUARANTEE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE." ARTICLE 6 ACT OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 6.1 Limitations on Voting Rights. Except as provided in this Section, in Section 8.2 and 10.2 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. Subject to Section 8.2 hereof, if an Event of Default with respect to the Preferred Securities has occurred and been subsequently cured, waived or otherwise 47 eliminated, the provisions of Section 6.1(b)(ii) hereof shall apply. During (x) the period commencing on the date of the occurrence of an Event of Default with respect to the Preferred Securities and ending on the date when such Event of Default is cured, waived or otherwise eliminated, or (y) any period not described in either the preceding sentence or the preceding clause (x), the provisions of Section 6.1(b)(i) shall apply. The Holders of a majority in aggregate Liquidation Amount of the Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or to exercise any trust or power conferred upon the Property Trustee under this Trust Agreement, including the right to direct the Property Trustee to exercise the remedies available to it as a holder of the Debentures but excluding the right to direct the Property Trustee to consent to an amendment, modification or termination of the Indenture or the First Supplemental Indenture (which shall be as provided below). So long as any Debentures are held by the Property Trustee, the Trustees shall not (A) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures, (B) waive any past default which is waivable under Section 5.13 of the Indenture, (C) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture, the First Supplemental Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a majority in aggregate Liquidation Amount of all Outstanding Preferred Securities (except in the case of clause (D), which consent, in the event that no Event of Default shall occur and be continuing, shall be of the Holders of a majority in aggregate Liquidation Amount of all Trust Securities, voting together as a single class); provided, however, that where a consent under the Indenture or the First Supplemental Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities, except by a subsequent vote of the Holders of the Preferred Securities. The Property Trustee shall notify all Holders of record of the Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation or partnership for United States Federal income tax purposes on account of such action. Subject to Section 8.2 of this Trust Agreement and only after the Event of Default with respect to the Preferred Securities has been cured, waived, or otherwise eliminated the Holders of a majority in aggregate Liquidation Amount of the Common Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or to exercise any trust or power conferred upon the Property Trustee under the Trust Agreement, including the 48 right to direct the Property Trustee to exercise the remedies available to it as a holder of the Debentures but excluding the right to direct the Property Trustee to consent to an amendment, modification or termination of the Indenture or the First Supplemental Indenture (which shall be as provided below). So long as any Debentures are held by the Property Trustee, the Trustees shall not (A) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures, (B) waive any past default which is waivable under Section 5.13 of the Indenture, (C) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture, the First Supplemental Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of a majority in aggregate Liquidation Amount of all Common Securities (except in the case of clause (D), which consent, in the event that no Event of Default shall occur and be continuing, shall be of the Holders of a majority in aggregate Liquidation Amount of all Trust Securities, voting together as a single class); provided, however, that where a consent under the Indenture or the First Supplemental Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Common Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Common Securities, except by a subsequent vote of the Holders of the Common Securities. The Property Trustee shall notify all Holders of record of the Common Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Common Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation or partnership for United States Federal income tax purposes on account of such action. The provisions of this Section 6.1(b) and Section 6.1(a) of this Trust Agreement shall be in lieu of ss. 316(a)(1)(A) of the Trust Indenture Act, and such ss. 316(a)(1)(A) is hereby expressly excluded from this Trust Agreement and the Preferred Securities, as permitted by the Trust Indenture Act. If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of a majority in aggregate Liquidation Amount of the Outstanding Preferred Securities. SECTION 6.2 Notice of Meetings. Notice of all meetings of the Holders of the Preferred Securities, stating the time, place 49 and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to each Preferred Securityholder of record, at its registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.3 Meetings of Securityholders. No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Preferred Securityholders of record of 25% of the Preferred Securities (based upon their Liquidation Amount), and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of the Holders of Trust Securities to vote on any matters as to which such Holders are entitled to vote. Holders of record of 50% of the Trust Securities (based upon their Liquidation Amount) entitled to vote, present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote by the Holders of record of Trust Securities present and entitled to vote, in person or by proxy, holding a majority of the Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote held by Holders of record of Trust Securities present and entitled to vote, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. SECTION 6.4 Voting Rights. Securityholders shall be entitled to one vote for each $50 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned at such time by the Depositor, the Trustees or any Affiliate of any Trustee shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not Outstanding. SECTION 6.5 Proxies, Etc. At any meeting of Securityholders, any Securityholders entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Securityholders of record shall be entitled to vote. When Trust 50 Securities are held jointly by several Persons, any one of them may vote at any meeting in person or represented by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.6 Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding a majority of all Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing. SECTION 6.7 Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Property Trustee or the Administrative Trustees who call a meeting pursuant to Section 6.3 may from time to time fix a date, not more than 90 days prior to the date of any such meeting of Securityholders or the payment of Distributions or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. SECTION 6.8 Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders or Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders or Owners in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders or Owners signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor of the Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate 51 of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register or, in the case of ownership of any interest in any Global Certificates, by the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise between the Securityholders and the Administrative Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article 6, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. Upon the occurrence and continuation of an Event of Default, the Holders of Preferred Securities shall rely on the enforcement by the Property Trustee of its rights as holder of the Debentures against the Depositor. If the Property Trustee fails to enforce its rights as holder of the Debentures after a request therefor by a Holder of Preferred Securities, such Holder may, to the fullest extent permitted by law, proceed to enforce such rights directly against the Depositor. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Depositor to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the Redemption Date), then a Holder of Preferred Securities shall have the right to institute a proceeding directly against the Depositor for enforcement of payment to such Holder of the principal amount of or interest on Debentures having a principal amount equal to the aggregate Liquidation 52 Amount of the Preferred Securities of such Holder after the respective due date specified in the Debentures (a "Direct Action"). In connection with any such Direct Action, the Depositor will be subrogated to the rights of any Holder of the Preferred Securities to the extent of any payment made by the Depositor to such Holder of Preferred Securities as a result of such Direct Action. SECTION 6.9 Inspection of Records. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE 7 REPRESENTATIONS AND WARRANTIES SECTION 7.1 Representations and Warranties of the Property Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee, each severally on behalf of and as to itself, hereby represents and warrants for the benefit of the Depositor and the Securityholders that (each such representation and warranty made by the Property Trustee and the Delaware Trustee being made only with respect to itself): the Property Trustee is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; the Delaware Trustee is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; each of the Property Trustee and the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; this Trust Agreement has been duly authorized, executed and delivered by each of the Property Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of the Property Trustee and the Delaware Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and the execution, delivery and performance by each of the Property 53 Trustee and the Delaware Trustee of this Trust Agreement have been duly authorized by all necessary corporate or other action on the part of the Property Trustee and the Delaware Trustee and do not require any approval of stockholders of the Property Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate either of the Property Trustee's or the Delaware Trustee's charter or by-laws or (ii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking, corporate, or trust powers of the Property Trustee or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Delaware Trustee. SECTION 7.2 Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Securityholders that: the Trust Securities Certificates issued on the Closing Date on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders will be, as of such date, entitled to the benefits of this Trust Agreement; and there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. ARTICLE 8 THE TRUSTEES SECTION 8.1 Certain Duties and Responsibilities. The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. The Property Trustee, before the occurrence of any Event of Default and after the curing or waiving of all Events of Default that may have occurred, shall undertake to perform only such duties and obligations as are specifically set forth in this Trust Agreement and the Trust Indenture Act and no implied covenants shall be read into this Trust Agreement against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 8.2) of which a Responsible Officer of the Property Trustee has actual knowledge, the Property Trustee shall exercise such rights and powers vested in it by this Trust Agreement and the Trust Indenture Act, and use the same degree of care and skill in its exercise, as a prudent individual would exercise or use under the circumstances in the conduct of his or her own affairs. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees to expend or risk their own 54 funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section. Nothing in this Trust Agreement shall be construed to release the Administrative Trustees from liability for their own grossly negligent action, their own grossly negligent failure to act, or their own willful misconduct. To the extent that, at law or in equity, an Administrative Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Administrative Trustee shall not be liable to the Trust or to any Securityholder for such Administrative Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Administrative Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustees. All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; the Property Trustee's sole duty with respect to the custody, safekeeping 55 and physical preservation of the Debentures and the Payment Account shall be to deal with such property as fiduciary assets, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of the Administrative Trustees or the Depositor; and the Property Trustee shall have no duty or liability with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments thereon or in connection therewith. SECTION 8.2 Notice of Defaults. Within ten days after the occurrence of any Event of Default actually known to a Responsible Officer of the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Event of Default to the Holders of Preferred Securities, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived, provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures, the Property Trustee shall be fully protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities. Within ten days after the receipt of notice of the Depositor's exercise of its right to extend the interest payment period for the Debentures pursuant to the First Supplemental Indenture, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such exercise to the Securityholders, unless such exercise shall have been revoked. The Holders of a majority in Liquidation Amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences, provided that, if the underlying Debenture Event of Default: is not waivable under the Indenture, the Event of Default under this Trust Agreement shall also not be waivable; or 56 requires the consent or vote of greater than a majority in principal amount of the holders of the Debentures, including the consent or vote of all such holders, (a "Super Majority") to be waived under the Indenture, the Event of Default under this Trust Agreement may only be waived by the vote of the Holders of the same proportion in Liquidation Amount of the Preferred Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. The provisions of Section 6.1(b) and this Section 8.2(c) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Trust Agreement and the Preferred Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Trust Agreement without any further act, vote, or consent of the Holders of the Common Securities. The Holders of a majority in Liquidation Amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Debenture Event of Default: is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default as provided below in this Section 8.2(d), the Event of Default under this Trust Agreement shall also not be waivable; or requires the consent or vote of a Super Majority to be waived, except where the Holders of the Common Securities are deemed to have waived such Event of Default under this Trust Agreement as provided below in this Section 8.2(d), the Event of Default under this Trust Agreement may only be waived by the vote of the Holders of the same proportion in Liquidation Amount of the Common Securities that the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding; provided further, that each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only 57 the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Preferred Securities. The provisions of Section 6.1(b) and this Section 8.2(d) shall be in lieu of ss.316(a)(1)(B) of the Trust Indenture Act and such ss.316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Trust Agreement and the Common Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 8.2(d), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Trust Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. A waiver of a Debenture Event of Default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Trust Agreement. The foregoing provisions of this Section 8.2(e) shall be in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Trust Agreement and the Preferred Securities, as permitted by the Trust Indenture Act. SECTION 8.3 Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee such as a certificate presented for transfer, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; if no Event of Default has occurred and is continuing and, (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions in this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Holders of Preferred Securities are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from 58 taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate and an Opinion of Counsel which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees; the Property Trustee shall have no duty to accomplish any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; the Property Trustee may consult with counsel at the Depositor's expense (which counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees) and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; and the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity satisfactory to it against the costs, expenses (including attorneys' fees and expenses and the expenses of the Property Trustee's agents, custodians or nominees) and liabilities which might be incurred by it in compliance with such request or direction; the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolutions, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, but the Property Trustee may make such further inquiry or investigation into such facts or custodian or nominee matters as it may see fit; the Property Trustee may execute any of the trusts or powers 59 hereunder or perform any duties hereunder either directly or by or through its agents, custodians or nominees, attorneys or an Affiliate, provided that the Property Trustee shall not be responsible for the negligence or recklessness on the part of any agent, attorney, custodian or nominee appointed by it with due care hereunder; whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders of the Trust Securities, which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in conclusively relying on or acting in accordance with such instructions; except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement; the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Trust Agreement; and in the event that the Property Trustee is also acting as a Paying Agent, Conversion Agent, and/or Securities Registrar hereunder, the rights and protections afforded to the Property Trustee pursuant to this Article 8 shall also be afforded to such Paying Agent, Conversion Agent, and/or Securities Registrar. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 8.4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall not be taken as the statements of the Trustees, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. SECTION 8.5 May Hold Securities 60 Except as provided in the definition of the term "Outstanding" in Article 1, any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Section 8.8 and 8.12, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 8.6 Compensation; Indemnity; Fees The Depositor agrees: to pay the Trustees from time to time reasonable compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any officer, director, shareholder, employee, representative or agent of any Trustee, and (iv) any employee or agent of the Trust or its Affiliates (referred to herein as an "Indemnified Person") from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation, dissolution or termination of the Trust or in connection with the administration of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Trust Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. No Trustee may claim any lien or charge on any Trust Property as a result of any amount due pursuant to this Section 8.6. SECTION 8.7 Property Trustee Required; Eligibility of Trustees. There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least 61 $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. SECTION 8.8 Conflicting Interests. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. SECTION 8.9 Resignation and Removal; Appointment of Successor. Subject to Sections 8.9(b) and 8.9(c), Trustees (the "Relevant Trustee") may be appointed or removed without cause at any time: until the issuance of any Trust Securities, by written instrument executed by the Depositor; and after the issuance of any Trust Securities, by vote of the Holders of a majority in Liquidation Amount of the Common Securities voting as a class. The Trustee that acts as Property Trustee shall not be removed in accordance with Section 8.9(a) until a successor possessing the qualifications to act as a Property Trustee under Section 8.7 (a "Successor Property Trustee") has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Depositor and the removed Property Trustee. The Trustee that acts as Delaware Trustee shall not be removed in 62 accordance with Section 8.9(a) until a successor possessing the qualifications to act as Delaware Trustee under Section 8.7 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Depositor and the removed Delaware Trustee. A Trustee appointed to office shall hold office until his, her or its successor shall have been appointed or until his, her or its death, removal, resignation, dissolution or liquidation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Depositor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: No such resignation of the Trustee that acts as the Property Trustee shall be effective: until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Depositor and the resigning Property Trustee; or until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Trust Securities; no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Depositor and the resigning Delaware Trustee; and no appointment of a successor Property Trustee or Delaware Trustee shall be effective until all fees, charges, and expenses of the retiring Property Trustee or retiring Delaware Trustee, as the case may be, have been paid. The Holders of the Common Securities shall use their best efforts to promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with Section 8.9(d). If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 8.9 within 60 days after delivery pursuant to this Section 8.9 of an instrument of resignation or removal, the Property Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. 63 No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or Successor Delaware Trustee, as the case may be. The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.8 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees or the Delaware Trustee, as the case may be, set forth in Section 8.7). The indemnity provided to a Trustee under Section 8.6 shall survive any Trustee's resignation or removal or termination of this Trust Agreement. SECTION 8.10 Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee and (b) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder. Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. 64 No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. SECTION 8.11 Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 8.12 Preferential Collection of Claims Against Depositor or Trust. If and when the Property Trustee shall be or become a creditor of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), the Property Trustee shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). SECTION 8.13 Reports by Property Trustee. To the extent required by the Trust Indenture Act, within 60 days after December 31 of each year commencing with December 31, 1998 the Property Trustee shall transmit to all Securityholders in accordance with Section 10.8 and to the Depositor, a brief report dated as of such December 31 with respect to: its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; a statement that the Property Trustee has complied with all of its obligations under this Trust Agreement during the twelve-month period (or, in the case of the initial report, the period since the Closing Date) ending with such December 31 or, if the Property Trustee has not complied in any material respects with such obligations, a description of such noncompliance; any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities; and 65 such other information as is required by Section 313(a) of the Trust Indenture Act. In addition, the Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. A copy of such report shall, at the time of such transmissions to Holders, be filed by the Property Trustee with each national securities exchange or self-regulatory organization upon which the Trust Securities are listed, with the Commission and with the Depositor. SECTION 8.14 Reports to the Property Trustee. The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as are required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 8.15 Evidence of Compliance with Conditions Precedent. Each of the Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 8.16 Number of Trustees. The number of Trustees shall be five, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same Person. If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 8.16(a), or if the number of Trustees is increased pursuant to Section 8.16(a), a vacancy shall occur. The death, resignation, retirement, removal, bankruptcy, dissolution, termination, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Trust Agreement. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 8.9, the Administrative Trustees in office, regardless of their 66 number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 8.17 Delegation of Power. Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereof filed with the Commission, or making any other governmental filing. The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE 9 DISSOLUTION, LIQUIDATION AND MERGER SECTION 9.1 Dissolution upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on September 30, 2028 (the "Expiration Date"). SECTION 9.2 Early Dissolution. The first to occur of any of the following events is an "Early Dissolution Event": the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; the occurrence of a Special Event except in the case of a Tax Event following which the Depositor has elected (i) to pay any Additional Sums (in accordance with Section 4.4) such that the net amount received by Holders of Preferred Securities in respect of Distributions are not reduced as a result of such Tax Event and the Depositor has not revoked any such election or failed to make such payments or (ii) to redeem all or some of the Debentures pursuant to Section 4.4(a); the redemption, conversion or exchange of all of the Trust Securities; 67 an order for dissolution of the Trust shall have been entered by a court of competent jurisdiction; and receipt by the Property Trustee of written notice from the Depositor at any time (which direction is optional and wholly within the discretion of the Depositor) of its intention to dissolve the Trust and distribute the Debentures in exchange for the Preferred Securities. SECTION 9.3 Dissolution. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of all expenses owed by the Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. SECTION 9.4 Liquidation. If an Early Dissolution Event specified in clause (a), (b), (d) or (e) of Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder an aggregate principal amount of Debentures equal to the aggregate Liquidation Amount of Trust Securities held by such Holder, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address as it appears in the Securities Register. All notices of liquidation shall: state the Liquidation Date; state that, from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent an aggregate principal amount of Debentures equal to the aggregate Liquidation Amount of Preferred Securities held by such Holder; and provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or, if Section 9.4(d) applies, receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. 68 Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date and, unless the Property Trustee determines otherwise, shall be the date which is the fifteenth day (whether or not a Business Day) next preceding the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) the Clearing Agency or its nominee, as the record holder of such Trust Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution and (iii) any Trust Securities Certificates not held by the Clearing Agency will be deemed to represent an aggregate principal amount of Debentures equal to the aggregate Liquidation Amount of Trust Securities held by such Holders, and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities until such certificates are presented to the Property Trustee for transfer or reissuance. In the event that, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practicable, the Trust Property shall be liquidated, and the Trust shall be wound-up or terminated, by the Property Trustee in such manner as the Property Trustee determines, and an Administrative Trustee shall prepare, execute and file the certificate of cancellation with the Secretary of State of the State of Delaware. In such event, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such winding-up or termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust 69 The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except pursuant to this Section 9.5 or Section 9.4. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the Property Trustee, the Delaware Trustee or the Holders of the Preferred Securities, the Trust may merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to Distributions and payments upon liquidation, redemption and otherwise, (ii) the Depositor expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Debentures, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holder's interest in the new entity), (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act, and (c) following such merger, consolidation, amalgamation or replacement, the Trust or such successor entity will be treated as a grantor trust for United States Federal income tax purposes, and (viii) the Depositor or any permitted successor or assignee owns, directly or indirectly, all of the common securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of 100% in aggregate Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer 70 or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States Federal income tax purposes. ARTICLE 10 MISCELLANEOUS PROVISIONS SECTION 10.1 Limitation of Rights of Securityholders. Other than as set forth in Section 9.1, the death, incapacity, dissolution, bankruptcy or termination of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to dissolve the Trust or terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 10.2 Amendment. This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, (i) to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will be classified for United States Federal income tax purposes as a grantor trust at all times that any Trust Securities are Outstanding or to ensure that the Trust will not be required to register as an "investment company" under the 1940 Act, or be classified as other than a grantor trust for United States Federal income tax purposes, or (iii) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Trust Agreement under the Trust Indenture Act; provided, however, that in the case of clause (i), such action shall not adversely affect in any material respect the interests of any Securityholder, and any such amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. Except as provided in Section 10.2(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with (i) the consent of Holders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding, acting as a single class, and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States Federal income tax purposes or the Trust's exemption from the status of an "investment company" under the 1940 Act; provided, however, if any amendment or proposal that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment or 71 otherwise, would adversely affect only the Preferred Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in Liquidation Amount of such class of Trust Securities. In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended. Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from the status of an "investment company" under the 1940 Act or be classified as other than a grantor trust for United States Federal income tax purposes. Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor. In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement which affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. SECTION 10.3 Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.4 Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND TRUSTEES WITH RESPECT TO 72 THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES AND EXCLUDING SECTIONS 3540 AND 3561 OF TITLE 12 THEREOF. SECTION 10.5 Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day which is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day (except as otherwise provided in Section 4.1(a) and Section 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no interest shall accrue thereon for the period after such date. SECTION 10.6 Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or any Relevant Trustee, including any successor by operation of law. Except in connection with a transaction that is permitted under Article 8 of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.7 Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 10.8 Reports, Notices and Demands. Any report, notice, demand or other communications which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Holder of Preferred Securities, to such Holder as such Holder's name and address may appear on the Securities Register; and (b) in the case of the Holder of the Common Securities, to Pioneer-Standard Electronics, Inc., 4800 East 131st Street, Cleveland, Ohio 44105, Attention: Vice President--Treasurer, facsimile no. (216) 587-3563. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate 73 Trust Administration, (b) with respect to the Delaware Trustee, to Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, with a copy of any such notice to the Property Trustee at its address above, and (c) with respect to the Administrative Trustees, to them at the address for notices to the Depositor, marked "Attention: Administrative Trustees of Pioneer-Standard Financial Trust c/o Vice President--Treasurer". Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. SECTION 10.9 Agreement Not to Petition. Each of the Trustees and the Depositor agrees for the benefit of the Securityholders that, until at least one year and one day after the Trust has been dissolved in accordance with Article 9, it shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor takes action in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Securityholders, that, at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Trustee or the Trust may assert. The provisions of this Section 10.9 shall survive the dissolution of the Trust and the termination of this Trust Agreement. SECTION 10.10 Trust Indenture Act; Conflict with Trust Indenture Act. This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. The Property Trustee shall be the only Trustee which is the trustee for the purposes of the Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or to be excluded, as the case may be. The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust. 74 SECTION 10.11 Acceptance of Terms of Trust Agreement, Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE, THE INDENTURE AND THE FIRST SUPPLEMENTAL INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS THE AGREEMENT OF THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. SECTION 10.12 Counterparts. This Trust Agreement may contain more than one counterpart of the signature page and this Trust Agreement may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. ARTICLE 11 REGISTRATION RIGHTS SECTION 11.1 Registration Rights. The Holders of the Preferred Securities, the Debentures and the Guarantee and the shares of Common Stock of the Depositor issuable upon conversion of the Debentures and/or the Preferred Securities are entitled to the benefits of the Registration Rights Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. PIONEER-STANDARD ELECTRONICS, INC., as Depositor 75 By: /s/ John V. Goodger ----------------------------------------- WILMINGTON TRUST COMPANY, as Property Trustee By: /s/ Donald G. MacKelcan ----------------------------------------- Title: Assistant Vice President -------------------------------------- WILMINGTON TRUST COMPANY, as Delaware Trustee By: /s/ Donald G. MacKelcan ----------------------------------------- Title: Assistant Vice President -------------------------------------- John V. Goodger, as Administrative Trustee James L. Bayman, as Administrative Trustee Arthur Rhein, as Administrative Trustee EXHIBIT A -- Certificate of Trust of Pioneer-Standard Financial Trust tc "EXHIBIT A -- Certificate of Trust of Pioneer-Standard Financial Trust" CERTIFICATE OF TRUST 76 OF PIONEER-STANDARD FINANCIAL TRUST THIS Certificate of Trust of Pioneer-Standard Financial Trust (the "Trust"), dated as of ______________, 1998, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. ss.3801 et seq.). 1. Name. The name of the business trust formed hereby is Pioneer-Standard Financial Trust. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first-above written. Wilmington Trust Company, not in its individual capacity but solely as trustee of the Trust By: Name:________________________ Title: ________________________ ______________________, not in his individual capacity but solely as trustee of the Trust A-1 EXHIBIT B -- Form of Certificate Depositary Agreement tc "EXHIBIT B -- Form of Certificate Depositary Agreement" EXHIBIT C -- Form of Common Securities of Pioneer-Standard Financial Trust tc "EXHIBIT C -- Form of Common Securities of 77 Pioneer-Standard Financial Trust" THE COMMON SECURITIES EVIDENCED HEREBY, THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR AND THE SHARES OF COMPANY COMMON STOCK ISSUABLE UPON CONVERSION OF THE COMMON SECURITIES AND THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE TRANSFEROR AND ANY PERSON ACTING ON BEHALF OF SUCH TRANSFEROR REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO AN ENTITY WHOLLY OWNED BY PIONEER-STANDARD ELECTRONICS, INC. OR TO CERTAIN SUCCESSORS OF PIONEER-STANDARD ELECTRONICS, INC. Certificate Number ____ Number of Common Securities _____ CERTIFICATE EVIDENCING COMMON SECURITIES OF PIONEER-STANDARD FINANCIAL TRUST 6 3/4% Convertible Common Securities (Liquidation Amount $50 per Common Security) Pioneer-Standard Financial Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Holder"), is the registered owner of ______________ common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the Pioneer-Standard Financial Trust 6 3/4% Convertible Common Securities (Liquidation Amount $50 per Common Security) (the "Common Securities"). Except as set forth in Section 5.10 of the Trust Agreement (as defined below), the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust 78 Agreement of the Trust dated as of March 23, 1998, as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of the Common Securities as set forth therein. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this ______ day of _____________, 1998. PIONEER-STANDARD FINANCIAL TRUST By: Name: As Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Common Securities referred to in the within-mentioned Trust Agreement. Dated: WILMINGTON TRUST COMPANY, as Property Trustee By: Name: Authorized Signatory EXHIBIT D -- Form of Preferred Securities of Pioneer-Standard Financial Trust 79 tc "EXHIBIT D -- Form of Preferred Securities of Pioneer-Standard Financial Trust" [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE, INSERT - This Preferred Security is a Global Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation ("DTC") or a nominee of DTC. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than DTC or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC) may be registered except in limited circumstances. Unless this certificate is presented by an authorized representative of DTC, to the Trust (defined below) or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] ["THE PREFERRED SECURITIES EVIDENCED HEREBY, THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR, AND THE SHARES OF COMPANY COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED SECURITIES AND THE DEBENTURES AND THE GUARANTEE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE TRANSFEROR AND ANY PERSON ACTING ON BEHALF OF SUCH TRANSFEROR REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS."] ["THE PREFERRED SECURITIES EVIDENCED HEREBY, THE DEBENTURES THAT MAY BE ISSUED IN EXCHANGE THEREFOR, THE SHARES OF COMPANY COMMON STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED SECURITIES AND THE DEBENTURES, AND THE 80 GUARANTEE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE."] Certificate Number ____ Number of Preferred Securities ______ CUSIP NO. 723879 20 1 CERTIFICATE EVIDENCING PREFERRED SECURITIES OF PIONEER-STANDARD FINANCIAL TRUST 6 3/4% Convertible Preferred Securities (Liquidation Amount $50 per Preferred Security) Pioneer-Standard Financial Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that __________________ (the "Holder") is the registered owner of _______ preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the Pioneer-Standard Financial Trust 6 3/4% Convertible Preferred Securities (Liquidation Amount $50 per Preferred Security) (the "Preferred Securities"). Except to the extent set forth in the Trust Agreement (as defined below), the Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.4 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of March 23, 1998 as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of Preferred Securities as set forth therein. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Pioneer-Standard Electronics, Inc., an Ohio corporation, and Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as Guarantee Trustee, dated as of March 23, 1998 (the "Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. 81 IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this _____ day of ________________, 1998. PIONEER-STANDARD FINANCIAL TRUST By: Name: An Administrative Trustee PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Trust Agreement. Dated: WILMINGTON TRUST COMPANY, as Property Trustee By: Name: Authorized Signatory ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) 82 (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Securities Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: Signature: (Sign exactly as your name appears on the other side of this Preferred Securities Certificate) D-5 [TO BE ATTACHED TO GLOBAL CERTIFICATE] SCHEDULE A The initial Liquidation Amount of this Global Certificate shall be $__________. The following increases or decreases in the Liquidation Amount of this Global Certificate have been made: Date Made Amount of increase in Liquidation Amount of this Global Certificate including upon exercise of overallotment option Amount of decrease in Liquidation Amount of this Global Certificate Liquidation Amount of this Global Certificate following such decrease or increase 83 Signature of authorized officer of Trustee or Securities Custodian 84 D-6 EXHIBIT E -- Form of Regulation S Certificate tc "EXHIBIT E -- Form of Regulation S Certificate" REGULATION S CERTIFICATE (For transfers pursuant to Sections 5.4(b)(i), (iii), (iv) and (v) of the Trust Agreement) [Property Trustee] Attention: Corporate Trust Department Re: 6 3/4% Convertible Trust Preferred Securities of Pioneer-Standard Financial Trust (the "Securities") Reference is made to the Amended and Restated Trust Agreement, dated as of March 23, 1998 (as amended from time to time, the "Trust Agreement"), among Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Trust. Terms used herein and defined in the Trust Agreement or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to _________ shares of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s).: 723879 20 1 CERTIFICATE No(s).: The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Certificate, they are held through the Clearing Agency or 85 participant in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Certificate, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a Person (the "Transferee") who will take delivery in the form of a Regulation S Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904: the Owner is not a distributor of the Securities, an Affiliate of the Company or any such distributor or a Person acting on behalf of any of the foregoing; the offer of the Specified Securities was not made to a Person in the United States; either: at the time the buy order was originated, the Transferee was outside the United States or the Owner and any Person acting on its behalf reasonably believed that the Transferee was outside the United States, or the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any Person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; no directed selling efforts have been made in the United States by or on behalf of the Owner or any Affiliate thereof; if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Restricted Period, then the requirements of Rule 904(c)(1) have been satisfied; and the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: 86 the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Trust or from an Affiliate of the Trust, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or the transfer is occurring after a holding period of at least two years has elapsed since the Specified Securities were last acquired from the Trust or from an Affiliate of the Trust, whichever is later, and the Owner is not, and during the preceding three months has not been, an Affiliate of the Trust. (3) Transfer Prior to Expiration of Regulation S Restricted Period. If the transfer is occurring prior to the expiration of the "restricted period" under Regulation S, the interest transferred will be held immediately thereafter through Euroclear or CEDEL. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Transferee. Dated: (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate) By: Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) EXHIBIT F -- Form of Restricted Securities Certificate tc "EXHIBIT F -- Form of Restricted Securities Certificate" RESTRICTED SECURITIES CERTIFICATE (For transfers pursuant to Sections 5.4(b)(ii), (iii), (iv) and (v) of the Trust Agreement) [Property Trustee] 87 Attention: Corporate Trust Department Re: 6 3/4% Convertible Trust Preferred Securities of Pioneer-Standard Financial Trust (the "Securities") Reference is made to the Amended and Restated Trust Agreement, dated as of March 23, 1998 (as amended from time to time, the "Trust Agreement"), among Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Trust. Terms used herein and defined in the Trust Agreement or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to _________ shares of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s).: 723879 20 1 CERTIFICATE No(s).: The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Certificate, they are held through the Clearing Agency or participant in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Certificate, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a Person (the "Transferee") who will take delivery in the form of a Restricted Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 144A or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A: the Specified Securities are being transferred to a Person that the Owner and any Person acting on its behalf reasonably believe is a "qualified institutional buyer" 88 within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Trust or from an Affiliate of the Trust, whichever is later, and is being effected in accordance with the applicable amount, manner of sale, and notice requirements of rule 144; or the transfer is occurring after a holding period of at least two years has elapsed since the Specified Securities were last acquired from the Trust or from an Affiliate of the Trust, whichever is later, and the Owner is not, and during the preceding three months has not been, an Affiliate of the Trust. Regulation S Transfers. If the transfer is being effected in accordance with Regulation S: the transfer is being made to a Person who is not a U.S. Person; or the Transferee is not acquiring such Specified Securities for the account or benefit of any U.S. Person. This certificate and the statements contained herein are made for your benefit and benefit of the Trust and the Transferee. Dated: (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) 89 EXHIBIT G -- Form of Unrestricted Securities Certificate tc "EXHIBIT G -- Form of Unrestricted Securities Certificate" UNRESTRICTED SECURITIES CERTIFICATE (For removal of Securities Act Legends pursuant to Section 5.4(c)) [Property Trustee] Attention: Corporate Trust Department Re: 6 3/4% Convertible Trust Preferred Securities of Pioneer-Standard Financial Trust (the "Securities") Reference is made to the Amended and Restated Trust Agreement, dated as of March 23, 1998 (as amended from time to time, the "Trust Agreement"), among Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), Wilmington Trust Company, a banking corporation organized and existing under the laws of the State of Delaware, the Administrative Trustees named therein and the holders, from time to time, of undivided beneficial interests in the assets of the Trust. Terms used herein and defined in the Trust Agreement or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to ________________ shares of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s).: 723879 20 1 CERTIFICATE No(s).: The Person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Certificate, they are held through the Clearing Agency or participant in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Certificate, they are registered in the name of the Undersigned as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for 90 Securities bearing no Securities Act Legend pursuant to Section 5.4(c) of the Trust Agreement. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after a holding period of at least two years (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Trust or from an Affiliate of the Trust, whichever is later, and the Owner is not, and during the preceding three months has not been, an Affiliate of the Trust. The Owner also acknowledges that any future transfers of the Specified Securities must comply with all applicable securities laws of the states of the United States and other jurisdictions. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Transferee. Dated: (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) EXHIBIT H -- Notice of Conversion tc "EXHIBIT H -- Notice of Conversion" NOTICE OF CONVERSION To: Wilmington Trust Company, as Property Trustee of Pioneer-Standard Financial Trust The undersigned owner of these Trust Securities (as that term is defined in the Trust Agreement defined below) hereby irrevocably exercises the option to convert these Trust Securities, or the portion below designated, into Common Stock (the "Company Common Stock") of Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), in accordance with the terms of the Amended and Restated Trust Agreement (as amended from time to time, the "Trust Agreement"), dated as of March 23, 1998, by John V. Goodger, James L. Bayman and Arthur Rhein, as Administrative 91 Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Property Trustee, the Company, as Depositor, and by the Holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to the Trust Agreement. Pursuant to the aforementioned exercise of the option to convert these Trust Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Trust Agreement) to (i) exchange such Trust Securities for a portion of the Debentures (as that term is defined in the Trust Agreement) held by the Trust (at the rate of exchange specified in the terms of the Trust Securities set forth in the Trust Agreement) and (ii) immediately convert such Debentures on behalf of the undersigned, into Company Common Stock (at the conversion rate specified in the terms of the Trust Securities set forth in the Trust Agreement). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any holder, upon the exercise of its conversion rights in accordance with the terms of the Trust Agreement and the Trust Securities, agrees to be bound by the terms of the Registration Rights Agreement relating to the Company Common Stock issuable upon conversion of the Trust Securities. Date: in whole _____ in part _____ Number of Trust Securities to be converted: ____________ Preferred Common If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Company Common Stock are to be issued, along with the address or addresses of such person or persons Signature (for conversion only) 92 Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number Signature Guarantee:* ADVANCE \x 72" (Signature must be guaranteed by an institution which is a member of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee programs acceptable to the Trustee. 93 ::ODMA\PCDOCS\CHICAGO4\533721\4 Normal Default Paragraph Font Header Footer BM_1_!SoftSolutions_Document_Identifier Calfee, Halter & Griswold LLP'\\DM\DATA\14\harvey\pioneer\GSH0353.DOC Calfee, Halter & Griswold LLP A:\GSH0361.DOCy@14W \\14\Q14W HPPCL5MS HP LaserJet 4 Plus HP LaserJet 4 Plus Times New Roman Symbol L&F L&F HM Trust Agreement Calfee, Halter & Griswold LLP Calfee, Halter & Griswold LLP Root Entry WordDocument WordDocument CompObj CompObj SummaryInformation SummaryInformation Microsoft Word Document MSWordDoc Word.Document.6 HM Trust Agreement Calfee, Halter & Griswold LLP Normal Calfee, Halter & Griswold LLP M DocumentSummaryInformation 94 DocumentSummaryInformation HM Trust Agreement osoft Word for Windows 95 HM Trust Agreement EX-4.N 7 EXHIBIT 4(N) 1 Exhibit 4(n) [EXECUTION COPY] PIONEER-STANDARD ELECTRONICS, INC. to WILMINGTON TRUST COMPANY as Trustee JUNIOR SUBORDINATED INDENTURE DATED AS OF MARCH 23, 1998 SUBORDINATED DEBENTURES DUE MARCH 23, 2028 2 Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Junior Subordinated Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of March 23, 1998. TRUST INDENTURE INDENTURE ACT SECTION SECTION - - --------------------------------- Section 310(a)(1), (2) and (5) 6.9 (a)(3) Not Applicable (a)(4) Not Applicable (b) 6.8, 6.10 (c) Not Applicable Section 311(a) 6.13 (b) 6.13 (b)(2) 6.13 Section 312(a) 7.1 (b) 7.2(a), 7.2(b) (c) 7.2(c) Section 313(a) 7.3(a), 7.3(b) (b) 7.3(a) (c) 7.3(a) (d) 7.3(c) Section 314(a)(1), (2),(3) and (4) 7.4 (b) Not Applicable (c)(1) 1.2 (c)(2) 1.2 (c)(3) Not Applicable (d) Not Applicable (e) 1.2 (f) Not Applicable Section 315(a) 6.1(a) (b) 6.2 (c) 6.1(b) (d) 6.1(c) (d)(1) 6.1(a), 6.1(c)(i) (d)(2) 6.1(c)(ii) (d)(3) 6.1(c)(iii) (e) 5.14 Section 316(a)(1)(A) 5.12 (a)(1)(B) 5.13 (a)(2) Not Applicable (b) 5.8 (c) 1.4(f) Section 317(a)(1) 5.3 (a)(2) 5.4 (b) 10.3 Section 318(a) 1.7 Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Subordinated Indenture. 3
PAGE ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions 1 SECTION 1.2 Compliance Certificate and Opinions 7 SECTION 1.3 Forms of Documents Delivered to Trustee 8 SECTION 1.4 Acts of Holders 8 SECTION 1.5 Notices, Etc. to Trustee and Company 9 SECTION 1.6 Notice to Holders; Waiver 9 SECTION 1.7 Conflict with Trust Indenture Act 10 SECTION 1.8 Effect of Headings and Table of Contents 10 SECTION 1.9 Successors and Assigns 10 SECTION 1.10 Separability Clause 10 SECTION 1.11 Benefits of Indenture 10 SECTION 1.12 Governing Law 10 SECTION 1.13 Non-Business Days 10 ARTICLE 2 DEBENTURE FORM SECTION 2.1 Forms Generally 10 SECTION 2.2 Provisions Required in Global Debenture 11 SECTION 2.3 Form of Trustee's Certificate of Authentication 11 ARTICLE 3 THE DEBENTURES SECTION 3.1 Amount Unlimited; Issuable in Series 12 SECTION 3.2 Denominations 14 SECTION 3.3 Execution, Authentication, Delivery and Dating 14 SECTION 3.4 Temporary Debentures 14 SECTION 3.5 Registration, Transfer and Exchange 15 SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Debentures 16 SECTION 3.7 Payment of Interest; Interest Rights Preserved 17 SECTION 3.8 Persons Deemed Owners 18 SECTION 3.9 Cancellation 18 SECTION 3.10 Computation of Interest 18 SECTION 3.11 Right of Set-off 18 SECTION 3.12 Agreed Tax Treatment 18 SECTION 3.13 CUSIP Numbers 18 SECTION 3.14 Global Security 19
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PAGE ---- ARTICLE 4 SATISFACTION AND DISCHARGE SECTION 4.1 Satisfaction and Discharge of Indenture 20 SECTION 4.2 Application of Trust Money 21 ARTICLE 5 REMEDIES SECTION 5.1 Events of Default 21 SECTION 5.2 Acceleration of Maturity; Rescission and Annulment 22 SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee 23 SECTION 5.4 Trustee May File Proofs of Claim 24 SECTION 5.5 Trustee May Enforce Claim Without Possession of Debentures 25 SECTION 5.6 Application of Money Collected 25 SECTION 5.7 Limitation on Suits 25 SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest 26 SECTION 5.9 Restoration of Rights and Remedies 26 SECTION 5.10 Rights and Remedies Cumulative 26 SECTION 5.11 Delay or Omission Not Waiver 27 SECTION 5.12 Control by Holders 27 SECTION 5.13 Waiver of Past Defaults 27 SECTION 5.14 Undertaking for Costs 28 SECTION 5.15 Waiver of Usury, Stay, or Extension Laws 28 ARTICLE 6 THE TRUSTEE SECTION 6.1 Certain Duties and Responsibilities 29 SECTION 6.2 Notice of Defaults 30 SECTION 6.3 Certain Rights of Trustee 30 SECTION 6.4 Not Responsible for Recitals or Issuance of Debentures 31 SECTION 6.5 May Hold Debentures 31 SECTION 6.6 Money Held in Trust 31 SECTION 6.7 Compensation and Reimbursement 31 SECTION 6.8 Disqualification; Conflicting Interests 32 SECTION 6.9 Corporate Trustee Required; Eligibility 32 SECTION 6.10 Resignation and Removal; Appointment of Successor 33 SECTION 6.11 Acceptance of Appointment by Successor 34 SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business 35 SECTION 6.13 Preferential Collection of Claims Against Company 35 SECTION 6.14 Appointment of Authenticating Agent 35
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PAGE ---- ARTICLE 7 HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 7.1 Company to Furnish Names and Addresses of Holders 38 SECTION 7.2 Preservation of Information: Communications to Holders 38 SECTION 7.3 Reports by Trustee 38 SECTION 7.4 Reports by Company 38 ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 8.1 Company May Consolidate, Etc., Only on Certain Terms 39 SECTION 8.2 Successor Corporation Substituted 40 ARTICLE 9 SUPPLEMENTAL INDENTURES SECTION 9.1 Supplemental Indentures Without Consent of Holders 40 SECTION 9.2 Supplemental Indentures with Consent of Holders 41 SECTION 9.3 Execution of Supplemental Indentures 42 SECTION 9.4 Effect of Supplemental Indentures 42 SECTION 9.5 Conformity with Trust Indenture Act 43 SECTION 9.6 Reference in Debentures to Supplemental Indentures 43 ARTICLE 10 COVENANTS SECTION 10.1 Payment of Principal, Premium and Interest 43 SECTION 10.2 Maintenance of Office or Agency 43 SECTION 10.3 Money for Debenture Payments to Be Held in Trust 43 SECTION 10.4 Payment of Taxes and Other Claims 44 SECTION 10.5 Statement as to Compliance 45 SECTION 10.6 Waiver of Certain Covenants 45 SECTION 10.7 Additional Sums 45 SECTION 10.8 Additional Covenants 46 SECTION 10.9 Payment of Expenses of the Trust 47
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PAGE ---- ARTICLE 11 REDEMPTION OF DEBENTURES SECTION 11.1 Applicability of Article 47 SECTION 11.2 Election to Redeem; Notice to Trustee 47 SECTION 11.3 Selection of Debentures to Be Redeemed 47 SECTION 11.4 Notice of Redemption 48 SECTION 11.5 Deposit of Redemption Price 49 SECTION 11.6 Debentures Payable on Redemption Date 49 SECTION 11.7 Debentures Redeemed in Part 49 ARTICLE 12 SUBORDINATION OF DEBENTURES SECTION 12.1 Subordination Terms 50
7 JUNIOR SUBORDINATED INDENTURE, dated as of March 23, 1998 between PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation (the "COMPANY") having its principal office at 4800 East 131st Street, Cleveland, Ohio 44105, and Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware ("Bank"), as Trustee (the "TRUSTEE"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its Debentures to be issued in one or more series to evidence loans to be made to the Company of the proceeds from the issuance from time to time by one or more business trusts (each, a "TRUST" and collectively, the "TRUSTS"), of preferred trust interests in such Trusts (the "PREFERRED SECURITIES") and common interests in such Trusts (the "COMMON SECURITIES"), and to provide the terms and conditions upon which the Debentures are to be authenticated, issued and delivered. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Debentures of each series thereof, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1 For all purpose of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: a. the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; b. all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; c. all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; and 8 d. the words "HEREIN" and "HEREUNDER" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "ACT", when used with respect to any Holder, has the meaning specified in Section 1.4. "ADDITIONAL INTEREST" means the interest, if any, that shall accrue on any interest on any series of Debentures that is in arrears for more than one interest payment period or not paid during any Extension Period, which in either case (to the extent permitted by law) shall accrue at the stated rate per annum specified or determined as specified in such Debenture and compounded quarterly. "ADDITIONAL SUMS" has the meaning specified in Section 10.7. "ADDITIONAL TAXES" means the sum of any additional taxes, duties, assessments and other governmental charges to which the Trust has become subject from time to time as a result of a Tax Event. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; provided, however, that an Affiliate of the Company shall be deemed not to include any Trust to which Debentures have been issued. For the purposes of this definition, "CONTROL" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AUTHENTICATING AGENT" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Debentures. "BENEFITS TRUST" means The Pioneer Stock Benefit Trust established pursuant to that certain Share Subscription Agreement and Trust, dated as of July 2, 1996, between the Company and Wachovia Bank of North Carolina, N.A. as Trustee, as amended from time to time, or any successor to, or replacement of, such Benefits Trust. "BOARD OF DIRECTORS" means either the board of directors of the Company or any committee of that board duly authorized to act hereunder. "BOARD RESOLUTION" means a copy of the resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Company to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means any day other than a Saturday or Sunday or a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the 9 Trustee, or the principal office of the Property Trustee under the applicable Trust Agreement, is closed for business. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "COMMON SECURITIES" has the meaning specified in the first recital of this Indenture. "COMPANY" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "COMPANY COMMON STOCK" means common shares, without par value, of the Company. "COMPANY REQUEST" and "COMPANY ORDER" means, respectively, the written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller, its Secretary or an Assistant Secretary, and delivered to the Trustee. "CONVERSION AGENT" means the Trustee or any Person authorized by the Company to convert any portion of the Debentures of any series that have been given conversion rights as contemplated in Section 3.1. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date hereof is located at 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. "DEBENTURES" or "DEBENTURE" means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture. "DEFAULTED INTEREST" has the meaning specified in Section 3.7. "DEPOSITARY" means, with respect to the Debentures of any series issuable or issued in whole or in part in the form of one or more Global Debentures, the Person designated as Depositary by the Company (or any successor thereto). "EVENTS OF DEFAULT" has the meaning specified in Section 5.1. "EXTENSION PERIOD" has the meaning specified in Section 3.1. 10 "GLOBAL DEBENTURE" means a Debenture evidencing all or part of the Debentures of any series and bearing the legend set forth in Section 2.2 (or such other legend as contemplated by Section 2.2), issued to the Depositary or its nominee, and registered in the name of such Depositary or its nominee. "GUARANTEE" means any guarantee that the Company may enter into for the benefit of the holders of the Preferred Securities of any Trust. "HOLDER" means a Person in whose name a Debenture is registered in the Securities Register. "INDENTURE" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. The term "Indenture" shall also include the terms of a particular series of Debentures established as contemplated by Section 3.1. "INTEREST PAYMENT DATE," when used with respect to any installment of interest on any Debenture, means the date specified in such Debenture as the fixed date on which an installment of interest on such Debenture is due and payable. "INVESTMENT COMPANY EVENT" means, in respect of an issuance of Debentures of a particular series, the receipt by the Property Trustee, on behalf of the Trust to which such series of Debentures is issued of an Opinion of Counsel, rendered by a law firm having a national tax and securities practice (which opinion shall not have been rescinded by such law firm), to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "CHANGE IN 1940 ACT Law"), there is more than an insubstantial risk that such Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities of such Trust. "MATURITY" when used with respect to any of the Debentures, means the date on which the principal of such Debentures become due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "1940 ACT" means the Investment Company Act of 1940, as amended. "NON BOOK-ENTRY PREFERRED SECURITIES" has the meaning specified in Section 3.14. "NOTICE OF DEFAULT" has the meaning specified in Section 5.1(c). "OFFICERS' CERTIFICATE" means a certificate signed by (i) the Chairman, Chief Executive Officer, President or a Vice President, and by (ii) the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. 11 "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Company, the Trust or the Trustee, and who may be an employee thereof, and who shall be reasonably acceptable to the Trustee. "OUTSTANDING" means, as of the date of determination, all Debentures theretofore authenticated and delivered under this Indenture, except: 1) Debentures theretofore canceled by the Trustee or delivered to the Trustee for cancellation; 2) Debentures for whose payment money in the necessary amount has been theretofore irrevocably deposited with the Trustee or any Paying Agent in trust for the Holders of such Debentures; and 3) Debentures in substitution for or in lieu of which other Debentures have been authenticated and delivered or which have been paid pursuant to Section 3.6, or, with respect to any series of Debentures that includes a conversion option as contemplated by Section 3.1, Debentures of such series which have been converted into Company Common Stock pursuant to the Officers' Certificate or supplemental indenture referenced in Section 3.1, unless proof satisfactory to the Trustee is presented that any Debentures are held by Holders in whose hands such Debentures are valid, binding and legal obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Debentures have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Debentures owned by the Company or any other obligor upon the Debentures or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be fully protected in conclusively relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not the Company or any other obligor upon the Debentures or any Affiliate of the Company or such other obligor. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Debentures, if any, known by the Company to be owned or held by or for the account of the Company, or any other obligor on the Debentures or any Affiliate of the Company or such obligor, and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Debentures not listed therein are Outstanding for the purpose of any such determination. "PAYING AGENT" means the Trustee or any Person authorized by the Company to pay the principal of or interest on any Debentures of any series on behalf of the Company. 12 "PERSON" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof. "PREDECESSOR DEBENTURE" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture, and, for the purposes of this definition, any Debenture authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. "PREFERRED SECURITIES" has the meaning specified in the first recital of this Indenture. "PROPERTY TRUSTEE" means, in respect of any Trust, the commercial bank or trust company identified as the "Property Trustee" in the applicable Trust Agreement, solely in its capacity as Property Trustee of such Trust under such Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as therein provided. "PURCHASE AGREEMENT" means the Purchase Agreement dated March 18, 1998 by and among Pioneer-Standard Financial Trust, Pioneer-Standard Electronics, Inc. and the Initial Purchasers named therein. "REDEMPTION DATE", when used with respect to any Debenture to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture, or any indenture supplemental hereto or Board Resolution certified by an Officers' Certificate as contemplated in Section 3.1. "REDEMPTION PRICE" has the meaning specified in Section 11.4(b). "REGULAR RECORD DATE" means for the interest payable on any Interest Payment Date on the Debentures of any series the fifteenth day (whether or not a Business Day) next preceding such Interest Payment Date. "RESPONSIBLE OFFICER" when used with respect to the Trustee means any officer assigned to the Trustee's Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer, to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "SECURITIES REGISTER" and "SECURITIES REGISTRAR" have the respective meanings specified in Section 3.5. "SPECIAL EVENT" means a Tax Event or an Investment Company Event. 13 "SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "STATED MATURITY" when used with respect to any Debenture or any installment of principal thereof or interest thereon means the date specified in such Debenture as the fixed date on which the principal of such Debenture or such installment of interest is due and payable. "SHAREHOLDER RIGHTS AGREEMENT" means the Rights Agreement, dated as of April 25, 1989, as amended, by and between the Company and NATIONAL City Bank as Rights Agent, as amended from time to time, or any successor to, or replacement of, such Rights Agreement. "SUBSIDIARY" means any corporation of which at the time of determination the Company and/or one or more Subsidiaries owns or controls directly or indirectly more than 50% of the outstanding shares of voting stock. For purposes of this definition, "VOTING STOCK" means stock which has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "TAX EVENT" means with respect to an issuance of Debentures of a particular series, the receipt by the Property Trustee, on behalf of the Trust to which such series of Debentures is issued, of an Opinion of Counsel, rendered by a law firm having a national tax and securities practice (which opinion shall not have been rescinded by such law firm), to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the date of issuance of the Preferred Securities of such Trust and does not pertain to the use of the proceeds of the issuance of the Debentures of such series issued to such Trust , there is more than an insubstantial risk that (i) such Trust is, or will be within 90 days of the date thereof, subject to United States Federal income tax with respect to income received or accrued on such Debentures, (ii) interest payable by the Company on such Debentures (other than interest payable by delivery of Company Common Stock pursuant to exercise of a conversion right, if any, by a holder of Preferred Securities) is not, or within 90 days of the date thereof, will not be, deductible, in whole or in part, for United States Federal income tax purposes or (iii) such Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "TRUST" has the meaning specified in the first recital of this Indenture. "TRUST AGREEMENT" means any agreement establishing a Trust, as the same may be amended, modified, supplemented or restated. 14 "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbb), as amended and as in effect on the date of this Indenture. "TRUST SECURITIES" means the Common Securities and Preferred Securities of a particular Trust. "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder if at any time there is more than one such Person. "VICE PRESIDENT" when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "VICE PRESIDENT." 1.2 Compliance Certificate and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitute a condition precedent), if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.5) shall include: a. a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; b. a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; c. a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and d. a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 1.3 Forms of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by 15 the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any Officers' Certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 1.4 Acts of Holders. a. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section. b. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. c. The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. 16 d. The ownership of Debentures shall be proved by the Securities Register. e. Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Debenture shall bind every future Holder of the same Debenture and the Holder of every Debenture issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Debenture. f. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Except as otherwise provided herein, such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 7.1 prior to such solicitation. If a record date is fixed, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date. g. Without limiting the foregoing, a Holder entitled hereunder to give or take any such action with regard to any particular Debenture may do so with regard to all or any part of the principal amount of such Debenture or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. 1.5 Notices, Etc. to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with a. the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or b. the Company by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise provided in Section 5.1 hereof) hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. 1.6 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register on the date such notice is mailed, which shall be not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such 17 notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. 1.7 Conflict with Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the former provision shall be deemed to apply. 1.8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 1.9 Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. 1.10 Separability Clause. In case any provision in this Indenture or in any series of Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 1.11 Benefits of Indenture. Nothing in this Indenture or in any series of Debentures, express or implied, shall give to any Person, other than the parties thereto, any Paying Agent and their successors and assigns and the Holders of any series of Debentures, any benefit or any legal or equitable right, remedy or claim under this Indenture. 1.12 Governing Law. This Indenture and any series of Debentures shall be governed by and construed in accordance with the laws of the State of New York without regard to its principles of conflicts of laws. 1.13 Non-Business Days. Except as otherwise provided in any indenture supplemental hereto with respect to a particular series of Debentures, in any case where any Interest Payment Date, Redemption Date, or Stated Maturity of any Debenture shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Debentures) payment of interest or principal payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made 18 \ on the Interest Payment Date or Redemption Date or at the Stated Maturity, (and no interest shall accrue for the period from and after such Interest Payment Date or Redemption Date or Stated Maturity _____ ) except that, if such Business Day is in the next succeeding calendar year, payment of such interest or principal payable shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. ARTICLE 2 DEBENTURE FORM 2.1 Forms Generally. The Debentures of each series shall be in substantially the forms established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws, the rules of any securities exchange or Depositary or as may, consistently herewith, be determined by the officers executing such Debentures, as evidenced by their execution of such Debentures. If the form of Debentures of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company in an Officers' Certificate and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 for the authentication and delivery of such Debentures. The definitive Debentures shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which any series of Debentures may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Debentures may be listed, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures. 2.2 Provisions Required in Global Debenture. Unless otherwise specified as contemplated by Section 3.1 for any series of Debentures evidenced thereby, every Global Debenture issued hereunder shall, in addition to the provisions specified in an indenture supplemental hereto or Board Resolutions as contemplated by Section 3.1, bear a legend in substantially the following form: "This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Debenture is exchangeable for Debentures registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Indenture and may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary." 19 2.3 Form of Trustee's Certificate of Authentication. The form of Trustee's Certificate of Authentication shall be as follows:1 "This is one of the Debentures of the series designated herein, referred to in the within mentioned Indenture. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: Authorized Signatory Dated:" ARTICLE 3 THE DEBENTURES 3.1 Amount Unlimited; Issuable in Series. The aggregate principal amount of Debentures which may be authenticated and delivered under this Indenture is unlimited. The Debentures may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 3.3, set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Debentures of any series: (i) the title of the Debentures of the series (which shall distinguish the Debentures of such series from Debentures of any other series); (ii) any limit upon the aggregate principal amount of the Debentures of the series which may be authenticated and delivered under this Indenture (except for Debentures authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Debentures of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 and except for any Debentures which, pursuant to Section 3.3, are deemed never to have been authenticated and delivered hereunder); (iii) the Person to whom any interest on a Debenture of the series shall be payable, if other than the Person in whose name that Debenture (or one or more Predecessor Debentures) is registered at the close of business on the Regular Record Date for such interest; (iv) the date or dates on which the principal of any Debentures of the series is payable; - - -------------------------- * Or in the form provided in Section 6.14 in the event that a separate Authenticating Agent is appointed pursuant thereto. 20 (v) the rate or rates at which any Debentures of the series shall bear interest, if any, the extent to which Additional Interest, if any, shall be payable in respect of any Debentures of such series, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable, the record date for any such interest payable on any Interest Payment Date if other than the Regular Record Date and the right, if any, of the Company to extend the interest payment periods and the duration of such extension (an "EXTENSION PERIOD"); (vi) the place or places where the principal of and any premium and interest on any Debentures of the series shall be payable; (vii) the period or periods within which, the price or prices at which and the terms and conditions upon which any Debentures of the series may be redeemed, in whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Debentures shall be evidenced; (viii) the obligation, if any, of the Company to redeem or repurchase any Debentures of the series pursuant to any sinking fund or analogous provisions or at the option of the Holder thereof, and the period or periods within which, the price or prices at which and the terms and conditions upon which any Debentures of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (ix) if other than denominations of $50 and any integral multiple thereof, the denominations in which any Debentures of the series shall be issuable; (x) if the amount of principal of or any premium or interest on any Debentures of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined; (xi) if other than the currency of the United States of America, the currency, currencies or currency units in which the principal of or any premium or interest on any Debentures of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for any purpose, including for purposes of the definition of "Outstanding" in Section 1.1; (xii) if the principal of or any premium or interest on any Debentures of the series is to be payable, at the election of the Company or the Holder thereof, in one or more currencies or currency units other than that or those in which such Debentures are stated to be payable, the currency, currencies or currency units in which the principal of or any premium or interest on such Debentures as to which such election is 21 made shall be payable, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined); (xiii) if other than the entire principal amount thereof, the portion of the principal amount of any Debentures of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.2; (xiv) if applicable, that any Debentures of the series shall be issuable in whole or in part in the form of one or more Global Debentures and in such case, the respective Depositaries designated for such Global Debentures, the form of any legend or legends which shall be borne by any such Global Debenture in addition to or in lieu of that set forth in Section 2.2 and any circumstances in addition to or in lieu of those set forth in the seventh paragraph of Section 3.5 in which any such Global Debenture may be exchanged in whole or in part for Debentures registered, and any transfer of such Global Debenture in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Debenture or a nominee thereof; (xv) any addition to or change in the Events of Default which apply to any Debentures of the series and any change in the right of the Trustee or the requisite Holders of such Debentures to declare the principal amount thereof due and payable pursuant to Section 5.2; (xvi) any addition to or change in the covenants set forth in Article 10 which Article applies to Debentures of each series; (xvii) the terms and conditions of any conversion rights granted to the Debentures of the series, including the price or prices at which any Debentures of the series may be converted, the manner in which any such conversion rights may be exercised and the designation of a conversion agent for such purposes; (xviii) the extent to which the payment by the Company of the principal of, premium, if any, and interest on Debentures of the series is subordinated; and (xix) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 9.1(g). All Debentures of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 3.3) set forth in the Officers' Certificate referred to above or in any indenture supplemental hereto. All Debentures of any series shall be subordinated in right of payment as provided in Article 12. 22 3.2 Denominations. The Debentures of each series shall be issuable only in registered form without coupons and only in denominations as shall be specified as contemplated by Section 3.1. In the absence of any such specified denomination with respect to the Debentures of any series, the Debentures of such series shall be issuable in denominations of $50 and any integral multiple thereof. 3.3 Execution, Authentication, Delivery and Dating. The Debentures of each series shall be executed on behalf of the Company by its President or one of its Vice Presidents under its corporate seal reproduced or impressed thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Debentures of any series may be manual or facsimile. Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debentures or did not hold such offices at the date of such Debentures. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures of any series may be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon Company Order without any further action by the Company. Debentures of any series may be authenticated on original issuance from time to time and delivered pursuant to such procedures acceptable to the Trustee ("PROCEDURES") as may be specified from time to time by Company Order. Procedures may authorize authentication and delivery pursuant to instructions of the Company or a duly authorized agent, which instructions shall be promptly confirmed in writing. Each Debenture shall be dated the date of its authentication. No Debenture shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Debenture a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Debenture shall be conclusive evidence, and the only evidence, that such Debenture has been duly authenticated and delivered hereunder. 3.4 Temporary Debentures. Pending the preparation of definitive Debentures of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Debentures which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Debentures may determine, as evidenced by their execution of such Debentures. If temporary Debentures of any series are issued, the Company will cause definitive Debentures of that series to be prepared without unreasonable delay. After the preparation of definitive Debentures of such series, the temporary Debentures of such series shall be exchangeable for definitive Debentures of such series upon surrender of the temporary Debentures of such series at the office or agency of the Company designated for the purpose without charge to the Holder. Upon surrender for 23 cancellation of any one or more temporary Debentures of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Debentures of the same series of any authorized denominations. Until so exchanged, the temporary Debentures of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures of such series. 3.5 Registration, Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register for each series of Debentures in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Debentures and of transfers of Debentures of each series. Each such register is herein sometimes referred to as the "SECURITIES REGISTER." The Trustee is hereby appointed "SECURITIES REGISTRAR" for the purpose of registering Debentures and transfers of Debentures as herein provided. Upon surrender for registration or transfer of any Debenture of a series at the office or agency of the Company designated for that purpose for that series the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Debentures of the same series of any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Debentures of any series may be exchanged for other Debentures of the same series in any authorized denominations, of a like aggregate principal amount, upon surrender of the Debentures to be exchanged at such office or agency. Whenever any Debentures are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Debentures which the Holder making the exchange is entitled to receive. All Debentures issued upon any transfer or exchange of Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Debentures surrendered upon such transfer or exchange. Every Debenture presented or surrendered for transfer or exchange shall (if so required by the Company or the Securities Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any transfer or exchange of Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Debentures. Notwithstanding any of the foregoing, any Global Debenture authenticated under this Indenture shall be exchangeable pursuant to this Section 3.5 for Debentures registered in the names of Persons other than the Depositary for such Global Debenture or its nominee only if (a) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Debenture, and the Company shall not have appointed a successor Depositary within 90 days after such notice, (b) at any time 24 such Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and the Company shall not have appointed a successor depositary within 90 days, (c) the Company executes and delivers to the Trustee a Company Order that such Global Debenture shall be so exchangeable or (d) there shall have occurred and be continuing an Event of Default. Any Global Debenture shall be exchangeable for Debentures registered in such names as such Depositary shall direct. Notwithstanding any other provisions in this Indenture, any Global Debenture may not be transferred except as a whole by the Depositary with respect to such Global Debenture to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. Neither the Company nor the Trustee shall be required, pursuant to the provisions of this Section, (a) to issue, transfer or exchange any Debenture of any series during a period beginning at the opening of business 15 days before the day of selection for redemption of Debentures of such series pursuant to Article 11 and ending at the close of business on the day of mailing of notice of redemption or (b) to transfer or exchange any Debenture of any series so selected for redemption in whole or in part, except, in the case of any Debenture of any series to be redeemed in part, any portion thereof not to be redeemed. Upon any distribution of the Debentures of any series to the holders of the corresponding Preferred Securities in accordance with the applicable Trust Agreement, the Company and the Trustee shall enter into a supplemental indenture pursuant to Section 9.1(j) to provide for transfer procedures and restrictions with respect to such Debentures substantially similar to those contained in the applicable Trust Agreement to the extent applicable in the circumstances existing at the time of such distribution. 3.6 Mutilated, Destroyed, Lost and Stolen Debentures. If any mutilated Debenture is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to save each of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Debenture of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding. If there shall be delivered to the Company and to the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Debenture, and (b) such security or indemnity as may be required by them to save each of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Debenture has been acquired by a bona fide purchaser, the Company shall execute and upon the receipt of a Company Order requesting authentication the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of the same series and of like tenor and principal amount and bearing a number not contemporaneously Outstanding. In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture. 25 Upon the issuance of any new Debenture under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Debenture issued pursuant to this Section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures. 3.7 Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 3.1 with respect to any series of Debentures, interest on any Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Debenture (or one or more Predecessor Debentures) is registered at the close of business on the Regular Record Date, except that interest payable on the Stated Maturity of the Debentures shall be paid to the Person to whom principal is paid. Any interest on any Debentures of any series which is payable, but is not timely paid or duly provided for, on an Interest Payment Date ("DEFAULTED INTEREST"), shall forthwith cease to be payable to the registered Holder on the Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (a) or (b) below: a. The Company may elect to make payment of any Defaulted Interest to the Persons in whose names any Debentures of such series (or their respective Predecessor Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on the Debentures of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of 26 the Debentures of such series at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Debentures of such series (or their respective Predecessor Debentures) are registered on such Special Record Date and shall no longer be payable pursuant to the following clause (b). b. The Company may make payment of any Defaulted Interest on the Debentures of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Debentures may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Debentures of such series are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debenture. 3.8 Persons Deemed Owners. The Company, the Trustee, the Paying Agent and any agent of the Company or the Trustee or the Paying Agent may treat the Person in whose name any Debenture is registered as the owner of such Debenture for the purpose of receiving payment of principal of and (subject to Section 3.7) interest or premium on such Debenture and for all other purposes whatsoever, whether or not such Debenture be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. 3.9 Cancellation. All Debentures surrendered for payment, redemption, conversion, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Debentures and Debentures surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver or cause to be delivered to the Trustee for cancellation any Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly canceled by the Trustee. No Debentures shall be authenticated in lieu of or in exchange for any Debentures canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Debentures shall be destroyed by the Trustee and upon written request, the Trustee shall deliver to the Company a certificate of such destruction. 3.10 Computation of Interest. Except as otherwise specified as contemplated by Section 3.1 for Debentures of any series, interest on the Debentures of each series shall be computed on the basis of a 360-day year of twelve 30-day months, and for periods less than a full month, interest shall be computed on the actual number of elapsed days over 360. 3.11 Right of Set-off. Notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set-off any payment it is otherwise 27 required to make hereunder or under the Board Resolutions or supplemental indenture respecting any series of Debentures contemplated by Section 3.1 in respect of the Debentures of such series to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment relating to the Debentures of such series under a Guarantee. 3.12 Agreed Tax Treatment. Each Debenture issued hereunder shall provide that the Company and, by its acceptance of a Debenture or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Debenture agree that for United States Federal, state and local tax purposes it is intended that such Debenture constitute indebtedness. 3.13 CUSIP Numbers. The Company in issuing the Debentures of any series may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use such "CUSIP" number in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such number either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. 3.14 Global Security. a. In connection with distribution of Debentures of any series to holders of the corresponding Preferred Securities of the Trust to which such series of Debentures was issued, in connection with the involuntary or voluntary dissolution of the applicable Trust, including a dissolution following the occurrence of a Special Event, 1) such Debentures in certificated form may be presented to the Trustee by the applicable Property Trustee in exchange for a global certificate in an aggregate principal amount equal to the aggregate principal amount of all Outstanding Debentures of such series (a "GLOBAL DEBENTURE"), to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary, or its custodian, for crediting to the accounts of its participants pursuant to the procedures of the Depositary. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with this Indenture; and 2) if any such Preferred Securities are held in non book-entry certificated form, the Debentures of the corresponding series in certificated form may be presented to the Trustee by the applicable Property Trustee and any Preferred Security certificate which represents Preferred Securities other than Preferred Securities held by the Depositary or its nominee ("NON BOOK-ENTRY PREFERRED SECURITIES") will be deemed to represent beneficial interests in Debentures of such series presented to the Trustee by such Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non 28 Book-Entry Preferred Securities until such Preferred Security certificates are presented to the Securities Registrar for transfer or reissuance at which time such Non-Book Entry Preferred Security certificates will be canceled and a Debenture of the corresponding series, registered in the name of the holder of the Preferred Security certificate or the transferee of the holder of such Preferred Security certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security certificate canceled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with this Indenture. On issue of such Debentures, Debentures of the same series with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled. b. A Global Debenture may be transferred, in whole but not in part, only to another nominee of the Depositary, or to a nominee of such successor Depositary. 29 c. If (a) the Depositary notifies the Company that it is unwilling or unable to continue as a depositary for any such Global Debenture and no successor Depositary shall have been appointed within 90 days by the Company, (b) the Depositary, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the Depositary is required to be so registered to act as such depositary and no successor Depositary shall have been appointed within 90 days by the Company, (c) the Company, in its sole discretion, determines that such Global Debenture shall be so exchangeable or (d) there shall have occurred and be continuing an Event of Default with respect to such Debentures, as the case may be, the Company will execute, and, subject to Article 3 of this Indenture, the Trustee, upon written notice from the Company and receipt of a Company Order, will authenticate and deliver the Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of such Global Debenture in exchange for such Global Debenture. In addition, upon an Event of Default that has occurred and is continuing or in the event the Company determines that the Debentures of any series shall no longer be represented by a Global Debenture, the Company will execute, and subject to Section 3.5 of this Indenture, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company and a Company Order, will authenticate and make available for delivery, the Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of such Global Debenture in exchange for such Global Debenture. Upon the exchange of any Global Debenture for such Debentures of the applicable series in definitive registered form without coupons, in authorized denominations, such ab d by the Trustee. Such Debentures in definitive registered form issued in exchange for any such Global Debenture shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver such Debentures to the Depositary for delivery to the Persons in whose names such Debentures are so registered. ARTICLE 4 SATISFACTION AND DISCHARGE 4.1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to (i) any surviving rights of transfer, substitution and exchange of any series of Debentures, (ii) rights hereunder of Holders to receive payments of principal of (and premium, if any) and interest (including Additional Interest, if any) on any series of Debentures and other rights, duties and obligations of the Holders as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee and (iii) the rights and obligations of the Trustee hereunder), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either 30 a) all Debentures theretofore authenticated and delivered (other than (i) Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Debentures for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or 1) all such Debentures not theretofore delivered to the Trustee for cancellation: (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year of the date of deposit or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of written notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Debentures are payable sufficient (without regard to investment of such amount deposited) to pay and discharge the entire indebtedness on the Debentures not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest (including any Additional Interest) to the date of such deposit or to the Stated Maturity; or (C) have been redeemed or tendered for conversion; b. the Company has paid or caused to be paid all other sums payable hereunder by the Company; and c. the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7 and, if money shall have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive. 4.2 Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by it, in accordance with the provisions of the Debentures of any series and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money or obligations have been deposited 31 with or received by the Trustee; provided, however, such moneys need not be segregated from other funds except to the extent required by law. ARTICLE 5 REMEDIES 5.1 Events of Default. "EVENT OF DEFAULT", wherever used herein with respect to the Debentures of any series, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): a. default in the payment of any interest upon the Debentures of such series, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period); b. default in the payment of the principal of (or premium, if any, on) the Debentures of such series when due whether at Stated Maturity, upon redemption by declaration or otherwise; c. failure on the part of the Company duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Company relating to such series contained in the Debentures of such series or contained in this Indenture or any supplemental indenture or Officers' Certificate contemplated by Section 3.1 related to the particular series of Debentures (other than a covenant or agreement which has been expressly included in this Indenture, such supplemental indenture or such Officers' Certificate solely for the benefit of the Company) and continuance of such failure for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by a Holder or Holders of at least 25% in aggregate principal amount of the Debentures of such series at the time Outstanding or the holder or holders of at least 25% in aggregate liquidation amount of the Preferred Securities of the Trust to which such series of Debentures has been issued; d. with respect to any series of Debentures that includes a conversion option as contemplated by Section 3.1, failure by the Company to issue Company Common Stock upon an appropriate election by the Holder or Holders of the Debentures of such series to convert such Debentures into shares of Company Common Stock; e. the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of the Company under any applicable Federal or 32 State bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or f. the institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated as bankrupt, or the taking of corporate action by the Company in furtherance of any such action. 5.2 Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to the Debentures of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Debentures of such series may declare the principal amount of all the Debentures of such series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, if an Event of Default occurs and is continuing and, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Debentures of such series fail to declare the principal of all the Debentures of such series to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the Preferred Securities then outstanding of the Trust to which such series of Debentures has been issued shall have such right by a notice in writing to the Company and the Trustee, and upon any such declaration such principal amount (or specified amount) of and the accrued interest (including any Additional Interest) on all the Debentures of such series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on the Debentures of such series shall remain subordinated to the extent established pursuant to any Officers' Certificate or indenture supplemental hereto as contemplated by Section 3.1 and Article 12. At any time after such a declaration of acceleration with respect to Debentures of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Debentures of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: a. the Company has paid or deposited with the Trustee a sum sufficient to pay: 33 1) all overdue installments of interest (including any Additional Interest) on the Debentures of such series; A) the principal of (and premium, if any, on) the Debentures of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by such Debentures; B) to the extent that payment of such interest is lawful, interest (including any Additional Interest) upon overdue installments of interest at the rate borne by such Debentures; 2) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and b. all Events of Default that shall have occurred and been continuing with respect to Debentures of such series, other than the non-payment of the principal of the Debentures of such series which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13. If the holders of a majority in aggregate principal amount of the Outstanding Debentures of such series fail to rescind and annul such declaration and its consequences, the holders of a majority in liquidation amount of the Preferred Securities then outstanding of the Trust to which such series of Debentures has been issued shall have such right. 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: a. default is made in the payment of any installment of interest (including any Additional Interest) on any Debenture when such interest becomes due and payable and such default continues for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period), or b. default is made in the payment of the principal of (and premium, if any, on) any Debenture whether at the Stated Maturity thereof, upon redemption by declaration or otherwise, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Debentures, the whole amount then due and payable on such Debentures for principal (and premium, if any) and interest (including any Additional Interest), including, to the extent that payment of such interest shall be lawful, interest on any overdue principal (and premium, if any) and on any overdue installments of interest (including any Additional Interest) at the rate borne by such Debentures, and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial 34 proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Debentures, wherever situated. If an Event of Default with respect to Debentures of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Debentures of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 5.4 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Debentures of any series or the property of the Company or of such other obligor or their creditors: a. the Trustee (irrespective of whether the principal of the Debentures of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal (or premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise, 1) to file and prove a claim (including a claim for reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) for the whole amount of principal (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Debentures of any applicable series and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and of the Trustee and any predecessor to the Trustee under Section 6.7 allowed in any such judicial proceedings; and 2) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and b. any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. 35 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures of any series or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. 5.5 Trustee May Enforce Claim Without Possession of Debentures. All rights of action and claims under this Indenture or the Debentures of any series may be prosecuted and enforced by the Trustee without the possession of any of the Debentures of any series or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of the Debentures of any series in respect of which such judgment has been recovered. 5.6 Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Debentures of any series pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal (or premium, if any) or interest (including any Additional Interest), upon presentation of the Debentures of such series and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: to the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7; SECOND: to the payment of the amounts then due and unpaid upon the Debentures of such series for principal (and premium, if any) and interest (including any Additional Interest), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal (and premium, if any) and interest (including any Additional Interest), respectively; and THIRD: the balance, if any, to the Person or Persons entitled thereto. 5.7 Limitation on Suits. No Holder of any Debenture of any series, including a holder of Preferred Securities acting to enforce the rights of the Property Trustee as a Holder of any Debentures pursuant to Section 6.8 of the applicable Trust Agreement, shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: a. such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to Debentures of such series; 36 b. if a Trust is not the sole holder of the Outstanding Debentures of such series, the Holders of not less than 25% in principal amount of the Outstanding Debentures of such series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; c. such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; d. the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and e. no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Debentures of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Debenture of any series shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on such Debenture on the Maturity or, if provided as contemplated by Section 3.1, to convert such Debenture in accordance with the terms of the Officers' Certificate or supplemental indenture contemplated by such Section and to institute suit for the enforcement of any such payment and any such right to convert, and such right shall not be impaired without the consent of such Holder. For so long as any Preferred Securities of the Trust to which such series of Debentures have been issued remain outstanding, to the fullest extent permitted by law and subject to the terms of this Indenture and the applicable Trust Agreement related to such Trust, upon an Event of Default that has occurred and is continuing specified in Sections 5.1(a) or 5.1(b), any holder of such outstanding Preferred Securities shall have the right to institute a proceeding directly against the Company, for enforcement of payment to such holder of the principal amount of (or premium, if any) or interest on Debentures of the series issued to the Trust which corresponds to such outstanding Preferred Securities having a principal amount equal to the liquidation amount of such Preferred Securities of such holder (a "DIRECT ACTION"). Notwithstanding any payment made to such holder of such Preferred Securities by the Company in connection with a Direct Action, the Company shall remain obligated to pay the principal of (or premium, if any) or interest on such Debentures held by such Trust or the Property Trustee. In connection with any such Direct Action, the rights of the Company will be subrogated to the rights of any holder of such Preferred Securities to the extent of any payment made by the Company to such holder of such Preferred Securities as a result of such Direct Action. Except as set forth in this Section, the holders of Preferred Securities shall have no right to 37 execute any right or remedy available to the Holders of or in respect of, any series of Debentures. 5.9 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holder shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holder shall continue as though no such proceeding had been instituted. 5.10 Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.11 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Debenture to exercise any right or remedy accruing upon any Event of Default that shall have occurred and be continuing shall impair any such right or remedy, or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 5.12 Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Debentures of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Debentures of such series, provided that: a. such direction shall not be in conflict with any rule of law or with this Indenture, b. the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and c. subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. 38 Upon receipt by the Trustee of any written notice directing the time, method or place of conducting any such proceeding or exercising any such trust or power, with respect to the Debentures of any series and, if all or part of the Debentures of any series is represented by a Global Security, a record date shall be established for determining Holders of Outstanding Debentures of such series entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date, provided, that, unless the Holders of a majority in principal amount of the Outstanding Debentures of such series shall have joined in such notice prior to the day which is 90 days after such record date, such notice shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new notice identical to a notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.12. 5.13 Waiver of Past Defaults. Subject to Section 9.2 hereof, the Holders of not less than a majority in aggregate principal amount of the Outstanding Debentures of any series affected by any past default may on behalf of the Holders of all the Debentures of such series waive any past default hereunder with respect to Debentures of such series and its consequences, except a default: a. in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Debenture of such series (unless such default has been cured or waived and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee), or b. in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Debenture of such series affected; provided, however, that if the Debentures of any series are held by a Trust or a trustee of such Trust, a waiver shall not be effective until the holders of a majority in liquidation amount of Trust Securities of such Trust entitled to vote thereon shall have consented to such waiver; provided, further, that if the consent of the Holder of each Outstanding Debenture of such series is required, such waiver shall not be effective until each holder of the Trust Securities of such Trust shall have consented to such waiver. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. If the Holders of a majority in aggregate principal amount of the Outstanding Debentures of the applicable series fail to waive such Event of Default, the holders of a majority in aggregate liquidation amount of Preferred Securities then outstanding of the Trust to which such series of Debentures have been issued shall have such right. No such rescission shall affect any subsequent default or impair any right consequent thereon. The provisions of this Section 5.13 shall be in lieu of Section 39 316(a)(1)(B) of the Trust Indenture Act, and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Indenture and the Debentures of any series, as permitted by the Trust Indenture Act. 5.14 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Debentures of any series or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on the Debentures of any series on or after the Maturity of such Debentures or, if provided as contemplated by Section 3.1, to convert a Debenture in accordance with the terms of the Officers' Certificate or supplemented indenture contemplated by such Section. The provisions of this Section 5.14 shall be in lieu of Section 315(e) of the Trust Indenture Act, and such Section 315(e) of the Trust Indenture Act is hereby expressly excluded from this Indenture and the Debentures, as permitted by the Trust Indenture Act. 5.15 Waiver of Usury, Stay, or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 THE TRUSTEE 6.1 Certain Duties and Responsibilities. a. Except during the continuance of an Event of Default, 1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to 40 the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. b. In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. c. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that 1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; 2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and 3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Debentures of such series. d. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. e. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. 6.2 Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to Debentures of any series, the Trustee shall transmit by mail to all Holders of Debentures of such series, as their names and addresses appear in the Securities Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Debenture, the Trustee shall be fully protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith 41 determines that the withholding of such notice is in the interests of the Holders of Debentures of such series; and provided, further, that, except in the case of any default of the character specified in Section 5.1(c), no such notice to Holders of the Debentures shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "DEFAULT" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Debentures of such series. 6.3 Certain Rights of Trustee. Subject to the provisions of Section 6.1: a. the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, Debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; b. any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; c. whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate and an Opinion of Counsel; d. the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; e. the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; f. the Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it; g. the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, Debenture or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall 42 be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; h. the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on any part of any agent, custodian, nominee or attorney appointed with due care by it hereunder; and i. in the event that the Trustee is also acting as a Paying Agent, Authenticating Agent, Conversion Agent, and/or Securities Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article 6 shall also be afforded to such Paying Agent, Authenticating Agent, Conversion Agent, and/or Securities Registrar. 6.4 Not Responsible for Recitals or Issuance of Debentures. The recitals contained herein and in the Debentures of any series, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures of any series. The Trustee shall not be accountable for the use or application by the Company of the Debentures of any series or the proceeds thereof. 6.5 May Hold Debentures. The Trustee, any Paying Agent, Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Debentures and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Securities Registrar or such other agent. 6.6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. 6.7 Compensation and Reimbursement. The Company agrees a. to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); b. to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel); and c. to indemnify the Trustee and its officers, directors and employees for, and to hold it harmless against, any loss, liability or expense 43 (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Agreement or the earlier resignation or removal of the Trustee. To secure the Company's payment obligations in this Section, the Company and the Holders agree that the Trustee shall have a lien prior to the Debentures of any series on all money or property held or collected by the Trustee except assets held in trust to pay principal and premium, if any, or interest on particular Debentures pursuant to Section 4.1(a)(ii)(B), or pursuant to any redemption if moneys have been deposited for such redemption and notice has been given and the Redemption Date has passed. Such lien shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(e) or (f) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute. 6.8 Disqualification; Conflicting Interests. The Trustee shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 310(b) of the Trust Indenture Act. The applicable Trust Agreement and the applicable Guarantee shall be deemed to be specifically described in this Indenture for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 6.9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder with respect to the Debentures of each series which shall be a. a corporation organized and doing business under the laws of the United States of America or of any State, Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority, or b. a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, 44 in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee hereunder. 6.10 Resignation and Removal; Appointment of Successor. a. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. b. The Trustee may resign at any time with respect to the Debentures of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Debentures of such series. c. The Trustee may be removed at any time with respect to the Debentures of one or more series by Act of the Holders of a majority in principal amount of the Outstanding Debentures of such series, delivered to the Trustee and to the Company. d. If at any time: 1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Debenture for at least six months, or 2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or 3) the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by Board Resolution may remove the Trustee with respect to all Debentures, or (B) subject to Section 5.14, any Holder who has been a bona fide Holder of a 45 Debenture for at least six months may, on behalf of himself and all other similarly situated Holders, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Debentures and the appointment of a successor Trustee. e. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Debentures of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Debentures of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Debentures of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Debentures of any particular series). If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Debentures of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Debentures of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Debentures of such series and supersede the successor Trustee with respect to the Debentures of any series appointed by the Company. If no successor Trustee with respect to the Debentures of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Debenture of such series for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Debentures of such series. f. The Company shall give notice of each resignation and each removal of the Trustee with respect to the Debentures of any series and each appointment of a successor Trustee with respect to the Debentures of any series by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of the Debentures of such series as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. 6.11 Acceptance of Appointment by Successor. a. In case of the appointment hereunder of a successor Trustee with respect to all Debentures, every such successor Trustee with respect to all Debentures, so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee, but, on the written request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and 46 deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Debentures of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Debentures of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Debentures, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Debentures of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, power and trusts referred to in paragraph (a) or (b) of this Section. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. 47 6.12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated, and in case any Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Debentures or in this Indenture that the certificate of the Trustee shall have. 6.13 Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Debentures), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 6.14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents, as described and with the powers and obligations conferred by this Section 6.14 ("AUTHENTICATING AGENT OR Agents"), with respect to the Debentures of any or all series which shall be authorized to act on behalf of the Trustee to authenticate the Debentures of such series issued upon exchange, registration of transfer or partial redemption thereof, and Debentures of such series so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Debentures by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State, Territory or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, 48 conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder for the applicable series of Debentures, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent for the applicable series of Debentures which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of the Debentures of such series. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7. If an appointment is made pursuant to this Section, the Debentures of the applicable series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: "This is one of the Debentures of the series designated herein, referred to in the within mentioned indenture. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: _______________________ As Authenticating Agent By: _______________________ Authorized Officer Dated:" 49 ARTICLE 7 HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY 7.1 Company to Furnish Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (unless the Trustee is acting as the Securities Registrar): a. quarterly at least five Business Days before each Interest Payment Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Debentures of each series as of each such date, and b. at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished. 7.2 Preservation of Information: Communications to Holders. a. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. b. The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Debentures, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act. c. Every Holder of Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. 7.3 Reports by Trustee. a. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto. b. Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted within 60 days after December 31 in each calendar year, commencing with December 31, 1998. 50 c. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange or self regulatory organization of which the Trustee has received notice by the Company upon which any Debentures are listed and also with the Commission. The Company will notify the Trustee in writing whenever any Debentures are listed on any stock exchange or self-regulatory organization. 7.4 Reports by Company. The Company shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act, provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company shall continue to file with the Commission and provide the Trustee and Holders with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Securities Exchange Act of 1934. The Company also shall comply with the other provisions of Trust Indenture Act Section 314(a). ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 8.1 Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: a. in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Person organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Debentures and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with any indenture supplemental hereto or Officers' Certificate contemplated by Section 3.1 which grants conversion rights to any series of Debentures; 51 b. immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; c. such consolidation, merger, conveyance, transfer or lease is permitted under each Trust Agreement and Guarantee and does not give rise to any breach or violation of any Trust Agreement or Guarantee; and d. the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. 8.2 Successor Corporation Substituted. Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance, transfer or lease the Company shall be discharged from all obligations and covenants under the Indenture and the Debentures and may be dissolved and liquidated. Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Debentures of any series issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee, and, upon the Company Order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Debentures of any series which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to a Company Order and any Debentures which such successor Person thereafter shall cause to be signed and delivered to the Trustee on its behalf pursuant to such provisions. All the Debentures of any series so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures of such series theretofore or thereafter issued in accordance with the terms of this Indenture as though all of the Debentures of such series had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Debentures of any series thereafter to be issued as may be appropriate. 52 ARTICLE 9 SUPPLEMENTAL INDENTURES 9.1 Supplemental Indentures Without Consent of Holders. Without the consent of or notice to any Holder, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Debentures of any series contained; or (b) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Company; or (c) to add to covenants of the Company for the benefit of the Holders of all or any series of the Debentures or to surrender any right or power herein conferred upon the Company; or (d) to establish the form or terms of Debentures of any series as permitted by Sections 1.1 and 3.1; or (e) to make provision with respect to the conversion rights of Holders with respect to any series of Debentures granted conversion rights as contemplated in Section 3.1; or (f) to add any additional Events of Default; or (g) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause shall not materially adversely affect the interest of the Holders of Debentures and for so long as any of the Preferred Securities shall remain outstanding, the holders of such Preferred Securities; or (h) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trust hereunder by more than one Trustee, pursuant to the requirements of Section 6.11; or (i) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or (j) to make provision for transfer procedures, certification, book-entry provisions, the form of restricted securities legends, if any, to be placed on 53 Debentures of any series, and all other matters required pursuant to Section 3.5 or otherwise necessary, desirable or appropriate in connection with the issuance of Debentures of any series to holders of Preferred Securities of the Trust to which such series of Debentures has been issued in the event of a distribution of such Debentures by such Trust if a Special Event occurs and is continuing. ab 9.2 Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Debentures of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Debentures of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Debenture affected thereby, a. except to the extent permitted by any supplemental indenture or Officers' Certificate as contemplated by Section 3.1 with respect to the extension of the interest payment period of the Debentures, change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Debenture, or reduce the principal amount thereof or the rate of interest thereon or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Debenture or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or b. adversely affect any right to convert or exchange any Debenture of any series granted conversion rights as contemplated in Section 3.1 or modify the provisions of this Indenture with respect to the subordination of the Debentures in a manner adverse to such Holder; or c. reduce the percentage in principal amount of the Outstanding Debentures, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or d. modify any of the provisions of this Section, Section 4.1, Section 5.8, Section 5.13 or Section 10.6, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Debenture affected thereby, or the consent of the holders of all the Preferred Securities as the case may be; or e. modify the provisions of any Officers' Certificate or indenture supplemental hereto contemplated by Section 3.1 and Article 12 with respect to the subordination of Outstanding Debentures in a manner adverse to the Holders thereof; 54 provided that, so long as any Preferred Securities of the Trust to which such series of Debentures has been issued remain outstanding (i) no such modification may be made that adversely affects the holders of such Preferred Securities in any material respect, no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation amount of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of such series of Debentures and all accrued and unpaid interest (including any Additional Interest) thereon have been paid in full and (ii) where a consent under this Indenture would require the consent of each Holder of Debentures of any series, no such consent will be given by the Property Trustee without the prior consent of each holder of the Preferred Securities of the Trust to which such series of Debentures has been issued. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. 9.3 Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in conclusively relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 9.4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes, and every Holder of the Debentures of the series to which such supplemental indenture relates theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 9.5 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. 9.6 Reference in Debentures to Supplemental Indentures. Debentures of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Debentures of such series presented to the Trustee. 55 ARTICLE 10 COVENANTS 10.1 Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of the Debentures of each series that it will duly and punctually pay the principal of (and premium, if any) and interest on the Debentures in accordance with the terms of the Debentures of each series and this Indenture. 10.2 Maintenance of Office or Agency. The Company will maintain in the United States, an office or agency for each series of Debentures where Debentures of such series may be presented or surrendered for payment and an office or agency where Debentures of such series may be surrendered for transfer or exchange and where notices and demands to or upon the Company in respect of the Debentures of such series and this Indenture may be served. The Company initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes for each series of Debentures. The Company will give prompt written notice to the Trustee of any change in the location of such office or agency. If at any time the Company shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. 10.3 The Company may also from time to time designate one or more other offices or agencies where the Debentures of one or more series may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for each series of Debentures for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency. Money for Debenture Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Debentures, it will, on or before each due date of the principal of (or premium, if any) or interest on any of the Debentures of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (or premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Debentures, it will, on or before each due date of the principal of or interest on the Debentures of such series, deposit with a Paying Agent a sum sufficient to pay the principal (or premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal and premium (if any) or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. 56 The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: a. hold all sums held by it for the payment of the principal of (or premium, if any) or interest on Debentures of any series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; b. give the Trustee notice of any default by the Company (or any other obligor upon such Debentures) in the making of any payment of principal (or premium, if any) or interest; c. at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and d. comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent, and, upon such payment by the Company or any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Debenture and remaining unclaimed for two years after such principal (or premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request, after all payments owing the Trustee have been paid, to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. 10.4 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (b) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim 57 whose amount, applicability or validity is being contested in good faith by appropriate proceedings. 10.5 Statement as to Compliance. The Company shall deliver to the Trustee, within 120 days after the end of each calendar year an Officers' Certificate (signed by at least one of the officers referred to in Section 314(a)(4) of the Trust Indenture Act) covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.5, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. 10.6 Waiver of Certain Covenants. With respect to any series of Debentures, the Company may omit in any particular instance to comply with any covenant or condition set forth in this Article 10, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Debentures of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect. 10.7 Additional Sums. In the event that (a) the Property Trustee of a particular Trust is the Holder of all of the Outstanding Debentures issued to such Trust, (b) a Tax Event in respect of such Trust shall have occurred and be continuing and (c) the Company shall not have (i) redeemed the Debentures of such series pursuant to the terms of the supplemental indenture or Officers' Certificate contemplated by Section 3.1 relating to such series of Debentures or (ii) dissolved such Trust pursuant to Section 9.2(b) of the applicable Trust Agreement, the Company shall pay to such Trust (and its permitted successors or assigns under the applicable Trust Agreement) for so long as the Property Trustee of such Trust (or its permitted successor or assignee) is the registered Holder of the Debentures of such series, such additional amounts as may be necessary in order that the amount of distributions (including any Additional Amounts (as defined in the applicable Trust Agreement)) then due and payable by such Trust on the Trust Securities of such Trust that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes (the "ADDITIONAL SUMS"). Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of (or premium, if any) or interest on the Debentures, such mention shall be deemed to include mention of the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made, provided, however, that the extension of an interest payment period pursuant to a supplemental indenture or Officers' Certificate as contemplated by Section 3.1 or the 58 Debentures shall not extend the payment of any Additional Sums that may be due and payable during such interest payment period. 10.8 Additional Covenants. The Company covenants and agrees with each Holder of Debentures of each series that so long as the Debentures of such series are Outstanding, if (i) there shall have occurred any event of which the Company has actual knowledge that (A) with the giving of notice or the lapse of time or both, would constitute an Event of Default hereunder with respect to Debentures of such series and (B) in respect of which the Company shall not have taken reasonable steps to cure, (ii) the Company shall be in default with respect to its payment of any obligations under the Guarantee relating to the Preferred Securities of the Trust to which such series Debentures have been issued or (iii) the Company shall have given notice of its selection of an Extension Period as provided in a supplemental indenture or Officers' Certificate as contemplated by Section 3.1, and shall not have rescinded such notice, or such period, or any extension thereof, shall be continuing, then the Company shall not, and shall cause any Subsidiary not to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock or (y) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees of indebtedness for money borrowed) of the Company that rank pari passu with or junior to the Debentures of such series (other than (1) any dividend, redemption, liquidation, interest, principal or guarantee payment by the Company where the payment is made by way of securities (including capital stock) that rank pari passu with or junior to the securities on which such dividend, redemption, interest, principal or guarantee payment is being made, (2) redemptions or purchases of any rights pursuant to the Company's Shareholder Rights Agreement and the declaration of a dividend of such rights or the issuance of preferred stock under such plans in the future, (3) payments under the applicable Guarantee and any similar guarantees issued by the Company on behalf of the holders of Preferred Securities issued by any Trust holding Debentures of any series, (4) purchases of Company Common Stock related to the issuance of Company Common Stock under the Benefits Trust or any of the Company's benefit plans for its directors, officers or employees, (5) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one series or class of the Company's capital stock for another series or class of the Company's capital stock and (6) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). The Company also covenants with each Holder of the Debentures of each series (i) that for so long as Preferred Securities of the Trust to which such series of Debentures has been issued remain outstanding, not to convert the Debentures of such series except pursuant to a notice of conversion delivered by a holder of Preferred Securities of the Trust to which such series of Debentures has been issued pursuant to the terms of a supplemental indenture or Officers' Certificate as contemplated by Section 3.1 with respect to Debentures of such series and (ii) to maintain directly or indirectly 100% ownership of the Common Securities of the Trust to which such series of Debentures has been issued; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (iii) not to voluntarily terminate, wind-up, liquidate or dissolve the Trust to which such series of Debentures has been issued, except (a) in connection with a 59 distribution of the Debentures of such series to the holders of Preferred Securities of such Trust in dissolution of such Trust or (b) in connection with certain mergers, consolidations or amalgamations permitted by the applicable Trust Agreement and (iv) to use its reasonable efforts, consistent with the terms and provisions of the applicable Trust Agreement to cause such Trust to remain a "grantor trust" and not to be classified as an association taxable as a corporation for United States Federal income tax purposes. 10.9 Payment of Expenses of the Trust. In connection with the offering, sale and issuance of the Debentures of each series to the Property Trustee of each Trust and in connection with the sale of the Preferred Securities by each Trust, the Company shall: a. pay for all costs, fees and expenses relating to the offering, sale and issuance of the Preferred Securities of each Trust, including commissions, discounts and expenses payable pursuant to any purchase agreement executed by the Company or any Trust created by the Company, including the Purchase Agreement and compensation of the Trustee in accordance with the provisions of Section 6.7; b. be responsible for and pay for all debts and obligations (other than with respect to the Preferred Securities) of each Trust, pay for all costs and expenses of each Trust (including, but not limited to, costs and expenses relating to the organization of such Trust, the offering, sale and issuance of the Preferred Securities of such Trust (including commissions, discounts and expenses in connection therewith), the fees and expenses of the Property Trustee of such Trust and any separate trustee required for such Trust under Delaware or other state laws, the costs and expenses relating to the operation of such Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and c. pay any and all taxes (other than United States withholding taxes attributable to each Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of such Trust. ARTICLE 11 REDEMPTION OF DEBENTURES SECTION 11.1 Applicability of Article. Debentures of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and, except as otherwise specified as contemplated by Section 3.1 for such Debentures, in accordance with this Article. SECTION 11.2 Election to Redeem; Notice to Trustee. The election of the Company to redeem any Debentures shall be evidenced by or pursuant to a Board 60 Resolution or in another manner specified as contemplated by Section 3.1 for such Debentures. In case of any redemption at the election of the Company, the Company shall, not less than 45 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such date and of the principal amount of Debentures to be redeemed. SECTION 11.3 Selection of Debentures to Be Redeemed. If less than all the Debentures of any series are to be redeemed, the particular Debentures to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee from the Outstanding Debentures of such series not previously called for redemption, by lot or by such other method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of the Debentures Outstanding of such series, provided that the unredeemed portion of the principal amount of the Debentures of such series be in an authorized denomination (which shall not be less than the minimum authorized denomination) for the Debentures of such series. The Trustee shall promptly notify the Company in writing of the Debentures selected for partial redemption and the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Debentures shall relate, in the case of any Debenture redeemed or to be redeemed only in part, to the portion of the principal amount of such Debenture which has been or is to be redeemed. If the Company shall so direct, Debentures registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Debentures selected for redemption. SECTION 11.4 Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth (30th) day, and not earlier than the sixtieth (60th) day, prior to the Redemption Date, to each Holder of Debentures to be redeemed, at the address of such Holder as it appears in the Securities Register. With respect to Debentures to be redeemed, each notice of redemption shall state: a. the Redemption Date; b. the redemption price at which the Debentures are to be redeemed (the "REDEMPTION PRICE"); c. if less than all Outstanding Debentures of any series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Debentures to be redeemed (including, if relevant, the CUSIP or ISIN number); d. that on the Redemption Date the Redemption Price will become due and payable upon each such Debenture or portion thereof to be redeemed, and that upon deposit with the Paying Agent interest thereon, if any, shall cease to accrue on and after the Redemption Date; 61 e. the place or places where such Debentures are to be surrendered for payment of the Redemption Price; f. that, for any series of Debentures which includes a conversion option as contemplated by Section 3.1, a Holder of Debentures who desires to convert Debentures called for redemption must satisfy the requirements for conversion contained in such Debentures, the then existing conversion price, and the date and time when the option to convert shall expire; and g. the record date for the determination of holders entitled to receive payment of the Redemption Price, as provided in Section 11.6. Notice of redemption of Debentures to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture. SECTION 11.5 Deposit of Redemption Price. Prior to 12:00 noon, New York City time, on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Company will deposit with the Trustee or with one or more Paying Agents (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to redeem on the Redemption Date all the Debentures so called for redemption at the applicable Redemption Price. With respect to any series of Debentures which includes a conversion option as contemplated by Section 3.1, if any Debenture of such series called for redemption has been converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Debenture shall (subject to any right of the Holder of such Debenture or any Predecessor Debenture to receive interest as provided in the last paragraph of Section 3.7) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. 62 SECTION 11.6 Debentures Payable on Redemption Date. If notice of redemption has been given as provided in Section 11.4, the Debentures so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, including any accrued interest (and any Additional Interest) thereon, and from and after such date (unless the Company shall default in the payment of the Redemption Price or any accrued interest (including any Additional Interest) on such Debentures) such Debentures shall cease to bear interest. Upon surrender of any such Debenture for redemption in accordance with said notice, such Debenture shall be paid by the Company at the Redemption Price, including any accrued interest (and any Additional Interest) to the Redemption Date, provided, however, that installments of interest on Debentures whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Debentures, or one of more Predecessor Debentures, registered as such at the close of business on the relevant Regular Record Dates or Special Record Dates, as the case may be, according to their terms and the provisions of Section 3.7. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, with the same force and effect as if made on such date. Payment of the Redemption Price shall be made to the Holders of such Debentures as they appear on the Securities Register for the Debentures date, which shall be the date which is the fifteenth (15th) day (whether or not a Business Day) preceding such Redemption Date. If any Debenture called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Debenture. SECTION 11.7 Debentures Redeemed in Part. In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange any Debenture during a period beginning at 9:00 a.m. (New York City time) fifteen (15) Business Days before any selection for redemption of Debentures and ending at 5:00 p.m. (New York City time) on the earliest date in which the relevant notice of redemption is deemed to have been given to all Holders of Debentures to be so redeemed or (ii) register the transfer of or exchange any Debentures so selected for redemption, in whole or in part, except for the unredeemed portion of any Debentures being redeemed in part. Any Debenture which is to be redeemed only in part shall be surrendered at the place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Debenture without service charge, a new Debenture or Debentures, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Debenture so surrendered. Each Debenture shall be subject to partial redemption only in the amount of $50 or integral multiples thereof. 63 ARTICLE 12 SUBORDINATION OF DEBENTURES 12.1 Subordination Terms. The payment by the Company of the principal of, premium, if any, and interest on any series of Debentures issued hereunder shall be subordinated to the extent set forth in an Officers' Certificate or an indenture supplemental hereto as contemplated by Section 3.1 relating to such series of Debentures. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ----------------------------------------- Name: John V. Goodger --------------------------------------- Title: Vice President, Treasurer -------------------------------------- and Assistant Secretary -------------------------------------- WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: /s/ Donald G. MacKelcan ----------------------------------------- Name: Donald G. MacKelcan --------------------------------------- Title: Assistant Vice President -------------------------------------- EX-4.O 8 EXHIBIT 4(O) 1 Exhibit 4(o) FIRST SUPPLEMENTAL INDENTURE Dated as of March 23, 1998 TO INDENTURE Dated as of March 23, 1998 ------------------------- PIONEER-STANDARD ELECTRONICS, INC. TO WILMINGTON TRUST COMPANY AS TRUSTEE -------------------------- Series A 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028 2 TABLE OF CONTENTS PAGE ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions 2 SECTION 1.2 Effect of Headings and Table of Contents 6 SECTION 1.3 Successors and Assigns 6 SECTION 1.4 Separability Clause 6 SECTION 1.5 Benefits of First Supplemental Indenture 7 SECTION 1.6 Governing Law 7 ARTICLE 2 GENERAL TERMS OF THE SERIES A DEBENTURES SECTION 2.1 Title; Stated Maturity; Interest 7 SECTION 2.2 Deferrals of Interest Payment Dates 8 SECTION 2.3 Mandatory Redemption 9 SECTION 2.4 Optional Redemption 9 SECTION 2.5 Transfer 9 SECTION 2.6 Exchange of Trust Securities for Debentures 9 SECTION 2.7 Registration Rights 10 ARTICLE 3 FORM OF A SERIES A DEBENTURE SECTION 3.1 Forms Generally 10 SECTION 3.2 Form of Face of Series A Debenture. 11 SECTION 3.3 Form of Reverse of Series A Debenture 11 SECTION 3.4 Initial Issuance to Property Trustee 20 ARTICLE 4 CONVERSION OF DEBENTURES SECTION 4.1 Conversion Rights 20 SECTION 4.2 Conversion Procedures 20 SECTION 4.3 Expiration of Conversion Rights 24 SECTION 4.4 Conversion Price Adjustments 24 SECTION 4.5 Fundamental Change 28 SECTION 4.6 Notice of Adjustments of Conversion Price 30 SECTION 4.7 Prior Notice of Certain Events 30 SECTION 4.8 Certain Additional Rights 31 SECTION 4.9 Restrictions on Company Common Stock Issuable Upon Conversion 31 SECTION 4.10 Trustee Not Responsible for Determining Conversion Price or Adjustments 32 ARTICLE 5 SUBORDINATION OF DEBENTURES SECTION 5.1 Debentures Subordinate to Senior Debt 32 SECTION 5.2 Payment Over of Proceeds Upon Dissolution, Etc. 32 SECTION 5.3 Prior Payment to Senior Debt upon Acceleration of Debentures 34 SECTION 5.4 No Payment When Senior Debt in Default 34 SECTION 5.5 Payment Permitted If No Default 35 SECTION 5.6 Subrogation to Rights of Holders of Senior Debt 35 SECTION 5.7 Provisions Solely to Define Relative Rights 35 SECTION 5.8 Trustee to Effectuate Subordination 36 SECTION 5.9 No Waiver of Subordination Provisions 36 3 SECTION 5.10 Notice to Trustee 36 SECTION 5.11 Reliance on Judicial Order or Certificate of Liquidating Agent 36 SECTION 5.12 Trustee Not Fiduciary for Holders of Senior Debt 36 SECTION 5.13 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights 36 SECTION 5.14 Article Applicable to Paying Agents 37 SECTION 5.15 Certain Conversions or Exchanges Deemed Payment 37 ARTICLE 6 MISCELLANEOUS PROVISIONS SECTION 6.1 Ratification of Indenture 37 SECTION 6.2 Counterparts 37 ANNEX A Form of Trust Agreement ANNEX B Form of Amended and Restated Trust Agreement 4 FIRST SUPPLEMENTAL INDENTURE, dated as of March 23, 1998 (the "First Supplemental Indenture"), between Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), and Wilmington Trust Company, as trustee (the "Trustee") under the Junior Subordinated Indenture dated as of March 23, 1998, from the Company to the Trustee (the "Indenture"). RECITALS WHEREAS, the Company has executed and delivered the Indenture to the Trustee in order to provide for the future issuance of its junior subordinated debentures (the "Debentures"), such Debentures to be issued from time to time in one or more series as may be determined by the Company under the Indenture, in an unlimited aggregate principal amount that may be authenticated and delivered thereunder as provided in the Indenture; WHEREAS, Pioneer-Standard Financial Trust, a statutory business trust created under the laws of the State of Delaware (the "Series A Trust"), may pursuant to the Purchase Agreement, dated March 18, 1998, among the Company, the Series A Trust and the Initial Purchasers named therein, issue $125,000,000 aggregate liquidation amount of its 6 3/4% Convertible Trust Preferred Securities (the "Series A Preferred Securities") with a liquidation amount of $50 per Series A Preferred Security, plus up to $18,750,000 aggregate liquidation amount of its Series A Preferred Securities in the event the over-allotment option contained in the Purchase Agreement is exercised; WHEREAS, the Company is guaranteeing (the "Guarantee") the payment of distributions on the Series A Preferred Securities, the payment of the Redemption Price and the payment on liquidation with respect to the Series A Preferred Securities, to the extent provided in the Guarantee Agreement of even date herewith between the Company and Wilmington Trust Company, as guarantee trustee, for the benefit of the holders of the Series A Preferred Securities; WHEREAS, the Company wishes to sell to the Series A Trust, and the Series A Trust wishes to purchase from the Company, Series A Debentures (as defined below) in an aggregate principal amount equal to $128,900,000, plus Series A Debentures in an additional aggregate principal amount up to $19,300,000 in the event the over-allotment option contained in the Purchase Agreement is exercised, and in satisfaction of the purchase price for such Series A Debentures, the administrative trustees of the Series A Trust, on behalf of the Series A Trust, wish to (i) execute and deliver to the Company Common Securities certificates evidencing an ownership interest in the Series A Trust, registered in the name of the Company, having an aggregate liquidation amount of $3,900,000 (plus Common Securities Certificates having an additional aggregate liquidation amount up to $550,000 in the event the over-allotment option contained in the Purchase Agreement is exercised) and (ii) deliver to the Company the sum of $125,000,000 (plus an additional amount up to $18,750,000 in the event the over-allotment option contained in the Purchase Agreement is exercised); WHEREAS, the Company has duly authorized the creation of an issue of its Series A 6 3/4% Junior ConvertibLe Subordinated Debentures, due March 31, 2028 (the "Series A Debentures"), of the tenor and amount hereinafter set forth, and to provide 5 therefor the Company has duly authorized the execution and delivery of this First Supplemental Indenture; and WHEREAS, all things necessary to make the Series A Debentures, when executed by the Company, authenticated by the Trustee and delivered pursuant to the terms of this First Supplemental Indenture and the Indenture, the valid obligations of the Company, and to make this First Supplemental Indenture a valid agreement of the Company, each in accordance with its terms, have been done. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Series A Debentures by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Series A Debentures as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.1 Definitions. For all purposes of this First Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all terms used but not otherwise defined herein which are defined in the Indenture have the meanings assigned to them therein; (c) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (d) all accounting terms not otherwise defined herein or in the Indenture have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; and (e) the words "HEREIN" and "HEREUNDER" and other words of similar import refer to this First Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision. "APPLICABLE PRICE" means (i) in the case of a Non-Stock Fundamental Change in which the holders of Company Common Stock receive only cash, the amount of cash received by the holder of one share of Company Common Stock and (ii) in the event of any other Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average of the Closing Prices for Company Common Stock during the ten 6 trading days prior to and including the record date for the determination of the holders of Company Common Stock entitled to receive such securities, cash, or other property in connection with such Non-Stock Fundamental Change or Common Stock Fundamental Change or, if there is no such record date, the date upon which the holders of Company Common Stock shall have the right to receive such securities, cash, or other property, in each case as adjusted in good faith by the Company to appropriately reflect any of the events referred to in Section 4.4. "CLOSING PRICE" means on any day the reported last sale price on such day or, in case no sale takes place on such day, the average of the reported closing bid and asked prices in each case on NASDAQ or, if the stock is not quoted or admitted to trading on NASDAQ, on the principal national securities exchange on which such stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm, selected by the Trustee for that purpose. "COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board of Directors) of the consideration received by holders of Company Common Stock consists of common stock that for each of the ten consecutive trading days prior to the record date for the determination of the holders of Company Common Stock entitled to receive such common stock or, if there is no such record date, the date on which the holders of Company Common Stock shall have the right to receive such common stock, has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on the NASDAQ National Market; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Series A Preferred Securities continue to exist as outstanding Series A Preferred Securities or (ii) not later than the occurrence of such Fundamental Change, the outstanding Series A Preferred Securities are converted into or exchanged for shares of convertible preferred stock of an entity succeeding to the business of the Company or a subsidiary thereof, which convertible preferred stock has powers, preferences, and relative, participating, optional, or other rights, and qualifications, limitations, and restrictions, substantially similar to those of the Series A Preferred Securities. "COMPANY" has the meaning specified in the first paragraph of this First Supplemental Indenture. "CONVERSION AGENT" has the meaning specified in Section 4.2. "CONVERSION DATE" has the meaning specified in Section 4.2. "CONVERSION PRICE" has the meaning specified in Section 4.1. "CURRENT MARKET PRICE" means for any day the last reported sale price, regular way, on such day of Company Common Stock, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on NASDAQ, or, if Company Common Stock is not quoted or 7 admitted to trading on NASDAQ on such day, on the principal national securities exchange on which Company Common Stock is listed or admitted to trading, if Company Common Stock is listed on a national securities exchange, or, if Company Common Stock is not listed or admitted to trading on any such national securities exchange, on the principal quotation system on which Company Common Stock may be listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of Company Common Stock in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available in such manner, as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Directors. "DEBENTURES" has the meaning specified in the first recital of this First Supplemental Indenture. "DEBT" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person, and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible for or liable, directly or indirectly, as obligor or otherwise. "EXPIRATION TIME" has the meaning specified in Section 4.4(e). "FUNDAMENTAL CHANGE" means the occurrence of any Transaction or event in connection with a plan pursuant to which all or substantially all of Company Common Stock shall be exchanged for, converted into, acquired for, or constitute solely the right to receive securities, cash, or other property (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization, or otherwise); provided, that, in the case of a plan involving more than one such Transaction or event, for purposes of adjustment of the conversion price, such Fundamental Change shall be deemed to have occurred when substantially all of Company Common Stock shall be exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash, or other property, but the adjustment shall be based upon consideration that a holder of Company Common Stock received in such Transaction or event as a result of which more than 50% of Company Common Stock shall have been exchanged for, converted into, or acquired for or constitute solely the right to receive securities, cash, or other property. 8 "GUARANTEE" has the meaning specified in the third recital of this First Supplemental Indenture. "HOLDER" means a Person in whose name a Series A Debenture is registered in the Securities Register. "INDENTURE" has the meaning specified in the first paragraph of this First Supplemental Indenture. "JUNIOR SUBORDINATED PAYMENT" has the meaning specified in Section 5.2. "LIQUIDATED DAMAGES" has the meaning specified in the form of reverse of Series A Debenture set forth in Section 3.3. "NASDAQ" means the NASDAQ National Market Quotation System. "NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other than a Common Stock Fundamental Change. "NOTICE OF CONVERSION" means the notice given by either (a) a Holder to the Conversion Agent directing the Conversion Agent to convert such Series A Debentures into Company Common Stock on behalf of such Holder or (b) a holder of Series A Preferred Securities or Series A Common Securities to the Conversion Agent directing the Conversion Agent to exchange such Series A Preferred Securities or Series A Common Securities, as the case may be, for Series A Debentures and to convert such Series A Debentures into Company Common Stock on behalf of such holder. "PROCEEDING" has the meaning specified in Section 5.2. "PROPERTY TRUSTEE" means, in respect of the Series A Trust, the commercial bank or trust company identified as the "Property Trustee" in the Trust Agreement, solely in its capacity as Property Trustee of the Series A Trust under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as therein provided. "PURCHASED SHARES" has the meaning specified in Section 4.4(e). "PURCHASER STOCK PRICE" means, with respect to any Common Stock Fundamental Change the average of the Closing Prices for common stock received in such Common Stock Fundamental Change for the ten consecutive trading days prior to and including the record date for the determination of the holders of Company Common Stock entitled to receive such common stock or if there is no such record date, the date on which the holders of Company Common Stock shall have the right to receive such common stock, as adjusted in good faith by the Company to appropriately reflect any of the events referred to in Section 4.4. "REFERENCE DATE" has the meaning specified in Section 4.4(c). "REFERENCE MARKET PRICE" initially means $8.33 (which is an amount equal to 66 % of the reported last sale price for Company Common Stock on NASDAQ on March 9 17, 1998), and in the event of any adjustment of the Conversion Price other than as a result of a Non-Stock Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the Conversion Price after giving effect to any such adjustment shall always be the same as the ratio of the initial Reference Market Price to the initial Conversion Price of the Series A Debentures. "RESTRICTED PREFERRED SECURITIES" means all Series A Preferred Securities required to bear any restricted securities legend pursuant to the Trust Agreement. "RESTRICTED SECURITIES" means all the Series A Debentures required pursuant to Section 3.4 to bear a Restricted Securities Legend. "RESTRICTED SECURITIES LEGEND" has the meaning specified in Section 3.4 "RIGHTS" has the meaning specified in Section 4.2(g). "SENIOR DEBT" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt of the Company, whether incurred on or prior to the date of this First Supplemental Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Series A Debentures or to other Debt which is pari passu with, or subordinated to, the Series A Debentures, provided, however, that Senior Debt shall not be deemed to include (a) any Debt of the Company which when incurred and, without respect to any election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without recourse to the Company, (b) any Debt of the Company to any of its Subsidiaries, (c) Debt to any employee of the Company, (d) any liability for taxes, (e) Debt or other monetary obligations to trade creditors created or assumed by the Company or any of its Subsidiaries in the ordinary course of business in connection with the obtaining of goods, materials or services and (f) the Series A Debentures. "SERIES A COMMON SECURITIES" means the 6 3/4% Convertible Trust Common Securities of the Series A Trust, having a liquidation amount of $50 per Series A Common Security. "SERIES A DEBENTURES" has the meaning specified in the fifth recital of this First Supplemental Indenture. "SERIES A PREFERRED SECURITIES" has the meaning specified in the second recital of this First Supplemental Indenture. "SERIES A TRUST" has the meaning specified in the second recital of this First Supplemental Indenture. "SERIES A TRUST SECURITY" means any one of the Series A Common Securities or the Series A Preferred Securities. 10 "TRANSACTION" has the meaning specified in Section 4.5(a). "TRUST AGREEMENT" means the Trust Agreement substantially in the form attached hereto as Annex A, as amended by the form of Amended and Restated Trust Agreement substantially in the form attached hereto as Annex B, as amended from time to time, relating to the Series A Trust. "TRUSTEE" has the meaning specified in the first paragraph of this First Supplemental Indenture. SECTION 1.2 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.3 Successors and Assigns. All covenants and agreements in this First Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.4 Separability Clause. In case any provision in this First Supplemental Indenture or in the Series A Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.5 Benefits of First Supplemental Indenture. Nothing in this First Supplemental Indenture or in the Series A Debentures, express or implied, shall give to any Person, other than the parties thereto, any Paying Agent and their successors and assigns and the Holders of the Series A Debentures, any benefit or any legal or equitable right, remedy or claim under this First Supplemental Indenture. SECTION 1.6 Governing Law. This First Supplemental Indenture and the Series A Debentures shall be governed by and construed in accordance with the laws of the State of New York without regard to its principles of conflicts of laws. ARTICLE 2 GENERAL TERMS OF THE SERIES A DEBENTURES SECTION 2.1 Title; Stated Maturity; Interest. The aggregate principal amount of Series A Debentures which may be authenticated and delivered under this First Supplemental Indenture is limited to $148,200,000 except for Series A Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Series A Debentures pursuant to Section 3.3, 3.4, 3.5, 3.6, 9.6 or 11.7 of the Indenture. The Series A Debentures shall be known and designated as the "Series A 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028" of the Company. Their Stated Maturity shall be March 31, 2028, and they shall bear interest at the rate of 6 3/4% per annum, from March 23, 1998 or from the most recent Interest Payment Date on which interest has been paid or duly provided for, payable quarterly (plus Additional 11 Interest, if any, until the principal thereof is paid or duly provided for or made available for payment), subject to deferral as set forth in Section 2.2, in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1998. Additional Interest will accrue at the rate of 6 3/4% per annum. In the event that any date on which interest is payable on the Series A Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date shall be the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The principal of and interest on the Series A Debentures shall be payable at the office or agency of the Company in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Company, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Securities Register; provided further, that for so long as any Series A Debenture is registered in the name of the Property Trustee, payment of principal (including Redemption Price and interest) shall be made by wire transfer in immediately available funds at such place and to such account as may be designated by the Property Trustee. The Series A Debentures shall be subordinated in right of payment to Senior Debt as provided in Article 5. The Series A Debentures shall be redeemable as provided in Sections 2.3 and 2.4 and in Article 11 of the Indenture. SECTION 2.2 Deferrals of Interest Payment Dates. The Company shall have the right, at any time during the term of the Series A Debentures, so long as no Event of Default has occurred and is continuing, from time to time to extend the interest payment period for the Series A Debentures for up to 20 consecutive quarters with respect to each deferral period (each, an "EXTENSION PERIOD") during which periods the Company shall have the right to not make payments of interest (including any Liquidated Damages) on any Interest Payment Date, and at the end of such Extension Period the Company shall pay all interest then accrued and unpaid thereon (together with Additional Interest thereon, if any, at the rate specified for the Series A Debentures, to the extent permitted by applicable law), provided, however, that during any such Extension Period, the Company shall not, and shall cause any Subsidiary not to, (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock or (b) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees of indebtedness for money borrowed) of the Company that rank pari passu with or junior to the Series A Debentures (other than (i) any dividend, redemption, liquidation, interest, principal or guarantee payment 12 by the Company where the payment is made by way of securities (including capital stock) that rank pari passu with or junior to the securities on which such dividend, redemption, interest, principal or guarantee payment is being made, (ii) redemptions or purchases of any rights pursuant to the Company's Shareholder Rights Agreement and the declaration of a dividend of such rights or the issuance of Company Common Stock under such agreement in the future, (iii) payments under the Guarantee and any similar guarantees issued by the Company on behalf of the holders of Preferred Securities issued by any trust or other issuer holding Debentures of any series, (iv) purchases of Company Common Stock related to the issuance of Company Common Stock under the Benefits Trust or any of the Company's benefit plans for its directors, officers or employees, (v) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one series or class of the Company's capital stock for another series or class of the Company's capital stock and (vi) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no such Extension Period shall exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Series A Debentures. Upon termination of any Extension Period and the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest, including Additional Interest and Liquidated Damages, if any, shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Trustee, the Property Trustee and the Administrative Trustees of the Series A Trust written notice of its selection of such Extension Period at least one Business Day prior to the earlier of (i) the record date for the date the distributions on the Series A Preferred Securities (or, if no Series A Preferred Securities are outstanding, for the date interest on the Series A Debentures), would have been payable except for the election to begin such Extension Period and (ii) the date the Property Trustee (or, if no Series A Preferred Securities are outstanding, the Trustee) is required to give notice to NASDAQ or other applicable self-regulatory organization or to holders of such Series A Preferred Securities (or, if no Series A Preferred Securities are outstanding, to the Holders of the Series A Debentures) of such record date, but in any event not less than one Business Day prior to such record date. Such notice shall specify the period selected. The Trustee shall promptly give notice of the Company's selection of such Extension Period to the Holders of the outstanding Series A Debentures and Series A Preferred Securities. SECTION 2.3 Mandatory Redemption. The Series A Debentures are not entitled to the benefit of any sinking or like fund. Upon (i) repayment at maturity or (ii) as a result of acceleration upon the occurrence and continuation of an Event of Default, the Company shall redeem the Outstanding Series A Debentures, in whole but not in part, at a Redemption Price equal to 100% of the principal amount of such Series A Debentures plus any accrued and unpaid interest, including any Additional Interest, to the date fixed for redemption. 13 SECTION 2.4 Optional Redemption. Except as set forth below, on and after March 31, 2002 and subject to the next succeeding sentence, the Company shall have the right, at any time and from time to time, to redeem the Debentures, in whole or in part, upon notice given as set forth in Section 11.3 of the Indenture during the twelve month periods beginning on March 31 in each of the following years at the indicated Redemption Price (expressed as a percentage of the principal amount of the Series A Debentures being redeemed), together with any accrued but unpaid interest on the portion being redeemed:
Redemption Price Redemption Price Year (%) of Principal Amount) Year (% of Principal Amount) - - ------------------------------------------------------------------------------------------------------------ 2002............. 104.050% 2006............. 101.350% 2003............. 103.375% 2007............. 100.675% 2004............. 102.700% 2008 and thereafter 100.000% 2005............. 102.025%
The Company may not redeem the Series A Debentures in part unless all accrued and unpaid interest has been paid in full on all Outstanding Series A Debentures for all quarterly interest periods terminating on or prior to the giving of notice of the Redemption Date. If a Tax Event shall occur and be continuing, the Company shall have the right, upon not less than 30 nor more than 60 days' notice, to redeem the Series A Debentures in whole or in part, for cash upon the later of (i) 90 days following the occurrence of such Tax Event or (ii) March 31, 2002, at a Redemption Price equal to the principal amount of such Series A Debentures plus any accrued and unpaid interest, including Additional Interest, to the date fixed for such redemption. SECTION 2.5 Transfer. The Debentures may not be transferred except in compliance with the Restricted Securities Legend unless otherwise determined by the Company in accordance with applicable law. SECTION 2.6 Exchange of Trust Securities for Debentures. (a) At any time, the Company shall have the right to dissolve the Series A Trust and cause the Series A Debentures to be distributed to the holders of the Preferred Securities in liquidation of the Series A Trust after satisfaction of liabilities to creditors of the Series A Trust as provided by applicable law. (b) If a Special Event in respect of the Series A Trust shall occur and be continuing, the Company shall give the Property Trustee notice of the same. If a Special Event in respect of the Series A Trust shall occur and be continuing, the Trust Agreement requires the Property Trustee to direct the Conversion Agent (as defined in 14 the Trust Agreement) to exchange all outstanding Series A Trust Securities for the Series A Debentures having a principal amount equal to the aggregate liquidation amount of the Series A Trust Securities to be exchanged with accrued interest in an amount equal to any unpaid distributions (including any Additional Amounts) on the Series A Trust Securities provided that, in the case of a Tax Event that shall have occurred and be continuing, the Company shall have the right to direct the Property Trustee that less than all, or none, of the Series A Trust Securities be so exchanged (i) if and for so long as the Company shall have elected to pay any Additional Sums such that the amounts received by holders of the Series A Trust Securities that remain outstanding are not reduced as a result of such Tax Event, and shall not have revoked any such election or failed to make such payments or (ii) if the Company shall instead elect to redeem the Series A Debentures, in whole or in part, in the manner set forth in Section 2.4. SECTION 2.7 Registration Rights. The holders of the Series A Preferred Securities, the Holders, the holders of the Guarantee and the shares of Company Common Stock issuable upon conversion of the Series A Debentures are entitled to the benefits of a Registration Rights Agreement, dated as of March 23, 1998, among the Company, the Series A Trust and the Initial Purchasers named in the Purchase Agreement (the "REGISTRATION RIGHTS AGREEMENT"). ARTICLE 3 FORM OF A SERIES A DEBENTURE SECTION 3.1 Forms Generally. The Series A Debentures shall be substantially in the form set forth in this Article and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or Depositary or as may, consistently herewith, be determined by the officers executing such Series A Debentures, as evidenced by their execution of the Series A Debentures. SECTION 3.2 Form of Face of Series A Debenture. Series A 6 3/4% Junior Convertible Subordinated Debenture, due March 31, 2028 No. ________ $ Pioneer-Standard Electronics, Inc., a corporation organized and existing under the laws of Ohio (the "COMPANY", which term includes any successor corporation under the Indenture (hereinafter referred to), for value received, hereby promises to pay to __________________ , or registered assigns, the principal sum of $ ______________ on March 31, 2028 and to pay interest on said principal sum from March 23, 1998 or from the most recent interest payment date (each such date, an "INTEREST PAYMENT DATE") on which interest has been paid or duly provided for, quarterly (plus Additional Interest, if any, until the principal hereof is paid or duly provided for or made available for payment) subject to deferral as set forth herein, in arrears on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 1998 at the rate of 6 3/4% per annum, until the principal hereof shall have become due and payable. 15 Reference is hereby made to the further provisions of this Debenture set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: PIONEER-STANDARD ELECTRONICS, INC. By:_____________________________ Name: Title: Attest: By:_______________________________ Name: Title: [Secretary or Assistant Secretary] This is one of the Debentures of the series designated herein, referred to in the within mentioned Indenture. Dated: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: ____________________________ Name: Title: SECTION 3.3 Form of Reverse of Series A Debenture. This Debenture is one of a duly authorized issue of Debentures of the Company designated as its Series A 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028 (the "DEBENTURES") limited to the aggregate principal amount of $148,200,000, issued and to be issued under a Junior Subordinated Indenture, dated as of March 23, 1998 (the "BASE INDENTURE"), supplemented by a First Supplemental Indenture, dated as of March 23, 1998 (the "FIRST SUPPLEMENTAL INDENTURE" and collectively with the Base Indenture, the "INDENTURE") between the Company and Wilmington Trust Company, as Trustee (herein called the "TRUSTEE", which term includes any successor trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Debentures, and of the terms upon which the Debentures are, and are to be, authenticated and 16 delivered. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. For periods less than a full month, interest shall be computed on the actual number of elapsed days over 360 days. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of the interest on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date shall be the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. A "BUSINESS DAY" shall mean any day other than a Saturday or a Sunday, or a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal office of the Property Trustee under the Trust Agreement is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the fifteenth day (whether or not a Business Day) next preceding such Interest Payment Date. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Debentures not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The Company shall have the right at any time during the term of this Debenture, from time to time, to extend the interest payment period of such Debenture for up to 20 consecutive quarters with respect to each deferral period (each such deferral period, an "EXTENSION PERIOD"), during which periods the Company shall have the right not to make payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest and Liquidated Damages, if any, thereon to the extent permitted by applicable law); provided that during any such Extension Period, the Company will not, and will not permit any Subsidiary to (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock or (b) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees of indebtedness for money borrowed) of the Company that rank pari passu with or junior to the Debentures (other than (i) any dividend, redemption, liquidation, interest, principal or guarantee payment by the Company where the payment is made by way of securities (including capital stock) that rank pari passu with or junior to the securities on which such dividend, redemption, interest, principal or guarantee payment is being made, (ii) 17 redemptions or purchases of any rights pursuant to the Company's Shareholder Rights Agreement and the declaration of a dividend of such rights or the issuance of Company Common Stock under such agreement in the future, (iii) payments under the Guarantee and any similar guarantees issued by the Company on behalf of the holders of Preferred Securities issued by any trust or other issuer holding Debentures of any series, (iv) purchases of Company Common Stock related to the issuance of Company Common Stock under the Benefits Trust or any of the Company's benefit plans for its directors, officers or employees, (v) as a result of a reclassification of the Company's capital stock or the exchange or conversion of one series or class of the Company's capital stock for another series or class of the Company's capital stock and (vi) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period shall exceed 20 consecutive quarters or extend beyond the Stated Maturity of this Debenture. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Trustee, the Property Trustee and the Administrative Trustees notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the record date for the date the distributions on the Series A Preferred Securities (or, if no Series A Preferred Securities are outstanding, for the date interest on the Series A Debentures) would have been payable except for the election to begin such Extension Period and (ii) the date the Property Trustee (or, if no Series A Preferred Securities are outstanding, the Trustee) is required to give notice to NASDAQ or other applicable self-regulatory organization or to holders of such Series A Preferred Securities (or, if no Series A Preferred Securities are outstanding, to the Holders of such Series A Debentures) of the record date, but in any event not less than one Business Day prior to such record date. Payment of the principal of (and premium, if any) and interest on this Debenture will be made [INSERT, IF A GLOBAL SECURITY IS ISSUED - to the Depositary Trust Company or its nominee], [INSERT, IF SECURITIES IN DEFINITIVE FORM ARE ISSUED - AT THE OFFICE OR AGENCY OF THE PAYING AGENT MAINTAINED FOR THAT PURPOSE IN THE UNITED STATES], in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts provided, however, that at the option of the Company payment of interest may be made (a) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (b) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Securities Register. The indebtedness evidenced by this Debenture is, to the extent provided in the First Supplemental Indenture, subordinate and subject in right of payments to the prior payment in full of all Senior Debt (as defined in the First Supplemental Indenture), and this Debenture is issued subject to the provisions of the First Supplemental Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the 18 subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the First Supplemental Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. At any time on or after March 31, 2002, the Company may, at its option, subject to the terms and conditions of Article 11 of the Base Indenture and Section 2.4 of the First Supplemental Indenture, redeem this Debenture in whole or in part at any time or in part from time to time, at the Redemption Prices set forth in Section 2.4 of the First Supplemental Indenture. In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If a Special Event shall occur and be continuing, this Debenture shall be exchangeable for Series A Preferred Securities (as defined in the First Supplemental Indenture) in accordance with Section 2.6 of the First Supplemental Indenture or, in certain circumstances, redeemable by the Company in accordance with Section 2.4 of the First Supplemental Indenture. At any time, the Company may distribute this Debenture to the holders of Series A Preferred Securities in accordance with Section 2.6 of the First Supplemental Indenture. Subject to the terms and conditions set forth in Article 4 of the First Supplemental Indenture, this Debenture is convertible, at the option of the Holder hereof, into shares of Company Common Stock. If an Event of Default shall occur and be continuing, the principal of the Debentures may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction, discharge and defeasance of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Debentures to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Debentures. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Debentures at the time Outstanding, on behalf of the Holders of all Debentures, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding * upon the Holder of this Debenture and upon all future Holders of this Debenture and of any Debenture issued upon the registration of transfer hereof or in exchange 19 therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Debenture. As provided in and subject to the provisions of the Indenture, if an Event of Default shall occur and be continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debentures may declare the principal amount of all the Debentures to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, if an Event of Default shall occur and be continuing, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debentures fail to declare the principal of all the Debentures to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified amount) of and the accrued interest (including any Additional Interest) on all the Debentures shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Debentures shall remain subordinated to the extent provided in Article 5 of the First Supplemental Indenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Debenture at the times, place and rate, and in the coin or currency, herein prescribed. The holders of the Series A Preferred Securities, the Debentures issuable in respect of the Series A Preferred Securities, the shares of Company Common Stock issuable upon conversion of the Series A Preferred Securities and the Debentures, and the Guarantee (collectively, the "REGISTRABLE SECURITIES") are entitled to the benefits of a Registration Rights Agreement, dated as of March 23, 1998, among Pioneer-Standard Financial Trust, (the "TRUST"), the Company and the Initial Purchasers named therein (the "REGISTRATION RIGHTS AGREEMENT"). Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the holders of Registrable Securities that (i) it will, at its cost, use its best efforts within 90 days after the date of original issuance of the Registrable Securities, to file a shelf registration statement (the "SHELF REGISTRATION STATEMENT") with the Commission with respect to the resales of the Registrable Securities, (ii) it will use its best efforts to cause such Shelf Registration Statement to be declared effective by the Commission within 180 days after the date of issuance of the Registrable Securities and (iii) it will use its best efforts to maintain such Shelf Registration Statement continuously effective under the Securities Act until two years after the date of original issuance of the Preferred Securities (or such earlier date as the holders of Registrable Securities are able to sell all Registrable Securities immediately without restriction, whether pursuant to Rule 144(k) under the Securities Act or any successor rule thereto or otherwise) (the "EFFECTIVENESS PERIOD"). The Trust and the Company will be permitted to suspend the use of the prospectus (which is a part of the Shelf Registration Statement) in connection with sales of Registrable Securities by holders during certain periods of time under certain circumstances relating to pending corporate developments relating to the Company and public filings with the Commission and similar events. 20 If (i) on or prior to 90 days following the date of original issuance of the Registrable Securities, a Shelf Registration Statement has not been filed with the Commission, or (ii) on or prior to the 180th day following the original issuance of the Registrable Securities, such Shelf Registration Statement has not been declared effective (each such event a "REGISTRATION DEFAULT"), additional interest ("LIQUIDATED DAMAGES") will accrue on the Debentures and, accordingly, additional distributions will accrue on the Preferred Securities, from and including the day following such Registration Default until such time as such Shelf Registration Statement is filed or such Shelf Registration Statement is declared effective, as the case may be. Liquidated Damages will be paid quarterly in arrears (subject to the Company's ability to defer payment of Liquidated Damages during any Extension Period), with the first quarterly payment due on the first Interest Payment Date following the date on which such Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to an additional 0.25% of the principal amount or liquidation amount, as applicable, to and including the 90th day following such Registration Default and 0.50% thereof from and after the 91st day following such Registration Default. In the event that during the Effectiveness Period the Shelf Registration Statement ceases to be effective for more than 90 days, whether or not consecutive, during any 12-month period then the interest rate borne by the Debentures and the distribution rate borne by the Preferred Securities will each increase by an additional 0.50% per annum from the 91st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until the earlier of such time as (i) the Shelf Registration Statement again becomes effective or (ii) the Effectiveness Period expires. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Debenture is registrable in the Securities Register, upon surrender of this Debenture for registration of transfer at the office or agency of the Company maintained under Section 10.2 of the Base Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Debenture for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Debenture is registered as the owner hereof for all purposes, whether or not this Debenture be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Debentures are issuable only in registered form without coupons in denominations of $50 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Debentures are exchangeable for a like aggregate principal amount of Debentures of a different authorized denomination, as requested by the Holder surrendering the same. 21 The Company and, by its acceptance of this Debenture or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Debenture agree that for United States Federal, state and local tax purposes it is intended that this Debenture constitute indebtedness. THE INDENTURE AND THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. ASSIGNMENT FORM --------------- TO ASSIGN THIS DEBENTURE, FILL IN THE FORM BELOW: ------------------------------------------------- (I) OR (WE) ASSIGN AND TRANSFER THIS SECURITY TO ------------------------------------------------ (Insert assignee's social security or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Debenture on the books of the Company. The agent may substitute another to act for him. Your Signature: (Sign exactly as your name appears on the other side of this Security) Date: Signature Guarantee:* [Include the following if the Debenture bears a Restricted Securities Legend -- - - -------------------------------- * Signature must be guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee programs acceptable to the Trustee. 22 In connection with any transfer of any of the Debentures evidenced by this certificate, the undersigned confirms that such Debentures are being: CHECK ONE BOX BELOW (1) exchanged for the undersigned's own account without transfer; or (2) transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (3) transferred pursuant to and in compliance with Regulation S under the Securities Act of 1933; or (4) transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933; or (5) transferred pursuant to an effective Registration Statement under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Debentures evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee may require, prior to registering any such transfer of the Securities such legal opinions, certifications and other information as the Company has reasonably requested in writing and directed the Trustee to require confirmation that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. Signature Signature Guarantee:** ] Signature must be guaranteed Signature [TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. - - -------------------------------- ** Signature must be guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee programs acceptable to the Trustee. 23 The undersigned represents and warrants that it is purchasing this Debenture for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: NOTICE: To be executed by an executive officer] 24 NOTICE OF CONVERSION To: Pioneer-Standard Electronics, Inc. The undersigned owner of this Debenture hereby irrevocably exercises the option to convert this Debenture, or the portion below designated, into Common Stock of PIONEER-STANDARD ELECTRONICS, INC. in accordance with the terms of the Indenture referred to in this Debenture, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any Holder, upon the exercise of its conversion rights in accordance with the terms of the Indenture and the Debenture, agrees to be bound by the terms of the Registration Rights Agreement relating to Company Common Stock issuable upon conversion of the Debenture. Date: ____________, ____ in whole __ Portions of Debenture to be in part __ converted ($50 or integral multiples thereof): $_________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number Signature Guarantee:*** ------------------------- - - -------------------------------- *** Signature must be guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee programs acceptable to the Trustee. 25 SECTION 3.4 Initial Issuance to Property Trustee. The Series A Debentures initially issued to the Property Trustee shall be in the form of one or more individual certificates in definitive, fully registered form without distribution coupons and shall bear the following legend (the "RESTRICTED SECURITIES LEGEND") unless the Company determines otherwise in accordance with applicable law: "THE SECURITIES EVIDENCED HEREBY AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE TRANSFEROR AND ANY PERSON ACTING ON BEHALF OF SUCH TRANSFEROR REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION COMPLYING WITH RULE 144A UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS." ARTICLE 4 CONVERSION OF DEBENTURES SECTION 4.1 Conversion Rights. Subject to and upon compliance with the provisions of this Article, the Series A Debentures are convertible, at the option of the Holder, at any time prior to the redemption or maturity, into fully paid and nonassessable shares of Company Common Stock at an initial conversion rate of 3.1746 shares of Company Common Stock for each $50 in aggregate principal amount of Debentures (equal to a conversion price of approximately $15.75 per share of Company Common Stock), subject to adjustment as described in this Article 4 (as adjusted, the "CONVERSION PRICE"). A Holder of Debentures may convert any portion of the principal amount of the Debentures into that number of fully paid and nonassessable shares of Company Common Stock (calculated as to each conversion to the nearest 1/100th of a share) obtained by dividing the principal amount of the Debentures to be converted by the Conversion Price. In case a Debenture or portion thereof is called for redemption, such conversion right in respect of the Debenture or portion so called shall expire at the close of business on the Redemption Date, unless the Company defaults in making the payment due upon redemption. SECTION 4.2 Conversion Procedures. (a) In order to convert all or a portion of the Debentures, the Holder thereof shall deliver to the Property Trustee, as conversion agent or to such other agent appointed for such purposes (the "CONVERSION AGENT") an irrevocable Notice of Conversion setting forth the principal 26 amount of Series A Debentures to be converted, together with the name or names, if other than the Holder, in which the shares of Company Common Stock should be issued upon conversion and, if such Series A Debentures are definitive Debentures, surrender to the Conversion Agent the Series A Debentures to be converted, duly endorsed or assigned to the Company or in blank. In addition, a holder of Series A Preferred Securities or Series A Common Securities may exercise its right under the Trust Agreement to convert such Series A Preferred Securities or Series A Common Securities, as the case may be, into Company Common Stock by delivering to the Conversion Agent an irrevocable Notice of Conversion setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Series A Preferred Security or Series A Common Security, as the case may be, for a portion of the Series A Debentures held by the Series A Trust (at an exchange rate of $50 principal amount of Series A Debentures for each Series A Preferred Security or Series A Common Security, as the case may be,) and (ii) to immediately convert such Series A Debentures, on behalf of such holder, into Company Common Stock pursuant to this Article 4 and, if such Series A Preferred Securities or Series A Common Securities, as the case may be, are in definitive form, surrendering such Series A Preferred Securities or Series A Common Securities, as the case may be, duly endorsed or assigned to the Company or in blank. So long as any Series A Preferred Securities remain outstanding, the Series A Trust shall not convert any Series A Debentures except pursuant to a Notice of Conversion delivered to the Conversion Agent by a holder of Series A Preferred Securities. If a Notice of Conversion is delivered on or after the Regular Record Date and prior to the subsequent Interest Payment Date, the Holder of record on the Regular Record Date will be entitled to receive the interest paid on the subsequent Interest Payment Date on the portion of Series A Debentures to be converted notwithstanding the conversion thereof prior to such Interest Payment Date. Except as otherwise provided in the immediately preceding sentence, in the case of any Series A Debenture which is converted whose Stated Maturity, or interest on such Series A Debenture whose Interest Payment Date, is on or after the date of conversion of such Series A Debenture shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Series A Debentures being converted, which shall be deemed to be paid in full. Series A Debentures submitted for conversion prior to the expiration of conversion rights as provided in Section 4.3 shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Conversion was received (the "CONVERSION DATE") by the Conversion Agent from the Holder or from a holder of the Series A Preferred Securities or Series A Common Securities, as the case may be, effecting a conversion thereof pursuant to its conversion rights under the Trust Agreement. The Person or Persons entitled to receive Company Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Company Common Stock as of the Conversion Date and such Person or Persons will cease to be a record Holder or record Holders of the Series A Debentures on that date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder or holder, as the case may be, in the Notice of Conversion, a certificate or certificates for the number of full shares of Company Common Stock issuable upon such 27 conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. (b) The Company's delivery upon conversion of the fixed number of shares of Company Common Stock into which the Series A Debentures are convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at Maturity of the portion of Series A Debentures so converted and any unpaid interest (including Additional Interest and Liquidated Damages) accrued on such Series A Debentures at the time of such conversion. (c) No fractional shares of Company Common Stock will be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a cash adjustment in an amount equal to the same fraction of the Current Market Price with respect to such fractional interest on the date on which the Series A Debentures or Series A Preferred Securities or Series A Common Securities, as the case may be, were duly surrendered to the Conversion Agent for conversion, and the Conversion Agent in turn will make such payment, if any, to the Holder of the Series A Debentures or the holder of the Series A Preferred Securities or Series A Common Securities so converted. (d) In the event of the conversion of any Series A Debenture in part only, a new Series A Debenture or Debentures for the unconverted portion thereof will be issued in the name of the Holder thereof upon the cancellation of the Series A Debenture converted in part in accordance with Section 3.5 of the Indenture. (e) In effecting the conversion transactions described in this Section, the Conversion Agent is acting as agent of the holders of Series A Preferred Securities or Series A Common Securities (in the exchange of Series A Preferred Securities or Series A Common Securities for Series A Debentures) and as agent of the Holders of Series A Debentures (in the conversion of Series A Debentures into Company Common Stock), as the case may be, directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Series A Debentures held by the Series A Trust from time to time for Series A Preferred Securities or Series A Common Securities in connection with the conversion of such Series A Preferred Securities or 28 Series A Common Securities in accordance with this Article 4 and (ii) to convert all or a portion of the Series A Debentures into Company Common Stock and thereupon to deliver such shares of Company Common Stock in accordance with the provisions of this Article 4 and to deliver to the Series A Trust a new Series A Debenture or Debentures for any resulting unconverted principal amount. (f) Except as provided in Section 3.4, all shares of Company Common Stock delivered upon any conversion of Restricted Securities shall bear a Restrictive Securities Legend substantially in the form of the legend required to be set forth on such Series A Debentures and shall be subject to the restrictions on transfer provided in such legend and in Section 3.5 of the Indenture. Neither the Trustee nor the Conversion Agent shall have any responsibility for the inclusion or content of any such Restrictive Securities Legend on such Company Common Stock; provided, however, that the Trustee or the Conversion Agent shall have provided to the Company or to the Company's transfer agent for such Company Common Stock, prior to or concurrently with a request to the Company to deliver to such Conversion Agent certificates for such Company Common Stock, written notice that the Debentures delivered for conversion are Restricted Securities. (g) The Company shall at all times reserve and keep available out of its authorized and unissued Company Common Stock, solely for issuance upon the conversion of the Series A Debentures, such number of shares of Company Common Stock as shall from time to time be issuable upon the conversion of all the Series A Debentures then outstanding. Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of Series A Debentures shares of Company Common Stock reacquired and held in the treasury of the Company (in lieu of the issuance of authorized and unissued shares of Company Common Stock) so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Whenever the Company issues shares of Company Common Stock upon conversion of Series A Debentures, and the Company has in effect at such time a stock purchase rights agreement under which holders of Company Common Stock are issued rights ("RIGHTS") entitling the holders under certain circumstances to purchase an additional share or shares of stock, the Company will issue, together with each such share of Company Common Stock, such number of Rights (which number may be a fraction) as shall at that time be issuable with a share of Company Common Stock pursuant to such stock purchase rights agreement. Any shares of Company Common Stock issued upon conversion of the Series A Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Conversion Agent shall deliver the shares of Company Common Stock received upon conversion of the Series A Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. The Company shall use its best efforts to obtain and 29 keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of Company Common Stock (and all requirements to list Company Common Stock issuable upon conversion of Series A Debentures that are at the time applicable), in order to enable the Company to lawfully issue Company Common Stock upon conversion of the Series A Debentures and to lawfully deliver Company Common Stock to each Holder upon conversion of the Series A Debentures. (h) The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Company Common Stock on conversion of Series A Debentures. 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 Company Common Stock in a name other than that in which the Series A Debentures so converted were registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Conversion Agent the amount of any such tax, or has established to the satisfaction of the Conversion Agent that such tax has been paid. (i) Nothing in this Article 4 shall limit the requirement of the Company to withhold taxes pursuant to the terms of the Series A Debentures or as set forth in this First Supplemental Indenture or the Indenture or otherwise require the Trustee or the Company to pay any amounts on account of such withholdings. SECTION 4.3 Expiration of Conversion Rights. The conversion rights of Holders of Series A Debentures shall expire at the close of business on the date set for redemption of the Series A Debentures or on the Stated Maturity of the Series A Debentures. SECTION 4.4 Conversion Price Adjustments. The conversion price shall be subject to adjustment (without duplication) from time to time as follows: (a) In case the Company shall, while any of the Series A Debentures are Outstanding, (i) pay a dividend or make a distribution with respect to its Company Common Stock exclusively in shares of Company Common Stock, (ii) subdivide its outstanding shares of Company Common Stock, (iii) combine its outstanding shares of Company Common Stock into a smaller number of shares or (iv) issue by reclassification of its shares of Company Common Stock any shares of capital stock of the Company, the conversion privilege and the Conversion Price in effect immediately prior to such action shall be adjusted so that the Holder of any Series A Debentures thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which he would have owned immediately following such action had such Series A Debentures been converted immediately prior thereto. An adjustment made pursuant to 30 this subsection (a) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record date if a record date shall have been established for such event). If, as a result of an adjustment made pursuant to this subsection (a), the Holder of any Series A Debenture thereafter surrendered for conversion shall become entitled to receive shares of two or more classes or series of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a Board Resolution filed with the Trustee) shall determine the allocation of the adjusted Conversion Price between or among shares of such classes or series of capital stock. In the event that such dividend, distribution, subdivision, combination or issuance is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. (b) In case the Company shall, while any of the Series A Debentures are Outstanding, issue rights or warrants to all holders of its Company Common Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Company Common Stock at a price per share less than the Current Market Price per share of Company Common Stock on such record date, the Conversion Price for the Series A Debentures shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of shares of Company Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such Current Market Price, and of which the denominator shall be the number of shares of Company Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Company Common Stock offered for subscription or purchase. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. For the purposes of this subsection, the number of shares of Company Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any rights or warrants in respect of shares of Company Common Stock held in the treasury of the Company. In case any rights or warrants referred to in this subsection in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the Conversion Price shall be readjusted at the time of such expiration to the Conversion Price that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. 31 (c) Subject to the last sentence of this subparagraph, in case the Company shall, by dividend or otherwise, distribute to all holders of its Company Common Stock evidences of its indebtedness, shares of any class or series of capital stock, cash or assets (including securities, but excluding any rights or warrants referred to in subparagraph (b), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in subparagraph (a) of this Section 4.4), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subparagraph (c) by a fraction of which the numerator shall be the Current Market Price per share of Company Common Stock on the date fixed for the payment of such distribution (the "REFERENCE DATE") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Company Common Stock and the denominator shall be such Current Market Price per share of Company Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred. For purposes of this subparagraph (c), any dividend or distribution that includes shares of Company Common Stock or rights or warrants to subscribe for or purchase shares of Company Common Stock shall be deemed instead to be (i) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Company Common Stock or such rights or warrants (making any Conversion Price reduction required by this subparagraph (c)) immediately followed by (ii) a dividend or distribution of such shares of Company Common Stock or such rights or warrants (making any further conversion price reduction required by subparagraph (a) or (b)), except (A) the Reference Date of such dividend or distribution as defined in this subparagraph shall be substituted as (y) "the record date in the case of a dividend or other distribution," and (z) "the record date for the determination of stockholders entitled to receive such rights or warrants" within the meaning of subparagraphs (a) and (b) and (B) any shares of Company Common Stock included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the Conversion Price in subparagraph (a). (d) In case the Company shall pay or make a dividend or other distribution on its Company Common Stock exclusively in cash (excluding (i) all cash dividends, if the amount thereof does not exceed the per share amount of the immediately preceding regular cash dividend (as adjusted to reflect any of the events referred to in subparagraphs (a), (b), (c), (d) 32 or (e) of this Section and (ii) all cash dividends, if the annualized amount thereof per share of Company Common Stock does not exceed 12.5% of the Current Market Price per share of Company Common Stock on the trading day immediately preceding the date of declaration of such dividend), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subparagraph (d) by a fraction of which the numerator shall be the Current Market Price per share of Company Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed (excluding that portion of such distribution that does not exceed 12.5% of the Current Market Price per share, determined as provided above) applicable to one share of Company Common Stock and the denominator shall be such Current Market Price per share of Company Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the cash so distributed applicable to one share of Company Common Stock is equal to or greater than the Current Market Price per share of Company Common Stock on the record date mentioned above (excluding that portion of such distribution that does not exceed 12.5% of the Current Market Price per share, determined as provided above), in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Series A Debentures shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted each share of the Debentures immediately prior to the record date for the distribution of the cash (less that portion of such distribution that does not exceed 12.5% of the Current Market Price per share, determined as provided above). In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the conversion price which would then be in effect if such record date had not been fixed. (e) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of Company Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Company Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) at the last time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds the Current Market Price per share of Company Common Stock on the trading day next succeeding the Expiration Time, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subparagraph (e) by a fraction of which 33 the numerator shall be the number of shares of Company Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time (including the Purchased Shares) (as defined below) multiplied by the Current Market Price per share of Company Common Stock on the trading day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "PURCHASED SHARES") and (y) the product of the number of shares of Company Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Current Market Price per share of Company Common Stock on the trading day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that such tender or exchange offer is not so made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. (f) If the distribution date for the Rights of the Company provided in the Shareholder Rights Agreement occurs prior to the Conversion Date, and a Holder of the Series A Debentures who converts such Series A Debentures after such distribution date is not entitled to receive the Rights that would otherwise be attached (but for the date of conversion) to the shares of Company Common Stock received upon such conversion, then an adjustment shall be made to the Conversion Price pursuant to Section 4.4(b) as if the Rights were being distributed to holders of Company Common Stock immediately prior to such conversion. If such an adjustment is made and the Rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment shall be made to the Conversion Price, on an equitable basis, to take account of such event. (g) The Company shall have the right to reduce from time to time the Conversion Price by any amount selected by the Company for any period of at least 30 days, provided, that Company shall give at least 15 days' written notice of such reduction to the Trustee and the Property Trustee. The Company may, at its option, make such reductions in the Conversion Price, in addition to those set forth above in Section 4.4(a), as the Board of Directors deems advisable to avoid or diminish any income tax to holders of Company Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for United States Federal income tax purposes. (h) Notwithstanding anything to the contrary in this Section 4.4, no adjustment of the Conversion Price will be made upon the issuance of any shares of Company Common Stock (or securities convertible or 34 exchangeable for Company Common Stock), except as specifically provided in this Article 4, including pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Company Common Stock under any such plan, or the issuance of any shares of Company Common Stock or options or rights to purchase such shares pursuant to any present or future employee benefit plan or program of the Company or pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security which does not constitute an issuance to all holders of Company Common Stock of rights or warrants entitling holders of such rights or warrants to subscribe for or purchase Company Common Stock at less than the Current Market Price. Further, such issuances shall not be deemed to constitute an issuance of Company Common Stock or exercisable, exchangeable or convertible securities by the Company to which any of the adjustment provisions described above applies. No adjustment in the Conversion Price will be required unless such adjustment would require an increase or decrease of at least 1% of the Conversion Price, but any adjustment that would otherwise be required to be made shall be carried forward and taken into account in a subsequent adjustment. (i) If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the Holder of the Series A Debentures. SECTION 4.5 Fundamental Change. (a) In the event that the Company is a party to any transaction (including, without limitation, a merger other than a merger that does not result in a reclassification, conversion, exchange or cancellation of Company Common Stock), consolidation, sale of all or substantially all of the assets of the Company, recapitalization or reclassification of Company Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination of Company Common Stock) or any compulsory share exchange (each of the foregoing being referred to as a "TRANSACTION"), in each case, as a result of which shares of Company Common Stock shall be converted into the right to receive, or shall be exchanged for, (i) in the case of any Transaction other than a Transaction involving a Common Stock Fundamental Change (and subject to funds being legally available for such purpose under applicable law and the time of such conversion), securities, cash or other property, each Series A Debenture shall thereafter be convertible into the kind and, in the case of a Transaction which does not involve a Fundamental Change, amount of securities, cash and other property receivable upon the consummation of such Transaction by a holder of that number of shares of Company 35 Common Stock into which a Series A Debenture was convertible immediately prior to such Transaction, or (ii) in the case of a Transaction involving a Common Stock Fundamental Change, common stock, each Series A Debenture shall thereafter be convertible (in the manner described herein) into common stock of the kind received by holders of Company Common Stock (but in each case after giving effect to any adjustment discussed in paragraphs (b) and (c) relating to a Fundamental Change if such Transaction constitutes a Fundamental Change). The holders of Series A Debentures or Series A Preferred Securities will have no voting rights with respect to any Transaction. (b) If any Fundamental Change occurs, then the Conversion Price in effect will be adjusted immediately after such Fundamental Change as described in paragraph (c) below. In addition, in the event of a Common Stock Fundamental Change, each Series A Debenture shall be convertible solely into common stock of the kind received by holders of Company Common Stock as a result of such Common Stock Fundamental Change. (c) The Conversion Price in the case of any Transaction involving a Fundamental Change will be adjusted immediately after such Fundamental Change: (i) in the case of a Non-Stock Fundamental Change, the Conversion Price of the Series A Debentures will thereupon become the lower of (A) the Conversion Price in effect immediately prior to such Non-Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs, and (B) the result obtained by multiplying the greater of the Applicable Price or the then applicable Reference Market Price by a fraction of which the numerator will be $50 and the denominator will be (x) the amount of the Redemption Price for one Series A Debenture if the Redemption Date were the date of such Non-Stock Fundamental Change (or, for the period commencing on the first date of original issuance of the Series A Debentures and through March 31, 1999, and the twelve-month periods commencing March 31, 1999, and March 31, 2000 and March 31, 2001, the product of 106.750%, 106.075%, 105.400% and 104.725%, respectively, multiplied by $50) plus (y) any then-accrued and unpaid interest on one Series A Debenture; and (ii) in the case of a Common Stock Fundamental Change, the Conversion Price of the Series A Debentures in effect immediately prior to such Common Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs, will thereupon be adjusted by multiplying such 36 Conversion Price by a fraction of which the numerator will be the Purchaser Stock Price and the denominator will be the Applicable Price; provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of Company Common Stock is common stock of the successor, acquiror, or other third party (and cash, if any, is paid only with respect to any fractional interests in such common stock resulting from such Common Stock Fundamental Change) and (B) all Company Common Stock will have been exchanged for, converted into, or acquired for common stock (and cash with respect to fractional interests) of the successor, acquiror, or other third party, the Conversion Price of the Series A Debentures in effect immediately prior to such Common Stock Fundamental Change will thereupon be adjusted by multiplying such Conversion Price by a fraction of which the numerator will be one and the denominator will be the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of Company Common Stock as a result of such Common Stock Fundamental Change. SECTION 4.6 Notice of Adjustments of Conversion Price. Whenever the Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted conversion price and shall prepare a certificate signed by the Chief Financial Officer or the Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee, the Conversion Agent and the transfer agent for the Series A Preferred Securities and the Series A Debentures; and (b) a notice stating the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Series A Preferred Securities and Series A Debentures at their last addresses as they appear upon the stock transfer books of the Company and the Series A Trust and the Securities Registrar. SECTION 4.7 Prior Notice of Certain Events. In case: (a) the Company shall (i) declare any dividend (or any other distribution) on its Company Common Stock, other than (A) a dividend payable in shares of Company Common Stock or (B) a dividend payable in cash that would not require an adjustment pursuant to Section 4.4(c) or (d) or (ii) authorize a tender or exchange offer that would require an adjustment pursuant to Section 4.4(e); 37 (b) the Company shall authorize the granting to all holders of Company Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; (c) of any reclassification of Company Common Stock (other than a subdivision or combination of the outstanding Company Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of stockholders of the Company shall be required, or of the sale or transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby Company Common Stock is converted into other securities, cash or other property; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall (A) if any Series A Preferred Securities are outstanding under the Trust Agreement, cause to be filed with the transfer agent for the Series A Preferred Securities, and shall cause to be mailed to the holders of record of the Series A Preferred Securities, at their last addresses as they shall appear upon the stock transfer books of the Series A Trust or (B) shall cause to be mailed to all Holders of Series A Debentures at their last addresses as they shall appear in the Security Register, at least 15 days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of Company Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Company Common Stock of record shall be entitled to exchange their shares of Company Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). SECTION 4.8 Certain Additional Rights. In case the Company shall, by dividend or otherwise, declare or make a distribution on its Company Common Stock referred to in Section 4.4(c) or 4.4(d) (including, without limitation, dividends or distributions referred to in the last sentence of Section 4.4(c)), the Holders of the Series A Debentures, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the Conversion Price adjustment in respect of such distribution, shall also be entitled to receive for each share of Company Common Stock into which the Series A Debentures are converted, the portion of the shares of Company Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Company Common Stock; 38 provided, however, that, at the election of the Company (whose election shall be evidenced by a resolution of the Board of Directors) with respect to all Holders of Series A Debentures so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution). If any conversion of Series A Debentures described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Company Common Stock which the Holder of Series A Debentures so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a resolution of the Board of Directors) to distribute to such Holder a due bill for the shares of Company Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, provided, that such due bill (i) meets any applicable requirements of the principal national securities exchange or other market on which Company Common Stock is then traded and (ii) requires payment or delivery of such shares of Company Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of shares of Company Common Stock receiving such distribution. SECTION 4.9 Restrictions on Company Common Stock Issuable Upon Conversion. (a) Shares of Company Common Stock to be issued upon conversion of a Series A Debenture in respect of Restricted Preferred Securities of the Series A Trust shall bear such restrictive legends as the Company may provide in accordance with applicable law. (b) If shares of Company Common Stock to be issued upon conversion of a Series A Debenture in respect of Restricted Preferred Securities of the Series A Trust are to be registered in a name other than that of the Holder of such Preferred Security, then the Person in whose name such shares of Company Common Stock are to be registered must deliver to the Conversion Agent a certificate satisfactory to the Company and signed by such Person, as to compliance with the restrictions on transfer applicable to such Preferred Security. Neither the Trustee nor any Conversion Agent or Registrar shall be required to register in a name other than that of the Holder shares of Company Common Stock issued upon conversion of any such Series A Debenture in respect of such Series A Preferred Securities not so accompanied by a properly completed certificate. 39 SECTION 4.10 Trustee Not Responsible for Determining Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of any Series A Debenture or to any holder of a Series A Preferred Security to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind of account) of any shares of Company Common Stock or of any securities or property, which may at any time be issued or delivered upon the conversion of any Series A Debenture; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Company Common Stock or stock certificates or other securities or property upon the surrender of any Series A Debenture for the purpose of conversion, or, except as expressly herein provided, to comply with any of the covenants of the Company contained in Article 10 of the Indenture or this Article 4. ARTICLE 5 SUBORDINATION OF DEBENTURES SECTION 5.1 Debentures Subordinate to Senior Debt. The Company covenants and agrees, and each Holder of a Series A Debenture, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Series A Debentures are hereby expressly made junior and subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Notwithstanding the foregoing, any and all amounts payable to the Trustee pursuant to Section 6.7 of the Indenture are not subject to the provisions of Article 5. SECTION 5.2 Payment Over of Proceeds Upon Dissolution, Etc. Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceeding in connection with any insolvency or bankruptcy proceeding of the Company (each such event, if any, herein sometimes referred to as a "PROCEEDING"), then the holders of Senior Debt shall be entitled to receive payment in full of principal of (and premium, if any) and interest (including interest after the commencement of any such Proceeding at the rate specified in the applicable Senior Debt), if any, on such Senior Debt, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before the Holders of 40 the Series A Debentures are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Debt of the Company (including the Series A Debentures) subordinated to the payment of the Series A Debentures, but not including any payments that are made from funds on deposit pursuant to Section 4.1(a)(ii)(B) of the Indenture or funds on deposit for the redemption of Series A Debentures for which notice of redemption has been given and the applicable Redemption Date has passed, such payment or distribution being hereinafter referred to as a "JUNIOR SUBORDINATED PAYMENT"), in respect of principal of (or premium, if any) or interest (including any Additional Interest, if any) on the Series A Debentures or on account of the purchase or other acquisition of Series A Debentures by the Company or any Subsidiary and to that end the holders of Senior Debt shall be entitled to receive, for application to the payment thereof any payment or distribution of any kind of character, whether in cash, property or Series A Debentures, including any Junior Subordinated Payment, which may be payable or deliverable in respect of the Series A Debentures in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Series A Debenture shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, before all Senior Debt is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. For the purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Company, as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Debt to substantially the same extent as the Series A Debentures are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article 8 of the Indenture shall not be deemed a Proceeding for the purposes of this Section, if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article 8 of the Indenture. SECTION 5.3 Prior Payment to Senior Debt upon Acceleration of Debentures. In the event that the Series A Debentures are declared due and payable before their 41 Stated Maturity, then and in such event the holders of the Senior Debt outstanding at the time the Series A Debentures so become due and payable shall be entitled to receive payment in full of all amounts due on or in respect of such Senior Debt (including any amounts due upon acceleration), or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before the Holders of the Series A Debentures are entitled to receive any payment or distribution of any kind or character, whether in cash, properties or securities (including any Junior Subordinated Payment) by the Company on account of the principal of (or premium, if any) or interest (including any Additional Interest) on the Series A Debentures or on account of the purchase or other acquisition of Series A Debentures by the Company or any Subsidiary. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of the Series A Debentures prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known, as set forth in Section 5.10, to a Responsible Officer of the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 5.2 would be applicable. SECTION 5.4 No Payment When Senior Debt in Default. (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt, or in the event that any event of default with respect to any Senior Debt shall have occurred and be continuing and shall have resulted in such Senior Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event or default, then no payment or distribution of any kind or character, whether in cash, properties or Series A Debentures (including any Junior Subordinated Payment) shall be made by the Company on account of principal of (or premium, if any) or interest (including any Additional Interest), if any, on the Series A Debentures or on account of the purchase or other acquisition of Series A Debentures by the Company or any Subsidiary other than payments made from funds on deposit pursuant to Section 4.1(a)(ii)(B) of the Indenture or from funds on deposit for the redemption of Series A Debentures for which notice of redemption has been given and the Redemption Date has passed. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Series A Debenture prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known as set forth in Section 5.10, to a Responsible Officer of the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. 42 The provisions of this Section shall not apply to any payment with respect to which Section 5.2 would be applicable. SECTION 5.5 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this First Supplemental Indenture, the Indenture or in any of the Series A Debentures shall prevent (a) the Company, at any time except during the pendency of any Proceeding referred to in Section 5.2 or under the conditions described in Sections 5.3 and 5.4, from making payments at any time of principal of (or premium, if any) or interest on the Series A Debentures, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of (or premium, if any) or interest (including any Additional Interest) on the Series A Debentures or the retention of such payment by the Holders, if, at the time of such application by the Trustee, a Responsible Officer of the Trustee did not have actual knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 5.6 Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Series A Debentures shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Series A Debentures are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of (and premium, if any) and interest on the Series A Debentures shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Series A Debentures or the Trustee would be entitled except for the provisions of this Article, and no payments pursuant to the provisions of this Article to the holders of Senior Debt by Holders of the Series A Debentures or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Series A Debentures, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. SECTION 5.7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Series A Debentures on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article or elsewhere in this First Supplemental Indenture, the Indenture or in the Series A Debentures is intended to or shall (a) impair, as between the Company and the Holders of the Series A Debentures, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Series A Debentures the principal of (and premium, if any) and interest (including any Additional Interest) on the Series A Debentures as and when the same shall become due and payable in accordance with their terms, or (b) affect the relative rights against the Company of the Holders of the Series A Debentures and creditors of the Company 43 other than their rights in relation to the holders of Senior Debt, or (c) prevent the Trustee or the Holder of any Series A Debenture from exercising all remedies otherwise permitted by applicable law upon default under this First Supplemental Indenture or the Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 5.8 Trustee to Effectuate Subordination. Each Holder of a Series A Debenture by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 5.9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. SECTION 5.10 Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Series A Debentures. Notwithstanding the provisions of this Article or any other provision of this First Supplemental Indenture or the Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Series A Debentures, unless and until the Trustee shall have received written notice thereof from the Company or a Person representing itself as a holder of Senior Debt or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true). SECTION 5.11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Article 6 of the Indenture, and the Holders of the Series A Debentures shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which a Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Series A Debentures, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 5.12 Trustee Not Fiduciary for Holders of Senior Debt. With respect to the holders of the Senior Debt of the Company, the Trustee undertakes to perform or observe only such of its obligations and covenants as are set forth in this Article 5, and no implied covenants or obligations with respect to the holders of such Senior Debt shall be read into this First Supplemental Indenture against Bank and/or the Trustee. Bank 44 and/or the Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Debt and, subject to the provisions of Section 6.3 of the Indenture, neither the Trustee (nor Bank) shall be liable to the holder of any Senior Debt if it shall pay over or deliver to Holders, the Company, or any other Person, money or assets to which any holder of such Senior Debt shall be entitled to by virtue of this Article or otherwise. SECTION 5.13 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt, and, subject to the requirements of the Trust Indenture Act, nothing in this First Supplemental Indenture shall deprive the Trustee of any of its rights as such holder. SECTION 5.14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "TRUSTEE" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intent and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. SECTION 5.15 Certain Conversions or Exchanges Deemed Payment. With respect to the Series A Debentures, for the purpose of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Series A Debentures shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including any Additional Interest) on the Series A Debentures or on account of the purchase or other acquisition of Series A Debentures, and (b) the payment, issuance or delivery of cash (including any payments for fractional shares), property or securities (other than junior securities) upon conversion or exchange of a Series A Debenture shall be deemed to constitute payment on account of the principal of such security. For the purpose of this Section, the term "JUNIOR SECURITIES" means (i) shares of any stock of any class of the Company and (ii) securities of the Company which are subordinated in right of payment to all Senior Debt which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Series A Debentures are so subordinated as provided in this Article. ARTICLE 6 MISCELLANEOUS PROVISIONS SECTION 6.1 Ratification of Indenture. The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 6.2 Counterparts. This First Supplemental Indenture may be executed in any number of counterparts each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 45 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ----------------------------------------- Title: Vice President, Treasurer -------------------------------------- and Assistant Secretary -------------------------------------- WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: /s/ Donald G. MacKelcan ----------------------------------------- Title: Assistant Vice President -------------------------------------- EX-4.R 9 EXHIBIT 4(R) 1 Exhibit 4(r) [EXECUTION COPY] --------------------------------------------------------- GUARANTEE AGREEMENT Pioneer-Standard Electronics, Inc. and Wilmington Trust Company Relating to the Preferred Securities of Pioneer-Standard Financial Trust Dated as of March 23, 1998 --------------------------------------------------------- 2 CROSS REFERENCE TABLE* SECTION OF TRUST SECTION OF INDENTURE ACT OF GUARANTEE 1939, AS AMENDED AGREEMENT 310(a) 4.1(a) 310(b) 4.1(c), 2.8 310(c) Inapplicable 311(a) 2.2(b) 311(b) 2.2(b) 311(c) Inapplicable 312(a) 2.2(a) 312(b) 2.2(b) 313 2.3 314(a) 2.4 314(b) Inapplicable 314(c) 2.5 314(d) Inapplicable 314(e) 1.1, 2.5, 3.2 314(f) 3.2 315(a) 3.1(d) 315(b) 2.7 315(c) 3.1 315(d) 3.1(d) 316(a) 1.1, 2.6, 5.4 316(b) 5.3 317(a) Inapplicable 317(b) Inapplicable 318(a) 2.1(b) 318(b) 2.1 318(c) 2.1(a) - - -------- * This Cross-Reference Table does not constitute part of this Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. 3 TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS SECTION 1.1 Definitions 1 ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application 4 SECTION 2.2 List of Holders 4 SECTION 2.3 Reports by the Guarantee Trustee 4 SECTION 2.4 Periodic Reports to Guarantee Trustee 4 SECTION 2.5 Evidence of Compliance with Conditions Precedent 4 SECTION 2.6 Events of Default; Waiver 5 SECTION 2.7 Event of Default; Notice 5 SECTION 2.8 Conflicting Interests 5 ARTICLE 3 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee 5 SECTION 3.2 Certain Rights of Guarantee Trustee 7 SECTION 3.3 Indemnity 8 ARTICLE 4 GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility 9 SECTION 4.2 Appointment, Removal and Resignation of the Guarantee Trustee 9 ARTICLE 5 GUARANTEE SECTION 5.1 Guarantee 10 SECTION 5.2 Waiver of Notice and Demand 10 SECTION 5.3 Obligations Not Affected 10 SECTION 5.4 Rights of Holders 11 SECTION 5.5 Guarantee of Payment 11 SECTION 5.6 Subrogation 11 SECTION 5.7 Independent Obligations 11 ARTICLE 6 SUBORDINATION OF GUARANTEE PAYMENTS SECTION 6.1 Guarantee Subordinate to the Guarantor Liabilities 12 SECTION 6.2 Payment Over of Proceeds Upon Dissolution, Etc. 12 SECTION 6.3 No Payment When Guarantor Liabilities in Default 13 4 SECTION 6.4 Payment Permitted If No Default 13 SECTION 6.5 Guarantee Trustee to Effectuate Subordination 13 SECTION 6.6 No Waiver of Subordination Provisions 13 SECTION 6.7 Notice to Guarantee Trustee 14 SECTION 6.8 Reliance on Judicial Order or Certificate of Liquidating Agent 14 SECTION 6.9 Guarantee Trustee Not Fiduciary for Holders of Guarantor Liabilities 14 SECTION 6.10 Rights of Guarantee Trustee as Holder of Guarantor Liabilities; Preservation of Guarantee Trustee's Rights 14 ARTICLE 7 COVENANTS SECTION 7.1 Certain Covenants of the Guarantor 15 ARTICLE 8 TERMINATION SECTION 8.1 Termination 16 ARTICLE 9 MISCELLANEOUS SECTION 9.1 Successors and Assigns 16 SECTION 9.2 Amendments 16 SECTION 9.3 Notices 17 SECTION 9.4 Benefit 17 SECTION 9.5 Interpretation 17 SECTION 9.6 Governing Law 18 5 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, ("Guarantee Agreement") dated as of March 23, 1998, is executed and delivered by Pioneer-Standard Electronics, Inc., an Ohio corporation (as more fully defined below, the "Guarantor"), and Wilmington Trust Company, a banking corporation duly organized and existing under the laws of the State of Delaware, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Pioneer-Standard Financial Trust, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of March 23, 1998, among the Trustees named therein, the Guarantor, as Depositor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing 2,500,000 (2,875,000 if the overallotment option is exercised in full) of its 6 3/4% Convertible Preferred Securities (liquidation preference $50 per preferred security) (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the issuance of the Issuer's Common Securities (as defined below), will be used to purchase the Series A Debentures (as defined in the Indenture) of the Guarantor which will be deposited with Wilmington Trust Company, as Property Trustee under the Trust Agreement, as trust assets; and WHEREAS, as incentive for the Holders to purchase Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE 1 DEFINITIONS 1.1 Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein unless otherwise provided herein shall have the meanings assigned to such terms in the Trust Agreement as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct common control with such specified Person, 6 provided, however, that an Affiliate of the Guarantor shall not be deemed to include the Issuer. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Company Common Stock" shall mean the common shares, without par value, of the Guarantor. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any Guarantee Payments, the Guarantor shall have received written notice of default and shall not have cured such default within 60 days after receipt of such notice. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Preferred Securities, to the extent the Issuer shall have funds on hand available therefor at such time, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer to the extent the Issuer shall have funds on hand available therefor, and (iii) upon a voluntary or involuntary dissolution of the Issuer, unless Series A Debentures are distributed to the Holders, the lesser of (a) the aggregate of the liquidation preference of $50 per Preferred Security plus accumulated and unpaid Distributions on the Preferred Securities to the date of payment to the extent the Issuer shall have funds on hand available to make such payment and (b) the amount of assets of the Issuer remaining available for distribution to Holders in dissolution of the Issuer (in either case, the "Stockholder Distribution"). "Guarantee Trustee" means Wilmington Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Guarantor" means Pioneer-Standard Electronics, Inc., and its successor or successors by merger, consolidation or purchase of all or substantially all of its assets. "Guarantor Liabilities" has the meaning specified in Section 6.1. "Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. 7 "Indenture" means the Junior Subordinated Indenture, dated as of March 23, 1998, as supplemented by the First Supplemental Indenture thereto dated as of March 23, 1998, between the Guarantor and Wilmington Trust Company, as trustee, as the same may be supplemented or amended with respect to the Series A Debentures (as defined in the Indenture). "List of Holders" has the meaning specified in Section 2.2 (a). "Majority in Liquidation Preference of the Securities" means, except as provided by the Trust Indenture Act, a vote by the Holder(s), voting separately as a class, of more than 50% of the liquidation preference of all the outstanding Preferred Securities issued by the Issuer. "Officers' Certificate" means, with respect to any Person, a certificate signed by (i) the Chairman, Chief Executive Officer, President or a Vice President, and by (ii) the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: 1. a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; 2. a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; 3. a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 4. a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Proceedings" has the meaning specified in Section 6.2. "Responsible Officer" means, with respect to the Guarantee Trustee, any officer assigned to its Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Guarantee Agreement, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. 8 "Series A Debentures" means the Guarantor's Series A 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. 9 ARTICLE 2 TRUST INDENTURE ACT 2.1 Trust Indenture Act; Application. a. This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. b. If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. 2.2 List of Holders. a. The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (unless the Guarantee Trustee is acting as Securities Registrar with respect to the Preferred Securities under the Trust Agreement) (i) semi-annually, on or before January 15 and July 15 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (ii) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such written request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied list of Holders or has not otherwise been received by the Guarantee Trustee. Notwithstanding the foregoing, the Guarantor shall not be obligated to provide such List of Holders at any time the Preferred Securities are represented by one or more Global Certificates (as defined in the Trust Agreement). The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. b. The Guarantee Trustee shall comply with its obligations under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. 2.3 Reports by the Guarantee Trustee. Within 60 days after December 31 in each calendar year, commencing with December 31, 1998, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. 2.4 Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 10 of the Trust Indenture Act; and such compliance certificate of the Guarantor shall be delivered on or before 120 days after the end of each calendar year. 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. 2.6 Events of Default; Waiver. The Holders of a Majority in Liquidation Preference of the Securities may, by vote, on behalf of all the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. 2.7 Event of Default; Notice. a. The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be fully protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. b. The Guarantee Trustee shall not be deemed to have actual knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Trust Agreement shall have obtained written notice, of such Event of Default. 2.8 Conflicting Interests. The Trust Agreement and the Indenture shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE 3 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE 3.1 Powers and Duties of the Guarantee Trustee. 11 a. This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. b. If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. c. The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to the Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. d. No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred; (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions 12 furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; 2) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; 3) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Preference of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and 4) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or indemnity satisfactory to it against such risk or liability is not reasonably assured to it. 3.2 Certain Rights of Guarantee Trustee. a. Subject to the provisions of Section 3.1: 1) The Guarantee Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, proxy, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 2) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. 3) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter 13 be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. 4) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. 5) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee and its officers, directors and agents such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement and use the same degree of care and skill in the exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 6) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. 7) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents, custodians, nominees or attorneys or any Affiliate, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. 14 8) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request written instructions from the Holders of a Majority in Liquidation Preference of the Securities, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be fully protected in acting in accordance with such instructions. b. No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. 3.3 Indemnity. The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payment as a result of any amount due to it under this Guarantee Agreement. ARTICLE 4 GUARANTEE TRUSTEE 4.1 Guarantee Trustee; Eligibility. a. There shall at all times be a Guarantee Trustee which shall: 1) not be an Affiliate of the Guarantor; and 2) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. 15 b. If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). c. If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. 4.2 Appointment, Removal and Resignation of the Guarantee Trustee. a. Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. b. The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. c. The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. d. If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. 2. No Guarantee Trustee shall be liable for the acts or omissions of any Successor Guarantor Trustee. e. Upon the removal or resignation of the Guarantee Trustee, the Guarantor shall pay all amounts due and owing to such Guarantee Trustee. ARTICLE 5 GUARANTEE 16 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 5.3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: a. the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; b. the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Series A Debentures as so provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; c. any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; d. the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; e. any invalidity of, or defect or deficiency in, the Preferred Securities; f. the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or 17 g. any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders or the Guarantee Trustee to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. 5.4 Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in Liquidation Preference of the Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) if the Guarantee Trustee fails to enforce the Guarantee, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. 5.5 Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Series A Debentures to Holders as provided in the Trust Agreement. 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.1; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. 18 ARTICLE 6 SUBORDINATION OF GUARANTEE PAYMENTS SECTION 6.1 Guarantee Subordinate to the Guarantor Liabilities. The Company covenants and agrees, and each Holder, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the Guarantee Payments are hereby expressly made junior and subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all liabilities of the Guarantor (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed) (the "Guarantor Liabilities"), and pari passu with the most senior preferred stock, if any, now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and that the subordination is for the benefit of the holders of Guarantor Liabilities. SECTION 6.2 Payment Over of Proceeds Upon Dissolution, Etc. Upon any payment or distribution of assets of the Guarantor to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceeding in connection with any insolvency or bankruptcy proceeding of the Guarantor (each such event, if any, herein sometimes referred to as a "PROCEEDING"), then the holders of Guarantor Liabilities shall be entitled to receive payment in full of principal of (and premium, if any) and interest (including interest after the commencement of any such Proceeding at the rate specified in the applicable Guarantor Liability), if any, on such Guarantor Liabilities, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Guarantor Liabilities, before the Holders are entitled to receive or retain any payment or distribution of any kind or character on account of any Guarantee Payments pursuant to this Guarantee Agreement, whether in cash, property or securities (except for any Guarantee Payments that are due based upon funds deposited pursuant to Section 4.1(a)(ii)(B) of the Indenture or funds deposited for the redemption of Series A Debentures for which notice of redemption has been given and the applicable Redemption Date has passed), and to that end the holders of Guarantor Liabilities shall be entitled to receive, for application to the payment thereof any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Guarantee Payments in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, any payment or distribution of assets of the Guarantor of any kind or character is made at a time when the respective payment or distribution is not permitted to be made as a result of the subordination provisions described above and before all Guarantor Liabilities are paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Guarantor Liabilities, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the 19 Guarantee Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Guarantor for application to the payment of all Guarantor Liabilities remaining unpaid, to the extent necessary to pay all Guarantor Liabilities in full, after giving effect to any concurrent payment or distribution to or for the holders of Guarantor Liabilities. For the purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Guarantor, as reorganized or readjusted, or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Guarantor Liabilities to substantially the same extent as the Guarantee Payments are so subordinated as provided in this Article. The consolidation of the Guarantor with, or the merger of the Guarantor into, another Person or the liquidation or dissolution of the Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article 8 of the Indenture shall not be deemed a Proceeding for the purposes of this Section, if the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale, comply with the conditions set forth in Article 8 of the Indenture. SECTION 6.3 No Payment When Guarantor Liabilities in Default. In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Guarantor Liability, or in the event that any event of default with respect to any Guarantor Liability shall have occurred and be continuing and shall have resulted in such Guarantor Liability becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event of default, then no payment or distribution of any kind or character, whether in cash, properties or securities shall be made by the Guarantor on account of Guarantee Payments, other than any Guarantee Payments that are due based upon funds deposited pursuant to Section 4.1(a)(ii)(B) of the Indenture or funds deposited for the redemption of Series A Debentures for which notice of redemption has been given and the applicable Redemption Date has passed. In the event that, notwithstanding the foregoing, the Guarantor shall make any payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known as set forth in Section 6.7 to a Responsible Officer of the Guarantee Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 6.2 would be applicable. 20 SECTION 6.4 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Guarantee Agreement shall prevent (a) the Guarantor, at any time except during the pendency of any Proceeding referred to in Section 6.2 or under the conditions described in Sections 6.3 and 6.4, from making Guarantee Payments at any time, or (b) the application by the Guarantee Trustee of any money deposited with it hereunder to the payment of or on account of Guarantee Payments or the retention of such payment by the Holders, if, at the time of such application by the Guarantee Trustee, a Responsible Officer of the Trustee did not have actual knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 6.5 Guarantee Trustee to Effectuate Subordination. Each Holder by his or her acceptance thereof authorizes and directs the Guarantee Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Guarantee Trustee his or her attorney-in-fact for any and all such purposes. SECTION 6.6 No Waiver of Subordination Provisions. No right of any present or future holder of any Guarantor Liability to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms, provisions and covenants of this Guarantee Agreement, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. SECTION 6.7 Notice to Guarantee Trustee. The Guarantor shall give prompt written notice to the Guarantee Trustee of any fact known to the Guarantor which would prohibit the making of any payment to or by the Guarantee Trustee in respect of the Guarantee Payments. Notwithstanding the provisions of this Article or any other provision of this Guarantee Agreement, the Guarantee Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Guarantee Trustee in respect of the Guarantee Payments, unless and until the Guarantee Trustee shall have received written notice thereof from the Guarantor or a Person representing itself as a holder of any Guarantor Liability or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true). SECTION 6.8 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Guarantor referred to in this Article, the Guarantee Trustee, subject to the provisions of Article 3, and the Holders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which a Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Guarantee Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Guarantor Liabilities, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 21 SECTION 6.9 Guarantee Trustee Not Fiduciary for Holders of Guarantor Liabilities. With respect to the holders of the Guarantor Liabilities, the Guarantee Trustee undertakes to perform or observe only such of its obligations and covenants as are set forth in this Article 6, and no implied covenants or obligations with respect to the holders of such Guarantor Liabilities shall be read into this Guarantee Agreement against Wilmington Trust Company and/or the Guarantee Trustee. Wilmington Trust Company and/or the Guarantee Trustee shall not be deemed to owe any fiduciary duty to the holders of such Guarantor Liabilities and, subject to the provisions of Section 3.2, neither the Guarantee Trustee (nor Wilmington Trust Company) shall be liable to the holder of any Guarantor Liability if it shall pay over or deliver to Holders, the Guarantor, or any other Person, money or assets to which any holder of such Guarantor Liabilities shall be entitled to by virtue of this Article or otherwise. SECTION 6.10 Rights of Guarantee Trustee as Holder of Guarantor Liabilities; Preservation of Guarantee Trustee's Rights. The Guarantee Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Guarantor Liabilities which may at any time be held by it, to the same extent as any other holder of Guarantor Liabilities, and, subject to the requirements of the Trust Indenture Act, nothing in this Guarantee Agreement shall deprive the Guarantee Trustee of any of its rights as such holder. 22 ARTICLE 7 COVENANTS SECTION 7.1 Certain Covenants of the Guarantor. a. Guarantor covenants and agrees that if and so long as (i) the Issuer is the holder of all the Series A Debentures, (ii) a Tax Event (as defined in the Trust Agreement) in respect of the Issuer has occurred and is continuing and (iii) the Guarantor has elected, and has not revoked such election, to pay Additional Sums (as defined in the Trust Agreement) in respect of the Preferred Securities and Common Securities, the Guarantor will pay to the Issuer such Additional Sums. b. The Guarantor covenants and agrees that it will not, and will not cause any subsidiary of the Guarantor to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities (including guarantees of indebtedness for money borrowed) of the Guarantor that rank pari passu with or junior to the Series A Debentures (other than (a) any dividend, redemption, liquidation, interest, principal or guarantee payment by the Guarantor where the payment is made by way of securities (including capital stock) that rank pari passu with or junior to the securities on which such dividend, redemption, interest, principal or guarantee payment is being made, (b) redemptions or purchases of any rights pursuant to the Shareholder Rights Agreement (as defined in the Indenture), and the declaration of a dividend of such rights or the issuance of Company Common Stock under such agreement in the future, (c) payments under this Guarantee Agreement and any similar guarantee agreements issued by the Guarantor on behalf of the holders of preferred securities issued by any trust or other issuer holding Debentures (as defined in the Indenture) of any series, (d) purchases of Company Common Stock related to the issuance of Company Common Stock under the Benefits Trust (as defined in the Indenture ) or any of the Guarantor's benefit plans for its directors, officers or employees, (e) as a result of a reclassification of the Guarantor's capital stock or the exchange or conversion of one series or class of the Guarantor's capital stock for another series or class of the Guarantor's capital stock and (f) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged) if at such time (i) there shall have occurred any event of which the Guarantor has actual knowledge that (a) with the giving of notice or the lapse of time, or both, would constitute an "Event of Default" under the Indenture with respect to the Series A Debentures and (b) in respect of which the Guarantor shall not have taken reasonable steps to cure, (ii) the Guarantor shall be in default with respect to its payment of any obligations under this Guarantee Agreement or (iii) the Guarantor shall have given notice of its selection of an Extension Period (as defined in the Indenture) with respect to the Series A Debentures and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. 23 c. The Guarantor covenants and agrees (i) to maintain directly or indirectly 100% ownership of the Common Securities, provided that certain successors which are permitted by the Indenture may succeed to the Guarantor's ownership of the Common Securities, (ii) not to voluntarily dissolve the Issuer, except (a) in connection with a distribution of the Series A Debentures to the holders of the Preferred Securities in dissolution of the Issuer or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Issuer to remain classified as a grantor trust and not as an association taxable as a corporation for United States Federal income tax purposes, (iv) for so long as Preferred Securities are outstanding, not to convert Series A Debentures except pursuant to a notice of conversion delivered to the Conversion Agent (as defined in the Trust Agreement) by a Holder, (v) to maintain the reservation for issuance of the number of shares of Company Common Stock that would be required from time to time upon the conversion of all the Series A Debentures then outstanding, (vi) to deliver shares of Company Common Stock upon an election by the Holders to convert such Preferred Securities into Company Common Stock and (vii) to honor all obligations described herein relating to the conversion or exchange of the Preferred Securities into or for Company Common Stock or Series A Debentures. ARTICLE 8 TERMINATION SECTION 8.1 Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price or Optional Redemption Price, as the case may be, of all Preferred Securities, (ii) the distribution of Series A Debentures to the Holders in exchange for all of the Preferred Securities, (iii) full payment of the amounts payable in accordance with the Trust Agreement upon dissolution of the Issuer or (iv) upon the distribution, if any, of Company Common Stock to the holders of the Preferred Securities in respect of the conversion of all such holders' Preferred Securities into Company Common Stock. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. ARTICLE 9 MISCELLANEOUS SECTION 9.1 Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then Outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article 8 of the Indenture and pursuant to which the assignee agrees in writing to perform the 24 Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder. SECTION 9.2 Amendments. Except with respect to any changes which do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in Liquidation Preference of the Securities. The provisions of Article 6 of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. The Guarantor shall furnish the Guarantee Trustee with an Officers' Certificate and an Opinion of Counsel (as defined in the Trust Agreement) to the effect that any amendment of this Guarantee Agreement is authorized and permitted. SECTION 9.3 Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address as the Guarantor may give notice of to the Holders: Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Phone No.: (216) 587-3600 Facsimile No.: (216) 587-3563 Attention: Vice President -- Treasurer (b) if given to the Issuer, in care of the Guarantor, at the Issuer's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Issuer may give notice of to the Holders: Pioneer-Standard Financial Trust c/o Pioneer-Standard Electronics, Inc. 4800 East 131st Street Cleveland, Ohio 44105 Phone No.: (216) 587-3600 Facsimile No.: (216) 587-3563 Attention: Vice President -- Treasurer with a copy to: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890-0001 Phone No.: (302) 651-1000 Facsimile No.: (302) 427-4775 Attention: Corporate Trust Administration 25 (c) if given to any Holder, at the address set forth on the books and records of the Issuer. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. SECTION 9.5 Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; 1. all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; 1. a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; 1. a reference to the singular includes the plural and vice versa; and 1. the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 9.6 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 26 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger ------------------------------------- Name: John V. Goodger ----------------------------------- Title: Vice President, Treasurer and Assistant Secretary ---------------------------------- WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Guarantee Trustee By: /s/ Donald G. MacKelcan ------------------------------------- Name: Donald G. MacKelcan ----------------------------------- Title: Assistant Vice President ---------------------------------- EX-10.I 10 EXHIBIT 10(I) 1 Exhibit 10(i) PIONEER-STANDARD FINANCIAL TRUST --------- 6 3/4% Convertible Trust Preferred Securities REGISTRATION RIGHTS AGREEMENT New York, New York March 23, 1998 LAZARD FRERES & CO. LLC CLEARY GULL REILAND & McDEVITT INC. McDONALD & COMPANY SECURITIES, INC. c/o Lazard Freres & Co. LLC 30 Rockefeller Plaza New York, New York 10020 Ladies and Gentlemen: Pioneer-Standard Financial Trust, a statutory business trust created under the laws of the State of Delaware (the "Trust"), and Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company"), as depositor of the Trust and as guarantor propose to issue and sell to Lazard Freres & Co. LLC, Cleary Gull Reiland & McDevitt Inc. and McDonald & Company Securities, Inc. (collectively, the "Initial Purchasers"), upon the terms set forth in the purchase agreement of even date herewith (the "Purchase Agreement"), 2,500,000 (plus an additional 375,000 to cover over-allotments, if any) of its 6 3/4% Convertible Trust Preferred Securities (liquidation preference $50 per preferred security) (the "Preferred Securities") of the Trust (the "Offering"). The Preferred Securities are guaranteed on a subordinated basis by the Company as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a guarantee agreement (the "Guarantee") between the Company and Wilmington Trust Company, a Delaware state chartered bank, as trustee, and may be converted or exchanged under certain circumstances into the 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028 of the Company (the "Debentures") held by the Trust and then into common stock, without par value (together with the associated common share 2 purchase rights provided under the Rights Agreement (as defined herein), "Common Shares"), of the Company. The Preferred Securities, the Debentures, the Guarantee and the Common Shares issuable upon conversion of the Preferred Securities and/or the Debentures are referred to collectively as the "Securities." As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Company and the Trust each agree with you, (i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders (including the Initial Purchasers) of the Registrable Securities (as defined herein) until such time as such Registrable Securities have been sold pursuant to the Shelf Registration Statement (as defined below) (each of the foregoing a "Holder" and together the "Holders"), as follows: 1. DEFINITIONS. (a) Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "AFFILIATE" of any specified person means any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "COMMISSION" means the Securities and Exchange Commission. "DTC" means The Depository Trust Company. "EFFECTIVE TIME" means the date on which the Commission declares the Shelf Registration Statement 3 effective or on which the Shelf Registration Statement otherwise becomes effective. "ELECTING HOLDER" has the meaning assigned thereto in Section 3(a)(3) hereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "HOLDER" has the meaning set forth in the preamble hereto. "INDENTURE" means the Junior Subordinated Indenture dated March 23, 1998, and the First Supplemental Indenture dated March 23, 1998, relating to the Debentures, each entered or to be entered into by the Company and Wilmington Trust Company, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "INITIAL CLOSING DATE" has the meaning set forth in the Purchase Agreement. "MAJORITY HOLDERS" means, in any particular Underwritten Offering, the Holders of a majority of the aggregate principal amount of the Registrable Securities registered under a Shelf Registration Statement and participating in such Underwritten Offering; PROVIDED, THAT, Holders of Common Shares issued upon conversion of Preferred Securities shall be deemed to be Holders of the aggregate principal amount of Preferred Securities from which such Common Shares were converted. "MANAGING UNDERWRITERS" means the investment banker or investment bankers and manager or managers that shall administer an Underwritten Offering of the securities covered by the Shelf Registration Statement. "NOTICE AND QUESTIONNAIRE" means a Notice of Registration Statement and Selling Security Holder Questionnaire substantially in the form of Exhibit A hereto. "OFFERING MEMORANDUM" has the meaning set forth in the Purchase Agreement. 4 "PERSON" means a corporation, association, partnership, limited liability company, organization, business, individual, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PROSPECTUS" means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Shelf Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "PURCHASE AGREEMENT" means the purchase agreement dated March 17, 1998 among the Purchaser, the Company and the Trust. "INITIAL PURCHASERS" means Lazard Freres & Co. LLC, Cleary Gull Reiland & McDevitt Inc. and McDonald & Company Securities, Inc. "REGISTRABLE SECURITIES" means all or any portion of the Securities issued from time to time; PROVIDED, HOWEVER, that a Security ceases to be a Registrable Security when it is no longer a Restricted Security. "RESTRICTED SECURITY" means any Security except any such Security which (i) has been effectively registered under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto), (iii) has been sold in compliance with Regulation S under the Securities Act (or any successor thereto) and does not constitute the unsold allotment of a distributor within the meaning of Regulation S under the Securities Act, or (iv) has otherwise been transferred and a new Security not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the 5 Company in accordance with the terms of the Trust Agreement or the Indenture, as the case may be. "RIGHTS AGREEMENT" means the Rights Agreement dated as of April 25, 1989 between the Company and National City Bank, Cleveland, Ohio, and any successor or replacements thereof. "RULES AND REGULATIONS" means the published rules and regulations of the Commission promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time. "SECURITIES" has the meaning set forth in the preamble hereto. "SHELF REGISTRATION" means a registration effected pursuant to Section 2 hereof. "SHELF REGISTRATION PERIOD" has the meaning set forth in Section 2(b) hereof. "SHELF REGISTRATION STATEMENT" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2 hereof which covers some or all of the Registrable Securities, as applicable, on an appropriate form under Rule 415 under the Act or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "TRUST AGREEMENT" means the Trust Agreement, dated as of March 23, 1998, among the Company, as Depositor, Wilmington Trust Company, as Property Trustee and as Delaware Trustee, and the Administrative Trustees named therein, relating, among other things, to the Preferred Securities, as amended and supplemented from time to time in accordance with its terms. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, as the same shall be amended. 6 "UNDERWRITER" means any underwriter of Registrable Securities in connection with an offering thereof under a Shelf Registration Statement. "UNDERWRITTEN OFFERING" means an underwritten offering of at least ten percent (10%) in aggregate principal amount of the outstanding Registrable Securities. (b) Wherever there is a reference in this Agreement to a percentage of the "principal amount" of Registrable Securities or to a percentage of Registrable Securities, the Preferred Securities and the Debentures issuable upon exchange of the Preferred Securities will be treated as the same class of Securities and Common Shares shall be treated as representing the liquidation preference of Preferred Securities or the principal amount of Debentures which was surrendered for conversion in order to receive such number of Common Shares. 2. SHELF REGISTRATION; SUSPENSION OF USE OF PROSPECTUS. (a) The Company and the Trust shall prepare and, not later than 90 days following the Initial Closing Date, file with the Commission and thereafter, but not later than 180 days following the Initial Closing Date, shall each use their best efforts to cause to be declared effective under the Act, a Shelf Registration Statement relating to the offer and sale of the Registrable Securities; PROVIDED, HOWEVER, that no Holder shall be entitled to be named as a selling security holder in the Shelf Registration Statement or to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Holder is an Electing Holder. (b) The Company and the Trust shall each use its respective best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Electing Holders for a period of two years from the Initial Closing Date (or, in the event that Rule 144(k) under the Securities Act is amended to provide for a shorter holding period, until the end of such shorter period) or such shorter period that will terminate when (A) all the Preferred Securities 7 covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement; (B) all Debentures issued to Holders in respect of Preferred Securities that have not been sold pursuant to the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement; and (C) all Common Shares issued upon conversion of any such Preferred Securities or any such Debentures that have not been sold pursuant to the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company and the Trust shall be deemed not to have used each of its respective best efforts to keep the Shelf Registration Statement effective during the requisite period if the Company or the Trust voluntarily takes any action that would result in Electing Holders of Registrable Securities covered thereby not being able to offer and sell such Registrable Securities during that period, unless such action is (i) required by applicable law or (ii) pursuant to Section 2(e) hereof, and, in either case, so long as the Company and the Trust promptly thereafter complies with the requirements of Section 3(j) hereof, if applicable. (c) The Company and the Trust shall each use its respective best efforts, after the Effective Time of the Shelf Registration Statement and prior to the end of the Shelf Registration Period, promptly upon the request of any Holder that is not then an Electing Holder identified as a selling security holder in the Prospectus at the Effective Time, to take any action reasonably necessary to enable such Holder to use the Prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such Holder as a selling security holder in the Shelf Registration Statement; PROVIDED, HOWEVER, that nothing in this subparagraph shall relieve such Holder of the obligation to return a completed and signed Notice and Questionnaire to the Company and the Trust in accordance with Section 3(a)(2) hereof and to provide to the Company and the Trust, in writing, any information with respect to such Holder or the Registrable Securities held by such Holder as is, in the reasonable opinion of counsel to the Trust or the Company, required under applicable law to enable such Holder to use such Prospectus for resales of such Registrable Securities. 8 (d) If at any time prior to the end of the Shelf Registration Period, the Preferred Securities are convertible into securities other than Common Shares, the Company and the Trust shall each use its respective best efforts, or shall cause any successor under the Trust Agreement to, cause such securities to be included in the Shelf Registration Statement no later than the date on which the Preferred Securities may first be converted into such securities. (e) The Company and the Trust may suspend the use of the Prospectus for a period not to exceed 30 days in any three month period or four periods not to exceed an aggregate of 60 days in any 12 month period for valid business reasons (not including avoidance of the Company's or the Trust's obligations hereunder), including the acquisition or divestiture of assets, public filings with the Commission, pending corporate developments and similar events. Any such period during which the Company and the Trust are permitted to suspend the effectiveness of the Shelf Registration Statement is referred to herein as the "Suspension Period." (f) If (i) on or prior to the date 90 days after the Initial Closing Date, a Shelf Registration Statement has not been filed with the Commission or (ii) on or prior to the date 180 days after the Initial Closing Date such Shelf Registration Statement has not been declared effective (each such event, a "Registration Default"), additional interest ("Liquidated Damages") will accrue on the Debentures, and, accordingly, additional distributions will accrue on the Preferred Securities, from and including the day following such Registration Default until the earlier of such date as the Shelf Registration Statement is filed or declared effective, as the case may be, or the end of the Shelf Registration Period. Liquidated Damages will be paid quarterly in arrears (subject to the Company's right to defer the payment of Liquidated Damages during any Extension Period (as defined in the Indenture)), with the first quarterly payment due on the first interest or distribution payment date, as applicable, following the date on which such Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to an additional one-quarter of one percent (0.25%) of the principal amount or liquidation preference, as applicable, to and including the 90th day following such Registration Default and one-half of one 9 percent (0.50%) thereof from and after the 91st day following such Registration Default. In the event that the Shelf Registration Statement ceases to be effective during the Shelf Registration Period for more than 90 days, whether or not consecutive, during any 12-month period, then the interest rate borne by the Debentures and the distribution rate borne by the Preferred Securities will each increase by an additional one-half of one percent (0.50%) per annum from the 91st day of the applicable 12-month period during which such Shelf Registration Statement ceases to be effective until such time as the earlier to occur of the Shelf Registration Statement again becoming effective and the end of the Shelf Registration Period. 3. REGISTRATION PROCEDURES. In connection with any Shelf Registration Statement, the following provisions shall apply: (a) (1) The Company and the Trust shall not be required to take any action to name such Holder as a selling security holder in the Shelf Registration Statement or to enable such Electing Holder to use the Prospectus forming a part thereof for resales of Registrable Securities until such Holder has returned a completed and signed Notice and Questionnaire to the Company and the Trust and provided to the Company and the Trust such information with respect to such Holder or the Registrable Securities held by such Holder as is, in the reasonable opinion of counsel to the Company or the Trust, required to enable such Holder to use the Prospectus for resales of Registrable Securities. (2) Not less than 40 calendar days prior to the Effective Time of the Shelf Registration Statement, the Company or the Trust shall mail the Notice and Questionnaire to each Holder. No Holder shall be entitled to be named as a selling security holder in the Shelf Registration Statement as of the Effective Time, and no Holder shall be entitled to use the Prospectus forming a part thereof for resales of Registrable Securities at any time, unless such Holder has returned a completed and signed Notice and Questionnaire to the Company and the Trust and provided to the Company and the Trust such information with respect to such Holder of the Registrable Securities held by such Holder as is, in the reasonable opinion of 10 counsel to the Company or the Trust, required to enable such Holder to use the Prospectus for resales of Registrable Securities; PROVIDED, HOWEVER, that only Holders who have completed and returned the Notice and Questionnaire and any such additional information requested of such Holder to the Company or the Trust on or before the day that is ten days prior to the Effective Time shall be entitled to be named as a selling security holder in the Shelf Registration Statement as of the Effective Time. (3) The term "Electing Holder" shall mean any Holder that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(1) or 3(a)(2) hereof and provided to the Company and the Trust such information with respect to such Holder or the Registrable Securities held by such Holder as is, in the reasonable opinion of counsel to the Company or the Trust, required to enable such Holder to use the Prospectus for resales of Registrable Securities. (b) The Company and the Trust shall furnish to each Electing Holder for such Electing Holder's timely review, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement, and shall furnish to such Electing Holders each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall use their best efforts to reflect in each such document, when so filed with the Commission, such comments as such Electing Holders reasonably may propose. (c) The Company and the Trust shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in 11 order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d)(1) The Company shall advise the Initial Purchasers, and in the case of clause (i), the Electing Holders and, if requested by the Initial Purchasers or any such Electing Holder, confirm such advice in writing: (i) when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise the Initial Purchasers and the Electing Holders and, if requested by the Initial Purchasers or any such Electing Holder, confirm such advice in writing: (i) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Company or the Trust of any notification with respect to the suspension of the qualification of the securities included in any Shelf Registration Statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the suspension of the use of the Prospectus pursuant to Section 2(e) hereof or of the happening of any event that requires the making of any changes in the Shelf Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the 12 statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made); PROVIDED, THAT, such notice of the suspension of the use of the Prospectus pursuant to Section 2(e) hereof shall not be required to specify the nature of the event giving rise to the notice requirement hereunder. (e) The Company and the Trust shall each use its respective best efforts to obtain the withdrawal of any order suspending the effectiveness of any Shelf Registration Statement at the earliest possible time. (f) The Company and the Trust shall furnish to each Electing Holder of Registrable Securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Electing Holder so requests in writing, all exhibits (including those incorporated by reference). (g) The Company and the Trust shall, during the Shelf Registration Period, deliver to each Electing Holder of Registrable Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder may reasonably request; and the Company and the Trust each consents to the use, in compliance with the terms of this Agreement, of the Prospectus or any amendment or supplement thereto by each of the Electing Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto. (h) Prior to any offering of Registrable Securities pursuant to any Shelf Registration Statement, the Company and the Trust shall register or qualify or cooperate with the Electing Holders of Registrable Securities included therein and their respective counsel in connection with the 13 registration or qualification of such securities for offer and sale under the securities or blue sky laws of such U.S. jurisdictions as any such Electing Holders reasonably request in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Shelf Registration Statement; PROVIDED, HOWEVER, that neither the Company nor the Trust will be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) Unless any Registrable Securities shall be in book-entry only form, the Company and the Trust shall cooperate with the Electing Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as Electing Holders may request prior to sale of Registrable Securities pursuant to such Shelf Registration Statement. (j) Upon the occurrence of any event contemplated by paragraph (d)(2)(iii) above, the Company and the Trust shall, if required pursuant to the Act or paragraph (d)(2)(iii) above, promptly prepare a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of any Shelf Registration Statement hereunder, the Company and the Trust shall each provide a CUSIP number for the Preferred Securities registered under such Shelf Registration Statement; in the event of and at the time of any distribution of the Debentures to Holders, the Company and the Trust shall provide a CUSIP number for the Debentures 14 and provide the applicable trustee with printed certificates for such Registrable Securities, in a form eligible for deposit with DTC. (l) The Company shall use its best efforts to comply with all applicable Rules and Regulations and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Shelf Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act (which may be satisfied in the manner provided by Rule 158 under the Act). (m) The Company and the Trust shall cause the Indenture, the Trust Agreement and the Guarantee to be qualified under the Trust Indenture Act in a timely manner. (n) The Company and the Trust shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and/or Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (o) The Company and the Trust shall enter into such agreements including, in connection with an Underwritten Offering, underwriting agreements) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Registrable Securities and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all parties to be indemnified pursuant to Section 6 from Holders of Registrable Securities. (p) The Company and the Trust shall (i) make reasonably available for inspection by the Electing Holders, any Underwriter, and any attorney, accountant or other agent retained by the Electing Holders or any such Underwriter all relevant financial and other records, pertinent corporate 15 documents and properties of the Company and its subsidiaries and the Trust in connection with such Shelf Registration Statement as is customary for similar due diligence examinations; (ii) cause the officers, directors and employees of the Company and the Trust to supply all relevant information reasonably requested by the Holders participating in such Underwritten Offering or any such Underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement as is customary for similar due diligence examinations; PROVIDED, HOWEVER, that any information that is designated in writing by the Company or the Trust, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Holders or any such Underwriter, attorney, accountant or agent, unless disclosure thereof is made in connection with a court proceeding or required by law, or such information has become available (not in violation of this agreement) to the public generally or through a third party without an accompanying obligation of confidentiality, and the Company and the Trust shall each be entitled to request that such Holders sign a confidentiality agreement to the foregoing effect; (iii) in connection with an Underwritten Offering, make such representations and warranties to the Electing Holders of Registrable Securities participating in such Underwritten Offering and the Underwriters in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) in connection with an Underwritten Offering, obtain opinions of counsel to the Company and the Trust and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each Holder participating in such Underwritten Offering and the Underwriters covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and Underwriters; (v) in connection with an Underwritten Offering, obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company and the Trust (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, 16 included in the Shelf Registration Statement), addressed to each Holder participating in such Underwritten offering and the Underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) in connection with an Underwritten Offering, deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with section 3(j) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Trust. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 3(p) shall be performed at (A) the effectiveness of such Shelf Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (q) The Company and the Trust shall each use reasonable best efforts to take all other steps necessary to effect the registration, offering and sale of the Registrable Securities covered by the Shelf Registration Statement contemplated hereby. 4. AGREEMENT OF HOLDERS REGARDING USE OF PROSPECTUS. Each Electing Holder of Registrable Securities covered by a Shelf Registration Statement severally agrees with the Company and the Trust that such Electing Holder will not use the Prospectus, in each case after notice by the Company and the Trust of the applicable event, (i) during any period of suspension referred to in Section 2(e), (ii) during any period when a stop order is in effect as referred to in Section 3(d)(2)(i), (iii) in the applicable jurisdiction during any period when the qualification of the Securities included in the Shelf Registration Statement has been suspended in such jurisdiction, as referred to in Section 3(d)(2)(ii), and (iv) during any suspension period referred to in Section 3(d)(2)(iii). 5. REGISTRATION EXPENSES. The Company and the Trust shall each bear all expenses incurred in connection with the performance of its obligations under Sections 2 and 3 hereof and, in connection with an Underwritten Offering, 17 shall reimburse the Electing Holders for the reasonable and duly documented fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Electing Holders in connection therewith. 6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any Shelf Registration Statement, the Company and the Trust, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser and each Electing Holder, the directors, officers, employees and agents of each Initial Purchaser and each such Electing Holder and each person who controls an Initial Purchaser or any such Electing Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that (i) the Company and the Trust shall not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company or the Trust by or on behalf of any such Electing Holder or Underwriter or Managing Underwriter specifically for inclusion therein, (ii) the Company and the Trust shall not be liable to any indemnified party under this indemnity agreement with respect to any Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results from the use of the Prospectus during a period 18 when the use of the Prospectus has been suspended in accordance with Section 2(e) or Section 3(d)(2)(iii) hereof, PROVIDED, THAT, in each case, the Initial Purchasers and the Holders received prior notice of such suspension; and (iii) the Company and the Trust shall not be liable to any indemnified party under this indemnity agreement in this Section 6(a) with respect to any preliminary Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results from the fact that such indemnified party sold Registrable Securities to a person as to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus or of the Prospectus as then amended or supplemented in any case where such delivery is required by the Act, if the loss, claim, damage or liability of such indemnified party results from an untrue statement or omission of a material fact contained in the preliminary Prospectus which was corrected in the Prospectus or in the Prospectus as then amended or supplemented. This indemnity agreement will be in addition to any liability which the Company and the Trust may otherwise have. The Company and the Trust, jointly and severally, also agree to indemnify or contribute to Losses, as provided in Section 6(d), of any Underwriters of Registrable Securities registered under a Shelf Registration Statement, their officers and directors and each person who controls such Underwriters on substantially the same basis as that of the indemnification of the Initial Purchasers and the Electing Holders provided in this Section 6(a) and shall, if requested by any Electing Holder in connection with an Underwritten Offering, enter into an underwriting agreement reflecting such agreement, as provided in Section 3(o) hereof. (b) Each Electing Holder of Registrable Securities covered by a Shelf Registration Statement (including the Initial Purchasers) severally agrees to indemnify and hold harmless (i) the Company, (ii) the Trust, (iii) each of the Company's and the Trust's directors, trustees, agents and officers who signs such Shelf Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to 19 written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), in each case, reasonably satisfactory to the indemnifying party, and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel), if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the 20 indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Offering and the Shelf Registration Statement which resulted in such Losses; PROVIDED, HOWEVER, that in no case shall any Initial Purchaser or any subsequent Holder of any Registrable Securities be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Registrable Securities, as set forth on the cover page of the Prospectus, nor shall any Underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such Underwriter under the Shelf Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is 21 appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company and the Trust shall be deemed to be equal to the total net proceeds from the Offering (before deducting expenses) as set forth on the cover page of the final Offering Memorandum. Benefits received by each Initial Purchaser shall be deemed to be equal to the total compensation paid by the Company to each Initial Purchaser as set forth on the cover page of the Offering Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Registrable Securities registered under the Act. Benefits received by any Underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 22 (e) The provisions of this Section 6 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder, the Company or the Trust or any of the officers, directors or controlling persons referred to in Section 5 hereof, and will survive the sale by a Holder of securities covered by a Shelf Registration Statement. 7. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company and the Trust have not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and the Trust have obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Registrable Securities that has not yet been sold pursuant to a Shelf Registration Statement; PROVIDED, THAT, with respect to any matter that directly or indirectly affects the rights of the Initial Purchasers hereunder, the Company and the Trust shall obtain the written consent of Lazard Freres & Co. LLC against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Registrable Securities are being sold pursuant to a Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Registrable Securities being sold rather than registered under such Shelf Registration Statement. (c) NOTICES. All notices and other communications provided for or permitted hereunder shall be 23 made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 6(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Lazard Freres & Co. LLC; (2) if to the Initial Purchasers, initially at the address set forth in the Purchase Agreement; and (3) if to the Company or the Trust, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company and the Trust by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company and the Trust thereto, subsequent Holders of Registrable Securities. The Company and the Trust hereby agree to extend the benefits of this Agreement to any Holder of Registrable Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) COUNTERPARTS. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) HEADINGS. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 24 (g) GOVERNING LAW. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State. (h) SEVERABILITY. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) SECURITIES HELD BY THE COMPANY, ETC. Whenever the consent or approval of Holders of a specified percentage of principal amount of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates or the Trust (other than subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. Please confirm that the foregoing correctly sets forth the agreement between the Company, the Trust and the Initial Purchasers. 25 Very truly yours, PIONEER-STANDARD ELECTRONICS, INC. by /s/ John V. Goodger Name: John V. Goodger Title: Vice President, Treasurer and Assistant Secretary PIONEER-STANDARD FINANCIAL TRUST by /s/ John V. Goodger Name: John V. Goodger Title: Administrative Trustee Accepted in New York, New York March 23, 1998 LAZARD FRERES & CO. LLC CLEARY GULL REILAND & MCDEVITT INC. MCDONALD & COMPANY SECURITIES, INC. By: Lazard Freres & Co. LLC by /s/ Authorized Officer ----------------------------- 26 EXHIBIT A PIONEER-STANDARD ELECTRONICS, INC. PIONEER-STANDARD FINANCIAL TRUST INSTRUCTION TO DTC PARTICIPANTS (DATE OF MAILING) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: (DATE) The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in 6 3/4% Convertible Trust Preferred Securities (liquidation preference $50 per preferred security) of Pioneer-Standard Financial Trust (the "Trust") are held. The Preferred Securities are guaranteed on a subordinated basis by Pioneer-Standard Electronics, Inc. (the "Company") as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a guarantee agreement between the Company and Wilmington Trust Company, as trustee (the "Guarantee") and may be exchanged under certain circumstances into 6 3/4% Junior Convertible Subordinated Debentures due March 31, 2028 of the Company (the "Debentures") held by the Trust and converted into common shares, without par value ("Common Shares"), of the Company. The Preferred Securities, the Debentures, the Guarantee and the Common Shares are referred to collectively as the "Registrable Securities." The Company and the Trust are in the process of registering the Registrable Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Registrable Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Security Holder Questionnaire. It is important that beneficial owners of the Registrable Securities receive a copy of the enclosed materials as soon 27 as possible as their rights to have the Registrable Securities included in the registration statement depend upon their returning the Notice and Questionnaire by (DEADLINE FOR RESPONSE). Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Registrable Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact: Pioneer-Standard Electronics, Inc. - - ----------------------- - - ----------------------- Attn: Chief Financial Officer FORM OF PIONEER-STANDARD ELECTRONICS, INC. PIONEER-STANDARD FINANCIAL TRUST NOTICE OF REGISTRATION STATEMENT AND SELLING SECURITY HOLDER QUESTIONNAIRE [DATE] Pioneer-Standard Electronics, Inc., an Ohio corporation (the "Company") and Pioneer-Standard Financial Trust, a statutory business trust formed under the laws of the State of Delaware (the "Trust") have filed with the United States Securities and Exchange Commission (the "Commission") a preliminary registration statement on Form S-3 (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Trust's [ ]% Convertible Trust Preferred Securities (liquidation preference $50 per preferred security) (the "Preferred Securities"), the Company's 6 3/4% Junior Convertible Subordinated Debentures, due March 31, 2028 (the "Debentures"), the guarantee of the Company pursuant to the Guarantee Agreement between the Company and Wilmington Trust 28 Company, as trustee (the "Guarantee"), the common shares of the Company, without par value, issuable upon conversion of the Preferred Securities and/or the Debentures (together with the associated common share purchase rights (the "Rights") provided under the Rights Agreement, the "Company Common Shares", and together with the Preferred Securities, the Debentures and the Guarantee, the "Registrable Securities"), in accordance with the terms of the Registration Rights Agreement, dated as of March __, 1998 (the "Registration Rights Agreement"), among the Trust, the Company, and Lazard Freres & Co. LLC, Cleary Gull Reiland & McDevitt Inc. and McDonald & Company Securities, Inc. (the "Initial Purchasers"). A copy of the Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement. Each beneficial owner of Registrable Securities is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Security Holder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE (DEADLINE FOR RESPONSE). Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling security holders in the Shelf Registration Statement and related Prospectus and (ii) may not sell their Registrable Securities pursuant thereto, unless the Company, in its discretion, consents to include such owner's securities in the Shelf Registration Statement. Certain legal consequences arise from being named as a selling security holder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling security holder in the Shelf Registration Statement and related Prospectus. 29 ELECTION The undersigned holder (the "Selling Security Holder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement. The Selling Security Holder hereby undertakes, in accordance with Section 6 of the Registration Rights Agreement, (a) to indemnify and hold harmless (i) the Company, (ii) the Trust, (iii) each of the Company's and the Trust's directors, trustees, agents and officers who signs the Shelf Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or 30 alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided, that, such Selling Security Holder shall not be liable to any indemnified party in any case except to the extent that any such loss, claim, damage or liability of such indemnified party results from written information relating to such Selling Security Holder furnished to the Company by or on behalf of such Selling Security Holder specifically for inclusion in the Shelf Registration Statement as originally filed or any amendment thereof, or in any preliminary Prospectus or Prospectus, or any amendment thereof or supplement thereto, and (b) to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. The undersigned further undertakes, if applicable, to comply with the provisions of Sections 6(c) and (d) of the Registration Rights Agreement that are applicable to the undersigned. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement under the Securities Act, the Selling Security Holder will be required to deliver to the Company, the Trust and Trustee the Notice of Transfer set forth in Appendix I attached to this Notice and Questionnaire (completed and signed) and hereby undertakes to do so. The Selling Security Holder hereby provides the following information to the Company and the Trust and represents and warrants that such information is accurate and complete: 31 QUESTIONNAIRE (1) (a) Full Legal Name of Selling Security Holder: ----------------------------------------------------- (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in (3) below: ----------------------------------------------------- (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in (3) Below Are Held: ----------------------------------------------------- (2) Address for Notices to Selling Security Holder: --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Telephone: --------------------------- Fax: --------------------------- Contact Person: --------------------------- (3) Beneficial Ownership of Registrable Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities or Company Common Shares issued upon conversion of any Securities. 32 (a) Principal amount or liquidation preference of Registrable Securities (as defined in the Registration Rights Agreement) beneficially owned: ------------------------ CUSIP No(s). of such Registrable Securities: ---------- Number of Company Common Shares (if any) issued upon conversion of such Registrable Securities: ------------ (b) Principal amount or liquidation preference of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement: ---------------- CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement: ----------------- Number of Company Common Shares (if any) issued upon conversion of such Registrable Securities which are to be included in the Shelf Registration Statement: --------------- (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Security Holder is not the beneficial or registered owner of any Common Shares or any other securities of the Company or any of its affiliates, other than the Registrable Securities listed above in Item (3). State any exceptions here: (5) Relationships with the Company: 33 Except as set forth below, neither the Selling Security Holder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Security Holder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Security Holder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Security Holder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging positions they assume. The Selling Security Holder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: 34 Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company and the Trust. By signing below, the Selling Security Holder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder. In the event that the Selling Security Holder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company and the Trust, the Selling Security Holder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement. By signing below, the Selling Security Holder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Security Holder understands that such information will be relied upon by the Company and the Trust in connection with the preparation of the Shelf Registration Statement and related Prospectus. In accordance with the Selling Security Holder's obligation under Section 3(a) of the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Security Holder agrees to promptly notify the Company and the Trust of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: 35 (i) To the Trust: Pioneer-Standard Financial Trust c/o Pioneer-Standard Electronics, Inc. 4800 East 31st Street Cleveland, Ohio 44105 Attn: Vice President, Treasurer and Assistant Secretary (ii) With a copy to: Calfee, Halter & Griswald LLP 800 Superior Avenue, Suite 1400 Cleveland, Ohio 44114 Attn: William A. Papenbrock, Esq. Once this Notice and Questionnaire is executed by the Selling Security Holder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company, the Trust and the Selling Security Holder (with respect to the Registrable Securities beneficially owned by such Selling Security Holder and listed in Item (3) above). This Agreement shall be governed in all respects by the laws of the State of New York. 36 APPENDIX I NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT - - --------------------------------- Attention: ----------------------- - - --------------------------------- - - --------------------------------- - - --------------------------------- Re: Pioneer-Standard Financial Trust (the "Trust") [ ]% Convertible Trust Preferred Securities (the "Preferred Securities") ----------------------------------------------- Ladies and Gentlemen: Please be advised that _________________________ has transferred _________ Preferred Securities, or $ __________ aggregate principal amount of the Pioneer-Standard Electronics, Inc. (the "Company") 6 3/4% Junior Convertible Subordinated Debentures due March 31, 2028 (the "Debentures") or _____ the Company's common shares, without par value, issued on conversion of the Preferred Securities and/or the Debentures ("Stock") pursuant to an effective Shelf Registration Statement on Form S-3 (File No. 333- ) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied with respect to the transfer described above and that the above-named beneficial owner of the Preferred Securities, Debentures or Stock is named as a "Selling Security Holder" in the Prospectus dated __________, ____ or in amendments or supplements thereto, and that the aggregate principal amount of the Debentures, or number of shares of Preferred Securities or shares of Stock transferred are (a portion of) the Debentures, the Preferred Securities or Stock listed in such Prospectus, as amended or supplemented, opposite such owner's name. Dated: 37 Very truly yours, (Name) EX-10.J 11 EXHIBIT 10(J) 1 Exhibit 10(j) CREDIT AGREEMENT This Agreement, dated as of March 27, 1998, is among Pioneer-Standard Electronics, Inc., an Ohio corporation, and its successors and assigns (the "Borrower"), National City Bank, a national banking association, and the several banks, financial institutions and other entities from time to time parties to this Agreement (sometimes collectively, "Lenders" and sometimes individually, a "Lender"), and National City Bank, not individually, but as "Agent". RECITALS -------- A. Borrower is primarily engaged in the business of distributing industrial and consumer electronic products. B. Borrower is listed on the National Association of Securities Dealers Incorporated stock exchange ("NASDAQ"). C. Borrower has requested that Lenders make loans available to Borrower pursuant to the terms of this Agreement, and that Agent act as administrative agent for Lenders. Agent and Lenders have agreed to do so. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which Borrower or any of its Subsidiaries (i) acquires any business as a going concern or all or substantially all of the assets of any firm, corporation or division thereof, whether through purchase of assets or stock, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership interests of a partnership. "Advance" means a borrowing hereunder consisting of the aggregate amount of the several Loans made by Lenders to Borrower of the same Type. "Affected Lender" is defined in SECTION 2.15(d). 2 "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person whether through ownership of stock, by contract or otherwise. "Agent" means National City Bank in its capacity as agent for Lenders pursuant to ARTICLE IX, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to ARTICLE IX. "Aggregate Commitment" means the aggregate of the Commitments of all Lenders; provided, however, prior to the consummation of the Merger the Aggregate Commitment shall not exceed One Hundred and Sixty Five Million Dollars ($165,000,000.00). "Aggregate Measured Credit Risk" means, as at any time during the pendency of this Agreement that an interest rate exchange agreement or interest rate option agreement is in effect, the amount determined by Agent in accordance with the terms of such interest rate exchange agreement or interest rate option agreement as being Borrower's measured credit risk thereunder at such time. "Agreement" means this Credit Agreement, as it may be amended or modified and in effect from time to time. "Agreement for Inventory Financing" means that certain Agreement for Inventory Financing, dated as of March 31, 1998, by and between IBM Credit Corporation and Borrower. "Applicable Currency" means, as to any particular payment or Loan, Dollars, or the Foreign Currency in which it is denominated or payable. "Applicable Margin" means the applicable margin determined by reference to the table in SECTION 2.4 used in calculating the interest rate applicable to the various Types of Advances; which shall vary from time to time in accordance with SECTION 2.4. "Applicable Law" means collectively, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting Borrower or any of its Subsidiaries, whether now or hereafter enacted and in force. "Article" means an article of this Agreement unless another document is specifically referenced. -2- 3 "Assets" means, with respect to any Person, as of any date of determination, the total amount of assets of that Person as shown on the balance sheet of such Person. "Authorized Financial Officer" means any vice president or treasurer of Borrower, acting singly. "Authorized Officer" means the Vice President/Treasurer or Treasury Analyst of Borrower, acting singly. "Base Rate Applicable Margin" means, as of any date, the Applicable Margin in effect on such date with respect to Base Rate Loans. "Base Rate" or "Prime Rate" means the higher of (i) the Federal Funds Rate plus one-half of one percent, or (ii) the fluctuating rate of interest which is publicly announced from time to time by Agent at its Head Office as being its "prime rate" or "base rate" thereafter in effect, with each change in the Base Rate automatically, immediately and without notice being reflected in the fluctuating interest rate thereafter applicable hereunder, it being specifically acknowledged that the Base Rate is not necessarily the lowest rate of interest then available from Agent on fluctuating-rate loans. "Base Rate Advance" means an Advance which bears interest at the Base Rate. "Base Rate Loan" means a Loan which bears interest at the Base Rate. "Borrower" means Pioneer-Standard Electronics, Inc., an Ohio corporation. "Borrower EBIT" means, for any period, the sum of Borrower's Net Income, increased by the sum for such period of interest expense (including interest paid or accrued with respect to the Convertible Debentures), income and franchise tax expense, and non-recurring extraordinary expenses of Borrower (in each case as determined in accordance with GAAP (except not on a consolidated basis)) which was deducted in determining Borrower's Net Income for such period. "Borrower Interest Expense" means, for any period, the amount of interest expense of Borrower, only, for such period on the aggregate principal amount of its Indebtedness, determined in accordance with GAAP (except not on a consolidated basis) plus any capitalized interest which accrued during such period. "Borrower's Net Income" means, for any period, net income (or loss) of Borrower for such period determined in accordance with GAAP (except not on a consolidated basis and thereby excluding Borrower's net equity in earnings of Subsidiaries). -3- 4 "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in SECTION 2.9(a)(i). "Business Day" means with respect to any borrowing, payment or rate selection of Advances a day (other than a Saturday or Sunday) on which banks generally are open in Cleveland, Ohio; provided, with respect to LIBOR Rate Loans (including Foreign Currency Loans), Business Days shall not include a day on which dealings in Dollars may not be carried on in the London interbank LIBOR market; and provided, further that with respect to Foreign Currency Loans, Business Days shall not include a day on which dealings in the Applicable Currency may not be carried on in the applicable foreign exchange interbank market. "Canada" means Pioneer-Standard Canada Inc., a Canadian corporation. "Capital Expenditures" means any and all amounts invested, expended or incurred (including by reason of Capitalized Lease Obligations) incurred by Borrower or any of its Subsidiaries in respect of the purchase, acquisition, improvement, renovation or expansion of any properties or assets of Borrower or any of its Subsidiaries, including, without limitation, expenditures required to be capitalized in accordance with GAAP. "Capital Stock" means 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 which is not a corporation and any and all warrants or options to purchase any of the foregoing. "Capitalized Lease" of a Person means any lease of Property imposing obligations on such Person, as lessee thereunder, which are required in accordance with GAAP to be capitalized on a balance sheet of such Person. "Cash Equivalents" means, as of any date, (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof having maturities of not more than one year from such date, (ii) time deposits and certificates of deposit having maturities of not more than one year from such date and issued by any domestic commercial bank having (A) senior long-term unsecured debt rated at least A or the equivalent thereof by S&P or A2 or the equivalent thereof by Moody's and (B) capital and surplus in excess of $500,000,000, and (iii) commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's and in either case maturing within 90 days from such date. "Change In Control" means, (i) with respect to any Person, the transfer of the ownership or control (in one transaction or as the -4- 5 most recent transaction in a series of transactions) of such number of voting securities (or other ownership interests) of the controlled Person that possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person whether through ownership of stock, by contract or otherwise a majority, or (ii) with respect to any company whose stock is publicly traded on a securities exchange, a change in the membership of the board of directors at any time during any twelve (12) month period, such that following such change, at least thirty percent (30%) of the members of the board of directors were not members of the board of directors at the start of such twelve (12) month period but only if the election of such new members of the board of directors was not approved by at least three-quarters (3/4) of the directors who were either sitting at the beginning of such twelve (12) month period or elected to the board of directors during such twelve (12) month period with the approval of three-quarters (3/4) of the directors who were sitting at the beginning of such twelve (12) month period. "Closing Date" means the date of this Agreement. "Closing Fee" is defined in SECTION 2.5(b). "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to SECTION 11.3.2, as such amount may be modified from time to time pursuant to the terms hereof. "Condemnation" is defined in SECTION 6.9. "Consolidated Debt Service" means, for any period, (a) Consolidated Interest Expense for such period PLUS (b) the aggregate amount of scheduled principal payments of Indebtedness (excluding any unaccelerated Indebtedness arising under this Facility, the Convertible Debentures and the Agreement for Inventory Financing) required to be made during such period by Borrower or any of its Subsidiaries. "Consolidated EBIT" means, for any period, the sum of Borrower's and its Subsidiaries' Consolidated Net Income, increased by the sum for such period of Consolidated Interest Expense (including interest paid or accrued with respect to the Convertible Debentures), income and franchise tax expense, and non-recurring extraordinary expenses (in each case as determined in accordance with GAAP) which was deducted in determining Consolidated Net Income for such period and decreased by the sum of non-recurring extraordinary income (determined in accordance with GAAP) which was included in determining Consolidated Net Income for such period. -5- 6 "Consolidated EBITDA" means, for any period, the sum of Borrower's and its Subsidiaries' Consolidated Net Income, increased by the sum for such period of interest expense (including interest paid or accrued with respect to the Convertible Debentures), income and franchise tax expense, amortization and depreciation, non-recurring extraordinary expenses (in each case as determined in accordance with GAAP) which was deducted in determining Consolidated Net Income for such period and decreased by the sum of non-recurring extraordinary income (determined in accordance with GAAP) which was included in determining Consolidated Net Income for such period. "Consolidated Fixed Charge Coverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated EBITDA to (b) the sum of Consolidated Debt Service plus Distributions, Capital Expenditures, and Consolidated Taxes. "Consolidated Funded Debt" means as of any date of determination, all Indebtedness for Borrowed Money of Borrower and its Subsidiaries outstanding at such date (excluding Indebtedness arising under the Agreement for Inventory Financing and the Convertible Debentures), determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the amount of interest expense of Borrower and its Subsidiaries for such period on the aggregate principal amount of their Indebtedness, determined on a consolidated basis in accordance with GAAP plus any capitalized interest which accrued during such period. Consolidated Interest Expense shall not include any amounts paid or accrued with respect to the Convertible Debentures. "Consolidated Net Income" means, for any period, consolidated net income (or loss) of Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; PROVIDED that there shall be excluded (a) the income (or deficit) of any other Person accrued prior to the date it becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries and (b) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary. "Consolidated Outstanding Indebtedness" means, as of any date of determination, all Indebtedness of Borrower and its Subsidiaries outstanding at such date, determined on a consolidated basis in accordance with GAAP. "Consolidated Stockholder's Equity" means, as of any date of determination, an amount equal to the sum of the following amounts appearing on the consolidated balance sheet of Borrower and its Subsidiaries: (i) all equity as calculated in accordance with GAAP, -6- 7 including, without limitation, the aggregate outstanding principal amount of the Convertible Debentures and (ii) all indebtedness which is subordinate (to the satisfaction of each Lender) to Indebtedness arising under this Agreement, including, without limitation, the aggregate outstanding principal amount of the Convertible Debentures. "Contingent Obligation" means any direct or indirect liability, contingent or otherwise, with respect to any indebtedness, lease, dividend, letter of credit, banker's acceptance or other obligation of another Person incurred to provide assurance to the obligee of such obligation that such obligation will be paid or discharged, that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations shall include, without limitation, (i) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by any Person of the obligation of another Person; (ii) any liability for the Obligations of another Person through any agreement (contingent or otherwise) (A) to purchase, repurchase, or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions, or otherwise), (B) to maintain the solvency of any balance sheet item, level of income or financial condition of another, or (C) to make take-or-pay, pay-or-play, or similar payments if required regardless of nonperformance by any other party or parties to an agreement, if in the case of any agreement described under subclauses (A), (B) or (C) of this sentence the purpose or intent thereof is to provide the assurance described above. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Convertible Debentures" shall mean the Series A 6 3/4% Junior Convertible Subordinated Debentures of Borrower, due March 31, 2028, issued in an aggregate original principal amount of up to $150,000,000, under that certain Junior Subordinated Indenture, dated as of March 23, 1998, of Borrower to Wilmington Trust Company, as trustee, as supplemented by that certain First Supplemental Indenture, dated as of March 23, 1998, of Borrower to Wilmington Trust Company, as trustee. "Current Ratio" means, as of any date of determination, the ratio of (A) the sum of cash and Cash Equivalents plus eighty-five percent (85%) of the value of accounts receivable as set forth on -7- 8 the financial statements of Borrower issued contemporaneously with the date of determination and fifty percent (50%) of the value of inventory as set forth on the financial statements of Borrower issued contemporaneously with the date of determination, to (B) the sum of Indebtedness for Borrowed Money less the outstanding principal amount of the Convertible Debentures. "Default" means an event of Default described in ARTICLE VI. "Default Interest Rate" means an annual rate of interest equal to the lesser of (i) two percent (2.0%) above the Base Rate; or (2) the maximum rate of interest which may be lawfully charged in respect of the Obligations. "Dickens" is defined in SECTION 3.1. "Dickens, LLC" means The Dickens Services Group, a Pioneer-Standard Company, LLC, a Delaware limited liability company. "Distribution" shall mean with respect to Borrower and its Subsidiaries, interest paid with respect to the Convertible Debentures, any dividends (other than dividends payable solely in common stock), distributions, return of capital to any stockholders, general or limited partners or members, other payments, distributions or delivery of property or cash to stockholders, general or limited partners or members, or any redemption, retirement, purchase or other acquisition, directly or indirectly, of any shares of any class of capital stock now or hereafter outstanding (or any options or warranties issued with respect to capital stock) general or limited partnership interest, or the setting aside of any funds for the foregoing. "Dollar Equivalent" means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in a Foreign Currency, the equivalent amount in Dollars as determined by Agent at such time on the basis of the Exchange Rate. For purposes of any calculation or determination hereunder related to Loans and measured in Dollars (including, without limitation, calculation of the Outstanding Amount), any Loans in a Foreign Currency shall be valued at the Dollar Equivalent. "Environmental Laws" means any and all foreign, Federal, state, 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, in each case to the extent the foregoing are applicable to Borrower or any of its Subsidiaries or any of their respective assets or Properties. -8- 9 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Exchange Rate" means with respect to any Foreign Currency on a particular date, the rate at which such Foreign Currency may be exchanged into Dollars, as set forth on such date on the relevant Reuters currency page at or about 11:00 a.m. London time, on such date. In the event that such rate does not appear on any Reuters currency page, the "Exchange Rate" with respect to such Foreign Currency shall be determined by reference to such other publicly available service for exchange rates as may be agreed upon by Agent and Borrower, in the absence of such agreement, such "Exchange Rate" shall instead be Agent's spot rate of exchange in the market which its foreign currency exchange operations are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase of Dollars with such Foreign Currency, for delivery two (2) Business Days later; provided, that if at the time of any such determination, no such spot rate can be reasonably quoted, Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error. "Existing Facilities" means the $125,000,000 revolving loan facility for which NCB is agent. "Facility Fee" is defined in SECTION 2.5(a). "Facility Termination Date" means March 27, 2003; provided, however, the Facility Termination Date may be extended annually for additional one (1) year terms upon the prior written consent of Borrower and each Lender. "Face Amount" means, as to any Letter of Credit, the maximum amount which is available at such time to be drawn or disbursed under such Letter of Credit. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Cleveland, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Agent from three federal funds brokers of recognized standing selected by it. "Financial Undertaking" of a Person means (i) any repurchase obligation or liability of such Person or any of its Subsidiaries with respect to accounts or notes receivable sold by such Person or any of its Subsidiaries, (ii) any sale and leaseback transactions which do not create a liability on the consolidated balance sheet -9- 10 of such Person, (iii) any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person, or (iv) Hedge Agreements; provided, however, Financial Undertaking shall not include any agreement, device or arrangement (not otherwise described in (iv), above), that is designed to protect a Borrower from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, forward currency exchange agreements, interest rate cap or collar protection agreements, or forward rate currency options. "Foreign Currency" shall mean any lawful currency other than Dollars that is readily available, freely traded and convertible into Dollars in the Cleveland market and is acceptable to Agent for purposes of making a Foreign Currency Loan hereunder. "Foreign Currency Advance" means any Advance denominated in a Foreign Currency. "Foreign Currency Loan" means any Loan denominated in a Foreign Currency. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in SECTION 5.1; PROVIDED, HOWEVER, that if there shall be any change in accounting principles from GAAP as in effect at the Closing Date, then the Required Lenders and Borrower shall make such adjustments to the financial covenants affected thereby by reference to the official interpretations of GAAP by The Financial Accounting Standards Board, its predecessors and successors or as are mutually determined in good faith to be appropriate to reflect such changes so that the criteria for evaluating the financial condition and operations of Borrower shall be the same after such changes as if such changes had not been made. "Georgia" means Pioneer-Standard Georgia, Inc., a Georgia corporation, the Subsidiary of Borrower that is to be merged into Dickens in connection with the Merger. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Head Office" means, in relation to Agent, the head office of National City Bank, located at 1900 East Ninth Street, Cleveland, Ohio, 44114, or such other office as may be designated as such by written notice to Borrowers and Lenders by National City Bank or any successor Agent. -10- 11 "Hedge Agreement" means an interest rate swap, cap or other interest rate management agreement. "Illinois" means Pioneer-Standard Illinois, Inc., an Illinois corporation. "Indebtedness" means, in relation to any Person, at any time, all of the obligations of such Person which, in accordance with GAAP, would be classified as indebtedness upon a balance sheet (including any footnote thereto) of such Person prepared at such time, and in any event shall include, without limitation: (i) all indebtedness of such Person arising or incurred under or in respect of (A) any guaranties (whether direct or indirect) by such Person of the indebtedness, obligations or liabilities of any other Person, or (B) any endorsement by such Person of any of the indebtedness, obligations or liabilities of any other Person (otherwise than as an endorser of negotiable instruments received in the ordinary course of business and presented to commercial banks for collection of deposit), or (C) the discount by such Person, with recourse to such Person, of any of the indebtedness, obligations or liabilities of any other Person; (ii) all indebtedness of such Person arising or incurred under or in respect of any agreement, contingent or otherwise made by such Person (A) to purchase any indebtedness of any other Person or to advance or supply funds for the payment or purchase of any indebtedness of any other Person or (B) to purchase, sell or lease (as lessee or lessor) any property, products, materials or supplies or to purchase or sell transportation or services, in each such case if primarily for the purpose of enabling any other Person to make payment of any indebtedness of such other Person or to assure the owner or holder of such other Person's indebtedness against loss, regardless of the delivery or non-delivery of the property, products, materials or supplies or the furnishing or non-furnishing of the transportation or services, or (C) to make any loan, advance, capital contribution or other investment in any other Person for the purpose of assuring a minimum equity, asset base, working capital or other balance sheet condition for or as at any date, or to provide funds for the payment of any liability, dividend or stock liquidation payment, or otherwise to supply funds to or in any manner invest in any other Person; (iii) all indebtedness, obligations and liabilities secured by or arising under or in respect of any Lien, upon or in Property owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness, obligations and liabilities; -11- 12 (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person, even though the rights and remedies of the seller or lender (or lessor) under such agreement in the event of default are limited to repossession or sale of such Property; and (v) all indebtedness arising or incurred under or in respect of any Contingent Obligation. "Indebtedness for Borrowed Money" means at any time, all Indebtedness required by GAAP to be reflected as such on Borrower's balance sheet, including as appropriate, all Indebtedness (i) in respect of any money borrowed (including pursuant to this Agreement and debt incurred pursuant to or evidenced by the Convertible Debentures or the Preferred Securities); (ii) under or in respect of any Contingent Obligation (whether direct or indirect) of any money borrowed; (iii) evidenced by any loan or credit agreement, promissory note, debenture, bond, guaranty or other similar written obligation to pay money; (iv) arising under the Agreement for Inventory Financing; and (v) arising under Capitalized Leases. "Initial Advance" means the first Advance made hereunder. "Initial Borrowing Date" means the date on which the first Advance is made hereunder. "Intercreditor Agreement" means that certain Intercreditor Agreement, dated as of March 31, 1998, by and between Agent and IBM Credit Corporation. "Interest Expense" means, for any period, the amount of interest expense of a Person for such period on the aggregate principal amount of its Indebtedness (but excluding, for Borrower, any interest or distribution paid or accrued with respect to the Convertible Debentures or the Preferred Securities), plus any capitalized interest which accrued during such period. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade), contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures, or other securities of any other Person made by such Person. "Issuance Date" means, in relation to any Letter of Credit, the date on which such Letter of Credit is issued or is to be issued pursuant to this Agreement. -12- 13 "Issuing Bank" means NCB or its successor as the Lender responsible for the issuance of Letters of Credit in accordance with SECTION 2.23. "Late Charge" means with respect to any delinquent payment of principal or interest hereunder, a fee that is equal to the greater of Five Hundred and 00/100 Dollars ($500.00) or three percent (3%) of the delinquent payment, charged to Borrower or added to the unpaid balance of the Notes whenever any payment of principal or interest is not paid when due. "Lenders" means the lending institutions listed on the signature pages of this Agreement, their respective successors and assigns and any other lending institutions that subsequently become parties to this Agreement. "Lending Installations" means, with respect to a Lender, any office, branch, subsidiary, or affiliate of such Lender. "Letter of Credit" means any stand-by letter of credit issued by the Issuing Bank pursuant to this Agreement. "Letter of Credit Commission" means a commission, payable annually in advance to Agent for the ratable benefit of Lenders, equal to the Face Amount of each Letter of Credit multiplied by the then in effect LIBOR Applicable Margin. If a Default exists hereunder, the Applicable Margin used for determining the Letter of Credit Commission will be increased by two percent (2%). The Letter of Credit Commission shall be paid annually in respect of each Letter of Credit, with the first year's payment being due and payable, in advance, on the Issuance Date therefor and subsequent years' payments being due and payable in advance on each anniversary thereof so long as such Letter of Credit remains outstanding. "Letter of Credit Facing Fee" is defined in SECTION 2.23(g) (ii). "Letter of Credit Usage" means, as at the date on which the same is determined, the sum of (x) the aggregate of the Face Amounts of all Letters of Credit then outstanding, plus (y) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Bank and not theretofore either reimbursed by Borrower or converted into Loans as provided in SECTION 2.23(e). "LIBOR Applicable Margin" means, as of any date with respect to any LIBOR Interest Period, the Applicable Margin in effect for such LIBOR Interest Period for LIBOR Rate Loans made in Dollars as determined in accordance with SECTION 2.4 hereof. "LIBOR Break Funding Costs" means an amount sufficient to reimburse each Lender for any and all loss, cost or expense actually incurred by the Lender as the result of the occurrence of -13- 14 any LIBOR Break Funding Event, determined by Agent by multiplying the amount of the principal prepayment hereunder by the deficiency, if any, between, (x) LIBOR for a term then available closest to the remaining duration of the LIBOR Interest Period for the principal sum being prepaid, and for an amount comparable to such principal sum, in the Applicable Currency, and (y) the LIBOR Rate in effect for the principal sum being so prepaid, in the Applicable Currency, immediately prior to the prepayment of such sum, all as determined as of the date of occurrence of the LIBOR Break Funding Event. "LIBOR Break Funding Event" means any of the events or occurrences set for forth in SECTIONS 2.14(a) or 2.14(b). "LIBOR Interest Period" means a period of one, two, three or six months commencing on a Business Day selected by Borrower pursuant to this Agreement. Such LIBOR Interest Period shall end on (but exclude) the day which corresponds numerically to such date one, two, three or six months thereafter, PROVIDED, HOWEVER, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such LIBOR Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a LIBOR Interest Period would otherwise end on a day which is not a Business Day, such LIBOR Interest Period shall end on the next succeeding Business Day; PROVIDED, HOWEVER, that if said next succeeding Business Day falls in a new calendar month, such LIBOR Interest Period shall end on the immediately preceding Business Day. "LIBOR Rate" means one, two, three or six-month London InterBank Offered Rate (for the Applicable Currency), adjusted for statutory reserves, if applicable ("LIBOR") PLUS for each fiscal quarter, the LIBOR Applicable Margin. "LIBOR Rate Advance" means an Advance which bears interest at a LIBOR Rate, and may be a Foreign Currency Advance or a Loan denominated in Dollars. "LIBOR Rate Loan" means a Loan which bears interest at a LIBOR Rate, and may be a Foreign Currency Loan or a Loan denominated in Dollars. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Limited Partnership" means Pioneer-Standard Electronics, Ltd., a Texas limited partnership. -14- 15 "Loan" means, with respect to a Lender, such Lender's portion of any Advance. "Loan Documents" means this Agreement, the Notes, the Non-Borrowing and Non-Pledge Agreements, the Subordination Agreement, the Intercreditor Agreement, and any other document from time to time evidencing or securing indebtedness incurred by Borrower under this Agreement, as any of the foregoing may be amended or modified from time to time. "Maryland" means Pioneer Standard of Maryland, Inc., a Maryland corporation. "Material Adverse Change" means a material adverse change with respect to (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of Borrower and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform its obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of Agent or Lenders thereunder. "Materials of Environmental Concern" means 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 any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and ureaformaldehyde insulation. "Merger" is defined in SECTION 3.1. "Merger Documents" is defined in SECTION 3.1. "Minnesota" means Pioneer-Standard Minnesota, Inc., a Minnesota Corporation. "Money Market Line Advance" means an advance pursuant to SECTION 2.6. "Money Market Loan" means a Loan pursuant to SECTION 2.6. "Moody's" means Moody's Investors Service, Inc. and its successors. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which Borrowers or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "NCB" means National City Bank, a national banking association. "Net Income" means for any period, net income (or loss) of Borrower for such period determined in accordance with GAAP; -15- 16 provided, however that interest paid on the Convertible Debentures shall be deemed a Distribution. "Non-Borrowing and Non-Pledge Agreement" means a Non-Borrowing and Non-Pledge Agreement, executed by each of Borrower's Substantial Subsidiaries in favor of Lenders, substantially in the form of EXHIBIT C, as the same may be amended, supplemented, or otherwise modified from time to time. "Notes" means the Revolving Promissory Notes. "Notice of Assignment" is defined in SECTION 11.3.3. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Notes, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of Borrower to Lenders or to any Lender, Agent or any indemnified party hereunder (i) in respect of the Loans made or Letters of Credit issued pursuant to this Agreement; or (ii) under or in respect of any one or more of the Loan Documents. Obligations shall also include, without limitation, all interest, charges and other fees payable hereunder (or under any of the Loan Documents) by Borrower, or due hereunder (or under any of the Loan Documents) from Borrower to Agent or any one or more of Lenders from time to time, together with all costs and expenses payable hereunder or under any of the Loan Documents. "Outstanding Amount" means, at any time, the aggregate of (w) the principal balance of all Advances in Dollars then outstanding hereunder, PLUS, (x) the Dollar Equivalent of all Advances in a Foreign Currency then outstanding hereunder, PLUS (y) the Face Amount of all Letters of Credit then outstanding hereunder, PLUS (z) the amount of all draws or disbursements made under any Letter of Credit which Borrower has not converted into a Loan or otherwise reimbursed to the Issuing Bank in accordance with SECTION 2.23, below. "Participant" means a participant under SECTION 11.2.1. "Payment Date" means, with respect to the payment of interest accrued on any Base Rate Loan, the last day of each calendar month, and, with respect to the payment of interest accrued on any LIBOR Rate Loan, the last day of the LIBOR Interest Period except that for any LIBOR Interest Period in excess of three months, interim payments shall be made every third month. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Liens" are defined in SECTION 5.15. "Person" means any natural person, corporation, firm, joint venture, partnership, association, enterprise, trust or other -16- 17 entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which Borrower or any member of the Controlled Group may have any liability. "Preferred Securities" means the preferred securities issued by the Trust pursuant to the Preferred Securities Offering. "Preferred Securities Offering" shall mean Borrower's private placement as described in Schedule 4 hereto, in an amount not to exceed $150,000,000. "Preferred Securities Offering Documents" is defined in SECTION 3.1. "Pre-Tax Income" means, for any period, Net Income plus the sum of all income taxes paid by Borrower for such period. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, in relation to any particular item, the share of any Lender in such item, which shall be in the same proportion which the Commitment of a Lender bears to the Aggregate Commitment (excluding the commitment of NCB to make Swingline Loans), except that with respect to application of payments of principal and interest, Pro Rata Shares shall be adjusted as determined by Agent in its reasonable discretion to account for the portion of the Outstanding Amount at such time attributable to each Lender. Pro Rata Shares shall be net of any and all charges or fees due and payable to Agent under the Loan Documents. "Purchasers" is defined in SECTION 11.3.1. "Purchase Money Security Interest" is defined in SECTION 5.15(iv). "Rate Option" means the Base Rate or the LIBOR Rate. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for -17- 18 the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or SECTION 412(d) of the Code. "Request for Issuance of a Letter of Credit" means the form, substantially similar to that which is attached hereto as Exhibit D, to be executed by Borrower and delivered to Agent, requesting the issuance of a Letter of Credit and providing the information required in connection therewith by SECTION 2.23(a), below. "Required Lenders" means those Lenders whose aggregate Pro Rata Shares of the outstanding Advances equal or exceed sixty-six and two thirds percent (66 2/3%) of the aggregate amount of the outstanding Advances, or, in the event that there are no Advances outstanding, those Lenders having sixty-six and two thirds percent (66 2/3%) of the Aggregate Commitment. "Reserve Requirement" means, with respect to a LIBOR Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on new non-personal time deposits of $100,000 or more with a maturity equal to that of on Eurocurrency liabilities (in the case of LIBOR Rate Loans). "Revolving Promissory Note" means a promissory note, in substantially the form of EXHIBIT E hereto, duly executed by Borrower and payable to the order of a Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Same Day Funds" means (i) with respect to disbursements and payments in Dollars, immediately available funds, and (ii) with respect to disbursements and payments in a Foreign Currency, same day or other funds as may be determined by Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Foreign Currency. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. -18- 19 "Single Employer Plan" means a Plan maintained by Borrower or any member of the Controlled Group for employees of Borrower or any member of the Controlled Group. "Stockholder's Equity" means, as of any date of determination, an amount equal to the sum of the following amounts appearing on the balance sheet of Borrower or a Subsidiary, as the case may be: (i) all equity as calculated in accordance with GAAP, and (ii) all indebtedness which is subordinate (to the satisfaction of Agent) to Indebtedness arising under this Agreement, including, without limitation, the aggregate outstanding principal amount of the Convertible Debentures. "Subordination Agreement" means a Subordination Agreement, executed by Borrower and Limited Partnership in favor of Lenders, substantially in the form of EXHIBIT F attached hereto, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of Borrower. "Substantial Portion" means, with respect to the Property of Borrower and its Subsidiaries, Property which (i) represents more than 2% of the consolidated assets of Borrower and its Subsidiaries as would be shown in the consolidated financial statements of Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made. "Substantial Subsidiary" means any Subsidiary that has received funding or will receive funding from Borrower in excess of $100,000, other than the Trust, Georgia and Dickens, LLC. "Swingline Loan" means a Loan pursuant to SECTION 2.7. "SECT" shall mean Borrower's stock employee compensation trust as described in Schedule 5 hereto. "S&P" means Standard & Poor's Ratings Group and its successors. "Tangible Assets" means of Borrower, as of any date of determination, the total amount of assets after deducting therefrom (i) all investments and loans of Borrower to its Subsidiaries, as -19- 20 permitted under this Agreement, and (ii) all goodwill of Borrower, all as shown on the balance sheet of Borrower. "Tangible Net Worth" means, as of any date of determination, as to any Person on a nonconsolidated basis, an amount equal to Stockholder's Equity minus the sum of (i) any surplus resulting from any write-up of assets subsequent to December 31, 1997 (ii) goodwill, including any amounts, however designated on a balance sheet of such Person, representing the excess of the purchase price paid for assets or stock over the value assigned to it on the books of such Person, (iii) patents, trademarks, trade names and copyrights, (iv) any amount at which shares of capital stock of such Person appear as an asset on such Person's balance sheet, and (v) any other amount in respect of an intangible that should be classified as an asset on such Person's balance sheet, in accordance with GAAP. "Target's EBITDA" means, for any period, the sum of a Person's Consolidated Net Income, increased by the sum for such period of interest expense, income and franchise tax expense, amortization and depreciation, non-recurring extraordinary expenses (in each case as determined in accordance with GAAP) which was deducted in determining Consolidated Net Income for such period. "Tax" means any present or future assessments, taxes, charges, levies, imposts, or withholding taxes, provided, that "Tax" shall not include (a) any assessment, tax, charge, levy, impost, or withholding tax imposed on the net income, profits or gains of Lenders, (b) any franchise tax imposed on Lenders by the United States of America or by the state in which the lending office of Lenders is located. "Transferee" is defined in SECTION 11.4. "Trust" means Pioneer-Standard Financial Trust, a statutory business trust created under the laws of the State of Delaware. "Type" means, with respect to any Loan, its nature as a LIBOR Rate Loan in Dollars, Base Rate Loan, Money Market Line Loan, Swingline Loan or a Foreign Currency Loan. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date, for such Plans. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or -20- 21 one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDIT ---------- 2.1 COMMITMENT. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, that Borrower may, subject to the terms and conditions of this Agreement, borrow on a revolving basis from Lenders on the Closing Date and from time to time thereafter sums, the outstanding amount of which shall not when added to the Letter of Credit Usage, exceed the Aggregate Commitment at any time; PROVIDED, HOWEVER, that (i) with regard to each Lender individually, the sum of each such Lender's outstanding Loans shall not exceed such Lender's Commitment; (ii) with regard to Lenders collectively, the Outstanding Amount shall not exceed the Aggregate Commitment; (iii) the Dollar Equivalent of Foreign Currency Loans shall not exceed Fifty Million Dollars ($50,000,000); (iv) the amount of Money Market Line Loans shall not exceed Fifty Million Dollars ($50,000,000), provided, however, the amount of Money Market Line Loans may exceed Fifty Million Dollars ($50,000,000) by the amount of any Swingline Loans that are converted into a Money Market Loan pursuant to SECTION 2.7(b); and (v) the amount of Swingline Loans shall not exceed Five Million Dollars ($5,000,000). The Commitments to lend hereunder shall expire on the Facility Termination Date and may earlier terminate pursuant to Section 6.14. The credit facility established hereunder shall be evidenced by Revolving Promissory Notes delivered by Borrower in favor of each Lender, respectively. Loans shall be made in the Applicable Currency. 2.2 FINAL PRINCIPAL PAYMENT. Any outstanding Loans and all other unpaid Obligations shall be paid in full by Borrower on the Facility Termination Date. 2.3 RATABLE LOANS. (a) Each Advance hereunder shall consist of Loans made from the several Lenders ratably in accordance with their Pro Rata Share of the Aggregate Commitment, except for Swingline Loans, which shall be made solely by NCB. Each Lender will make the amount of its Pro Rata Share of each proposed Advance of LIBOR Rate Loans or Base Rate Loans available to Agent for the account of Borrower in Same Day Funds by 12:00 -21- 22 noon (Cleveland time) on the day requested except that in the case of a proposed Foreign Currency Loan, Lenders will make the amount of its share thereof available to Agent by such time on such day as Agent may specify. (b) For all purposes of this Agreement (but not for purposes of the preparation of any financial statements delivered pursuant hereto), the equivalent in any Foreign Currency of an amount in Dollars, and the equivalent in Dollars of an amount in any Foreign Currency, shall be determined at the Exchange Rate. 2.4 APPLICABLE MARGINS. On the Closing Date, the Applicable Margin shall be determined using Tier I of the performance grid below until June 30, 1998. Thereafter, the Base Rate Applicable Margin and LIBOR Applicable Margin shall be adjusted on the first day of each calendar quarter, beginning July 1, 1998, and on each October 1, January 1, April 1, and July 1, thereafter, based on the ratio of Consolidated Funded Debt plus Indebtedness for Borrowed Money arising under the Agreement for Inventory Financing as of the end of the quarter ending on March 31, 1998, and on each June 30, September 30, December 31, and March 31, thereafter, to Consolidated EBITDA for the most recent preceding four (4) fiscal quarters, including the fiscal quarter ending on the date of determination. To the extent that, as of an adjustment date, Borrower has not provided to Agent information necessary to apply the performance grid, interest shall be payable retroactively upon receipt of such information and calculation by Agent. In such event, Borrower shall continue to pay interest at the interest rate and on the Payment Dates in effect for the preceding quarter and the parties shall adjust for the difference between interest payable and interest actually paid, when information to apply the performance grid is available. -22- 23
============================================================================== Tier Consolidated LIBOR + Base Facility Funded Debt plus Rate Fee Indebtedness for Borrowed Money arising under the Agreement for Inventory Financing / EBITDA - - ------------- ---------------------- ---------------- -------- ------------ Tier I greater than 3.50x 112.5 bps* 0 bps 37.5 - - ------------- ---------------------- ---------------- -------- ------------ Tier II less than or equal 100.0 bps 0 bps 37.5 to 3.50x but greater than 3.25x - - ------------- ---------------------- ---------------- -------- ------------ Tier III less than or equal 87.5 bps 0 bps 37.5 to 3.25x but greater than 3.00x - - ------------- ---------------------- ---------------- -------- ------------ Tier IV less than or equal 75 bps 0 bps 37.5 to 3.00x but greater than 2.75x - - ------------- ---------------------- ---------------- -------- ------------ Tier V less than or equal 62.5 bps 0 bps 37.5 to 2.75x but greater than 2.50x - - ------------- ---------------------- ---------------- -------- ------------ Tier VI less than or equal 62.5 bps 0 bps 25 to 2.50x but greater than 2.25x - - ------------- ---------------------- ---------------- -------- ------------ Tier VII less than 2.25x 50.0 bps 0 bps 25 ==============================================================================
* bps = basis points Notwithstanding anything contained in this Agreement to the contrary, if at any time, or from time to time, Borrower is required to pay interest to IBM Credit Corporation pursuant to the Agreement for Inventory Financing, then, during such period that Borrower is required to pay such interest to IBM Credit Corporation, the rate of interest to be paid on all outstanding Loans hereunder will be equal to the greater of (i) the rate as determined pursuant to this Agreement, and (ii) the rate of interest the Borrower is required to pay IBM Credit Corporation. 2.5 FACILITY FEE; CLOSING FEE. (a) Borrower agrees to pay to Agent for the account of each Lender a facility fee (the "FACILITY FEE") on each Lender's Commitment from the Closing Date to and including the Facility Termination Date, calculated as follows (i) .375% per annum on such Lender's commitment in the -23- 24 event the Applicable Margin in Tiers I, II, III, IV or V, and (ii) .25% per annum on such Lender's Commitment in the event the Applicable Margin is Tier VI or Tier VII. The Facility Fee shall be payable quarterly in arrears on the first day of each calendar quarter hereafter beginning July 1, 1998, and on the Facility Termination Date. (b) Borrower further agrees to pay to Agent for the account of each Lender a closing fee (the "Closing Fee") equal to each such Lender's Commitment multiplied by 0.125%. (c) Borrower further agrees to pay all fees payable to Agent pursuant to a separate letter agreement. 2.6 MONEY MARKET LINE LOANS. Borrower may, subject to the terms and conditions of this Agreement, borrow on an overnight basis, payable on demand by Agent, on the Closing Date and from time to time thereafter sums which shall bear interest at a rate of interest equal to the rate of interest that would be payable on a thirty day (30) day LIBOR Rate Loan plus the LIBOR Applicable Margin. Each Money Market Line Advance shall be in an amount equal to or greater than Ten Million Dollars ($10,000,000); PROVIDED, HOWEVER, that, (i) a Money Market Advance that is the result of a conversion of a Swingline Loan pursuant to SECTION 2.7(b) shall not be required to be in an amount equal to or greater than Ten Million Dollars ($10,000,000), (ii) with regard to each Lender individually, the sum of each such Lender's outstanding Loans shall not exceed such Lender's Commitment; (iii) with regard to Lenders collectively, the Outstanding Amount shall not exceed the Aggregate Commitment; and (iv) Borrower may elect not to borrow a Money Market Line Loan by Telephonic Notice to Agent within two (2) hours of notice from Agent of the interest rate to be applicable to such Loan. Any Money Market Line Loan not repaid in full, including the principal amount thereof and all accrued interest, within one (1) Business Day of demand for payment by Agent or the Required Lenders shall automatically convert into a Base Rate Loan and bear interest at the Base Rate. 2.7 Swingline Loans. ---------------- (a) Borrower may, subject to the terms and conditions of this Agreement, borrow on an overnight basis, payable on demand by NCB, from NCB, on the Closing Date and from time to time thereafter sums which shall bear interest at a rate of interest equal to the rate of interest that would be payable on a thirty day (30) day LIBOR Rate Loan plus the LIBOR Applicable Margin. Each Swingline Loan shall be in an amount equal to or greater than One Million Dollars ($1,000,000); PROVIDED, HOWEVER, that, (i) the sum of NCB's outstanding Loans of all Types shall not exceed NCB's Commitment; (ii) with regard to Lenders collectively, the Outstanding Amount shall not exceed the Aggregate Commitment; and (iii) Borrower may elect not to borrow a Swingline Loan by Telephonic Notice to NCB within two (2) hours of notice from NCB of the interest rate to be -24- 25 applicable to such Loan. Any Swingline Loan not repaid in full, including the principal amount thereof and all accrued interest, within one (1) Business Day of demand for payment by NCB shall automatically convert into a Base Rate Loan and bear interest at the Base Rate. (b) Agent may, in its sole discretion, convert any Swingline Loan into a Money Market Line Loan upon delivery of notice thereof to Borrower. Upon delivery to Lenders of a copy of a notice delivered by Agent under this Section, all Swingline Loans shall be automatically converted to a Money Market Line Loan under this Agreement, and each Lender agrees to immediately fund its Pro Rata Share of such Money Market Line Loan. Conversions to Money Market Line Loans under this Section shall be in the sole discretion and control of Agent and shall be effective regardless of any default under this Agreement by Borrower or Agent, or any other circumstance. 2.8 MINIMUM AMOUNT OF ADVANCES. Base Rate Advances shall be in the minimum amount of $5,000,000, and in multiples of $1,000,000 if in excess thereof. LIBOR Rate Advances shall be in the minimum amount of $10,000,000, and in multiples of $1,000,000 if in excess thereof. Money Market Line Advances shall be in the minimum amount of $10,000,000. The Swingline Loans shall be in increments of $1,000,000. 2.9 INTEREST PAYABLE ON THE LOANS. (a) METHOD OF SELECTING RATE OPTIONS AND LIBOR INTEREST PERIODS. (i) Borrower shall select the Rate Option for each Advance and shall select the LIBOR Interest Period applicable to each LIBOR Rate Loan from time to time and whether such Loan shall be in Dollars or a foreign currency, by delivery to Agent of an irrevocable notice in the form of EXHIBIT H hereto (a "BORROWING NOTICE"), or by telephonic notice to Agent ("TELEPHONIC NOTICE"), followed by a same day (which shall mean prior to 5:00 p.m. Cleveland, Ohio, time) written Borrowing Notice delivered to Agent via facsimile. Agent will notify Borrower within four (4) Business Days of receipt of a Borrowing Notice requesting a loan in a foreign currency, whether such foreign currency is an acceptable Foreign Currency. If such foreign currency is an acceptable Foreign Currency, the Foreign Currency Advance shall be made on the fourth Business Day after Borrower requests a Foreign Currency Advance. Foreign Currency Loans shall bear interest at the LIBOR Rate. (ii) Each LIBOR Rate Loan shall bear interest from and including the first day of the LIBOR Interest Period applicable thereto until (but not including) the last day of such LIBOR Interest Period at the interest rate determined as applicable to such Loan. Borrower shall select LIBOR Interest Periods so that it is not necessary to pay such Loan prior to the last day of the applicable LIBOR Interest Period in order to repay the Loans on the -25- 26 Facility Termination Date. Provided that no Default shall have occurred and be continuing, Borrower may elect to continue a Loan as a LIBOR Rate Loan by giving irrevocable written, telephonic or telegraphic notice thereof to Agent not more than ten (10) nor less than three (3) Business Days prior to the last day of the then-current LIBOR Interest Period for such Loan, specifying the duration of the succeeding LIBOR Interest Period therefor. If Agent does not receive timely notice of such election, Borrower shall be deemed to have elected to convert such Loan to a Base Rate Loan in Dollars at the end of the then-current LIBOR Interest Period. Provided that no Default shall have occurred and be continuing, Borrower may, on any Business Day, convert any outstanding Base Rate Loan, or portion thereof, into a LIBOR Rate Loan in the same aggregate principal amount (or Dollar Equivalent). If Borrower desires to convert a Base Rate Loan, it shall give Agent prior written or telephonic notice not more than ten (10) nor less than three (3) Business Days prior to the requested conversion date, which notice shall specify the duration of the LIBOR Interest Period applicable thereto. (b) DETERMINATION OF RATE. Agent shall determine, in the exercise of its good faith discretion, the Base Rate or Federal Funds Rate, as the case may be, in effect from time to time. Any change in the Base Rate or Federal Funds Rate shall, for all purposes of this Agreement and the other Loan Documents, become effective on the effective date announced by Agent in accordance with Agent's customary practices. (C) MONTHLY INSTALLMENTS. (i) Borrower shall pay to Agent, for the account of Lenders in accordance with their respective Pro Rata Share, monthly in arrears on the last Business Day of each month beginning with the month following the month in which the Closing Date occurs, interest on the outstanding principal amount of the Base Rate Loans at the annual rate equal to the Base Rate plus the Base Rate Applicable Margin and on the outstanding principal amount of Money Market Line Loans and Swingline Loans at the annual rate determined pursuant to SECTION 2.6 AND SECTION 2.7. RESPECTIVELY,; PROVIDED, HOWEVER, that if Borrower elects, pursuant to the final paragraph of SECTION 2.9(a) (ii), to convert a Base Rate Loan, or any portion thereof, to a LIBOR Rate Loan, Borrower shall pay to Agent, for the account of Lenders in proportion to their respective Commitments, all accrued but unpaid interest on such Base Rate Loan, or that portion thereof which is being so converted, for the period commencing on the date of the last payment date under this -26- 27 SECTION 2.9(c) (i) and concluding on the day immediately preceding the first day of the LIBOR Interest Period for the LIBOR Rate Loan into which such Base Rate Loan is converted. (ii) Borrower shall pay to Agent, for the account of Lenders in accordance with their Pro Rata Share, in arrears, interest on the outstanding principal amount of the LIBOR Rate Loans, in Dollars at the annual rate equal to the LIBOR Rate. Such interest shall be due and payable on the last Business Day of the applicable LIBOR Interest Period of three months or less, and for all other LIBOR Rate Loans, interest shall be payable, in arrears as aforesaid, on (x) that Business Day which is three months after the beginning of the LIBOR Interest Period for such Loans; and (y) on the final day of the LIBOR Interest Period therefor. (d) INTEREST ON OVERDUE PAYMENTS; DEFAULT INTEREST RATE. If any payment of principal or interest is not paid when due, or prior to the expiration of the applicable period of grace (if any) therefor, Agent may charge and collect from Borrower, or may add to the unpaid balance of the Notes, a Late Charge. Any Late Charge charged and collected by Agent shall be distributed to Lenders in proportion to their respective Commitments. No failure by Agent to charge or collect any Late Charge in respect of any delinquent payment shall be considered to be a waiver by Agent or Lenders of any rights they may have hereunder, including without limitation the right subsequently to impose a Late Charge for such delinquent payment or to take such other actions as may then be available to them hereunder or at law or in equity, including but not limited to the right to terminate the Commitments and/or to accelerate the Obligations pursuant to the terms hereof. If the Notes have been accelerated pursuant to this Agreement or if a Default hereunder or under any other Loan Document shall have occurred and be continuing, the outstanding principal balance of the Indebtedness advanced under this Agreement, together with all accrued interest thereon and any and all other Obligations, shall bear interest from the date on which such amount shall have first become due and payable to the date on which such amount shall be paid (whether before or after judgment) at the Default Interest Rate. Interest at the Default Interest Rate will continue to accrue and will (to the extent permitted by applicable law) be compounded daily until the Obligations in respect of such payment are discharged (whether before or after judgment). (e) LIBOR Rate Loans in Dollars not repaid on the last day of the LIBOR Interest Rate Period applicable thereto shall be continued as LIBOR Rate Loans to the extent that Borrower provides written notice thereof to Agent and satisfies the requirements hereof for LIBOR Rate Loans, or, if such requirements are not -27- 28 satisfied, converted into Base Rate Loans and bear interest as provided herein, from and including the last day of such LIBOR Interest Rate Period. (f) Foreign Currency Loans not repaid on the last day of the LIBOR Interest Rate Period applicable thereto shall be continued as Foreign Currency Loans in the same Foreign Currency to the extent that Borrower provides written notice thereof to Agent and satisfies the requirements hereof for Foreign Currency Loans in such Foreign Currency, or, if such requirements are not satisfied, converted into Base Rate Loans (and redenominated in Dollars at its Dollar Equivalent) and bear interest as provided herein, from and including the last day of such LIBOR Interest Rate Period. 2.10 REPAYMENTS AND PREPAYMENTS OF PRINCIPAL. (a) OPTIONAL PREPAYMENTS. Without derogating from the mandatory prepayment requirements contained in Section 2.10(b) hereof, Borrower may prepay the principal of the Loans in full or in part at any time and from time to time upon payment to Agent of all accrued interest to the date of payment; PROVIDED, HOWEVER, that (i) all partial payments of principal shall be in an amount equal to or greater than One Hundred Thousand Dollars ($100,000.00); and (ii) all Loans may be prepaid without penalty or premium. If Borrower shall prepay any Loan which is a LIBOR Rate Loan on a day other than the final day of the applicable LIBOR Interest Period therefor, such prepayment must include an amount equal to all of Lenders' aggregate LIBOR Break Funding Costs, applicable to or resulting from such prepayment in accordance with SECTION 2.10(b), below. (B) MANDATORY PREPAYMENTS. (i) If at any time the Outstanding Amount exceeds the Aggregate Commitment, Borrower shall immediately prepay an amount equal to such excess. (ii) If at any time the Outstanding Amount with respect to any Lender exceeds such Lender's Commitment, Borrower shall immediately prepay an amount equal to such excess. (iii) If (and on each occasion that) a drawing or disbursement is made under a Letter of Credit and is not reimbursed by Borrower (either by causing the amount of such drawing or disbursement to be converted into a Loan or by paying the Issuing Bank the amount of such showing or disbursement in immediately available funds, in either case as and when required by SECTION 2.23, below), Borrower shall immediately prepay an amount equal to such drawing or disbursement, together with interest thereon. -28- 29 (c) APPLICATION OF PREPAYMENTS. Any prepayment of the Obligations shall be applied by Agent as set forth in SECTION 2.11 hereof. To the extent that such payment, repayment or prepayment shall be applied to LIBOR Rate Loan, Agent shall retain such amount until the expiration of the LIBOR Interest Period applicable to such Loan, and, shall apply such payment at such time so as to minimize the LIBOR Break Funding Costs applicable to such payment, repayment or prepayment, unless otherwise instructed by Borrower to pay, repay or prepay such Loan and nonetheless incur the applicable LIBOR Break Funding Cost. (d) MATURITY. Subject to the terms and conditions of this Agreement, Borrower will be entitled to reborrow all or any part of the principal of the Notes repaid or prepaid prior to the termination of the Commitments. The Commitments shall terminate, and all of the Indebtedness evidenced by each Note shall, if not sooner paid, be in any event absolutely and unconditionally due and payable in full by Borrower, on the Facility Termination Date. (e) NOTICE OF PREPAYMENTS OF PRINCIPAL. Unless otherwise specified herein, Borrower will provide Agent at least (1) one Business Day's advance, written notice of its intention to make any voluntary prepayment of principal. Such notice shall be irrevocable and shall specify the date of prepayment and the aggregate amount to be paid. (f) REDUCTION IN COMMITMENT. Provided there is not then any Default or Unmatured Default hereunder or any other Loan Document, Borrower may, upon and subject to the terms and conditions set forth in this SECTION 2.10(f), elect permanently to reduce the Aggregate Commitment by providing Agent and each Lender with not less than thirty (30) days' prior written notice of its election to do so. Such notice shall specify the date on which such reduction is intended to become effective and the amount to which Borrower would propose to reduce the Aggregate Commitment. Provided that Borrower shall, on or prior to the effective date for such reduction specified in such notice, have made such payments or prepayments as may be necessary to cause the outstanding balance of all Loans to Borrower to be reduced to an amount equal to or less than the amount of the Aggregate Commitment (giving effect to the proposed reduction thereof contemplated in Borrower's notice), the Aggregate Commitment shall, on the date specified in Borrower's notice, be reduced to the amount stipulated in Borrower's notice. In the event that Borrower shall elect to reduce the Aggregate Commitment as aforesaid, each Lender's Commitment shall be reduced, pro rata, to reflect any such reduction in the Aggregate Commitment, and the amount of the Facility Fee payable during the fiscal quarter in which such reduction shall become effective shall be calculated so as to give effect to such reduction, as of the effective date thereof, on a per diem basis. Each reduction in the amount of the Aggregate Commitment effected pursuant to this SECTION 2.10(f) (i) shall be in a multiple of Ten Million Dollars ($10,000,000). Each reduction in the amount of the Aggregate -29- 30 Commitment shall be permanent. Borrower may exercise their right permanently to reduce the amount of the Aggregate Commitment not more frequently than twice during any six-month period. Borrower shall pay all reasonable costs and expenses of Agent (including, without limitation, reasonable attorney's fees) incurred in connection with the exercise of Borrower's rights under this SECTION 2.10(f). 2.11 PAYMENTS AND COMPUTATIONS. (a) TIME AND PLACE OF PAYMENTS. Each payment to be made by Borrower under this Agreement or any other Loan Documents shall be made directly to Agent at its Head Office, not later than 12:00 noon Cleveland time, on the due date of each such payment, in Same Day Funds, and (i) in the case of Foreign Currency payments, no later than such time on the dates specified herein as may be determined by Agent to be necessary for such payment to be credited on such date in accordance with normal banking procedures in the place of payment, and (ii) in the case of any Dollar payments, no later than 12:30 p.m. (Cleveland time) on the date specified herein. Any payment which is received by Agent later than 12:30 p.m. (Cleveland time), or later than the time specified by Agent as provided in clause (i), above; (in the case of Foreign Currency payments), shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. Except as otherwise expressly provided herein (including payments with respect to Swingline Loans), all payments by Borrower shall be made to Agent for the account of Lenders, and, with respect to principal of, interest on, and any other amounts relating to, any Foreign Currency Loan, shall be made in the Foreign Currency in which such Loan is denominated or payable, and, with respect to all other amounts payable hereunder, shall be made in Dollars. Agent will, on the same Business Day that it receives (or is deemed to receive, as aforesaid) each such payment, cause to be distributed to each Lender, in immediately available and freely transferrable funds, such Lender's Pro Rata Share of each such payment received by Agent. (b) APPLICATION OF FUNDS. Notwithstanding anything herein to the contrary, the funds received by Agent with respect to the Obligations shall be applied as follows: (i) NO DEFAULT. Provided that the Notes have not been accelerated pursuant to SECTION 7.1, below, and provided further that no Default or Unmatured Default hereunder or under any Loan Document shall have occurred and be continuing at the time that Agent receives such funds, in the following manner: (a) FIRST, to the payment of all fees, charges, and other sums (other than principal and interest) then due and payable to Agent or Lenders under the Notes, this Agreement or the other Loan Documents (including, without limitation, any LIBOR Break -30- 31 Funding Costs which may then be payable); (b) SECOND, to the payment of all accrued but unpaid interest at the time of such payment in accordance with each Lender's Pro Rata Share; and (c) THIRD, to the payment of principal of the Notes in accordance with each Lender's Pro Rata Share. (ii) DEFAULT. If the Notes have been accelerated pursuant to SECTION 7.1, or if a Default hereunder shall have occurred and be continuing hereunder or under the Notes or any of the other Loan Documents at the time Agent receives such funds, in the following manner: (a) FIRST to the payment or reimbursement of Lenders and Agent for all costs, expenses, disbursements and losses which shall have been incurred or sustained by Lenders or Agent in or incidental to the collection of the Obligations owed by Borrower hereunder or the exercise, protection, or enforcement by Lenders or Agent of all or any of the rights, remedies, powers and privileges of Lenders and Agent under this Agreement, the Notes, or any of the other Loan Documents and in and towards the provision of adequate indemnity to Agent and any of Lenders against all taxes or Liens which by law shall or may have priority over the rights of Agent or Lenders in and to such funds; and (b) SECOND to the payment of all of the Obligations in accordance with SECTION 2.11(b) (i) above. (c) PAYMENTS ON BUSINESS DAYS. If any sum would (but for the provisions of this SECTION 2.11(c)) become due and payable on any day which is not a Business Day, then such sum shall become due and payable on the next succeeding Business Day, and interest payable on such sum shall continue to accrue and shall be adjusted by Agent accordingly. (d) COMPUTATION OF INTEREST. All computations of interest payable under this Agreement, the Notes, or any of the other Loan Documents shall be computed by Agent on the basis of the actual principal amount outstanding on each day during the payment period, and shall be calculated with reference to the actual number of days elapsed during such period on the basis of a year consisting of three hundred and sixty (360) days. The daily interest charge shall be one three-hundred-sixtieth (1/360th) of the annual interest amount. Each determination of any interest rate by Agent shall be conclusive and binding on Borrower in the absence of manifest error. Absent manifest error, a certificate or statement signed by an authorized officer of Agent shall be conclusive evidence of the amount of the Obligations due and unpaid as of the date of such certificate or statement. -31- 32 2.12 PAYMENTS TO BE FREE OF DEDUCTIONS. Each payment to be made by Borrower under this Agreement, any Note, or any of the other Loan Documents shall be made in accordance with SECTION 2.11 hereof, without set-off, deduction or counterclaim whatsoever, and free and clear of taxes, levies, imposts, duties, charges, fees, deduction, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any governmental or taxing authority, unless Borrower is compelled by law to make any such deduction or withholding. In the event that any such obligation to deduct or withhold is imposed upon Borrower with respect to any such payment: (a) Borrower shall be permitted to make the deduction or withholding required by law in respect of the said payment, and (b) there shall become and be absolutely due and payable by Borrower to Agent or such Lender on the date on which the said payment shall be due and payable, and Borrower hereby promises to pay to Agent or such Lender on such date, such additional amount as shall be necessary to enable Agent or such Lender to receive the same net amount which Agent or such Lender would have received on such due date had no such obligation been imposed by law. Notwithstanding any provision of this SECTION 2.12 to the contrary, the foregoing provisions of this SECTION 2.12 shall not apply in the case of any deductions or withholding made (y) in respect of taxes charged upon or by reference to the overall net income, profits or gains of Agent or any Lender, or (z) failure by a Lender to comply with SECTION 2.22. 2.13 USE OF PROCEEDS. Borrower represents, warrants and covenants to Agent and to each Lender that all proceeds of the Advances shall be used by Borrower only for the following purposes: (i) working capital needs, (ii) Acquisitions, to the extent expressly permitted under this Agreement and (iii) except as expressly limited in this Agreement, general corporate purposes. 2.14 LIBOR BREAK FUNDING COST. Borrower shall pay to Agent, for the ratable benefit of each Lender, the LIBOR Break Funding Costs that Agent determines are attributable to: (a) any payment (including, without limitation, any payment resulting from the acceleration of the Loans pursuant to this Agreement or any Loan Document), repayment, mandatory or optional prepayment, or conversion of a LIBOR Rate Loan for any reason on a date other than the last day of the LIBOR Interest Period for such Loan; or (b) any failure by Borrower for any reason to borrow a LIBOR Rate Loan on the date for such borrowing specified in the relevant notice of borrowing or Borrowing Notice. 2.15 ADDITIONAL COSTS. (a) Notwithstanding any conflicting provisions of this Agreement to the contrary, if any applicable law, rule or regulation not in effect as of the date hereof shall (i) subject -32- 33 Agent or any Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to any Loan, or Letter of Credit, this Agreement, any Note, or any of the other Loan Documents or the payment by Borrower of any amounts payable to Agent or any Lender hereunder or thereunder (other than taxes charged upon or by reference to the overall net income, profits or gains of Agent or any Lender or taxes charged with respect to any Lender's failure to comply with SECTION 2.22 hereof); or (ii) materially change, in the reasonable opinion of the party so affected, the basis of taxation (other than changes in tax rates applicable to taxes charged upon or by reference to the overall net income, profits or gains of Agent or any Lender or taxes charged with respect to any Lender's failure to comply with SECTION 2.22 hereof) of payments to Agent or any Lender of the principal of or the interest on any Note or any other amounts payable to Agent or any Lender under this Agreement, or any of the other Loan Documents; or (iii) impose or increase or render applicable any special or supplementary special deposit or reserve or similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or any eligible liabilities of, or loans by any office or branch of, Agent or any Lender; or (iv) impose on Agent or any Lender any other condition or requirement with respect to this Agreement, any Note, or any of the other Loan Documents, and if the result of any of the foregoing is (A) to increase the cost to Agent or any Lender of making, funding or maintaining all or any part of the principal of the Loans or of issuing, maintaining or making draws or disbursements under the Letters of Credit, or (B) to reduce the amount of principal, interest or any other sum payable by Borrower to Agent or any Lender under this Agreement, any Note, or any of the other Loan Documents, or (C) to require Agent or any Lender to make any payment or to forego any interest or other sum payable by Borrower to Agent or any Lender under this Agreement, any Note, or any of the other Loan Documents, the amount of which payment or foregone interest or other sum is measured by or calculated by reference to the gross amount of any sum receivable or deemed received by Agent or any Lender from Borrower under this Agreement, any Note, or any of the other Loans Documents, then, and in each such case, Borrower will pay to Agent for Agent or the account of a Lender, as the case may be, within sixty (60) days of written notice by Agent or such Lender, such additional amounts as will (in the reasonable opinion of Agent or such Lender, as the case may be) be sufficient to compensate Agent or such Lender for such sum. (b) If any present or future applicable law, rule or regulation shall make it unlawful for Borrower to perform any one or more of its agreements or Obligations under this Agreement, any Note, or any of the other Loan Documents, then the obligations of Lenders under their respective Commitment shall terminate immediately. If any present or future applicable law, rule or regulation shall make it unlawful for Borrower to perform any one or more of its agreements or obligations under this Agreement, any Note, or any of the other Loan Documents, and Agent, or any Lender -33 - 34 shall at any time determine (which reasonable determination shall be conclusive and binding on Borrower) (i) that, as a consequence of the effect or operation (whether direct or indirect) of any such applicable law, rule or regulation, any one or more of the rights, remedies, powers or privileges of Agent or any Lender under or in respect of this Agreement, any Note, or any of the other Loan Documents shall be or become invalid, unenforceable, or materially restricted; and (ii) that all or any one or more of the rights, remedies, powers and privileges so affected are of material importance to Agent or any Lender (as determined by the party so affected), then Agent shall, at the direction of the Required Lenders, by giving notice to Borrower, declare all of the Obligations, including, without limitation, the entire unpaid principal of the Notes, all of the unpaid interest accrued thereon and any and all other sums due and payable by Borrower to Agent or Lenders under this Agreement, any Note, and any of the other Loan Documents, to be immediately due and payable, and, thereupon, such Obligations shall (if not already due and payable) forthwith become and be due and payable without further notice or other formalities of any kind, all of which are hereby expressly waived. (c) If Agent or any Lender shall reasonably determine that any law, rule or regulation not in effect as of the date hereof regarding capital adequacy, or in the event of any change in any existing such law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital, as a consequence of its obligations hereunder, to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by any amount deemed by such Lender to be material, then Borrower shall pay to such Lender within sixty (60) days of written notice by such Lender such amount or amounts, in addition to the amounts payable under the provisions of this Agreement or any other Loan Document, as will compensate such Lender for such reduction. Determinations by any Lender of the additional amount or amounts required to compensate such Lender in respect of the foregoing shall be presumptively correct absent manifest error. In determining such amount or amounts, each Lender may use in good faith any reasonable averaging and attribution methods of general application. (d) Each Lender agrees, that upon the occurrence of any event giving rise to the operation of SECTION 2.12, or (a)-(c) of this SECTION 2.15 with respect to such Lender, it will, to the extent permitted by Applicable Law or by the relevant Governmental Authority, in consultation with Agent, for a period of thirty (30) days endeavor in good faith to avoid or minimize the increase in -34- 35 costs or reduction in payments resulting from such event (including, but not limited to, endeavoring to change its Lending Installation); provided, however, that such avoidance or minimization can be made in such a manner that such Lender, in its sole determination, suffers no economic, legal or regulatory disadvantage. If any Lender (an "Affected Lender") shall make a demand for payment under any of such Sections, and Borrower shall find a Lender or an assignee which offers in writing to purchase the Commitments and Advances of such Affected Lender without recourse at par on a specified date, together with accrued and unpaid interest and facility fees thereon to the date of purchase, and tenders the purchase price of such Commitments and Advances on such specified date, and if, in the reasonable opinion of such Affected Lender, its acceptance of such offer would be permitted under Applicable Law and all relevant governmental authorities and would not result in its suffering any economic, legal, or other regulatory disadvantage, then Borrower shall be excused from the payment of the increased costs claimed by such Affected Lender under any of such Sections accruing after the first interest payment date pursuant to SECTION 2.19 for each Advance of such Affected Lender following such specified date, if the Affected Lender demanding payment under either such Section declines such purchase offer. If such Affected Lender accepts such purchase offer, upon consummation of such purchase offer such Affected Lender shall cease to be a party hereto. Except as provided in the immediately preceding sentence, nothing in this SECTION 2.15(d) shall affect or postpone the obligations of Borrower to make payments as provided hereunder. Any reasonable expenses incurred by such Affected Lender under this SECTION 2.15(d) shall be paid by Borrower upon delivery by such Affected Lender to Borrower of a certificate as to the amount of such expenses, which certificate shall be conclusive and binding, in absence of manifest error. (e) For purposes of this SECTION 2.15, "laws, rules and regulations not in effect on the date hereof" or similar words shall be deemed to include future interpretations of existing laws, rules and regulations. 2.16 INDEMNIFICATION OF LOSSES. Without derogating from any of the other provisions of this Agreement or any of the other Loan Documents Borrower hereby absolutely and unconditionally agrees to indemnify Agent and each Lender, upon demand at any time and as often as the occasion therefor may require, against any and all claim, demands, suits, actions, damages, losses, costs, expenses and all other liabilities whatsoever which Agent or any Lender or any of their respective directors or officers may sustain or incur as a consequence of, on account of, in relation to or in any way in connection with (a) any failure by Borrower to pay, punctually on the due date thereof, any amount payable under this agreement, any Note, or any of the other Loan Documents beyond the expiration of the period of grace (if any) applicable thereto, or (b) the acceleration of the maturity of any of the Obligations, or (c) any failure by any Borrower to perform or comply with any of -35- 36 the terms and provisions of this Agreement, any Note or any of the other Loan Documents. Such claims, demands, suits, actions, damages, losses, costs, expenses shall include, without limitation (i) any costs incurred by Agent or any lender in carrying funds to cover any overdue principal, overdue interest or any other overdue sums payable by Borrower under this Agreement, any Note or any of the other Loan Documents; (ii) any interest payable by Agent or any Lender in order to carry the fund referred to in clause (i) of this SECTION 2.16; and (iii) any losses (but excluding losses of anticipated profit) incurred or sustained by Agent or any Lender in liquidating or re-employing funds acquired from third parties to make, fund or maintain all or any part of the Loans. 2.17 STATEMENTS BY AGENT OR ANY LENDER. A certified statement signed by an officer of Agent or any Lender setting forth any additional amount required to be paid by Borrower to Agent or such Lender (together with supporting documentation setting forth in reasonable detail an explanation of the basis for requesting payment of such amount), respectively, under SECTION 2.15 and 2.16 hereof shall be submitted by Agent or such Lender to Borrower in connection with each demand made at any time by Agent (with copies thereof delivered to each other Lender) or such Lender under either of such Sections. A claim by Agent or any Lender for all or any part of any additional amounts required to be paid by Borrower under Section 2.15 and 2.16 hereof may be made before or after any payment to which such claim relates. Each such statement shall, in the absence of manifest error, constitute presumptive evidence of the additional amount required to be paid to Agent or such Lender. 2.18 BORROWING NOTICES; TELEPHONIC NOTICES. (a) All requests for draws, advances, or disbursements of Loan proceeds shall be made by and on behalf of Borrower in writing on a Borrowing Notice, by Telephonic Notice. All Telephonic Notices, must be followed by same day (which shall mean prior to 5:00 p.m., Cleveland, Ohio, time) written Borrowing Notice delivered to Agent via facsimile. Borrowing Notices may be transmitted to Agent at its Head Office via fax or telecopy, PROVIDED that Borrower immediately notifies Agent by telephone of such transmission. Each Borrowing Notice for Base Rate Loans shall be transmitted to and received by Agent, or each Telephonic Notice shall be received by telephone by Agent, not later than 12:00 p.m. Cleveland, Ohio, time not more than ten (10) Business Days nor less than one (1) Business Day before the Borrowing Date of each such Loan, and not more than ten (10) Business Days nor less than three (3) Business Days before the Borrowing Date for each LIBOR Rate Loan. Each Borrowing Notice for Money Market Line Loans and Swingline Loans shall be transmitted and received by Agent, not later than 11:00 a.m. Cleveland, Ohio, time on the Borrowing Date of each such Loan. All Borrowing Notices shall be accompanied by such documents, reports and other materials as may be reasonably necessary to enable Agent (and each Lender) to confirm that the conditions precedent to the disbursement of such requested Loan have been satisfied. -36- 37 (b) Agent shall notify Lenders promptly by telephone of its receipt of Borrower's Borrowing Notice, but in no event shall Agent notify Lenders later than 5:00 p.m. Cleveland time, on the day on which Agent actually receives the applicable Borrowing Notice. In addition, Agent shall provide each Lender with a copy of each such Borrowing Notice, together with all accompanying materials, promptly upon Agent's receipt thereof, and shall in addition provide each Lender with a statement showing Agent's calculation of its respective Pro Rata Share of the Advance so requested. Each Lender will, upon receiving notice from Agent of Borrower's Borrowing Notice, become and be obligated to place at the disposal of Agent, not later than 10:00 a.m., Cleveland time, on the Borrowing Date set forth on such Borrowing Notice, an aggregate amount in dollars equal to such Lender's Pro Rata Share multiplied by the amount of the Advance requested. The payment by each Lender of such aggregate amount shall be made to Agent at Agent's Head Office in immediately available and freely transferrable funds. (c) Agent shall disburse the proceeds of each Loan to Borrower, in immediately available funds not later than noon, Cleveland time, on the Borrowing Date described therefor, provided that: (x) Borrower shall have provided Agent with a Borrowing Notice for such Advance as and when provided above; (y) all of the conditions precedent applicable to such Advance shall be satisfied as at the Closing Date or such later Borrowing Date as may be applicable to such Loan; and (z) each Lender shall fund the amount equal to its Loan as provided in SECTION 2.18(b), above. 2.19 NOTES; TELEPHONIC NOTICES. Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its respective Note or Notes, provided, however, that the failure to so record shall not affect Borrower's obligations under such Note. Borrower hereby authorizes Lenders and Agent to extend, convert or continue Loans, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons Agent or any Lender in good faith believes to be acting on behalf of Borrower. Borrower agrees to deliver promptly to Agent a written confirmation, if such confirmation is requested by Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by Agent and Lenders, the records of Agent and Lenders shall govern absent manifest error. 2.20 LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation. Each Lender may, by written or telex notice to Agent and Borrower, designate a Lending Installation through -37- 38 which Loans will be made by it and for whose account Loan payments are to be made. 2.21 NON-RECEIPT OF FUNDS BY AGENT. Unless Borrower or a Lender, as the case may be, notifies Agent prior to the date on which it is scheduled to make payment to Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of Borrower, a payment of principal, interest or fees to Agent for the account of Lenders, that it does not intend to make such payment, Agent may assume that such payment has been made. Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or Borrower, as the case may be, has not in fact made such payment to Agent, the recipient of such payment shall, on demand by Agent, repay to Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by Agent until the date Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Rate for such day or (ii) in the case of payment by Borrower, the interest rate applicable to the relevant Loan. 2.22 WITHHOLDING TAX EXEMPTION. At least five Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Lender, each Lender that is not incorporated under the laws of the United States of America, or a state thereof, agrees that it will deliver to each Borrower and Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to each Borrower and Agent two additional copies of such form (or a successor form) on or before the date that such form expires (currently, three successive calendar years for Form 1001 and one calendar year for Form 4224) or becomes obsolete or after the occurrence of any event requiring a change in the most recent forms so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrower or Agent, in each case certifying that such Lender is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises Borrower and Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. -38- 39 2.23 The Letters of Credit. ---------------------- (a) ISSUANCE OF LETTERS OF CREDIT; CONDITIONS AND LIMITATIONS. Upon the terms and conditions set forth in this Agreement, Borrower may request, in accordance with the provisions of this SECTION 2.23, that the Issuing Bank issue one or more Letters of Credit for its account from time to time prior to the Facility Termination Date. If Borrower desires the issuance of a Letter of Credit, it shall deliver to Agent a Request for Issuance of Letter of Credit in form substantially similar to that which is attached hereto as EXHIBIT D and made a part hereof by this reference, no later than 11:00 A.M. (Cleveland time) at least five Business Days before the proposed Issuance Date therefor. The Request for Issuance of Letter of Credit shall be accompanied by a Letter of Credit application, on the Issuing Bank's then-customary form, and shall contain, among other things, the following information with respect to each requested Letter of Credit: (i) its proposed Issuance Date (which shall be a Business Day), (ii) its proposed Face Amount, (iii) its proposed expiration date, (iv) the name and address of its proposed beneficiary, and (v) a summary of its purpose and contemplated terms. Borrower shall, in addition, furnish a precise description of any documents to be presented under, and any other terms of, the requested Letter of Credit, together with the text of any certificate to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Bank to make payment under the Letter of Credit. No Letter of Credit shall require payment against a conforming draft to be made thereunder on the same Business Day that such draft is presented if such presentation is made after 10:00 A.M. (Cleveland time) on such Business Day. The minimum Face Amount of any Letter of Credit shall be One Million Dollars ($1,000,000) or the Dollar Equivalent thereof. The issuance of each Letter of Credit shall be subject to the satisfaction, on the Issuance Date for each Letter of Credit, of all of the conditions precedent set forth in SECTION 3.2 below, and to the following additional limitations: (i) Borrower shall not request the issuance of a Letter of Credit if, after giving effect to the issuance of such Letter of Credit, the Letter of Credit Usage would equal or exceed Fifteen Million Dollars ($15,000,000); (ii) Borrower shall not request the issuance of a Letter of Credit if, after giving effect to the issuance of such Letter of Credit, the Outstanding Amount would exceed the Aggregate Commitment; and (iii) In no event shall the Issuing Bank issue any Letter of Credit having an expiration date later than the first to occur of (x) Facility Termination Date or (y) one (1) year after the Issuance Date of the proposed Letter of Credit; PROVIDED that, subject to the foregoing clause (x), this clause (y) shall not prevent the Issuing -39- 40 Bank from agreeing that a Letter of Credit will automatically be renewed for additional periods not to exceed one (1) year each after the initial expiry date thereof if the Issuing Bank does not cancel such renewal, provided that all of the conditions to the issuance of a Letter of Credit and set forth or referred to in this SECTION 2.23(a) must be satisfied as at each such renewal date in respect of such renewal and that the Letter of Credit Commission will be adjusted to the extent that the then in effect LIBOR Applicable Margin has been adjusted. (b) ISSUANCE OF LETTERS OF CREDIT: PURCHASE OF PARTICIPATIONS THEREIN. Upon Agent's receipt of a Request for Issuance of Letter of Credit, Agent shall promptly so notify each Lender, and shall provide each Lender with a copy of such Request for Issuance of Letter of Credit. Provided that all of the conditions precedent to the issuance of the requested Letter of Credit have been satisfied, the Issuing Bank shall cause each Letter of Credit properly requested hereunder to be issued in accordance with the terms of the respective Request for Issuance for Letter of Credit therefor. Immediately upon the issuance of each Letter of Credit, each Lender (other than the Issuing Bank) shall be deemed to have irrevocably purchased from the Issuing Bank a participation in such Letter of Credit and any and all drawings and disbursements thereunder, in an amount equal to such Lender's Pro Rata Share of the initial Face Amount of such Letter of Credit, and each Lender hereby covenants and agrees to purchase and pay for such participation on the terms and subject to the conditions set forth in this SECTION 2.23. (c) PAYMENT IN CERTAIN CIRCUMSTANCES. Each Letter of Credit shall provide that the Issuing Bank may (but shall not be required to) pay the beneficiary thereof upon the occurrence of an Event of Default and the acceleration of the maturity of the Loans or, if payment is not then due to the beneficiary under such Letter of Credit, may provide for the deposit of funds in an account to secure payment to the beneficiary, and that any funds so deposited shall be paid to such beneficiary (subject to the satisfaction of all conditions to such payment), or returned to the Issuing Bank for distribution to Lenders (or, if all obligations then shall have been indefeasibly paid in full, to Borrower) if no payment to such beneficiary has been made and if the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by the Issuing Bank as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by the Issuing Bank under the related Letter of Credit. (d) TERMINATION OF COMMITMENTS. If for any reason the Commitments shall terminate when any Letter of Credit is outstanding, Borrower shall, on or prior to the date of such termination: (i) cause each outstanding Letter of Credit to be cancelled, and an amount equal to all amounts previously drawn -40- 41 under Letters of Credit and not theretofore reimbursed by Borrower or converted into Loans pursuant to SECTION 2.23(e) to be paid immediately to or as directed by the Issuing Bank; or (ii) deposit, with Agent, immediately available funds in an amount equal to the Letter of Credit Usage to secure all outstanding Letters of Credit which are not cancelled as described in the preceding clause. (e) PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. Upon receipt by the Issuing Bank of any request for drawing under its Letter of Credit by the beneficiary thereof, the Issuing Bank shall notify Borrower and Agent promptly after its receipt of notice of any such request, and in any event at least two (2) Business Days prior to the date on which the Issuing Bank intends to honor such drawing (unless under the terms of the Letter of Credit the Issuing Bank is required to honor a drawing prior to the second Business Day after presentation of a request for drawing, in which case the Issuing Bank shall provide Borrower and Agent with such notice of such request as may be practicable under the circumstances). Agent shall provide each Lender with a true and complete copy of such notice within one (1) Business Day of Agent's receipt of the same. Borrower shall, and hereby covenants and agrees to, reimburse the Issuing Bank on the day on which such drawing is honored in an amount, in immediately available funds, equal to the amount of such drawing; PROVIDED that (i) unless Borrower shall have notified Agent prior to 11:00 A.M. (Cleveland time) on the Business Day immediately prior to the date of such drawing that Borrower intends to reimburse the Issuing Bank for the amount of such drawing with funds other than the proceeds of Loans, Borrower shall be deemed to have given a Request for Advance to Agent requesting a Base Rate Loan on the date on which such drawing is honored, in the amount of such drawing; and (ii) Lenders shall, on the date of such drawing, make Loans in the amount of such drawing, the proceeds of which shall be applied directly by Agent to reimburse the Issuing Bank for the amount of such drawing; and PROVIDED FURTHER, that if for any reason proceeds of such Loans are not received by the Issuing Bank on such date in an amount equal to the amount of such drawing, Borrower shall reimburse the Issuing Bank, on the next Business Day, in an amount equal to the excess of the amount of such drawing over the amount of such Loans which are actually received, plus accrued interest on such amount at the Default Interest Rate. (f) PAYMENT BY LENDERS. If Borrower shall fail to reimburse the Issuing Bank as and when required above for the amount of any drawing honored by the Issuing Bank under a Letter of Credit issued by it, the Issuing Bank shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective Pro Rata Share thereof. Each Lender shall make available to the Issuing Bank an amount equal to its respective Pro Rata Share of such unreimbursed drawing, in immediately available funds, at the office of the Issuing Bank specified in such notice, not later than 12:00 P.M. (Cleveland time) on the first Business Day after such Lender's receipt of such notice from the Issuing -41- 42 Bank. If any Lender fails so to make available to the Issuing Bank the amount of such Lender's Pro Rata Share of such Letter of Credit, the Issuing Bank shall be entitled to recover such amount on demand from such Lender, together with interest at the customary rate set by the Issuing Bank for the correction of errors among banks. Nothing in this provision shall prejudice the right of any Lender to recover from the Issuing Bank any amounts made available by such Lender to the Issuing Bank pursuant to this provision in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Issuing Bank in respect of which payment was made by the Issuing Bank constituted gross negligence or willful misconduct on the part of the Issuing Bank. The Issuing Bank shall, or shall cause Agent to, distribute to each other Lender which has paid all amounts payable by it under this SECTION 2.23(f) with respect to any Letter of Credit issued by the Issuing Bank such other Lender's Pro Rata Share of all payments received by the Issuing Bank from Borrower in reimbursement of drawings honored by the Issuing Bank under such Letter of Credit when such payments are received. (g) COMPENSATION. Borrower agrees to pay the following amounts with respect to each Letter of Credit issued pursuant to this Agreement: (i) a Letter of Credit Commission payable, in advance, to Agent for the ratable benefit of Lenders, on the Issuance Date of such Letter of Credit (and, solely in the case of Letters of Credit which are renewed after the expiration of the initial period thereof, on each renewal date for so long as such Letters of Credit remain outstanding); (ii) a Letter of Credit facing fee (the "Letter of Credit Facing Fee"), payable to the Issuing Bank, equal to the Face Amount of each Letter of Credit multiplied by 0.125%; and (iii) with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with the Issuing Bank's standard schedule for such charges in effect at the time of such provided for in this Agreement, Borrower agrees to protect, indemnify, pay and save the Issuing Bank harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which the Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuing Bank as determined by a court of competent jurisdiction, or (ii) the failure of the Issuing Bank to honor a drawing under any Letter of Credit as a result of -42- 43 any act or omission, whether rightful or wrongful, of any present or future Governmental Authority. As between Borrower and the Issuing Bank, Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Bank by the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of Letters of Credit, even if any of the foregoing should in fact prove to be invalid, insufficient, inaccurate, fraudulent or forged in any respect; (ii) the validity or insufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) the errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telecopy, telex or otherwise, whether or not they be in cipher; (v) the errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or any proceeds thereof; (vii) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Issuing Bank. None of the above shall affect, impair, or prevent the vesting of any of the Issuing Bank's rights or powers hereunder. In determining whether to pay under any Letter of Credit, the Issuing Bank shall be responsible only to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that the same comply on their face with the requirements of that Letter of Credit. Borrower shall have no obligation to indemnify the Issuing Bank in respect of any liability incurred by the Issuing Bank to the extent arising out of the gross negligence or willful misconduct of the Issuing Bank, as determined by a court of competent jurisdiction, or out of the wrongful dishonor by the Issuing Bank of a proper demand for payment made under the Letters of Credit issued by it. (h) AMENDMENTS. Borrower may request that the Issuing Bank enter into one or more amendments of its Letter of Credit by delivering to Agent and the Issuing Bank a Notice of Issuance of Letter of Credit specifying (i) the Issuing Bank, (ii) the proposed -43- 44 date of the proposed amendment and (iii) the nature of the requested amendment. The Issuing Bank shall be entitled to enter into amendments with respect to its Letters of Credit, PROVIDED, that any amendment extending the expiry date or increasing the stated amount of any Letter of Credit shall be permitted only if the Issuing Bank would, at the time of the proposed be permitted to issue a new Letter of Credit having such an expiry date or stated amount under this SECTION 2.23 on the date of the amendment. ARTICLE III CONDITIONS PRECEDENT -------------------- 3.1 INITIAL ADVANCE. Lenders shall not be required to make the Initial Advance hereunder unless (a) Borrower has paid all fees due and payable to Lenders and Agent hereunder, (b) the initial Borrowing Notice is delivered to Agent on or before March 24, 1998, (c) the proceeds of the Initial Advance together with the net proceeds of the Preferred Securities Offering are sufficient to and are used for the payoff and termination of the Existing Facilities, (d) the gross proceeds of the Preferred Securities Offering shall be equal to or greater than $125 million and the net proceeds thereof shall have been received by Borrower, (e) the consummation of the Preferred Securities Offering shall have occurred on or before the date hereof, in accordance with the terms and conditions of documents and instruments (the "Preferred Securities Offering Documents") that have been reviewed and approved by Agent and Agent's counsel, (f) the execution of an agreement by and between Borrower and Dickens Data Systems, Inc. ("Dickens") whereby Borrower will agree to acquire a controlling interest in the capital stock of Dickens at a cash purchase price not to exceed $121,025,000, plus assumption of certain liabilities, and plus payments of certain other consideration not to exceed $17,000,000 (the "Merger"), in accordance with the terms and conditions of documents and instruments (the "Merger Documents") that have been reviewed and approved by Agent and Agent's counsel, and (g) Borrower shall have furnished to Agent, with sufficient copies for Lenders, the following: (i) The duly executed originals of the Loan Documents, including the Notes, payable to the order of each of Lender, and this Agreement and a Non-Borrowing and Non-Pledge Agreement executed by Maryland, Illinois, the Limited Partnership, Minnesota and Canada; (ii) A certificate of good standing for Borrower and each of its Substantial Subsidiaries, certified by the appropriate governmental officer, and foreign qualification certificates, certified by the appropriate governmental officer, for each jurisdiction where the failure to so qualify or be -44- 45 licensed (if required) could reasonably be expected to result in a Material Adverse Change; (iii) Copies, certified by an officer of Borrower of each of Borrower's and each of its Substantial Subsidiaries formation documents (including by-laws or code of regulations), together with all amendments thereto; (iv) An incumbency certificate, executed by an officer of Borrower and each Substantial Subsidiary, which shall identify by name and title and bear the signature of the Persons authorized to sign the Loan Documents or the Non-Borrowing and Non-Pledge Agreement, as the case may be, and to make borrowings hereunder on behalf of Borrower, upon which certificate Agent and Lenders shall be entitled to rely until informed of any change in writing by Borrower or such Substantial Subsidiary; (v) Copies, certified by the Secretary or Assistant Secretary, of Borrower's and each Substantial Subsidiaries' Board of Directors' resolutions, which shall provide either a shareholder or Board of Directors resolution (and resolutions of other bodies, if any are deemed necessary by counsel for any Lender) authorizing, as the case may be, the Advances PROVIDED for herein and the execution, delivery and performance of the Loan Documents or the Non-Borrowing and Non-Pledge Agreement to be executed and delivered by Borrower and each Subsidiary hereunder; (vi) A written opinion of Borrower's, and each Substantial Subsidiaries' counsel, addressed to Lenders in substantially the form of EXHIBIT I and EXHIBIT J hereto; (vii) A certificate, signed by an officer of Borrower, stating that on the initial Borrowing Date no Default or Unmatured Default has occurred and is continuing and that all representations and warranties of Borrower are true and correct as of the initial Borrowing Date; (viii) The most recent financial statements of Borrower and a certificate from an officer of Borrower stating that no Material Adverse Change in Borrower's financial condition has occurred since December 31, 1997 that has not been publicly announced; -45- 46 (ix) UCC financing statement, judgment, and tax lien searches with respect to Borrower from the State of Ohio, from the state of Illinois with respect to Illinois, from the State of Maryland with respect to Maryland and from the province of Ontario with respect to Canada, from the State of Minnesota with respect to Minnesota, from the State of Texas with respect to the Limited Partnership and from the State of Georgia with respect to Dickens; (x) A certificate, signed by an officer of Borrower, stating that all judgments against Borrower have been satisfied, and that all liens or encumbrances on any Property of Borrower have been released, other than liens permitted pursuant to SECTION 5.15; (xi) Written money transfer instructions, in substantially the form of EXHIBIT K hereto, addressed to Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as Agent may have reasonably requested; (xii) A true, correct and complete copy of the fully executed Agreement for Inventory Financing; (xiii) A copy of Borrower's Private Placement Memorandum, and any amendments or supplements thereto, relating to the Preferred Securities and any other documents or instruments relating thereto requested by Agent or any Lender, and a certificate of an Authorized Financial Officer stating that the Preferred Securities Offering has been consummated; and (xiv) Such other documents as any Lender or its counsel may have reasonably requested, the form and substance of which documents shall be acceptable to the parties and their respective counsel. 3.2 EACH ADVANCE. Lenders shall not be required to make any Advance, or honor any Request for Issuance of such Letter of Credit, as the case may be, unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default; (ii) The representations and warranties contained in ARTICLE IV are true and correct in all material respects as of such Borrowing Date with respect to Borrower and to any Subsidiary in existence on such Borrowing Date, except to the extent any such representation or warranty is stated to relate -46- 47 solely to an earlier date, in which case such representation or warranty shall be true and correct in all material respects on and as of such earlier date; (iii) All legal matters incident to the making of such Advance shall be satisfactory to Lenders and their counsel; and (iv) Borrower has provided to Lenders, Borrower's latest audited annual financial statement and unaudited partial year financial statement (all such financial statements to be prepared with the specified detail required in SECTION 5.1 hereof). Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by Borrower that the conditions contained in SECTIONS 3.2(i) and (ii) have been satisfied. ARTICLE IV REPRESENTATIONS AND WARRANTIES ------------------------------ Borrower represents and warrants to Lenders that: 4.1 EXISTENCE. Borrower is a corporation duly organized and validly existing and in good standing under the laws of the State of Ohio. Borrower's Subsidiaries are each duly incorporated or duly formed, as the case may be, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. The principal place of business of Borrower and each of its Subsidiaries is located in Garfield Heights, Ohio. Each of Borrower and its Subsidiaries are qualified to do business in each jurisdiction where the failure to so qualify or be licensed (if required) could reasonably be expected to result in a Material Adverse Change. 4.2 AUTHORIZATION AND VALIDITY. Borrower has the power and authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder. The execution and delivery by Borrower of the Loan Documents and the performance of its obligations thereunder has been duly authorized by proper proceedings, and the Loan Documents constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. -47- 48 4.3 NO CONFLICT, GOVERNMENT CONSENT. Neither the execution and delivery by Borrower of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Borrower or any of its Subsidiaries or Borrower's or any Subsidiary's articles of incorporation, bylaws or partnership agreement, or the provisions of any material indenture, material instrument or material agreement to which Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the Property of Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents. 4.4 FINANCIAL STATEMENTS -- MATERIAL ADVERSE CHANGE. The December 31, 1997 financial statements of Borrower and its Subsidiaries heretofore delivered to Lenders were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the financial condition and operations of Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. Except for the Merger, the Preferred Securities Offering and as publicly announced prior to the date hereof, since December 31, 1997, there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of Borrower and its Subsidiaries which could reasonably be expected to result in a Material Adverse Change. 4.5 TAX. Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by Borrower or any of its Subsidiaries except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 4.6 LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation, arbitration, governmental investigation, proceeding or inquiry: pending or, to the knowledge of any of its officers, threatened against or affecting Borrower or any of its Subsidiaries which could reasonably be expected to result in a Material Adverse Change. Borrower and its Subsidiaries have no material Contingent -48- 49 Obligations not provided for or disclosed in the financial statements referred to in SECTION 5.1 (including reports of the type referred to in SECTION 5.1(ix)). 4.7 SUBSIDIARIES. SCHEDULE 1 hereto contains an accurate list of all of the presently existing Subsidiaries of Borrower setting forth their respective jurisdictions of incorporation or formation, as the case may be, and the percentage of their respective capital stock or partnership interests, as the case may be, owned by Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or partnership interests, as the case may be, of such Subsidiaries have been duly authorized and issued and are fully paid and nonassessable. 4.8 ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $1,000,000. Neither Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $250,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 4.9 ACCURACY OF INFORMATION. All factual information heretofore or contemporaneously furnished by or on behalf of Borrower or any of its Subsidiaries to Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of Borrower or any of its Subsidiaries to Agent or any Lender will be, true and accurate in all material respects (taken as a whole) on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time. 4.10 REGULATION U. Borrower does not hold any margin stock (as defined in Regulation U). 4.11 MATERIAL AGREEMENTS. Neither Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to result in a Material Adverse Change or (ii) any agreement or instrument evidencing or governing Indebtedness. 4.12 COMPLIANCE WITH LAWS. Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the -49- 50 conduct of their respective businesses, and ownership of their respective Property, the non-compliance with which could reasonably be expected to result in a Material Adverse Change. Neither Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to result in a Material Adverse Change. 4.13 OWNERSHIP OF PROPERTIES. Except as set forth on Schedule 2 hereto, on the date of this Agreement, Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by SECTION 5.15, to all of the Property and assets reflected in the financial statements as owned by it. 4.14 INVESTMENT COMPANY ACT. Neither Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 4.15 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor any of its Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.16 SOLVENCY. (i) Immediately after the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of Borrower individually, and Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of Borrower individually, or Borrower and its Subsidiaries on a consolidated basis, as the case may be; (b) the present fair saleable value of the Property of Borrower individually, and Borrower and its Subsidiaries on a consolidated basis, will be greater than the amount that will be required to pay the probable liability of Borrower individually, or Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) Borrower individually, and Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) Borrower individually, and Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses -50- 51 are now conducted and are proposed to be conducted after the date hereof. (ii) Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by Borrower or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. 4.17 INSURANCE. Borrower and its Subsidiaries carry insurance on their businesses with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses in localities where Borrower and its Subsidiaries operate, including, without limitation: (i) Property and casualty insurance (including coverage for flood and other water damage for any Property located within a 100-year flood plain) in the amount of the replacement cost of the improvements at the Property; (ii) Comprehensive general liability insurance in the amount of $20,000,000 per occurrence. 4.18 ENVIRONMENTAL MATTERS. Each of the following representations and warranties is true and correct on and as of the Closing Date except to the extent that the facts and circumstances giving rise to any such failure to be so true and correct, in the aggregate, could not reasonably be expected to result in a Material Adverse Change: (a) To the best knowledge of Borrower, the Property of Borrower and its Subsidiaries does not contain, and has not previously contained, any Materials of Environmental Concern in amounts or concentrations which constitute or constituted a violation of, or could reasonably give rise to liability under, Environmental Laws. (b) To the best knowledge of Borrower, the Property of Borrower and its Subsidiaries and all operations of such Property are in compliance, and have in the last two years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Property of Borrower and its Subsidiaries, or violation of any Environmental Law with respect to the Property of Borrower and its Subsidiaries. (c) Neither Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding -51- 52 environmental matters or compliance with Environmental Laws with regard to any of their Property, nor does Borrower or its Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened. (d) To the best knowledge of Borrower, Materials of Environmental Concern have not been transported or disposed of from any Property of Borrower and its Subsidiaries in violation of, or in a manner or to a location which could reasonably give rise to liability under, Environmental Laws, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Property of Borrower and its Subsidiaries in violation of, or in a manner that could give rise to liability under, any applicable Environmental Laws. (e) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of Borrower or its Subsidiaries, threatened, under any Environmental Law to which Borrower or any of its Subsidiaries is or will be named as a party with respect to any Property of Borrower and its Subsidiaries nor are there any consent decrees or other decrees, consent orders, administrative order or other orders, or other administrative of judicial requirements outstanding under any Environmental Law with respect to any Property of Borrower and its Subsidiaries. (f) To the best knowledge of Borrower, there has been no release or threat of release of Materials of Environmental Concern at or from any Property of Borrower or its Subsidiaries, or arising from or related to the operations of Borrower and its Subsidiaries in connection with any Property in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. ARTICLE V COVENANTS --------- During the term of this Agreement, unless Lenders shall otherwise consent in writing: 5.1 FINANCIAL REPORTING. Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with GAAP, and furnish to Lenders: (i) As soon as available, but in any event not later than 45 days after the close of each fiscal quarter, for Borrower and its Subsidiaries, an unaudited consolidated and consolidating balance sheet as of the close of each such period and the -52- 53 related unaudited consolidated and consolidating statements of income and retained earnings for such period and the portion of the fiscal year through the end of such period and of year to date cash flows of Borrower and its Subsidiaries, all certified by an Authorized Financial Officer; (ii) As soon as available, but in any event not later than 45 days after the close of each fiscal quarter, for Borrower and its Subsidiaries, related reports in form and substance satisfactory to Lenders, all certified by Borrower's Authorized Financial Officer, a statement detailing Consolidated Outstanding Indebtedness; (iii) As soon as available, but in any event not later than 90 days after the close of each fiscal year, for Borrower and its Subsidiaries, (i) audited financial statements, including a consolidated balance sheet as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, by Ernst & Young, LLP (or other independent certified public accountants of nationally recognized standing acceptable to (Agent), and (ii) unaudited financial statements, including a consolidating balance sheet as at the end of such year and the related consolidating statements of income and retained earnings and of cash flow for such year; (iv) As soon as available, but in any event not later than 90 days after the close of each fiscal year, for Borrower and its Subsidiaries, the following related reports in form and substance satisfactory to Lenders, all certified by the entity's Authorized Financial Officer: a statement of Consolidated Outstanding Indebtedness; (v) Together with the quarterly and annual financial statements required hereunder, a compliance certificate in substantially the form of EXHIBIT L hereto signed by an Authorized Officer showing the calculations and computations necessary to determine compliance with the financial covenants set forth in this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof; -53- 54 (vi) As soon as possible and in any event within 10 days after Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by an Authorized Financial Officer of Borrower, describing said Reportable Event and the action which Borrower proposes to take with respect thereto; (vii) As soon as possible and in any event within 10 days after receipt by Borrower, a copy of (a) any notice or claim to the effect that Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by any Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, which could reasonably be expected to result in a Material Adverse Change and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to result in a Material Adverse Change; (viii) Promptly upon the furnishing thereof to the shareholders of Borrower, copies of all financial statements, reports and proxy statements so furnished; (ix) Within three (3) business days after due to the SEC, copies of all registration statements and annual, quarterly, monthly or other reports and any other public information which Borrower or any of its Subsidiaries files with the Securities Exchange Commission; and (x) Such other information (including, without limitation, financial statements for Borrower and nonfinancial information) as Agent may from time to time reasonably request. 5.2 PROHIBITED USES OF PROCEEDS. Borrower will not nor will it permit any Subsidiary to, use any of the proceeds of the Advances (i) to purchase or carry any "margin stock" (as defined in Regulation U), or (ii) for any purpose that shall be a violation of Regulation U, or regulations G, T and X of the Board of Governors of the Federal Reserve System or for any other purpose violative of any rule or regulation of such Board. 5.3 NOTICE OF DEFAULT. Borrower will give, and will cause each of its Subsidiaries to give, notice in writing to Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to result in a Material Adverse Change, -54- 55 promptly upon (but in no event later then ten (10) Business Days after) such occurrence or development. 5.4 CONDUCT OF BUSINESS. Borrower will do, and will cause its Subsidiaries to do, all things necessary to remain duly incorporated or duly qualified, validly existing and in good standing as a corporation, general partnership, limited partnership or limited liability company, as the case may be, in its jurisdiction of incorporation/formation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted and to carry on and conduct its business in substantially the same manner as it is presently conducted and, specifically, neither Borrower nor its Subsidiaries may undertake any significant business other than the manufacture or distribution of industrial and consumer electronic products or related consulting or support services. 5.5 TAXES. Borrower will pay, and will cause its Subsidiaries to pay, when due all taxes, assessments and governmental charges and levies upon it of its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside. 5.6 INSURANCE. Borrower will, and will cause its Subsidiaries to, maintain with financially sound and reputable insurance companies, insurance in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses in localities where Borrower and its Subsidiaries operate, including, without limitation: (i) Property and casualty insurance (including coverage for flood and other water damage for any Property located within a 100-year flood plain) in the amount of the replacement cost of the improvements at the Property; and (ii) Comprehensive general liability insurance in the amount of $20,000,000 per occurrence. 5.7 COMPLIANCE WITH LAWS. Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, the non-compliance with which could reasonably be expected to result in a Material Adverse Change. 5.8 MAINTENANCE OF PROPERTIES. Except as permitted pursuant to SECTION 5.11 of this Agreement, Borrower will, and will cause its Subsidiaries to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, ordinary wear and tear excepted, and make all -55- 56 necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 5.9 INSPECTION. Borrower will, and will cause its Subsidiaries to, permit Agent and each Lender, by its respective representatives and agents, to inspect any Property, corporate books and financial records of Borrower and each of its Subsidiaries, to examine and make copies of the books of accounts and other financial records of Borrower and each of its Subsidiaries, and to discuss the affairs, finances and accounts of Borrower and each of its Subsidiaries, and to be advised as to the same by their respective officers at such reasonable times and intervals as Agent may designate (provided, however, that any inspection by a Lender shall be arranged by Agent). 5.10 MAINTENANCE OF STATUS. Borrower shall remain a corporation validly existing and in good standing in the state of its incorporation and Borrower shall at all times remain a corporation listed and in good standing on NASDAQ or other national securities exchange. Borrower shall not permit a Change in Control of Borrower. 5.11 MERGER; SALE OF ASSETS. Borrower will not, nor will it permit any of its Subsidiaries to, enter into any merger, consolidation, reorganization or liquidation or transfer or otherwise dispose of a Substantial Portion of its Property or business, unless approved in advance by Lenders. The prohibition in this section shall not apply to (a) the Merger, (b) mergers and consolidations involving only Borrower and its Subsidiaries, or any of them, in which Borrower is the survivor, (c) mergers and consolidations involving only Subsidiaries of Borrower, and (d) transfers of assets to and among Substantial Subsidiaries. 5.12 DELIVERY OF NON-BORROWING AND NON-PLEDGE AGREEMENT. After ten (10) days following Borrower's acquisition of a Substantial Subsidiary, Borrower shall cause such Substantial Subsidiary to execute and deliver to Lenders' a Non-Borrowing and Non-Pledge Agreement and an updated Schedule 1 initialed by Borrower for identification (together with such other documents as Lenders shall reasonably request, including, but not limited to, documents of the type described in SECTION 3.1). The Non-Borrowing and Non-Pledge Agreement and such other documents each shall be in form and substance satisfactory to Lenders. 5.13 SALE AND LEASEBACK. Borrower will not, nor will it permit its Subsidiaries to, sell or transfer all or a Substantial Portion of its Property in order to concurrently or subsequently lease as lessee such or similar Properties. 5.14 ACQUISITIONS AND INVESTMENTS. Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments, or commitments therefor, or create any Subsidiary or -56- 57 become or remain a partner in any partnership or joint venture, or make any Acquisition of any Person, except for: (a) Investments in Cash Equivalents; (b) the Investments in Subsidiaries set forth on Schedule "1" hereto; (c) Investments in Persons not to exceed, in the aggregate, at any time, a value of $35,000,000; provided that any Investment permitted under this SECTION 5.14(c) may only consist of Investments in Persons in the business of the manufacturing or the distributing of industrial and consumer electronic products or related consulting or support services; (d) Acquisitions of Persons, PROVIDED, that (i) the Person to be acquired is in the business of manufacturing or distributing industrial and consumer electronic products or related consulting or support services, (ii) the Person to be acquired has generated positive Target's EBITDA for a minimum of the most recent preceding four fiscal quarters, and (iii) on a pro-forma basis, at all times for the preceding four fiscal quarters (including the fiscal quarter in which the Acquisition would occur), Borrower and its Subsidiaries shall have had a ratio of Consolidated Funded Debt to Consolidated EBITDA of no greater than the ratio then in effect pursuant to Section 5.22 of this Agreement; and (e) the Merger, including the creation of Georgia in connection therewith. 5.15 LIENS. Borrower will not, nor will it permit any of its Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on any Property of it or any of its Subsidiaries, except: (i) with respect to Property consisting of real property under the laws of the state where such Property is located, any tax lien, or any lien securing workers' compensation or unemployment insurance obligations, or any mechanic's, carrier's or landlord's lien, or any lien arising under ERISA, or any security interest arising under article four (bank deposits and collections) or five (letters or credit) of the Uniform Commercial Code, or any security interest or other lien similar to the foregoing, EXCEPT that this clause (i) shall apply only to (A) the extent that the aggregate of such liens on a consolidated basis does not exceed $1,000,000, and (B) security -57- 58 interests and other liens arising by operation of law (whether statutory or common law) and in the ordinary course of business and shall not apply to any security interest or other lien that secures any Indebtedness for Borrowed Money or any Contingent Obligation or any obligation that is in material default in any manner (other than any default contested in good faith by timely and appropriate proceedings effective to stay enforcement of the security interest or other lien in question); (ii) zoning or deed restrictions, public utility easements, minor title irregularities and similar matters having no adverse effect as a practical matter on the ownership or use of any of the properties or interfere with use thereof in the business of Borrower or its Subsidiaries; (iii) with respect to Property consisting of real property under the laws of the state where such Property is located, any lien securing or given in lieu of surety, stay, appeal or performance bonds, or securing performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule or as a condition to the transaction of business or the exercise of any right, privilege or license, EXCEPT that this clause (iii) shall not apply to (A) the extent that the aggregate of such liens on a consolidated basis exceeds $1,000,000, and (B) any lien or deposit securing any obligation that is in material default in any manner (other than any default contested in good faith by timely and appropriate proceedings effective to stay enforcement of the security interest or than lien in question); (iv) any mortgage, security, interest or other lien (each a "PURCHASE MONEY SECURITY INTEREST") which is created or assumed in purchasing, constructing or improving any real property or equipment to which any property is subject when purchased, PROVIDED, that (A) the Purchase Money Security Interest shall be confined to the aforesaid property, (B) the indebtedness secured thereby does not exceed the total cost of the purchase, construction or improvement and (C) any such indebtedness, if repaid in whole or in part, cannot be reborrowed; -58- 59 (v) any lease other than any Capitalized Lease (it being agreed that a Capitalized Lease is a lien rather than a lease for the purposes of this Agreement) so long as the aggregate annual rentals of all such leases do not exceed Ten Million Dollars ($10,000,000) on a consolidated basis; (vi) any lien in favor of IBM Credit Corporation, subject to Section 5.31 of this Agreement; (vii) any financing statement perfecting a security interest that would be permissible under this subsection; and (viii) liens existing on the date hereof and described on SCHEDULE 2 hereof. Liens permitted pursuant to this SECTION 5.15 shall be deemed to be "PERMITTED LIENS". 5.16 AFFILIATES. Except as permitted pursuant to SECTION 5.2, SECTION 5.11, SECTION 5.15 or SECTION 5.17, Borrower will not, nor will it permit any of its Subsidiaries to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of Borrower or such Subsidiary's business and upon fair and reasonable terms no less favorable to that Borrower or such Subsidiary than that Borrower or such Subsidiary would obtain in a comparable arm's-length transaction. 5.17 ADDITIONAL INDEBTEDNESS AND FINANCIAL UNDERTAKINGS. Borrower will not enter into or remain liable upon, any Financial Undertaking, nor will Borrower incur Indebtedness for Borrowed Money. The prohibition in the preceding sentence shall not apply to Indebtedness for Borrowed Money which is incurred under or in connection with (a) this Agreement, (b) the Agreement for Inventory Financing, provided that such Indebtedness which is incurred under the Agreement for Inventory Financing shall not exceed $150,000,000, (c) the Convertible Debentures, (d) Indebtedness for Borrowed Money shown in Borrower's December 31, 1997, financial statements, or (e) Hedge Agreements that in the aggregate, at any time, do not create an Aggregate Measured Credit Risk in excess of $7,500,000). Borrower will not permit any of its Subsidiaries to enter into or remain liable upon, any Financial Undertaking, nor will Borrower permit any of its Subsidiaries to incur Indebtedness for Borrowed Money (other than loans made by Borrower that do not exceed the amounts set forth on Schedule 3 attached hereto). 5.18 LITIGATION. Borrower shall furnish or cause to be furnished to Agent, promptly (and, in any event, within five (5) Business Days) after any Borrower or its Subsidiaries shall have -59- 60 first become aware of the same, a written notice setting forth full particulars of and what action Borrower or its Subsidiaries is taking or proposes to take with respect to (a) any final judgment in an amount exceeding One Million Dollars ($1,000,000) rendered against Borrower or any Affiliate of Borrower; (b) the commencement or institution of any legal or administrative action, suit, proceeding or investigation by or against Borrower in or before any court, governmental or regulatory body, agency, commission, or official, board of arbitration or arbitrator, the outcome of which could reasonably be expected to result in a Material Adverse Change; or (c) the occurrence of any adverse development not previously disclosed by Borrower to Agent in writing, in any such action, suit, proceeding or investigation. 5.19 FURTHER ASSURANCES. Borrower will execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, any and all such further assurances and other agreements or instruments, and take or cause to be taken all such other action, as shall be reasonably requested by Agent from time to time in order to give full force and effect to the Loan Documents. 5.20 CONSOLIDATED STOCKHOLDERS EQUITY. Borrower and its Subsidiaries shall have Consolidated Stockholders Equity of not less than $345,000,000 at Closing. Thereafter, Borrower and its Subsidiaries shall maintain, at all times, Consolidated Stockholders Equity equal to $345,000,000 plus (i) 100% of the net proceeds to Borrower or any of its Subsidiaries of any equity offering; (ii) 100% of the net proceeds to Borrower or any of its Subsidiaries of any securities sold or distributed by the SECT; and (iii) a minimum of 75% of positive Consolidated Net Income, if any, per calendar quarter thereafter; provided, however, that no adjustments shall be made as a consequence of any loss. 5.21 RATIO OF EBIT TO INTEREST. (a) Borrower and its Subsidiaries shall have a ratio of Consolidated EBIT to Consolidated Interest Expense of no less than 3.0 to 1.0 on the Closing Date, and on the last calendar day of each fiscal quarter thereafter, until December 31, 1998. Thereafter, until the Facility Termination Date, Borrower and its Subsidiaries shall have a ratio of Consolidated EBIT to Consolidated Interest Expense of no less than 3.50 to 1.0. The ratio of Consolidated EBIT to Consolidated Interest Expense shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination. (b) Borrower shall have a ratio of Borrower EBIT to Borrower Interest Expense of no less than 1.50 to 1.0 on and after the Closing Date, and on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. The ratio of Borrower EBIT to Borrower Interest Expense shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination. -60- 61 5.22 RATIO OF DEBT TO CASH FLOW. Borrower and its Subsidiaries shall have a ratio of Consolidated Funded Debt to Consolidated EBITDA of no greater than 3.75 to 1.0 on the Closing Date, and on the last calendar day of each fiscal quarter thereafter, until June 30, 1998; and no greater than 3.50 to 1.00 on the last calendar day of each fiscal quarter thereafter, until March 31, 1999; and no greater than 3.00 to 1.00 on the last calendar day of each fiscal quarter thereafter, until September 30, 1999; and no greater than 2.75 to 1.0 on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. The ratio of Consolidated Funded Debt to Consolidated EBITDA shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination and shall exclude any debt relating to the Convertible Debentures or the securities sold pursuant to the Preferred Securities Offering. 5.23 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Borrower and its Subsidiaries shall maintain a Consolidated Fixed Charge Coverage Ratio of no less than 1.0 to 1.0 on the Closing Date, and on the last calendar day of each fiscal quarter thereafter until December 31, 1998; and no less than 1.1 to 1.0 on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. The Consolidated Fixed Charge Coverage Ratio shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination. 5.24 CURRENT RATIO. Borrower and its Subsidiaries shall maintain a Current Ratio of no less than 1.0 to 1.0 on and after the Closing Date, and on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. 5.25 ENVIRONMENTAL MATTERS. Borrower and its Subsidiaries shall: (a) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, except to the extent that (i) the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to result in a Material Adverse Change, or (ii) that Borrower has determined in good faith that contesting the same is not in the best interests of Borrower and its Subsidiaries and the failure to contest the same could not be reasonably expected to result in a Material Adverse Change. (b) Defend, indemnify and hold harmless Agent and each Lender, and their respective employees, agents, officers and directors from and against any claims, demands, penalties, -61- 62 fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of Borrower, its Subsidiaries or its Property, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. This indemnity shall continue in full force and effect regardless of the termination of this Agreement. 5.26 SUBSIDIARIES TANGIBLE NET WORTH. Each Substantial Subsidiary of Borrower, shall at all times maintain a Tangible Net Worth equal to or greater than One Million Dollars ($1,000,000). 5.27 TANGIBLE ASSETS; ASSETS. As of the Closing Date, and at all times thereafter until the Facility Termination Date, Borrower's Tangible Assets shall be equal to or greater than forty (40%) percent of Assets of Borrower, based on the equity method of accounting. 5.28 AGREEMENT FOR INVENTORY FINANCING. As of the Closing Date, and at all times thereafter, Borrower shall perform and observe in all material respects each term, covenant, and condition of the Agreement for Inventory Financing. 5.29 DICKENS, LLC. Borrower shall not, without prior written consent of Agent, amend the Operating Agreement, Articles of Organization or other governing documents of Dickens, LLC so as to limit Borrower's ability to consent to Dickens LLC's incurring Indebtedness for Borrowed Money or Liens (other than Permitted Liens). Borrower will not, and will not permit its employees or agents, in their capacity as managers of Dickens, LLC, to consent to or otherwise permit to occur, the incurrence by Dickens, LLC of Indebtedness for Borrowed Money, or the granting by Dickens, LLC of any Liens with respect to its assets, other than Liens that are Permitted Liens under this Agreement. 5.30 DELIVERY OF MERGER DOCUMENTS. Within five (5) Business Days of the consummation thereof, Borrower will deliver copies of the executed Merger Documents and any other documents or instruments relating thereto requested by Agent or any Lender. 5.31 LIENS TO IBM CREDIT CORPORATION. In the event that Borrower or any Subsidiary grants any Lien or security interest in favor of IBM Credit Corporation, then Borrower and each Subsidiary will grant a Lien in favor of Lenders on all of their assets, and will deliver to Agent all documents, stock certificates, security agreements, pledges, financing statements and other instruments or -62- 63 documents deemed necessary or advisable by Agent to fulfill the requirements of this Section. Without limiting Borrower's obligations under this Section, Borrower hereby appoints Agent as its attorney-in-fact with irrevocable authority to execute and deliver on behalf of Borrower, at any time after Borrower grants a Lien or security interest in favor of IBM Credit Corporation, all documents, stock certificates, security agreements, pledges, financing statements and other instruments or documents deemed necessary or advisable by Agent to fulfill the requirements of this Section. 5.32 YEAR 2000 COMPLIANCE. Borrower shall use commercially reasonable efforts to ensure that Borrower's and each Subsidiary's internal operating systems and hardware, during and after the calendar year 2000 A.D., include design, function and performance capabilities such that the internal operating systems and hardware shall not abnormally end and/or have invalid and/or incorrect results from and/or performance or functional degradation because of the then current date. Borrower shall use commercially reasonable efforts to ensure that the design and function of Borrower's and each Subsidiary's internal operating systems and hardware contain year 2000 A.D. functionality and include, but not be limited to, date data century recognition, calculations that accommodate same century and multicentury formulas and date values, and date data interface values that reflect the century. 5.33 INVENTORY FINANCE LIMITATION. Borrower and its Subsidiaries shall have a ratio of Consolidated Funded Debt plus Indebtedness for Borrowed Money arising under the Agreement for Inventory Financing to Consolidated EBITDA of no greater than 4.75 to 1.0 on the Closing Date, and on the last calendar day of each fiscal quarter thereafter, until June 30, 1998; and no greater than 4.50 to 1.00 on the last calendar day of each fiscal quarter thereafter, until March 31, 1999; and no greater than 4.00 to 1.00 on the last calendar day of each fiscal quarter thereafter, until September 30, 1999; and no greater than 3.75 to 1.0 on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. The ratio of Consolidated Funded Debt plus Indebtedness for Borrowed Money arising under the Agreement for Inventory Financing to Consolidated EBITDA shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination and shall exclude any debt relating to the Convertible Debentures or the securities sold pursuant to the Preferred Securities Offering. 5.34 AMENDMENTS TO THE AGREEMENT FOR INVENTORY FINANCING. Notwithstanding anything in this Agreement or the Agreement for Inventory Financing to the contrary, Borrower shall not amend or modify the definition of "Termination Date" set forth in the Agreement for Inventory Financing without the prior written approval of the Required Lenders. -63- 64 ARTICLE VI DEFAULTS -------- The occurrence of any one or more of the following events shall constitute a Default: 6.1 NONPAYMENT OF PRINCIPAL. Nonpayment of any principal payment on any Note when due. 6.2 NONPAYMENT OF OTHER OBLIGATIONS. Nonpayment of interest upon any Note or of any Facility Fee or other payment Obligations under any of the Loan Documents within three (3) Business Days after the same becomes due. 6.3 CERTAIN BREACHES. The breach of any of the terms or provisions of SECTIONS 5.2, 5.6, 5.7 and 5.9 through 5.34, or the breach by any Substantial Subsidiary of its Non-Borrowing and Non-Pledge Agreement. 6.4 REPRESENTATIONS AND WARRANTIES. Any representation or warranty made or deemed made by or on behalf of Borrower or any of its Subsidiaries to Lenders or Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 6.5 OTHER BREACHES. The breach by any Borrower (other than a breach which constitutes a Default under any other section of this ARTICLE VI) which constitutes a Default under any of the terms or provisions of this Agreement which is not remedied within fifteen (15) days after written notice from Agent or any Lender. 6.6 DEFAULTS ON INDEBTEDNESS. Failure of Borrower or any of its Subsidiaries to pay any of its respective Indebtedness when due; or the default by Borrower or any of its Subsidiaries in the performance of any term, provision or condition contained in any agreement, or any other event shall occur or condition exist which causes or permits any Indebtedness of Borrower or any of its Subsidiaries to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof; provided, however, that it shall not be a default under this SECTION 6.6 if (i) Borrower shall be in default with respect to Indebtedness arising from Indebtedness other than Indebtedness for Borrowed Money in an aggregate amount not exceeding Five Million Dollars ($5,000,000), (ii) Borrower fails to pay the interest payable on the Convertible Debentures, to the extent that such interest is deferable by the terms of the Convertible Debentures, or (iii) Borrower shall be in default with respect to Indebtedness arising under the Agreement for Inventory Financing; provided that if such default causes any Indebtedness of Borrower or any of its Subsidiaries to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the -64- 65 stated maturity, then such default shall constitute a default hereunder. 6.7 BANKRUPTCY, ETC. Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any of its Property, (iv) institute any proceeding for an order for relief under the Federal bankruptcy laws as now or hereafter in effect or to adjudicate it as a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate action to authorize or effect any of the foregoing actions set forth in this SECTION 6.7, (vi) fail to contest in good faith any appointment or proceeding described in SECTION 6.8 or (vii) not pay, or admit in writing its inability to pay, its debts generally as they become due. 6.8 APPOINTMENT OF RECEIVER. A receiver, trustee, examiner, liquidator or similar official shall be appointed for Borrower or any of its Subsidiaries or any of their respective Property, or a proceeding described in SECTION 6.7(iv) shall be instituted against Borrower or any Subsidiary and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of thirty (30) consecutive days. 6.9 CONDEMNATION. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of (each a "CONDEMNATION"), all or any portion of the Property of Borrower and its Subsidiaries which, when taken together with all other Property of such Person so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such Condemnation occurs, could reasonably be expected to result in a Material Adverse Change on Borrower or Subsidiary. 6.10 JUDGMENTS. Borrower or any of its Subsidiaries shall fail within sixty (60) days to pay, bond or otherwise discharge any judgments or orders for the payment of money in an amount which, when added to all other judgments or orders outstanding against Borrower and any of its Subsidiaries would exceed $1,000,000 in the aggregate, which have not been stayed on appeal or otherwise appropriately contested in good faith. 6.11 ERISA WITHDRAWAL. Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to -65- 66 such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $250,000 or requires payments exceeding $100,000 per annum. 6.12 ERISA REORGANIZATION. Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $250,000. 6.13 OTHER DEFAULTS. The occurrence of any default under any Loan Document or the breach of any of the terms or provisions of any Loan Document, which default or breach continues beyond any period of grace therein provided. 6.14 TERMINATION OF THE AGREEMENT FOR INVENTORY FINANCING. The receipt by Borrower and Agent of a notice of termination from IBM Credit Corporation relating to the Agreement for Inventory Financing that is not revoked within sixty days; provided, however, upon the receipt by Borrower and Agent of a notice of termination from IBM Credit Corporation relating to the Agreement for Inventory Financing, Lender's obligation to make advances to Borrower under the Loan Documents shall immediately terminate. 6.15 IBM SHIPPING POLICY CHANGE. A Material Adverse Change resulting from a modification in International Business Machines Corporation's policies or procedures relating to shipments to Borrower. ARTICLE VII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ---------------------------------------------- 7.1 ACCELERATION. If any Default described in SECTION 6.7 or 6.8 occurs with respect to Borrower, the obligations of Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of Agent or any Lender. If any other Default occurs, Agent may, with the concurrence of the Required Lenders, terminate or suspend the obligations of Lenders to make Loans hereunder, or declare the -66- 67 Obligations to be due and payable or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which Borrower hereby expressly waives. If, within ten (10) days after acceleration of the maturity of the Obligations or termination of the obligations of Lenders to make Loans hereunder as a result of any Default (other than any Default as described in SECTION 6.7 or 6.8 with respect to any Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, each Lender (in their sole discretion) shall so direct, Agent shall, by notice to Borrower, rescind and annul such acceleration and/or termination. 7.2 AMENDMENTS & WAIVERS. Subject to the provisions of this ARTICLE VII, the Required Lenders (or Agent with the consent in writing of the Required Lenders) and Borrower may enter into agreements and waivers supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of Lenders or Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement or waiver shall, without the consent of each Lender affected thereby: (i) Extend the Facility Termination Date or forgive all or any portion of the principal amount of any Loan or accrued interest thereon or the Facility Fee, reduce the Applicable Margins or the underlying interest rate options or extend the time of payment of such interest or Facility Fees. (ii) Release any Substantial Subsidiary from its Non-Borrowing and Non-Pledge Agreement. (iii) Increase the amount of the Commitment of any Lender hereunder. (iv) Permit Borrower to assign its rights under this Agreement. (v) Amend this SECTION 7.2. (vi) Amend the definition of Required Lenders. (vii) Amend the Intercreditor Agreement. No amendment of any provision of this Agreement relating to Agent shall be effective without the written consent of Agent. 7.3 PRESERVATION OF RIGHTS. No delay or omission of Lenders or Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any -67- 68 Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by Lenders required pursuant to SECTION 7.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to Agent and Lenders jointly until the Obligations have been paid in full. 7.4 RECEIPT OF A NOTICE OF TERMINATION OF THE AGREEMENT FOR INVENTORY FINANCING. Upon receipt by Borrower of a notice of termination relating to the Agreement for Inventory Financing, Borrower will not incur any additional Indebtedness under the Agreement for Inventory Financing without the prior written approval of Agent, which approval may be withheld in the sole discretion of Agent. ARTICLE VIII GENERAL PROVISIONS ------------------ 8.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of Borrower contained in this Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated. 8.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 8.3 TAX. Any taxes (excluding federal income taxes on the overall net income of any Lender and taxes resulting from a Lenders failure to comply with SECTION 2.22) or other similar assessments or charges made by any governmental or revenue authority in respect of the Loan Documents shall be paid by Borrower, together with interest and penalties, if any. 8.4 HEADING. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 8.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and understanding among Borrower, Agent and Lenders and supersede all prior commitments, agreements and understandings among Borrower, Agent and Lenders relating to the subject matter thereof. -68- 69 8.6 SEVERAL OBLIGATIONS BENEFITS OF THIS AGREEMENT. The respective obligations of Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 8.7 EXPENSES; INDEMNIFICATION. Borrower shall reimburse Agent for any costs, internal charges and out-of-pocket expenses (including, without limitation, all expenses of Agent's due diligence investigation of Borrower, syndication expenses, travel expenses, reasonable fees for consultants and fees and reasonable expenses for attorneys for Agent, which attorneys may be employees of Agent) paid or incurred by Agent in connection with the amendment, modification, and administration of the Loan Documents. Borrower also agrees to reimburse Agent and Lenders for any costs, internal charges and out-of-pocket expenses (including, without limitation, all fees and reasonable expenses for attorneys for Agent and Lenders, which attorneys may be employees of Agent or Lenders) paid or incurred by Agent or any Lender in connection with the collection and enforcement of the Loan Documents (including, without limitation, any workout). Borrower further agrees to indemnify Agent and each Lender, its directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not Agent or any Lender is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, any Property, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder. The obligations of Borrower under this Section shall survive the termination of this Agreement. 8.8 NUMBERS. All statements, notices, closing documents, and requests hereunder shall be furnished to Agent with sufficient counterparts so that Agent may furnish one to each of Lenders. 8.9 ACCOUNTING. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP, except that any calculation or determination which is to be made on a consolidated basis shall be made for Borrower and all its Subsidiaries, including those Subsidiaries, if any, which are unconsolidated on Borrower's official financial statements. 8.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be -69- 70 inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 8.11 NONLIABILITY OF LENDERS. The relationship between Borrower, on the one hand, and Lenders and Agent, on the other, shall be solely that of borrower and lender. Neither Agent nor any Lender shall have any fiduciary responsibilities to Borrower. Neither Agent nor any Lender undertakes any responsibility to Borrower to review or inform Borrower of any matter in connection with any phase of any Borrower's business or operations. 8.12 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF OHIO, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 8.13 CONSENT TO JURISDICTION. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR OHIO STATE COURT SITTING IN CUYAHOGA COUNTY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IMPAIR THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY BORROWER AGAINST AGENT OR ANY LENDER OR ANY AFFILIATE OF Agent OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CUYAHOGA COUNTY, OHIO. 8.14 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. ARTICLE IX AGENT ----- 9.1 APPOINTMENT. National City Bank is hereby appointed Agent hereunder and under each other Loan Document, and each of Lenders irrevocably authorizes Agent to act as the agent of such Lender. Agent agrees to act as such upon the express conditions -70- 71 contained in this ARTICLE IX. Agent shall not have a fiduciary relationship in respect of Borrower or any Lender by reason of this Agreement. 9.2 POWERS. Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. Agent shall have no implied duties to Lenders, or any obligation to Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by Agent. 9.3 GENERAL IMMUNITY. Neither Agent nor any of its directors, officers, agents or employees shall be liable to Borrower, Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. 9.4 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (iii) the satisfaction of any condition specified in ARTICLE IV, except receipt of items required to be delivered to Agent; (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; or (v) the value, sufficiency, creation, perfection or priority of any interest in any collateral security. Agent shall have no duty to disclose to Lenders information that is not required to be furnished by Borrower to Agent at such time, but is voluntarily furnished by Borrower to Agent (either in its capacity as Agent or in its individual capacity). 9.5 ACTION ON INSTRUCTIONS OF LENDERS. Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of Lenders and on all holders of Notes. Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 9.6 EMPLOYMENT OF AGENTS AND COUNSEL. Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and -71- 72 shall not be answerable to Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document. 9.7 RELIANCE ON DOCUMENTS; COUNSEL. Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by Agent, which counsel may be employees of Agent. 9.8 AGENT'S REIMBURSEMENT AND INDEMNIFICATION. Lenders agree to reimburse and indemnify Agent ratably in proportion to their respective Commitments (i) for any amounts not reimbursed by Borrower for which Agent is entitled to reimbursement by Borrower under the Loan Documents, (ii) for any other expenses incurred by Agent on behalf of Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby, or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of Agent. The obligations of Lenders under this SECTION 9.8 shall survive payment of the Obligations and termination of this Agreement. 9.9 RIGHTS AS A LENDER. In the event Agent is a Lender, Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not Agent, and the term "Lender" or "Lenders" shall, at any time when Agent is a Lender, unless the context otherwise indicates, include Agent in its individual capacity. Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Borrower or any of its Subsidiaries in which Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. Agent, in its individual capacity, is not obligated to remain a Lender. 9.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the financial statements prepared by Borrower and such other documents and information as it has deemed -72- 73 appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon 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 decisions in taking or not taking action under this Agreement and the other Loan Documents. 9.11 SUCCESSOR AGENT. Agent may resign at any time by giving written notice thereof to Lenders and Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. Upon any such resignation, Lenders shall have the right to appoint, on behalf of Borrower and Lenders, a successor Agent. If no successor Agent shall have been so appointed by Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of Borrower and Lenders, a successor Agent. If Agent has resigned and no successor Agent has been appointed, Lenders may perform all the duties of Agent hereunder and Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the effectiveness of the resignation of Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Agent, the provisions of this ARTICLE IX shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as Agent hereunder and under the other Loan Documents. ARTICLE X SETOFF; RATABLE PAYMENTS ------------------------ 10.1 SETOFF. In addition to, and without limitation of, any rights of Lenders under applicable law, if Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender to or for the credit or account of Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. -73- 74 10.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XI BENEFIT OF AGREEMENT; ASSIGNMENT; PARTICIPATION ----------------------------------------------- 11.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of Borrower and Lenders and their respective successors and assigns, except that (i) Borrower shall not have the right to assign their rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with SECTION 11.3. Notwithstanding clause (ii) of this Section, any Lender may at any time, without the consent of Borrower or Agent, assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank; provided, however, that no such assignment shall release the transferor Lender from its obligations hereunder. Agent may treat the payee of any Note as the owner thereof for all purposes hereof unless and until such payee complies with SECTION 11.3 in the case of an assignment thereof or, in the case of any other transfer, a written notice of the transfer is filed with Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be bound by all the terms and provisions of the Loan Documents. 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 such Note or of any Note or Notes issued in exchange therefor. 11.2 PARTICIPATION. 11.2.1 PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks, financial institutions, pension funds, or any other funds or entities participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such -74- 75 Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 11.2.2 VOTING RIGHTS. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment or postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees on, any such Loan or Commitment or releases any Subsidiary from a Non-Borrowing and Non-Pledge Agreement. 11.2.3 BENEFIT OF SETOFF. Borrower agrees that each Participant shall be deemed to have the right of Setoff provided in SECTION 10.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in SECTION 10.1 with respect to the amount of participating interests sold to each Participant. Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in SECTION 10.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with SECTION 10.2 as if each Participant were a Lender. 11.3 ASSIGNMENTS. 11.3.1 PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks, financial institutions, pension funds, or any other funds or entities ("PURCHASERS") all or any portion of its rights and obligations under the Loan Documents; provided, however, each such assignment must be in an amount equal to no less than Five Million Dollars ($5,000,000). Such assignment shall be substantially in the form of EXHIBIT M hereto or in such other -75- 76 form as may be agreed to by the parties thereto. The consent of Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof. Such consent shall not be unreasonably withheld. 11.3.2 PRIOR CONSENT. Notwithstanding SECTION 11.3.1, Lenders may not assign rights and obligations under the Loan Documents to a Purchaser without the prior written consent of Borrower if any of the following would occur: (i) an assignment of less than five (5%) of the Aggregate Commitment as of the date of such assignment, (ii) the proposed purchaser is a financial institution not organized under the laws of a state or of the United States (unless such institution is an affiliate of the transferring Lender), or (iii) such transfer would result in Borrower incurring increased payments pursuant to SECTION 2.11; PROVIDED, HOWEVER, that, if at the time of the proposed assignment Borrower is the subject of a proceeding referenced in SECTION 6.7 or 6.8, or any Default shall have occurred, Borrower consent shall not be required and any Lender may consummate an assignment notwithstanding the requirements of clauses (i), (ii) or (iii) of this SECTION 11.3.2. 11.3.3 EFFECTIVE DATE. Upon (i) delivery to Agent of a notice of assignment, substantially in the form attached as EXHIBIT A to EXHIBIT M hereto (a "Notice of Assignment"), together with any consents required by Section 11.3.2, and (ii) payment of a $3,000 fee to Agent for processing such assignment (PROVIDED, HOWEVER, that if such assignment shall be made to an Affiliate of Lender, then Lender shall not be required to pay such fee to Agent), such assignment shall become effective on the effective date specified in such Notice of Assignment. The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement are "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by Borrower, Lenders or Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this SECTION 11.3.2, the transferor Lender, Agent and Borrower shall make appropriate arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, -76- 77 replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their Commitment, as adjusted pursuant to such assignment. 11.4 DISSEMINATION OF INFORMATION. Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of Borrower and its Subsidiaries. 11.5 TAX TREATMENT. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other-than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of SECTION 2.22. ARTICLE XII NOTICES; NATURE OF OBLIGATIONS ------------------------------ 12.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.18 with respect to borrowing notices, all notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the log of telexes). 12.2 CHANGE OF ADDRESS. Borrower, Agent and any Lender may change the address for service of notice upon it by a notice in writing to the other parties hereto. 12.3 NATURE OF BORROWER'S OBLIGATIONS AND MODIFICATION THEREOF. The obligations of Borrower under this Agreement are absolute and unconditional and shall be irrevocable. Borrower agrees that its obligations hereunder shall not be impaired, modified, changed, released or limited in any manner whatsoever by any impairment, modification, change, release or limitation of the liability of Borrower by any bankruptcy case or by any stay or other legal impediment in or arising from the operation of any present or future provision of the Bankruptcy Code or other similar state or federal statute, or from the decision of any court. Borrower agrees that Lenders may, in their discretion, (i) release, discharge, compromise or settle with, or grant indulgences to, refuse to proceed or take action against, Borrower with respect to -77- 78 its respective obligations under this Agreement, (ii) release, surrender, modify, impair, exchange, substitute or extend the period or duration of time for the performance, discharge or payment of, refuse to enforce, compromise or settle its respective lien, security interest, pledge or assignment against, any and all deposits or other property or assets on which Lenders may have a lien, security interest, pledge or assignment or which secures any of the obligations of Borrower under this Agreement, and (iii) amend, modify, alter or restate, in accordance with their respective terms, this Agreement or any of the Loan Documents or otherwise, accept deposits or other property from, or enter into transactions of any kind or nature with, Borrower. Borrower confirms that it will be directly or indirectly benefitted by the Loan and any and all other Advances under this Agreement or any of the Loan Documents. ARTICLE XIII COUNTERPARTS ------------ This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by Borrower, each Subsidiary of Borrower, Agent and Lenders and each party has notified Agent by telex or telephone, that it has taken such action. -78- 79 IN WITNESS WHEREOF, Borrower, Lenders and Agent have executed this Agreement as of the date first above written. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger Print Name: John V. Goodger Title: Vice President 4800 East 131st Street Garfield Heights, Ohio 44105 phone: 216 587-3600 facsimile: 216 587-3563 Attention: John V. Goodger -79- 80 Commitments - - ----------- $95,000.00 NATIONAL CITY BANK, Individually and as Agent By: /s/ Anthony J. DiMare Print Name: Anthony J. DiMare Title: Senior Vice President Via Hand Delivery National City Bank National City Center, 10th Floor 1900 East Ninth Street Cleveland, Ohio 44114 Via U.S. Mail National City Bank Location No. 2104 1900 East Ninth Street Cleveland, Ohio 441114-3484 Attention: Anthony J. DiMare Senior Vice President -80- 81 $45,000.00 KEYBANK NATIONAL ASSOCIATION By: /s/ Richard A. Pohle Print Name: Richard A. Pohle Title: Vice President Via Hand Delivery KeyBank National Association Large Corporate Group Mail Code OH-01-27-0606 127 Public Square Cleveland, Ohio 44114-1306 Via U.S. Mail KeyBank National Association Large Corporate Group Mail Code OH-01-27-0606 127 Public Square Cleveland, Ohio 44114-1306 Attention: Brendan A. Lawlor -81- 82 $35,000.00 MELLON BANK, N.A. By: /s/ Mark F. Johnston Print Name: Mark F. Johnston Title: AVP Via Hand Delivery Mellon Bank, N.A. Three Mellon Bank Center Suite 2300 Pittsburgh, PA 15259 Attention: Loan Administration Theresa Heukeshoven Via U.S. Mail Mellon Bank, N.A. Three Mellon Bank Center Suite 2300 Pittsburgh, PA 15259 Attention: Loan Administration Theresa Heukeshoven With a Copy To: Via Hand Delivery Mellon Bank, N.A. One Mellon Bank Center Grant Street, Room 4530 Pittsburgh, PA 15258-0001 Via U.S. Mail Mellon Bank, N.A. One Mellon Bank Center Grant Street, Room 4530 Pittsburgh, PA 15258-0001 Attention: Mark F. Johnston -82- 83 $20,000.00 STAR BANK, N.A. By: /s/ John D. Barrett Print Name: John D. Barrett Title: Sr. Vice President Via Hand Delivery Star Bank, N.A. 1350 Euclid Avenue, Suite 220 Cleveland, Ohio 44115 Via U.S. Mail Star Bank, N.A. 1350 Euclid Avenue, Suite 220 Mail Location 4432 Cleveland, Ohio 44115 Attention : John D. Barrett -83 - 84 $25,000.00 NBD Bank By: /s/ Paul R. DeMelo Print Name: Paul R. DeMelo Title: Vice President NBD Bank 811 Woodward Ave. Detroit, MI 48226 Attention: Paul R. DeMelo Vice President -84- 85 $20,000.00 COMERICA BANK By: /s/ Jeffrey J. Judge Print Name: Jeffrey J. Judge Title: Vice President Comerica Bank 500 Woodward Ave. Detroit, MI 48226 Attention: Jeffrey J. Judge Account Officer -85- 86 $20,000.00 ABN AMRO Bank N.V. By: /s/ Patrick M. Pastore By: /s/ Christopher S. Helmeci Print Name: Patrick M. Pastore Print Name: Christopher S. Helmeci Title: Vice President Title: Vice President ABN AMRO Bank N.V. One PPG Place Suite 2950 Pittsburgh, PA 15222-5400 Attention: Chris Helmeci Vice President -86- 87 SCHEDULE 1 ---------- Subsidiaries of Borrower
Subsidiary Incorporation Investment ---------- ------------- ---------- 1. Pioneer-Standard of Maryland, Inc. Maryland Pioneer-Standard Electronics, Inc. (100%) 2. Pioneer-Standard Canada Inc. Canada Pioneer-Standard Electronics, Inc. (100%) 3. Pioneer-Standard FSC, Inc. Virgin Islands Pioneer-Standard Electronics, Inc. (100%) 4. Pioneer-Standard Illinois, Inc. Delaware Pioneer-Standard Electronics, Inc. (100%) 5. Pioneer-Standard Minnesota, Inc. Delaware Pioneer-Standard Electronics, Inc. (100%) 6. Pioneer-Standard Electronics, Ltd. Delaware Pioneer-Standard Electronics, Inc. (1%) (General Partner) Pioneer-Standard Illinois, Inc. (99%) (Limited Partner) 7. Pioneer-Standard Georgia, Inc.(1) Georgia Pioneer-Standard Electronics, Inc. (100%) 8. Dickens Data Systems, Inc.(2) Georgia Pioneer-Standard Electronics, Inc. (100%) 9. The Dickens Services Group, a Delaware Pioneer-Standard Electronics, Pioneer-Standard Company, LLC(3) Inc. (51%) 10. Pioneer-Standard Financial Trust Delaware Pioneer-Standard Electronics, Inc. (100% of Common Stock) (1) To be merged into Dickens Data Systems, Inc., effective March 31, 1998. (2) To become a Subsidiary of Borrower, effective March 31, 1998. (3) To become a Subsidiary of Borrower, effective March 31, 1998.
88 SCHEDULE 2 ---------- Permitted Liens [See attached table] 89 Prepared by co Pioneer-Standard Electronics, Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pioneer-Standard Electronics, Inc. California Sec State as of 3-4-98 no UCC financing statements, state or federal tax liens, or judgments on file Pioneer-Standard Electronics, Inc. Alameda County, CA as of 3-19-98 no UCC financing statements, state or federal tax liens, or judgments on file Pioneer-Standard Electronics, Inc. Alameda County as of 3-13-98 no judgments or Superior Court, CA pending suits on file Pioneer-Standard Electronics, Inc. Orange County, CA as of 3-18-98 no UCC financing statements, state or federal tax liens, or judgments on file Pioneer-Standard Electronics, Inc. Orange County as of 3-18-98 no judgments on file Superior Court, CA one (1) pending suit - Sidon Data Systems, Inc. v. Pioneer Standard Electronics, Inc., Case No. 791407, filed 3-9-98 Pioneer-Standard Electronics, Inc. CA - U.S. Northern as of 3-17-98 no judgments on file District Court two (2) pending suits (1) Maxim Integrated Products, Inc. v. Analog Devices, Inc., Case No.92-20716 filed 11-10-92; and (2) Maxim Integrated Products, Inc. v. Pioneer-Standard Electronics, Inc., Case No.96-20723, filed 9-6-96 Pioneer-Standard Electronics, Inc. CA - U.S. Central as of 2-12-98 no judgments or District Court pending suits on file Pioneer Standard Electronics Second Generation Massachusetts Sec 3-2-98 532391 all rentals in the Technologies, Inc. State property, additions, proceeds Pioneer-Standard Electronics, Inc. Massachusetts Sec as of 2-25-98 one lien (#038082) State filed on 5-22-97 by Department of Revenue
90
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pioneer-Standard Electronics, Inc. MA - U.S. District as of 3-17-98 No federal tax liens, Court judgments, or pending suits on file Pioneer-Standard Electronics, Inc. Lexington Town as of 3-18-98 no UCC financing Clerk, MA statements on file Pioneer-Standard Electronics, Inc. Middlesex County, MA Pioneer-Standard Electronics, Inc. Pitney Bowes Credit Ohio Sec State 1-3-95 AL53075 leased equipment, products, proceeds Pioneer-Standard Electronics, Inc. Deutsche Credit Ohio Sec State 5-8-95 AL84093 listed leased equipment Corporation (original filing AB67460 filed 2-6-90 lapsed) Pioneer-Standard Electronics, Inc. Deutsche Credit Ohio Sec State 5-8-95 AL84094 listed equipment Corporation (original filing AB26256 filed 8-4-89 lapsed) Pioneer-Standard Electronics, Inc. Alcatel Friden Leasing Ohio Sec State 5-13-96 AM72741 leased mailing, shipping, computing, and other equipment Pioneer-Standard Electronics, Inc. Amplicon, Inc. ASSIGNED TO: Cuyahoga County 8-2-90 1173901 listed equipment Deutsche Credit Recorder, OH Corporation Pioneer-Standard Electronics, Inc. Deutsche Credit Cuyahoga County 6-10-91 1198973 amendment to 1173901 Corporation Recorder, OH Pioneer-Standard Electronics, Inc. Deutsche Credit Cuyahoga County 7-12-91 1201411 amendment to 1173901 Corporation Recorder, OH Pioneer-Standard Electronics, Inc. Deutsche Credit Cuyahoga County 7-17-95 1318244 continuation of 1173901 Corporation Recorder, 0H Pioneer-Standard Electronics, Inc. Deutsche Credit Cuyahoga County 3-28-95 1307916 listed computer Corporation Recorder, OH equipment (original filing 1139124 filed 8-14-89 lapsed) Pioneer-Standard Electronics, Inc. Deutsche Credit Cuyahoga County 3-28-95 1307913 listed computer Corporation Recorder, OH equipment (original filing 1155898 filed 2-5-90 lapsed) Pioneer-Standard Electronics, Inc. Cuyahoga County as of 3-18-98 No federal tax liens Recorder, OH on file
-2- 91
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pionneer-Standard Electronics, Inc. Cuyahoga County as of 3-13-98 no state liens, or Court of Common judgments, on file Pleas, OH one (1) pending suit - Charles A. Rodeback v. Pioneer Standard Electronics Inc. et al., Case No. 349294, filed 2-19-98 Pioneer-Standard Electronics, Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file Pioneer-Standard Electronics, Inc. Summit County as of 3-13-98 no UCC financing state- Recorder, OH ments or federal tax liens on file Pioneer-Standard Electronics, Inc. Summit County as of 3-13-98 no state tax liens or Court of Common judgments on file Pleas, OH
-3- 92 Prepared by co Pioneer-Standard Illinois, Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pionneer-Standard of Illinois Inc. Illinois Sec State as of 3-17-98 no UCC financing state- ments or federal tax liens on file Pioneer-Standard of Illinois Inc. Du Page County, IL as of 3-18-98 no UCC financing state- ments, state or federal tax liens, or judgments on file Pioneer-Standard of Illinois Inc. Du Page Circuit as of 3-10-98 no judgments or pending Court, IL suits on file Pioneer-Standard of Illinois lnc. IL - U.S. Northern as of 3-3-98 no judgments or pending District Court suits on file Pioneer-Standard of Illinois Inc. Ohio Sec State as of 2-16-98 no UCC financing state- ments on file Pioneer-Standard of Illinois Inc. Cuyahoga County as of 3-13-98 no UCC financing state- Recorder, OH ments or federal tax liens on file Pioneer-Standard of Illinois Inc. Cuyahoga County as of 3-13-98 no state tax liens, Court of Common judgments, or suits Pleas, OH on file Pioneer-Standard of Illinois Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file
-4- 93 Prepared by co Pioneer-Standard of Maryland, Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pionneer-Standard of Maryland, Inc. California Sec State as of 3-4-98 no UCC financing state- ments, state or federal tax liens, or judgments on file Pioneer-Standard of Maryland, Inc. Santa Clara County, as of 3-17-98 no UCC financing state- CA ments, state or federal tax liens, or judgments on file Pioneer-Standard of Maryland, Inc. Santa Clara County as of 3-17-98 no judgments or pending Superior Court, CA suits on file Pioneer-Standard of Maryland, Inc. CA - U.S. Northern as of 3-17-98 no judgments or pending District Court suits on file Pioneer-Standard of Maryland, Inc. Maryland Dept. of as of 3-13-98 no UCC financing state- Assessment and ments on file Taxation Pioneer-Standard of Maryland, Inc. Montgomery County, as of 3-11-98 no UCC financing state- MD ments on file as of 3-18-98 no state or federal tax liens, or judgments on file Pioneer-Standard of Maryland, Inc. Montgomery County as of 3-18-98 no pending suits on file Court, MD Pioneer-Standard of Maryland, Inc. MD - U.S. Southern as of 3-17-98 no judgments or pending District Court suits on file Pioneer-Standard of Maryland, Inc. Ohio Sec State as of 2-16-98 no UCC financing state- ments on file Pioneer-Standard of Maryland, Inc. Cuyahoga County as of 3-18-98 no UCC financing state- Recorder, OH ments or federal tax liens on file Pioneer-Standard of Maryland, Inc. Cuyahoga County as of 3-13-98 no state or federal tax Court of Common liens, or suites on Pleas, OH file
-5- 94
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pionneer-Standard of Maryland, Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file
-6- 95 Prepared by co Pioneer-Standard Canada Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pioneer-Standard Canada Inc. Ohio Sec State as of 2-16-98 no UCC financing state- ments on file Pioneer-Standard Canada Inc. Cuyahoga County as of 3-18-98 no UCC financing state- Recorder, OH ments or federal tax liens on file Pioneer-Standard Canada Inc. Cuyahoga County as of 3-13-98 no state tax liens, Court of Common judgments, or suits on Pleas, OH file Pioneer-Standard Canada Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file Pioneer-Standard Canada Inc. Mississauga, Ontario, Canada
-7- 96 Prepared by co Pioneer-Standard Electronics, Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pioneer-Standard Minnesota, Inc. Minnesota See State as of 3-17-98 no UCC financing statements, state or federal tax liens on file Pioneer-Standard Minnesota, Inc. Hennepin County, MN as of 3-16-98 no UCC financing statements, state or federal tax liens, or judgments on file Pioneer-Standard Minnesota, Inc. Hennepin County as of 3-16-98 no pending suits on District Court, MN file Pioneer-Standard Minnesota, Inc. MN - U.S. District as of 3-18-98 no judgments or pending Court suits on file Pioneer-Standard Minnesota, Inc. Ohio Sec State as of 2-16-98 no UCC financing statements on file Pioneer-Standard Minnesota, Inc. Cuyahoga County as of 3-18-98 no UCC financing Recorder, OH statements, or federal tax liens on file Pioneer-Standard Minnesota, Inc. Cuyahoga County as of 3-13-98 no state liens, Court of Common judgments, or suits on Pleas, OH file Pioneer-Standard Minnesota, Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file
-8- 97 Prepared by co Pioneer-Standard Electronics, Inc. UCC-11 All-Lien Search Summary March 23, 1998
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pionneer-Standard Electronics Pitney Bowes Credit Ohio Sec State 1-3-95 AL53075 leased equipment, Corporation products, proceeds Pioneer-Standard Electronics, Inc. Deutsche Credit Ohio Sec State 5-8-95 AL84093 listed leased equipment Corporation (original filing AB67460 filed 2-6-90 lapsed) Pioneer-Standard Electronics, Inc. Deutsche Credit Ohio Sec State 5-8-95 AL84094 listed equipment Corporation (original filing AB26256 filed 8-4-89 lapsed) Pioneer-Standard Electronics, Inc. Alcatel Friden Ohio See State 5-13-96 AM72741 leased mailing, Leasing shipping, computing and other equipment Pioneer-Standard Electronics, Inc. Cuyahoga County as of 3-18-98 no UCC financing Recorder, OH statements or federal tax liens on file Pioneer-Standard Electronics, Inc. Cuyahoga County as of 3-13-98 no state tax liens, Court of Common judgments, or suits on Pleas, OH file Pioneer-Standard Electronics, Inc. OH - U.S. Northern as of 3-16-98 no judgments or pending District Court suits on file Pioneer-Standard Electronics, Inc. Texas Sec State as of 3-8-98 no UCC financing statements or federal tax liens on file Pioneer-Standard Electronics, Inc. Dallas County Clerk, as of 3-12-98 no UCC financing TX statements, state or federal tax liens, or judgments on file Pioneer-Standard Electronics, Inc. Dallas County as of 3-12-98 no judgments or pending District Court, TX suits on file Pioneer-Standard Electronics, Inc. TX - U.S. Northern as of 3-12-98 no judgments or pending District Court suits on file Pioneer-Standard Electronics, Ltd. Travis County Clerk, as of 3-13-98 no UCC financing TX statements, state or federal tax liens, or judgments on file
-9- 98
DEBTOR SECURED PARTY PLACE OF FILING DATE OF FILING FILE # COLLATERAL ------ ------------- --------------- -------------- ------ ---------- Pioneer-Standard Electronics, Ltd. Travis County as of 3-10-98 no judgments or pending District Court, TX suits on file Pioneer-Standard Electronics, Ltd. TX - U.S. Western as of 3-14-98 no judgments or pending District Court suits on file
-10- 99 SCHEDULE 3 ---------- Permitted Loan 3 and Investments to Subsidiaries Subsidiaries of Pioneer-Standard Electronics, Inc.
Current ------- Equity Investment Additional Current Loans Maximum ----------------- ---------- ------------- ------- Subsidiary (as of 12/31/97) Equity Investment (as of 12/31/97) Permitted Loans ---------- ---------------- ----------------- ---------------- --------------- 1. Pioneer-Standard of $38,000,000 $1,000,000 $34,000,000 $60 ,000,000 Maryland, lnc. 2. Pioneer-Standard Canada Inc. $4,300,000 $6,000,000(1) $20,000,000 $35,000,000 3. Pioneer-Standard FSC, Inc. Less than $100,000 -0- -0- $1,000,000 4. Pioneer-Standard Illinois, Inc. $4,000,000 $1,000,000 -0- $10,000,000 5. Pioneer-Standard Minnesota, $12,000,000 $1,000,000 ($8,000,000) $10,000,000 Inc. 6. Pioneer-Standard Electronics, $144,000,000 $1,000,000 $7,000,000 $20,000,000 Ltd. 7. Pioneer Standard Georgia, Inc. $125,000,000 -0- -0- -0- (Projected)(2) 8. Dickens Data Systems, Inc. $125,000,000 $15,000,000 -0- $115,000,000(4) (Projected)(3) 9. Dickens Services Group, a $2,500,000(5) [Part of $35,000,000 -0- $5,000,000 Pioneer-Standard Company, Basket) LLC 10. Pioneer-Standard Financial $4,500,000(6) -0- -0- -0- Trust _____________________ (1) Includes a $3,000,000 equity investment made in March, 1998. (2) Projected amount of investment necessary to consummate anticipated merger into Dickens Data Systems. Inc., effective March 31, 1998. (3) Projected investment necessary to become a Subsidiary of Borrower, effective March 31, 1998. (4) Amount does not include that portion of Borrower's Indebtedness for Borrowed Money under the Agreement for Inventory Financing which is attributable to Dickens Data Systems. Inc. (5) Investment necessary to become a Subsidiary of Borrower, effective March 31, 1998. (6) Investment made on March 23, 1998
100 SCHEDULE 4 ---------- Description of Borrower's Preferred Securities Offering Pioneer-Standard Financial Trust (the "Trust"), a statutory business trust created under the laws of the State of Delaware, is issuing 2,500,000 of the Trust's 6 3/4% Convertible Trust Preferred Securities to qualified institutional purchasers ("Initial Purchasers"). Additionally, Pioneer-Standard Electronics, Inc. (the "Borrower") and the Trust are granting the Initial Purchasers an option for 30 days to purchase up to an additional 375,000 Preferred Securities at the initial offering price solely to cover overallotments, if any. The Borrower will directly or indirectly own all of the common securities of the Trust (the "Common Securities"), representing all of the undivided beneficial interests in the assets of the Trust represented by common securities. The Trust exists for the sole purpose of issuing the Preferred Securities and the Common Securities and investing the proceeds thereof in Series A 6 3/4 Junior Convertible Subordinated Debentures, due March 31, 2028 to be issued by the Borrower. The Preferred Securities will have a preference under certain circumstances with respect to cash distributions and amount payable on liquidation, redemption or otherwise over the Common Securities held by the Borrower. Distributions on the Preferred Securities will be cumulative from the date of the original issuance of the Preferred Securities and will be payable at the annual rate of 6 3/4% of the liquidation preference of $50.00 per Preferred Security. Distributions will be made quarterly in arrears on March 31, June 30, September 30 and December 31 commencing on June 30, 1998 when and to the extent that funds of the Trust are available thereof. The distribution rate and the distribution and other payment dates for the Preferred Securities will correspond to the interest rate and other payment dates for the Debentures, which will be the sole assets of the Trust. Each Preferred Security is convertible in the manner specified in the Offering Memorandum, dated March 18, 1998, at the option of the holder at any time into common shares, without par value, of the Borrower at a rate of 3.1746 Common Shares for each Preferred Security. The Preferred Securities have been designated for trading in the Private Offering, Resale and Trading through Automated Linkages Market. 101 SCHEDULE 5 ---------- Description of SECT On July 2, 1996, Pioneer-Standard Electronics, Inc. ("Borrower") established the Pioneer Stock Benefits Trust (the "Benefits Trust") pursuant to which Wachovia Bank, N.A., as trustee (the "Trustee"), has subscribed for 5,000,000 Common Shares of the Borrower to be paid for over the 15-year term of the Benefits Trust. The proceeds from the sale of the Common Shares will be used to fund obligations under various employee benefit plans and to pay cash bonuses and other similar employee related obligations. Under Ohio law, the subscribed for Common Shares are deemed to be issued and outstanding for voting and dividend purposes, but will not be fully paid and nonassessable until payment for such is received as provided in that certain Share Subscription Agreement and Trust effective as of July 2, 1996 (the "Benefit Trust Agreement"). According to GAAP, none of the 5,000,000 Common Shares will be deemed outstanding for purposes of calculating earnings per share until payment is received for the Common Shares as provided in the Benefits Trust Agreement. As of December 31, 1997, 220,000 of the Common Shares had been released from the Benefits Trust. EX-10.K 12 EXHIBIT 10(K) 1 Exhibit 10(k) FIRST AMENDMENT TO CREDIT AGREEMENT ----------------------------------- THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made as of May 1, 1998, by and among Pioneer-Standard Electronics, Inc., an Ohio corporation, and its successors and assigns (the "Borrower"), National City Bank, a national banking association, and the several banks, financial institutions and other entities from time to time parties to the Ag?eement (as defined below) (sometimes collectively, "Lenders" and sometimes individually, a "Lender"), and National City Bank, not individually, but as "Agent." WHEREAS, Borrower, the Lenders and Agent entered into that certain Credit Agreement dated as of March 27, 1998 (the "Agreement"); and WHEREAS, Borrower, the Lenders and Agent are desirous of amending the Agreement on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Borrower, the Lenders and Agent agree as follows: 1. Section 2.6 of the Agreement shall be deleted in its entirety and the following inserted in lieu thereof: 2.6 MONEY MARKET LINE LOANS. Borrower may, subject to the terms and conditions of this Agreement, borrow on an overnight basis, payable on demand by Agent, on the Closing Date and from time to time thereafter sums which shall bear interest at a rate of interest equal to the Federal Funds Rate plus the LIBOR Applicable Margin. Each Money Market Line Advance shall be in an amount equal to or greater than Ten Million Dollars ($10,000,000); PROVIDED, HOWEVER, that, (i) a Money Market Advance that is the result of a conversion of a Swingline Loan pursuant to SECTION 2.7(b) shall not be required to be in an amount equal to or greater than Ten Million Dollars ($10,000,000), (ii) with regard to each Lender individually, the sum of each such Lender's outstanding Loans shall not exceed such Lender's Commitment; (iii) with regard to Lenders collectively, the Outstanding Amount shall not exceed the Aggregate Commitment; and (iv) Borrower may elect not to borrow a Money Market Line Loan by Telephonic Notice to Agent within two (2) hours of notice from Agent of the interest rate to be applicable to such Loan. Any Money Market Line Loan not repaid in full, including the principal amount thereof and all accrued interest, within one (1) Business Day of demand for payment by Agent Or the Required Lenders shall automatically convert into a Base Rate Loan and bear interest at the Base Rate. 2. Section 2.7 of the Agreement shall be deleted in its entirety and the following inserted in lieu thereof: 2 2.7 SWINGLINE LOANS. (a) Borrower may, subject to the terms and conditions of this Agreement, borrow on an overnight basis, payable on demand by NCB, from NCB, on the Closing Date and from time to time thereafter sums which shall bear interest at a rate of interest equal to the Federal Funds Rate plus the LIBOR Applicable Margin. Each Swingline Loan shall be in an amount equal to or greater than One Million Dollars ($1,000,000); provided, however, that, (i) the sum of NCB's outstanding Loans of all Types shall not exceed NCB's Commitment; (ii) with regard to Lenders collectively, the Outstanding Amount shall not exceed the Aggregate Commitment; and (iii) Borrower may elect not to borrow a Swingline Loan by Telephonic Notice to NCB within two (2) hours of notice from NCB of the interest rate to be applicable to such Loan. Any Swingline Loan not repaid in full, including the principal amount thereof and all accrued interest, within one (1) Business Day of demand for payment by NCB shall automatically convert into a Base Rate Loan and bear interest at the Base Rate. (b) Agent may, m its sole discretion, convert any Swingline Loan into a Money Market Line Loan upon delivery of notice thereof to Borrower. Upon delivery to Lenders of a copy of a notice delivered by Agent under this Section, all Swingline Loans shall be automatically converted to a Money Market Line Loan under this Agreement, and each Lender agrees to immediately fund its Pro Rata Share of such Money Market Line Loan. Conversions to Money Market Line Loans under this Section shall be in the sole discretion and control of Agent and shall be effective regardless of any default under this Agreement by Borrower or Agent, or any other circumstance. 3. Section 5.23 of the Agreement shall be deleted in its entirety and the following inserted in lieu thereof: 5.23 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Borrower and its Subsidiaries shall maintain a Consolidated Fixed Charge Coverage Ratio of no less than 0.85 to 1.0 on the Closing Date, and on March31, 1998, June 30, 1998, and September 30, 1998; no less than 0.95 to 1.0 on December 31, 1998; and no less than 1.1 to 1.0 on the last calendar day of each fiscal quarter thereafter, until the Facility Termination Date. The Consolidated Fixed Charge Coverage Ratio shall be calculated for the most recent preceding four fiscal quarters, including the fiscal quarter ending on the date of determination. 4. This Amendment shall be deemed to form a part of and shall be construed in connection with and as part of the Agreement. Except as hereinbefore expressly amended, all of the other terms, covenants and conditions contained in the Agreement shall continue to remain unchanged and in full force and effect and are hereby ratified and confirmed. Capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Agreement. 3 IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers. PIONEER-STANDARD ELECTRONICS, INC. By: /s/ John V. Goodger Print Name: John V. Goodger Title: Vice President 4800 East 131st Street Garfield Heights, Ohio 44105 phone: 216 587-3600 facsimile: 216 587-3563 Attention: John V. Goodger 4 Commitments - - ----------- $95,000,000 NATIONAL CITY BANK, Individually and as Agent By: /s/ Anthony J. DiMare Print Name: Anthony J. DiMare Title: Senior Vice President Via Hand Delivery National City Bank National City Center, 10th Floor 1900 East Ninth Street Cleveland, Ohio 44114 Via U.S. Mail National City Bank Location No.2104 1900 East Ninth Street Cleveland, Ohio 441114-3484 Attention: Anthony J. DiMare Senior Vice President 5 $45,000,000 KEYBANK NATIONAL ASSOCIATION By: /s/ Brendan A. Lawlor Print Name: Brendan A. Lawlor Title: Assistant Vice President Via Hand Delivery KeyBank National Association Large Corporate Group Mail Code OH-01-27-0606 127 Public Square Cleveland, Ohio 44114-1306 Via U.S. Mail KeyBank National Association Large Corporate Group Mail Code OH-01-27-0606 127 Public Square Cleveland, Ohio 44114-1306 Attention: Brendan A. Lawlor 6 $35,000,000 MELLON BANK, N A By: /s/ Mark F. Johnston Print Name: Mark F. Johnston Title: Assistant Vice President Via Hand Delivery Mellon Bank, N.A. Three Mellon Bank Center Suite 2300 Pittsburgh, PA 15259 Attention: Loan Administration Theresa Heukeshoven Via U.S. Mail Mellon Bank, N.A. Three Mellon Bank Center Suite 2300 Pittsburgh, PA 15259 Attention: Loan Administration Theresa Heukeshoven With a Copy To: Via Hand Delivery Mellon Bank, N.A. One Mellon Bank Center Grant Street, Room 4530 Pittsburgh, PA 15258-0001 Via U.S. Mail Mellon Bank, N.A. One Mellon Bank Center Grant Street, Room 4530 Pittsburgh, PA 15258-0001 Attention: Mark F. Johnston 7 $25,000,000 NBD Bank By: Paul P. DeMelo Print Name: Paul P. DeMelo Title: Vice President NBD Bank 811 Woodward Ave. Detroit, MI 48226 Attention: Paul R. DeMelo Vice President 8 $20,000,000 ABN - AMRO Bank N.V. By: /s/ Chris Helmeci /s/ Louis K. McLinden Jr. Print Name: Chris Helmeci Louis K. McLinden Jr. Title: Vice President Vice President ABN - AMRO Bank One PPG Place Suite 2950 Pittsburgh, PA 15222-5400 Attention: Chris Helmeci Vice President 9 $20,000,000 COMERICA BANK By: /s/ Jeffrey J. Judge Print Name: Jeffrey J. Judge Title: Vice President Comerica Bank 500 Woodward Ave. Detroit, MI 48226 Attention: Jeffrey J. Judge Account Officer 10 $20,000,000 STAR BANK, N.A. By: John D. Barrett Print Name: John D. Barrett Title: Senior Vice President Via Hand Delivery Star Bank, N.A. 1350 Euclid Avenue, Suite 220 Cleveland, Ohio 44115 Via U.S. Mail Star Bank, N.A. 1350 Euclid Avenue, Suite 220 Mail Location 4432 Cleveland, Ohio 44115 Attention: John D. Barrett EX-13 13 EXHIBIT 13 1 Exhibit 13 Pioneer-Standard Electronics 1998 annual report [Graphic] Expanding our reach 2 Pioneer-Standard Electronics, Inc., one of the largest international distributors of industrial electronic components and computer products, became a $2 billion company on March 31, 1998, with the completion of its acquisition of Dickens Data Systems. Pioneer-Standard has operations throughout North America and provides access to international markets through its strategic alliances with World Peace Industrial Co., Ltd., based in Taiwan, and Eurodis Electron PLC, headquartered near London, England. As a distributor of computer products, Pioneer-Standard sells mid-range and high-end computer systems, personal computers, software, peripherals and services from the industry's foremost suppliers to large corporations and value-added resellers (VARs). Pioneer-Standard offers a full complement of value-added services, including systems integration and enterprise network consulting. As a distributor of electronic components, Pioneer-Standard sells semiconductors; interconnect, passive and electromechanical components; and system products from leading suppliers to original equipment manufacturers and VARs. Through value-added services such as component kitting, turnkey and sub-assembly; device programming; power products integration; systems integration; and integrated inventory logistics, Pioneer-Standard assists customers in bringing their products to market more quickly and cost effectively. Pioneer-Standard Fiscal Year 1998 Sales [PIE CHART] [PIE CHART] Computer Products 44% Computer Products 54% Electronic Components 56% Electronic Components 46% FY 1998 actual: $1.7 billion FY 1998 pro forma, with acquisition of Dickens Data Systems: $2 billion 3 CONTENTS Financial Highlights 1 Letter to Shareholders 2 Strategic Investments to Fuel Growth 6 People Make the Difference 10 Value-Added Services: Tailor-Made 13 and Distinctive Financial Review 18 Corporate Directory 37 Shareholder Information 37
FINANCIAL HIGHLIGHTS Fiscal years ended March 31 1998 1997 1996 - - --------------------------------------------------------------------------------------------------------------------------- Net sales $1,685,265,000 $1,508,709,000 $1,105,281,000 Income before income taxes 52,233,000 40,321,000 43,639,000 Provision for income taxes 21,624,000 17,067,000 18,387,000 Net income $30,497,000 $23,254,000 $25,252,000 ........................................................................................................................... Per share data Diluted net income $1.14 $1.00 $1.09 Dividends .12 .12 .106 Shareholders' equity 9.30 8.22 6.70 Weighted average shares outstanding 26,949,333 23,235,870 23,127,486 ........................................................................................................................... 1)
4 To Our Fellow Shareholders For Pioneer-Standard, fiscal 1998 was a challenging year competitively and an extraordinary year strategically. In addition to achieving record sales in an intensely competitive environment, we executed a progressive expansion strategy that will serve us well this year and for years to come. We enter fiscal 1999 well positioned for growth. Sales in 1998 totaled $1.7 billion, a 12 percent increase over sales of $1.5 billion in the prior year. Substantial contributions came from our computer products business, which accounted for 44 percent of Company sales. On the electronic components side of our business, which accounted for 56 percent of sales, interconnect, passive and electromechanical products increased significantly over last year. Mitigating these gains was a tough semiconductor market that continues to be challenged by overcapacity. An unexpected pause occurred in our portion of the computer products market in January and February. With our expanding customer base and a strong companywide sales effort, we rebounded in March and finished the fourth quarter strong, making for a satisfactory year. Net income reached $30.5 million, a 31 percent increase over net income of $23.3 million in 1997. Diluted earnings per share of $1.14 were 14 percent higher than the previous year's $1.00 per share. Our interest expense rose, largely to fund working capital needs and increased capital spending to support the growth of the business. Operating expenses as a percentage of sales remained flat with last year, partly because of the weakness in semiconductor sales, but also as a result of calculated business decisions. We added sales personnel and continued with a multi-year investment in the largest capital spending project in our history: a computer system platform upgrade to enhance information management and decision support. Arthur Rhein, left, and James L. Bayman 2) 5 [Photo] 6 An Expanded Presence in Key Markets We expanded our reach in 1998 with a major acquisition and our emergence as a global presence. As the year closed, we became the leading North American distributor of IBM(R) computer systems, peripherals and services with our acquisition of Dickens Data Systems. This move enhances the strategic position we already had established with IBM, and offers us significant growth opportunities from the combined companies' value-added capabilities and expanded customer base. We acted on our pledge to expand our international presence with our purchase of an equity interest in World Peace Industrial Co., Ltd. of Taiwan, one of the largest and fastest-growing distributors of industrial electronic components in the critical Asia-Pacific region, with 1997 revenues approximating $350 million. Further extension of our worldwide capabilities came with our purchase of an equity interest in London-based Eurodis Electron PLC, one of Europe's largest distributors of electronic components, with 1997 revenues of nearly $500 million. In both cases, we have the option of increasing our ownership. These affiliations enable us to seamlessly meet the needs of our customers and suppliers with expanded coverage in key world markets. Our growing ability to access markets in North America, Asia-Pacific and Europe gives us an expanded market reach of nearly $3 billion. Supporting Our Growth Strategy With a continuing focus on exceeding customer expectations, we added several high-quality product lines and joined with independent software vendors and our suppliers to deliver complete solutions. We also reinforced our relationships with specific customer segments by creating business units dedicated to their particular needs. For example, within the computer business, we formed KeyLink(SM) Systems to support our value-added resellers. Within the components division, we launched Electronic Manufacturing Services, a sales unit serving the rapidly growing contract manufacturing community. We drew upon the wealth of leadership and expertise we possess to guide and advance our long-term growth strategy. Tom Pitera was named president of the Industrial Electronics Division, and Robert J. Bailey and Peter J. Coleman were promoted to senior vice presidents in the Computer Systems and Services Division. Jim Jefferies was appointed vice president, worldwide marketing, and Jeff Levine was named vice president, operations. All these executives are Pioneer-Standard veterans with extensive industry experience. 4) 7 "We expanded our reach in 1998 with a major acquisition and our emergence as a global presence." We feel strongly about recognizing people for their contributions. Our success rests on the ability of our employees to build long-term relationships with customers and suppliers, as well as with other Pioneer-Standard people. The accomplishments of the past year bring credit to all our dedicated employees. We are proud to be associated with them. Positioned for Progress We enter fiscal 1999 with enthusiasm and a keen sense of optimism about the opportunities that await us. We anticipate progressive sales growth, and expect to benefit from our firm commitment to reduce operating expenses as a percentage of sales. The acquisition of Dickens secures our standing in the mid-range computer market, the fastest-growing segment of the computer industry. Computer product sales are growing, and our strong relationships with industry leaders such as Compaq, Digital, IBM and Intel bode well for the future. In the electronic components industry, we see the continuation of pricing and margin pressures. We expect semiconductors to remain a particular challenge because of excess supply versus demand. The industrial distribution industry continues to consolidate, and we intend to participate in that trend through selective acquisitions. We will be disciplined but assertive in positioning ourselves as a favored consolidator. In accord with our long-term strategic plan for growth, we will develop and expand our international relationships and strengthen alliances with leading suppliers, with the aim of offering our customers a full spectrum of technology solutions. We also will continue to enhance the industry-leading value-added services that differentiate us. Finally, we will invest in the training of top-quality people and in leading-edge information technology, which is critical to the success of all our initiatives. We have a solid foundation on which to build, thanks in large part to the strategic strides we made in 1998. We owe a large debt of gratitude to all our constituents. Your interest and support are fundamental to our progress, and we deeply appreciate the confidence you have shown in Pioneer-Standard. Sincerely, /s/ James L. Bayman /s/ Arthur Rhein James L. Bayman Arthur Rhein Chairman and President and Chief Executive Officer Chief Operating Officer 5) 8 Strategic Investments to Fuel Growth In fiscal 1998, Pioneer-Standard began executing a vigorous expansion strategy to meet customer demands for global logistical support, design assistance, materials management and manufacturing, and to fill supplier needs for global capabilities. Expanding Horizons: Globalization In December 1997, the Company purchased an equity interest in World Peace Industrial Company, Ltd. (WPI) of Taipei, Taiwan. WPI is one of the Asia-Pacific region's largest industrial electronic component distributors, with revenues of nearly $350 million and offices in Singapore, South Korea, Thailand, Malaysia, mainland China and Hong Kong. WPI is a regional distributor for Texas Instruments, Philips Semiconductor, IDT, Temic and Intel, among other leading lines. In April 1998, Pioneer-Standard extended its global coverage with the purchase of an equity interest in Eurodis Electron PLC, a pan-European distributor of electronic components, with revenues approximating $500 million. Headquartered near London, Eurodis has 1,100 employees in 13 countries and operating centers in England, Austria, Netherlands, Belgium, France, Germany, Italy, Switzerland and Eastern Europe. The Eurodis line card includes such noteworthy suppliers as SGS-Thomson, Philips Semiconductor, Siemens and Texas Instruments. Through its global alliances, Pioneer-Standard achieves an expanded presence in key international markets. The Company is well positioned to meet the worldwide needs of customers and suppliers. Seamless Service Across Boundaries For suppliers, Pioneer-Standard's global emergence will widen the playing field because they will gain access to new markets for their product lines. Customers will benefit from the heightened diversity of products and services the Company can offer in cooperation with its worldwide affiliates in strategic locations. Now, customers will be able to count on Pioneer-Standard for international sales and technical support, value-added services, inventory management and operational coverage. 6) 9 [Graphic of Globe] Recent Strategic Actions Dickens Data Systems acquisition establishes Pioneer-Standard as the leading IBM mid-range distributor. World Peace Industrial investment provides access to vital Asia-Pacific markets. Eurodis Electron PLC investment opens access to important European markets. Quality supplier line additions strengthen the investment in products and technologies. 10 With the strategic acquisition of Dickens Data Systems and the investments in WPI and Eurodis, Pioneer-Standard has attained a market reach of nearly $3 billion, based on its ability to serve markets in North America, Asia-Pacific and Europe. [Graphics of Globe] 11 Strategic Investments to Fuel Growth High-Growth Acquisition: Dickens Data Systems The acquisition of Dickens Data Systems presents a significant growth opportunity for Pioneer-Standard. Dickens, of Roswell, Georgia, was ranked as IBM Corporation's largest mid-range distributor, and won top honors from IBM for customer satisfaction and sales performance. The company had sales of $346 million in calendar 1997. As an authorized distributor of IBM products and IBM's first certified RS/6000(R) Authorized Assembler, Pioneer-Standard established a solid relationship with IBM prior to the Dickens acquisition, and was recognized as IBM's fastest-growing distributor. The Leading IBM Distributor The acquisition of Dickens has enhanced that relationship, positioning Pioneer-Standard as North America's leading distributor of IBM mid-range computer systems, with the industry's largest number of IBM-trained and - - -certified technical support specialists. The acquisition of Dickens substantially bolsters Pioneer-Standard's computer distribution business, and enables the Company to reach a broader customer base throughout North America. The mid-range server market is the fastest-growing segment of the computer industry, with growth of 27 percent in 1996. This performance is driven by the burgeoning increase in client-server network environments. IBM leads this market with an estimated 36 percent share. But growth in the market is only part of the story. Like other large suppliers, IBM is increasingly turning to the distribution channel. And, like its competitors, it is dealing with a sharply limited number of distributors. Pioneer-Standard will participate as a leader in this high-growth market. Additional Quality Suppliers In fiscal 1998, Pioneer-Standard engaged several new suppliers whose capabilities strengthen the Company's investments in products and technologies that serve customer needs. The list of new suppliers features Compaq Computer Corporation, Eos Corporation, EXAR Corporation, Fairchild Semiconductor, Fujitsu Microelectronics, Inc., Hyundai Electronics America and Lambda Electronics, Inc. In May 1997, Atmel Corporation honored Pioneer-Standard with its 1996 Distributor of the Year Award. Digital Equipment Corporation named Pioneer-Standard its largest distributor worldwide in its 1997 fiscal year. Bourns, Inc. recognized Pioneer-Standard with its 1997 Distributor of the Year Award for North America, and Astec America, Inc. chose Pioneer-Standard as the first recipient of its Carol Dreyer Distributor of the Year Award. (9 12 These Pioneer-Standard employees are high achievers who have been recognized for superior performance. Clockwise from left, they are: Deborah Gray, account executive; Steve Greenberg, VAR account manager with KeyLink Systems; James Martin, technical outside sales representative; Tracy Allen, corporate product coordinator; and Archie Martin, senior EMS inside account manager. [Photo] Not just anyone can fill these shoes... 10) 13 People Make the Difference Pioneer-Standard's success hinges on a vital asset: its employees and the relationships they develop with both customers and suppliers. People Hold the Key Pioneer-Standard hires entrepreneurial professionals and invests in them with industry-leading training that features curriculum architecture: a road map that charts for them what they must do to advance in the organization. This cutting-edge approach has drawn the attention of suppliers, some of whom have asked Pioneer-Standard to provide its training programs to them. People are trained to fully understand the customer's business so they can offer valuable and timely information. To expertly manage information, the Company is investing in the largest capital project in its history, an upgrade to state-of-the-art information technology that will pay off in reduced costs and increased customer satisfaction. A Business of Relationships Being successful means more than having the right resources to do the job; it also means having the capability to develop long-term relationships with suppliers and customers. KeyLink Systems represents one successful route to strengthened customer relationships. Launched in 1997, KeyLink markets computer products to value-added resellers (VARs) through innovative programs and tools, high-caliber service and support, and quality products. KeyLink operates as a business unit of Pioneer-Standard, with centralized administration and support. This organizational structure fosters strong customer satisfaction and support because of its targeted focus. Another example of targeted customer relationships is Electronic Manufacturing Services (EMS), a unit of the components business dedicated to serving contract manufacturers, the fastest-growing part of the Company's customer base. Contract manufacturers serve original equipment manufacturers, which are increasingly outsourcing the manufacturing function so they can focus on other aspects of their business. Pioneer-Standard's objective with EMS is to help contract manufacturers win business and exceed the expectations of their customers. Through services such as information management, enhanced market and product knowledge, and supply chain solutions, Pioneer-Standard serves the specialized needs of contract manufacturers. EMS also benefits Pioneer-Standard's suppliers because it offers them an additional channel for reaching this critically important market segment. 11) 14 People Make the Difference To offer customers the complete, one-stop solutions they seek, Pioneer-Standard people develop strategic relationships that span all segments of the industry. In addition to contract manufacturers, the components business targets the communications and computer markets. Through focused programs such as EMS, Pioneer-Standard introduces supplier technologies to customers within these targeted market segments; helps customers incorporate the technologies into their products; and, with its value-added services, improves the profit opportunities of customers, suppliers and the Company itself. Delivering Total Solutions Even the best distributors cannot be everything to everyone. By combining forces, companies can leverage their individual strengths, while providing turnkey solutions. A good example is the alliance that Pioneer-Standard formed last year with Promis Systems Corporation and Digital Equipment Corporation to offer semiconductor and precision electronics manufacturers an efficient, cost-effective solution in migrating to Digital's 64-bit AlphaServer platform. The relationships that Pioneer-Standard has with independent software vendors present other opportunities to furnish total solutions. For example, Pioneer-Standard teamed with The Baan Company last year to provide pre-configured, industry-leading UNIX and NT server platforms that run Baan's enterprise resource planning (ERP) software. These pre-packaged systems, delivered to KeyLink's VARs, greatly reduce their risk, complexity and cost of installing complete ERP solutions. Enhancing Long-Term Relationships: Digital Equipment Corporation Pioneer-Standard is proud to have sustained a rewarding and continually expanding affiliation with Digital for more than 15 years. Fiscal 1998 was the fourth consecutive year Pioneer-Standard ranked as Digital's largest distributor. The combination works because Pioneer-Standard understands how Digital goes to market, and Digital has a high level of confidence in the value that Pioneer-Standard brings. In January 1998, Compaq, a new Pioneer-Standard supplier, announced its intent to acquire Digital. Based on its long-term alliance with Digital, and its growing affiliation with Compaq, Pioneer-Standard is optimistic about the planned combination, and anticipates the continuation of a strong, productive association with both suppliers. 12) 15 Value-Added Services: Tailor-Made and Distinctive Pioneer-Standard has long differentiated itself from competitors through the quality of its value-added services. Their strategic importance as growth drivers is apparent in actions taken in fiscal 1998. The components group consolidated all its value-added services under the newly created position of vice president of value-added services and national accounts, while the computer products unit committed to a major expansion that will double the size of its Systems Integration Value-Added Center. The growth in value-added services represents yet another way in which Pioneer-Standard is expanding its market reach, as the following examples illustrate. 16 [Graphics] Adding value at every step 17 Value-Added Services: Tailor-Made and Distinctive At SIVAC, systems integration requires: technical expertise in the integration process (left, top photo); tracking of integrated parts via computer (center); and a refined shipping process that delivers to the customer on demand (bottom). The Systems Integrator of Choice At the Systems Integration Value-Added Center (SIVAC) in Ohio, Pioneer-Standard offers a wide array of systems integration and outsourcing services that complement and enhance customers' business objectives, and allow customers to focus on what they do best. Customizing its services to suit customer needs, SIVAC provides systems integration and related functions such as software load/setup, system test, burn-in and expansion cabinet integration, all supported by a broad line of system products. SIVAC employees add value through their continually developing technical, hardware and software expertise. The facility has the flexibility to adapt to changing service, product line and technology requirements. The value that SIVAC delivers lies less in what people do than in how they do it. Many companies offer systems integration, but they do not furnish the depth of management, quality and documentation that are standard practice at SIVAC. This commitment is the backbone of the ISO 9002-certified operation. First in Channel Assembly A current trend in the distribution industry is channel assembly, and Pioneer-Standard is leading the way in mid-range computer systems. Under the channel assembly model, manufacturing customers order the precise configurations they want, and Pioneer-Standard integrates the systems. The Company was the first distributor in the industry to win authorization under IBM's RS/6000 Authorized Assembler Program and Digital's Certified Integration Program. Spurred by trends such as channel assembly, SIVAC is growing rapidly, and will relocate later this year to larger quarters in a building with 223,000 square feet. This move will increase production capacity, provide for faster throughput and extend Pioneer-Standard's ability to address the needs of new customers and take full advantage of important industry trends. [Photo] Project Engineer Andrew Mogorovic is responsible for developing and implementing customized solutions at SIVAC. 15) 18 Value-Added Services: Tailor-Made and Distinctive At the EMRS center in Maryland, an online system tracks order status (right, top photo); with a flexible approach, Pioneer-Standard assembles kitting orders of all sizes (center); a contract manufacturer builds and tests circuit boards, enabling Pioneer-Standard to offer a turnkey solution (bottom). EMRS: A Vital Production Link No value-added service better exemplifies the evolution of components distribution at Pioneer-Standard than Electronic Manufacturing Resources and Services (EMRS), the group that performs kitting, turnkey services and sub-assembly. As outsourcing has increased, Pioneer-Standard's role has evolved over the years from components distribution to materials management to a vital link in the production chain: o Ten years ago, a typical components customer wanted Pioneer-Standard to ship piece parts on demand. o Five years ago, that customer decided to reduce the number of vendors needed to procure parts, so Pioneer-Standard stepped in to handle kitting. Pioneer-Standard took the customer's list of required materials, bought all the parts and assembled the kit. o From that point, it was a short step to just-in-time inventory management, with Pioneer-Standard warehousing the parts, building the kit and delivering it to the customer exactly when the material was required. o Now, Pioneer-Standard is securing turnkey opportunities. In these instances, Pioneer-Standard works in conjunction with contract manufacturers, who use kitted materials from the Company to build circuit boards. The boards, completed and tested, are then shipped by Pioneer-Standard to the customer on request. Because of increased outsourcing, Pioneer-Standard is now performing the purchasing and inventory management functions for the customer and contracting out the manufacturing function. The customer gains added value from EMRS because Pioneer-Standard works with its suppliers to obtain the complete bill of materials at competitive rates and manages the inventory until it is needed, saving the customer labor, procurement and overhead costs. Almost as important is the time savings. Instead of placing purchase orders with multiple suppliers, the customer gives Pioneer-Standard one part number, for the circuit board. Pioneer-Standard does the rest. A CustomerCentric(SM) Approach EMRS employees have years of manufacturing expertise, so they understand customers' problems. Like everyone in the components business, they are guided by a CustomerCentric business philosophy, which Pioneer-Standard applies to align an appropriate mix of technical, financial, management, service and logistical resources to meet customers' needs and expectations. [PHOTO] Program Manager Janice Jeter coordinates and oversees the EMRS turnkey process. 16) 19 [GRAPHICS] Taking on an expanded role 20 Management Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Fiscal 1998 Compared with Fiscal 1997 Sales Fiscal 1998 was the 12th consecutive year of record sales and the 26th year in the 27 years the Company has been public that sales increased. Net sales for the year ended March 31, 1998, of $1,685.3 million increased 12 percent over sales of the prior year of $1,508.7 million. Product Line Sales The Company's products are classified into three broad categories: semiconductors; computer systems products; and interconnect, passive and electromechanical products. Semiconductors are the building blocks of computer chips and include microprocessors, memory devices, programmable logic devices, and analog and digital integrated circuits. Computer systems products include mid-range computer systems and high-end platforms, storage subsystems, software, servers, personal computers, display terminals and networking products. Interconnect, passive and electromechanical products are devices that move or use an electrical signal and include capacitors, connectors, resistors, potentiometers, switches and power conditioning equipment. The increase in total net sales of 12 percent reflects a strong demand for computer systems products and interconnect, passive and electromechanical products, which more than offset the weaker sales comparisons experienced by the Company's semiconductor lines. The slower pace of the Company's semiconductor sales was reflective of the industry's excess of supply versus demand for that product category. Semiconductor products accounted for 36 percent of sales compared with 41 percent in 1997. Computer systems products comprised 44 percent of sales compared with 39 percent in 1997. Interconnect, passive and electromechanical products were 19 percent of sales versus 17 percent in 1997. Miscellaneous products accounted for 1 percent of sales in 1998 and 3 percent in 1997. Gross Margins Fiscal 1998 gross margin of 17.7 percent increased from 17.2 percent in the prior year. Sales mix changes in the three major product classifications contributed to the increased gross margin percent. As to the relative gross margin profitability of the Company's major product categories, the interconnect, passive and electromechanical group earned the highest gross margin percent in 1998, followed by the computer systems products group. The effect of certain high-volume, low-margin products included in the semiconductor product line ranked semiconductors below the computer systems products group relative to the gross margin percent attainment in 1998. Although the gross margin percent increased in fiscal 1998 compared with the prior year, management expects margin pressure to continue in the next fiscal year. Operating Efficiencies Warehouse, selling and administrative expenses were 13.4 percent of sales in both fiscal 1998 and 1997. During 1998, gains resulting from improvements from leveraging expenses on higher sales volume, coupled with the effects of implementation of cost controls, were offset both by added sales personnel for administration of the Company's new and expanding lines and by an acceleration of expenses associated with the Company's multi-year computer platform project. Efficiencies were realized through improved employee productivity and receivable collections. Sales per employee increased to $766,000 from $739,000 in 1997. Sales per employee have reflected an annual average efficiency gain of approximately 11 percent over the past five years. Receivable collections were reduced to 44 days in 1998 from 47 days in the previous year. Inventory turnover of 4.4 times declined from 5.2 times in 1997, reflecting a combination of increased stocking levels for recent product line additions as well as for certain of the Company's existing product lines, for improved customer satisfaction. The resulting operating profit of $73.0 million was up 27 percent from $57.4 million in 1997. Operating profit was 4.3 percent of sales in 1998 compared with 3.8 percent of sales in 1997, reflecting the increased gross margin percentage gain in fiscal 1998, discussed above. 18) 21 [Graph inserted here] Interest Expense Interest expense was $20.7 million in fiscal 1998 compared with $17.1 million in fiscal 1997. The increased interest expense is attributable to additional debt to fund working capital and capital expenditure requirements necessary to support the ongoing growth needs of the business. Taxes The effective tax rate was 41.4 percent for fiscal 1998 compared with 42.3 percent in fiscal 1997. The downward trend is reflective primarily of the reduction of various local and state taxes relative to the Company's operations. Net Income Primarily as a result of the factors noted above, the Company's net income for fiscal 1998 reached a record high of $30.5 million - an increase of $7.2 million, or 31 percent over fiscal 1997 net income of $23.3 million. Diluted earnings per share for fiscal 1998 increased to $1.14 from $1.00 in the previous year. Fiscal 1997 Compared with Fiscal 1996 Sales Net sales for the year ended March 31, 1997, of $1,508.7 million increased 37 percent over sales of the prior year of $1,105.3 million. Fiscal 1997 sales included the sales of Pioneer-Standard of Maryland, Inc., the Company's former 50 percent-owned affiliate, which Pioneer acquired on November 30, 1995. Including the former affiliate's sales on a pro forma basis for the entire 1996 fiscal year, net sales increased to $1,508.7 million from $1,325.0 million a year ago, a 14 percent increase. Product Line Sales All three of the Company's major product categories added to sales growth in fiscal 1997. Semiconductor products accounted for 41 percent of sales compared with 38 percent in 1996. Computer systems products comprised 39 percent of sales compared with 40 percent in 1996. Interconnect, passive and electromechanical products were 17 percent of sales versus 20 percent in 1996. Miscellaneous products accounted for 3 percent of sales in 1997 and 2 percent in 1996. Gross Margins Fiscal 1997 gross margin was 17.2 percent compared with 18.3 percent in the prior year. The reduced gross margin percent in 1997 is attributable primarily to the effects of the inclusion of operations of the newly acquired affiliate and a weak pricing environment. As to the relative gross margin profitability of the Company's major product categories, the interconnect, passive and electromechanical group earned the highest gross margin percent in fiscal 1997, followed by the computer systems product group. The inclusion of certain high-volume, low-margin products in the semiconductor product line ranked semiconductors below the computer systems product group relative to the gross margin percent attainment in 1997. Operating Efficiencies Warehouse, selling and administrative expenses were 13.4 percent of sales in fiscal 1997 compared with 13.6 percent of sales in fiscal 1996. The improvement reflects to some extent the leveraging of expenses on higher sales volume, as well as the effect of cost-cutting programs. Efficiencies were also realized with improved employee productivity, as well as through asset control. Sales per employee were $739,000 in fiscal 1997 compared with $671,000 the prior year. Sales per employee have reflected an average annual efficiency gain of approximately 14 percent over the past five years. Receivable collections (47 days in 1997) and inventory turnover (5.2 times in 1997) placed Pioneer among the top of industry averages relative to asset turnover. Although the resulting operating profit in dollars was higher than in 1996, it was 3.8 percent of sales in fiscal 1997 compared with 4.7 percent of sales in fiscal 1996. The decline in the gross profit margin percent in 1997 more than offset the efficiencies gained with respect to operating expenses. 19) 22 Interest Expense Interest expense was $17.1 million in fiscal 1997 compared with $8.1 million in fiscal 1996. The increased interest expense was due to added debt resulting from the purchase of the Company's former 50 percent-owned affiliate and funding of working capital and capital expenditures to support ongoing growth needs of the business. Equity Interest The consolidated statements of income for fiscal years 1997 and 1996 include the operating results of Pioneer-Standard of Maryland from the date of acquisition, November 30, 1995. Prior to the acquisition, the Company accounted for its investment in the affiliate under the equity method of accounting. The equity interest in the net income of the former affiliate resulted in a net loss of $173,000 in fiscal 1996. This loss included Pioneer's 50 percent share ($1.2 million after tax, or 5 cents per share) of non-recurring discontinuance costs. Taxes The effective tax rate, although trending downward during fiscal 1997, was 42.3 percent for the entire fiscal year. The effective tax rate was 42.1 percent in fiscal 1996. Net Income Primarily as a result of the factors noted above, the Company's net income for fiscal 1997 of $23.3 million was $2.0 million lower than the $25.3 million earned in fiscal 1996. The related diluted earnings per share of $1.00 in fiscal 1997 compared with $1.09 in fiscal 1996. Risk Control Systems are in place for continuous measurement and evaluation of foreign exchange exposures so that timely action can be taken when considered desirable. Reducing exposure to foreign currency fluctuations is an integral part of the Company's risk management program. Financial instruments in the form of forward exchange contracts are employed as one of the methods to reduce such risk. In addition, on June 1, 1995, the Company entered into a five-year interest swap agreement for a notional amount of $20 million to reduce the impact of increases in interest rates on its outstanding floating rate debt. Under the agreement, the Company will pay interest at a fixed rate of 6.05 percent and will receive interest payments on the same notional amount at a floating rate based on three-month LIBOR (London Interbank Offered Rate). This swap agreement has the effect of converting the floating rate of interest into a fixed rate of 6.05 percent on $20 million of floating rate bank credit borrowings outstanding. The Company does not enter into financial instruments for trading or speculative purposes. The Company extends credit based on customers' financial conditions, and generally, collateral is not required. Credit losses are provided for in the financial statements when collections are in doubt. Inflation has had a nominal effect on the Company's operations. Accounting Changes In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," which requires that an enterprise classify items of other comprehensive income, as defined therein, by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The Company intends to comply with the provisions of this statement upon its required adoption in the first fiscal quarter of 1999, and does not anticipate a significant impact on the financial statements. Also in June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." This statement establishes standards for reporting financial and descriptive information about operating segments. Under SFAS No. 131, information pertaining to the Company's operating segments will be reported on the basis that is used internally for evaluating segment performance and making resource allocation determinations. Management is currently analyzing the potential effects of adoption of this statement, which is required for fiscal 1999. Acquisitions On March 31, 1998, the Company acquired 100 percent of the outstanding capital stock of Dickens Data Systems, Inc. for $121.0 million in cash. Dickens Data Systems, Inc. was one of IBM's largest distributors of mid-range computer systems, and had total sales approximating $346 million in calendar year 1997. Management believes the acquisition will expand the 20) 23 Company's customer base and product offerings and enhance the Company's ability to take advantage of growth opportunities in the mid-range computer systems market. The acquisition was funded with borrowings under the Company's revolving credit facility. The excess of the purchase price over the fair value of the net assets acquired approximated $116.8 million, and is being amortized over 40 years for shareholder reporting purposes. In November 1997, the Company purchased a minority equity interest in World Peace Industrial Co., Ltd. ("WPI") of Taiwan. Management believes this investment will provide the Company with access to an extensive distribution network in the Asia-Pacific region. Headquartered in Taipei, WPI has offices in countries throughout the region, including Singapore, South Korea, Thailand, Malaysia, mainland China and Hong Kong. This minority interest investment is recorded on the cost basis and is included in other assets. Subsequent to year end, in April 1998, the Company purchased a minority equity interest in Eurodis Electron PLC ("Eurodis"), a pan-European distributor of electronic components. This purchase furthers the Company's growth strategy by offering it access to what management believes is a very broad industrial electronic components market, as well as one of the world's largest telecommunications markets. Headquartered near London, Eurodis employs 1,100 people in 13 countries and has operating centers in the United Kingdom, Austria, the Netherlands, Belgium, France, Germany, Italy, Switzerland and Eastern Europe. Liquidity and Capital Resources During fiscal 1998, the Company continued developing its capital structure to support the growth of operations. Equity was strengthened: Proceeds from a private offering of Convertible Trust Preferred Securities were used to reduce bank borrowings, the Benefit Trust released 220,000 Common Shares to supplement cash flow and the Company gained the added flexibility of having preferred shares available as a potential financing vehicle. In addition, the Company's revolving credit facility was expanded and used to fund the Dickens Data Systems acquisition. As a result of the Company's operations, capital structure enhancements and acquisition, the Company ended fiscal 1998 with a debt-to-capital ratio of 48 percent (including the Convertible Trust Preferred Securities as equity), the same ratio as a year ago. Strengthened Equity In March 1998, the Company issued $125 million principal amount 63/4 percent Convertible Trust Preferred Securities (company-obligated mandatorily redeemable preferred securities). Subsequent to year end, in April 1998, an additional $18.7 million of the securities were sold upon exercise of the overallotment option. The Convertible Trust Preferred Securities are convertible into Common Shares of Pioneer at a conversion price of $15.75 per share. Net proceeds of the offering were applied to reduce borrowings under the Company's revolving credit facility. These securities have characteristics of both traditional debt and traditional preferred securities. They are classified between long-term liabilities and shareholders' equity in the Company's consolidated balance sheet. The quarterly 63/4 percent distributions to investors are included net of income taxes in the statements of income. In September 1997, the Company's Benefit Trust released 220,000 Common Shares subscribed for by the Benefit Trust. The net proceeds of $3.3 million were used by Pioneer to fund existing employee benefit plans. During fiscal 1998, Pioneer's shareholders approved an amendment to the Company's Amended Articles of Incorporation authorizing 5,000,000 serial preferred shares, without par value. The amendment enables the Company's Board of Directors to authorize issuance of preferred shares from time to time and to determine relevant terms thereof. This capability provides flexibility for meeting future financing needs. Expanded Credit Facility Effective March 30, 1998, the Company's revolving credit facility was repaid with proceeds of borrowings under a new revolving credit facility capability of $260 million with an initial term of five years, replacing both the former $125 million three-year facility and $40 million in unsecured short-term credit lines. Borrowings under the revolving credit facility were $180 million at March 31, 1998, compared with an aggregate of $35.5 million of short-term and revolving credit borrowings outstanding a year ago. The Company continued investing in programs to support future growth in fiscal 1998. Capital expenditures were $44.3 million compared with $20.2 million in 1997. The increased capital spending reflects acceleration of ongoing initiatives designed to improve efficiencies through computer enhancement of operating 21) 24 processes, as well as the computer platform. Management estimates that capital expenditures will be in the range of $45.0 million in fiscal 1999. During fiscal 1998, total interest-bearing debt increased a net $142.4 million. This increase, coupled with proceeds of the Convertible Trust Preferred Securities and retained earnings, supported the funding needs arising from acquisitions including Dickens Data Systems, Inc. and WPI of Taiwan, capital expenditures and working capital requirements. The resulting ratio of interest-bearing debt to capitalization was 48 percent at March 31, 1998 -- the same as the previous year. The Company maintains a strong financial position and excellent liquidity. Current assets increased by $202.6 million and current liabilities increased by $39.6 million during the fiscal year ended March 31, 1998, resulting in an increase of $163.0 million in working capital. The increase in assets is attributable to increased inventory of $78.4 million, increased accounts receivable of $29.9 million and assets acquired from Dickens Data Systems. The current liabilities increase is attributable to timing differences in accounts payable and liabilities assumed in the acquisition. The current ratio was 2.9:1 at March 31, 1998, compared with 2.5:1 at March 31, 1997. The Company believes that cash generated from operations and amounts available under its credit facility is presently sufficient to fund its working capital and capital expenditure requirements. Year 2000 The Company is in the process of implementing a new core business process system on a company-wide basis, which it believes will be fully Year 2000-compliant. In addition, the Company has identified other applications used by the Company and is modifying or replacing them in order to be Year 2000-compliant. All the identified applications will be modified or replaced and tested by June 1999, with the majority completed by December 1998. Although the Company believes that it is taking appropriate precautions against disruption of its systems due to the Year 2000 issue, there can be no assurance that the Company will identify all Year 2000 problems in advance of their occurrence, or that the Company will be able to successfully remedy any problems that are discovered. Furthermore, while the Company is responding to customer requests regarding its Year 2000 compliance and intends to complete a survey of its key suppliers in the third quarter of 1998 as to their Year 2000 compliance, there can be no assurance that the Company's suppliers and customers will not be adversely affected by the Year 2000 issue. While the Company does not believe that expenditures for the Year 2000 matter will have a material adverse effect, any resulting systems failures or interruptions at the Company or its suppliers or customers could have a material adverse effect on the Company's business, financial condition and operating results. Forward-Looking Information Portions of this report contain current management expectations which may constitute forward-looking information. The Company's performance may differ materially from that contemplated by such statements for a variety of reasons, including, but not limited to: competition, dependence on the computer market, cyclical nature of the semiconductor market, inventory obsolescence and technology changes, and dependence on key suppliers. [Graph inserted here] 22) 25
Consolidated Balance Sheets March 31, 1998, and 1997 1998 1997 - - ---------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 31,999,000 $ 28,116,000 Accounts receivable, less allowance for doubtful accounts (1998 - $7,798,000, 1997 - $7,541,000) 303,599,000 209,086,000 Merchandise inventory 349,100,000 243,940,000 Prepaid expenses 5,799,000 6,633,000 Deferred income taxes 10,113,000 10,282,000 ...................................................................................................... Total current assets 700,610,000 498,057,000 INVESTMENT AND OTHER ASSETS: Intangible assets 154,908,000 39,260,000 Other assets 14,258,000 2,602,000 PROPERTY AND EQUIPMENT, AT COST: Land 828,000 828,000 Buildings 10,067,000 9,561,000 Furniture and equipment 115,500,000 73,708,000 Leasehold improvements 9,408,000 7,584,000 ...................................................................................................... 135,803,000 91,681,000 Less accumulated depreciation and amortization 48,076,000 39,087,000 ...................................................................................................... Net property and equipment 87,727,000 52,594,000 ...................................................................................................... $957,503,000 $592,513,000 - - ------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to banks $ -- $ 20,500,000 Accounts payable 197,167,000 144,277,000 Income taxes 1,275,000 1,681,000 Accrued salaries, wages and commissions 7,908,000 11,489,000 Other accrued liabilities 29,710,000 18,697,000 Long-term debt due within one year 3,101,000 2,878,000 ...................................................................................................... Total current liabilities 239,161,000 199,522,000 LONG-TERM DEBT 336,234,000 173,587,000 DEFERRED INCOME TAXES 10,380,000 5,425,000 MINORITY INTEREST 1,732,000 -- MANDATORILY REDEEMABLE CONVERTIBLE TRUST PREFERRED SECURITIES 125,000,000 -- SHAREHOLDERS' EQUITY: Serial preferred shares, without par value: authorized 5,000,000; issued and outstanding - none -- -- Common shares, without par value, $.30 stated value: authorized 80,000,000 shares; outstanding 31,128,554 shares (including 4,780,000 subscribed shares) in 1998 and 31,034,545 shares (including 5,000,000 subscribed-for shares) in 1997 9,256,000 9,228,000 Capital in excess of stated value 120,465,000 121,489,000 Retained earnings 174,411,000 147,055,000 Unearned compensation (58,555,000) (63,750,000) Foreign currency translation adjustment (581,000) (43,000) ...................................................................................................... Total shareholders' equity 244,996,000 213,979,000 ...................................................................................................... $957,503,000 $592,513,000 - - ------------------------------------------------------------------------------------------------------ See accompanying notes to consolidated financial statements.
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Consolidated Statements of Income Years ended March 31, 1998, 1997 and 1996 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------ Net sales $1,685,265,000 $1,508,709,000 $1,105,281,000 Operating costs and expenses: Cost of goods sold 1,386,666,000 1,249,873,000 902,629,000 Warehouse, selling and administrative expenses 225,649,000 201,449,000 150,704,000 ...................................................................................................... 1,612,315,000 1,451,322,000 1,053,333,000 - - ------------------------------------------------------------------------------------------------------ Operating profit 72,950,000 57,387,000 51,948,000 Equity in loss of 50%-owned company -- -- 173,000 Interest expense 20,717,000 17,066,000 8,136,000 ...................................................................................................... Income before income taxes 52,233,000 40,321,000 43,639,000 Provision for income taxes: Federal Current 13,584,000 9,598,000 16,779,000 Deferred 5,124,000 4,269,000 (2,304,000) ...................................................................................................... 18,708,000 13,867,000 14,475,000 State 2,916,000 3,200,000 3,912,000 ...................................................................................................... 21,624,000 17,067,000 18,387,000 - - ------------------------------------------------------------------------------------------------------ Distributions on mandatorily redeemable convertible trust preferred securities, net of tax 112,000 -- -- - - ------------------------------------------------------------------------------------------------------ Net income $ 30,497,000 $ 23,254,000 $ 25,252,000 - - ------------------------------------------------------------------------------------------------------ Earnings per common share: Basic $1.16 $1.02 $1.13 Diluted $1.14 $1.00 $1.09 - - ------------------------------------------------------------------------------------------------------ See accompanying notes to consolidated financial statements.
24) 27
Consolidated Statements of Shareholders' Equity Years ended March 31, 1998, 1997 and 1996 - - --------------------------------------------------------------------------------------------------------------------------- Foreign Stated value Capital in currency Common of common excess of Retained Unearned translation shares shares stated value earnings compensation adjustment Total - - --------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1995 22,374,219 $6,630,000 $ 16,318,000 $103,646,000 $(179,000) $126,415,000 Net income 25,252,000 25,252,000 Cash dividends ($.106 per share) (2,392,000) (2,392,000) Shares issued upon exercise of stock options 124,442 37,000 693,000 730,000 Tax benefit related to exercise of stock options 214,000 214,000 Cash in lieu of fractional shares for stock split (151) (4,000) (4,000) Foreign currency translation adjustment 478,000 478,000 - - --------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1996 22,498,510 6,667,000 17,221,000 126,506,000 299,000 150,693,000 Net income 23,254,000 23,254,000 Issuance of 3,450,000 common shares 3,450,000 1,035,000 41,331,000 42,366,000 Subscription of 5,000,000 common shares 5,000,000 1,500,000 62,250,000 $(63,750,000) -- Cash dividends ($.12 per share) (2,705,000) (2,705,000) Shares issued upon exercise of stock options 86,035 26,000 468,000 494,000 Tax benefit related to exercise of stock options 219,000 219,000 Foreign currency translation adjustment (342,000) (342,000) - - --------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1997 31,034,545 9,228,000 121,489,000 147,055,000 (63,750,000) (43,000) 213,979,000 Net income 30,497,000 30,497,000 Shares sold by trust 504,000 2,805,000 3,309,000 Value change in subscribed-for shares (2,390,000) 2,390,000 -- Cash dividends ($.12 per share) (3,141,000) (3,141,000) Shares issued upon exercise of stock options 94,009 28,000 737,000 765,000 Tax benefit related to exercise of stock options 125,000 125,000 Foreign currency translation adjustment (538,000) (538,000) - - --------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1998 31,128,554 $9,256,000 $120,465,000 $174,411,000 $(58,555,000) $(581,000) $244,996,000 - - --------------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements.
(25 28 Consolidated Statements of Cash Flows
Years ended March 31, 1998, 1997 and 1996 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 30,497,000 $ 23,254,000 $ 25,252,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 11,193,000 9,914,000 7,543,000 Amortization 3,788,000 4,659,000 1,455,000 Gain on sale of property and equipment -- (221,000) -- Undistributed loss of affiliate -- -- 173,000 Increase in operating working capital (115,151,000) (68,421,000) (31,898,000) Increase in intangible assets -- -- (5,155,000) (Increase) decrease in other assets (7,068,000) (1,099,000) 67,000 Deferred taxes 5,124,000 4,269,000 (2,304,000) - - ------------------------------------------------------------------------------------------------------------------------ Total adjustments (102,114,000) (50,899,000) (30,119,000) - - ------------------------------------------------------------------------------------------------------------------------ Net cash used in operating activities (71,617,000) (27,645,000) (4,867,000) Cash flows from investing activities: Additions to property and equipment (44,283,000) (20,179,000) (21,004,000) Acquisition of businesses, net of cash acquired (123,253,000) -- (49,883,000) Investment in affiliate (6,531,000) -- -- Proceeds from sale of property and equipment -- 1,468,000 -- - - ------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (174,067,000) (18,711,000) (70,887,000) Cash flows from financing activities: Increase (decrease) in short-term financing (20,500,000) (500,000) 14,000,000 Increase (decrease) in revolving credit borrowings 146,859,000 (137,000,000) 81,000,000 Principal payments under long-term debt obligations (2,883,000) (2,860,000) (2,956,000) Proceeds from issuance of senior notes -- 150,000,000 -- Proceeds from issuance of common shares -- 42,366,000 -- Proceeds from sale of trust securities 3,309,000 -- -- Proceeds from issuance of mandatorily redeemable convertible trust preferred securities 125,000,000 -- -- Issuance of common shares under stock option plans 765,000 494,000 730,000 Tax benefit related to exercise of stock options 125,000 219,000 214,000 Dividends paid (3,141,000) (2,705,000) (2,392,000) Cash in lieu of fractional shares for stock split -- -- (4,000) - - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 249,534,000 50,014,000 90,592,000 Effect of exchange rate changes on cash 33,000 18,000 4,000 - - ------------------------------------------------------------------------------------------------------------------------ Net increase in cash and cash equivalents 3,883,000 3,676,000 14,842,000 Cash and cash equivalents at beginning of year 28,116,000 24,440,000 9,598,000 - - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 31,999,000 $ 28,116,000 $ 24,440,000 - - ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 26) 29 Notes to Consolidated Financial Statements Note 1 - Operations and Significant Accounting Policies The Company distributes a broad range of electronic components and computer systems products manufactured by others. These products are sold to original equipment manufacturers, value-added resellers, research laboratories, government agencies and end users, including manufacturing companies, and service and other non-manufacturing organizations. The Company has operations in the United States, Canada and an affiliate in the Asia-Pacific region. The Company maintains the following significant accounting policies: PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. CASH EQUIVALENTS - The Company considers highly liquid instruments with a maturity of 90 days or less at date of purchase to be cash equivalents. MERCHANDISE INVENTORY - Inventory is stated at the lower of cost (first-in, first-out basis) or market. The Company's inventory is constantly monitored for obsolescence. This review considers such factors as turnover, technical obsolescence, right of return status to suppliers and price protection offered by suppliers. Reserves for slow-moving and obsolete inventory at March 31 were $5,661,000 in 1998 and $6,659,000 in 1997. LONG-LIVED ASSETS - Property and equipment are recorded at cost. The Company capitalizes costs associated with software developed for its own use. Depreciation and amortization is computed using the straight-line method based on the estimated useful lives of the assets as follows: buildings, 40 years; furniture, 10 years; equipment, 5 to 10 years; software, 5 to 7 years; and leasehold improvements, the lease periods. Accelerated methods are used for tax reporting purposes. Intangible assets represent the excess of cost over value assigned to net assets of purchased businesses, which is being amortized on the straight-line method over 40 years. Accumulated amortization at March 31 was $3,684,000 in 1998 and $2,656,000 in 1997. Impairment of long-lived assets and related intangible assets is recognized when events or changes in circumstances indicate that the carrying amount of the asset, or related groups of assets, may not be recoverable. Measurement of the amount of impairment may be based on appraisal, market values of similar assets or estimated discounted future cash flows resulting from the use and ultimate disposition of the asset. REVENUE RECOGNITION - Revenue is recognized when customers' orders are complete and shipped. FOREIGN CURRENCY - The assets and liabilities of foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date, whereas income statement accounts are translated at the weighted average exchange rates for the year. The gains or losses resulting from these translations are recorded as a separate component of shareholders' equity. Gains or losses resulting from realized foreign currency transactions are included in net income. ADVERTISING PROMOTION - All costs associated with advertising and promoting products are expensed in the year incurred. Advertising and promotion expense was $2,784,000 in 1998, $2,176,000 in 1997 and $1,878,000 in 1996. STOCK-BASED COMPENSATION - The Company accounts for stock-based employee compensation in accordance with the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. EARNINGS PER COMMON SHARE - Earnings per Common Share are calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share," issued by the Financial Accounting Standards Board during 1997. The Company adopted the statement, which provides for the reporting of both basic and diluted earnings per share, effective with the quarter ended December 31, 1997. Basic earnings per share are computed by dividing net income available to common shareholders by the weighted average number of Common Shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities to issue Common Shares were converted into Common Shares. Such Common Shares consist of shares issuable upon exercise of stock options computed by using the treasury stock method, and of shares issuable upon conversion of the Convertible Trust Preferred Securities. Prior periods have been restated to reflect the new standard. Due to the application of the treasury stock method, the 4,780,000 shares subscribed for by the Trust (see Note 7) have no effect on earnings per share. In addition, the subscribed-for shares are excluded when determining shareholders' equity per share. (27 30 USE OF ESTIMATES - The financial statements are prepared in conformity with generally accepted accounting principles and, accordingly, include management's best estimates and judgments where applicable. Actual results could differ from those estimates. PRESENTATION - Certain 1997 and 1996 amounts have been reclassified to conform with the 1998 presentation. ACCOUNTING CHANGES - In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," which requires that an enterprise classify items of other comprehensive income, as defined therein, by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The Company intends to comply with the provisions of this statement upon its required adoption in the first quarter of fiscal 1999, and does not anticipate a significant impact to the financial statements. Also in June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." This statement establishes standards for reporting financial and descriptive information about operating segments. Under SFAS No. 131, information pertaining to the Company's operating segments will be reported on the basis that is used internally for evaluating segment performance and making resource allocation determinations. Management is currently analyzing the potential effects of adoption of this statement, which is required for fiscal 1999. Note 2 - Acquisition On March 31, 1998, the Company acquired 100 percent of the outstanding capital stock of Dickens Data Systems, Inc. for $121.0 million in cash. The acquisition was accounted for using the purchase method of accounting. Accordingly, the assets and liabilities of Dickens Data Systems, Inc. are included in the consolidated balance sheet at their estimated fair value as of March 31, 1998. The excess of the purchase price over the fair value of the net assets acquired approximated $116.8 million and is being amortized over 40 years. The following unaudited pro forma information presents a summary of consolidated results of operations for the Company and Dickens Data Systems, Inc. for fiscal years 1998 and 1997 (incorporating Dickens Data Systems, Inc. audited financial statements for years ended December 31, 1997, and December 31, 1996, respectively) as if the acquisition had occurred at the beginning of each fiscal year, with pro forma adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects:
1998 1997 - - -------------------------------------------------------------------- Net sales $ 2,031,245,000 $ 1,704,091,000 Net income 31,595,000 22,892,000 Net income per share Basic $1.21 $1.01 Diluted 1.18 0.99
Note 3 - Notes Payable and Long-Term Debt Notes Payable: As of March 31, 1998, short-term borrowing capability is provided under the Company's revolving credit facility, which is classified as long-term debt. Borrowings against unsecured lines of credit at March 31, 1997, were $20.5 million, with a weighted average interest rate of 7.59%. Long-Term Debt: Long-term debt at March 31, 1998, and 1997 consisted of the following:
1998 1997 - - ----------------------------------------------------------------- Revolving credit facility $180,000,000 $ 15,000,000 8.5% Senior Notes 150,000,000 150,000,000 9.79% Senior Notes 8,560,000 11,420,000 Other 775,000 45,000 - - ----------------------------------------------------------------- 339,335,000 176,465,000 Less amounts due within one year 3,101,000 2,878,000 - - ----------------------------------------------------------------- $336,234,000 $173,587,000 - - -----------------------------------------------------------------
The Company entered into a new revolving credit facility dated March 27, 1998, with various banks providing for up to an aggregate amount of $260 million of unsecured borrowings on a revolving credit basis for an initial term of five years. In addition, on an annual basis, the facility may be extended for a one-year period with the consent of all members of the bank group. Interest rates on borrowings are based on various floating rate alternative pricing mechanisms. There is a fee ranging from .25 percent to .375 percent on the amount of the total facility, and there is no prepayment penalty. In August 1996, the Company completed a public offering of $150 million principal amount of its 8.5 percent Senior Notes due August 2006. Interest is payable semi-annually. The net proceeds from the sale of the Notes were applied to the repayment of a portion of the borrowings under the Company's revolving credit facility. The indenture under which the Notes were 28) 31 issued limits the creation of liens; sale and leaseback transactions; consolidations, mergers and transfers of all or substantially all of the Company's assets; and indebtedness of the Company's restricted subsidiaries. The Notes are subject to mandatory repurchase by the Company at the option of the holders in the event of a change in control of the Company. Annual principal payments of $2.86 million on the 9.79 percent Senior Notes are due each November 1 and continue through November 1, 2000, when the last payment of $2.84 million is due. Interest is payable semi-annually. The terms of the credit agreement and 9.79 percent Senior Note Purchase Agreement provide for, among other things, restrictions regarding the payment of cash dividends and purchase of the Company's Common Shares, limitations on other borrowings and capital expenditures, minimum working capital requirements and the maintenance of certain financial ratios. Unrestricted retained earnings available for dividends at March 31, 1998, under the most restrictive covenants are $24.5 million. Aggregate maturities of long-term debt for the next five fiscal years are: 1999-$3,101,000; 2000- $3,080,000; 2001-$2,987,000; 2002-$0; and 2003- $180,050,000. Note 4 - Lease Commitments The Company is committed under lease agreements ranging up to seven years, which contain renewal options for periods up to 10 years, for certain facilities and equipment. Future minimum lease payments for operating leases at March 31, 1998, are: 1999 - $7,349,000; 2000 - $4,711,000; 2001 - $3,008,000; 2002 - $1,703,000; 2003 - $713,000; and $934,000 thereafter. Rental expense for operating leases was $6,602,000, $6,416,000 and $4,230,000 for 1998, 1997 and 1996, respectively. Note 5 - Income Taxes The following is a reconciliation of the Company's effective income tax rate to the federal statutory rate:
1998 1997 1996 - - -------------------------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% Provision for state taxes 3.6 5.2 5.8 Foreign losses with (recognized) unrecog- nized tax benefits 1.2 (.3) .6 Non-deductible and other 1.6 2.4 .7 - - -------------------------------------------------------------------- Effective rate 41.4% 42.3% 42.1% - - --------------------------------------------------------------------
Deferred tax assets and (liabilities) as of March 31, 1998, and 1997 are presented below:
1998 1997 - - ------------------------------------------------------------------------ Deferred tax assets: Capitalized inventory costs $ 2,722,000 $ 2,426,000 Accrued expenses 2,446,000 2,894,000 Allowance for doubtful accounts 2,648,000 2,665,000 Inventory valuation reserve 1,552,000 1,646,000 Foreign loss carryforward 1,202,000 572,000 Other 745,000 651,000 - - ------------------------------------------------------------------------ 11,315,000 10,854,000 Less valuation allowance (1,202,000) (572,000) - - ------------------------------------------------------------------------ Total deferred tax assets 10,113,000 10,282,000 Deferred tax liabilities: Depreciation expense (1,289,000) (1,688,000) Software amortization (8,789,000) (3,677,000) Other (302,000) (60,000) - - ------------------------------------------------------------------------ Total deferred tax liabilities (10,380,000) (5,425,000) Net deferred tax assets (liabilities) $ (267,000) $ 4,857,000 - - ------------------------------------------------------------------------
Note 6 - Mandatorily Redeemable Convertible Trust Preferred Securities On March 23, 1998, Pioneer-Standard Financial Trust (the "trust") issued $125 million of 6 3/4 percent Mandatorily Redeemable Convertible Trust Preferred Securities (the "trust preferred securities"). Subsequent to year end, in April 1998, an additional $18.7 million of the securities were sold upon exercise of the overallotment option. Pioneer-Standard Financial Trust, a statutory business trust, is a wholly owned consolidated subsidiary of the Company, with its sole asset being $148.2 million aggregate principal amount of 6 3/4 percent Junior Convertible Subordinated Debentures due March 31, 2028, of Pioneer-Standard Electronics, Inc. (the trust debenture). The trust preferred securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 6 3/4 percent, carry a liquidation value of $50 per share and are convertible into the Company's Common Shares at any time prior to the close of business on March 31, 2028, at the option of the holder. The trust preferred securities are convertible into Common Shares at the rate of 3.1746 per Common Share for each trust preferred security (equivalent to a conversion price of $15.75 per Common Share). The Company has executed a guarantee with regard to the trust preferred securities. The guarantee, when taken together with the Company's obligations under the trust debenture, the indenture pursuant to which the trust debenture was issued and the applicable trust document, provides a full and unconditional guarantee of the trust's obligations under the trust preferred securities. (29 32 After March 31, 2002, the trust preferred securities are redeemable, at the option of the Company, for a redemption price of 104.05 percent of par reduced annually by .675 percent to a minimum of $50 per trust preferred security. The trust preferred securities are subject to mandatory redemption on March 31, 2028, at a redemption price of $50 per trust preferred security. Pioneer may cause the trust to delay payment of distributions on the trust preferred securities for 20 consecutive quarters. During such deferral periods, distributions, to which holders of the trust preferred securities are entitled, will compound quarterly, and the Company may not declare or pay any dividends on its Common Shares. Note 7 - Shareholders' Equity During fiscal 1998, the Company's shareholders approved an amendment to the Company's Amended Articles of Incorporation authorizing 5,000,000 serial preferred shares, without par value. The amendment empowers the Board of Directors to authorize issuance of the preferred shares from time to time and to determine all relevant terms thereof. Holders of preferred shares will be entitled to one vote per preferred share upon all matters presented to shareholders, and vote together with holders of Common Shares as one class on all matters, except as otherwise provided by the Company's Amended Articles of Incorporation. In addition, the Board of Directors represented that such shares would not be used to thwart any attempted acquisition of the Company. No preferred shares have been issued to date. On March 12, 1997, the Company completed an underwritten public offering of 3,450,000 Common Shares at a price of $13.00 per share. The net proceeds from the offering of approximately $42.4 million were used to repay a portion of the indebtedness outstanding under the Company's revolving credit facility. On July 2, 1996, the Company entered into a Share Subscription Agreement and Trust (the "Trust") with Wachovia Bank of North Carolina, N.A., as Trustee, whereby the Trustee subscribed for 5,000,000 Common Shares of the Company, which will be paid for over the 15-year term of the Trust. The proceeds from the sale or direct use of the Common Shares over the life of the Trust are used to fund Company obligations under various benefit plans. As of March 31, 1998, 220,000 shares have been released from the Trust. The following details the fair market value of the 4,780,000 Common Shares subscribed for by the Trust, reflected in shareholders' equity at March 31, 1998: Common Shares at stated value (4,780,000 @ $.30) $ 1,434,000 Capital in excess of stated value (4,780,000 shares) 57,121,000 Unearned compensation (4,780,000 shares @ $12.25 fair market value) (58,555,000) - - ---------------------------------------------------- Net effect on shareholders' equity $ -- - - ----------------------------------------------------
The Company maintains a Common Share Purchase Rights Plan whereby, until the occurrences of certain events, each share of the Company's outstanding Common Shares represents ownership of one right ("Right"). The Rights may be exercised only if a person or group acquires 20 percent or more of the Company's Common Shares, or announces a tender offer for at least 20 percent of the Company's Common Shares. The exercise price of each Right is $11.85 per Common Share, subject to adjustment in certain events. The Rights trade with the Company's Common Shares until the Rights become exercisable. If the Company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then-exercise price, a number of the acquiring Company's common shares (or other securities) having a market value at the time of twice the Right's then-current exercise price. In addition, if a person or group acquires 20 percent or more of the Company's Common Shares or certain specified transactions occur while a person or group beneficially owns 20 percent or more of such Common Shares, each Right will entitle its holder (other than such person or members of such group) to purchase, at the Right's then-current exercise price, a number of the Company's Common Shares having a market value of twice the Right's then-exercise price. Prior to the acquisition by a person or group of beneficial ownership of 20 percent or more of the Company's Common Shares, the Rights are redeemable for $.003 per Right at the option of the Board of Directors. The Rights will expire May 10, 1999. Note 8 - Earnings per Share Earnings per share have been computed in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, adopted for the quarter ended December 31, 1997. All earnings per share amounts shown for periods prior to adoption have been restated to conform to the provisions of SFAS No. 128. Basic earnings per share increased by $.02, $.02 and $.04 for the periods March 31, 1998, 1997 and 1996, respectively, over the previous method of computing earnings per share. 30) 33 Basic and diluted earnings per share are computed as follows:
For the years ended March 31 1998 1997 1996 - - ------------------------------------------------------------------------------------------------------------------------------ Basic Net income applicable to common shareholders $30,497,000 $23,254,000 $25,252,000 - - ------------------------------------------------------------------------------------------------------------------------------ Weighted average shares outstanding 26,204,520 22,731,951 22,436,003 - - ------------------------------------------------------------------------------------------------------------------------------ Basic earnings per share $ 1.16 $ 1.02 $ 1.13 - - ------------------------------------------------------------------------------------------------------------------------------ Diluted Net income applicable to common shareholders $30,497,000 $23,254,000 $25,252,000 Add back: Distributions on mandatorily redeemable convertible trust preferred securities, net of tax 112,000 -- -- - - ------------------------------------------------------------------------------------------------------------------------------ Net income applicable to common shareholders $30,609,000 $23,254,000 $25,252,000 - - ------------------------------------------------------------------------------------------------------------------------------ Weighted average shares outstanding 26,204,520 22,731,951 22,436,003 Effect of diluted securities: Common share equivalents of outstanding stock options 570,863 503,919 691,483 Common shares issuable upon conversion of mandatorily redeemable convertible trust preferred securities 173,950 -- -- - - ------------------------------------------------------------------------------------------------------------------------------ Diluted weighted average shares outstanding 26,949,333 23,235,870 23,127,486 - - ------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share $ 1.14 $ 1.00 $ 1.09 - - ------------------------------------------------------------------------------------------------------------------------------
Note 9 - Stock Options The Company has stock option plans which provide for the granting of options to employees and directors to purchase its Common Shares. These plans provide for nonqualified or incentive stock options. Options are granted at the fair market value of the Company's Common Shares on the date of grant and expire 10 years from date of grant. The Company makes no recognition of the options in the financial statements until they are exercised. Pro forma disclosures are provided for 1998 and 1997 as if the Company adopted the cost recognition requirements under Financial Accounting Standard No. 123 ("SFAS 123") - "Accounting for Stock-Based Compensation." Transactions involving the stock option plans are summarized as follows:
Number Average option of shares price per share - - ----------------------------------------------------------------- Outstanding at March 31, 1995 1,581,750 $ 7.95 Exercised (124,442) $ 5.87 Granted 274,000 $14.99 Forfeited (110,734) $10.53 Outstanding at March 31, 1996 1,620,574 $ 9.12 Exercised (86,035) $ 5.74 Granted 7,500 $15.25 Forfeited (59,053) $11.68 Outstanding at March 31, 1997 1,482,986 $ 9.24 Exercised (94,009) $ 8.13 Granted 266,800 $12.43 Forfeited (57,855) $13.74 Outstanding at March 31, 1998 1,597,922 $ 9.68 Exercisable at March 31, 1998 979,426 $ 9.16 Available for grant at March 31, 1998 407,715
Options Outstanding and Exercisable by Price Range as of March 31, 1998
Options Outstanding - - ---------------------------------------------------- Weighted- average Outstanding remaining Weighted- Range of as of contractual average exercise prices 3/31/1998 life exercise price - - ---------------------------------------------------- $ 0.00 - $ 3.00 125,550 2.0 $ 2.96 $ 3.00 - $ 6.00 82,350 3.1 $ 4.52 $ 6.00 - $ 9.00 472,993 5.1 $ 6.11 $ 9.00 - $12.00 224,479 6.1 $11.33 $12.00 - $15.00 499,050 8.0 $12.64 $15.00 - $18.00 193,500 8.0 $15.38 - - ---------------------------------------------------- 1,597,922 6.1 $ 9.68
Options Exercisable - - ---------------------------------------------------- Exercisable Range of as of Weighted-average exercise prices 3/31/1998 exercise price - - ---------------------------------------------------- $ 0.00 - $ 3.00 125,550 $ 2.96 $ 3.00 - $ 6.00 82,350 $ 4.52 $ 6.00 - $ 9.00 271,390 $ 6.11 $ 9.00 - $12.00 140,599 $11.33 $12.00 - $15.00 214,571 $12.78 $15.00 - $18.00 144,966 $15.38 - - ---------------------------------------------------- 979,426 $ 9.16
(31 34 The fair market value of each option granted during 1998 and 1997 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
1998 1997 - - -------------------------------------------------- Dividend yield 1.0% 1.0% Expected volatility 33.1% 34.0% Risk-free interest rate 5.60% 6.39% Expected life 7.3 years 8 years
The weighted average fair value of options granted during 1998, 1997 and 1996 was $5.29, $7.27 and $7.14, respectively. If compensation expense had been recognized for the 1998, 1997 and 1996 grants for stock-based compensation plans in accordance with provisions of SFAS 123, the Company would have recorded net income and diluted earnings per share of $29,851,000 and $1.11, respectively, in 1998; and $22,603,000 and $.97, respectively, in 1997. The pro forma effect for 1996 would have been immaterial. The impact of applying SFAS 123 in this pro forma disclosure is not indicative of future amounts. SFAS 123 does not apply to grants prior to March 31, 1995, and additional grants in future years are anticipated. Note 10 - Financial Instruments and Estimated Fair Values The Company uses forward exchange contracts to reduce exposure to foreign currency fluctuations. Gains or losses resulting from contracts which hedge specific transactions are included in net income offsetting the net income effect of the transaction creating the risk. As of March 31, 1998, there is one contract outstanding for the forward sale of U.S. dollars against Canadian dollars in a notional amount of $2.5 million, which approximates fair value at March 31, 1998. The contract matured on April 30, 1998, and was utilized to hedge U.S. dollar transactions of the Canadian subsidiary. On June 1, 1995, the Company entered into a five-year interest rate swap agreement for a notional amount of $20 million to reduce the impact of increases in interest rates on its outstanding floating rate debt. Under the agreement, the Company will pay interest at a fixed rate of 6.05 percent and will receive interest payments on the same notional amount at a floating rate based on three-month LIBOR (London Interbank Offered Rate). This swap agreement has the effect of converting the floating rate of interest into a fixed rate of 6.05 percent on $20 million of floating rate bank credit borrowings outstanding. The carrying amounts and estimated fair values of the Company's other financial instruments are as follows:
1998 1997 - - ------------------------------------------------------------------------------------------------------ Carrying Fair Carrying Fair amount value amount value - - ------------------------------------------------------------------------------------------------------ Cash and cash equivalents $ 31,999,000 $31,999,000 $ 28,116,000 $ 28,116,000 Notes payable to banks -- -- 20,500,000 20,500,000 Long-term debt: 8.5% Senior Notes 150,000,000 162,000,000 150,000,000 151,084,000 9.79% Senior Notes 8,560,000 8,951,000 11,420,000 11,887,000 Revolving credit borrowings 180,000,000 180,000,000 15,000,000 15,000,000 Interest rate swap -- (106,000) -- 363,000 Mandatorily redeemable convertible trust preferred securities 125,000,000 126,250,000 -- --
The fair value of the 9.79 percent Senior Notes is estimated using rates currently available for securities with similar terms and remaining maturities. The fair value of the interest rate swap is the amount at which it could be settled, based on market estimates. The fair value of the 8.5 percent Senior Notes and the Mandatorily Redeemable Convertible Trust Preferred Securities represents market value. 32) 35 Note 11 - Operating Working Capital Changes and Supplemental Information for the Statements of Cash Flows The components of the changes in operating working capital were:
1998 1997 1996 - - ------------------------------------------------------------------------------------------------------- Accounts receivable $(29,921,000) $(20,002,000) $(18,456,000) Merchandise inventory (78,450,000) (5,712,000) (57,702,000) Prepaid expenses 2,381,000 (3,712,000) (894,000) Accounts payable (7,908,000) (40,675,000) 41,911,000 Income taxes (442,000) 232,000 (3,107,000) Accrued salaries, wages and commissions (3,618,000) (1,520,000) 2,156,000 Other accrued liabilities 2,807,000 2,968,000 4,194,000 - - ------------------------------------------------------------------------------------------------------- Increase in operating working capital $(115,151,000) $(68,421,000) $(31,898,000) - - -------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
1998 1997 1996 - - ------------------------------------------------------------------------------------------------------- Cash paid or received during the year for: Interest $20,942,000 $15,260,000 $ 7,824,000 Income taxes 18,001,000 16,471,000 21,195,000 - - ------------------------------------------------------------------------------------------------------- Non-cash assets and liabilities of business acquired: Working capital $23,456,000 -- $57,817,000 Intangible assets 116,758,000 -- 33,208,000 Other assets 2,912,000 -- 5,648,000 Long-term debt assumed (18,141,000) -- (30,000,000) Minority interest (1,732,000) -- -- Investment in 50%-owned company at date of acquisition -- -- (16,790,000) - - -------------------------------------------------------------------------------------------------------
Note 12 - Employee Retirement Plans The Company maintains various profit-sharing and thrift plans for all employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, with the Company matching a percentage thereof. The Company may also make contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and Company matching contributions were $3,541,000, $3,034,000 and $2,622,000 for 1998, 1997 and 1996, respectively. (33 36 Report of Independent Auditors Shareholders and the Board of Directors Pioneer-Standard Electronics, Inc. We have audited the accompanying consolidated balance sheets of Pioneer-Standard Electronics, Inc. as of March 31, 1998, and 1997 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pioneer-Standard Electronics, Inc. at March 31, 1998, and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Cleveland, Ohio May 5, 1998 Quarterly Financial Data
(Unaudited) - - ------------------------------------------------------------------------------------------------------ Fiscal year First Second Third Fourth ending March 31 quarter quarter quarter quarter Year - - ------------------------------------------------------------------------------------------------------ 1998 Net sales $396,264,000 $431,284,000 $424,148,000 $433,569,000 $1,685,265,000 Gross profit 68,711,000 74,490,000 75,742,000 79,656,000 298,599,000 Net income 7,305,000 7,459,000 8,439,000 7,294,000 30,497,000 Net income per share: Basic .28 .29 .32 .28 1.16 Diluted .28 .28 .31 .27 1.14 - - ------------------------------------------------------------------------------------------------------ 1997 Net sales $375,156,000 $357,683,000 $384,385,000 $391,485,000 $1,508,709,000 Gross profit 66,166,000 61,286,000 64,924,000 66,460,000 258,836,000 Net income 6,151,000 4,533,000 5,625,000 6,945,000 23,254,000 Net income per share: Basic .27 .20 .25 .30 1.02 Diluted .27 .20 .24 .29 1.00 - - ------------------------------------------------------------------------------------------------------
34) 37 Dividend Information and Price Range of Common Shares
Fiscal year First Second Third Fourth ending March 31 quarter quarter quarter quarter Year - - ------------------------------------------------------------------------------------------------------ 1998 High $14.13 $17.75 $18.25 $16.88 $18.25 Low 11.38 13.25 14.00 11.38 11.38 Close 13.50 17.19 15.25 12.25 12.25 Dividends paid .03 .03 .03 .03 .12 - - ------------------------------------------------------------------------------------------------------ 1997 High $16.50 $14.25 $13.75 $15.63 $16.50 Low 12.50 11.00 10.25 12.50 10.25 Close 13.25 11.25 13.13 12.75 12.75 Dividends paid .03 .03 .03 .03 .12 - - ------------------------------------------------------------------------------------------------------
As of May 1, 1998, there were 31,138,554 Common Shares (including 4,780,000 subscribed Common Shares - see Note 7) of Pioneer-Standard Electronics, Inc. outstanding, and there were 2,962 shareholders of record. The market price of Pioneer-Standard Electronics, Inc. Common Shares at the close of business May 1, 1998, was $12.50. See Note 3 for information regarding dividend restrictions. Quarterly Stock Prices [Graphic] (35 38 Financial Review Five-Year Summary of Operations
(Dollars in thousands except per share amounts) For the year ended March 31 1998 1997 1996 1995 1994 - - ---------------------------------------------------------------------------------------------------------------------------------- Combined sales (Pioneer-Standard Electronics, Inc. and Pioneer-Standard of Maryland, Inc.) $ 1,685,265 $ 1,508,709 $ 1,325,047 $ 1,200,252 $ 1,002,758 Pioneer-Standard Electronics, Inc. Net sales 1,685,265 1,508,709 1,105,281 832,152 580,757 Interest expense 20,717 17,066 8,136 3,966 2,687 Income before income taxes and equity in earnings of Pioneer-Standard of Maryland, Inc. 52,233 40,321 43,812 39,713 28,702 Equity in earnings (loss) of Pioneer-Standard of Maryland, Inc. -- -- (173) 2,500 3,001 Income taxes 21,624 17,067 18,387 17,204 12,027 Net income 30,497 23,254 25,252 25,009 19,676 - - ---------------------------------------------------------------------------------------------------------------------------------- Year-end position Accounts receivable 303,599 209,086 189,296 133,987 81,155 Inventory 349,100 243,940 238,370 123,008 85,754 Working capital 461,449 298,535 224,840 131,438 85,132 Net property and equipment 87,727 52,594 48,679 30,929 25,572 Total assets 957,503 592,513 559,110 327,415 220,039 Long-term debt 336,234 173,587 164,447 56,318 22,272 Shareholders' equity 244,996 213,979 150,693 126,415 102,740 Weighted shares outstanding Basic 26,204,520 22,731,951 22,436,003 22,355,630 22,065,568 Diluted 26,949,333 23,235,870 23,127,486 22,886,877 22,677,035 Average number of employees 2,199 2,042 1,647 1,213 1,003 - - ---------------------------------------------------------------------------------------------------------------------------------- Per share data Basic net income per share 1.16 1.02 1.13 1.12 .89 Diluted net income per share 1.14 1.00 1.09 1.09 .87 Cash dividends paid per share .12 .12 .106 .075 .058 Shareholders' equity per share 9.30 8.22 6.70 5.65 4.61 Price range of common shares High 18.25 16.50 19.25 13.17 12.55 Low 11.38 10.25 10.75 9.17 5.33 - - ---------------------------------------------------------------------------------------------------------------------------------- Measurement data Gross margin percent of sales 17.7 17.2 18.3 18.6 19.8 Net income percent of sales 1.8 1.5 2.3 3.0 3.4 Net income percent of average shareholders' equity 13.3 14.2 18.2 21.8 21.1 Sales per employee 766 739 671 686 579 Accounts receivable days outstanding at year end 44 47 45 47 43 Turns on annual average inventory 4.4 5.2 5.4 6.5 6.1 Interest bearing debt percent of equity plus debt (including convertible trust preferred securities as equity) 48 48 56 34 21
The Company acquired the remaining 50 percent of the common stock of Pioneer-Standard of Maryland, Inc. on November 30, 1995. The consolidated statements include the operating results of Maryland from the date of acquisition. Prior to the acquisition, the Company accounted for its investment in Maryland under the equity method of accounting. 36) 39 Corporate Directory Arthur Rhein John V. Goodger President and Chief Operating Vice President, Treasurer Directors Officer of the Company and Assistant Secretary James L. Bayman 1 Edwin Z. Singer 1,2,3 William A. Papenbrock Chairman and Chairman of the Board, Secretary Chief Executive Officer Sandusco, Inc. of the Company (wholesale merchandising, real estate) Arthur Rhein President and Chief Operating Charles F. Christ Thomas C. Sullivan 1,3 Officer Retired Vice President and General Chairman of the Board and Manager of Components Division, Chief Executive Officer, RPM, Inc. Corporate Offices Digital Equipment Corporation (specialty coating and membranes) (computer and office equipment) Pioneer-Standard Electronics, Inc. Karl E. Ware 2 4800 East 131st Street Frederick Downey 1 Chairman and Chief Executive Officer, Cleveland, Ohio 44105 President, FA Downey Associates, Inc. Ware Industries, Inc. Phone: (216) 587-3600 (venture capital/consulting) (metal wire forms and steel components) Legal Counsel Victor Gelb 1,2,3 1 Executive Committee President, Victor Gelb Inc. 2 Audit Committee Calfee, Halter & Griswold LLP (industrial fibers) 3 Compensation Committee 1400 McDonald Investment Center 800 Superior Avenue Gordon E. Heffern 3 Corporate Officers Cleveland, Ohio 44114 Retired Chairman of the Board and Chief Executive Officer, James L. Bayman Independent Auditors Society Corporation and Society Chairman and National Bank Chief Executive Officer Ernst & Young LLP (banking) 1300 Huntington Building Cleveland, Ohio 44115
Shareholder Information Transfer Agent and Registrar National City Bank Corporate Trust Operations P.O. Box 92301 Cleveland, Ohio 44139-0900 800-622-6757 Common Shares Nasdaq Symbol-PIOS Quoted in the National Market System Trustee 8.5 Percent Senior Notes Star Bank, N.A. 425 Walnut Street P.O. Box 1118 Cincinnati, Ohio 45201-1118 Dividend Reinvestment and Stock Purchase Plan The plan allows for full or partial dividend reinvestment, and additional monthly cash investment up to $5,000 per month, in Pioneer-Standard Common Shares without brokerage commissions or service charges on stock purchases. If you are interested in joining the Plan and need an authorization form and/or more background information, please call National City Bank, Corporate Trust Operations at 800-622-6757. Form 10-K A copy of the Company's Form 10-K annual report, which is filed with the Securities and Exchange Commission, may be obtained by writing Treasurer's Office, Pioneer-Standard Electronics, Inc., 4800 East 131st Street, Cleveland, Ohio 44105. Annual Meeting Shareholders and other interested persons are cordially invited to attend the annual meeting of shareholders at 11:00 a.m. July 28, 1998, at the Cleveland South Hilton Inn, 6200 Quarry Lane, Cleveland, Ohio. Affirmative Action Policy Pioneer-Standard Electronics, Inc. is an equal opportunity and affirmative action employer committed to a policy of equal employment opportunity for all persons, regardless of race, color, sex, religion, national origin, ancestry, age, marital status, disability or veteran status. World Wide Web site: http://www.pios.com 40 Pioneer-Standard Electronics, Inc. 4800 East 131st Street, Cleveland, Ohio 44105 Phone: 216-587-3600 Internet:www.pios.com EX-21 14 EXHIBIT 21 1 Exhibit 21 SUBSIDIARIES OF PIONEER-STANDARD ELECTRONICS, INC. State or jurisdiction Subsidiaries of the Company of organization or incorporation - - --------------------------- -------------------------------- Pioneer-Standard of Maryland, Inc. Maryland Pioneer-Standard Canada Inc. Ontario Pioneer-Standard FSC, Inc. Virgin Islands of the United States Pioneer-Standard Illinois, Inc. Delaware Pioneer-Standard Minnesota, Inc. Delaware Pioneer-Standard Electronics, Ltd. Delaware Dickens Data Systems, Inc. Georgia The Dickens Services Group, a Pioneer-Standard Company, LLC Delaware EX-23 15 EXHIBIT 23 1 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Pioneer-Standard Electronics, Inc. of our report dated May 5, 1998 included in the 1998 Annual Report to Shareholders of Pioneer-Standard Electronics, Inc. We also consent to the incorporation by reference in the Registration Statements (Forms S-3 and Forms S-8) listed below and the related prospectuses of Pioneer-Standard Electronics, Inc. of our reports dated May 5, 1998 with respect to the consolidated financial statements and schedule of Pioneer-Standard Electronics, Inc. incorporated by reference and included in this Annual Report (Form 10-K) for the year ended March 31, 1998: - Registration of 220,000 Common Shares (Form S-3 No. 333-26697) - Registration of $200,000,000 of Debt Securities and Common Shares (Form S-3 No. 333-07665) - 1995 Stock Option Plan for Outside Directors of Pioneer-Standard Electronics, Inc. (Form S-8 No. 333-07143) - 1991 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. (Forms S-8 No. 33-46008 and 33-53329) - 1982 Incentive Stock Option Plan of Pioneer-Standard Electronics, Inc. (Form S-8 No. 33-18790) ERNST & YOUNG LLP Cleveland, Ohio June 16, 1998 EX-27 16 EXHIBIT 27
5 1,000 YEAR MAR-31-1998 APR-01-1997 MAR-31-1998 31,999 0 311,397 7,798 349,100 700,610 135,803 48,076 957,503 239,161 462,759 0 0 9,256 235,740 957,503 1,685,265 1,685,265 1,386,666 1,386,666 225,649 0 20,717 52,233 21,624 30,497 0 0 0 30,497 1.16 1.14
EX-99.A 17 EXHIBIT 99(A) 1 Exhibit 99(a) ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YY) 6/16/98 PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION Aon Risk Services, Inc. of Ohio ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. Skylight Office Tower THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE 1660 West 2nd Street, Suite 650 COVERAGE AFFORDED BY THE POLICIES BELOW. Cleveland, OH 44113 ------------------------------------------------------ 216-621-8100 COMPANIES AFFORDING COVERAGE -------------------------------- Company A Royal Insurance of America - - -------------------------------------------------------------------------------- INSURED Company B Pioneer-Standard Electronics, -------------------------------- Inc. Company 4800 East 131st Street C Cleveland, OH 44105 -------------------------------- Company D - - -------------------------------------------------------------------------------- COVERAGES THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES, LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. - - --------------------------------------------------------------------------------
POLICY POLICY CO POLICY EFFECTIVE DATE EXPIRATION DATE LTR TYPE OF INSURANCE NUMBER (MM/DD/YY) (MM/DD/YY) LIMITS - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ OTHER A EXCESS DIRECTORS & PSF000178 11/01/97 11/01/00 $10,000,000 Ea Loss OFFICERS LIABILITY $10,000,000 Ea Policy Year - - ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS - - -------------------------------------------------------------------------------- CERTIFICATE HOLDER To Whom It May Concern - - -------------------------------------------------------------------------------- CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENT OR REPRESENTATIVES. - - -------------------------------------------------------------------------------- AUTHORIZED REPRESENTATIVE 701091000 /s/ Monica H. Peres ACORD 25-S (1/95) B ACORD CORPORATION 1988 2 ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YY) 6/16/98 PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION Aon Risk Services, Inc. of Ohio ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. Skylight Office Tower THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE 1660 West 2nd Street, Suite 650 COVERAGE AFFORDED BY THE POLICIES BELOW. Cleveland, OH 44113 ------------------------------------------------------ 216-621-8100 COMPANIES AFFORDING COVERAGE ------------------------------------------------------ Company A Federal Insurance Company - - ------------------------------------------------------------------------------------------------------ INSURED Company B Pioneer-Standard Electronics, ------------------------------------------------------ Inc. Company 4800 East 131st Street C Cleveland, OH 44105 ------------------------------------------------------ Company D - - ------------------------------------------------------------------------------------------------------ COVERAGES THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. - - ------------------------------------------------------------------------------------------------------
POLICY POLICY CO POLICY EFFECTIVE DATE EXPIRATION DATE LTR TYPE OF INSURANCE NUMBER (MM/DD/YY) (MM/DD/YY) LIMITS - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ OTHER A DIRECTORS & OFFICERS 8102-64-55I 11/01/97 11/01/00 $25,000,000 Ea Loss LIABILITY $25,000,000 Ea Policy Year - - ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS - - -------------------------------------------------------------------------------- CERTIFICATE HOLDER To Whom It May Concern - - -------------------------------------------------------------------------------- CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES. - - -------------------------------------------------------------------------------- AUTHORIZED REPRESENTATIVE 701091000 /s/ Monica H. Peres ACORD CORPORATION 1988 - -----END PRIVACY-ENHANCED MESSAGE----- -----END PRIVACY-ENHANCED MESSAGE-----