-----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, Tzffdgn+lchD2QBsO51U0SIBc5kSD5YTC/8V7s1ll+pI6CaMVoEChOw+HDnGSjUz mHsNx+XnWkWV7wFpXaBagQ== 0000950137-03-001524.txt : 20030318 0000950137-03-001524.hdr.sgml : 20030318 20030318170844 ACCESSION NUMBER: 0000950137-03-001524 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20030103 FILED AS OF DATE: 20030318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANIXTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000052795 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 941658138 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10212 FILM NUMBER: 03608123 BUSINESS ADDRESS: STREET 1: 4711 GOLF RD CITY: SKOKIE STATE: IL ZIP: 60076 BUSINESS PHONE: 8477152568 MAIL ADDRESS: STREET 1: 4711 GOLF RD CITY: SKOKIE STATE: IL ZIP: 60076 FORMER COMPANY: FORMER CONFORMED NAME: ITEL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SSI COMPUTER DATE OF NAME CHANGE: 19710316 FORMER COMPANY: FORMER CONFORMED NAME: SSI COMPUTER CORP DATE OF NAME CHANGE: 19690727 10-K 1 c75506e10vk.txt ANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 3, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-5989 ANIXTER INTERNATIONAL INC. (Exact name of Registrant as specified in its charter) DELAWARE 94-1658138 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
4711 GOLF ROAD SKOKIE, ILLINOIS 60076 (847) 677-2600 (Address and telephone number of principal executive offices in its charter) SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED --------------------- ------------------- Common stock, $1 par value New York Stock Exchange Convertible notes due 2020 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE. 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 requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulations 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 or any amendment to this Form 10-K. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ] The aggregate market value of the shares of Registrant's Common Stock, $1 par value, held by nonaffiliates of Registrant was approximately $877,146,000 as of June 28, 2002. At March 7, 2003, 37,244,174 shares of Registrant's Common Stock, $1 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of the Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders of Anixter International Inc. are incorporated by reference into Part III. This document consists of 55 pages. Exhibit List begins on page 44. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business of the Company..................................... 1 Item 2. Properties.................................................. 4 Item 3. Legal Proceedings........................................... 4 Item 4. Submission of Matters to a Vote of Security Holders......... 4 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................... 5 Item 6. Selected Financial Data..................................... 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 6 Item 7A. Quantitative and Qualitative Disclosures about Market Risk........................................................ 15 Item 8. Consolidated Financial Statements and Supplementary Data.... 16 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 50 PART III Item 10. Directors and Executive Officers of the Registrant.......... 51 Item 11. Executive Compensation...................................... 51 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 51 Item 13. Certain Relationships and Related Transactions.............. 51 Item 14. Controls and Procedures..................................... 51 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 52
i PART I ITEM 1. BUSINESS OF THE COMPANY. (A) GENERAL DEVELOPMENT OF BUSINESS Anixter International Inc. (the "Company"), formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is engaged in the distribution of communications and specialty wire and cable products and fasteners and small parts ("C" Class inventory components) through Anixter Inc. and its subsidiaries (collectively "Anixter"). In September 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. ("Pentacon"), a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services, pursuant to Pentacon's plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code. See Note 4 "Acquisition and Divestiture of Businesses" in the Notes to the Consolidated Financial Statements for additional information on the acquisition of Pentacon. In the fourth quarter of 1998, the Company decided to exit its Integration segment and accordingly, the Integration segment is reflected as a discontinued operation in these financial statements. The European Integration business was sold in the fourth quarter of 1998. In 1999, the Company completed the disposal of the Integration segment with North America Integration being sold in the first quarter of 1999 followed by the sale of Asia Pacific Integration in the fourth quarter of 1999. As of January 2, 1998, the Company owned approximately 19% of ANTEC Corporation and its subsidiaries (collectively "ANTEC"), a broadband communications technology company, which was reduced from 31% in February 1997, by the issuance of additional stock by ANTEC in connection with a merger. In 1998, the Company sold its remaining 19% interest in ANTEC. In June 1998, the Company purchased 100% of the outstanding common stock of Pacer Electronics, Inc., a distributor of wire and cable products, along with value added services, to original equipment manufacturers in the electronics industry. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company is engaged in the distribution of communications and specialty wire and cable products and "C" Class inventory components from top suppliers to contractors and installers and to end users, including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company is organized by geographic regions, and accordingly, has identified North America (United States and Canada), Europe and Asia Pacific and Latin America as reportable segments. The Company obtains and coordinates financing, legal, tax, information technology and other related services, certain of which are rebilled to subsidiaries. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. In 2001, 10.3% of total sales were to Lucent Technologies and its subsidiaries. No other customer accounts for 10% or more of sales in 2002, 2001 or 2000. For certain financial information concerning the Company's business segments, see Note 12 "Business Segments" in the Notes to the Consolidated Financial Statements. (C) NARRATIVE DESCRIPTION OF BUSINESS Overview Anixter is the leading global distributor of data, voice, video and security network communication products. In addition, Anixter is the largest North American distributor of specialty wire and cable products. Through its recent purchase of Pentacon, Anixter also distributes "C" Class inventory components. "C" Class inventory components are incorporated into a wide variety of end use applications and include screws, bolts, nuts, washers, pins, rings, fittings, springs, electrical connectors and similar small parts, many of which are specialized or highly engineered for particular applications. 1 The Company is an industry leader in the provision of advanced inventory management services including procurement, just-in-time delivery, quality assurance testing, advisory engineering services, component kit production, small component assembly and e-commerce and electronic data interchange to a broad spectrum of customers. The Company's comprehensive supply chain management solutions are designed to reduce customer procurement and management costs and enhance overall production efficiencies. Inventory management services are frequently provided under customer contracts for some periods in excess of one year and include the interfacing of Anixter and customer information systems and the maintenance of dedicated distribution facilities. Customers The Company sells products to 82,000 active customers. These customers include international, national, regional, and local companies that include end users of the Company's products, installers and resellers of the Company's products and Original Equipment Manufacturers who use the Company's products as a component of their end product. Customers for the Company's products cover all industry groups including manufacturing, telecommunications, internet service, finance, education, health care, transportation, utilities and government as well as contractors, installers, system integrators, value added resellers, architects, engineers and wholesale distributors. The average order size is approximately $1,500. Products Anixter sells approximately 185,000 products. These products include communications (voice, data, video and security) products used to connect personal computers, peripheral equipment, mainframe equipment, security equipment, and various networks to each other. The products include an assortment of transmission media (copper and fiber optic cable), connectivity products and support and supply products. These products are incorporated in enterprise networks, physical security networks, central switching offices, web hosting sites and remote transmission sites. Anixter also provides industrial wire and cable products, including electrical and electronic wire and cable, control and instrumentation cable and coaxial cable that is used in a wide variety of maintenance and repair and construction related applications. The Company also provides a wide variety of electrical and electronic wire and cable products, fasteners and other small components that are used by OEM's in manufacturing a wide variety of products. Suppliers The Company sources products from approximately 2,000 suppliers. However, approximately 35% of Anixter's dollar volume purchases in 2002 were from the five largest suppliers. An important element of Anixter's overall business strategy is to develop and maintain close relationships with its key suppliers, which include the world's leading manufacturers of communication cabling, connectivity, support and supply products, electrical wiring systems, and fasteners. Such relationships stress joint product planning, inventory management, technical support, advertising and marketing. In support of this strategy, Anixter does not compete with its suppliers in product design or manufacturing activities. Significant terms of the Company's typical distribution agreement are described as follows: - A non-exclusive right to re-sell products to any customer in a geography (typically defined as a country); - Usually cancelable upon 90 days notice by either party for any reason; - Excludes any minimum purchase agreements, although pricing may change with volume on a prospective basis; - The right to pass through the manufacturer's warranty to Anixter's customers. 2 Distribution and Service Platform Anixter cost-effectively serves its customers' needs through its proprietary computer system, which connects most of its warehouses and sales offices throughout the world. The system is designed for sales support, order entry, inventory status, order tracking, credit review and material management. Customers may also conduct business through Anixter's e-commerce platform, one of the most comprehensive, user-friendly and secure Websites in the industry. Anixter operates a series of large modern hub warehouses in key distribution centers in North America, Europe, Asia and Latin America that provide for cost-effective and reliable storage and delivery of products to its customers. The hub warehouses store the bulk of Anixter's inventory. Some smaller warehouses are also maintained to maximize transportation efficiency and to provide for the local pick-up needs of customers in certain cities. This network consists of 108 locations in the United States, 16 in Canada, 11 in the United Kingdom, 24 in Continental Europe, 12 in Latin America, 12 in Asia and 4 in Australia/New Zealand. Anixter has also developed close relationships with certain freight, package delivery and courier services to minimize transit times between its facilities and customer locations. The combination of its information systems, distribution network and delivery partnerships allows Anixter to provide a high level of customer service while maintaining a reasonable level of investment in inventory and facilities. Employees At January 3, 2003, the Company and its subsidiaries employed approximately 5,000 people. Less than 1 percent of the Company's employees are covered by collective bargaining agreements. Competition Given the Company's role as an aggregator of many different types of products from many different sources and the fact that these products are sold to many different industry groups, there is no well defined industry group against which the company competes. The Company views the competitive environment as highly fragmented with hundreds of distributors and manufacturers that sell products directly or through multiple distribution channels to end users or other resellers. Competition is based primarily on breadth of products, quality, services, price and geographic proximity. Anixter believes that it has a significant competitive advantage due to its comprehensive product offering, highly skilled workforce, and global distribution network. The Company can ship 99% of orders for delivery within 24 to 48 hours to all major global markets. In addition, the Company has common systems and processes in 40 countries around the world that provide its customers and suppliers global consistency. Anixter enhances its value proposition to both key suppliers and customers through its industry leading specifications and testing lab in suburban Chicago. In this Underwriter Laboratories-certified lab, Anixter works with key suppliers to develop product specifications and to test compliance. The Company uses the same lab to design and test various product configurations for customers in order to optimize their network performance. In addition to competitive factors, future performance could be subject to economic downturns, possible rapid changes in applicable technologies, regulatory changes or liquidity problems that may be experienced by the Company's two largest customers. Although relationships with its suppliers are good, the loss of a major supplier could have a temporary adverse effect on the Company's business, but would not have a lasting impact since comparable products are available from alternate sources. Many of the Company's competitors, including the two largest competitors, are privately held, and as a result reliable competitive information is not available. Contract Sales and Backlog The Company has a number of customers who purchase products under long-term (generally 3 to 5 year) contractual arrangements. In such circumstances the relationship with the customer typically involves a high 3 degree of material requirements planning and information systems interfaces and in some cases may require the maintenance of a dedicated distribution facility to meet the needs of the customer. Such contracts do not generally require the customer to purchase any minimum amount of goods from the Company, but would provide that materials acquired as a result of joint material requirements planning between the Company and the customer would be required to be purchased by the customer. Backlog orders are not material as a significant amount of orders are shipped within 24 to 48 hours of receipt. Available Information The Company maintains an Internet web site at http://www.anixter.com that includes links to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports. These forms are available without charge as soon as reasonably practical following the time they are filed with or furnished to the SEC. Shareholders and other interested parties may request email notification of the posting of these documents through the Investor Relations section of the Company's Website. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES For information concerning foreign and domestic operations and export sales, see Note 9 "Income Taxes" and Note 12 "Business Segments" in the Notes to the Consolidated Financial Statements. ITEM 2. PROPERTIES. The Company's distribution network consists of 142 warehouses in 40 countries with approximately 4 million square feet. There are 13 regional distribution centers (100,000 - 575,000 square feet), 22 local distribution centers (35,000 - 100,000 square feet) and 107 service centers. Additionally, the Company has 45 sales offices throughout the world. All these facilities are leased. No one facility is material to operations, and the Company believes there is ample supply of alternative warehousing space available on similar terms and conditions in each of its markets. ITEM 3. LEGAL PROCEEDINGS. From time to time, in the ordinary course of business, the Company and its subsidiaries become involved as plaintiffs or defendants in various legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts which may be material. However, it is the opinion of the Company's management, based upon the advice of its counsel, that the ultimate disposition of pending litigation will not be material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the fourth quarter of 2002, no matters were submitted to a vote of the security holders. 4 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Anixter International Inc.'s Common Stock is traded on the New York Stock Exchange under the symbol AXE. Stock price information is set forth in Note 13 "Selected Quarterly Financial Data (Unaudited)" in the Notes to the Consolidated Financial Statements. As of March 7, 2003, the Registrant had 4,079 shareholders of record. ITEM 6. SELECTED FINANCIAL DATA.
FISCAL YEAR ---------------------------------------------------- 2002* 2001 2000 1999 1998 -------- -------- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Results of operations: Net sales................................ $2,520.1 $3,144.2 $3,514.4 $2,712.0 $2,390.1 Operating income (a)..................... 87.7 102.0 189.8 112.8 87.0 Interest expense and other, net (b)...... (15.2) (43.8) (55.2) (34.6) (34.8) Gain on ANTEC investment................. -- -- -- -- 24.3 Income from continuing operations (c).... 43.5 33.6 78.7 69.7 44.7 Income from discontinued operations...... -- -- -- 54.5 20.9 Extraordinary loss on early extinguishment of debt................ (0.4) (3.3) -- -- -- Net income............................... 43.1 30.3 78.7 124.2 65.6 Basic income per share: Continuing operations................. $ 1.18 $ 0.92 $ 2.15 $ 1.86 $ 1.00 Net income............................ 1.17 0.83 2.15 3.31 1.46 Diluted income per share: Continuing operations................. $ 1.14 $ 0.89 $ 2.03 $ 1.83 $ 0.99 Net income............................ 1.13 0.80 2.03 3.26 1.45 Financial position at year-end: Total assets............................. $1,226.0 $1,198.8 $1,686.0 $1,434.7 $1,335.1 Total debt............................... $ 195.1 $ 241.1 $ 451.9 $ 468.0 $ 543.6 Stockholders' equity (d)................. $ 634.8 $ 563.1 $ 554.9 $ 456.4 $ 411.5 Diluted book value per share............. $ 16.71 $ 14.90 $ 13.57 $ 11.99 $ 9.09 Diluted shares........................... 38.0 37.8 40.9 38.1 45.3 Year end outstanding shares.............. 37.5 36.9 37.7 35.9 41.9
*On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc.("Pentacon"), for $108.5 million. The acquisition was accounted for as a purchase and the results of operations of the acquired business are included in the consolidated financial statements from the date of acquisition. Pentacon's operations in 2002 were not significant to the Company. See Note 3 "Acquisitions and Divestiture of Businesses" in the Notes to the Consolidated Financial Statements for further information. - --------------- Notes: (a) In the third quarter of 2001, the Company incurred a restructuring charge of $31.7 million associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. Additionally, 2001, 2000, 1999 and 1998 include goodwill amortization of $9.0 million, $8.4 million, $7.4 million and $7.1 million, respectively. 5 (b) In the fourth quarter of 2000, the Company incurred an $8.8 million charge relating to the discount on the initial sale of accounts receivable to an unconsolidated wholly owned special purpose corporation in connection with an accounts receivable securitization program. (c) In the third quarter of 1999, the Company recorded a $24.3 million tax benefit in continuing operations for the reversal of previously established tax reserves determined to be no longer necessary. (d) Stockholders' equity reflects treasury stock purchases of $46.9 million, $15.4 million, $91.9 million and $101.8 million in 2001, 2000, 1999 and 1998, respectively. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following Management's Discussion and Analysis of Financial Condition and Results of Operations may contain various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the use of forward-looking terminology such as "believes", "expects", "prospects", "estimated", "should", "may" or the negative thereof or other variations thereon or comparable terminology indicating the Company's expectations or beliefs concerning future events. The Company cautions that such statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, a number of which are identified in this report. Other factors also could cause actual results to differ materially from expected results included in these statements. These factors include general economic conditions, technology changes, changes in supplier or customer relationships, exchange rate fluctuations and new competitors. The information contained in this financial review should be read in conjunction with the consolidated financial statements, including the notes thereto, on pages 18 to 41 of this Report. FINANCIAL LIQUIDITY AND CAPITAL RESOURCES Acquisition of Pentacon, Inc. On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. ("Pentacon"), pursuant to Pentacon's plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code. Pentacon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services and has 21 distribution and sales facilities in the United States, along with sales offices and agents in Europe, Canada, Mexico and Australia. The Company paid a total of $108.5 million for tangible assets with a fair value of approximately $81.7 million. The tangible net assets primarily consist of accounts receivable, inventory, office and warehouse equipment and furnishings, accounts payable and select operating liabilities. Based upon a third party valuation, intangible assets have also been recorded at an estimated fair value as follows: $13.8 million of intangible assets with finite lives (customer relationships) and a $1.8 million intangible asset with an indefinite life (trade name). Goodwill resulting from the transaction totaled $14.1 million. The Company agreed to hire the existing Pentacon employees and assume the lease obligations for certain of its operating facilities. The acquired assets will be used in substantially the same manner in which they were utilized by Pentacon. The Company has incurred approximately $2.9 million of transaction-related costs that have been capitalized as part of the acquisition. In addition, the Company agreed to pay $1.2 million in retention bonuses, $1.0 million of which was expensed in the fourth quarter of 2002 and $0.1 million will be expensed in each year of 2003 and 2004. The acquisition was accounted for as a purchase and the results of operations of the acquired business are included in the consolidated financial statements from the date of acquisition. Included in the results of the Company for 2002 are $51.5 million of sales and $0.5 million of operating profit related to Pentacon. Pentacon had sales of $205.3 million in 2002. 2001 Restructuring Staff Reductions: The Company has completed all of the approximately 700 staff reductions (approximately 13% of the total workforce prior to the announcement) that were originally anticipated in the 6 restructuring charge. In 2002, the Company paid $4.5 million in severance and termination benefits. During the second quarter of 2002, the Company recorded an additional charge of $0.4 million for severance associated with headcount reductions in Europe. The Company's results of operations were not impacted by this charge, as it was offset by the reversal of excess accruals in North America and Asia Pacific. The Company estimates that staff reductions resulted in savings of approximately $39.6 million in 2002. Facility Restructuring: In the fourth quarter of 2001, the Company vacated substantially all of the 900,000 square feet of space located in 35 warehouses and sales locations. The reduction in square feet represented approximately 18% of the total square footage the Company occupied prior to the restructuring initiative. In 2002, the Company paid out $6.3 million related to exit costs for these facilities. During the second quarter, the Company recorded an additional charge for the facility consolidation in our UK operation of $1.0 million. The Company's consolidated results of operations were not impacted by the charge, as it was offset by the reduction in excess accruals in North America and Asia Pacific. The Company estimates the 2002 operating expense savings were $7.8 million. Korea: The Company closed operations in Korea during the fourth quarter of 2001. The remaining accrued expense of $1.4 million is needed to cover the legal proceedings against Anixter Korea. Other Items: The remaining accrued expense of $0.3 million is needed for legal costs associated with the restructuring. Financings On June 28, 2000, the Company issued $792.0 million 7% zero-coupon convertible notes ("Convertible Notes") due 2020. The net proceeds from the issue were $193.4 million and were initially used to repay working capital borrowings under the floating rate bank line of credit. The discount associated with the issuance is being amortized through June 28, 2020, using the effective interest rate method. During 2002, the Company repurchased Convertible Notes with a notional amount of $378.7 million and a book carrying value of $109.7 million for $107.2 million. In addition, the Company wrote-off related debt issuance costs of $2.8 million. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt of $0.3 million ($0.2 million, net of tax) in its Consolidated Statement of Operations for the year ended January 3, 2003. Holders of the remaining Convertible Notes may convert at any time on or before the maturity date, unless the notes have previously been redeemed or purchased, into 7.4603 shares of the Company's common stock for which the Company has reserved 3.1 million shares. Additionally, holders may require the Company to purchase at book value, all or a portion of their Convertible Notes on June 28, 2005, at a price of $356.28 per Convertible Note; on June 28, 2010, at a price of $502.57 per Convertible Note; and on June 28, 2015, at a price of $708.92 per Convertible Note. The Company may choose to pay the purchase price in cash or common stock or a combination of both. See Exhibit 4.2 for the calculation of the purchase price if the Company were to choose to pay in common shares. The Convertible Notes are structurally subordinated to the indebtedness of Anixter Inc. ("Anixter"). At January 3, 2003, the remaining face value of the Convertible Notes outstanding was $413.3 million with a book value of $124.0 million. On October 6, 2000, the Company entered into two financing arrangements to support further business growth. The agreements consisted of a $500.0 million, senior unsecured, revolving credit agreement and a $275.0 million accounts receivable securitization program which was amended and restated in October 2002. This new revolving credit line included a $390.0 million, five-year agreement, plus a $110.0 million, 364-day agreement. As a result of the economic slowdown experienced in 2001 and 2002, these facilities have been scaled down to fit the Company's current anticipated needs through the remainder of the arrangements. On April 24, 2001, Anixter cancelled the $110.0 million, 364-day revolving credit line. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt in 2001 of $0.3 million ($0.2 million, net of tax) to expense the financing fees associated with this portion of the revolving credit agreement. On October 6, 2001, the Company reduced the borrowing capacity on the accounts receivable securitization program from $275.0 million to $225.0 million. In March 2003, Anixter cancelled $115.0 million of the five-year agreement and will record a loss on the early extinguishment of debt of approximately $0.4 million as a nonoperating expense in its Consolidated Statements of Operations for the 13 weeks ended April 4, 2003. 7 The accounts receivable securitization program is conducted through Anixter Receivables Corporation ("ARC"), which is a wholly owned unconsolidated subsidiary of the Company that is accounted for using the equity method. ARC was established in order to take advantage of the lower borrowing costs available under this arrangement versus the borrowing costs on the unsecured revolving credit agreement. The program allows Anixter to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to ARC and consists of a series of 364-day facilities. ARC may in turn sell an interest in these receivables to financial institutions and borrow up to $225.0 million. Prior to the October 6, 2001 borrowing capacity reduction, ARC could borrow up to $275.0 million. The Company reduced the capacity of the facility in order to reduce costs associated with excess availability. Under this arrangement, Anixter continues to service the sold receivables by performing the collection and cash application functions in order to maintain relationships with its customers. These services are billed by Anixter to ARC at cost. The securitization program began in October 2000, at which time $416.8 million of gross accounts receivable were sold and removed from the balance sheet. At January 3, 2003 and December 28, 2001, the outstanding balance of accounts receivable sold to ARC totaled $248.6 million and $296.0 million, respectively. In order to fund the purchase of the accounts receivable from Anixter, ARC incurred long-term debt of $129.7 million and $143.7 million and has a subordinated note payable to Anixter of $69.6 million and $111.4 million at January 3, 2003 and December 28, 2001, respectively. The effective interest rate paid by ARC in 2002 and 2001 on the long-term debt was 2.6% and 5.0%, respectively. ARC's long-term debt has not been guaranteed by Anixter or the Company and neither have an obligation, contingent or otherwise, to the holders of ARC's long-term debt. Under this program, ARC is required to maintain ratios that are consistent with other programs arranged by the Company's financial institutions. The financial institutions used by the Company have a significant presence in this type of financing and are familiar with industry norms. ARC is in compliance with all covenant ratios and the Company believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business. See Exhibit 4.7 for definitions of the covenant ratios. A charge of $8.8 million, primarily relating to the discount on the initial sale of accounts receivable to ARC, was recorded at inception of the program in the fourth quarter of 2000. The ongoing discount rate of 2.12% was calculated by a third party and represents a rate equivalent to those in an arms-length transaction. The Company expects to substantially recover this $8.8 million charge during the course of the program. In Other expenses, the Company recorded net charges of $2.7 million, $8.7 million and $3.8 million in 2002, 2001 and 2000, respectively, primarily for the interest expense on the long-term debt incurred by ARC to fund the purchases of the accounts receivable from Anixter. In September 1996, Anixter filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to a $200.0 million aggregate principal amount of unsecured notes. On September 17, 1996, Anixter issued $100.0 million of these notes due September 2003. The notes, which bear interest at 8%, contain various restrictions with respect to secured borrowings and are unconditionally guaranteed by the Company. During 2001, Anixter repurchased $81.3 million of the 8% senior notes for $86.5 million. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt of $5.2 million ($3.1 million, net of tax) in its Consolidated Statement of Operations for the year ended December 28, 2001. During 2002, Anixter repurchased $10.7 million of these senior notes for $11.1 million. Accordingly, the Company recorded an extraordinary loss on the early extinquishment of debt of $0.4 million ($0.2 million, net of tax) in its Consolidated Statement of Operations for the year ended January 3, 2003. At January 3, 2003, the outstanding balance of the 8% notes was $8.0 million. These notes have a put provision that under certain circumstances is triggered by a rating downgrade. The current outstanding balance is well under the cross-default thresholds of Anixter and the Company's other existing indebtedness. Therefore, Anixter and the Company are not exposed to any potentially adverse effects from the put provision. At January 3, 2003, $345.3 million was available under the bank revolving lines of credit at Anixter, of which $10.8 million was available to pay the Company for intercompany liabilities. The primary liquidity source for Anixter is the $390.0 million revolving credit agreement, $59.5 million of which was outstanding at January 3, 2003. The borrowing rate on the revolving credit agreement is LIBOR plus 87.5 basis points and the interest rate on the $59.5 million outstanding balance was 2.9%. In March 2003, $115.0 million of this facility was cancelled by the Company in order to reduce costs associated with this excess availability. This revolving credit agreement requires certain covenant ratios to be maintained. The Company is in compliance 8 with all of these covenant ratios and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business. See Exhibit 4.3 for definitions of the covenant ratios. Due to the requirement of the leverage ratio, borrowings of only $135.9 million of the $345.3 million available under bank revolving lines of credit at Anixter would be permitted as of January 3, 2003. In 2003, the Company estimates that it will have positive cash flow from operating activities and after capital expenditures. On February 5, 2003, Anixter repurchased, at book value, an additional $2.0 million of the 8% senior notes. The Company will continue to pursue opportunities to repurchase outstanding debt, with the volume and timing to depend on market conditions. The Board of Directors of the Company had authorized the purchase of up to 2.8 million common shares (2.0 million was authorized in 2001 and 0.8 million carried over from prior year authorizations), with the volume and timing to depend on market conditions. In 2001, the Company repurchased 2,079,000 shares at an average cost of $22.57. In February 2003, the Board of Directors of the Company authorized the purchase of up to an additional 0.6 million shares with the volume and timing to depend on market conditions. As of March 13, 2003, Anixter had repurchased an additional 586,100 shares at an average cost of $21.93. Purchases were made on the open market and were financed from cash generated by operations. Cash Flow Year ended January 3, 2003: Consolidated net cash provided by continuing operating activities was $165.7 million in 2002 compared to $288.5 million in 2001. Cash provided by continuing operating activities decreased primarily because the decline in working capital in 2002 was less than the decline in 2001. In 2002, cash generated by the collection of receivables was almost entirely offset by the payments made on accounts payable and accrued expenses. Inventory was further reduced in 2002 by $81.4 million associated with the decline in sales. The Company paid $10.8 million for costs related to the 2001 restructuring. In 2001, accounts receivable decreased, providing cash of $128.5 million. Inventory declined $357.1 million in 2001 as the $120.0 million specifically identified at December 29, 2000 as "inventory returnable to vendors" was returned and the remaining decline was due to reduced purchases as lower levels of inventory were needed to support the reduced sales levels. The increase in cash flow generated by the reduction in inventory was partially offset by the related decrease of $294.5 million in accounts payable and accrued expenses. In 2001, the Company incurred a $31.7 million restructuring charge, $6.6 million of which was non-cash. At January 3, 2003, $6.9 million remained to be paid. Consolidated net cash used in investing activities was $122.4 million in 2002 versus $20.5 million in 2001. In the third quarter of 2002, the Company completed the acquisition of certain assets and liabilities of Pentacon for $110.4 million, including transaction related costs. Also in 2002, $2.9 million was received from the sale of real estate and other fixed assets and $2.0 million from the sale of securities. Capital expenditures decreased $5.1 million from 2001 as spending was reduced due to weak economic conditions. In 2002, capital expenditures includes $11.6 million for the construction of a new corporate headquarters. Capital expenditures in 2001 were primarily for the upgrades of warehouse facilities and the purchase of software and computer equipment. Capital expenditures are expected to be approximately $24.0 million in 2003, $18.0 million of which is for the new corporate headquarters. Consolidated net cash used by financing activities was $48.8 million in 2002 in comparison to $255.8 million in 2001. In 2002, cash used in financing activities includes $107.2 million and $11.1 million for the repurchase of the Convertible Notes and 8% senior notes, respectively. Proceeds from borrowing under the revolving credit agreements were $62.6 million in 2002. The Company received $7.5 million for the issuance of 0.6 million shares of common stock relating to the exercise of stock options and the employee stock purchase program. In 2001, cash used in financing activities included a net repayment of long-term borrowings of $142.4 million, extinquishment of senior notes of $86.5 million and $46.9 million of treasury stock purchases, partially offset by proceeds of $22.3 million received from the issuance of 1.3 million shares of common stock for the exercise of stock options and the employee stock purchase plan. Cash used for discontinued operations was $2.6 million in 2002 compared to $5.8 million in 2001. 9 Year ended December 28, 2001: Consolidated net cash provided by continuing operating activities was $288.5 million in 2001 compared to $67.5 million in 2000. Cash provided by continuing operating activities increased primarily due to a reduction in working capital required to support the business. In 2001, accounts receivable decreased, providing cash of $128.5 million compared to $91.4 million in 2000. Inventory declined $357.1 million as the $120.0 million specifically identified at December 29, 2000 as "inventory returnable to vendors" was returned and the remaining decline was due to reduced purchases as lower levels of inventory were needed to support the reduced sales levels. In 2000, inventory increased $329.7 million, $120.0 million of which represented inventories returnable to vendors, to support the growth in the service provider and integrated supply markets and a significant competitive local exchange carrier contract. The increase in cash flow generated by the reduction in inventory was partially offset by the related decrease of $294.5 million in accounts payable and accrued expenses. In 2000, accounts payable and accrued expenses increased $181.8 million. In 2001, the Company incurred a $31.7 million restructuring charge, of which $6.6 million was non-cash. At December 28, 2001, $17.7 million remained to be paid. Consolidated net cash used in investing activities was $20.5 million in 2001 versus $26.3 million in 2000. Capital expenditures were $22.0 million in 2001 compared to $22.6 million in 2000. Capital expenditures in 2001 were primarily for the upgrades of warehouse facilities and the purchase of software and computer equipment. In the first quarter of 2000, the Company purchased allNet Technologies Pty. Limited in Australia for $6.7 million. In the third quarter of 2000, the Company sold the net assets of a wholly owned U.S. subsidiary of its structured cabling business for $3.0 million in cash and $1.6 million in notes receivable. Consolidated net cash used by financing activities was $255.8 million in 2001 in comparison to $24.4 million in 2000. In 2001, cash used in financing activities included a net repayment of long-term borrowings of $142.4 million, extinquishment of senior notes of $86.5 million and $46.9 million of treasury stock purchases, partially offset by proceeds of $22.3 million received from the issuance of 1.3 million shares of common stock for the exercise of stock options and the employee stock purchase plan. In 2000, net repayment of long-term borrowings was $21.5 million, while treasury stock purchases were $15.4 million. In addition, in 2000 the Company received $34.9 million from the issuance of 2.2 million shares for the exercise of stock options and the employee stock purchase plan. Cash used for discontinued operations was $5.8 million in 2001 compared to $13.5 million in 2000. Interest Expense Interest expense for continuing operations was $15.5 million, $30.1 million and $43.3 million for 2002, 2001 and 2000, respectively. During the second quarter of 2001, the Company incurred $1.7 million in interest expense related to the cancellation of certain interest rate hedge agreements for which there were no longer outstanding borrowings. The decrease in the interest expense in 2002 from 2001 was due to lower debt levels as a result of lower working capital, the repurchase of high interest rate debt and overall lower interest rates. The Company has entered into interest rate agreements that effectively fix or cap, for a period of time, the interest rate on a portion of its floating-rate obligations. As a result, the interest rate on approximately 83% of debt obligations at January 3, 2003, is fixed or capped. Total outstanding debt at January 3, 2003, was $195.1 million for the Company and $129.7 million for ARC. The impact of interest rate swaps and caps for 2002 and 2001 was an increase to interest expense of $0.1 million and $0.3 million, respectively, and a decrease to interest expense of $0.7 million in 2000. Income Taxes Various foreign subsidiaries of the Company had aggregate cumulative net operating loss ("NOL") carryforwards for foreign income tax purposes of approximately $144.7 million at January 3, 2003, which are subject to various provisions of each respective country. Approximately $52.3 million of this amount expires between 2003 and 2012 and $92.4 million of the amount has an indefinite life. Of the $144.7 million NOL carryforwards of foreign subsidiaries, $68.6 million relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at January 3, 2003, were approximately $76.1 million, which are subject to various provisions of each respective country. Approximately $43.5 million of this amount expires 10 between 2003 and 2012 and $32.6 million of the amount has an indefinite life. The deferred tax asset and valuation allowance has been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the U.S. Liquidity Considerations and Other With the deterioration of market conditions in the communication products industry, the Company's two largest customers have experienced significant downturns in their business. This has resulted in each of them incurring large losses and multiple restructuring charges. If these conditions persist for an extended period of time, these customers may experience future liquidity problems. The Company holds a significant amount of accounts receivable and inventory relating to these customers. The Company believes that the inventory and logistics services that it provides to these two customers are critical to their on-going operations. While the Company believes the current risk is minimal, if these customers were to default on their obligations to the Company, the effect could be material. Certain debt agreements entered into by the Company's operating subsidiaries contain various restrictions, including restrictions on payments to the Company. These restrictions have not had nor are expected to have an adverse impact on the Company's ability to meet its cash obligations. RESULTS OF OPERATIONS The Company competes with distributors and manufacturers who sell products directly or through existing distribution channels to end users or other resellers. The Company's relationship with the manufacturers for which it distributes products could be affected by decisions made by these manufacturers as the result of changes in management or ownership as well as other factors. In addition to competitive factors, future performance could be subject to economic downturns, possible rapid changes in applicable technologies, regulatory changes or liquidity problems that may be experienced by the Company's two largest customers. Although relationships with its suppliers are good, the loss of a major supplier could have a temporary adverse effect on the Company's business, but would not have a lasting impact since comparable products are available from alternate sources. Year ended January 3, 2003: Net income was $43.1 million in 2002 compared with $30.3 million in 2001. Due to a combination of increased economic softness and continued deterioration of market conditions in the communications products industry, the Company incurred a restructuring charge of $31.7 million ($19.0 million, net of tax) in the third quarter of 2001 associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. The restructuring resulted in annualized expense reductions of approximately $48.0 million. In 2002, the Company recorded an after-tax extraordinary loss of $0.4 million for the early extinguishment of $109.7 million of the Company's Convertible Notes and $10.7 million of its 8% senior notes. In 2001, the Company recorded an after-tax extraordinary loss of $3.3 million for the early extinguishment of $81.3 million of Anixter's 8% senior notes and debt issuance costs associated with the cancellation of a $110.0 million 364-day revolving credit agreement due 2001. In 2002, the Company no longer amortized goodwill. Operating income for 2001 includes $9.0 million of expense for goodwill amortization. The Company's net sales for the year ended January 3, 2003, declined 19.8% to $2.5 billion from $3.1 billion in 2001. Net sales by major geographic market are presented in the following table:
YEARS ENDED --------------------------- JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) North America............................... $1,996.2 $2,433.5 Europe...................................... 344.9 502.1 Asia Pacific and Latin America.............. 179.0 208.6 -------- -------- $2,520.1 $3,144.2 ======== ========
11 In 2002, North America sales declined 18.0% to $2.0 billion from $2.4 billion in 2001. Excluding Pentacon, sales declined 20.1%. Sales fell across all customer markets. The decline reflects a significant fall in spending in the telecom industry, a reduction in technology-related spending and general overall economic softness. In 2001, sales included $148.3 million related to service provider customers. Due to the significant fall in spending in the telecommunications industry, sales to the service provider market in 2002 were minimal. Europe sales declined 31.3% when compared to 2001. Excluding the effects of changes in exchange rates, sales declined 35.5%. All customer markets were down as international markets also felt the poor economic conditions experienced in North America. In 2001, sales in Europe included $57.0 million to the service provider market which were minimal in 2002. Asia Pacific and Latin America net sales decreased 14.2% from the same period in 2001, reflecting reduced spending in the communications customer market. Excluding the effect of changes in exchange rates, Asia Pacific and Latin America net sales decreased 13.6%. In 2002, operating income decreased 14.0% to $87.7 million from $102.0 million in 2001. Operating margins increased to 3.5% in 2002 from 3.2% in 2001. Excluding the 2001 restructuring charge of $31.7 million and $9.0 million of goodwill amortization expense, operating income declined 38.5% from 2001 to 2002. Gross margins improved to 24.0% in 2002 from 23.4% in 2001. Operating income (loss) by major market is presented in the following table:
YEARS ENDED --------------------------- JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) North America *............................. $ 83.7 $ 89.7 Europe *.................................... 5.3 21.2 Asia Pacific and Latin America*............. (1.3) (8.9) ------ ------ $ 87.7 $102.0 ====== ======
*The year ended December 28, 2001 includes restructuring costs for North America, Europe and Asia Pacific and Latin America of $23.1 million, $2.3 million and $6.3 million, respectively. In addition, 2001 includes goodwill amortization expense of $8.4 million, $0.3 million and $0.3 million for North America, Europe and Asia Pacific. North America operating income decreased 6.5% in 2002 compared to 2001. Excluding 2001 restructuring costs of $23.1 million and goodwill amortization expense of $8.4 million, operating income declined 31.6%. Operating margins increased to 4.2% in 2002 from 3.7% in 2001. Excluding restructuring costs and goodwill amortization in 2001, operating margins declined 80 basis points. As North America gross margins were flat with 2001 at 23.9%, the decline in operating margin is primarily due to the decrease in sales volume. Excluding Pentacon, operating expenses declined 17.6% primarily due to a reduction in headcount and facility expenses resulting from the third quarter 2001 restructuring along with lower variable costs associated with the lower sales volume. Excluding Pentacon, average headcount for the year declined 28.1% from 2001. Europe operating income decreased 74.9% when compared to 2001. Excluding the 2001 restructuring costs of $2.3 million and goodwill amortization expense of $0.3 million, operating income decreased 77.7%, while operating margins declined by 330 basis points to 1.5%. The sharp declines in operating income and margins reflect the 31.3% decline in sales. Europe's gross margins increased 360 basis points to 26.7%, as 2001 included $57.0 million of low margin service provider sales. While cost savings from the 2001 restructuring were achieved, operating expenses declined by only 7.5% reflecting the minimal operating costs incurred on the 2001 service provider sales, $1.4 million of additional restructuring costs incurred in 2002 and the impact of changes in exchange rates. Excluding the effect of exchange rates, restructuring costs and goodwill amortization expense, operating expenses decreased 11.6% and operating income declined 75.3%. Asia Pacific and Latin America recorded an operating loss of $1.3 million in 2002 compared to a $8.9 million loss for 2001. In 2002, Asia Pacific and Latin America reversed net excess restructuring accruals of $0.5 million. Excluding the restructuring costs in 2002 and 2001 and goodwill amortization expense in 2001, the operating loss decreased 20.5% from a $2.3 million loss in 2001 to a $1.8 million loss in 2002. In 2001, 12 Latin America wrote-off $6.3 million of inventory. The remaining loss in 2002 is primarily due to the decline in sales. Excluding restructuring costs, goodwill amortization expense and changes in exchange rates, the operating loss was reduced by 18.7% compared to 2001. Consolidated interest expense and other expenses decreased to $15.2 million in 2002 from $43.8 million in 2001. Interest expense decreased $14.6 million to $15.5 million due to lower debt levels as a result of lower working capital, the repurchase of high interest rate debt and overall lower interest rates. During the second quarter of 2001, the Company incurred $1.7 million in interest expense related to the cancellation of certain interest rate hedge agreements for which there were no longer outstanding borrowings. In 2001, the Company incurred a $2.3 million foreign exchange loss resulting from the devaluation of the Argentine Peso. Other, net income (expense) includes the following:
YEARS ENDED --------------------------- JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) Gain on sale of fixed assets and securities................................ $ 2.9 $ -- Accounts receivable securitization.......... (2.7) (8.7) Foreign exchange............................ (0.1) (5.3) Other....................................... 0.2 0.3 -------- -------- $ 0.3 $ (13.7) ======== ========
The consolidated tax provision increased to $29.0 million in 2002 from $24.6 million in 2001 due to higher pre-tax earnings, partially offset by a decline in the income tax rate. The 2002 effective tax rate of 40.0% declined from 42.2% in 2001. The decrease in the effective tax rate resulted from no longer having non-deductible goodwill amortization which was recorded in 2001, partially offset by greater non-deductible losses in certain foreign entities. Year ended December 28, 2001: Net income was $30.3 million in 2001 compared with $78.7 million in 2000. Due to a combination of increased economic softness and continued deterioration of market conditions in the communications products industry, the Company incurred a restructuring charge of $31.7 million ($19.0 million, net of tax) in the third quarter of 2001 associated with reducing its workforce, closing or consolidating certain facilities and exiting the Korean market. In addition, the Company recorded an after-tax extraordinary loss of $3.3 million for the early extinguishment of $81.3 million of Anixter's 8% senior notes and debt issuance costs associated with the cancellation of a $110.0 million 364-day revolving credit agreement due 2001. In 2000, the Company incurred an initial after-tax charge of $5.3 million for the receivables securitization program, which the Company expects to substantially recover during the course of the program. The Company's net sales for the year ended December 28, 2001, declined 10.5% to $3.1 billion from $3.5 billion in 2000. Net sales by major geographic market are presented in the following table:
YEARS ENDED --------------------------- DECEMBER 28, DECEMBER 29, 2001 2000 ------------ ------------ (IN MILLIONS) North America............................... $2,433.5 $2,739.3 Europe...................................... 502.1 587.1 Asia Pacific and Latin America.............. 208.6 188.0 -------- -------- $3,144.2 $3,514.4 ======== ========
In 2001, North America sales declined 11.2% to $2.4 billion from $2.7 billion in 2000. With the exception of integrated supply, all customer markets in North America declined from 2000. Enterprise network communications product sales declined 10.6%, due to a worldwide reduction in technology-related spending. 13 The electrical wire and cable market declined 4.3% as the result of general economic softness. Due to the significant fall in spending in the telecom industry, sales in the service provider market were down 67.7%. The integrated supply market improved significantly, as sales increased 65.1% primarily due to contracts added in late 2000. Europe sales decreased 14.5% when compared to 2000. Increased sales in the integrated supply market partially offset declines across all other customer markets as international markets were also feeling the general economic softness being experienced in the United States. Excluding the effect in changes in exchange rates, Europe sales declined 10.9%. Asia Pacific and Latin America net sales increased 11.0% from the same period in 2000, reflecting strong growth in Latin America associated with expanded product lines. Excluding the effect of changes in exchange rates, Asia Pacific and Latin America net sales increased 13.8%. In 2001, operating income decreased 46.2% to $102.0 million from $189.8 million in 2000. Operating margins declined to 3.2% in 2001 from 5.4% in 2000. Excluding the one-time restructuring charge of $31.7 million previously discussed, operating profit declined 29.5% to $133.7 million, representing a 4.3% operating margin compared to 5.4% in 2000. Gross margins were flat at 23.4%. Operating income (loss) by major market is presented in the following table:
YEARS ENDED --------------------------- DECEMBER 28, DECEMBER 29, 2001 2000 ------------ ------------ (IN MILLIONS) North America *............................. $ 89.7 $164.2 Europe *.................................... 21.2 24.6 Asia Pacific and Latin America *............ (8.9) 1.0 ------ ------ $102.0 $189.8 ====== ======
*The year ended December 28, 2001 includes restructuring costs for North America, Europe and Asia Pacific and Latin America of $23.1 million, $2.3 million and $6.3 million, respectively. 2001 includes goodwill amortization expense of $8.4 million, $0.3 million, and $0.3 million for North America, Europe, and Asia Pacific. 2000 includes goodwill amortization expense of $7.8 million, $0.3 million and $0.3 million for North America, Europe, and Asia Pacific. North America operating income decreased 45.4% in 2001 compared to 2000. Excluding restructuring costs of $23.1 million and the non-recurring fulfillment sales impact on operating income of $6.9 million during 2000, operating profit declined 28.3%. Operating margins decreased to 3.7% in 2001 from 6.0% in 2000. Excluding restructuring costs, operating margins were 4.6%, a decline of 140 basis points when compared to 2000. Operating results were negatively affected, particularly in the second half of the year, as sales declined more rapidly than the Company was able to reduce operating expenses. This more than offset a slight improvement in gross margins of 23.7% in 2000 to 23.9% in 2001, resulting primarily from the change in sales mix caused by the decline in sales to the lower margin service provider market. Europe operating income decreased 13.6% when compared to 2000. Excluding restructuring costs of $2.3 million, operating profit decreased 4.2%, while operating margins improved by 50 basis points to 4.7%. Excluding the effect of changes in exchange rates and the restructuring charge, Europe operating income remained flat. Operating income and margins benefited from a significant reduction in operating expenses, reflecting organizational changes and refocused market efforts that offset the 14.5% decline in sales. In addition, Europe's gross margins improved to 22.3% from 21.7% in 2000, reflecting reduced sales of lower margin networking products. Asia Pacific and Latin America recorded an operating loss of $8.9 million in 2001 compared to operating income of $1.0 million for 2000. Excluding restructuring costs of $6.3 million, the operating loss was $2.6 million and the operating margin was 180 basis points below 2000. The operating loss was negatively impacted by $6.3 million in inventory write-offs in Latin America recorded in 2001. Changes in exchange rates had a minimal effect on operating income. 14 Consolidated interest expense and other expenses decreased to $43.8 million in 2001 from $55.2 million in 2000. Interest expense decreased $13.2 million to $30.1 million due to lower debt levels, resulting from the accounts receivable securitization program implemented in the fourth quarter of 2000, lower working capital levels and a reduction in interest rates. During the second quarter of 2001, the Company incurred $1.7 million in interest expense related to the cancellation of certain interest rate hedge agreements for which there were no longer outstanding borrowings. In 2001, the Company incurred a $2.3 million foreign exchange loss resulting from the deterioration of the Argentine Peso. In 2000, the $12.6 million expense from the accounts receivable securitization includes $8.8 million for the initial discounting fee. Other, net income (expense) includes the following:
YEARS ENDED --------------------------- DECEMBER 28, DECEMBER 29, 2001 2000 ------------ ------------ (IN MILLIONS) Accounts receivable securitization.......... $ (8.7) $(12.6) Foreign exchange............................ (5.3) (0.9) Other....................................... 0.3 1.6 ------ ------ $(13.7) $(11.9) ====== ======
The consolidated tax provision decreased to $24.6 million in 2001 from $55.9 million in 2000 due to lower pre-tax earnings, partially offset by a small increase in the income tax rate. The 2001 effective tax rate of 42.2% is based on pre-tax book income adjusted primarily for amortization of nondeductible goodwill and losses of foreign operations that are not currently deductible. The increase from 41.6% in 2000 is due to nondeductible goodwill being a higher percentage of the total, offset by a lower state tax rate. Impact of Inflation: Inflation is currently not an important determinant of the Company's results of operations due to the low rate of inflation and, in part, to rapid inventory turnover. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company believes that the following are critical areas that either require significant judgement by management or may be affected by changes in general market conditions outside the control of management. As a result, changes in estimates and general market conditions could cause actual results to differ materially from future expected results. Allowance for Doubtful Accounts: Each quarter the Company segregates the doubtful receivable balances into the following major categories and determines the bad debt reserve as stated below: - Customers that have refused to pay their balances are reserved based on the historical write-off percentages - Risk accounts are individually reviewed and the reserve is based on the probability of potential default; - The outstanding balance for customers who have declared bankruptcy is reserved at 100%. If circumstances change (i.e., higher (lower) than expected defaults or an unexpected material change in a major customer's ability to meet its financial obligations to the Company), the Company's estimates of the recoverability of amounts due to the Company could be reduced (increased) by a material amount. Inventory Obsolescence: At January 3, 2003, the Company reported inventory of $498.8 million. Each quarter the Company reviews the excess inventory and makes an assessment of the realizable value. There are many factors that management considers in determining whether or not a reserve should be established. These factors include the following: - Return or rotation privileges with vendors; - Price protection from vendors; 15 - Expected usage during the next twenty-four months; - Whether or not a customer is obligated by contract to purchase the inventory; - Current market pricing; - Risk of obsolescence. If circumstances change (i.e., unexpected shift in market demand, pricing or customer defaults) there could be a material impact on the net realizable value of the inventory. Deferred Tax Assets: The Company applies a three-year cumulative taxable income test for foreign subsidiaries whose results are not included in the U.S. tax return in determining whether to recognize an income tax benefit for their respective foreign NOL carryforwards, with a resultant adjustment to the valuation allowance. Qualitative factors surrounding a particular subsidiary are also examined, and in certain circumstances (e.g., projections of further losses for that subsidiary in the short term), an income tax benefit may not be recorded (and therefore, the valuation allowance not adjusted) even when the three-year cumulative taxable income is positive for a given subsidiary. Life Insurance Policies: Anixter implemented a nonqualified deferred compensation plan on January 1, 1995. The plan permits selected employees to make pre-tax deferrals of salary and bonus. The plan provides for benefit payments upon retirement, death, disability, termination or other scheduled dates determined by the participant. Concurrent with the implementation of the deferred compensation plan, Anixter purchased variable, separate account life insurance policies on the lives of the participants. To fund additional liabilities, Anixter purchased fixed, general account "increasing whole life" insurance policies on the lives of certain participants in both the deferred compensation plan and an executive excess defined benefit plan. Anixter owns all of the above policies and pays level annual premiums on them. Policy proceeds are payable to Anixter upon the insured participant's death. The cash surrender values on those policies are updated quarterly. At January 3, 2003 and December 28, 2001, the cash surrender value of $18.5 million and $19.1 million, respectively, was recorded under this program and reflected in "Other Assets" on the consolidated balance sheets at market value. The Company's investment in the cash surrender value program is liquid and redeemable in whole or part by "surrendering" the underlying life insurance policies. As the life insurance policies are recorded at market value, changes in the market value of the underlying securities can have a significant impact on the Company's results of operations. Pension Expense: The Company accounts for its defined benefit pension plans in accordance with the Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers' Accounting for Pensions," which requires that amounts recognized in financial statements be determined on an actuarial basis. A substantial portion of the Company's pension benefit cost relates to its defined benefit plan in the United States. The Company has not made contributions to the U.S. pension plan since 1995. SFAS No. 87 and the policies used by the Company generally reduce the volatility of the net benefit cost from changes in pension liability discount rates and the performance of the pension plan's assets, as significant actuarial gains/losses are amortized over the service lives of the plan participants. A significant element in determining the Company's net periodic benefit cost in accordance with SFAS No. 87 is the expected return on plan assets. The Company has assumed that the weighted-average expected long-term rate of return on plan assets will be 8.43%. Over the long term, the Company's pension plan assets have earned in excess of 8.43%; therefore, the Company believes that its assumption of future returns of 8.43% is reasonable. This expected return on plan assets is included in the net periodic benefit cost. The plan assets actually incurred a loss of $10.7 million in 2002. If significant, the difference between this expected return and the actual return on plan assets is amortized over the service lives of the plan participants. At the end of each year, the Company determines the discount rate to be used to discount the plan liabilities. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks to rates of return on high quality, fixed-income investments that receive one of the two highest ratings given by a recognized ratings agency. At January 3, 2003, the Company determined this rate to be 6.45%. 16 At January 3, 2003, the Company's consolidated pension liability was $27.1 million, up from $21.5 million at the end of 2001. For the year ended January 3, 2003, the Company recognized a consolidated pre-tax net periodic cost of $7.1 million, up from $5.8 million in 2001. As a result of the decline in the fair value of the pension plan assets, a reduced discount rate and other actuarial gains and losses, the Company estimates its 2003 net periodic cost to increase by 55% to 65%. Tax Contingencies: The Company believes it has a reasonable basis in the tax law for all of the positions it takes on the various tax returns it files. However, in recognition of the fact that various taxing authorities may take opposing views on some issues, that the costs and hazards of litigation in maintaining the positions that the Company has taken on various returns might be significant, and that the taxing authorities may prevail in their attempts to overturn such positions, the Company maintains tax reserves. The amounts of such reserves, the potential issues they are intended to cover and their adequacy to do so are topics of frequent review internally and with outside tax professionals. Where necessary, periodic adjustments are made to such reserves to reflect the lapsing of statutes of limitations, closings of ongoing examinations or the commencement of new examinations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to the impact of interest rate changes and fluctuations in foreign currencies, as well as changes in the market value of its financial instruments. The Company periodically enters into derivatives in order to minimize these risks, but not for trading purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be perfectly effective, such that the change in the value of the derivative perfectly offsets the impact of the underlying hedged item. Any resulting gains or losses from hedge ineffectiveness are reflected directly in income. See "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations, Note 1 "Interest rate agreements" and "Foreign currency forward contracts" and Note 7 "Debt" to the consolidated financial statements for further detail on interest agreements and outstanding debt obligations. Approximately 27% of the Company's sales were denominated in foreign currency in 2002, 2001 and 2000. At January 3, 2003, the Company has net assets and liabilities that were denominated in currencies other than the functional currency of the reporting entity. If there was a 10 percent adverse change in exchange rates, the Company would record a foreign exchange loss of approximately $3.2 million. The Company has entered into interest rate agreements that effectively fix or cap, for a period of time, the London Interbank Offered Rate ("LIBOR") component of the interest rate on a portion of its floating rate obligations. As a result, the interest rate on approximately 83% of debt obligations at January 3, 2003 was fixed or capped. There were no interest rate agreements outstanding at December 28, 2001, as a result of the Company canceling two hedge agreements and one interest rate collar agreement in 2001 for which there were no longer outstanding borrowings. The Company prepared sensitivity analyses of its derivatives and other financial instruments assuming a one percentage point adverse change in interest rates and a 10 percent adverse change in the foreign currency contracts outstanding. Holding all other variables constant, the hypothetical adverse changes would have increased interest expense by $0.1 million and $0.8 million and decreased the value of foreign currency forward contracts by $6.1 million and $3.2 million in 2002 and 2001, respectively. The estimated fair market value of the Company's outstanding fixed rate debt at January 3, 2003 and December 28, 2001, was $138.2 million and $245.2 million, respectively. If interest rates were to increase or decrease by 1%, the fair market value of the fixed rate debt would decrease or increase by 2.3% and 3.2% for 2002 and 2001, respectively. Changes in the market value of the Company's debt does not affect the reported results of operations unless the Company is retiring such obligations prior to their maturity. These analyses did not consider the effects of a changed level of economic activity that could exist in such an environment and certain other factors. Further, in the event of a change of this magnitude, management would likely take actions to further mitigate its exposure to possible changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in the Company's financial structure. 17 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PAGE ---- Report of Independent Auditors.............................. 19 Consolidated Statements of Operations....................... 20 Consolidated Balance Sheets................................. 21 Consolidated Statements of Cash Flows....................... 22 Consolidated Statements of Stockholders' Equity............. 23 Notes to the Consolidated Financial Statements.............. 24 Selected Quarterly Financial Data (Unaudited)............... 40
18 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Anixter International Inc. We have audited the accompanying consolidated balance sheets of Anixter International Inc. as of January 3, 2003, and December 28, 2001, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended January 3, 2003. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 Anixter International Inc. at January 3, 2003 and December 28, 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 3, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As described in Note 2 to the consolidated financial statements, effective December 29, 2001, the Company changed its method of accounting for goodwill and other intangible assets to conform with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." ERNST & YOUNG LLP Chicago, Illinois February 3, 2003 19 ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED ---------------------------------------- JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ---------- ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) NET SALES................................................. $2,520.1 $3,144.2 $3,514.4 Cost of operations: Cost of goods sold...................................... 1,914.7 2,407.3 2,692.5 Operating expenses...................................... 517.3 594.2 623.7 Amortization of intangibles............................. 0.4 9.0 8.4 Restructuring and other charges......................... -- 31.7 -- -------- -------- -------- Total costs and expenses........................... 2,432.4 3,042.2 3,324.6 -------- -------- -------- OPERATING INCOME.......................................... 87.7 102.0 189.8 Other (expenses) income: Interest expense........................................ (15.5) (30.1) (43.3) Other, net.............................................. 0.3 (13.7) (11.9) -------- -------- -------- Income before income taxes and extraordinary loss......... 72.5 58.2 134.6 Income tax expense........................................ 29.0 24.6 55.9 -------- -------- -------- Income before extraordinary loss.......................... 43.5 33.6 78.7 Extraordinary loss on early extinguishment of debt, net... (0.4) (3.3) -- -------- -------- -------- NET INCOME................................................ $ 43.1 $ 30.3 $ 78.7 ======== ======== ======== BASIC INCOME (LOSS) PER SHARE: Income before extraordinary loss........................ $ 1.18 $ 0.92 $ 2.15 Extraordinary loss...................................... (0.01) (0.09) -- -------- -------- -------- Net income.............................................. $ 1.17 $ 0.83 $ 2.15 ======== ======== ======== DILUTED INCOME (LOSS) PER SHARE: Income before extraordinary loss........................ $ 1.14 $ 0.89 $ 2.03 Extraordinary loss...................................... (0.01) (0.09) -- -------- -------- -------- Net income.............................................. $ 1.13 $ 0.80 $ 2.03 ======== ======== ========
See accompanying notes to the consolidated financial statements. 20 ANIXTER INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS
JANUARY 3, DECEMBER 28, 2003 2001 ----------- ------------- (IN MILLIONS, EXCEPT SHARE AMOUNTS) ASSETS CURRENT ASSETS Cash...................................................... $ 19.1 $ 27.2 Accounts receivable (less allowances of $15.4 and $20.9 in 2002 and 2001, respectively)........................... 188.2 154.1 Note receivable -- unconsolidated subsidiary.............. 69.6 111.4 Inventories............................................... 498.8 495.7 Deferred income taxes..................................... 26.5 32.0 Other current assets...................................... 10.0 8.6 -------- -------- Total current assets................................. 812.2 829.0 Property and equipment, at cost............................. 191.1 167.4 Accumulated depreciation.................................... (132.0) (112.4) -------- -------- Net property and equipment........................... 59.1 55.0 Goodwill (less accumulated amortization of $96.0 and $95.4 in 2002 and 2001, respectively)........................... 247.6 231.6 Other assets................................................ 107.1 83.2 -------- -------- $1,226.0 $1,198.8 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.......................................... $ 257.3 $ 251.0 Accrued expenses.......................................... 83.5 86.2 Accrued restructuring..................................... 4.2 11.1 Income taxes payable...................................... 4.7 4.4 -------- -------- Total current liabilities............................ 349.7 352.7 Long-term debt.............................................. 195.1 241.1 Other liabilities........................................... 46.4 41.9 -------- -------- Total liabilities.................................... 591.2 635.7 STOCKHOLDERS' EQUITY Common stock -- $1.00 par value, 100,000,000 shares authorized, 37,500,878 and 36,917,313 shares issued and outstanding in 2002 and 2001, respectively............. 37.5 36.9 Capital surplus........................................... 45.2 32.5 Foreign currency translation.............................. (43.9) (64.6) Minimum pension liability................................. (0.3) -- Unrealized gain on foreign exchange contracts............. -- 5.1 Retained earnings......................................... 596.3 553.2 -------- -------- Total stockholders' equity........................... 634.8 563.1 -------- -------- $1,226.0 $1,198.8 ======== ========
See accompanying notes to the consolidated financial statements. 21 ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED ----------------------------------------- JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ----------- ------------ ------------ (IN MILLIONS) OPERATING ACTIVITIES Net income............................................. $ 43.1 $ 30.3 $ 78.7 Adjustments to reconcile net income to net cash provided by continuing operating activities: Extraordinary loss................................ 0.4 3.3 -- Gain on sale or disposal of fixed assets and securities..................................... (2.9) -- -- Depreciation and amortization..................... 23.5 32.4 29.6 Accretion of zero-coupon convertible notes........ 11.9 14.7 7.0 Non-cash restructuring costs...................... -- 6.6 -- Income tax savings from employee stock plans...... 2.5 5.3 11.2 Deferred income taxes............................. (0.8) (12.5) (3.2) Changes in assets and liabilities: Accounts receivable............................ 37.8 128.5 91.4 Inventory...................................... 81.4 357.1 (329.7) Accounts payable and accruals.................. (31.1) (294.5) 181.8 Restructuring and other charges................ (10.8) 17.7 -- Other, net..................................... 10.7 (0.4) 0.7 ------- ------- --------- Net cash provided by continuing operating activities................................ 165.7 288.5 67.5 INVESTING ACTIVITIES Capital expenditures................................... (16.9) (22.0) (22.6) Acquisitions and divestiture........................... (110.4) -- (3.7) Proceeds from sale of fixed assets..................... 2.9 1.5 -- Proceeds from sale of securities....................... 2.0 -- -- ------- ------- --------- Net cash used in continuing investing activities................................ (122.4) (20.5) (26.3) FINANCING ACTIVITIES Proceeds from long-term borrowings..................... 262.6 795.2 1,557.0 Repayment of long-term borrowings...................... (200.0) (937.6) (1,578.5) Retirement of notes payable............................ (118.3) (86.5) -- Proceeds from issuance of common stock................. 7.5 22.3 34.9 Debt issuance costs.................................... (0.6) -- (8.3) Purchases of common stock for treasury................. -- (46.9) (15.4) Other, net............................................. -- (2.3) (14.1) ------- ------- --------- Net cash used in continuing financing activities................................ (48.8) (255.8) (24.4) ------- ------- --------- (DECREASE) INCREASE IN CASH FROM CONTINUING OPERATIONS... (5.5) 12.2 16.8 Cash used in discontinued operations..................... (2.6) (5.8) (13.5) Cash at beginning of year................................ 27.2 20.8 17.5 ------- ------- --------- Cash at end of year...................................... $ 19.1 $ 27.2 $ 20.8 ======= ======= =========
See accompanying notes to the consolidated financial statements. 22 ANIXTER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED COMMON STOCK OTHER --------------- CAPITAL RETAINED COMPREHENSIVE COMPREHENSIVE SHARES AMOUNT SURPLUS EARNINGS INCOME INCOME ------ ------ ------- -------- ------------- ------------- (IN MILLIONS) Balance at December 31, 1999................ 35.9 $ 35.9 $ -- $458.1 $(37.6) Net income.................................. -- -- -- 78.7 -- $ 78.7 Other comprehensive income: Foreign currency translation.............. -- -- -- -- (15.0) (15.0) ------ Comprehensive income........................ $ 63.7 ====== Issuance of common stock and related tax benefits.................................. 2.5 2.5 47.7 -- -- Purchase and retirement of treasury stock... (0.7) (0.7) (0.8) (13.9) -- ---- ------ ------ ------ ------ Balance at December 29, 2000................ 37.7 37.7 46.9 522.9 (52.6) Net income.................................. -- -- 30.3 -- $ 30.3 Other comprehensive income: Foreign currency translation.............. -- -- -- -- (12.0) (12.0) Cumulative effect of change in accounting principle, net of tax of $1.8........... -- -- -- -- 2.7 2.7 Change in fair market value of foreign exchange contracts, net of tax of $1.6.................................... -- -- -- -- 2.4 2.4 ------ Comprehensive income........................ $ 23.4 ====== Issuance of common stock and related tax benefits.................................. 1.3 1.3 30.4 -- -- Purchase and retirement of treasury stock... (2.1) (2.1) (44.8) -- -- ---- ------ ------ ------ ------ Balance at December 28, 2001................ 36.9 36.9 32.5 553.2 (59.5) Net income.................................. -- -- -- 43.1 -- $ 43.1 Other comprehensive income: Foreign currency translation.............. -- -- -- -- 20.7 20.7 Minimum pension liability, net of tax of $0.2.................................... -- (0.3) (0.3) Change in fair market value of foreign exchange contracts, net of tax of $3.4.................................... -- -- -- -- (5.1) (5.1) ------ Comprehensive income........................ $ 58.4 ====== Issuance of common stock and related tax benefits.................................. 0.6 0.6 12.7 -- -- ---- ------ ------ ------ ------ Balance at January 3, 2003.................. 37.5 $ 37.5 $ 45.2 $596.3 $(44.2) ==== ====== ====== ====== ======
See accompanying notes to the consolidated financial statements. 23 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION: Anixter International Inc., formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is engaged in the distribution of communications and specialty wire and cable products, fasteners and small parts through Anixter Inc. and its subsidiaries (collectively "Anixter"). BASIS OF PRESENTATION: The consolidated financial statements include the accounts of Anixter International Inc. and its majority-owned subsidiaries, excluding Anixter Receivables Corporation (collectively "the Company"), after elimination of intercompany transactions. The Company's fiscal year ends on the Friday nearest December 31 and included 53 weeks in 2002 and 52 weeks in 2001 and 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain amounts for prior years have been reclassified to conform to the current year presentation. RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances, as well as credit conditions and based on a history of write-offs and collections. A receivable is considered past due if payments have not been received within agreed upon invoice terms. NOTE RECEIVABLE: At January 3, 2003 and December 28, 2001, the Company's note receivable of $69.6 million and $111.4 million, respectively, represents the amount due to Anixter from Anixter Receivables Corporation ("ARC") primarily for the sale of accounts receivable and is subordinated to ARC's repayment of ARC long-term debt. INVENTORIES: Inventories, consisting primarily of finished goods, are stated at the lower of cost or market. Cost is determined using the average-cost method. The Company has agreements with some of its vendors that provide a right to return products. This right is typically limited to a small percentage of the Company's total purchases from that vendor. The Company can return slow moving product and the vendor will replace it with faster moving product chosen by the Company. Some vendor agreements contain price protection provisions that require the manufacturer to issue a credit in an amount sufficient to reduce the Company's current inventory carrying cost down to the manufacturer's current price. The Company considers these agreements in determining its reserve for obsolescence. PROPERTY AND EQUIPMENT: Capital expenditures are primarily for equipment, leasehold improvements, computer software and the construction of a new corporate headquarters in 2002 to be completed in 2003. Equipment and computer software are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which range from 3 to 10 years. Leasehold improvements are depreciated over the term of the related lease. Upon sale or retirement, the cost and related depreciation are removed from the respective accounts, and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation expense charged to operations was $19.1 million, $18.7 million and $17.1 million in 2002, 2001 and 2000, respectively. GOODWILL: Goodwill is the excess of cost over the fair value of the net assets of businesses acquired. The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," as of December 29, 2001. SFAS No. 142 required that goodwill and other intangible assets with an indefinite useful life no longer be amortized. Retroactive restatement for all prior periods presented was not required. Goodwill is reviewed annually for impairment. The Company performs its impairment tests utilizing the two step process outlined in SFAS No. 142. If the carrying amount of a reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss would be 24 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. The Company currently expects the carrying amount to be fully recoverable. INTANGIBLE ASSETS: Intangible assets primarily consist of customer relationships that are being amortized on a straight-line basis over periods ranging from 8 to 10 years. The Company continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of its intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. INTEREST RATE AGREEMENTS: The Company utilized interest rate agreements that effectively fix or cap, for a period of time, the London Interbank Offered Rate ("LIBOR") component of the interest rate on a portion of its floating rate obligations. There were no interest rate agreements outstanding at December 28, 2001 because the Company had minimal floating rate obligations outstanding. At January 3, 2003, as a result of this type of interest rate agreement, the interest rate on approximately 83% of debt obligations, was fixed or capped. In June 2001, the Company cancelled hedge agreements for which there were no longer outstanding borrowings and incurred $1.7 million in interest expense related to the cancellation. At January 3, 2003, the Company had interest rate swap agreements outstanding with a notional amount of $30.0 million. These swap agreements obligate the Company to pay a fixed rate of approximately 3.5% through October 2007. At January 3, 2003, the fair market value of outstanding interest rate agreements, which is the estimated amount that the Company would have received or paid to enter into similar interest rate agreements at the current interest rate, was a liability of $0.1 million. The impact of interest rate agreements was to increase interest expense by $0.1 million and $0.3 million in 2002 and 2001, respectively, and decrease interest expense by $0.7 million in 2000. The Company does not enter into interest rate transactions for speculative purposes. FOREIGN CURRENCY FORWARD CONTRACTS: The Company uses foreign currency forward contracts to reduce its exposure to adverse fluctuations in foreign exchange rates. When entered into, these financial instruments are designated as hedges of underlying exposures. The Company does not enter into derivative financial instruments for trading purposes. The Company purchased foreign currency forward contracts to minimize the effect of fluctuating foreign currency denominated payables (cash flow hedge) on its reported income. The forward contracts were revalued at current foreign exchange rates, with the changes in valuation reflected directly in income offsetting the transaction gain/loss recorded on the foreign currency denominated payable. The net impact of these foreign currency forward contracts on the income statement was insignificant in 2002, 2001 and 2000. At January 3, 2003 and December 28, 2001, the face amount of the foreign currency forward contracts outstanding was approximately $55.9 million and $28.1 million, respectively. The Company recognized the difference between the face amount and the fair value of its forward contracts and recorded an asset of $0.2 million and a liability of $0.1 million at January 3, 2003 and December 28, 2001, respectively. The Company previously purchased a foreign exchange forward contract to hedge the exposure related to a foreign currency denominated intercompany loan (cash flow hedge). The contract was revalued at current foreign exchange rates, with the changes in valuation initially recorded in Accumulated Other Comprehensive Income. The intercompany loan was settled during the first quarter of 2002. No net gain or loss has been recognized in the statements of operations. At December 28, 2001, the face amount of the foreign currency forward contract was approximately $45.9 million. At December 28, 2001, the amount by which the fair value exceeded the face amount of the foreign exchange contract was $8.5 million and was included in Other assets on the Consolidated Balance Sheet. FOREIGN CURRENCY TRANSLATION: The results of operations for foreign subsidiaries where the functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates during the year, while the assets and liabilities are translated using period-end exchange rates. The related translation 25 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) adjustments are recorded in a separate component of Stockholders' equity, Foreign currency translation. Gains and losses from foreign currency transactions are included in Other, net in the Consolidated Statements of Operations. The Company recognized $0.1 million, $5.3 million and $0.9 million in net foreign exchange losses in 2002, 2001 and 2000, respectively. REVENUE RECOGNITION: Sales to customers, resellers and distributors and related cost of sales are recognized upon transfer of title, which occurs upon shipment of products. Services, such as design and testing of product configurations for customers and contractual supply chain management are not billed separately and are included in the sales price of the product. In those cases where the Company does not have goods in stock and delivery times are critical, product is purchased from the manufacturer and drop shipped to the customer. The Company takes title to the goods when shipped by the manufacturer and then bills the customer for the product upon transfer of the title. ADVERTISING AND SALES PROMOTION: Advertising and sales promotion costs are expensed as incurred. Advertising and promotion costs were $6.3 million, $10.9 million and $11.3 million in 2002, 2001 and 2000, respectively. SHIPPING AND HANDLING FEES AND COSTS: The Company incurred shipping and handling costs totaling $60.8 million, $76.5 million and $90.6 million for the years ended 2002, 2001 and 2000, respectively. These costs are included in Operating expenses in the Consolidated Statements of Operations. INCOME TAXES: Using the liability method, provisions for income taxes include deferred taxes resulting from temporary differences in determining income for financial and tax purposes. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. STOCK BASED COMPENSATION: In accordance with the Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees," compensation cost of stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the option exercise price and is charged to operations over the vesting period. Income tax benefits attributable to stock options exercised totaled $2.5 million, $5.3 million and $11.2 million in 2002, 2001 and 2000, respectively, and were credited to Capital surplus. The Company accounted for compensation expense under the intrinsic value method and applied the disclosure-only provisions of SFAS No. 123, "Accounting for Stock Based Compensation." Accordingly, no compensation expense has been recognized in the Consolidated Statements of Operations for the stock option plans. The Black-Scholes option pricing model was developed for estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's stock options. Had compensation costs for the plans been determined based on the fair value at the grant date using 26 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the Black-Scholes option pricing model and amortized over the respective vesting period, the Company's net income would have been reduced to the pro forma amounts indicated below:
2002 2001 2000 ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE DATA) Net income as reported...................................... $43.1 $30.3 $78.7 Deduct: Stock-based employee compensation expense, net...... (8.0) (7.1) (6.0) ----- ----- ----- Basic pro forma net income.................................. 35.1 23.2 72.7 Interest impact of assumed conversion of convertible notes..................................................... -- -- 4.3 ----- ----- ----- Diluted pro forma net income................................ $35.1 $23.2 $77.0 ===== ===== ===== Basic earnings per share: as reported............................................... $1.17 $0.83 $2.15 pro forma................................................. $0.95 $0.63 $1.99 Diluted earnings per share: as reported............................................... $1.13 $0.80 $2.03 pro forma................................................. $0.95 $0.62 $1.90
The weighted average fair value of the Company's stock options (which was $14.74 per share in 2002, $14.92 per share in 2001 and $11.74 per share in 2000) was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions for 2002, 2001 and 2000, respectively: expected stock price volatility of 46%, 52% and 45%; expected dividend yield of zero each year; risk-free interest rate of 4.7%, 5.2% and 6.5%; and an average expected life of 8 years for 2002 and 7 years for 2001 and 2000. ACCOUNTS RECEIVABLE PROGRAM: On October 6, 2000, the Company entered into an accounts receivable securitization program. The underlying agreements for this program were amended and restated in October 2002. The program is conducted through Anixter Receivables Corporation ("ARC"), which is a wholly owned unconsolidated subsidiary of the Company, on terms equivalent to those in an arms-length transaction. The investment is accounted for using the equity method. At January 3, 2003 and December 28, 2001, Anixter's investment in ARC was $43.5 million and $34.2 million, respectively. The program allows the Company to sell, on an ongoing basis without recourse, a majority of the accounts receivable originating in the United States to ARC and consists of a series of 364-day facilities. ARC may in turn sell an interest in these receivables to a financial institution and borrow up to $225.0 million. Prior to the October 6, 2001 borrowing capacity reduction, ARC could borrow up to $275.0 million. Under this arrangement, Anixter continues to service the sold receivables by performing the collection and cash application functions in order to maintain relationships with its customers. These services are billed by Anixter to ARC at cost. At January 3, 2003 and December 28, 2001, the outstanding balance of accounts receivable sold to ARC totaled $248.6 million and $296.0 million, respectively. Accordingly, these accounts receivable were removed from the balance sheet. In order to fund the purchases of the accounts receivable from Anixter, ARC incurred long-term debt of $129.7 million and $143.7 million and has a subordinated note payable to Anixter of $69.6 million and $111.4 million at January 3, 2003 and December 28, 2001, respectively. Net charges associated with the accounts receivable securitization program of $2.7 million, $8.7 million and $3.8 million were recorded as Other expenses in the 2002, 2001 and 2000 Consolidated Statements of Operations, respectively. These costs primarily relate to the interest expense on the long-term debt incurred by ARC. Additionally, charges of $8.8 million relating to the discount on the initial sale of accounts receivable to ARC were recorded as Other expenses in the 2000 Consolidated Statement of Operations. The Company expects to substantially recover the charges on the initial sale during the course of the program. The net charges are detailed as follows: 27 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2002 2001 2000 ------ ------ ------ (IN MILLIONS) Loss on sales of receivables................................ $ 24.5 $ 40.3 $ 21.3 Gain on collection of receivables by ARC.................... (25.2) (41.5) (12.8) Interest expense incurred by ARC............................ 3.4 9.9 4.1 2.7 8.7 12.6 ------ ------ ------ Less initial discount....................................... -- -- 8.8 ------ ------ ------ Total..................................................... $ 2.7 $ 8.7 $ 3.8 ====== ====== ======
Anixter had total billings to ARC of $1,544.2 million, $2,027.4 million and $986.1 million in 2002, 2001 and 2000, respectively. These billings were for the sale of receivables, servicing fees and interest costs calculated on the outstanding balance of the note receivable. These billings are not included in the consolidated sales results of the Company. Anixter received proceeds from ARC of $1,586.0 million, $2,042.1 million and $860.0 million in 2002, 2001 and 2000, respectively, as payment for Anixter billings. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections," effective for fiscal years beginning after May 15, 2002. SFAS No. 145 will require gains and losses on extinguishment of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. The Company adopted SFAS No. 145 as required on January 4, 2003. As a result, any gain or loss from the extinguishment of debt will be recorded as other income or expense before income taxes. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in the Consolidated Statements of Operations will be reclassified in accordance with this Statement. In 2002 and 2001, the Company had extraordinary losses on the early extinguishment of debt, net of tax, of $0.4 million and $3.3 million, respectively. Accordingly, the adoption of SFAS No. 145 is not expected to have a material effect on the Company's results of operations, financial position or debt covenants. See Note 7 "Debt" herein for information regarding the Company's extinguishment of debt. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"), "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Therefore, SFAS No. 146 eliminates the definition and requirements for recognition of exit costs in EITF 94-3. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 is not expected to have a material effect on the Company's results of operations, financial position or debt covenants. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," an amendment to FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 requires prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The adoption of SFAS No. 148 did not have a material effect on the Company's results of operations, financial position or debt covenants. 28 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. INCOME (LOSS) PER SHARE The table below sets forth the computation of basic and diluted income (loss) per share. The Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets" as of December 29, 2001, which requires that goodwill no longer be amortized (see Note 1 "Summary of Significant Accounting Policies"). For comparative purposes, earnings per share have been adjusted to exclude goodwill amortization reported in 2001 and 2000.
YEARS ENDED ------------------------------------------ JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ------------ ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE DATA) BASIC INCOME (LOSS) PER SHARE: Reported income before extraordinary loss... $ 43.5 $ 33.6 $78.7 Goodwill amortization....................... -- 9.0 8.4 ------ ------ ----- Adjusted income before extraordinary loss... 43.5 42.6 87.1 Extraordinary loss.......................... (0.4) (3.3) -- ------ ------ ----- Adjusted net income......................... $ 43.1 $ 39.3 $87.1 ====== ====== ===== Weighted-average common shares outstanding.............................. 37.0 36.5 36.6 Reported income per share before extraordinary loss....................... $ 1.18 $ 0.92 $2.15 Goodwill amortization per share............. -- 0.24 0.23 Adjusted income per share before extraordinary loss....................... $ 1.18 $ 1.16 $2.38 Extraordinary loss per share................ $(0.01) $(0.09) $ -- Adjusted net income per share............... $ 1.17 $ 1.08 $2.38 DILUTED INCOME (LOSS) PER SHARE: Reported income before extraordinary loss... $ 43.5 $ 33.6 $78.7 Goodwill amortization....................... -- 9.0 8.4 Interest impact of assumed conversion of convertible notes........................ -- -- 4.3 Adjusted net income before extraordinary loss..................................... 43.5 42.6 91.4 Extraordinary loss.......................... (0.4) (3.3) -- ------ ------ ----- Adjusted net income......................... $ 43.1 $ 39.3 $91.4 ====== ====== ===== Weighted-average common shares outstanding.............................. 37.0 36.5 36.6 Effect of dilutive securities: Stock options and warrants.................. 1.0 1.3 4.3 ------ ------ ----- Weighted-average common shares outstanding.............................. 38.0 37.8 40.9 ====== ====== ===== Reported income per share before extraordinary loss....................... $ 1.14 $ 0.89 $2.03 Goodwill amortization per share............. $ -- $0.24 Adjusted income per share before extraordinary loss....................... $ 1.14 $ 1.13 $2.23 Extraordinary loss per share................ $(0.01) $(0.09) $ -- Adjusted net income per share............... $ 1.13 $ 1.04 $2.23
In 2002 and 2001, the Company excluded 3.1 million and 5.9 million, respectively, of common stock equivalents, primarily relating to the 7% zero-coupon convertible notes ("Convertible Notes"), from its calculation of diluted income (loss) per share because the effect would have been antidilutive. Because the Convertible Notes were antidilutive, the related $7.3 million and $9.0 million for 2002 and 2001, respectively, of net interest expense was not excluded from the determination of income in the calculation of diluted income 29 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (loss) per share. Potentially dilutive securities that were excluded from the calculation of diluted income per share were insignificant in 2000. NOTE 3. ACQUISITION AND DIVESTITURE OF BUSINESSES ACQUISITION OF PENTACON, INC. On September 20, 2002, the Company completed the purchase of the operations and assets of Pentacon, Inc. ("Pentacon"), pursuant to Pentacon's plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code. Pentacon is a leading distributor of fasteners and other small parts to original equipment manufacturers and provider of inventory management services and has 21 distribution and sales facilities in the United States, along with sales offices and agents in Europe, Canada, Mexico and Australia. The Company believes Pentacon's business model and position as a value-added distributor are perfect compliments to our current Industrial Wire and Cable - Original Equipment Manufacturer market focus. The Company paid a total of $108.5 million for tangible assets with a fair value of approximately $81.7 million. The tangible net assets primarily consist of accounts receivable, inventory, office and warehouse equipment and furnishings, accounts payable and select operating liabilities. Based upon a third party valuation, intangible assets have also been recorded at estimated fair value as follows: $13.8 million of intangible assets with finite lives (customer relationships) and a $1.8 million intangible asset with an indefinite life (trade name). Goodwill resulting from the transaction totaled $14.1 million. The Company agreed to hire the existing Pentacon employees and assume the lease obligations for certain of its operating facilities. The acquired assets will be used in substantially the same manner in which they were utilized by Pentacon. The Company has incurred approximately $2.9 million of transaction-related costs that have been capitalized as part of the acquisition. In addition, the Company agreed to pay $1.2 million in retention bonuses, $1.0 million of which was expensed in the fourth quarter of 2002 and $0.1 million will be expensed in each year of 2003 and 2004. The acquisition was accounted for as a purchase and the results of operations of the acquired business are included in the consolidated financial statements from the date of acquisition. Included in the results of the Company for 2002 are $51.5 million of sales and $0.5 million of operating profit related to Pentacon. Pentacon had sales of $205.3 million in 2002. The chairman of the Company, Samuel Zell, was an indirect beneficial owner of 24.5% of Pentacon's senior subordinated notes. Pro Forma Information The following unaudited consolidated pro forma information reflects the results of the Company's operations for the years ended January 3, 2003 and December 28, 2001, as if the Pentacon acquisition had occurred on December 30, 2000. The pro forma results are not necessarily indicative of the actual results that would have occurred had the purchase been made at the beginning of the period presented, nor do they purport to indicate the results of the future operations of the Company.
JANUARY 3, DECEMBER 29, 2003 2001* -------------- -------------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Net sales........................................... $2,673.9 $3,403.6 Income before extraordinary item.................... $ 46.3 $ 17.6 Net income.......................................... $ 45.9 $ 14.3 Diluted income per share before extraordinary item.............................................. $ 1.22 $ 0.47 Diluted net income per share........................ $ 1.21 $ 0.38
*Restructuring and other charges: In 2001, Pentacon initiated a plan to restructure its current business operations and conducted an assessment of its business in the aerospace and telecommunication industries in view of the impact of the September 11, 2001 events in 30 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) New York and Washington, D.C., as well as the financial difficulties in the telecommunications industry. As a result, Pentacon recorded restructuring and other charges of $54.6 million. Included in cost of sales are charges totaling $39.1 million for the write-off of inventory. Of that total, $33.5 million related to non-cash write-offs of excess aerospace and telecommunications inventory based on a review of the anticipated future demand for the inventory resulting from decreased usage levels. The remaining $5.6 million represented a non-cash charge resulting from offering $9.8 million of slower moving inventory at substantially reduced prices in order to take advantage of the cash flows and tax benefits. The remaining $15.5 million of restructuring and other charges resulted from the write-down of deferred tax assets, termination benefit costs, the closing of five distribution facilities, professional fees and write-off of debt issuance costs. The pro forma adjustments (before income taxes and extraordinary item) that were made as if the purchase had occurred at the beginning of the earliest period presented are as follows:
JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) Rental expense.............................................. $ 0.7 $ 1.2 Legal and professional fees................................. 4.5 1.0 Depreciation expense........................................ 0.9 1.2 Amortization of intangibles................................. (1.2) 1.9 Interest expense, net....................................... 4.9 12.8 ----- ----- Income before taxes and extraordinary item.................. $ 9.8 $18.1 ===== =====
The pro forma adjustments included in each of the periods presented above relate to: 1) rental expense for leased facilities that were not acquired, 2) legal and professional fees that were directly related to the bankruptcy proceedings of Pentacon, 3) depreciation expense savings due to the net write-down of acquired fixed assets to their fair market value, 4) the exclusion of the 2001 goodwill amortization expense incurred by Pentacon, partially offset by purchase accounting adjustments for the amortization of $13.8 million of other intangibles with finite lives, and 5) the exclusion of the total interest expense incurred by Pentacon, partially offset by the interest expense that would have been incurred by Anixter resulting from $110.4 million of borrowings used to fund the acquisition at an annualized interest rate of 4.75% over the respective period. Allocation of Purchase Price Assets and liabilities have been recorded at estimated fair value based on the following allocation of purchase price. During the fourth quarter of 2002, the Company completed a third party valuation of Pentacon and identified certain intangible assets. Intangible assets with finite lives (customer relationships) totaling $13.8 million will be amortized over their useful lives of 8 to 10 years, while an intangible asset with an indefinite life (trade name) of $1.8 million will not be amortized. In addition, the Company recorded $14.1 million of goodwill, which has been reported under the North America business segment and will not be amortized. The total amount of goodwill recorded is expected to be deductible for income tax purposes. 31 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Purchase price............................................. $108.5 Other transaction-related costs............................ 2.9 ------ Total investment......................................... 111.4 Cash....................................................... 1.0 Accounts receivable........................................ 27.3 Inventories................................................ 69.0 Other current assets....................................... 5.5 Fixed assets............................................... 8.0 Other assets, net.......................................... 0.2 Intangible assets.......................................... 15.6 Accounts payable........................................... (25.0) Accrued expenses........................................... (4.3) ------ Net assets acquired...................................... 97.3 ------ Goodwill................................................. $ 14.1 ======
OTHER ACQUISITION AND DIVESTITURE In January 2000, the Company acquired 100% of the stock of allNET Technologies Pty. Limited ("allNET") for $6.7 million. allNET is a communications products distributor located in Australia. This acquisition was accounted for using the purchase method of accounting. In September 2000, the Company sold the net assets of a wholly owned subsidiary of Accu-Tech Corporation for $3.0 million in cash and $1.6 million in notes receivable. The effect of these transactions on the operating results of the Company was not significant. NOTE 4. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC. The Company guarantees, fully and unconditionally, substantially all of the debt of its subsidiaries, which includes Anixter Inc. Certain debt agreements entered into by Anixter Inc. contain various restrictions including restrictions on payments to the Company. Such restrictions have not had nor are expected to have an 32 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) adverse impact on the Company's ability to meet its cash obligations. The following summarizes the financial information for Anixter Inc.: ANIXTER INC. CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 3, DECEMBER 29, 2003 2001 ------------ ------------ (IN MILLIONS) Assets: Current assets......................................... $ 813.4 $ 827.1 Property, net.......................................... 59.1 55.0 Goodwill and other intangibles......................... 263.2 231.6 Other assets........................................... 88.5 83.1 -------- -------- $1,224.2 $1,196.8 ======== ======== Liabilities and Stockholders' Equity: Current liabilities.................................... $ 347.3 $ 352.9 Subordinated notes payable to parent................... 210.2 244.8 Long-term debt......................................... 71.1 19.3 Other liabilities...................................... 46.2 41.5 Stockholders' equity................................... 549.4 538.3 -------- -------- $1,224.2 $1,196.8 ======== ========
ANIXTER INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED --------------------------------------------------------- JANUARY, 3 DECEMBER 28, DECEMBER 29, 2003 2001 2000 ----------------- ----------------- ----------------- (IN MILLIONS) Net sales........................... $2,520.1 $3,144.2 $3,514.4 Operating income.................... $ 88.5 $ 103.5 $ 191.6 Income from continuing operations before income taxes and extraordinary loss................ $ 71.1 $ 58.7 $ 135.1 Income from continuing operations before extraordinary loss......... $ 35.7 $ 34.2 $ 76.3 Extraordinary loss.................. $ (0.3) $ (3.3) $ -- Discontinued operations gain (loss)............................ $ 0.3 $ -- $ (0.6) Net income.......................... $ 35.7 $ 30.9 $ 75.7
NOTE 5. RESTRUCTURING COSTS Due to increased general economic softness and deteriorating market conditions in the communications products market, during the third quarter of 2001 the Board of Directors approved the restructuring plan (as outlined below) and the Company incurred restructuring and other charges of $31.7 million. The Company's remaining liability at January 3, 2003 was $6.9 million, $4.2 million of which was classified as short-term. As 33 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of September 27, 2002, the Company had implemented all of the restructuring initiatives. Activity related to the accrued costs during 2002 is identified below:
STAFF FACILITY KOREA REDUCTIONS RESTRUCTURING CLOSURE OTHER TOTAL ---------- ------------- ------- ----- ----- (IN MILLIONS) Balance at December 28, 2001........... $ 4.3 $ 11.0 $ 1.6 $ 0.8 $ 17.7 Accrual adjustments.................... 0.4 1.0 (0.4) (0.7) 0.3 Cash payments.......................... (4.5) (6.3) -- (0.3) (11.1) Reclassification....................... -- (0.5) -- 0.5 -- Foreign exchange....................... -- (0.2) 0.2 -- -- ----- ------ ----- ----- ------ Balance at January 3, 2003............. $ 0.2 $ 5.0 $ 1.4 $ 0.3 $ 6.9 ===== ====== ===== ===== ======
Staff Reductions -- In 2001, the Company recorded a restructuring charge of $9.8 million relating to severance and outplacement costs. The Company implemented a plan to reduce approximately 700 employees across all business functions and geographical areas. The headcount reductions occurred in the following functional areas - administrative 100, sales and marketing 350 and operations 250. These reductions approximated 13% of the total workforce prior to the announcement. Most of the staff reductions occurred during the last half of 2001. During the 53 weeks ended January 3, 2003, the Company paid $4.5 million in severance and outplacement benefits. As of September 27, 2002, the Company had completed all staff reductions associated with this initiative. During the second quarter of 2002, Europe recorded an additional charge of $0.4 million for severance associated with headcount reductions. The Company's consolidated results of operations were not impacted by this charge, as it was offset by the reversal of excess accruals in North America and Asia Pacific. Facility Restructuring -- In 2001, the Company recorded a restructuring charge of $13.9 million to cover the costs of vacating 900,000 square feet of space in approximately 35 warehouses and sales locations that were primarily located in North America. The reduction in square feet represented approximately 18% of the total square footage the Company occupied prior to the restructuring initiative. The major components of the charge included the following items - $19.1 million for the gross value of committed future lease payments and related costs and $2.0 million for impaired asset write-offs. These charges were partially offset by management's estimate of realizing sublet income totaling $7.2 million. The sublet income was estimated based on a review of each facility with a local real estate broker to determine the potential for subletting each of the properties and the expected rental income per square foot. During the 53 weeks ended January 3, 2003, the Company paid $6.3 million associated with the facility restructuring. As of September 27, 2002, the Company had vacated all of the space. In lieu of subletting some of these leased facilities, the company paid additional penalties to be released from its future lease obligations. Therefore, the sublet income is currently estimated to be $3.2 million, $2.4 million of which has been committed. During 2002, the Company received $0.1 million of sublet income. The remaining accrued expense of $5.0 million for the facility restructuring is reasonable based on the Company's current estimates. During the second quarter of 2002, Europe recorded an additional charge for the facility consolidation in the Company's UK operation of $1.0 million. The Company's consolidated results of operations were not impacted by this charge, as it was offset by the reduction of excess accruals in North America and Asia Pacific. The Company has classified $2.7 million of the net lease obligations due to the consolidation of facilities as long-term and estimates that it will be paid over the respective lease terms through the year 2008. Korea -- In 2001, the Company decided to exit the Korean market and, as a result, recorded restructuring and other charges of $6.2 million. The major portions of the charge included reserving for the net remaining accounts receivable balance of $3.1 million, legal proceedings brought against Anixter Korea of $2.1 million and other closure costs of $1.0 million. Exiting the Korean market had no material impact on the Company's consolidated revenue as Korean sales accounted for less than 0.2% of the Company's total sales. 34 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The remaining accrued expense of $1.4 million is needed to cover the legal proceedings against Anixter Korea. There was no cash paid out in 2002. Other Items -- In 2001, the Company expensed purchased software that it decided not to implement due to the general economic downturn and provided for legal costs associated with the restructuring. The total charge for these items was $1.8 million. The remaining accrual balance of $0.3 million is needed for legal costs associated with the restructuring. NOTE 6. ACCRUED EXPENSES Accrued expenses consisted of the following:
JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) Salaries and fringe benefits................................ $39.4 $37.5 Discontinued operations..................................... 9.3 11.9 Taxes....................................................... 6.5 5.5 Selling and promotion....................................... 4.4 4.5 Freight..................................................... 3.5 4.1 Other....................................................... 20.4 22.7 ----- ----- Total accrued expenses............................ $83.5 $86.2 ===== =====
NOTE 7. DEBT Debt is summarized below:
JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) 7% Zero-coupon convertible notes............................ $124.0 $221.8 Bank revolving lines of credit.............................. 62.2 0.5 8% Senior notes............................................. 8.0 18.6 Other....................................................... 0.9 0.2 ------ ------ Total debt.................................................. $195.1 $241.1 ====== ======
On June 28, 2000, the Company issued $792.0 million of Convertible Notes due 2020 and subsequently repurchased $378.7 million of this issue in 2002. The discount associated with the issuance is being amortized through June 28, 2020 using the effective interest rate method. Gross issuance costs totaling $3.7 million, after $2.8 million of write-offs due to note repurchases, are being amortized through June 28, 2020 using the straight-line method. Holders of the Convertible Notes may convert at any time on or before the maturity date, unless the notes have previously been redeemed or purchased, into 7.4603 shares of the Company's common stock for which the Company has reserved 3.1 million shares. Additionally, holders may require the Company to purchase, at book value, all or a portion of their Convertible Notes on June 28, 2005, at a price of $356.28 per Convertible Note; on June 28, 2010, at a price of $502.57 per Convertible Note; and on June 28, 2015, at a price of $708.92 per Convertible Note. The Company may choose to pay the purchase price in cash or common stock or a combination of both. 35 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On October 6, 2000, Anixter entered into a new financing arrangement to replace the existing $550.0 million revolving credit agreement set to mature in 2001. The new agreement consisted of a $500.0 million, senior unsecured, revolving credit line which includes a $390.0 million agreement, due 2005, plus a $110.0 million, 364-day agreement that was cancelled in the second quarter of 2001. Anixter has various other revolving bank lines of credit worldwide that provide for up to $17.5 million of additional borrowings, none of which are domestic. These international lines of credit reduce or mature at various dates in 2003 through 2004. Floating and fixed interest rate options, based on the prime or LIBOR rate, are available under these facilities. At January 3, 2003, $62.2 million was borrowed and $345.3 million was available under the bank revolving lines of credit at Anixter, $10.8 million of which was available to pay the Company for intercompany liabilities. The weighted average interest rate on debt, excluding the fixed rate notes, at January 3, 2003 and December 28, 2001, was 3.0% and 5.0%, respectively. Facility fees of 0.25% payable on the 5 year agreement and 0.23% payable on the 364-day agreement totaled $1.0 million and $1.1 million in 2002 and 2001, respectively, and were included in Interest expense in the Consolidated Statements of Operations. Facility fees for 2000 were insignificant. Interest paid in 2002, 2001 and 2000 was $5.0 million, $18.2 million and $39.1 million, respectively. In September 1996, Anixter filed a shelf registration statement with the Securities and Exchange Commission to offer from time to time up to $200.0 million aggregate principal amount of unsecured notes. On September 17, 1996, Anixter issued $100.0 million of these notes due September 2003 and has subsequently repurchased $92.0 million. The notes, which bear interest at 8%, contain various restrictions with respect to secured borrowings and are unconditionally guaranteed by the Company. During the years ended January 3, 2003 and December 28, 2001, the Company repurchased a portion of its Convertible Notes and its 8% senior notes and subsequently wrote-off debt issuance costs associated with the Convertible Notes and the cancellation of the $110.0 million 364-day revolving credit agreement. The following table reflects the repurchase activity:
YEARS ENDED ----------------------------------- JANUARY 3, 2003 DECEMBER 28, 2001 --------------- ----------------- BOOK BOOK VALUE COST VALUE COST ------ ------ ------- ------- (IN MILLIONS) 8% Senior notes...................................... $ 10.7 $ 11.1 $ 81.3 $ 86.5 7% Zero-coupon convertible notes..................... $109.7 $107.2 $ -- $ -- Debt issuance costs written-off...................... $ 2.8 $ -- $ 0.3 $ --
Accordingly, for the year ended January 3, 2003, the Company recorded an extraordinary loss on the early extinguishment of debt in its Consolidated Statement of Operations of $0.7 million ($0.4 million, net of tax). For the year ended December 28, 2001, the Company recorded an extraordinary loss on the early extinguishment of debt of $5.5 million ($3.3 million, net of tax). Certain debt agreements entered into by the Company's subsidiaries contain various restrictions including restrictions on payments to the Company. The Company has guaranteed substantially all of the debt of its subsidiaries. Restricted net assets of subsidiaries were approximately $516.2 million and $415.8 million at January 3, 2003 and December 28, 2001, respectively. Aggregate annual maturities of debt at January 3, 2003, were as follows: 2003-$8.9 million; 2004-$2.7 million; 2005-$59.5 million; 2006-none; 2007-none and $124.0 million thereafter. The amount due in 2003 was classified as long-term due to the Company's ability and intent to refinance through its long-term facilities. 36 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The estimated fair value of the Company's debt at January 3, 2003 and December 28, 2001 was $201.3 million and $245.9 million, respectively, based on public quotations and current market rates. NOTE 8. COMMITMENTS AND CONTINGENCIES Substantially all of the Company's office and warehouse facilities and equipment are leased under operating leases. A certain number of these leases are long-term operating leases and expire at various dates through 2018. Most operating leases entered into by the Company contain renewal options. Minimum lease commitments under operating leases at January 3, 2003 are as follows: 2003 -- $35.8 million; 2004 -- $26.4 million; 2005 -- $17.7 million; 2006 -- $10.5 million; 2007 -- $7.4 million; beyond 2007 -- $18.8 million. Total rental expense was $50.5 million, $57.8 million and $52.3 million in 2002, 2001 and 2000, respectively. Aggregate future minimum rentals to be received under noncancelable subleases at January 3, 2003 was $2.4 million. In 2002, the Company entered into a contract for construction of its new corporate headquarters. The contract is paid on a percentage-of-completion basis. As of January 3, 2003, the contract has a remaining obligation of approximately $18.0 million, due in the first half of 2003. From time to time, in the ordinary course of business, the Company and its subsidiaries become involved as plaintiffs or defendants in various legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts that may be material. However, it is the opinion of the Company's management, based upon the advice of its counsel, that the ultimate disposition of pending litigation will not be material. NOTE 9. INCOME TAXES The Company and its U.S. subsidiaries file their federal income tax return on a consolidated basis. As of January 3, 2003, the Company had no net operating loss ("NOL") or investment tax credit carryforwards for U.S. federal income tax purposes. At January 3, 2003, various foreign subsidiaries of the Company had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $144.7 million, which are subject to various provisions of each respective country. Approximately $52.3 million of this amount expires between 2003 and 2012 and $92.4 million of the amount has an indefinite life. Of the $144.7 million NOL carryforwards of foreign subsidiaries mentioned above, $68.6 million relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow-through of such losses in certain circumstances. Without such losses included, the cumulative NOL carryforwards at January 3, 2003 were approximately $76.1 million, which are subject to various provisions of each respective country. Approximately $43.5 million of this amount expires between 2003 and 2012 and $32.6 million of the amount has an indefinite life. The deferred tax asset and valuation allowance, shown below relating to foreign NOL carryforwards, have been adjusted to reflect only the carryforwards for which the Company has not taken a tax benefit in the U.S. Domestic income before income taxes and extraordinary loss was $63.5 million, $55.5 million and $110.1 million for 2002, 2001 and 2000, respectively. Foreign income before income taxes was $9.0 million, $2.7 million and $24.5 million for 2002, 2001 and 2000, respectively. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $67.1 million at January 3, 2003. Those earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. According to the 37 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's computations as of January 3, 2003, unrecognized foreign tax credit carryforwards would be available to fully offset the U.S. regular corporate income tax liability that would arise upon such a distribution. Additionally, with respect to the countries that have undistributed earnings as of January 3, 2003, according to the foreign laws and treaties in place at that time, withholding taxes of approximately $1.6 million would be payable upon the remittance of all earnings at January 3, 2003. The Company paid income taxes in 2002, 2001 and 2000 of $26.1 million, $33.7 million and $46.8 million, respectively. Significant components of the Company's deferred tax assets and (liabilities) were as follows:
JANUARY 3, DECEMBER 28, 2003 2001 ------------ ------------ (IN MILLIONS) Gross deferred tax liabilities.............................. $ (8.8) $(17.4) Foreign NOL carryforwards................................... 24.1 29.6 Deferred compensation....................................... 18.0 14.7 Inventory reserves.......................................... 12.6 17.2 Allowance for doubtful accounts............................. 6.3 3.0 Other....................................................... 9.8 10.5 ------ ------ Gross deferred tax assets................................. 70.8 75.0 Valuation allowance......................................... (23.8) (24.5) ------ ------ Net deferred tax assets................................... $ 38.2 $ 33.1 ====== ====== Net current deferred tax assets............................. $ 26.5 $ 32.0 Net non-current deferred tax assets......................... 11.7 1.1 ------ ------ Net deferred tax assets................................... $ 38.2 $ 33.1 ====== ======
Income tax expense (benefit) was comprised of:
YEARS ENDED ------------------------------------------ JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ------------ ------------ ------------ (IN MILLIONS) Current: Foreign....................................... $ 9.7 $ 10.1 $ 11.8 State......................................... 1.9 3.3 8.1 Federal....................................... 15.7 25.1 36.7 ------ ------ ------ 27.3 38.5 Deferred: Foreign....................................... 4.3 (0.7) (0.7) State......................................... 0.2 (2.3) (2.4) Federal....................................... ( 2.8) (10.9) 2.4 ------ ------ ------ 1.7 (13.9) ------ ------ ------ Income tax expense............................ $ 29.0 $ 24.6 $ 55.9 ====== ====== ======
38 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reconciliations of income tax expense to the statutory corporate federal tax rate of 35% were as follows:
YEARS ENDED ------------------------------------------ JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ------------ ------------ ------------ (IN MILLIONS, EXCEPT PER SHARE DATA) Statutory tax expense......................... $ 25.4 $20.4 $47.1 Increase (reduction) in taxes resulting from: Losses on foreign operations.................. 6.5 0.9 2.3 State income taxes............................ 1.4 0.5 3.7 Amortization of goodwill...................... -- 2.6 2.5 Other, net.................................... (4.3) 0.2 0.3 ------ ----- ----- Income tax expense............................ $ 29.0 $24.6 $55.9 ====== ===== =====
NOTE 10. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS The majority of the Company's various pension plans are non-contributory and cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in the plans. The Company's policy is to fund these plans as required by the Employee Retirement Income Security Act and the Internal Revenue Service. Plan assets consisted primarily of equity securities and mutual fund investments. In 2000, the Company incurred a $3.2 million loss on settlement of a supplemental employee retirement plan. 39 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENSION BENEFITS ----------------- 2002 2001 ------- ------- (IN MILLIONS) Change in projected benefit obligation: Beginning balance......................................... $ 121.2 $ 107.4 Service cost.............................................. 7.1 7.0 Interest cost............................................. 8.3 7.6 Amendments.................................................. (0.1) 0.7 Actuarial loss (gain)..................................... 2.6 3.2 Benefits paid............................................. (3.5) (3.4) Foreign currency exchange rate changes...................... 3.6 (1.3) ------- ------- Ending balance............................................ $ 139.2 $ 121.2 ======= ======= Change in plan assets at fair value: Beginning balance......................................... $ 95.3 $ 99.8 Actual return on plan assets.............................. (10.7) (2.7) Company contributions..................................... 2.3 2.7 Benefits paid............................................. (3.5) (3.4) Foreign currency exchange rate changes.................... 2.5 (1.1) ------- ------- Ending balance............................................ $ 85.9 $ 95.3 ======= ======= Reconciliation of funded status: Projected benefit obligation.............................. $(139.2) $(121.2) Plan assets at fair value................................. 85.9 95.3 ------- ------- Funded status............................................. (53.3) (25.9) Unrecognized net actuarial loss (gain).................... 24.0 2.2 Unrecognized prior service cost........................... 2.2 2.4 Unrecognized transition obligation........................ -- (0.2) ------- ------- Accrued benefit cost...................................... $ (27.1) $ (21.5) ======= ======= Weighted average assumptions: Discount rate............................................. 6.45% 6.81% Expected return on plan assets............................ 8.43% 8.53% Salary growth rate........................................ 4.82% 4.96%
40 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENSION BENEFITS --------------------------- 2002 2001 2000 ------- ------- ------- (IN MILLIONS) Components of net periodic cost: Service cost.......................................... $ 7.1 $ 7.0 $ 6.2 Interest cost......................................... 8.3 7.6 6.9 Expected return on plan assets........................ (8.2) (8.4) (8.4) Net amortization...................................... (0.1) (0.4) (0.7) ------- ------- ------- Periodic benefit cost prior to settlement/curtailment............................. 7.1 5.8 4.0 Net settlement/curtailment loss....................... -- -- 3.0 ------- ------- ------- Net periodic cost..................................... $ 7.1 $ 5.8 $ 7.0 ======= ======= =======
The Company has six plans in 2002 and four plans in 2001 where the accumulated benefit obligation is in excess of the fair value of plan assets. The accumulated benefit obligation was $94.8 million and $4.2 million and the fair values of the plans' assets were $74.5 million and $0.2 million in 2002 and 2001, respectively. In 2002, the Company was required to record a minimum pension liability of $0.8 million relating to the primary domestic plan. A minimum pension liability is defined as the difference between the accumulated benefit obligation and the underlying pension plan assets and the accrued pension liability. There was no income statement impact as the offset to the minimum pension liability adjustment was accumulated other comprehensive income. The Company has several savings plans. The Company's contributions to these plans are based upon various levels of employee participation. The total cost of these plans was $1.6 million in 2002, $1.6 million in 2001 and $1.5 million in 2000. The Company's liability for post-retirement benefits other than pensions is not material. A non-qualified deferred compensation plan was implemented on January 1, 1995. The plan permits selected employees to make pre-tax deferrals of salary and bonus. Interest is accrued quarterly on the deferred compensation balances based on the average 10-year treasury note rate for the previous three months times 1.4 and adjusted if certain goals are achieved. The plan provides for benefit payments upon retirement, death, disability, termination or other scheduled dates determined by the participant. At January 3, 2003 and December 28, 2001, the long-term deferred compensation liability was $15.1 million and $13.6 million, respectively. Concurrent with the implementation of the deferred compensation plan, the Company purchased variable, separate account life insurance policies on the lives of the participants. To fund additional liabilities, fixed general account "increasing whole life" insurance policies were purchased on the lives of certain participants in both the deferred compensation plan and an executive excess defined benefit plan. The Company pays level annual premiums on the above policies that are owned by the Company. Policy proceeds are payable to the Company upon the insured participant's death. At January 3, 2003 and December 28, 2001, the cash surrender value of $18.5 million and $19.1 million, respectively, was recorded under this program and reflected in Other assets on the Consolidated Balance Sheets. NOTE 11. PREFERRED STOCK AND COMMON STOCK Preferred Stock The Company has the authority to issue 15 million shares of preferred stock, par value $1.00 per share, none of which was outstanding at the end of 2002 or 2001. 41 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Options and Stock Grants At January 3, 2003, the Company had reserved a total of 4.4 million shares for future issuance, 3.1 million of which was reserved for the holders of the Convertible Notes as discussed in Note 7 "Debt" herein. Additionally, the Company had stock incentive plans that reserve 1.3 million shares for additional stock option awards or stock grants. Options previously granted under these plans have been granted with exercise prices at or higher than the fair market value of the common stock on the date of grant. One-fourth of the employee options granted become exercisable each year after the year of grant. The director options fully vest in one year. All options expire ten years after the date of grant. In 2002, the Company issued 4,000 shares of restricted stock with a weighted-average grant date fair value of $21.49 per share. In 2001, the Company granted 31,340 shares of restricted stock and granted 161,039 executive stock units, both with a weighted-average grant date fair value of $18.81 per share. During 2000, the first year that restricted stock was granted, the Company issued 281,173 shares of restricted stock, of which 94,637 shares had a weighted-average grant date fair value of $27.25 per share and 186,536 shares had a weighted-average grant date fair value of $20.44 per share. Restricted stock and executive stock units fully vest after four years from the date of grant. Compensation expense associated with the restricted stock grants and executive stock units was $2.8 million, $3.6 million and $1.7 million in 2002, 2001 and 2000, respectively. The following table summarizes the 2002, 2001 and 2000 activity under the employee and director option plans:
WEIGHTED WEIGHTED AVERAGE AVERAGE EMPLOYEE EXERCISE DIRECTOR EXERCISE OPTIONS PRICE OPTIONS PRICE -------- -------- -------- -------- (OPTIONS IN THOUSANDS) Balance at December 31, 1999........................... 5,183.6 $15.92 360.0 $14.57 Granted................................................ 1,127.5 20.59 -- -- Exercised.............................................. (2,003.0) 16.14 (100.0) 11.30 Canceled............................................... (147.1) 16.91 -- -- -------- ------ ------ ------ Balance at December 29, 2000........................... 4,161.0 17.06 260.0 15.83 Granted................................................ 1,190.0 25.24 -- -- Exercised.............................................. (1,128.1) 16.91 (40.0) 17.24 Canceled............................................... (138.3) 20.17 -- -- Balance at December 28, 2001........................... 4,084.6 19.37 220.0 15.57 Granted................................................ 1,216.5 25.86 -- -- -------- ------ ------ ------ Exercised.............................................. (407.7) 15.46 (60.0) 8.42 Canceled............................................... (55.9) 22.65 -- -- Balance at January 3, 2003............................. 4,837.5 $21.30 160.0 $18.26 Options exercisable at year-end: 2000................................................... 2,031.3 $16.75 260.0 $15.83 2001................................................... 1,649.0 $16.72 220.0 $15.57 2002................................................... 2,184.9 $18.49 160.0 $18.26
42 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information relating to options outstanding and exercisable at January 3, 2003, using various ranges of exercise prices: EMPLOYEE OPTIONS
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------- ---------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE OF EXERCISE REMAINING EXERCISE EXERCISE PRICES OUTSTANDING PRICE YEARS EXERCISABLE PRICE - --------------- ----------- -------- --------- ----------- -------- (OPTIONS IN THOUSANDS) $12.69-$15.75.................... 874.3 $13.73 6.0 680.1 $14.02 $17.44-$24.33.................... 1,755.5 $19.44 6.6 1,237.9 $18.90 $25.20-$32.00.................... 2,207.7 $25.77 9.5 266.9 $27.97
DIRECTOR OPTIONS
WEIGHTED WEIGHTED AVERAGE AVERAGE RANGE OF OUTSTANDING & EXERCISE REMAINING EXERCISE PRICES EXERCISABLE PRICE YEARS - --------------- ------------- -------- --------- (OPTIONS IN THOUSANDS) $15.00-$16.65....................................... 80.0 $15.82 1.5 $20.69.............................................. 80.0 $20.69 3.0
In addition, the Company has an Employee Stock Purchase Plan ("ESPP") covering most employees. Participants can request that up to 10% of their base compensation be applied toward the purchase of common stock under the Company's ESPP. The purchase price is the lower of 85% of the fair market value of the common stock at the beginning of the ESPP year, July 1, 2002, or at the end of the ESPP year, June 30, 2003. Under the ESPP, the Company sold 81,900 shares, 110,128 shares and 114,100 shares to employees in 2002, 2001 and 2000, respectively. Stock Option Plans of Anixter In 1995 and prior years, Anixter granted to key employees options to purchase the common stock of Anixter. Substantially all options were granted with exercise prices at the fair market value of the common stock on the date of grant. These options vest over four years and terminate seven to ten years from the date of grant. At January 3, 2003, the Company owned 99.97% of the approximately 30.6 million shares of outstanding Anixter common stock. 43 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the 2002, 2001 and 2000 option activity:
WEIGHTED AVERAGE EXERCISE OPTIONS PRICE -------- --------- (OPTIONS IN THOUSANDS) Balance at December 31, 1999................................ 369.5 $12.08 Exercised................................................... (323.7) 11.92 Canceled.................................................... (0.5) 14.50 ------ ------ Balance at December 29, 2000................................ 45.3 13.23 Exercised................................................... (27.3) 12.40 Canceled.................................................... -- -- ------ ------ Balance at December 28, 2001................................ 18.0 14.50 Exercised................................................... (18.0) 14.50 Canceled.................................................... -- -- ------ ------ Balance at January 3, 2003.................................. -- -- ====== ====== Options exercisable at year-end: 2000...................................................... 45.3 $13.23 2001...................................................... 18.0 $14.50
Stock Units The Company adopted a Director Stock Unit Plan ("DSUP") to pay its non-employee directors annual retainer fees in the form of stock units. These stock units convert to common stock of the Company at the pre-arranged time selected by each director. Stock units were granted to nine directors in 2002 and eight directors in 2001, having an aggregate value at grant date of $540,000 and $480,000, respectively. 44 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the 2002, 2001 and 2000 activity under the DSUP:
DSUP STOCK UNITS -------------- (IN THOUSANDS) Balance at December 31, 1999................................ 107.8 Granted..................................................... 107.8 Converted................................................... 20.4 Balance at December 29, 2000 Granted..................................................... 97.0 Converted................................................... 18.4 Canceled.................................................... (0.6) Balance at December 28, 2001 Granted..................................................... 83.0 Converted................................................... 24.8 Converted................................................... (6.6) ----- Balance at January 3, 2003.................................. 101.2 =====
NOTE 12. BUSINESS SEGMENTS The Company is engaged in the distribution of communications and specialty wire and cable products and fasteners and small parts from top suppliers to contractors and installers, and also to end users including manufacturers, natural resources companies, utilities and original equipment manufacturers. The Company is organized by geographic regions, and accordingly, has identified North America (United States and Canada), Europe and Asia Pacific and Latin America as reportable segments. The Company obtains and coordinates financing, tax, information technology, legal and other related services, certain of which are rebilled to subsidiaries. Interest expense and other non-operating items are not allocated to the segments or reviewed on a segment basis. 45 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 2001, the Company reported sales in all segments to a single customer that represented 10.3% of total net sales. No other customer accounted for 10% or more of sales in 2002, 2001 or 2000. Export sales were insignificant. Segment information for 2002, 2001 and 2000 was as follows:
WORLDWIDE OPERATIONS ------------------------------ 2002 2001 2000 -------- -------- -------- (IN MILLIONS) Net sales United States................................ $1,771.6 $2,179.5 $2,453.9 Canada................................................. 224.6 254.0 285.4 -------- -------- -------- North America........................................ 1,996.2 2,433.5 2,739.3 Europe............................................... 344.9 502.1 587.1 Asia Pacific and Latin America....................... 179.0 208.6 188.0 -------- -------- -------- $2,520.1 $3,144.2 $3,514.4 Operating income (loss)* United States........................................ $ 72.1 $ 79.4 $ 144.6 Canada............................................... 11.6 10.3 19.6 North America........................................ 83.7 89.7 164.2 Europe............................................... 5.3 21.2 24.6 Asia Pacific and Latin America....................... (1.3) (8.9) 1.0 -------- -------- -------- $ 87.7 $ 102.0 $ 189.8 Depreciation United States........................................ $ 15.2 $ 14.3 $ 12.1 Canada............................................... 0.9 0.9 0.8 -------- -------- -------- North America........................................ 16.1 15.2 12.9 Europe............................................... 1.82.2 2.9 Asia Pacific and Latin America....................... 1.2 1.3 1.3 -------- -------- -------- $ 19.1 $ 18.7 $ 17.1 Amortization United States........................................ $ 4.4 $ 12.7 11.5 Canada............................................... -- 0.4 0.4 North America........................................ 4.4 13.1 0.3 Europe............................................... 4.4 13.1 11.9 Asia Pacific and Latin America....................... -- 0.3 0.3 $ 4.4 $ 13.7 $ 12.5 ======== ======== ======== Total assets United States........................................ $ 842.7 $ 770.2 $1,028.0 Canada............................................... 96.8 105.2 147.5 North America........................................ 939.5 875.4 1,175.5 Europe............................................... 171.2 197.9 375.6 Asia Pacific and Latin America....................... 115.3 125.5 134.9 -------- -------- -------- $1,226.0 $1,198.8 $1,686.0 ======== ======== ========
46 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WORLDWIDE OPERATIONS ------------------------------ 2002 2001 2000 -------- -------- -------- (IN MILLIONS) Tangible long-lived assets United States........................................ $ 126.1 $ 119.2 $ 89.8 Canada............................................... 1.9 2.7 3.7 -------- -------- -------- North America 128.0 121.9 93.5 Europe 3.5 4.7 5.2 Asia Pacific and Latin America....................... 3.1 3.3 4.2 -------- -------- -------- $ 134.6 $ 129.9 $ 102.9 ======== ======== ======== Capital expenditures United States........................................ $ 15.2 $ 17.8 $ 18.4 Canada............................................... 0.1 1.4 0.9 -------- -------- -------- North America........................................ 15.3 19.2 19.3 Europe............................................... 0.7 2.0 1.4 Asia Pacific and Latin America....................... 0.9 0.8 1.9 -------- -------- -------- $ 16.9 22.0 $ 22.6 ======== ======== ========
*The year ended December 28, 2001 includes restructuring costs and other charges for the United States, Canada, Europe and Asia Pacific and Latin America of $20.7 million, $2.4 million, $2.3 million and $6.3 million, respectively. The years ended December 28, 2001 and December 29, 2000 include goodwill amortization for the United States and Canada of $8.0 million and $0.4 million and $7.4 million and $0.4 million, respectively. In addition, Europe and Asia Pacific and Latin America include goodwill amortization of $0.3 million each for both years. NOTE 13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the unaudited interim results of operations and the price range of the common stock composite for each quarter in the years ended January 3, 2003 and December 28, 2001. The Company has never paid cash dividends on its common stock and has not adopted a plan to pay cash dividends in the foreseeable future. 47 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED JANUARY 3, 2003 Net sales.............................................. $ 614.7 $ 617.3 $ 626.3 $ 661.8 Cost of sales.......................................... (472.9) (469.6) (476.4) (495.8) Operating income....................................... 20.5 22.5 23.1 21.6 Income before income taxes and extraordinary (loss) gain................................................. 15.8 21.3 18.0 17.4 Income before extraordinary (loss) gain................ 9.5 12.8 10.8 10.4 Extraordinary (loss) gain on early extinguishment of debt, net of tax..................................... (0.6) (0.4) 0.8 (0.2) Net income............................................. 8.9 12.4 11.6 10.2 Basic income (loss) per share: Income before extraordinary (loss) gain.............. 0.26... 0.35 0.29 0.28 Extraordinary (loss) gain............................ (0.02) (0.01) 0.02 (0.01) Net income............................................. 0.24 0.34 0.31 0.27 Diluted income (loss) per share: Income before extraordinary (loss) gain.............. 0.25 0.33 0.28 0.27 Extraordinary (loss) gain............................ (0.02) (0.01) 0.02 (0.01) Net income........................................... 0.23 0.33 0.30 .27 Composite stock price range: High................................................. 30.68 31.25 24.65 .24 Low.................................................. 25.87 22.03 20.39 18.95 Close................................................ 29.63 23.50 20.39 23.77 YEAR ENDED DECEMBER 28, 2001 Net sales.............................................. $ 880.3 $ 839.8 $ 761.5 $ 662.6 Cost of sales.......................................... (668.3) (639.3) (590.8) (508.9) Operating income (loss)................................ 49.7 43.2 (10.0) 19.1 Income (loss) before income taxes and extraordinary loss................................................. 35.6 30.9 (19.7) 11.4 Income (loss) before extraordinary loss................ 20.9 18.7 (11.7) 5.7 Extraordinary loss on early extinguishment of debt, net of tax............................................... -- (0.8) (0.2) (2.3) Net income (loss)...................................... 20.9 17.9 (11.9) 3.4 Basic income (loss) per share: Income (loss) before extraordinary loss.............. 0.57 0.52 (0.32) 0.16 Extraordinary loss................................... -- (0.02) (0.01) (0.06) Net income (loss).................................... 0.57 0.50 (0.33) 0.10 DILUTED INCOME (LOSS) PER SHARE: Income (loss) before extraordinary loss.............. 0.53 0.49 (0.32) 0.15 Extraordinary loss................................... -- (0.02) (0.01) (0.06) Net income (loss).................................... 0.53 0.47 (0.33) 0.09 Composite stock price range: High................................................. 29.25.. 31.80 31.69 30.86 Low.................................................. 18.81.. 23.30 23.15 23.85 Close................................................ 24.10.. 30.70 24.78 28.82
48 ANIXTER INTERNATIONAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In the third quarter of 2001, the Company recorded a $31.7 million ($19.0 million after-tax) restructuring charge for severance and costs associated with closing and consolidating certain facilities. As a result, basic and diluted income per share were reduced by $0.52 and $0.50, respectively. Additionally, the year ended December 28, 2001 includes goodwill amortization of $2.2 million in the first quarter, $2.3 million in the second quarter, $2.2 million in the third quarter and $2.3 million in the fourth quarter. As a result, basic and diluted income per share were reduced by $0.06 and $0.05, respectively, in the first and second quarter and by $0.06 in the third and fourth quarters of 2001 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None 49 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT. See Registrant's Proxy Statement for the 2002 Annual Meeting of Stockholders--"Election of Directors." EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the name, age as of March 8, 2003, position, offices and certain other information with respect to the executive officers of the Company. The term of office of each executive officer will expire upon the appointment of his successor by the Board of Directors. John A. Dul, 42........................... Secretary of the Company since November 2002; General Counsel since May 1998; Assistant Secretary from May 1995 to November 2002; General Counsel and Secretary of Anixter since January 1996. Terrance A. Faber, 51..................... Vice-President Controller of the Company since October 2000; Chief Financial Officer of International Survey Research from January 2000 to October 2000; Corporate Controller of BT Office Products International from August 1997 to January 2000. Robert W. Grubbs Jr., 46.................. President and Chief Executive Officer of the Company since February 1998; President and Chief Executive Officer of Anixter since July 1994. Dennis J. Letham, 51...................... Chief Financial Officer, Senior Vice-President--Finance of the Company since January 1995; Chief Financial Officer, Executive Vice President of Anixter since July 1993. Philip F. Meno, 44........................ Vice-President--Taxes of the Company since May 1993. Rodney A. Shoemaker, 45................... Vice-President--Treasurer of the Company and Anixter since July 1999; Assistant Treasurer of the Company and Anixter from October 1994 to July 1999.
ITEM 11. EXECUTIVE COMPENSATION. See Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders--"Executive Compensation," "Compensation of Directors," "Employment Contracts and Termination of Employment and Changes in Control Arrangements" and "Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. See Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders--"Security Ownership of Management" and "Security Ownership of Principal Stockholders." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. See Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders-"Certain Relationships and Related Transactions." ITEM 14. CONTROLS AND PROCEDURES Within the 90 day period prior to the filing of this report, evaluations were carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and 50 procedures (as defined in Rule 13a-14 (c) and 15d-14(c) under the Securities Exchange Act of 1934). Based upon these evaluations, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes have been made in our internal controls or in the factors that could significantly affect these controls subsequent to the date of the evaluations. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Exhibits. The exhibits listed below in Items 15(a)1, 2 and 3 are filed as part of this annual report. Each management contract or compensatory plan required to be filed as an exhibit is identified by an asterisk (*). (b) Reports on Form 8-K On November 12, 2002, the Company filed a Current Report on Form 8-K under "Item 9. Regulation FD Disclosure," disclosing that on November 11, 2002, each of the President and Chief Executive Officer, Robert W. Grubbs, and the Senior Vice President-Finance and Chief Financial Officer, Dennis J. Letham, of Anixter International, Inc. submitted to the Commission sworn statements pursuant to the Commission's June 27, 2002 Order Requiring the Filing of Sworn Statements Pursuant to Section 21 (a) (1) of the Securities Exchange Act of 1934 (No. 4-460). On November 27, 2002, the Company filed a Current Report on Form 8-K/A under "Item 7. Financial Statements, Pro Forma Financial Information and Exhibits." The filing was an amendment to its Current Report on Form 8-K filed September 20, 2002, announcing the completion of the purchase of the operations and assets of Pentacon, Inc. (a) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. (1) Financial Statements. The following Consolidated Financial Statements of Anixter International Inc. and Report of Independent Auditors are filed as part of this report.
PAGE ---- Report of Independent Auditors.............................. 17 Consolidated Statements of Operations for the years ended January 3, 2003, December 28, 2001 and December 29, 2000...................................................... 18 Consolidated Balance Sheets at January 3, 2003 and December 28, 2001.................................................. 19 Consolidated Statements of Cash Flows for the years ended January 3, 2003, December 28, 2001 and December 29, 2000...................................................... 20 Consolidated Statements of Stockholders' Equity for the years ended January 3, 2003, December 28, 2001 and December 29, 2000......................................... 21 Notes to the Consolidated Financial Statements.............. 22
(2) Financial Statement Schedules. The following financial statement schedules of Anixter International Inc. are filed as part of this report and should be read in conjunction with the Consolidated Financial Statements of Anixter International Inc.:
PAGE ---- I. Condensed financial information of Registrant............ 48 II. Valuation and qualifying accounts and reserves.......... 52
All other schedules are omitted because they are not required or are not applicable, or the required information is shown in the Consolidated Financial Statements or notes thereto. (3) Exhibit List.Each management contract or compensation plan required to be filed as an exhibit is identified by an asterisk (*). 51
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- (3) Articles of Incorporation and by-laws. 3.1 Restated Certificate of Incorporation of Anixter International Inc., filed with Secretary of the State of Delaware on September 29, 1987 and Certificate of Amendment thereof, filed with the Secretary of Delaware on August 31, 1995 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 3.1) 3.2 By-laws of Anixter International Inc. as amended through November 21, 2002. (4) Instruments defining the rights of security holders, including indentures. 4.1 Indenture dated September 17, 1996, between Anixter Inc., Anixter International Inc. and the Bank of New York, as Trustee, providing for 8% Senior Notes due 2003. (Incorporated by reference from Amendment No. 1 to Anixter Inc.'s Registration Statement on Form S-3, Registration Number 333-09185, filed August 27, 1996, Exhibit 4.1) 4.2 Indenture dated as of June 28, 2000, by and between Anixter International Inc. and Bank of New York, as Trustee offering 7% zero-coupon convertible notes due 2020. (Incorporated by reference from Anixter International Inc.'s Registration Statement on Form S-3, Registration Number 333-42788, filed August 1, 2000, Exhibit 4.1) 4.3 (a)Five-Year, $390.0 million, Revolving Credit Agreement, dated October 6, 2000, among Anixter Inc., Bank of America, N.A., as Agent, and other banks named therein (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.3) (b)Amendment No. 1 to Anixter Five-Year, $390.0 million, Revolving Credit Agreement, dated October 6, 2000. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2001, Exhibit 4.3 (b)) (c)Amendment No. 2 to Anixter Five-Year, $390.0 million, Revolving Credit Agreement, dated October 6, 2000. 4.4 Receivables Sale Agreement, dated October 6, 2000, between Anixter Inc. and Anixter Receivables Corporation (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.5) 4.5 Receivables Purchase Agreement, dated October 6, 2000, among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent, and the other financial institutions named therein. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 4.6) 4.6 Amended and Restated Receivables Sale Agreement, dated October 3, 2002, between Anixter Inc. and Anixter Receivables Corporation 4.7 Amended and Restated Receivables Purchase Agreement, dated October 3, 2002, among Anixter Receivables Corporation, as Seller, Anixter Inc., as Servicer, Bank One, NA, as Agent and the other financial institutions named herein (10) Material contracts. 10.1 (a)Asset Purchase Agreement, dated February 22, 1999 (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K dated April 2, 1999) (b)First Amendment to Asset Purchase Agreement, dated March 29, 1999 (Incorporated by reference from Anixter International Inc. Current Report on Form 8-K dated April 2, 1999) 10.2 * Company's 1983 Stock Incentive Plan as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.3)
52
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.3 * Anixter International Inc. 1998 Stock Incentive Plan (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, file number 333-56935. Exhibit 4a) 10.4 * Company's Key Executive Equity Plan, as amended and restated July 16, 1992. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.8) 10.5 * Company's Director Stock Option Plan. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Exhibit 10.24) 10.6 Form of Stock Option Agreement. (Incorporated by reference from Itel Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Exhibit 10.24) 10.7 * Form of Indemnity Agreement with all directors and officers (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.24) 10.8 * Anixter International Inc. 1996 Stock Incentive Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.26) 10.9 * Form of Stock Option Grant (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.27) 10.10* Anixter Excess Benefit Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.28) 10.11* Forms of Anixter Stock Option, Stockholder Agreement and Stock Option Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.29) 10.12* (a)Anixter Deferred Compensation Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1995, Exhibit 10.30) (b)Anixter 1999 Restated Deferred Compensation Plan (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 31, 1999, Exhibit 10.15(b)). (c)Amendment No. 1 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2001, Exhibit 10.12 (c)) (d)Amendment No. 2 to Anixter 1999 Restated Deferred Compensation Plan. (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 28, 2001, Exhibit 10.12 (d)) (e)Amendment No. 3 to Anixter 1999 Restated Deferred Compensation Plan 10.13* Financial Advisory Agreement, dated August 4, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.21) 10.14* Employment Agreement with Robert W. Grubbs, dated July 22, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.22) 10.15* Employment Agreement with Dennis J. Letham, dated July 22, 1999 (Incorporated by reference from Anixter International Inc. Quarterly Report on Form 10-Q for the quarterly period ended October 1, 1999, Exhibit 10.23)
53
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.16* Anixter International Inc. Management Incentive Plan (Incorporated by reference from Anixter International Inc. Quarterly Report on form 10Q for the quarterly period ended June 30, 2000, Exhibit 10.20) 10.17* Amendment to Employee Agreements with Robert W. Grubbs and Dennis J. Letham, dated February 14, 2001 (Incorporated by reference from Anixter International Inc. Annual Report on Form 10-K for the year ended December 29, 2000, Exhibit 10.23) 10.18* Anixter International Inc. 2001 Stock Incentive Plan (Incorporated by reference from Anixter International Inc. Registration Statement on Form S-8, File number 333-103270, Exhibit 4a 10.19* Anixter International Inc. 2001 Mid-Level Stock Option Plan 10.20* Anixter International Inc. 1998 Mid-Level Stock Option Plan (21) Subsidiaries of the Registrant. 21.1 List of Subsidiaries of the Registrant (23) Consents of experts and counsel. 23.1 Consent of Ernst & Young LLP (24) Power of attorney. 24.1 Power of Attorney executed by Lord James Blyth, Robert L. Crandall, Robert W. Grubbs, F Philip Handy, Melvyn N. Klein, John R. Petty, Stuart M. Sloan, Thomas C. Theobald, Mary Agnes Wilderotter, Matthew Zell and Samuel Zell (99) Additional Exhibits. 99.1 Robert W. Grubbs, President and Chief Executive Officer, Certification Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Dennis J. Letham, Senior Vice-President Finance and Chief Financial Officer, Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Copies of other instruments defining the rights of holders of long-term debt of the Company and its subsidiaries not filed pursuant to Item 601(b)(4)(iii) of Regulation S-K and omitted copies of attachments to plans and material contracts will be furnished to the Securities and Exchange Commission upon request. 54 ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) STATEMENTS OF OPERATIONS (IN MILLIONS)
YEARS ENDED ------------------------------------------ JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ------------ ------------ ------------ Operating loss.......................................... $(1.9) $(1.5) $ (4.1) Other income (expenses): Interest income, including intercompany............... 5.6 5.3 6.6 Other................................................. -- -- (0.6) ----- ----- ------ Income from operations before income taxes, equity in earnings of subsidiaries and extraordinary loss....... 3.7 3.8 1.9 Income tax (expense) benefit............................ 5.5 (1.8) 1.9 Equity in earnings of subsidiaries...................... 34.0 28.3 74.9 Extraordinary loss...................................... (0.1 -- -- ----- ----- ------ Net income.............................................. $43.1 $30.3 $ 78.7 ===== ===== ======
55 ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) BALANCE SHEETS
JANUARY, 3 DECEMBER 28, 2003 2001 ------------ ------------ ASSETS Current assets: Cash...................................................... $ 0.4 $ 0.8 Accounts receivable....................................... 2.9 2.8 Amounts currently due from affiliates, net................ -- 2.7 Other assets.............................................. 0.6 0.2 ------ ------ Total current assets.............................. 3.9 6.5 Investment in and advances to subsidiaries.................. 762.8 788.6 Other assets................................................ 3.1 6.8 ------ ------ $769.8 $801.9 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses, due currently........ $ 2.3 $ 2.2 Amounts currently due to affiliates, net.................... 4.3 -- Long-term debt.............................................. 124.0 221.8 Income taxes, net, primarily deferred....................... 4.4 14.8 ------ ------ Total liabilities................................. 135.0 238.8 Stockholders' equity: Common stock.............................................. 37.5 36.9 Capital surplus........................................... 45.2 32.5 Accumulated other comprehensive income.................... (44.2) (59.5) Retained earnings......................................... 596.3 553.2 ------ ------ Total stockholders' equity........................ 634.8 563.1 ------ ------ $769.8 $801.9 ====== ======
56 ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) STATEMENTS OF CASH FLOWS
YEARS ENDED ------------------------------------------ JANUARY 3, DECEMBER 28, DECEMBER 29, 2003 2001 2000 ------------ ------------ ------------ Operating activities: Net income......................................... $ 43.1 $ 30.3 $ 78.7 Extraordinary loss................................. 0.1 -- -- Adjustments to reconcile net income to net cash provided by operating activities: Income tax expense (benefit).................. (5.5) 1.8 (1.9) Equity in earnings of subsidiaries............ (34.0) (28.3) (74.9) Accretion of zero-coupon convertible notes.... (1.9) -- -- Income tax savings from employee stock plans....................................... 2.5 5.3 11.2 Intercompany transactions..................... 6.4 (7.2) (9.3) Change in other operating items............... (0.9) 2.6 7.5 ------- ------- ------ Net cash provided by operating activities..... 9.6 4.5 11.3 Investing activities: Proceeds from sale of Anixter Inc. shares to Anixter Inc................................................ 66.7 -- -- ------- ------- ------ Net cash provided by investing activities..... 66.7 -- -- Financing activities: Retirement of 7% zero-coupon convertible notes........ (107.1) -- -- Loans (to) from subsidiaries, net..................... 22.9 20.5 (224.4) Proceeds from issuance of common stock................ 7.5 22.3 34.9 Purchase of treasury stock............................ -- (46.9) (15.4) Proceeds from long-term debt.......................... -- -- 200.0 Debt issuance costs................................... -- -- (6.4) ------- ------- ------ Net cash used in financing activities......... (76.7) (4.1) (11.3) ------- ------- ------ Cash provided (used).................................... (0.4) 0.4 -- Cash at beginning of year............................... 0.8 0.4 0.4 ------- ------- ------ Cash at end of year..................................... $ 0.4 $ 0.8 $ 0.4 ======= ======= ======
57 ANIXTER INTERNATIONAL INC. SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT ANIXTER INTERNATIONAL INC. (PARENT COMPANY) NOTE TO CONDENSED FINANCIAL STATEMENTS NOTE A--BASIS OF PRESENTATION In the parent company financial statements, the Company's investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The Company's share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. The parent company financial statements should be read in conjunction with the Company's consolidated financial statements. 58 ANIXTER INTERNATIONAL INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES YEARS ENDED JANUARY 3, 2003, DECEMBER 28, 2001 AND DECEMBER 29, 2000 (IN MILLIONS)
ADDITIONS ------------------ BALANCE AT CHARGED CHARGED BALANCE AT BEGINNING OF TO TO OTHER END OF THE DESCRIPTION THE PERIOD INCOME ACCOUNTS DEDUCTIONS PERIOD - ----------- ------------ ------- -------- ---------- ---------- Year ended January 3, 2003: Allowance for doubtful accounts......... $20.9 $13.9 $(2.5) $(16.9) $15.4 Allowance for deferred tax asset........ $24.5 $(0.7) -- -- $23.8 Year ended December 28, 2001: Allowance for doubtful accounts......... $14.8 $11.5 $(0.1) $ (5.5) $20.9 Allowance for deferred tax asset........ $25.5 $(1.0) -- -- $24.5 Year ended December 29, 2000: Allowance for doubtful accounts......... $10.3 $ 8.1 $(0.4) $ (3.2) $14.8 Allowance for deferred tax asset........ $26.3 $(0.8) -- -- $25.5
59 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SKOKIE, STATE OF ILLINOIS, ON THE 18TH DAY OF MARCH, 2003. ANIXTER INTERNATIONAL INC. By: /s/ DENNIS J. LETHAM ---------------------------------- Dennis J. Letham Senior Vice President Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ ROBERT W. GRUBBS Chief Executive Officer and President March 18, 2003 - ------------------------------------------ (Principal Executive Officer) Robert W. Grubbs /s/ DENNIS J. LETHAM Senior Vice President--Finance March 18, 2003 - ------------------------------------------ (Chief Financial Officer) Dennis J. Letham /s/ TERRANCE A. FABER Vice President--Controller March 18, 2003 - ------------------------------------------ (Chief Accounting Officer) Terrance A. Faber /s/ LORD JAMES BLYTH* Director March 18, 2003 - ------------------------------------------ Lord James Blyth /s/ ROBERT L. CRANDALL* Director March 18, 2003 - ------------------------------------------ Robert L. Crandall /s/ ROBERT W. GRUBBS Director March 18, 2003 - ------------------------------------------ Robert W. Grubbs /s/ F. PHILIP HANDY* Director March 18, 2003 - ------------------------------------------ F. Philip Handy /s/ MELVYN N. KLEIN* Director March 18, 2003 - ------------------------------------------ Melvyn N. Klein /s/ JOHN R. PETTY* Director March 18, 2003 - ------------------------------------------ John R. Petty /s/ STUART M. SLOAN* Director March 18, 2003 - ------------------------------------------ Stuart M. Sloan /s/ THOMAS C. THEOBALD* Director March 18, 2003 - ------------------------------------------ Thomas C. Theobald Director March 13, 2002 - ------------------------------------------ Mary Agnes Wilderotter /s/ MATTHEW ZELL* Director March 18, 2003 - ------------------------------------------ Matthew Zell /s/ SAMUEL ZELL* Director March 18, 2003 - ------------------------------------------ Samuel Zell *By /s/ DENNIS J. LETHAM ------------------------------------- Dennis J. Letham (Attorney in fact)
Dennis J. Letham, as attorney in fact for each person indicated 60 PRESIDENT AND CHIEF EXECUTIVE OFFICER CERTIFICATION I, Robert W. Grubbs, certify that: (1) I have reviewed this annual report on Form 10-K of Anixter International Inc.; (2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; (3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ ROBERT W. GRUBBS ------------------------------------ Robert W. Grubbs President and Chief Executive Officer March 18, 2003 61 SENIOR VICE PRESIDENT - FINANCE AND CHIEF FINANCIAL OFFICER CERTIFICATION I, Dennis J. Letham, certify that: (1) I have reviewed this annual report on Form 10-K of Anixter International Inc.; (2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; (3) Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ DENNIS J. LETHAM ------------------------------------ Dennis J. Letham Senior Vice President--Finance and Chief Financial Officer March 18, 2003 62 EX-3.2 3 c75506exv3w2.txt BY-LAWS OF ANIXTER INTERNATIONAL INC. EXHIBIT 3.2 ANIXTER INTERNATIONAL INC. AMENDED AND RESTATED BYLAWS - EFFECTIVE NOVEMBER 21, 2002 ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders for the election of Directors shall be held in the City of San Francisco, State of California, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. Annual meetings of stockholders shall be held on the third Thursday of April in each year if not a legal holiday and if a legal holiday then on the next business day following at 2:30 P.M. or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such meeting the stockholders shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Notice of Annual Meeting. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than fifty days before the date of the meeting. Section 4. List of Stockholders. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Notice of Special Meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than fifty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business Transacted at Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. Quorum. The holders of one-half of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the Page-2 adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. Vote Requirements. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Vote in Person or by Proxy. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Action without Meeting. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if all of the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all of the stockholders who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the total number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the total vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent. ARTICLE III DIRECTORS Section 1. Number and Election. The number of Directors which shall constitute the whole Board shall be the number at any given time determined by the Board. The Directors shall be elected at the annual meeting of stockholders, except as provided in Section 2 of this Article, and each Director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies. Vacancies and newly created directorships resulting from any increase in the Page-3 authorized number of Directors may be filled by a majority of the Directors then in office though less than a quorum, or by a sole remaining Director, and the Directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no Directors in office, then an election of Directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the Directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such Directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the Directors chosen by the Directors then in office. Section 3. Authority of Board of Directors. The business of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws directed or required to be exercised or done by the stockholders. Section 4. Meetings of the Board of Directors. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. A meeting of the Board of Directors may be held without notice immediately following the annual meeting of stockholders. Section 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times as are fixed from time to time by resolution of the Board but no less than quarterly, commencing in April, 1983, upon not less than three days' prior notice, on the Thursday subsequent to the third Monday of each month. Meetings will commence at 9:00 A.M. at the offices of the corporation or at such other time and at such other place as shall be determined by the Board of Directors. Section 6. Special Meetings. Special meetings of the Board of Directors may be called by the President on not less than three days' prior notice to each Director, either personally or by mail or by telegram. Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two Directors. Section 7. Quorum. At all meetings of the Board of Directors six Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or Page-4 by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Action without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting, if all members of the Board or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or Committee. Section 9. Committees of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more Committees, each Committee to consist of two or more of the Directors of the corporation. The Board of Directors may designate one or more Directors as alternate members of any Committee, who may replace any absent or disqualified member at any meeting of the Committee. Any such Committee, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that in the absence or disqualification of any member of such Committee or Committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Such Committee or Committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 10. Meetings of Committees. Each Committee may hold meetings, regular and/or special, either within or without the State of Delaware. Any regular or special meeting of a Committee shall be held on not less than three days' prior notice to each member of such Committee. Section 11. Minutes of Committee Meetings. Each Committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 12. Compensation of Directors. The Directors may be paid such compensation as the Board of Directors shall deem advisable. Section 13. The Chairman of the Board. The Board of Directors at its first meeting after each annual meeting of stockholders, or at such other time as it may determine, shall choose a Chairman of the Board. The Page-5 Chairman of the Board shall preside at meetings of the Board, shall be the Chairman of the Executive Committee, and shall have such other powers and duties as shall from time to time be assigned by the Board of Directors. ARTICLE IV NOTICES Section 1. Form of Notice. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-laws, notice is required to be given to any Director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing by mail, addressed to such Director or stockholder at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given by telegram. Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. Officers. The officers of the corporation shall be chosen by the Board of Directors and shall be a President, one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and a General COUNSEL. The Board of Directors may designate certain Vice-Presidents as executive or senior Vice-Presidents and may affix such functional designations to Vice-Presidential titles as it shall deem appropriate. The Board of Directors may also choose one or more Assistant Secretaries and Assistant Treasurers, Assistant Controllers, and Associate General Counsels. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide. The Board of Directors may authorize and approve the terms of employment contracts with officers covering the duties, term, compensation, and other terms of the employment of officers. Section 2. Appointment of Officers at First Meeting of Newly Elected Board of Directors. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a President, one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, one or more Assistant Controllers, a General Counsel and one or more Associate General Counsels. Page-6 Section 3. Appointment of Officers from Time to Time. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. Compensation of Officers. The compensation of all officers of the corporation shall be fixed by the Board of Directors. Section 5. Terms of Office. The officers of the corporation shall hold office until their successors are chosen and qualify. Any other officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. Section 6. The President. The President shall be Chief Executive Officer of the corporation and shall have all powers ordinarily exercised by the President and Chief Executive Officer of a corporation and such other powers and duties as shall from time to time be assigned to him by the Board of Directors. The President may execute on behalf of the corporation stock certificates, bonds, contracts, deeds, mortgages, or other instruments authorized by the Board of Directors, except in cases where the signing or execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the corporation or such documents or instruments shall be required by law to be signed or executed otherwise, and the President may affix the seal of the corporation to any instrument requiring the same. In the absence or disability of the Chairman of the Board, or in the event that for any reason it is impracticable for the Chairman to act personally, the President shall have the powers and duties of the Chairman, including the responsibility to preside at all meetings of stockholders and of the Board of Directors in the absence of the Chairman of the Board. In the performance of all the duties hereunder, the President shall be subject to the supervision of, and shall report to, the Board of Directors. Section 7. The Vice-Presidents. In the absence of the President or in the event of the President's inability or refusal to act, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have the powers of and be subject to all the restrictions upon the President. The Vice-Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 8. The Secretary. The Secretary shall attend all meetings of the Board of Directors and its Committees and all meetings of the stockholders and record all the proceedings of all such meetings in a book to Page-7 be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors and its Committees, and shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or President, under whose supervision he shall be. The Secretary shall have custody of the corporate seal of the corporation and the Secretary or Assistant Secretary shall have the authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the Secretary's signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by the signature of such officer. Section 9. The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary, or at the Secretary's request, or in the event of the Secretary's inability or refusal to act, or if the office of secretary is vacant, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 10. The Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors or its Executive Committee. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors or its Executive Committee, or as he may deem appropriate, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all transactions of the Treasurer. Section 11. Bonding of Treasurer. If required by the Board of Directors, the Treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the Treasurer's office and for the restoration of the corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the Treasurer belonging to the corporation. Section 12. The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then Page-8 in the order of their election), shall, in the absence of the Treasurer, or at the Treasurer's request, or, in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 13. The Controller. The Controller shall be the Chief Accounting Officer of the corporation and shall perform such duties and exercise such powers as are ordinarily performed or exercised by the Controller of a corporation and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 14. The Assistant Controller. The Assistant Controller, or if there be more than one, the Assistant Controllers in the order determined by the Board of Directors (or if there be no such determination, then in order of their election), shall, in the absence of the Controller or at the Controller's request, or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Controller and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 15. The General Counsel. The General Counsel shall be the Chief Legal Officer of the corporation and shall act as legal advisor to the Board of Directors and officers. The General Counsel shall perform such duties and exercise such powers as are ordinarily performed or exercised by the General Counsel of a corporation and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 16. The Associate General Counsel. The Associate General Counsel, or if there be more than one, the Associate General Counsels either in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) or with such allocations of the duties and powers to, between or among them as may be fixed in a manner authorized by the Board of Directors, shall in the absence of the General Counsel, or at the General Counsel's request, or in the event of his inability or refusal to act, or if the office of General Counsel is vacant, perform the duties and exercise the powers of the General Counsel and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF STOCK Section 1. Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed in the name of the corporation by the Chairman of the Board of Directors, or the President or a Vice- Page-9 President and the Treasurer or an Assistant Treasurer, or the Secretary or Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. Signatures on Stock Certificates. Where a certificate is countersigned (i) by a transfer agent other than the corporation or its employee, or (ii) by a registrar other than the corporation or its employee, the signatures of the officers of the corporation may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 5. Fixing Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Page-10 Section 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Payment of Dividends. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Directors shall think conducive to the interest of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Annual Statement. The Board of Directors shall prepare and furnish to each stockholder prior to each annual meeting an annual report, and shall present at each annual meeting and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Section 4. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. Section 6. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of Page-11 its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced otherwise. ARTICLE VIII AMENDMENTS Section 1. Amendment of By-laws. These By-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal, or adoption of new by-laws be contained in the notice of such special meeting. ARTICLE IX INDEMNIFICATION Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article IX, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that she or he is or was a director or officer, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by her or him in connection with such action, suit or proceeding if she or he acted in good faith and in a manner she or he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe her or his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which she or he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that her or his conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article IX, the corporation shall indemnify any person who was or is a party or is Page-12 threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that she or he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by her or him in connection with the defense or settlement of such action or suit if she or he acted in good faith and in a manner she or he reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Authorization of Indemnification. Any indemnification under this Article IX (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because she or he has met the applicable standard of conduct set forth in Section 1 or Section 2, of this Article IX, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, she or he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by her or him in connection therewith, without the necessity of authorization in the specific case. Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article IX, a person shall be deemed to have acted in good faith and in a manner she or he reasonably believed to be in or not opposed to the best interests of the corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe her or his conduct was unlawful, if her or his action is based on the records or books of account of the corporation or another enterprise, or on information supplied to her or him by the officers Page-13 of the corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the corporation or another enterprise or on information or records given or reports made to the corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust or other enterprise of which such person is or was serving at the request of the corporation as a director or officer. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or 2 of this Article IX, as the case may be. Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article IX, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article IX. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because she or he has met the applicable standards of conduct set forth in Sections 1 and 2 of this Article IX, as the case may be. Notice of any application for indemnification pursuant to this Section 5 shall be given to the corporation promptly upon the filing of such application. Section 6. Expenses Payable in Advance. Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that she or he is not entitled to be indemnified by the corporation as authorized in this Article IX. Section 7. Non-exclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in her or his official capacity and as to action in another capacity while holding such office, it being the policy of the corporation that indemnification of the persons specified in Sections 1 and 2 of this Article IX shall be made to the fullest extent permitted by law. The provisions of this Article IX shall not be deemed to preclude the indemnification of any Page-14 person who is not specified in Sections 1 or 2 of this Article IX but whom the corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against her or him and incurred by her or him in any such capacity, or arising out of her or his status as such, whether or not the corporation would have the power or the obligation to indemnify her or him against such liability under the provisions of this Article IX. Section 9. Meaning of "Corporation" for Purposes of Article IX. For purposes of this Article IX, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as she or he would have with respect to such constituent corporation if its separate existence had continued. Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Page-15 EX-4.3(C) 4 c75506exv4w3xcy.txt AMENDMENT NO.2 TO REVOLVING CREDIT AGREEMENT EXHIBIT 4.3(c) SECOND AMENDMENT THIS SECOND AMENDMENT dated as of June 7, 2002 (this "Amendment") amends the Five-Year Revolving Credit Agreement dated as of October 6, 2000, as amended as of March 8, 2002, among Anixter Inc. ("Anixter"), various subsidiaries of Anixter (the "Borrowing Subsidiaries"), various financial institutions (the "Lenders") and Bank of America, N.A., as administrative agent (the "Administrative Agent"). Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent have entered into the Credit Agreement; and WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as more fully set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1 Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 3, the Credit Agreement shall be amended as follows. 1.1 Amendment to Section 7.03(v). Clause (v) of Section 7.03 is amended in its entirety to read as follows: "Investments in connection with the acquisition by Anixter or any Subsidiary of substantially all of the assets or all of the capital stock of any Person not in excess of an aggregate amount of US$150,000,000 over the term of this Agreement (exclusive of the value of any capital stock of Anixter or AXE given in connection with any such acquisition);" SECTION 2 Warranties. Each Borrower represents and warrants to the Administrative Agent and the Lenders that, after giving effect to the effectiveness hereof, (a) each warranty set forth in Article V of the Credit Agreement is true and correct in all material respects, except to the extent that such warranty specifically refers to an earlier date, and (b) no Default or Event of Default exists. SECTION 3 Effectiveness. The amendments set forth in Section 1 above shall become effective when the Administrative Agent shall have received counterparts of this Amendment executed by Anixter, the Borrowing Subsidiaries and the Required Lenders. SECTION 4 Miscellaneous. 4.1 Continuing Effectiveness, etc. As herein amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. After the effectiveness of this Amendment, all references in the Credit Agreement and the other Loan Documents to "Credit Agreement" or similar terms shall refer to the Credit Agreement as amended hereby. 4.2 Counterparts. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same Amendment. 4.3 Governing Law. This Amendment shall be a contract made under and governed by the laws of the State of Illinois. 4.4 Successors and Assigns. This Amendment shall be binding upon Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of Anixter, the Borrowing Subsidiaries, the Lenders and the Administrative Agent and the respective successors and assigns of the Lenders and the Administrative Agent. 2 Delivered as of the day and year first above written. ANIXTER INC., as Borrower By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- ANIXTER INTERNATIONAL N.V./S.A., as a Borrowing Subsidiary By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- ANIXTER U.K. LTD., as a Borrowing Subsidiary By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-1 BANK OF AMERICA, N.A., as Administrative Agent By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- BANK OF AMERICA, N.A., as a Lender By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-2 BANK ONE, NA, as Syndication Agent and Lender By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-3 THE BANK OF NOVA SCOTIA, as Documentation Agent and Lender By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-4 SUNTRUST BANK, as Managing Agent and as a Lender By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-5 CREDIT LYONNAIS CHICAGO BRANCH, as Managing Agent and as a Lender By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-6 , as a Lender -------------------- By: ----------------------------------- Name: --------------------------------- Title: ------------------------------- S-7 EX-4.6 5 c75506exv4w6.txt AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT EXHIBIT 4.6 AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT dated as of October 3, 2002 between ANIXTER INC., as Originator AND ANIXTER RECEIVABLES CORPORATION, as Buyer ARTICLE I AMOUNTS AND TERMS..................................................2 Section 1.1 Purchase of Receivables.....................................2 Section 1.2 Payment for the Purchase....................................3 Section 1.3 Purchase Price Credit Adjustments...........................5 Section 1.4 Payments and Computations, Etc..............................6 Section 1.5 Transfer of Records.........................................6 Section 1.6 Characterization............................................7 ARTICLE II REPRESENTATIONS AND WARRANTIES....................................7 Section 2.1 Representations and Warranties of Originator................7 ARTICLE III CONDITIONS OF PURCHASE..........................................11 Section 3.1 Conditions Precedent to Purchase...........................11 Section 3.2 Conditions Precedent to Subsequent Payments................11 ARTICLE IV COVENANTS........................................................11 Section 4.1 Affirmative Covenants of Originator........................11 Section 4.2 Negative Covenants of Originator...........................16 ARTICLE V AMORTIZATION EVENTS...............................................18 Section 5.1 Amortization Events........................................18 Section 5.2 Remedies...................................................19 ARTICLE VI INDEMNIFICATION..................................................19 Section 6.1 Indemnities by Originator..................................19 Section 6.2 Other Costs and Expenses...................................22 ARTICLE VII MISCELLANEOUS...................................................22 Section 7.1 Waivers and Amendments.....................................22 Section 7.2 Notices....................................................22 Section 7.3 Protection of Ownership Interests of Buyer.................22 Section 7.4 Confidentiality............................................23 Section 7.5 Bankruptcy Petition........................................24 Section 7.6 CHOICE OF LAW..............................................24 Section 7.7 CONSENT TO JURISDICTION....................................24 Section 7.8 WAIVER OF JURY TRIAL.......................................25 Section 7.9 Integration; Binding Effect; Survival of Terms.............25 Section 7.10 Counterparts; Severability; Section References............25
i Exhibits and Schedules EXHIBIT I Definitions EXHIBIT II Principal Place of Business; Location(s) of Records; Federal Employer Identification Number; Other Names; State of Incorporation; Organizational Identification Number EXHIBIT III Lock-Boxes; Collection Accounts; Collection Banks EXHIBIT IV Form of Compliance Certificate EXHIBIT V Credit and Collection Policy EXHIBIT VI Copy of Subscription Agreement EXHIBIT VII Form of Amended and Restated Subordinated Note SCHEDULE A List of Documents to Be Delivered to Buyer ii AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT THIS AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT, dated as of October 3, 2002, is by and between ANIXTER INC., a Delaware corporation, ("Originator"), and ANIXTER RECEIVABLES CORPORATION, a Delaware corporation ("Buyer"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I. PRELIMINARY STATEMENTS Reference is hereby made to that certain Receivables Sale Agreement dated as of October 6, 2000 by and between Originator and Buyer (the "Original Receivables Sale Agreement"). Originator and Buyer have agreed to amend and restate the Original Receivables Sale Agreement on the terms and subject to the conditions set forth herein. Originator now owns, and from time to time hereafter will own, Receivables. Originator wishes to sell and assign to Buyer, and Buyer wishes to purchase from Originator, all of Originator's right, title and interest in and to such Receivables, together with the Related Security and Collections with respect thereto. Originator and Buyer intend the transactions contemplated hereby to be true sales of the Receivables from Originator to Buyer, providing Buyer with the full benefits of ownership of the Receivables, and Originator and Buyer do not intend these transactions to be, or for any purpose to be characterized as, loans from Buyer to Originator. Following the purchase of Receivables from Originator, Buyer will sell undivided interests therein and in the associated Related Security and Collections pursuant to that certain Amended and Restated Receivables Purchase Agreement dated as of October 3, 2002 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Purchase Agreement") among Buyer, Originator, as Servicer, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation, as Conduit Purchasers, the financial institutions from time to time party thereto ("Financial Institutions" and, together with the Conduit Purchasers, the "Purchasers"), Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Bank, as managing agents (collectively, the "Managing Agents") and Bank One, or any successor agent appointed pursuant to the terms of the Purchase Agreement, as agent for the Purchasers (in such capacity, the "Agent"). ARTICLE I AMOUNTS AND TERMS Section 1.1 Purchase of Receivables. (a) Pursuant to the Original Receivables Sale Agreement, Originator has sold to Buyer, without recourse (except to the extent expressly provided therein), all of Originator's right, title and interest in and to all Receivables existing as of the close of business on the day immediately prior to the closing date of the Original Receivables Sale Agreement and all Receivables arising thereafter, in each case, with all Related Security relating thereto and all Collections thereof. Originator and Buyer hereby reaffirm that purchase and sale, and, in consideration for the Purchase Price and upon the terms and subject to the conditions set forth herein, Originator does hereby sell, assign, transfer, set-over and otherwise convey to Buyer, without recourse (except to the extent expressly provided herein), and Buyer does hereby purchase from Originator, all of Originator's right, title and interest in and to all Receivables hereafter arising through and including the Amortization Date, together with all Related Security relating thereto and all Collections thereof; provided that Buyer shall be obligated to pay the Purchase Price therefor in accordance with Section 1.2. In connection with the payment of the Purchase Price for any Receivables purchased hereunder, Buyer may request that Originator deliver, and Originator shall deliver, such approvals, opinions, information, reports or documents as Buyer may reasonably request. (b) It is the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a "sale of accounts" (as such term is used in Article 9 of the UCC), which sale is absolute and irrevocable and provides Buyer with the full benefits of ownership of the Receivables. Except for the Purchase Price Credits owed pursuant to Section 1.3, the sale of Receivables hereunder is made without recourse to Originator; provided, however, that (i) Originator shall be liable to Buyer for all representations, warranties and covenants made by Originator pursuant to the terms of the Transaction Documents to which Originator is a party, and (ii) such sale does not constitute and is not intended to result in an assumption by Buyer or any assignee thereof of any obligation of Originator or any other Person arising in connection with the Receivables, the related Contracts and/or other Related Security or any other obligations of Originator. In view of the intention of the parties hereto that the Purchase of Receivables made hereunder shall constitute a sale of such Receivables rather than loans secured thereby, Originator agrees that it will, on or prior to the date hereof and in accordance with Section 4.1(e)(ii), cause all Receivable reports relating to the Receivables to bear a legend acceptable to Buyer and to the Agent or any Managing Agent, as Buyer's assignees, evidencing that Buyer has purchased such Receivables as provided in this Agreement 2 and note in its financial statements that its Receivables have been sold to Buyer. Upon the request of Buyer or the Agent or any Managing Agent, as Buyer's assignees, Originator will execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate to perfect and maintain the perfection of Buyer's ownership interest in the Receivables and the Related Security and Collections with respect thereto, or as Buyer or the Agent or any Managing Agent, as Buyer's assignees, may reasonably request. Section 1.2 Payment for the Purchase. (a) The Purchase Price for each Receivable coming into existence after the date hereof shall be due and owing in full by Buyer to Originator or its designee on the date each such Receivable came into existence (except that Buyer may, with respect to any such Purchase Price, offset against such Purchase Price any amounts owed by Originator to Buyer hereunder and which have become due but remain unpaid) and shall be paid to Originator in the manner provided in the following paragraphs (b), (c), (d) and (e). (b) With respect to any Receivables coming into existence after the date hereof, on each Settlement Date, Buyer shall pay the Purchase Price therefor in accordance with Section 1.2(d) and (e) and in the following manner: (i) first, by delivery of immediately available funds, to the extent of funds available to Buyer from (i) its subsequent sale of an interest in the Receivables to each Managing Agent for the benefit of the Purchasers under the Purchase Agreement, (ii) Collections arising from any Receivables previously sold to Buyer in which Buyer has retained an interest, or (iii) other cash on hand; (ii) second, by delivery of the proceeds of a subordinated revolving loan from Originator to Buyer (a "Subordinated Loan"), provided that the making of any such Subordinated Loan shall be subject to the provisions set forth in below; and (iii) third, unless the Originator has declared the Amortization Date to have occurred pursuant to Section 5.2, by accepting a contribution to its capital pursuant to the Subscription Agreement in an amount equal to the remaining unpaid balance of such Purchase Price. The Maximum amount of any Subordinated Loan that can be borrowed by Buyer pursuant to clause (ii) above is limited to the maximum Subordinated Loan that could be borrowed without rendering Buyer's Net Worth less than the Required Capital Amount. The Originator is hereby authorized by Buyer to endorse on the schedule attached to the Subordinated Note an appropriate notation evidencing the date and amount of each advance thereunder, as well as the date of each 3 payment with respect thereto, provided that the failure to make such notation shall not affect any obligation of Buyer thereunder. Subject to the limitations set forth in the second preceding sentence, Originator irrevocably agrees to advance each Subordinated Loan requested by Buyer on or prior to the Amortization Date. The Subordinated Loans shall be evidenced by, and shall be payable in accordance with the terms and provisions of the Subordinated Note and shall be payable solely from funds which Buyer is not required under the Purchase Agreement to set aside for the benefit of, or otherwise pay over to, the Purchasers, the Agent, the Managing Agents or any other Person then entitled to any amounts as specified in the Purchase Agreement. (c) From and after the Amortization Date, Originator shall not be obligated to (but may, at its option): (i) sell Receivables to Buyer, or (ii) contribute Receivables to Buyer's capital pursuant to clause third of Section 1.2(b) unless Originator reasonably determines that the Purchase Price therefor will be satisfied with funds available to Buyer from sales of interests in the Receivables pursuant to the Purchase Agreement, Collections, proceeds of Subordinated Loans or otherwise. (d) On each day prior to the Amortization Date (unless Buyer or the Agent shall otherwise direct), Buyer may permit Originator to retain all or a specified portion of the Collections received in respect of Receivables theretofore transferred by Originator to Buyer hereunder, it being understood that in the event Buyer shall have sold, assigned or otherwise transferred an interest in such Receivables to the Agent for the benefit of the Purchasers under the Purchase Agreement, such Collections in the possession of such Originator or Buyer are made available to Buyer at the discretion of the Agent and the Managing Agents. Any such Collections so retained by Originator ("Applied Collections") shall, on and as of the date of receipt thereof, be (i) deemed applied toward the Purchase Price of any Receivables of Originator arising on such date and then being transferred to Buyer pursuant to the terms hereof, to the extent of any such Purchase Price, (ii) then, in respect of any balance remaining, deemed applied toward the Purchase Price of any other Receivables of Originator arising during such Accrual Period and in respect of which the Purchase Price shall not theretofore have been paid, to the extent of any such Purchase Price, and (iii) in respect of any balance remaining, held in trust by Originator for the benefit of Buyer until the earlier to occur of (A) application toward the Purchase Price for any Purchase occurring on any later date and (B) the next following Settlement Date, in which case such amount shall be remitted to Buyer. (e) Although the Purchase Price for each Receivable coming into existence after the date hereof shall be due and payable in full by Buyer to Originator on the date such Receivable came into existence, and payment of such Purchase Price shall be made from Applied Collections, to the extent available, as provided in Section 1.2(d), final settlement of the Purchase Price between Buyer and Originator shall be effected on a monthly basis on Settlement Dates with respect to all Receivables coming into existence during the same Calculation Period and based on the information contained in the Monthly Report delivered by the Servicer pursuant 4 to Article VIII of the Purchase Agreement for the Calculation Period then most recently ended. On each Settlement Date, Buyer and Originator shall cause a reconciliation to made in respect of all Purchases that shall have been made during the Calculation Period then most recently ended. To the extent that the aggregate amount of Applied Collections retained by Originator during such Calculation Period shall have been less than the aggregate Purchase Price in respect of all Purchases made by Buyer from Originator during such month, Buyer shall pay the balance due in respect of such aggregate Purchase Price in the manner described in Section 1.2(a). To the extent that the aggregate amount of Applied Collections retained by Originator during such Calculation Period shall have been greater than the aggregate Purchase Price in respect of all Purchases made by Buyer from Originator during such Calculation Period, Originator shall turn over such excess to Buyer either by remitting such excess in immediately available funds to Buyer or by directing that a reduction in the outstanding balance of the Subordinated Loan occur in an amount equal to such excess, or a combination of both. Although settlement shall be effected on Settlement Dates, increases or decreases in the amount owing under the Subordinated Note made pursuant to Section 1.2(b) and any contribution of capital by Originator to Buyer made pursuant to Section 1.2(b) shall be deemed to have occurred and shall be effective as of the last Business Day of the Calculation Period to which such settlement relates. (f) At all times prior to the occurrence of the Amortization Date, notwithstanding any delay in the making of any payment of the Purchase Price in respect of any Purchase, all right, title and interest of Originator in and to each Receivable shall be sold, assigned and otherwise transferred to Buyer effective immediately and automatically upon the creation of such Receivable, without any further action of any type or kind being required on the part of any Person. The monthly settlement and reconciliation contemplated in this Section 1.2 has been devised solely for the administrative convenience of the parties hereto. Buyer and Originator may at any time, as may agreed between themselves, elect to effect settlement and reconciliation on a more (but not less) frequent basis. Section 1.3 Purchase Price Credit Adjustments. If on any day: (a) the Outstanding Balance of a Receivable is: (i) reduced as a result of any defective or rejected goods or services, any discount or any adjustment or otherwise by Originator (other than cash Collections on account of the Receivables); or (ii) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction); or 5 (b) any of the representations and warranties set forth in paragraphs (i) and (s) of Section 2.1 are no longer true with respect to any Receivable; then, in such event, Buyer shall be entitled to a credit (each, a "Purchase Price Credit") against the Purchase Price otherwise payable hereunder equal to the Outstanding Balance of such Receivable. If such Purchase Price Credit exceeds the Original Balance of the Receivables coming into existence on any day, then Originator shall pay the remaining amount of such Purchase Price Credit in cash within three (3) Business Days thereafter, provided that if the Amortization Date has not occurred, Originator shall be allowed to deduct the remaining amount of such Purchase Price Credit from any indebtedness owed to it under the Subordinated Note. Section 1.4 Payments and Computations, Etc. All amounts to be paid or deposited by Buyer hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account of Originator designated from time to time by Originator or as otherwise directed by Originator. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day. If any Person fails to pay any amount hereunder when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid in full; provided, however, that such Default Fee shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Section 1.5 Transfer of Records. (a) In connection with the Purchase of Receivables hereunder, Originator hereby sells, transfers, assigns and otherwise conveys to Buyer all of Originator's right and title to and interest in the Records relating to all Receivables sold hereunder, without the need for any further documentation in connection with the Purchase. In connection with such transfer, Originator hereby grants to each of Buyer, the Agent and the Servicer, an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by Originator to account for the Receivables, to the extent necessary to administer the Receivables, whether such software is owned by Originator or is owned by others and used by Originator under license agreements with respect thereto, provided that should the consent of any licensor of Originator to such grant of the license described herein be required, Originator hereby agrees that upon the request of Buyer (or the Agent or any Managing Agent as Buyer's assignees), Originator will use its reasonable efforts to obtain the consent of such third-party licensor. The license granted hereby shall be irrevocable, and shall terminate on the date this Agreement terminates in accordance with its terms. 6 (b) Originator (i) shall take such action requested by Buyer (or the Agent or any Managing Agent as Buyer's assignees), from time to time hereafter, that may be necessary or appropriate to ensure that Buyer and its assigns under the Purchase Agreement have an enforceable ownership interest in the Records relating to the Receivables purchased from Originator hereunder, and (ii) shall use its reasonable efforts to ensure that each of the Buyer, the Agent and the Servicer has an enforceable right (whether by license, sublicense or otherwise) to use all of the computer software used by Originator to account for the Receivables and/or to recreate such Records. Section 1.6 Characterization. If, notwithstanding the intention of the parties expressed in Section 1.1(b), any sale or contribution by Originator to Buyer of Receivables hereunder shall be characterized as a secured loan and not a sale, or such sale shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed to constitute a security agreement under the UCC and other applicable law. For this purpose and without being in derogation of the parties' intention that the sale of Receivables hereunder shall constitute a true sale thereof, Originator hereby grants to Buyer a duly perfected security interest in all of Originator's right, title and interest in, to and under all Receivables now existing and hereafter arising, all Collections, Related Security and Records with respect thereto, each Lock-Box and Collection Account and all proceeds of the foregoing, which security interest shall be prior to all other Adverse Claims thereto. After the occurrence of an Amortization Event, Buyer (and the Agent and each Managing Agent, as Buyer's assignees) shall have, in addition to the rights and remedies which they may have under this Agreement, all other rights and remedies provided to a secured creditor after default under the UCC and other applicable law, which rights and remedies shall be cumulative. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of Originator. Originator hereby represents and warrants to Buyer, as of the date hereof and as of the date of each purchase hereunder, that: (a) Corporate Existence and Power. Originator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is a "registered organization" as defined in the UCC in such jurisdiction, and is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect. 7 (b) Power and Authority; Due Authorization Execution and Delivery. The execution and delivery by Originator of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, Originator's use of the proceeds of the Purchase made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which Originator is a party has been duly executed and delivered by Originator. (c) No Conflict. The execution and delivery by Originator of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of Originator or its Subsidiaries (except as created hereunder), except, in any case, where such contravention or violation could not reasonably be expected to have a Material Adverse Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by Originator of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of Originator's knowledge, threatened, against or affecting Originator, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Originator is not in default with respect to any order of any court, arbitrator or governmental body, which defaults, individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. (f) Binding Effect. This Agreement and each other Transaction Document to which Originator is a party constitute the legal, valid and binding obligations of Originator enforceable against Originator in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 8 (g) Accuracy of Information. All information heretofore furnished by Originator or any of its Affiliates to Buyer (or to the Agent or any Managing Agent, as Buyer's assignees) for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by Originator or any of its Affiliates to Buyer (or to the Agent or any Managing Agent, as Buyer's assignees) will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. (h) Use of Proceeds. No proceeds of the Purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Immediately prior to the time each Receivable came into existence, Originator shall be the legal and beneficial owner of each such Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. (j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to transfer to Buyer (and Buyer shall acquire from Originator) legal and equitable title to, with the right to sell and encumber each Receivable existing and hereafter arising, together with the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's ownership interest in the Receivables, the Related Security and the Collections. (k) Places of Business. The principal places of business and chief executive office of Originator and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit II or such other locations of which Buyer has been notified in accordance with Section 4.2(a) in jurisdictions where all action required by Section 4.2(a) has been taken and completed. Originator's state of organization, organizational identification number (if any), and Federal Employer Identification Number are correctly set forth on Exhibit II. (l) Collections. The conditions and requirements set forth in Section 4.1(i) have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Originator at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit III. 9 (m) Material Adverse Effect. Since June 30, 2002 no event has occurred that would have a Material Adverse Effect. (n) Names. Except for those listed on Exhibit II, in the past five (5) years, Originator has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement. (o) Ownership of Buyer. Originator owns, directly or indirectly, 100% of the issued and outstanding capital stock of Buyer, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of Buyer. (p) Not a Holding Company or an Investment Company. Originator is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Originator is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (q) Compliance with Law. Originator has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation, except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect. (r) Compliance with Credit and Collection Policy. Originator has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any change to such Credit and Collection Policy except such material change as to which the Agent has been notified in accordance with Section 4.1(a)(iii). (s) Enforceability of Contracts. Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 10 (t) Eligible Receivables. As of the date of this Agreement, each Receivable included in the Net Receivables Balance under the Original Agreement is an "Eligible Receivable" as defined under the Purchase Agreement as of the date of this Agreement; provided, however, that Receivables included in the Net Receivables Balance under the Earlier Agreement with an aggregate Outstanding Balance of up to $268,766.62 may be ineligible as a result of clause (i)(c) of the definition of "Eligible Receivable," it being understood that the aggregate Outstanding Balance of such Receivables will be excluded from the Net Receivables Balance as of the first Determination Date following the date of this Agreement. Each Receivable included in the Net Receivables Balance as an Eligible Receivable on the date it came into existence was an Eligible Receivable on such date. (u) Accounting. The manner in which Originator accounts for the transactions contemplated by this Agreement does not jeopardize the true sale analysis. ARTICLE III CONDITIONS OF PURCHASE Section 3.1 Conditions Precedent to Purchase. The effectiveness of this Agreement is subject to the condition precedent that Buyer shall have received on or before the date of such purchase those documents listed on Schedule A. Section 3.2 Conditions Precedent to Subsequent Payments. Buyer's obligation to pay for Receivables coming into existence after the date hereof shall be subject to the further conditions precedent that (a) the Facility Termination Date shall not have occurred; and (b) Buyer shall have received such other approvals, opinions or documents as it may reasonably request. Originator represents and warrants that the representations and warranties set forth in Article II are true and correct on and as of the date each Receivable came into existence as though made on and as of such date. ARTICLE IV COVENANTS Section 4.1 Affirmative Covenants of Originator. Until the date on which this Agreement terminates in accordance with its terms, Originator hereby covenants as set forth below: (a) Financial Reporting. Originator will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to Buyer (and to the Agent and each Managing Agent, as Buyer's assignees): 11 (i) Annual Reporting. Within 90 days after the close of each of its respective fiscal years, audited financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Originator for such fiscal year certified in a manner acceptable to Buyer (and to the Agent and the Managing Agents, as Buyer's assignees) by Ernst & Young or other independent public accountants reasonably acceptable to Buyer (and to the Agent and the Managing Agents, as Buyer's assignees). (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of each of its respective fiscal years, balance sheets of Originator as at the close of each such period and statements of income and retained earnings and a statement of cash flows for Originator for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer or treasurer. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit IV signed by Originator's Authorized Officer on behalf of Originator and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of Originator copies of all financial statements, reports and proxy statements so furnished. (v) S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which Originator or any of its Subsidiaries files with the Securities and Exchange Commission. (vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than Buyer, the Agent, the Managing Agents or the Purchasers, copies of the same. (vii) Change in Credit and Collection Policy. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the consent of each Managing Agent thereto; provided that if such change or amendment was required pursuant to any change in any applicable law, 12 rule or regulation, the Originator shall only be required to give notice of such change or amendment and shall not be required to request the consent of the Managing Agents. (viii) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of Originator as Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may from time to time reasonably request in order to protect the interests of Buyer (and its assigns) under or as contemplated by this Agreement. (b) Notices. Originator will notify the Buyer (and the Agent and each Managing Agent, as Buyer's assignees) in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Amortization Events or Potential Amortization Events. The occurrence of each Amortization Event and each Potential Amortization Event, by a statement of an Authorized Officer of Originator. (ii) Judgment and Proceedings. (A) The entry of any judgment or decree against Originator or any of its Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against Originator and its Subsidiaries exceeds $25,000,000, or (B) the institution of any litigation, arbitration proceeding or governmental proceeding against Originator, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, or which seeks to enjoin performance of or otherwise relates to the Transaction Documents. (iii) Material Adverse Effect. The occurrence of any event or condition that has, or could reasonably be expected to have, a Material Adverse Effect. (iv) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other financing arrangement or arrangements governing indebtedness, individually or in the aggregate for all such arrangements, in a principal amount greater than or equal to $25,000,000, pursuant to which Originator is a debtor or an obligor. (v) Downgrade of the Originator. Any downgrade in the rating of any Indebtedness of the Originator by Standard and Poor's Ratings Group or by Moody's Investors Service, Inc., setting forth the Indebtedness affected and the nature of such change. (c) Compliance with Laws and Preservation of Corporate Existence. Originator will comply in all respects with all applicable laws, rules, regulations, orders, writs, 13 judgments, injunctions, decrees or awards to which it may be subject except where the failure to comply could not reasonably be expected to have a Material Adverse Effect. Originator will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to maintain or qualify could not reasonably be expected to have a Material Adverse Effect. (d) Audits. Originator will furnish to Buyer (and the Agent and each Managing Agent, as Buyer's assignees) from time to time such information with respect to it and the Receivables as Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may reasonably request. Originator will, from time to time during regular business hours as requested by Buyer (or the Agent or any Managing Agent, as Buyer's assignees), upon reasonable notice and at the sole cost of Originator except as provided below, permit Buyer (or the Agent or any Managing Agent, as Buyer's assignees) or their respective agents or representatives, (i) to examine and make copies of and abstracts from all Records in the possession or under the control of Originator relating to the Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of Originator for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to Originator's financial condition or the Receivables and the Related Security or Originator's performance under any of the Transaction Documents or Originator's performance under the Contracts and, in each case, with any of the officers or employees of Originator having knowledge of such matters. So long as no Potential Amortization Event or Amortization Event exists, the visits under this Section 4.1(d) that are at the sole cost of the Originator and that are requested by the Agent or any Managing Agent shall be limited to one per calendar year. (e) Keeping and Marking of Records and Books. (i) Originator will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). Originator will give Buyer (and the Agent and each Managing Agent, as Buyer's assignees) notice of any material change in the administrative and operating procedures referred to in the previous sentence. (ii) Originator will (A) on or prior to the date hereof, cause all reports relating to the Receivables to bear a legend, acceptable to Buyer (and the Agent and each Managing Agent, as Buyer's assignees), describing Buyer's ownership interests in the 14 Receivables and further describing the Purchaser Interests of the Purchasers under the Purchase Agreement and (B) from and after the occurrence of an Amortization Event, (x) mark each Contract with a legend describing Buyer's ownership interests in the Receivables and further describing the Purchaser Interests of the Purchasers and (y) deliver to Buyer (and the Agent and each Managing Agent, as Buyer's assignees) all Contracts (including, without limitation, all multiple originals of any such Contract) relating to the Receivables. (f) Compliance with Contracts and Credit and Collection Policy. Originator will timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. Originator will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of Buyer and its assigns. (g) Ownership. Originator will take all necessary action to establish and maintain, irrevocably in Buyer, legal and equitable title to the Receivables, the Related Security and the Collections, free and clear of any Adverse Claims other than Adverse Claims in favor of Buyer (and the Agent and each Managing Agent, as Buyer's assignees) (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Buyer's interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Buyer (and the Agent and each Managing Agent, as Buyer's assignees) as Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may reasonably request). (h) Purchasers' Reliance. Originator acknowledges that the Agent, the Managing Agents and the Purchasers are entering into the transactions contemplated by the Purchase Agreement in reliance upon Buyer's identity as a legal entity that is separate from Originator and any Affiliates thereof. Therefore, from and after the date of execution and delivery of this Agreement, Originator shall take all reasonable steps including, without limitation, all steps that Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may from time to time reasonably request to maintain Buyer's identity as a separate legal entity and to make it manifest to third parties that Buyer is an entity with assets and liabilities distinct from those of Originator and any Affiliates thereof and not just a division of Originator. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Originator (i) will not hold itself out to third parties as liable for the debts of Buyer nor purport to own the Receivables and other assets acquired by Buyer from Originator, (ii) will take all other actions necessary on its part to ensure that Buyer is at all times in compliance with the covenants set forth in Section 7.1(i) of the Purchase Agreement and (iii) will cause all tax liabilities arising in connection with the transactions contemplated herein or otherwise to be allocated between 15 Originator and Buyer on an arm's-length basis and in a manner consistent with the procedures set forth in U.S. Treasury Regulations Sections 1.1502-33(d) and 1.1552-1. (i) Collections. Originator will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Originator or any Affiliate of Originator, Originator will remit (or will cause all such payments to be remitted) directly to a Collection Bank for deposit into a Collection Account within two (2) Business Days following receipt thereof and, at all times prior to such remittance, Originator will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of Buyer (and the Agent and each Managing Agent, as Buyer's assignees). Originator will transfer exclusive ownership, dominion and control of each Lock-Box and Collection Account to Buyer and, will not grant the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to Buyer (or the Agent, as Buyer's assignee) as contemplated by this Agreement and the Purchase Agreement. (j) Taxes. Originator will file all tax returns and reports required by law to be filed by it and promptly pay all taxes and governmental charges at any time owing , except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on its books, unless the failure to make any such payment (1) shall give rise to an immediate right to foreclosure on an Adverse Claim securing such amounts, or (2) could reasonably be expected to have a Material Adverse Effect. (k) Insurance. Originator will maintain in effect, or cause to be maintained in effect, at Originator's own expense, such casualty and liability insurance as Originator deems appropriate in its good faith business judgement. Originator will pay or cause to be paid, the premiums therefor and deliver to Buyer and each Managing Agent evidence satisfactory to Buyer and each Managing Agent of such insurance coverage. Copies of each policy shall be furnished to Buyer, each Managing Agent, the Agent and any Purchaser in certificated form upon Buyer's, any Managing Agent's, the Agent's or such Purchaser's request. The foregoing requirements shall not be construed to negate, reduce or modify, and are in addition to, Originator's obligations hereunder. Section 4.2 Negative Covenants of Originator. Until the date on which this Agreement terminates in accordance with its terms, Originator hereby covenants that: (a) Name Change, Offices and Records. Originator will not change its name, identity, state of incorporation or corporate structure (within the meaning of Section 9-507(c) of 16 Revised Article 9 of the UCC) or relocate its chief executive office or any office where Records are kept unless it shall have: (i) given Buyer (and the Agent and each Managing Agent, as Buyer's assignees) at least forty-five (45) days' prior written notice thereof and (ii) delivered to Buyer (and the Agent and each Managing Agent, as Buyer's assignees) all financing statements, instruments and other documents requested by Buyer (or the Agent or any Managing Agent, as Buyer's assignees) in connection with such change or relocation. (b) Change in Payment Instructions to Obligors. Except as may be required by the Agent pursuant to Section 8.2(b) of the Purchase Agreement, Originator will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless Buyer (and the Agent and each Managing Agent, as Buyer's assignees) shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that Originator may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account. (c) Modifications to Contracts and Credit and Collection Policy. Originator will not make any change to the Credit and Collection Policy that could reasonably be expected to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables unless required to do so by any applicable law, rule or regulation. Except as otherwise permitted in its capacity as Servicer pursuant to Section 8.2(d) of the Purchase Agreement, Originator will not extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy. (d) Sales, Liens. Originator will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable, Related Security or Collections, or upon or with respect to any Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of Buyer provided for herein), and Originator will defend the right, title and interest of Buyer (and the Agent and each Managing Agent, as Buyer's assignees) in, to and under any of the foregoing property, against all claims of third parties claiming through or under Originator. Originator shall not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory. 17 (e) Accounting for Purchase. Originator will not, and will not permit any Affiliate to, account for or treat (whether in financial statements or otherwise) the transactions contemplated hereby in any manner other than the sale of the Receivables and the Related Security by Originator to Buyer or in any other respect account for or treat the transactions contemplated hereby in any manner other than as a sale of the Receivables and the Related Security by Originator to Buyer except to the extent that such transactions are not recognized on account of consolidated financial reporting in accordance with generally accepted accounting principles. ARTICLE V AMORTIZATION EVENTS Section 5.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event: (a) Originator shall fail (i) to make any payment or deposit required hereunder when due, or (ii) to perform or observe any term, covenant or agreement hereunder (other than as referred to in clause (i) of this paragraph (a)) or any other Transaction Document to which it is a party and such failure shall continue for three (3) consecutive Business Days. (b) Any representation, warranty, certification or statement made by Originator in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect when made or deemed made; provided, however, that any breach of the representations and warranties set forth in Sections 2.1(i), (s) or (t) shall not constitute an Amortization Event unless such breach or breaches apply in the aggregate to a material portion of the Receivables. (c) Failure of Originator to pay when due any Indebtedness having an outstanding principal balance in excess of $25,000,000; or the default by Originator in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of Originator shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (d) (i) Originator or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against Originator or any of its Significant Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, 18 adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property; provided that in the event any such proceedings shall have been instituted against Originator or any Significant Subsidiary, such proceedings shall have continued undismissed or unstayed and in effect for a period of sixty (60) consecutive days or an order for relief shall have been entered in such proceedings; or (iii) Originator or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth in the foregoing clause (i) or (ii) of this subsection (d). (e) A Change of Control shall occur. (f) One or more final judgments for the payment of money in an amount in excess of $25,000,000, individually or in the aggregate, shall be entered against Originator, and such judgment shall continue unsatisfied and in effect for ten (10) consecutive days without a stay of execution. Section 5.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, Buyer may take any of the following actions: (i) declare the Amortization Date to have occurred, whereupon the Amortization Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by Originator; provided, however, that upon the occurrence of Amortization Event described in Section 5.1(d)(ii), or of an actual or deemed entry of an order for relief with respect to Originator under the Federal Bankruptcy Code, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by Originator and (ii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any amounts then due and owing by Buyer to Originator. The aforementioned rights and remedies shall be in addition to all other rights and remedies of Buyer and its assigns available under this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. ARTICLE VI INDEMNIFICATION Section 6.1 Indemnities by Originator. Without limiting any other rights that Buyer may have hereunder or under applicable law, Originator hereby agrees to indemnify Buyer and its assigns, officers, directors, agents and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of 19 them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by Buyer of an interest in the Receivables, excluding, however: (i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (iii) taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the Intended Characterization; provided, however, that nothing contained in this sentence shall limit the liability of Originator or limit the recourse of Buyer to Originator for amounts otherwise specifically provided to be paid by Originator under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Originator shall indemnify Buyer for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Originator) relating to or resulting from: (1) any representation or warranty made by Originator (or any officers of Originator) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by Originator pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made; (2) the failure by Originator, to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of Originator to keep or perform any of its obligations, express or implied, with respect to any Contract; (3) any failure of Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; 20 (4) any products liability, personal injury or damage suit or similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable; (5) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; (6) the commingling of Collections of Receivables at any time with other funds; (7) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby or thereby, the use of the proceeds of a Purchase, the ownership of the Receivables, or any other investigation, litigation or proceeding relating to Buyer or Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (8) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (9) any Amortization Event described in Section 5.1(d); (10) any failure to vest and maintain vested in Buyer, or to transfer to Buyer, legal and equitable title to, and ownership of, the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim; (11) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable, the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of the Purchase or at any subsequent time; (12) any action or omission by Originator which reduces or impairs the rights of Buyer with respect to any Receivable or the value of any such Receivable; and (13) any attempt by any Person to void the Purchase hereunder under statutory provisions or common law or equitable action. 21 Section 6.2 Other Costs and Expenses. Originator shall pay to Buyer on demand all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder. Originator shall pay to Buyer on demand any and all costs and expenses of Buyer, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. ARTICLE VII MISCELLANEOUS Section 7.1 Waivers and Amendments. No failure or delay on the part of Buyer (or the Agent or any Managing Agent, as Buyer's assignees) in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. No provision of this Agreement may be amended, supplemented, modified or waived except in writing signed by Originator and Buyer and, to the extent required under the Purchase Agreement, the Agent and the Financial Institutions or the Required Financial Institutions. Section 7.2 Notices. Except as provided below, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (iii) if given by any other means, when received at the address specified in this Section 7.2. Section 7.3 Protection of Ownership Interests of Buyer. (a) Originator agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may request, to perfect, protect or more fully evidence the Purchaser Interests, or to enable Buyer (or the Agent or any Managing Agent, as Buyer's assignees) to exercise and enforce their rights and remedies hereunder. At any time, Buyer (or following the occurrence of an Amortization Event, 22 the Agent, or any Managing Agent, as Buyer's assignees) may, at Originator's sole cost and expense, direct Originator to notify the Obligors of Receivables of the ownership interests of Buyer and its assigns under this Agreement and the other Transaction Documents and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to Buyer or its designee (or the Agent or any Managing Agent, as Buyer's assignee). (b) If Originator fails to perform any of its obligations hereunder, Buyer (or the Agent or any Managing Agent, as Buyer's assignees) may (but shall not be required to) perform, or cause performance of, such obligation, and the costs and expenses incurred by Buyer (or the Agent or any Managing Agent, as Buyer's assignees) in connection therewith shall be payable by Originator as provided in Section 6.2. Originator irrevocably authorizes Buyer (and the Agent or any Managing Agent, as Buyer's assignees) at any time and from time to time in the sole discretion of Buyer (or the Agent or any Managing Agent, as Buyer's assignees), and appoints Buyer (and the Agent and each Managing Agent, as Buyer's assignees) as its attorney(s)-in-fact, to act on behalf of Originator (i) to execute on behalf of Originator as debtor and to file financing statements necessary or desirable in the sole discretion of Buyer (or the Agent or any Managing Agent, as Buyer's assignees) to perfect and to maintain the perfection and priority of the interest of Buyer in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as Buyer (or the Agent or any Managing Agent, as Buyer's assignees) in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of Buyer's interests in the Receivables. This appointment is coupled with an interest and is irrevocable. Section 7.4 Confidentiality. (a) Originator shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential proprietary information with respect to the Agent, the Managing Agents and the Purchasers and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that Originator and its officers and employees may disclose such information to Originator's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, Originator hereby consents to the disclosure of any nonpublic information with respect to it (i) to Buyer, the Agent, the Managing Agents or the Purchasers by each other, (ii) by Buyer, the Agent, the Managing Agents or the Purchasers to any prospective or actual assignee or participant of any of them or (iii) by the Agent or any Managing Agent to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to the Conduits or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which 23 any of the Managing Agents acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided that each such Person is informed of the confidential nature of such information. In addition, the Purchasers, the Managing Agents and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law), provided that such Purchaser, Managing Agent or the Agent, as applicable, shall, if practicable, notify Originator in advance prior to disclosure and will use reasonable efforts to cooperate with Originator at Originator's expense in obtaining any protective order for such information. Section 7.5 Bankruptcy Petition. Originator and Buyer each hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior Indebtedness of a Conduit, it will not institute against, or join any other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 7.6 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, BUT NOT LIMITED TO, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. Section 7.7 CONSENT TO JURISDICTION. ORIGINATOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT AND ORIGINATOR 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 LIMIT THE RIGHT OF BUYER (OR THE AGENT OR ANY MANAGING AGENT, AS BUYER'S ASSIGNEES) TO BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ORIGINATOR AGAINST BUYER (OR THE AGENT OR ANY MANAGING AGENT, AS BUYER'S ASSIGNEES) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 24 Section 7.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES 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 THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Section 7.9 Integration; Binding Effect; Survival of Terms. (a) This Agreement, the Subordinated Note, the Subscription Agreement and each Collection Account Agreement contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by Originator pursuant to Article II, (ii) the indemnification and payment provisions of Article VI, and (iii) Section 7.5 shall be continuing and shall survive any termination of this Agreement. Section 7.10 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. 25 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. ANIXTER INC. By: ------------------------------------------- Name: Title: Address: ----------------------------- ----------------------------- Attn: ------------------------ Facsimile: ------------------- ANIXTER RECEIVABLES CORPORATION By: ------------------------------------------- Name: Title: Address: ----------------------------- ----------------------------- Attn: ------------------------ Facsimile: ------------------- Signature Page to Amended and Restated Receivables Sale Agreement EXHIBIT I Definitions This is Exhibit I to the Agreement (as hereinafter defined). As used in the Agreement and the Exhibits, Schedules and Annexes thereto, capitalized terms have the meanings set forth in this Exhibit I (such meanings to be equally applicable to the singular and plural forms thereof). If a capitalized term is used in the Agreement, or any Exhibit, Schedule or Annex thereto, and not otherwise defined therein or in this Exhibit I, such term shall have the meaning assigned thereto in Exhibit I to the Purchase Agreement. "Agent" has the meaning set forth in the Preliminary Statements to the Agreement. "Agreement" means this Amended and Restated Receivables Sale Agreement, dated as of October 3, 2002, between Originator and Buyer, as the same may be amended, restated or otherwise modified. "Amortization Date" means the earliest to occur of (i) the Facility Termination Date, (ii) any Business Day so designated by Originator and Buyer, (iii) the Business Day immediately prior to the occurrence of an Amortization Event set forth in Section 5.1(d), (iv) the Business Day specified in a written notice from Buyer to Originator following the occurrence of any other Amortization Event, and (v) the date which is thirty (30) days after Buyer's receipt of written notice from Originator that it wishes to terminate the facility evidenced by this Agreement. "Amortization Event" has the meaning set forth in Section 5.1 of the Agreement. "Applied Collections" has the meaning set forth in Section 1.2(d) of the Agreement. "Authorized Officer" means, with respect to Originator, its treasurer, corporate controller or chief financial officer. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as amended, and any successor statute thereto. "Base Rate" means a rate per annum equal to the corporate base rate, prime rate or base rate of interest, as applicable, announced by the Bank One, NA (Main Office Chicago) from time to time, changing when and as such rate changes. "Business Day" means any day on which banks are not authorized or required to close in New York, New York or Chicago, Illinois and The Depository Trust Company of New York is open for business. "Buyer" has the meaning set forth in the preamble to the Agreement. "Calculation Period" means each calendar month or portion thereof which elapses during the term of the Agreement. The first Calculation Period shall commence on the date of the Purchase of Receivables hereunder and the final Calculation Period shall terminate on the Amortization Date. "Change of Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of Originator. "Credit and Collection Policy" means Originator's credit and collection policies and practices relating to Contracts and Receivables existing on the date hereof and summarized in Exhibit V, as modified from time to time in accordance with the Agreement. "Default Fee" means a per annum rate of interest equal to the sum of (i) the Base Rate, plus (ii) 2% per annum. "Dilutions" means, at any time, the aggregate amount of reductions or cancellations described in Section 1.3(a) of the Agreement. "Discount Factor" means a percentage calculated to provide Buyer with a reasonable return on its investment in the Receivables after taking account of (i) the time value of money based upon the anticipated dates of collection of the Receivables and the cost to Buyer of financing its investment in the Receivables during such period and (ii) the risk of nonpayment by the Obligors. Originator and Buyer may agree from time to time to change the Discount Factor based on changes in one or more of the items affecting the calculation thereof, provided that any change to the Discount Factor shall take effect as of the commencement of a Calculation Period, shall apply only prospectively and shall not affect the Purchase Price payment in respect of Purchase which occurred during any Calculation Period ending prior to the Calculation Period during which Originator and Buyer agree to make such change. "Intended Characterization" means, for income tax purposes, the characterization of the acquisition by the Purchasers of Purchaser Interests under the Purchase Agreement as a loan or loans by the Purchasers to Buyer secured by the Receivables, the Related Security and the Collections. "Managing Agents" has the meaning set forth in the Preliminary Statements to this Agreement. "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of Originator and its Subsidiaries, (ii) the ability of Originator to perform its obligations under the Agreement or any other Transaction Document, (iii) the legality, validity or enforceability of the Agreement or any other Transaction Document, (iv) Originator's, Buyer's, the Agent's, any Managing Agent's or any Purchaser's interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Net Worth" means as of the last Business Day of each Calculation Period preceding any date of determination, the excess, if any, of (a) the aggregate Outstanding Balance of the Receivables at such time, over (b) the sum of (i) the aggregate Capital outstanding at such time, plus (ii) the aggregate outstanding principal balance of the Subordinated Loans (including any Subordinated Loan proposed to be made on the date of determination). "Original Balance" means, with respect to any Receivable, the Outstanding Balance of such Receivable on the date it was purchased by Buyer. "Originator" has the meaning set forth in the preamble to the Agreement. "Potential Amortization Event" means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event. "Purchase" means the purchase under the Agreement by Buyer from Originator of the Receivables, the Related Security and the Collections related thereto, together with all related rights in connection therewith. "Purchase Agreement" has the meaning set forth in the Preliminary Statements to the Agreement. "Purchase Price" means, with respect to any Purchase on any date, the aggregate price to be paid by Buyer to Originator for such Purchase in accordance with Section 1.2 of the Agreement for the Receivables, Collections and Related Security being sold to Buyer on such date, which price shall equal (i) the product of (x) the Original Balance of such Receivables, multiplied by (y) one minus the Discount Factor then in effect, minus (ii) any Purchase Price Credits to be credited against the Purchase Price otherwise payable in accordance with Section 1.3 of the Agreement. "Purchase Price Credit" has the meaning set forth in Section 1.3 of the Agreement. "Purchasers" has the meaning set forth in the Preliminary Statements to the Agreement. "Receivable" means the indebtedness and other obligations owed to Originator (without giving effect to any transfer or conveyance under the Agreement) or Buyer (after giving effect to the transfers under the Agreement) whether constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by Originator and includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction. "Related Security" means, with respect to any Receivable: (i) all of Originator's interest in the Equipment or other inventory and goods (including returned or repossessed inventory or goods), if any, the financing or lease of which by Originator gave rise to such Receivable, and all insurance contracts with respect thereto, (ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise, (iv) all service contracts and other contracts and agreements associated with such Receivable, (v) all Records related to such Receivable, (vi) all proceeds of any of the foregoing. "Required Capital Amount" means, as of any date of determination, an amount equal to 3.5% of the Outstanding Balance of all Receivables at such time. "Settlement Date" means the seventeenth day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day. "Subordinated Loan" has the meaning set forth in Section 1.2(a) of the Agreement. "Subordinated Note" means a promissory note in substantially the form of Exhibit VII hereto as more fully described in Section 1.2 of the Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Subscription Agreement" means that certain Stockholder and Subscription Agreement, dated as of October 6, 2000, between Originator and Buyer, a copy of which is attached hereto as Exhibit VI. "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, limited liability company, 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. "Transaction Documents" means, collectively, this Agreement, each Collection Account Agreement, the Subordinated Note, the Subscription Agreement and all other instruments, documents and agreements executed and delivered in connection herewith. "UCC" means the Uniform Commercial Code as from time to time in effect in the State of Illinois. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9. EXHIBIT II Places of Business; Locations of Records; Federal Employer Identification Number(s); Other Names; State of Incorporation; Organizational Identification Number Places of Business: Locations of Records: Federal Employer Identification Number: Corporate, Partnership Trade and Assumed Names: State of Incorporation: Organizational Identification Number (if any): EXHIBIT III Lock-boxes; Collection Accounts; Collection Banks EXHIBIT IV Form of Compliance Certificate This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Sale Agreement dated as of October 3, 2002, between ANIXTER INC. ("Originator") and ANIXTER RECEIVABLES CORPORATION ("Buyer")(the "Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement. THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected ______________ of Originator. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Originator and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Amortization Event or a Potential Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below. 4. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Originator has taken, is taking, or proposes to take with respect to each such condition or event: The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this _____ day of _______, 20__. ANIXTER INC. By: ------------------------------ Name: Title: EXHIBIT V Credit and Collection Policy (See attached) EXHIBIT VI Copy of Stockholder Subscription Agreement (See Attached) Copy of Stockholder Subscription Agreement STOCKHOLDER AND SUBSCRIPTION AGREEMENT THIS STOCKHOLDER AND SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of October 6, 2000, is entered into by and between ANIXTER RECEIVABLES CORPORATION a Delaware corporation ("SPV"), and ANIXTER INC., a Delaware corporation ("Parent"). Except as otherwise specifically provided herein, capitalized terms used in this Agreement have the meanings ascribed thereto in the Receivables Sale Agreement, dated as of even date herewith, between SPV and Parent (as amended, restated, supplemented or otherwise modified from time to time, the "Sale Agreement"). RECITALS A. SPV has been organized under the laws of the State of Delaware for the purpose of, among other things, purchasing, holding, financing, receiving and transferring accounts receivable and related assets originated or otherwise held by Parent. B. Contemporaneously with the execution and delivery of this Agreement: (i) Parent and SPV have entered into the Sale Agreement pursuant to which Parent has, from and after the initial purchase date thereunder and prior to the termination date specified therein, sold all of its Receivables, Collections and Related Security to SPV; and (ii) SPV, Parent, as Servicer, certain financial institutions party thereto as "Purchasers," and Bank One, NA, as the "Agent," have entered into a Receivables Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement") pursuant to which SPV will sell "Purchaser Interests" to the Agent for the benefit of the Purchasers. C. SPV desires to sell shares of its capital stock to Parent, and Parent desires to purchase such shares, on the terms set forth in this Agreement. NOW, THEREFORE, SPV and Parent agree as follows: Section 1. Purchase and Sale of Capital Stock. Parent hereby purchases from SPV, and SPV hereby sells to Parent, 1,000 shares of common stock, par value $0.01 per share, of SPV (the "Common Stock") for the Stock Purchase Price set forth in Section 2(a). The shares of Common Stock being purchased under this Agreement are referred to herein as the "Shares." Within three (3) Business Days from the date hereof, SPV shall deliver to Parent a certificate registered in Parent's name representing the Shares. Section 2. Consideration for Shares and Capital Contributions. (a) Consideration for Shares. To induce SPV to enter into the Sale Agreement and to enable SPV to fund its obligations thereunder by consummating the transactions contemplated by the Purchase Agreement, and in reliance upon the representations and warranties set forth herein, Parent hereby pays to SPV on the date hereof the sum of $14,600,000 (the "Stock Purchase Price") in consideration of the purchase of the Shares. The Stock Purchase Price shall take the form of a transfer of cash, except that Parent may, in lieu of cash payment of the Stock Purchase Price, offset the amount of the Stock Purchase Price against the purchase price otherwise payable by SPV to Parent on the purchase date pursuant to the Sale Agreement. (b) Contributions After Initial Closing Date. From time to time Parent may make additional capital contributions to SPV. All such contributions shall take the form of a cash transfer, except that SPV agrees, in lieu of cash payment thereof, to offset the amount of such contributions against the purchase price for Receivables otherwise payable by SPV to Parent on the date of such capital contributions. All of the Receivables so paid for through such offset shall constitute purchased Receivables within the meaning of the Sale Agreement and shall be subject to all of the representations, warranties and indemnities otherwise made thereunder. It is expressly understood and agreed that Parent has no obligations under this Agreement or otherwise to make any capital contributions from and after payment of the Stock Purchase Price. Section 3. Representations and Warranties of SPV. SPV represents and warrants to Parent as follows: (a) SPV is a corporation duly incorporated validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to carry on its business as proposed to be conducted on the date hereof. (b) SPV has all requisite legal and corporate power otherwise, to enter into this Agreement, to issue the Shares and to perform its other obligations under this Agreement. (c) Upon receipt by SPV of the Stock Purchase Price and the issuance of the Shares to Parent, the Shares will be duly authorized, validly issued, fully paid and nonassessable. (d) SPV has taken all corporate action necessary for its authorization, execution and delivery of, and, its performance under, this Agreement. (e) This Agreement constitutes a legally valid and binding obligation of SPV, enforceable against SPV in accordance with its terms, except that enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) SPV has filed its Certificate of Incorporation in the form attached hereto as Annex A with the Secretary of State of Delaware and (ii) adopted By-laws in the form attached hereto as Annex B. (g) The issuance of the Shares by SPV hereunder is legally permitted by all laws and regulations to which SPV is subject. Section 4. Representations and Warranties of Parent. Parent represents and warrants to SPV as follows: (a) Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to carry on its business as conducted on the date hereof. (b) Parent has all requisite legal and corporate power otherwise, to enter into this Agreement, to purchase the Shares and to perform its other obligations under this Agreement. (c) Parent has taken all corporate action necessary for its authorization, execution and delivery of, and its performance under, this Agreement. (d) This Agreement constitutes a legally valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) Parent is purchasing the Shares for investment for its own account, not as a nominee or agent, and not with a view to any distribution of any part thereof. Parent has no current intention of selling, granting a participation in, or otherwise distributing, the shares. (e) Parent understands that the Shares have not been registered under the Securities Act of 1933, as amended, or under any other Federal or state law, and that SPV does not contemplate such a registration. (f) Parent has such knowledge, sophistication and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated by this Agreement, and has made such investigations in connection herewith as have been deemed necessary or desirable to make such evaluation. (g) The purchase of the Shares by Parent is legally permitted by all laws and regulations to which Parent is subject. Section 5. Restrictions on Transfer Imposed by the Act; Legend. (a) Legend. Each certificate representing any Shares shall be endorsed with the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT. SUCH SECURITIES SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT SUCH REGISTRATION, UNLESS, IN THE OPINION OF THE CORPORATION'S COUNSEL, SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. (b) Registration of Transfers. SPV need not register a transfer of any Shares unless the conditions specified in the legend set forth in Section 5(a) hereof are satisfied. SPV may also instruct its transfer agent (which may be SPV) not to register the transfer of any Shares unless the conditions specified in the legend set forth in Section 5(a) hereof are satisfied. Section 6. Agreement to Vote. Parent hereby agrees and covenants to vote all of the shares of Common Stock now or hereafter owned by it, whether beneficially or otherwise, as is necessary at a meeting of stockholders of SPV, or by written consent in lieu of any such meeting, to cause to be elected to, and maintained on, SPV's board of directors at least one (1) person meeting the qualifications of an Independent Director and selected in accordance with the provisions of the Certificate of Incorporation and By-Laws of SPV. Section 7. Successors and Assigns. Each party agrees that it will not assign, sell, transfer, delegate, or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any right or obligation under this Agreement except in connection with a transfer of Shares in compliance with the terms and conditions hereof, as contemplated by Section 5(b) above, or otherwise in accordance with the terms hereof. Any purported assignment, transfer or delegation in violation of this Section 7 shall be null and void ab initio. Subject to the foregoing limits on assignment and delegation and except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, legatees, executors, administrators, assignees and legal successors. Section 8. Amendments and Waivers. Any term hereof may be amended and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of SPV and Parent. Any amendment or waiver so effected shall be binding upon SPV and Parent. Section 9. Further Acts. Each party agrees to perform any further acts and execute and deliver any document which may be reasonably necessary to carry out the provisions of this Agreement. Section 10. Counterparts. This Agreement may be executed in any number of counterparts, and all of such counterparts together will be deemed one instrument. Section 11. Notices. Any and all notices, acceptances, statements and other communications to Parent in connection herewith shall be in writing, delivered personally, by facsimile or certified mail, return receipt requested, and shall be addressed to the address of Parent indicated on the stock transfer register of SPV or, if no address is so indicated, to the address provided to SPV pursuant to the Sale Agreement unless changed by written notice to SPV or its successor. Section 12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, EXCEPT AND TO THE EXTENT THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE IS APPLICABLE. Section 13. Entire Agreement. This Agreement, together with the Sale Agreement and the documents expressly to be delivered in connection therewith, constitute the entire understanding and agreement between the parties hereto with subject matter hereof and thereof. Section 14. Severability of this Agreement. In case any provision of this Agreement shall be invalid or unenforceable, the validity, legality and enforceability of the remaining shall not in any way be affected or impaired thereby. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ANIXTER RECEIVABLES CORPORATION By: -------------------------------- Name: Title: ANIXTER INC. By: -------------------------------- Name: Title: ANNEX A to Subscription Agreement Certificate of Incorporation (see attached) ANNEX B to Subscription Agreement By-Laws (see attached) EXHIBIT VII Form of Amended and Restated Subordinated Note AMENDED AND RESTATED SUBORDINATED NOTE October 3, 2002 1. Note. FOR VALUE RECEIVED, the undersigned, ANIXTER RECEIVABLES CORPORATION, a Delaware corporation ("SPV"), hereby unconditionally promises to pay to the order of ANIXTER INC., a Delaware corporation ("Originator"), in lawful money of the United States of America and in immediately available funds, on the date following the Amortization Date which is one year and one day after the date on which (i) the Outstanding Balance of all Receivables sold under the "Sale Agreement" referred to below has been reduced to zero and (ii) Originator has paid to the Buyer all indemnities, adjustments and other amounts which may be owed thereunder in connection with the Purchases (the "Collection Date"), the aggregate unpaid principal sum outstanding of all "Subordinated Loans" made from time to time by Originator to SPV pursuant to and in accordance with the terms of that certain Amended and Restated Receivables Sale Agreement dated as of October 3, 2002 between Originator and SPV (as amended, restated, supplemented or otherwise modified from time to time, the "Sale Agreement"). Reference to Section 1.2 of the Sale Agreement is hereby made for a statement of the terms and conditions under which the loans evidenced hereby have been and will be made. All terms which are capitalized and used herein and which are not otherwise specifically defined herein shall have the meanings ascribed to such terms in the Sale Agreement. 2. Interest. SPV further promises to pay interest on the outstanding unpaid principal amount hereof from the date hereof until payment in full hereof at a rate equal to the Base Rate less 1.50% per annum; provided, however, that if SPV shall default in the payment of any principal hereof, SPV promises to pay, on demand, interest at the rate of the Base Rate plus 0.50% per annum on any such unpaid amounts, from the date such payment is due to the date of actual payment. Interest shall be payable on the first Business Day of each month in arrears; provided, however, that SPV may elect on the date any interest payment is due hereunder to defer such payment and upon such election the amount of interest due but unpaid on such date shall constitute principal under this Amended and Restated Subordinated Note. The outstanding principal of any loan made under this Amended and Restated Subordinated Note shall be due and payable on the Collection Date and may be repaid or prepaid at any time without premium or penalty. 3. Principal Payments. Originator is authorized and directed by SPV to enter on the grid attached hereto, or, at its option, in its books and records, the date and amount of each loan made by it which is evidenced by this Amended and Restated Subordinated Note and the amount of each payment of principal made by SPV, and absent manifest error, such entries shall constitute prima facie evidence of the accuracy of the information so entered; provided that neither the failure of Originator to make any such entry or any error therein shall expand, limit or affect the obligations of SPV hereunder. 4. Subordination. The indebtedness evidenced by this Amended and Restated Subordinated Note is subordinated to the prior payment in full of all of SPV's recourse obligations under that certain Amended and Restated Receivables Purchase Agreement dated as of October 3, 2002 by and among SPV, Originator, as Servicer, various "Purchasers", "Financial Institutions" and "Managing Agents" from time to time party thereto, and Bank One, NA, as the "Agent" (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement"). The subordination provisions contained herein are for the direct benefit of, and may be enforced by, the Agent and the Purchasers and/or any of their respective assignees (collectively, the "Senior Claimants") under the Purchase Agreement. Until the date on which all "Capital" outstanding under the Purchase Agreement has been repaid in full and all other obligations of SPV and/or the Servicer thereunder and under the "Fee Letter" referenced therein (all such obligations, collectively, the "Senior Claim") have been indefeasibly paid and satisfied in full, Originator shall not demand, accelerate, sue for, take, receive or accept from SPV, directly or indirectly, in cash or other property or by set-off or any other manner (including, without limitation, from or by way of collateral) any payment or security of all or any of the indebtedness under this Subordinated Note or exercise any remedies or take any action or proceeding to enforce the same; provided, however, that (i) Originator hereby agrees that it will not institute against SPV any proceeding of the type described in Section 5.1(d) of the Sale Agreement unless and until the Collection Date has occurred and (ii) nothing in this paragraph shall restrict SPV from paying, or Originator from requesting, any payments under this Subordinated Note so long as SPV is not required under the Purchase Agreement to set aside for the benefit of, or otherwise pay over to, the funds used for such payments to any of the Senior Claimants and further provided that the making of such payment would not otherwise violate the terms and provisions of the Purchase Agreement. Should any payment, distribution or security or proceeds thereof be received by Originator in violation of the immediately preceding sentence, Originator agrees that such payment shall be segregated, received and held in trust for the benefit of, and deemed to be the property of, and shall be immediately paid over and delivered to the Agent for the benefit of the Senior Claimants. 5. Bankruptcy; Insolvency. Upon the occurrence of any proceeding of the type described in Section 5.1(d) of the Sale Agreement involving SPV as debtor, then and in any such event the Senior Claimants shall receive payment in full of all amounts due or to become due on or in respect of Capital and the Senior Claim (including "Yield" as defined and as accruing under the Purchase Agreement after the commencement of any such proceeding, whether or not any or all of such Yield is an allowable claim in any such proceeding) before Originator is entitled to receive payment on account of this Subordinated Note, and to that end, any payment or distribution of assets of SPV of any kind or character, whether in cash, securities or other property, in any applicable insolvency proceeding, which would otherwise be payable to or deliverable upon or with respect to any or all indebtedness under this Amended and Restated Subordinated Note, is hereby assigned to and shall be paid or delivered by the Person making such payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly to the Agent for application to, or as collateral for the payment of, the Senior Claim until such Senior Claim shall have been paid in full and satisfied. 6. Amendments. This Amended and Restated Subordinated Note shall not be amended or modified except in accordance with Section 7.1 of the Sale Agreement. The terms of this Amended and Restated Subordinated Note may not be amended or otherwise modified without the prior written consent of each Managing Agent for the benefit of the Purchasers. 7. GOVERNING LAW. THIS AMENDED AND RESTATED SUBORDINATED NOTE HAS BEEN MADE AND DELIVERED AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS. WHEREVER POSSIBLE EACH PROVISION OF THIS AMENDED AND RESTATED SUBORDINATED NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS SUBORDINATED NOTE. 8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. Originator additionally expressly waives all notice of the acceptance by any Senior Claimant of the subordination and other provisions of this Amended and Restated Subordinated Note and expressly waives reliance by any Senior Claimant upon the subordination and other provisions herein provided. 9. Assignment. This Amended and Restated Subordinated Note may not be assigned, pledged or otherwise transferred to any party other than Originator without the prior written consent of each Managing Agent, and any such attempted transfer shall be void. 10. No Novation. It is expressly understood and agreed by the SPV that (i) the principal balance of this Amended and Restated Subordinated Note includes a portion of the SPV's indebtedness hitherto evidenced by that certain Amended and Restated Subordinated Note dated as of October 3, 2000 (the "Existing Note"), and (ii) to the extent such indebtedness is included in the principal balance of this Amended and Restated Subordinated Note, this Amended and Restated Subordinated Note (a) merely re-evidences such indebtedness, (b) is given in partial substitution for, and not in payment of, the Existing Note and (c) is in no way intended to constitute a novation of the Existing Note. The unpaid principal balance of the indebtedness hitherto evidenced by the Existing Note and now evidenced by this Amended and Restated Subordinated Note shall continue to be secured pursuant to the terms of the Sale Agreement. ANIXTER RECEIVABLES CORPORATION By: -------------------------------- Name: Title: Schedule to SUBORDINATED NOTE SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Unpaid Subordinated Principal Principal Notation Date Loan Paid Balance made by - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------ - ------- --------------- ------------ --------------- ------------
SCHEDULE A DOCUMENTS TO BE DELIVERED TO BUYER ON OR PRIOR TO THE PURCHASE (See Attached.) EX-4.7 6 c75506exv4w7.txt AMENDED & RESTATED RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.7 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of October 3, 2002 Among ANIXTER RECEIVABLES CORPORATION, as Seller, ANIXTER INC., as Servicer, FALCON ASSET SECURITIZATION CORPORATION and THREE PILLARS FUNDING CORPORATION, as Conduits, THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO, as Financial Institutions, BANK ONE, NA (MAIN OFFICE CHICAGO) and SUNTRUST CAPITAL MARKETS, INC., as Managing Agents and BANK ONE, NA (MAIN OFFICE CHICAGO), as Agent ARTICLE I PURCHASE ARRANGEMENTS........................................................................3 Section 1.1 Purchase Facility............................................................3 Section 1.2 Increases....................................................................3 Section 1.3 Decreases....................................................................4 Section 1.4 Payment Requirements.........................................................4 Section 1.5 Assignment of Purchaser Interests to SunTrust................................4 ARTICLE II PAYMENTS AND COLLECTIONS.....................................................................5 Section 2.1 Payments.....................................................................5 Section 2.2 Collections Prior to Amortization............................................6 Section 2.3 Collections Following Amortization...........................................6 Section 2.4 Application of Collections...................................................7 Section 2.5 Payment Recission............................................................7 Section 2.6 Maximum Purchaser Interests..................................................7 Section 2.7 Clean Up Call................................................................8 ARTICLE III CONDUIT FUNDING..............................................................................8 Section 3.1 Yield........................................................................8 Section 3.2 Yield Payments...............................................................8 Section 3.3 Calculation of Yield.........................................................8 ARTICLE IV FINANCIAL INSTITUTION FUNDING................................................................9 Section 4.1 Financial Institution Funding................................................9 Section 4.2 Yield Payments...............................................................9 Section 4.3 Selection and Continuation of Tranche Periods................................9 Section 4.4 Financial Institution Discount Rates.........................................9 Section 4.5 Suspension of the LIBO Rate.................................................10 ARTICLE V REPRESENTATIONS AND WARRANTIES..............................................................10 Section 5.1 Representations and Warranties of The Seller Parties........................10 ARTICLE VI CONDITIONS OF PURCHASES.....................................................................14 Section 6.1 Conditions Precedent to Initial Incremental Purchase........................14 Section 6.2 Conditions Precedent to All Purchases and Reinvestments.....................14
ARTICLE VII COVENANTS...................................................................................15 Section 7.1 Affirmative Covenants of The Seller Parties.................................15 Section 7.2 Negative Covenants of the Seller Parties....................................23 ARTICLE VIII ADMINISTRATION AND COLLECTION...............................................................24 Section 8.1 Designation of Servicer.....................................................24 Section 8.2 Duties of Servicer..........................................................25 Section 8.3 Collection Notices..........................................................26 Section 8.4 Responsibilities of Seller..................................................27 Section 8.5 Reports.....................................................................27 Section 8.6 Servicing Fees..............................................................27 ARTICLE IX AMORTIZATION EVENTS.........................................................................27 Section 9.1 Amortization Events.........................................................27 Section 9.2 Remedies....................................................................29 ARTICLE X INDEMNIFICATION.............................................................................29 Section 10.1 Indemnities by the Seller Parties...........................................29 Section 10.2 Increased Cost and Reduced Return...........................................32 Section 10.3 Other Costs and Expenses....................................................32 ARTICLE XI THE AGENT...................................................................................33 Section 11.1 Authorization and Action....................................................33 Section 11.2 Delegation of Duties........................................................33 Section 11.3 Exculpatory Provisions......................................................33 Section 11.4 Reliance by Agent...........................................................34 Section 11.5 Non-Reliance on Agent and Other Purchasers..................................34 Section 11.6 Reimbursement and Indemnification...........................................35 Section 11.7 Agents in their Individual Capacities.......................................35 Section 11.8 Successor Agent.............................................................35 ARTICLE XII ASSIGNMENTS; PARTICIPATIONS.................................................................36 Section 12.1 Assignments.................................................................36 Section 12.2 Participations..............................................................37 Section 12.3 Extension of Liquidity Termination Date.....................................37 ARTICLE XIII MISCELLANEOUS...............................................................................38
Page 2 Section 13.1 Waivers and Amendments......................................................38 Section 13.2 Notices.....................................................................39 Section 13.3 Ratable Payments............................................................40 Section 13.4 Protection of Ownership Interests of the Purchasers.........................40 Section 13.5 Confidentiality.............................................................41 Section 13.6 Bankruptcy Petition.........................................................41 Section 13.7 Limitation of Liability; Limitation on Payment; No Recourse.................41 Section 13.8 CHOICE OF LAW...............................................................42 Section 13.9 CONSENT TO JURISDICTION.....................................................42 Section 13.10 WAIVER OF JURY TRIAL........................................................43 Section 13.11 Integration; Binding Effect; Survival of Terms..............................43 Section 13.12 Counterparts; Severability; Section References..............................43 Section 13.13 Agent Roles.................................................................43 Section 13.14 Characterization............................................................44 Exhibits and Schedules Exhibit I Definitions Exhibit II Form of Purchase Notice Exhibit III Places of Business of the Seller Parties; Locations of Records; Federal Employer Identification Number(s); Jurisdiction of Organization; Organizational Identification Number Exhibit IV Names of Collection Banks; Collection Accounts Exhibit V Form of Compliance Certificate Exhibit VI Form of Collection Account Agreement Exhibit VII Form of Assignment Agreement Exhibit VIII Credit and Collection Policy Exhibit IX Form of Contract(s) Exhibit X Form of Monthly Report Exhibit XI Form of Mid-Month Report Schedule A Commitments; Purchase Limits Schedule B Closing Documents Schedule 1 Fiscal Months
Page 3 ANIXTER RECEIVABLES CORPORATION AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT This Amended and Restated Receivables Purchase Agreement dated as of October 3, 2002 is among Anixter Receivables Corporation, a Delaware corporation ("Seller"), Anixter Inc., a Delaware corporation ("Anixter"), as initial Servicer (Anixter, together with Seller, the "Seller Parties" and each a "Seller Party"), Falcon Asset Securitization Corporation ("Falcon") and Three Pillars Funding Corporation ("Three Pillars"), as conduits (collectively, the "Conduits" and each individually, a "Conduit"), the entities listed on Schedule A to this Agreement (together with any of their respective successors and assigns hereunder, the "Financial Institutions"), Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc. ("SunTrust"), as managing agents (collectively, the "Managing Agents" and each individually, a "Managing Agent") and Bank One, as agent for the Purchasers hereunder or any successor agent hereunder (together with its successors and assigns hereunder, the "Agent"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I. PRELIMINARY STATEMENTS A. Reference is made to that certain Receivables Purchase Agreement dated as of October 6, 2000 by and among the Seller Parties, Falcon, and Bank One, as a "Financial Institution" and as "Agent" (as heretofore amended, the "Earlier Purchase Agreement"). B. The Seller Parties, the Conduit, the Financial Institutions, the Managing Agents and the Agent have, on the terms and conditions set forth herein, agreed to amend and restate the Earlier Purchase Agreement in its entirety. C. Seller desires to transfer and assign Purchaser Interests to the Purchasers from time to time. D. The Conduits may, in their absolute and sole discretion, purchase Purchaser Interests from Seller from time to time. E. In the event that a Conduit declines to make any purchase, the Financial Institutions which are part of such Conduit's Purchase Group shall, at the request of Seller, purchase Purchaser Interests from time to time in an amount not to exceed the Group Purchase Limit for such Purchase Group. In addition, the Financial Institutions in each Purchase Group have agreed to provide a liquidity facility to the Conduit in such Purchase Group in accordance with the terms of a Liquidity Agreement entered into by such Conduit with such Financial Institutions. F. Each Managing Agent has been requested and is willing to act as Managing Agent on behalf of the Conduit and the Financial Institutions in its Purchase Group in accordance with the terms hereof G. Bank One, NA has been requested and is willing to act as Agent on behalf of the Purchasers in accordance with the terms hereof. AMENDMENT AND RESTATEMENT (a) This Agreement amends and restates in its entirety the Earlier Purchase Agreement. Upon the effectiveness of this Agreement, the terms and provisions of the Earlier Purchase Agreement shall, subject to the following clauses (b) and (c), be superseded hereby. (b) Notwithstanding the amendment and restatement of the Earlier Purchase Agreement by this Agreement: (i) the Seller shall continue to be liable to Falcon and Bank One with respect to (A) all unpaid CP Costs, Yield, fees, expenses and (except as otherwise provided in Section 1.5 with respect to the Capital of Falcon under the Earlier Purchase Agreement) other obligations of the Seller accrued under the Earlier Purchase Agreement prior to the effective date of this Agreement and (B) all agreements on the part of the Seller under the Earlier Purchase Agreement to indemnify Falcon or Bank One in connection with events or conditions arising or existing prior to the effective date of this Agreement, including, but not limited to, those events and conditions set forth in Article X thereof; (ii) Falcon and Bank One (in its capacity as a "Financial Institution") shall continue to be liable in respect of each claim of Bank One (in its capacity as "Agent") as against such Person arising under the Earlier Purchase Agreement prior to the effective date of this Agreement, including but not limited to, each claim arising under Section 11.6 of the Earlier Purchase Agreement; and (iii) Falcon and Bank One shall continue to be liable in respect of any claim against such Person in favor of the Seller arising under the Earlier Purchase Agreement prior to the effective date of this Agreement. (c) This Agreement is entered into in substitution for the Earlier Purchase Agreement and not as payment of any of the obligations of the Seller thereunder, and is in no way intended to constitute a novation of the Earlier Purchase Agreement. Except as set forth in Section 1.5 with respect to the Capital of Falcon under the Earlier Purchase Agreement, nothing contained herein is intended to amend, modify or otherwise affect any obligation of, or grant of authority by, the Seller existing prior to the date hereof. (d) Upon the effectiveness of this Agreement, each reference to the Earlier Purchase Agreement in any other document, instrument or agreement executed and/or delivered in connection therewith shall mean and be a reference to this Agreement unless the context otherwise requires. (e) Upon the effectiveness of this Agreement, the terms of this Agreement shall govern all aspects of the facility contemplated herein, including, without limitation, the eligibility of Receivables purchased under the Earlier Purchase Agreement and any settlements to be made with respect thereto. 2 ARTICLE I PURCHASE ARRANGEMENTS Section 1.1 Purchase Facility. (a) Upon the terms and subject to the conditions hereof, Seller may, at its option, sell and assign Purchaser Interests to the Agent, for the benefit of the Purchasers, in all of its Receivables, Related Security, Collections, and proceeds of any of the foregoing, in each case, whether now owned or hereafter arising. In accordance with the terms and conditions set forth herein, each Conduit may, at its option, instruct the related Managing Agent to purchase on its behalf through the Agent, or if any such Conduit shall decline to purchase, the applicable Managing Agent shall purchase, on behalf of the applicable Financial Institutions through the Agent, Purchaser Interests from time to time in an aggregate amount not to exceed the Purchase Limit, and for each Purchase Group, in an aggregate amount not to exceed the Group Purchase Limit for such Purchase Group, during the period from the date hereof to but not including the Facility Termination Date. Notwithstanding the foregoing, at no time shall a Purchaser Interest be purchased for a Financial Institution pursuant to this Section 1.1(a) if the Capital allocated to the Financial Institution with respect to such Purchaser Interest would exceed such Financial Institution's Unused Back-up Commitment at such time. (b) Seller may, upon at least 30 days' notice to the Agent and each Managing Agent, terminate in whole or reduce in part, ratably among the Financial Institutions based on the amount of their Back-Up Commitments, the Unused Purchase Limit; provided that each partial reduction of the Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple thereof. Each Financial Institution's Back-Up Commitment shall be reduced by its Pro Rata Share of each reduction in the Purchase Limit, and each Financial Institution's Liquidity Commitment shall be reduced by its Pro Rata Share of 102% of each such reduction in the Purchase Limit. Section 1.2 Increases. Seller shall provide each Managing Agent with at least three (3) Business Days' prior notice in a form set forth as Exhibit II hereto of each Incremental Purchase (collectively, a "Purchase Notice"). Each Purchase Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable and shall specify the requested (i) Purchase Price (which shall not be less than $500,000 per Purchase Group), (ii) date of purchase (which in the case of any Incremental Purchase other than the initial Incremental Purchase, shall be a Monthly Settlement Date or a Mid-Month Report Date unless otherwise agreed to by the Purchasers), and (iii) in the event a Conduit declines to make an Incremental Purchase and such Incremental Purchase is to be funded by the related Financial Institutions, the type of Discount Rate and Tranche Period. Following receipt of a Purchase Notice, each Managing Agent will determine whether the Conduit in its Purchase Group agrees to make the purchase. If any Conduit declines to make a proposed purchase, its Managing Agent shall promptly notify the Agent and the Seller, and the Seller may cancel the Purchase Notice in its entirety or, in the absence of such a cancellation, the Incremental Purchase of the Purchaser Interest will be made by the Financial Institutions in such Conduit's Purchase Group. Each Incremental Purchase to be made hereunder shall be made ratably among the Purchase Groups in accordance with their Group Purchase Limits. On the date of each Incremental Purchase, upon 3 satisfaction of the applicable conditions precedent set forth in Article VI, each Conduit or the applicable Financial Institutions, as applicable, shall make available to the related Managing Agent at its address listed beneath its signature on its signature page to this Agreement, for deposit to such account as the Seller designates from time to time, in immediately available funds, no later than 12:00 Noon (Chicago time), an amount equal to (i) in the case of a Conduit, such Conduit's Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests then being purchased, which amount shall not exceed such Conduit's Pro Rata Share of the Unused Purchase Limit, or (ii) in the case of a Financial Institution, such Financial Institution's Pro Rata Share of the aggregate Purchase Price of the Purchaser Interests then being purchased, such amount not to exceed such Financial Institution's Unused Back-Up Commitment. Section 1.3 Decreases. Seller shall provide each Managing Agent with at least three (3) Business Days' prior written notice of any proposed reduction of Aggregate Capital from Collections (a "Reduction Notice"). Such Reduction Notice shall designate (i) the date (the "Proposed Reduction Date") which must be a Monthly Settlement Date or a Mid-Month Report Date, upon which any such reduction of Aggregate Capital shall occur, and (ii) the amount of Aggregate Capital to be reduced which shall be applied by the Managing Agents ratably to the Purchaser Interests of the Purchasers in accordance with the amount of Capital (if any) owing to such Purchaser (ratably, based on such Purchaser's Capital Pro Rata Share) (the "Aggregate Reduction"). Only one (1) Reduction Notice shall be outstanding at any time. Section 1.4 Payment Requirements. All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 11:00 a.m. (Chicago time) on the day when due in immediately available funds, and if not received before 11:00 a.m. (Chicago time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Purchaser they shall be paid to the related Managing Agent, for the account of such Purchaser, at its address listed beneath its signature on its signature page to this Agreement until otherwise notified in writing by such Managing Agent. Upon notice to Seller, the Agent may debit the Facility Account for all amounts due and payable hereunder. All computations of Yield, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day. Section 1.5 Assignment of Purchaser Interests to SunTrust. On the Closing Date: (a) SunTrust, in its capacity as Managing Agent for Three Pillars, shall pay to Bank One, in its capacity as Managing Agent for Falcon, in immediately available funds, an amount equal to its Pro Rata Share of Falcon's outstanding Capital at such time, whereupon, Falcon shall be deemed to have sold, transferred and assigned to SunTrust, without recourse, representation or warranty (except that Bank One and Falcon represent and warrant that the undivided interest in Falcon's Purchaser Interest sold to SunTrust hereunder is free and clear of any Lien created by or through Bank One or Falcon), and SunTrust, on behalf of the Three Pillars Purchase Group, shall be deemed to have hereby irrevocably taken, received and assumed from Falcon, an undivided interest in Falcon's Purchaser Interest outstanding under the Earlier Purchase Agreement. The amount of SunTrust's payment corresponding to its Pro Rata Share of 4 outstanding Capital shall constitute Capital under this Agreement, so that immediately upon giving effect to such payment, each Conduit will have a Purchaser Interest hereunder based upon its outstanding Capital. (b) The Seller shall pay to Bank One, in its capacity as Managing Agent for Falcon, on the first Settlement Date following the date hereof, in immediately available funds, (i) all accrued but unpaid CP Costs (as defined in the Earlier Purchase Agreement) attributable to Falcon's outstanding Capital under the Earlier Purchase Agreement through the Accrual Period ended September 30, 2002; (ii) all accrued and unpaid Yield (under and as defined in the Earlier Purchase Agreement) attributable to Falcon's outstanding Capital hereunder accrued through the Accrual Period ended September 30, 2002; and (iii) all accrued and unpaid fees and other costs and expenses payable in respect of Falcon's outstanding Capital under the Earlier Purchase Agreement accrued through the Accrual Period ended September 30, 2002. On the second Settlement Date following the date hereof, the Seller shall pay to (i) Bank One, as Managing Agent for the Falcon Purchase Group, for the benefit of the applicable Purchasers in the Falcon Purchase Group, Yield (as defined in this Agreement) on the outstanding Capital of the Purchasers of such Purchase Group for the period commencing October 1, 2002 and ending on October 31, 2002, and (ii) to SunTrust, as Managing Agent for the Three Pillars Purchase Group, for the benefit of the applicable Purchasers in the Three Pillars Purchase Group, Yield (as defined in this Agreement) on the outstanding Capital of the Purchasers of such Purchase Group for the period commencing on the date hereof and ending on October 31, 2002. ARTICLE II PAYMENTS AND COLLECTIONS Section 2.1 Payments. Notwithstanding any limitation on recourse contained in this Agreement, Seller shall immediately pay to each Managing Agent when due, for the account of the related Purchaser or Purchasers on a full recourse basis, (i) such fees as set forth in the Fee Letter (which fees shall be sufficient to pay all fees owing to the Financial Institutions), (ii) all amounts payable as Yield, (iii) all amounts payable as Deemed Collections (which shall be immediately due and payable by Seller and applied to reduce outstanding Aggregate Capital hereunder in accordance with Sections 2.2 and 2.3 hereof), (iv) all amounts payable pursuant to Section 2.6, (v) all amounts payable pursuant to Article X, if any, (vi) all Servicer costs and expenses, including the Servicing Fee, in connection with servicing, administering and collecting the Receivables, (vii) all Broken Funding Costs and (viii) all Default Fees (collectively, the "Obligations"). If any Person fails to pay any of the Obligations when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or the Fee Letter shall require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law. If at any time any Seller Party receives any Collections or is deemed to receive any Collections, such Seller Party shall immediately pay such Collections or Deemed Collections to the Servicer for application in accordance with the terms and conditions hereof and, at all times prior to such payment, such Collections or Deemed Collections shall be held in trust by such Seller Party for the exclusive benefit of the Purchasers, the Managing Agents and the Agent. 5 Section 2.2 Collections Prior to Amortization. Prior to the Amortization Date, any Collections and/or Deemed Collections received by the Servicer shall be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Aggregate Unpaids or for a Reinvestment or an Aggregate Reduction as provided in this Section 2.2. If at any time any Collections are received by the Servicer prior to the Amortization Date, (i) the Servicer shall set aside the Termination Percentage (as hereinafter defined) of Collections evidenced by the Purchaser Interests of each Terminating Financial Institution and (ii) Seller hereby requests and the Purchasers (other than any Terminating Financial Institutions) hereby agree to make, simultaneously with such receipt, a reinvestment of funds (each a "Reinvestment") with a portion of the balance of each and every Collection received by the Servicer or Deemed Collection that is part of any Purchaser Interest (other than any Purchaser Interests of Terminating Financial Institutions), such that after giving effect to such Reinvestment, the amount of Aggregate Capital immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Aggregate Capital immediately prior to such receipt. On each Settlement Date prior to the occurrence of the Amortization Date, the Servicer shall remit to the Managing Agents' respective accounts in accordance with the applicable Group Pro Rata Share of its Purchase Group, the amounts set aside during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1) first, to reduce unpaid Obligations and second, to reduce the Capital of all Purchaser Interests of Terminating Financial Institutions, applied ratably to each such Terminating Financial Institution according to its respective Termination Percentage. If such Terminating Financial Institution's Capital and other Obligations shall be reduced to zero, any additional Collections received by the Servicer shall (i) if applicable, be remitted to the Managing Agents' respective accounts in accordance with the applicable Pro Rata Shares of the related Purchasers no later than 11:00 a.m. (Chicago time) to the extent required to fund any Aggregate Reduction on such Settlement Date and (ii) thereafter, be remitted from the Servicer to Seller on such Settlement Date. Each Terminating Financial Institution shall be allocated a ratable portion of Collections from the date on which it became a Terminating Financial Institution (the "Termination Date") until such Terminating Financing Institution's Capital shall be paid in full. This ratable portion shall be calculated on the Termination Date of each Terminating Financial Institution as a percentage equal to (i) Capital of such Terminating Financial Institution outstanding on its Termination Date, divided by (ii) the Aggregate Capital outstanding on such Termination Date (the "Termination Percentage"). Each Terminating Financial Institution's Termination Percentage shall remain constant prior to the Amortization Date. On and after the Amortization Date, each Termination Percentage shall be disregarded, and each Terminating Financial Institution's Capital shall be reduced ratably with all Financial Institutions in accordance with Section 2.3. Section 2.3 Collections Following Amortization. On the Amortization Date and on each day thereafter, the Servicer shall set aside and hold in trust, for the holder of each Purchaser Interest, all Collections received on such day and an additional amount of funds of the Seller for the payment of any accrued and unpaid Aggregate Capital and other accrued and unpaid Obligations owed by Seller and not previously paid by Seller in accordance with Section 2.1. On and after the Amortization Date, the Servicer shall, at any time upon the request from time to time by (or pursuant to standing instructions from) the Agent (i) remit to the Managing Agents' respective accounts established for the benefit of the related Purchasers, in accordance with the 6 applicable Capital Pro Rata Shares, the amounts set aside pursuant to the preceding sentence, and (ii) apply such amounts to reduce the Aggregate Capital and any other Aggregate Unpaids. Section 2.4 Application of Collections. If there shall be insufficient funds on deposit for the Servicer to distribute funds in payment in full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as applicable), the Servicer shall distribute funds: (i) first, to the payment of the Servicer's reasonable out-of-pocket costs and expenses in connection with servicing, administering and collecting the Receivables, including the Servicing Fee, if Seller or one of its Affiliates is not then acting as the Servicer, (ii) second, to the reimbursement of the reasonable costs of collection and enforcement of this Agreement incurred by the Agent or any Managing Agent, (iii) third, ratably to the payment of all accrued and unpaid fees under the Fee Letter and Yield, (iv) fourth, (if applicable) to the ratable reduction of the Aggregate Capital (without regard to any Termination Percentage), (v) fifth, for the ratable payment of all other unpaid Obligations, provided that to the extent such Obligations relate to the payment of Servicer costs and expenses, including the Servicing Fee, when Seller or one of its Affiliates is acting as the Servicer, such costs and expenses will not be paid until after the payment in full of all other Obligations, and (vi) sixth, after the Aggregate Unpaids have been indefeasibly reduced to zero, to Seller. Collections applied to the payment of Aggregate Unpaids shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth in this Section 2.4 above, shall be shared ratably (within each priority) among the Agent, the Managing Agents and the Purchasers in accordance with the amount of such Aggregate Unpaids owing to each of them in respect of each such priority. Section 2.5 Payment Recission. No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Agent (for application to the Person or Persons who suffered such recission, return or refund) the full amount thereof, plus the Default Fee from the date of any such recission, return or refunding. Section 2.6 Maximum Purchaser Interests. Seller shall ensure that the Purchaser Interests of the Purchasers shall at no time exceed in the aggregate 100%. If the aggregate of the Purchaser Interests of the Purchasers exceeds 100%, Seller shall pay to the Managing Agent of 7 each Purchase Group within three (3) Business Days of Seller's knowledge thereof, such Purchase Group's Group Pro Rata Share of an amount to be applied to reduce the Aggregate Capital, such that after giving effect to such payment the aggregate of the Purchaser Interests equals or is less than 100%. Section 2.7 Clean Up Call. In addition to Seller's rights pursuant to Section 1.3, Seller shall have the right (after providing three (3) Business Days' written notice to each Managing Agent), at any time following the reduction of the Aggregate Capital to a level that is less than ten percent (10.00%) of the original Purchase Limit, to repurchase from the Purchasers all, but not less than all, of the then outstanding Purchaser Interests. The purchase price in respect thereof shall be an amount equal to the Aggregate Unpaids through the date of such repurchase, payable in immediately available funds. Such repurchase shall be without representation, warranty or recourse of any kind by, on the part of, or against any Purchaser, any Managing Agent or the Agent. ARTICLE III CONDUIT FUNDING Section 3.1 Yield. Seller shall pay Yield at the applicable CP Rate with respect to the Capital associated with each Purchaser Interest of each Conduit for each day that any Capital in respect of such Purchaser Interest is outstanding; provided, that any Purchaser Interest, or portion thereof, which, or an undivided interest in which, is being funded by the Financial Institutions of such Conduit's Purchase Group pursuant to such Conduit's Liquidity Agreement shall accrue Yield pursuant to Article IV. Each Purchaser Interest funded by Falcon substantially with Pooled Commercial Paper will accrue Yield at the Falcon CP Rate each day on a pro rata basis, based upon the percentage share the Capital in respect of such Purchaser Interest represents in relation to all assets held by Falcon and funded substantially with Pooled Commercial Paper. Each Purchaser Interest funded by Three Pillars will accrue Yield at the Three Pillars CP Rate each day. Section 3.2 Yield Payments. On each Monthly Settlement Date, Seller shall pay to each Managing Agent (for the benefit of each Conduit in its Purchase Group) an aggregate amount equal to all accrued and unpaid Yield in respect of the Capital associated with all Purchaser Interests of such Conduit for the immediately preceding Accrual Period in accordance with Article II. Section 3.3 Calculation of Yield. On or before the third Business Day immediately preceding each Monthly Settlement Date, each Conduit shall calculate the aggregate amount of Yield in respect of the Capital associated with all Purchaser Interests of such Conduit for the immediately preceding Accrual Period and shall notify Seller of such aggregate amount. 8 ARTICLE IV FINANCIAL INSTITUTION FUNDING Section 4.1 Financial Institution Funding. Each Purchaser Interest of the Financial Institutions shall accrue Yield for each day during its Tranche Period at either the LIBO Rate or the Base Rate in accordance with the terms and conditions hereof. Until Seller gives notice to the Managing Agents of another Discount Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions pursuant to the terms and conditions hereof shall be the Base Rate. If any Financial Institution acquires by assignment from the Conduit in its Purchase Group all or any portion of a Purchaser Interest (or an undivided interest therein) pursuant to such Conduit's Liquidity Agreement, each Purchaser Interest so assigned shall each be deemed to have a new Tranche Period commencing on the date of any such assignment. Section 4.2 Yield Payments. On the Settlement Date for each Purchaser Interest of the Financial Institutions, Seller shall pay to each Managing Agent (for the benefit of the Financial Institutions) an aggregate amount equal to the accrued and unpaid Yield for the entire Tranche Period of such Purchaser Interest in accordance with Article II. Section 4.3 Selection and Continuation of Tranche Periods. (a) With consultation from (and approval by) each related Managing Agent, Seller shall from time to time request Tranche Periods for the Purchaser Interests of the Financial Institutions. Seller shall select Tranche Periods such that (i) each Purchase Group shall have Purchaser Interests with an amount of Capital allocated to each Tranche Period based on such Purchase Group's Group Pro Rata Share and (ii) at least one Tranche Period for each Purchase Group shall end on a Monthly Settlement Date. (b) The Seller or the Agent, with the consent or at the direction of the Managing Agent for the Purchasers holding such Purchaser Interest, may, upon notice to and consent by the other received at least three (3) Business Days prior to the last day of a Tranche Period (the "Terminating Tranche") for any Purchaser Interest, effective on such last day, (i) divide any such Purchaser Interest into multiple Purchaser Interests, or (ii) combine any such Purchaser Interest with one or more other Purchaser Interests which either have a Terminating Tranche ending on such day or are newly created on such day (subject to the Conduits' ability to accommodate such division or combination), provided that in no event may a Purchaser Interest of a Conduit be combined with a Purchaser Interest of the Financial Institutions. Section 4.4 Financial Institution Discount Rates. The Seller may, subject to the terms of this Agreement, select the LIBO Rate or the Base Rate for each Purchaser Interest of the Financial Institutions. Seller shall by 11:00 a.m. (Chicago time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Discount Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Base Rate is being requested as a new Discount Rate, give each related Managing Agent irrevocable notice of the new Discount Rate for the Purchaser Interest associated with such Terminating Tranche. Agent will, from time 9 to time, at Seller's request make available non-binding indications of the LIBO Rate for a new Tranche Period with respect to any Terminating Tranche. Until Seller gives notice to the Managing Agents of another Discount Rate, the initial Discount Rate for any Purchaser Interest transferred to Financial Institutions pursuant to the terms and conditions hereof shall be the Base Rate. Section 4.5 Suspension of the LIBO Rate. (a) If any Financial Institution notifies its related Managing Agent that (i) it has determined that funding its Pro Rata Share of the Purchaser Interests of the Financial Institutions at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or (ii) deposits of a type and maturity appropriate to match fund its Purchaser Interests at such LIBO Rate are not available, or (iii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Purchaser Interest at such LIBO Rate, then such Managing Agent shall notify the Agent and shall suspend the availability of such LIBO Rate at the end of any then current Tranche Period, provided that if required by any applicable law, rule, regulation or directive, any then current Tranche Period for such Purchaser Interest based on the LIBO Rate shall terminate immediately and a new Tranche Period based on the Base Rate shall commence. (b) If less than all of the Financial Institutions give a notice to the Managing Agents pursuant to Section 4.5(a), each Financial Institution which gave such a notice shall be obligated, at the request of Seller or such Financial Institution's Managing Agent (on behalf of the related Conduit or Conduits), to assign all of its rights and obligations hereunder to (i) another Financial Institution or (ii) another funding entity nominated by Seller that is acceptable to the related Conduit or Conduits and willing to participate in this Agreement and the related Liquidity Agreement through the Liquidity Termination Date in the place of such notifying Financial Institution; provided that (x) the notifying Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Financial Institution's Capital Pro Rata Share of the Capital and Yield owing to all of the Financial Institutions and all accrued but unpaid fees and other costs and expenses payable in respect of its Capital Pro Rata Share of the Purchaser Interests of the Financial Institutions, and (y) the replacement Financial Institution otherwise satisfies the requirements of Section 12.1(b). ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties of The Seller Parties. Each Seller Party hereby represents and warrants to the Agent, the Managing Agents and the Purchasers, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment that: (a) Corporate Existence and Power. Such Seller Party is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is a "registered organization" as defined in the UCC in effect in such jurisdiction and is duly 10 qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted, except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect. (b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller, Seller's use of the proceeds of purchases made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party. (c) No Conflict. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate of incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Seller Party or its Subsidiaries (except as created hereunder), except, in any case, where such contravention or violation could not be reasonably expected to have a Material Adverse Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of such Seller Party's knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Anixter is not in default with respect to any order of any court, arbitrator or governmental body, which defaults, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Seller is not in default with respect to any order of any court, arbitrator or governmental body. (f) Binding Effect. This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 11 (g) Accuracy of Information. All information heretofore furnished by such Seller Party or any of its Affiliates to the Agent, the Managing Agents or the Purchasers for purposes of or in connection with this Agreement, any Monthly Report, any Mid-Month Report, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller Party or any of its Affiliates to the Agent, the Managing Agents or the Purchasers will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. (h) Use of Proceeds. No proceeds of any purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Immediately prior to each purchase hereunder, Seller shall be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's ownership interest in each Receivable, its Collections and the Related Security. (j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and shall, upon each purchase hereunder, transfer to the Agent for the benefit of the Purchasers (and the Agent for the benefit of the Purchasers shall acquire from Seller) a valid and perfected first priority undivided percentage ownership or security interest in each Receivable existing or hereafter arising and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent's (on behalf of the Purchasers) ownership or security interest in the Receivables, the Related Security and the Collections. (k) Places of Business and Locations of Records. The principal places of business and chief executive office of such Seller Party and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit III or such other locations of which the Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 13.4(a) has been taken and completed. Each Seller Party's state of organization, organizational identification number (if any) and Federal Employer Identification Number are correctly set forth on Exhibit III. (l) Collections. The conditions and requirements set forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Seller at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV. 12 Seller has not granted any Person, other than the Agent as contemplated by this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event. (m) Material Adverse Effect. (i) The initial Servicer represents and warrants that since June 30, 2002, no event has occurred that would have a material adverse effect on the financial condition or operations of the initial Servicer and its Subsidiaries, taken as a whole, or the ability of the initial Servicer to perform its obligations under this Agreement, and (ii) Seller represents and warrants that since June 30, 2002, no event has occurred that would have a material adverse effect on (A) the financial condition or operations of Seller, (B) the ability of Seller to perform its obligations under the Transaction Documents, or (C) the collectibility of the Receivables generally or any material portion of the Receivables. (n) Names. In the past five (5) years, Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement. (o) Ownership of Seller. Originator owns, directly or indirectly, 100% of the issued and outstanding capital stock of Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of Seller. (p) Not a Holding Company or an Investment Company. Such Seller Party is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (q) Compliance with Law. Such Seller Party has complied in all material respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation, except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect. (r) Compliance with Credit and Collection Policy. Such Seller Party has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any change to such Credit and Collection Policy, except such material change as to which the Agent has been notified in accordance with Section 7.1(a)(vii). 13 (s) Enforceability of Contracts. Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (t) Eligible Receivables. (i) As of the date of this Agreement, each Receivable included in the Net Receivables Balance under the Earlier Agreement is an "Eligible Receivable" as defined hereunder as of the date of this Agreement; provided, however, that Receivables included in the Net Receivables Balance under the Earlier Agreement with an aggregate Outstanding Balance of up to $268,766.62 may be ineligible as a result of clause (i)(c) of the definition of "Eligible Receivable," it being understood that the aggregate Outstanding Balance of such Receivables will be excluded from the Net Receivables Balance as of the first Determination Date following the date of this Agreement. (ii) Each Receivable included in the Net Receivables Balance as an Eligible Receivable on the date of its purchase under the Receivables Sale Agreement was an Eligible Receivable on such purchase date, and, as of the date of each Monthly Report, Mid-Month Report and any other report delivered pursuant to Section 8.5, each Receivable included in the Net Receivables Balance on such Monthly Report, Mid-Month Report or other report was an Eligible Receivable. (u) Net Receivables Balance. Seller has determined that, immediately after giving effect to each Incremental Purchase hereunder, the Net Receivables Balance is at least equal to the sum of (i) the Aggregate Capital, plus (ii) the Aggregate Reserves. (v) Accounting. The manner in which each Seller Party accounts for the transactions contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize true sale analysis. ARTICLE VI CONDITIONS OF PURCHASES Section 6.1 Conditions Precedent to Initial Incremental Purchase. (a) The effectiveness of this Agreement and the initial Incremental Purchase under this Agreement are subject to the conditions precedent that (i) the Agent and each Managing Agent shall have received on or before the Closing Date those documents listed on Schedule B and (b) the Agent and each Managing Agent shall have received all fees and expenses required to be paid on or prior to the Closing Date pursuant to the terms of this Agreement and the Fee Letters. Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each Incremental Purchase of a Purchaser Interest and each Reinvestment shall be subject to the further conditions precedent that (a) in the case of each such Incremental Purchase or Reinvestment, the Servicer shall have delivered to the Managing Agents on or prior to the date of such Incremental Purchase or Reinvestment, in form and substance satisfactory to the Managing 14 Agents, (i) all Monthly Reports, Mid-Month Reports and other reports as and when due under Section 8.5 and (ii) upon the Agent's or any Managing Agent's request, the Servicer shall have delivered to the Managing Agents at least three (3) Business Days prior to any Incremental Purchase or Reinvestment an interim report the form of a Monthly Report showing the amount of Eligible Receivables; (b) the Facility Termination Date shall not have occurred; (c) the Agent and each Managing Agent shall have received such other approvals, opinions or documents as it may reasonably request; and (d) on the date of each such Incremental Purchase or Reinvestment, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment shall be deemed a representation and warranty by Seller that such statements are then true): (i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute a Potential Amortization Event; and (iii) the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%. It is expressly understood that each Reinvestment shall, unless otherwise directed by any Managing Agent or any Purchaser, occur automatically on each day that the Servicer shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Agent, which right may be exercised at any time on demand of the Agent (with the consent or at the direction of the Required Financial Institutions), to rescind the related purchase and direct Seller to pay to the Agent for the benefit of the Purchasers an amount equal to the Collections prior to the Amortization Date that shall have been applied to the affected Reinvestment. ARTICLE VII COVENANTS Section 7.1 Affirmative Covenants of The Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below: (a) Financial Reporting. Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Agent and each Managing Agent: 15 (i) Annual Reporting. Within 90 days after the close of each of its respective fiscal years, audited financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Anixter and its consolidated Subsidiaries for such fiscal year certified in a manner acceptable to each Managing Agent by Ernst & Young or other independent public accountants reasonably acceptable to each Managing Agent. (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of each of its respective fiscal years, balance sheets of Anixter and its consolidated Subsidiaries as at the close of each such period and statements of income and retained earnings and a statement of cash flows for Anixter and its consolidated Subsidiaries for the period from the beginning of such fiscal year to the end of such quarter, all certified by its respective chief financial officer or treasurer. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by such Seller Party's Authorized Officer on behalf of such Seller Party and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of such Seller Party copies of all financial statements, reports and proxy statements so furnished. (v) S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which Originator or any of its Subsidiaries files with the Securities and Exchange Commission. (vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Agent, any Managing Agent or any Purchaser, copies of the same. (vii) Change in Credit and Collection Policy. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the consent of the Managing Agents to such proposed change or amendment; provided that if such change or amendment was required pursuant to any change in any applicable law, rule or regulation, such Seller Party shall only be required to give notice of such change or amendment and shall not be required to request the consent of the Managing Agents. (viii) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or 16 operations, financial or otherwise, of such Seller Party as either Managing Agent may from time to time reasonably request in order to protect the interests of the Agent, the Managing Agents and the Purchasers under or as contemplated by this Agreement. (ix) Fiscal Months. No less frequently than annually, an updated list of fiscal months. (b) Notices. Such Seller Party will notify each Managing Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Amortization Events or Potential Amortization Events. The occurrence of each Amortization Event and each Potential Amortization Event, by a statement of an Authorized Officer of such Seller Party. (ii) Judgment and Proceedings. (A) (1) The entry of any judgment or decree against the Servicer or any of its respective Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against the Servicer and its Subsidiaries exceeds $25,000,000 and (2) the institution of any litigation, arbitration proceeding or governmental proceeding against the Servicer which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or which seeks to enjoin performance of or otherwise relates to the Transaction Documents; and (B) the entry of any judgment or decree or the institution of any litigation, arbitration proceeding or governmental proceeding against Seller. (iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect. (iv) Termination Date. The occurrence of the "Amortization Date" under and as defined in the Receivables Sale Agreement. (v) Defaults Under Other Agreements. (A) The occurrence of a default or an event of default under any other financing arrangement pursuant to which Seller is a debtor or an obligor and (B) the occurrence of any default or event of default under any other financing arrangement or arrangements governing Indebtedness, individually or in the aggregate, in a principal amount greater than or equal to $25,000,000 pursuant to which Servicer is a debtor or obligor. (vi) Downgrade of Originator. Any downgrade in the rating of any Indebtedness of Originator by S&P or by Moody's, setting forth the Indebtedness affected and the nature of such change. (c) Compliance with Laws and Preservation of Corporate Existence. Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the 17 jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to preserve and maintain or qualify could not reasonably be expected to have a Material Adverse Effect. (d) Audits. Such Seller Party will furnish to each Managing Agent from time to time such information with respect to it and the Receivables as either Managing Agent may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by either Managing Agent upon reasonable notice and at the sole cost of such Seller Party (except as provided below), permit each Managing Agent, or its respective agents or representatives, (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person's financial condition or the Receivables and the Related Security or any Person's performance under any of the Transaction Documents or any Person's performance under the Contracts and, in each case, with any of the officers or employees of Seller or the Servicer having knowledge of such matters. So long as no Potential Amortization Event or Amortization Event exists, the visits under this Section 7.1(d) that are at the sole cost of the applicable Seller Party shall be limited to once per calendar year. (e) Keeping and Marking of Records and Books. (i) The Servicer will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will give each Managing Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence. (ii) Such Seller Party will (A) on or prior to the date hereof, cause all Receivable reports relating to the Purchaser Interests to bear a legend, acceptable to each Managing Agent, describing the Purchaser Interests and (B) from and after the occurrence of an Amortization Event (x) mark each Contract with a legend describing the Purchaser Interests and (y) deliver to the Agent all Contracts (including, without limitation, all multiple originals of any such Contract) relating to the Receivables. (f) Compliance with Contracts and Credit and Collection Policy. Such Seller Party will timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. 18 (g) Performance and Enforcement of Receivables Sale Agreement. Seller will, and will require Originator to, perform each of their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to Seller under the Receivables Sale Agreement. Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agent, the Managing Agents and the Purchasers as assignees of Seller) under the Receivables Sale Agreement as either Managing Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement. (h) Ownership. Seller will (or will cause Originator to) take all necessary action to (i) vest legal and equitable title to the Receivables, the Related Security and the Collections purchased under the Receivables Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent and the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Seller therein as either Managing Agent may reasonably request), and (ii) establish and maintain, in favor of the Agent, for the benefit of the Purchasers, a valid and perfected first priority undivided percentage ownership interest (and/or a valid and perfected first priority security interest) in all Receivables, Related Security and Collections to the full extent contemplated herein, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent for the benefit of the Purchasers (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent's (for the benefit of the Purchasers) interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of the Agent for the benefit of the Purchasers as either Managing Agent may reasonably request). (i) Purchasers' Reliance. Seller acknowledges that the Purchasers are entering into the transactions contemplated by this Agreement in reliance upon Seller's identity as a legal entity that is separate from Originator. Therefore, from and after the date of execution and delivery of this Agreement, Seller shall take all reasonable steps, including, without limitation, all steps that either Managing Agent or any Purchaser may from time to time reasonably request, to maintain Seller's identity as a separate legal entity and to make it manifest to third parties that Seller is an entity with assets and liabilities distinct from those of Originator and any Affiliates thereof and not just a division of Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Seller will: (A) conduct its own business in its own name and require that all full-time employees of Seller, if any, identify themselves as such and not as employees of Originator (including, without limitation, by 19 means of providing appropriate employees with business or identification cards identifying such employees as Seller's employees); (B) compensate all employees, consultants and agents directly, from Seller's own funds, for services provided to Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of Seller is also an employee, consultant or agent of Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between Seller and Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to Seller and Originator or such Affiliate, as applicable; (C) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of Originator, Seller shall lease such office at a fair market rent; (D) have a separate telephone number, which will be answered only in its name and separate stationery, invoices and checks in its own name; (E) conduct all transactions with Originator (including, without limitation, any delegation of its obligations hereunder as Servicer) strictly on an arm's-length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between Seller and Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use; (F) at all times have a Board of Directors consisting of three members, at least one member of which is an Independent Director; (G) observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of Seller or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving Seller, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director); (H) maintain Seller's books and records separate from those of Originator and any Affiliate thereof and otherwise readily identifiable as its own assets rather than assets of Originator and any Affiliate thereof; (I) prepare its financial statements separately from those of Originator and insure that any consolidated financial statements of Originator or any Affiliate thereof that include Seller and that are filed 20 with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of Seller; (J) except as herein specifically otherwise provided, maintain the funds or other assets of Seller separate from, and not commingled with, those of Originator or any Affiliate thereof and only maintain bank accounts or other depository accounts to which Seller alone is the account party, into which Seller alone makes deposits and from which Seller alone (or the Agent or Managing Agents hereunder) has the power to make withdrawals; (K) pay all of Seller's operating expenses from Seller's own assets (except for certain payments by Originator or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i)); (L) operate its business and activities such that it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the Receivables Sale Agreement; and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to make payment to Originator thereunder for the purchase of Receivables from Originator under the Receivables Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement; (M) maintain its corporate charter in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its Certificate of Incorporation or By-Laws in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(i) of this Agreement; (N) maintain the effectiveness of, and continue to perform under the Receivables Sale Agreement, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the Receivables Sale Agreement, or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach 21 under the Receivables Sale Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of each Managing Agent; (O) maintain its corporate separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary. (P) maintain at all times the Required Capital Amount (as defined in the Receivables Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause the Required Capital Amount to cease to be so maintained; and (Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Schiff Hardin & Waite, as counsel for Seller, in connection with the closing or initial Incremental Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times. (j) Collections. Such Seller Party will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Seller or any Affiliate of Seller, Seller will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, Seller will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agent, the Managing Agents and the Purchasers. Seller will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement and the applicable Collection Agreement) of each Lock-Box and Collection Account and shall not grant the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Agent as contemplated by this Agreement. (k) Taxes. Such Seller Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing; provided, however, that no Seller Party shall be required to pay any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books, unless the failure to make any such payment (1) in the case of either Seller Party, shall give rise to an 22 immediate right to foreclosure on an Adverse Claim securing such amounts, (2) in the case of the Seller, shall result in the attachment of an Adverse Claim securing such amounts, or (3) could reasonably be expected to have a Material Adverse Effect. Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of any Purchaser, Managing Agent or the Agent. (l) Insurance. Seller will maintain in effect, or cause to be maintained in effect, at Seller's own expense, such casualty and liability insurance as Seller shall deem appropriate in its good faith business judgment. Seller will pay or cause to be paid, the premiums therefor and deliver to each Managing Agent evidence satisfactory to such Managing Agent of such insurance coverage. Copies of each policy shall be furnished to each Managing Agent in certificated form upon such Managing Agent's request. The foregoing requirements shall not be construed to negate, reduce or modify, and are in addition to, Seller's obligations hereunder. (m) Payment to Originator. With respect to any Receivable purchased by Seller from Originator, such sale shall be effected under, and in strict compliance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to Originator in respect of the purchase price for such Receivable. Section 7.2 Negative Covenants of the Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, that: (a) Name Change, Offices and Records. Such Seller Party will not change its name, identity, state of incorporation, corporate structure or organizational number, if any, or relocate its chief executive office or any office where Records are kept unless it shall have: (i) given each Managing Agent at least forty-five (45) days' prior written notice thereof and (ii) delivered to each Managing Agent all financing statements, instruments and other documents requested by such Managing Agent in connection with such change or relocation. (b) Change in Payment Instructions to Obligors. Except as may be required by the Agent pursuant to Section 8.2(b), such Seller Party will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Agent and each Managing Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account. (c) Modifications to Contracts and Credit and Collection Policy. Such Seller Party will not make any change to the Credit and Collection Policy that could reasonably be expected to adversely affect the collectibility of the Receivables or decrease the credit quality of 23 any newly created Receivables, unless required to do so by a change in any applicable law, rule or regulation. Except as provided in Section 8.2(d), the Servicer will not extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy. (d) Sales, Liens. Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any Receivable, Related Security or Collections, or upon or with respect to any Contract under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of the Agent and the Purchasers provided for herein), and Seller will defend the right, title and interest of the Agent and the Purchasers in, to and under any of the foregoing property, against all claims of third parties claiming through or under Seller or Originator. Seller will not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory, the sale or lease of which would give rise to a Receivable. (e) Net Receivables Balance. At no time prior to the Amortization Date shall Seller permit the Net Receivables Balance to be less than an amount equal to the sum of (i) the Aggregate Capital plus (ii) the Aggregate Reserves. (f) Amortization Date Determination. Seller will not designate the "Amortization Date" (as defined in the Receivables Sale Agreement), or send any written notice to Originator in respect thereof, without the prior written consent of each Managing Agent, except with respect to the occurrence of such Amortization Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement. ARTICLE VIII ADMINISTRATION AND COLLECTION Section 8.1 Designation of Servicer. (a) The servicing, administration and collection of the Receivables shall be conducted by such Person (the "Servicer") so designated from time to time in accordance with this Section 8.1. Anixter is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms of this Agreement. Anixter shall not resign as the Servicer without the prior written consent of each Managing Agent. After the occurrence and during the continuation of an Amortization Event, the Managing Agents may at any time designate as Servicer any Person to succeed Anixter or any successor Servicer. (b) Without the prior written consent of the Managing Agents, Anixter shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Seller and (ii) with respect to certain Charged-Off Receivables, outside collection agencies in accordance with its customary practices. Seller shall not be permitted to further delegate to any other Person any of the duties or responsibilities of the Servicer delegated to it by 24 Anixter. If at any time the Managing Agents shall designate as Servicer any Person other than Anixter, all duties and responsibilities theretofore delegated by Anixter to Seller may, at the discretion of the Managing Agents, be terminated forthwith on notice given by the Agent to Anixter and to Seller. (c) Notwithstanding the foregoing subsection (b), if Anixter shall have delegated its duties and responsibilities as Servicer to any Person, (i) Anixter shall be and remain primarily liable to the Agent, the Managing Agents and the Purchasers for the full and prompt performance of all duties and responsibilities of the Servicer (other than any Servicer appointed by the Managing Agents without Anixter's consent) hereunder, (ii) the Agent, the Managing Agents and the Purchasers shall be entitled to deal exclusively with Anixter in matters relating to the discharge by the Servicer (other than any Servicer appointed by the Managing Agents without Anixter's consent) of its duties and responsibilities hereunder and (iii) none of the Agent, the Managing Agents or the Purchasers shall be required to give notice, demand or other communication to any Person other than Anixter in order for communication to the Servicer (other than any Servicer appointed by the Managing Agents without Anixter's consent) and its sub-servicer or other delegate with respect thereto to be accomplished. Anixter, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement. Section 8.2 Duties of Servicer. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. (b) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or Collection Account. The Servicer shall effect a Collection Account Agreement substantially in the form of Exhibit VI with each bank maintaining a Collection Account at any time. In the case of any remittances received in any Lock-Box or Collection Account that shall have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Servicer shall promptly remit such items to the Person identified to it as being the owner of such remittances. From and after the date the Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, the Agent may request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account specified by the Agent and, at all times thereafter, Seller and the Servicer shall not deposit or otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections. (c) The Servicer shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicer shall set aside and hold in trust for the account of Seller and the Purchasers their respective shares of the Collections in accordance with Article II. The Servicer shall, upon the request of the Agent, in its discretion or at the direction of the Required Financial Institutions, segregate, in a manner acceptable to the Agent 25 and the Required Financial Institutions, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or Seller prior to the remittance thereof in accordance with Article II. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Agent such allocable share of Collections of Receivables set aside for the Purchasers on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer. (d) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Charged-Off Receivable or limit the rights of the Agent, the Managing Agents or the Purchasers under this Agreement. Notwithstanding anything to the contrary contained herein, at any time that an Amortization Event is continuing, the Agent, in its discretion or at the direction of the Required Financial Institutions, shall have the absolute and unlimited right to direct the Servicer to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security. (e) The Servicer shall hold for Seller and the Purchasers all Records that (i) evidence or relate to the Receivables, the related Contracts and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and shall, as soon as practicable upon demand of the Agent, in its discretion or at the direction of the Required Financial Institutions, at any time following an Amortization Event or a Potential Amortization Event, deliver or make available to the Agent all such Records, at a place selected by the Agent, with the consent or at the direction of the Required Financial Institutions. The Servicer shall, from time to time at the request of any Managing Agent, furnish to such Managing Agent (promptly after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Article II. Section 8.3 Collection Notices. Upon the occurrence of and during the continuation of an Amortization Event or Potential Amortization Event, the Agent is authorized at any time to date and to deliver to the Collection Banks the Collection Notices, and shall deliver such Collection Notices if directed to do so by the Required Financial Institutions. Seller hereby transfers to the Agent for the benefit of the Purchasers, effective when the Agent delivers such notice, the exclusive ownership and control of each Lock-Box and the Collection Accounts. In case any authorized signatory of Seller whose signature appears on a Collection Account Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. Seller hereby authorizes the Agent, and agrees that the Agent shall be entitled to, following the delivery of the Collection Notice (i) endorse Seller's name on checks and other instruments representing Collections, (ii) enforce the Receivables, the related Contracts and the Related Security and (iii) take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Agent rather than Seller. 26 Section 8.4 Responsibilities of Seller. Anything herein to the contrary notwithstanding, the exercise by the Agent, the Managing Agents and the Purchasers of their rights hereunder shall not release the Servicer, Originator or Seller from any of their duties or obligations with respect to any Receivables or under the related Contracts. None of the Agent, the Managing Agents or the Purchasers shall have any obligation or liability with respect to any Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of Seller. Section 8.5 Reports. The Servicer shall prepare and forward to each Managing Agent (i) on each Determination Date, a Monthly Report, (ii) on the last Business Day of each calendar month (each such date, a "Mid-Month Report Date"), a Mid-Month Report containing information relating to the period from the first day of the related fiscal month (a list of fiscal months is set forth on Schedule 1 hereto) to and including the Friday closest to the fifteenth day of such calendar month, (iii) at such times as either Managing Agent shall reasonably request, a report in the form of a Monthly Report updating the information contained in the most recent Monthly Report, and (iv) at such times as either Managing Agent shall request, a listing by Obligor of all Receivables together with an aging of such Receivables. Section 8.6 Servicing Fees. In consideration of Anixter's agreement to act as Servicer hereunder, the Purchasers hereby agree that, so long as Anixter shall continue to perform as Servicer hereunder, Seller shall pay over to Anixter a fee (the "Servicing Fee") on the first calendar day of each month, in arrears for the immediately preceding month, equal to 0.36% times the Outstanding Balance of all Receivables generated during such immediately preceding calendar month, as compensation for its servicing activities. ARTICLE IX AMORTIZATION EVENTS Section 9.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event: (a) Any Seller Party shall fail (i) to make any payment or deposit required hereunder when due, or (ii) to perform or observe any term, covenant or agreement hereunder (other than as referred to in clause (i) of this paragraph (a) and Section 9.1(e)) and such failure shall continue for three (3) consecutive Business Days. (b) Any representation, warranty, certification or statement made by any Seller Party in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect when made or deemed made; provided, however, that any breach of the representations and warranties set forth in Sections 5.1(i), (s) or (t) shall not constitute an Amortization Event unless such breach or breaches apply in the aggregate to a material portion of the Receivables. (c) Failure of Seller to pay any Indebtedness when due or the failure of any other Seller Party to pay when due any Indebtedness having an outstanding principal balance in excess of $25,000,000; or the default by any Seller Party in the performance of any term, 27 provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of any Seller Party shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (d) (i) Any Seller Party or any of its Significant Subsidiaries shall generally not pay its debts as such debts become due or shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted by or against any Seller Party or any of its Significant Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, provided that in the event any such proceedings shall have been instituted against such Seller Party or Significant Subsidiary, such proceedings shall have continued undismissed or unstayed and in effect for a period of sixty (60) consecutive days or an order for relief shall have been entered in such proceedings, or (iii) any Seller Party or any of its Significant Subsidiaries shall take any corporate action to authorize any of the actions set forth in clauses (i) or (ii) above in this subsection (d). (e) Seller shall fail to comply with the terms of Section 2.6. (f) As at the end of any Collection Period: (i) the average of the Delinquency Ratios as of the end of such Collection Period and the two preceding Collection Periods shall exceed 11.875%; (ii) the average of the Dilution Trigger Ratios as of the end of such Collection Period and the two preceding Collection Periods shall exceed 4.0%; or (iii) the average of the Loss-to-Liquidation Ratios as of the end of such Collection Period and the two preceding Collection Periods shall exceed 4.875%. (g) A Change of Control shall occur. (h) (i) One or more final judgments for the payment of money shall be entered against Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $25,000,000, individually or in the aggregate, shall be entered against the Servicer, and such judgment shall continue unsatisfied and in effect for ten (10) consecutive days without a stay of execution. (i) The "Amortization Date" under and as defined in the Receivables Sale Agreement shall occur under the Receivables Sale Agreement or Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Seller under the Receivables Sale Agreement. (j) Anixter shall fail to comply with any of the financial covenants set forth in Sections 7.16, 7.17 or 7.18 of the Credit Agreement, as amended from time to time pursuant to 28 any amendment which (i) becomes effective while Bank One is a party to the Credit Agreement, and (ii) is consented to in writing by Bank One as a party to the Credit Agreement. (k) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of Seller, or the Agent for the benefit of the Purchasers shall cease to have a valid and perfected first priority security interest in the Receivables, the Related Security and the Collections with respect thereto, and the Collection Accounts. Section 9.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, the Agent may, and upon the direction of the Required Financial Institutions, shall, take any of the following actions: (i) replace the Person then acting as Servicer, (ii) declare the Amortization Date to have occurred, whereupon the Amortization Date shall forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided, however, that upon the occurrence of an Amortization Event described in Section 9.1(d)(ii), or of an actual or deemed entry of an order for relief with respect to any Seller Party under the Bankruptcy Code, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party, (iii) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any of the Aggregate Unpaids outstanding at such time, (iv) deliver the Collection Notices to the Collection Banks, and (v) notify Obligors of the Purchasers' interest in the Receivables. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Agent, the Managing Agents and the Purchasers otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. ARTICLE X INDEMNIFICATION Section 10.1 Indemnities by the Seller Parties. Without limiting any other rights that the Agent, any Managing Agent or any Purchaser may have hereunder or under applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand to) the Agent, the Managing Agents and each Purchaser and their respective assigns, officers, directors, agents and employees (each an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Purchaser of an interest in the Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of the Servicer's activities as Servicer hereunder excluding, however, in all of the foregoing instances under the preceding clauses (A) and (B): 29 (a) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (b) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (c) taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by the Purchasers of Purchaser Interests as a loan or loans by the Purchasers to Seller secured by the Receivables, the Related Security, the Collection Accounts and the Collections; provided, however, that nothing contained in this sentence shall limit the liability of any Seller Party or limit the recourse of the Purchasers to any Seller Party for amounts otherwise specifically provided to be paid by such Seller Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller shall indemnify the Agent, the Managing Agents and the Purchasers for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Seller or the Servicer) relating to or resulting from: (i) any representation or warranty made by any Seller Party or Originator (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made; (ii) the failure by Seller, the Servicer or Originator to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of Originator to keep or perform any of its obligations, express or implied, with respect to any Contract; (iii) any failure of Seller, the Servicer or Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; (iv) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable; (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, 30 without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vi) the commingling of Collections of Receivables at any time with other funds; (vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of an Incremental Purchase or a Reinvestment, the ownership of the Purchaser Interests or any other investigation, litigation or proceeding relating to Seller, the Servicer or Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (ix) any Amortization Event described in Section 9.1(d); (x) any failure of Seller to acquire and maintain legal and equitable title to, and ownership of any Receivable and the Related Security and Collections with respect thereto from Originator, free and clear of any Adverse Claim (other than as created hereunder); or any failure of Seller to give reasonably equivalent value to Originator under the Receivables Sale Agreement in consideration of the transfer by Originator of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action; (xi) any failure to vest and maintain vested in the Agent for the benefit of the Purchasers, or to transfer to the Agent for the benefit of the Purchasers, legal and equitable title to, and ownership of, a first priority perfected undivided percentage ownership interest (to the extent of the Purchaser Interests contemplated hereunder) or security interest in the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim (except as created by the Transaction Documents); (xii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivable, the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of any Incremental Purchase or Reinvestment or at any subsequent time; (xiii) any action or omission by any Seller Party which reduces or impairs the rights of the Agent or the Purchasers with respect to any Receivable or the value of any such Receivable; 31 (xiv) any attempt by any Person, other than a Purchaser, to void any Incremental Purchase or Reinvestment hereunder under statutory provisions or common law or equitable action; and (xv) the failure of any Receivable included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an Eligible Receivable at the time so included. Section 10.2 Increased Cost and Reduced Return. If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy) or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source's obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source's capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by the Agent or the relevant Managing Agent, Seller shall pay to the applicable Managing Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. Section 10.3 Other Costs and Expenses. Seller shall pay to the Agent, the Managing Agents and Purchasers on demand all reasonable out-of-pocket costs and expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of any Purchaser's auditors auditing the books, records and procedures of Seller, reasonable fees and out-of-pocket expenses of legal counsel for the Purchasers, Managing Agents and the Agent with respect thereto and with respect to advising Purchasers, the Managing Agents and the Agent as to their respective rights and remedies under this Agreement. Seller shall pay to the Agent or the applicable Managing Agent on demand any and all costs and expenses of the Agent, the Managing Agents and the Purchasers, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this 32 Agreement or such documents, or the administration of this Agreement following an Amortization Event. ARTICLE XI THE AGENT Section 11.1 Authorization and Action. Each Purchaser hereby designates and appoints Bank One to act as Agent hereunder and under each other Transaction Document, and authorizes the Agent and such Purchaser's related Managing Agent to take such actions as Agent or Managing Agent, as the case may be, on its behalf and to exercise such powers as are delegated to the Agent or such Managing Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto. Neither the Agent nor any Managing Agent shall have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent or the Managing Agents shall be read into this Agreement or any other Transaction Document or otherwise exist for the Agent or the Managing Agents. In performing their respective functions and duties hereunder and under the other Transaction Documents, (i) the Agent shall act solely as agent for the Purchasers, (ii) each Managing Agent shall act solely as agent for the Conduits and Financial Institutions in the related Purchase Group and (iii) neither the Agent nor any Managing Agent shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of such Seller Party's successors or assigns. Neither the Agent nor any Managing Agent shall be required to take any action that exposes the Agent or the Managing Agents to personal liability or that is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Agent and the Managing Agents hereunder shall terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each Purchaser hereby authorizes the Agent and the Managing Agent for its Purchase Group, as applicable, to execute each of the Uniform Commercial Code financing statements, this Agreement and such other Transaction Documents as may require the Agent's or such Managing Agent's signature on behalf of such Purchaser (the terms of which shall be binding on such Purchaser). Section 11.2 Delegation of Duties. The Agent and the Managing Agents may execute any of their respective duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither the Agent nor any Managing Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 11.3 Exculpatory Provisions. None of the Agent, the Managing Agents or any of their respective directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by any Seller Party contained in this Agreement, 33 any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of any Seller Party to perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in Article VI, or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. Neither the Agent nor any Managing Agent shall be under any obligation to any Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Seller Parties. Neither the Agent nor any Managing Agent shall be deemed to have knowledge of any Amortization Event or Potential Amortization Event unless the Agent or such Managing Agent has received notice from Seller or a Purchaser. No Managing Agent shall have any responsibility hereunder to any Purchaser other than the Purchasers in its Purchase Group. Section 11.4 Reliance by Agent. The Agent and the Managing Agents shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Seller), independent accountants and other experts selected by the Agent or any Managing Agent. The Agent and the Managing Agents shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Conduits or the Required Financial Institutions or all of the Purchasers, as applicable, as they deem appropriate and they shall first be indemnified to their satisfaction by the Purchasers, provided that unless and until the Agent or any Managing Agent shall have received such advice, or unless the Required Financial Institutions or each Managing Agent, as applicable, shall have directed the Agent to take or refrain from taking any action, the Agent or such Managing Agent may take or refrain from taking any action, as the Agent or such Managing Agent shall deem advisable and in the best interests of the Purchasers. The Agent and the Managing Agents shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of the related Conduits or the Required Financial Institutions or all of the Purchasers, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Purchasers. Section 11.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that none of the Agent, the Managing Agents or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent or any Managing Agent hereafter taken, including, without limitation, any review of the affairs of any Seller Party, shall be deemed to constitute any representation or warranty by the Agent or such Managing Agent. Each Purchaser represents and warrants to the Agent and the Managing Agents that it has and will, independently and without reliance upon the Agent, any Managing Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions 34 and creditworthiness of Seller and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto. Section 11.6 Reimbursement and Indemnification. The Financial Institutions agree to reimburse and indemnify the Agent, and the Financial Institutions in each Purchase Group agree to reimburse the Managing Agent for such Purchase Group, and their respective officers, directors, employees, representatives and agents ratably according to their Pro Rata Shares or Adjusted Pro Rata Shares, as applicable, to the extent not paid or reimbursed by the Seller Parties (i) for any amounts for which the Agent, acting in its capacity as Agent, or any Managing Agent, acting in its capacity as a Managing Agent, is entitled to reimbursement by the Seller Parties hereunder and (ii) for any other expenses incurred by the Agent, in its capacity as Agent, or any Managing Agent, acting in its capacity as a Managing Agent, and acting on behalf of the related Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents. If there is a Terminating Financial Institution, for purposes of this Section, Pro Rata Share and Adjusted Pro Rata Share shall be calculated based on such Terminating Financial Institution's Back-up Commitment immediately prior to its becoming a Terminating Financial Institution; provided, however, that no Terminating Financial Institution shall be required to reimburse or indemnify the Agent or any Managing Agent, or their respective officers, directors, employees, representatives or agents for any amounts referenced in this Section 11.6 resulting from events occurring after such Terminating Financial Institution's Capital shall have been paid in full. Section 11.7 Agents in their Individual Capacities. The Agent, each Managing Agent and each of its respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Seller Party or any Affiliate of any Seller Party as though it were not the Agent or a Managing Agent hereunder. With respect to the acquisition of Purchaser Interests pursuant to this Agreement, the Agent and each Managing Agent shall have the same rights and powers under this Agreement in its individual capacity as any Purchaser and may exercise the same as though it were not the Agent or a Managing Agent, and the terms "Financial Institution," "Purchaser," "Financial Institutions" and "Purchasers" shall include the Agent and each Managing Agent in its individual capacity. Section 11.8 Successor Agent. The Agent may, upon fifteen (15) days' notice to Seller and the Purchasers, and the Agent will, upon the direction of all of the Purchasers (other than such Agent, in its individual capacity) resign as Agent. Each Managing Agent may, upon fifteen (15) days' notice to Seller and the Purchasers in its Purchase Group, and a Managing Agent will, upon the direction of all the Purchasers in its Purchase Group (other than such Managing Agent in its individual capacity), resign as Managing Agent. If the Agent shall resign, then the Required Financial Institutions during such fifteen-day period shall appoint from among the Purchasers a successor agent. If a Managing Agent shall resign, then the Purchasers in the related Purchase Group shall appoint a successor agent during such fifteen-day period. If for any reason no successor agent is appointed by the Required Financial Institutions or the applicable Purchase Group, as applicable, during such fifteen-day period, then effective upon the termination of such fifteen-day period, the Purchasers shall perform all of the duties of the Agent, or the Purchasers in the related Purchase Group shall perform all of the duties of the applicable Managing Agent, as applicable, hereunder and under the other Transaction 35 Documents and Seller and the Servicer (as applicable) shall make all payments in respect of the Aggregate Unpaids directly to the applicable Purchasers and for all purposes shall deal directly with the Purchasers. After the effectiveness of any retiring Agent's or Managing Agent's resignation hereunder as Agent or Managing Agent, as applicable, the retiring Agent or Managing Agent shall be discharged from its duties and obligations hereunder and under the other Transaction Documents and the provisions of this Article XI and Article X shall continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while it was Agent or Managing Agent under this Agreement and under the other Transaction Documents. ARTICLE XII ASSIGNMENTS; PARTICIPATIONS Section 12.1 Assignments. (a) The Seller, each Financial Institution and each other party hereto hereby agree and consent to the complete or partial assignment (or participation) by each Conduit of all or any portion of its rights under, interest in, title to and obligations under this Agreement to the Financial Institutions pursuant to a Liquidity Agreement, and upon such assignment, such Conduit shall be released from its obligations, if any, so assigned. Further, with the consent of the Seller (not to be unreasonably withheld), each Conduit may assign all of its rights and obligations hereunder to another commercial paper issuing conduit for which the Managing Agent of such assigning Conduit acts as administrator. Further, Seller and each Financial Institution hereby agree that any assignee of a Conduit of this Agreement or all or any of the Purchaser Interests of such Conduit shall have all of the rights and benefits under this Agreement as if the term "Conduit" explicitly referred to such party, and no such assignment shall in any way impair the rights and benefits of the Conduits hereunder. Neither the Seller nor the Servicer shall have the right to assign its rights or obligations under this Agreement. (b) Any Financial Institution may at any time and from time to time, assign to one or more Persons ("Purchasing Financial Institutions") all or any part of its rights and obligations under this Agreement and its Liquidity Agreement pursuant to an assignment agreement, substantially in the form set forth in Exhibit VII hereto (the "Assignment Agreement") executed by such Purchasing Financial Institution and such selling Financial Institution. The consent of the Conduit or Conduits in such Financial Institution's Purchase Group and the Agent shall be required prior to the effectiveness of any such assignment. Each assignee of a Financial Institution must have a short-term debt rating of A-1 or better by S&P and P-1 by Moody's (the "Required Ratings") and must agree to deliver to the Agent, promptly following any request therefor by the Managing Agent for its Purchase Group or the affected Conduit or Conduits, an enforceability opinion in form and substance satisfactory to such Managing Agent and such Conduit or Conduits. Upon delivery of the executed Assignment Agreement to the Agent (with a copy to the Seller), such selling Financial Institution shall be released from its obligations hereunder to the extent of such assignment. Thereafter the Purchasing Financial Institution shall for all purposes be a Financial Institution party to this Agreement and shall have all the rights and obligations of a Financial Institution under this 36 Agreement to the same extent as if it were an original party hereto and no further consent or action by Seller, the Purchasers or the Agent shall be required. (c) Each of the Financial Institutions agrees that in the event that it shall cease to have the Required Ratings (an "Affected Financial Institution"), such Affected Financial Institution shall be obliged, at the request of the Conduits in such Financial Institution's Purchase Group or the applicable Managing Agent, to assign all of its rights and obligations hereunder and under its Liquidity Agreement to (x) another Financial Institution or (y) another funding entity nominated by such Managing Agent and acceptable to the affected Conduit or Conduits that has the Required Ratings, and willing to participate in this Agreement through the Liquidity Termination Date in the place of such Affected Financial Institution; provided that the Affected Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Financial Institution's Pro Rata Share of the Capital and Yield owing to the Financial Institutions and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions. In the event and on the date that an Affected Financial Institution becomes a Terminating Financial Institution, the Purchase Limit shall be reduced by an amount equal to such Affected Financial Institution's Back-up Commitment. Section 12.2 Participations. Any Financial Institution may, in the ordinary course of its business at any time sell to one or more Persons (each a "Participant") participating interests in its Pro Rata Share of the Purchaser Interests of the Financial Institutions, its obligation to purchase Purchaser Interests from the applicable Conduits under a Liquidity Agreement or any other interest of such Financial Institution hereunder. Notwithstanding any such sale by a Financial Institution of a participating interest to a Participant, such Financial Institution's rights and obligations under this Agreement shall remain unchanged, such Financial Institution shall remain solely responsible for the performance of its obligations hereunder, and Seller, the Conduits, the Managing Agents and the Agent shall continue to deal solely and directly with such Financial Institution in connection with such Financial Institution's rights and obligations under this Agreement. Each Financial Institution agrees that any agreement between such Financial Institution and any such Participant in respect of such participating interest shall not restrict such Financial Institution's right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 13.1(b)(i). Section 12.3 Extension of Liquidity Termination Date. The Seller may advise any Managing Agent in writing of its desire to extend the Liquidity Termination Date for an additional 364 days, provided such request is made not more than 60 days prior to, and not less than 40 days prior to, the then current Liquidity Termination Date. Each Managing Agent so advised by the Seller shall promptly notify each Financial Institution in its related Purchase Group of any such request and each such Financial Institution shall notify its related Managing Agent, the Agent and the Seller of its decision to accept or decline the request for such extension no later than 30 days prior to the then current Liquidity Termination Date (it being understood that each Financial Institution may accept or decline such request in its sole discretion and on such terms as it may elect, and the failure to so notify its Managing Agent, the Agent and the Seller shall be deemed an election not to extend by such Financial Institution and, with respect to 37 SunTrust and Bank One, their respective Conduits; it being further understood that SunTrust's or Bank One's decision to decline an extension request shall also constitute the decision of its related Conduit to decline such extension request). In the event that at least one Financial Institution and the Conduit in its Purchase Group agree to extend the Liquidity Termination Date, the Seller Parties, the Agent, the applicable Conduit or Conduits, the extending Financial Institutions and the applicable Managing Agent or Agents shall enter into such documents as such extending Financial Institutions may deem necessary or appropriate to reflect such extension, and all reasonable costs and expenses incurred by such Financial Institutions, such Conduit or Conduits, such Managing Agent or Agents and the Agent (including reasonable attorneys' fees) shall be paid by the Seller. In the event that any Financial Institution (a) declines the request to extend the Liquidity Termination Date or (b) is in a Purchase Group with respect to which the Seller did not seek an extension of the Liquidity Termination Date (each such Financial institution being referred to herein as a "Non-Renewing Financial Institution"), and, in the case of a Non-Renewing Financial Institution described in clause (a), the Back-up Commitment and Liquidity Commitment of such Non-Renewing Financial Institution are not assigned to another Person in accordance with the terms of this Article XII prior to the then current Liquidity Termination Date, the Purchase Limit shall be reduced by an amount equal to each such Non-Renewing Financial Institution's Back-up Commitment on the then current Liquidity Termination Date. ARTICLE XIII MISCELLANEOUS Section 13.1 Waivers and Amendments. (a) No failure or delay on the part of the Agent, any Managing Agent or any Purchaser in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. (b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 13.1(b); it being understood that notwithstanding anything in this Section 13.1(b) to the contrary, no material amendment to this Agreement shall become effective with respect to any Conduit unless, if required by the documents governing such Conduit's commercial paper program, such Conduit (or the applicable Managing Agent on its behalf) shall have received written confirmation from each of the Rating Agencies that such amendment shall not result in the reduction or withdrawal of the rating of such Conduit's Commercial Paper. The Conduits, the Seller, the Servicer, the Managing Agents and the Agent, at the direction of the Required Financial Institutions, may enter into written modifications or waivers of any provisions of this Agreement, provided, however, that no such modification or waiver shall: 38 (i) without the consent of each affected Purchaser, (A) extend the Liquidity Termination Date or the date of any payment or deposit of Collections by Seller or the Servicer, (B) reduce the rate or extend the time of payment of Yield (or any component thereof), (C) reduce any fee payable to the Agent or the Managing Agents for the benefit of the Purchasers, (D) except pursuant to Article XII hereof, change the amount of the Capital of any Purchaser, any Financial Institution's Pro Rata Share (except as may be required pursuant to a Conduit's Liquidity Agreement) or any Financial Institution's Back-up Commitment or Liquidity Commitment, (E) amend, modify or waive any provision of the definition of Required Financial Institutions, this Section 13.1(b), (F) consent to or permit the assignment or transfer by Seller of any of its rights and obligations under this Agreement, (G) change the definition of "Facility Termination Date", "Eligible Receivable", "Loss Reserve", "Default Proxy Ratio", "Delinquency Ratio", "Delinquent Receivable", "Dilution Reserve", "Dilution Reserve Ratio", "Dilution Trigger Ratio", "Loss Reserve", "Loss Reserve Ratio", "Loss-to-Liquidation Ratio", or "Yield Reserve", or (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or (ii) without the written consent of the Agent or any Managing Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of the Agent or such Managing Agent, as applicable. Notwithstanding the foregoing, (i) without the consent of the Financial Institutions in any Purchase Group (other than the Purchase Group to which such Financial Institutions are being added), the Agent may, with the consent of Seller, amend this Agreement solely to add additional Persons as Financial Institutions hereunder and (ii) the Agent, the Required Financial Institutions, the Managing Agents, and the Conduits may enter into amendments to modify any of the terms or provisions of Article XI, Article XII and Section 13.13 or any other provision of this Agreement without the consent of Seller, provided that such amendment has no negative impact upon Seller. Any modification or waiver made in accordance with this Section 13.1 shall apply to each of the Purchasers equally and shall be binding upon Seller, the Purchasers, the Managing Agents and the Agent. Section 13.2 Notices. Except as provided below, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (iii) if given by any other means, when received at the address specified in this Section 13.2. Seller hereby authorizes the Agent to effect purchases and each Managing Agent to make Tranche Period and Discount Rate selections based on telephonic notices made by any Person whom the Agent or such Managing Agent, as applicable, in good faith believes to be acting on behalf of Seller. 39 Seller agrees to deliver promptly to the Agent or the applicable Managing Agent a written confirmation of each telephonic notice signed by an authorized officer of Seller; provided, however, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the Agent or such Managing Agent, the records of the Agent or such Managing Agent shall govern absent manifest error. Section 13.3 Ratable Payments. If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of the Aggregate Unpaids owing to such Purchaser (other than payments received pursuant to Section 10.2 or 10.3) in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such Aggregate Unpaids held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of such Aggregate Unpaids; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 13.4 Protection of Ownership Interests of the Purchasers. (a) Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that the Agent or any Managing Agent may request, to perfect, protect or more fully evidence the Purchaser Interests, or to enable the Agent or the Purchasers to exercise and enforce their rights and remedies hereunder. At any time after the occurrence of an Amortization Event, the Agent may (or at the direction of the Managing Agents, shall), or the Agent may (or at the direction of the Managing Agents, shall) direct Seller or the Servicer to, notify the Obligors of Receivables, at Seller's expense, of the ownership or security interests of the Purchasers under this Agreement and may (or at the direction of the Managing Agents, shall) also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Agent or its designee. Seller or the Servicer (as applicable) shall, at any Purchaser's request, withhold the identity of such Purchaser in any such notification. (b) If any Seller Party fails to perform any of its obligations hereunder, the Agent or any Purchaser may (but shall not be required to) perform, or cause performance of, such obligations, and the Agent's or such Purchaser's costs and expenses incurred in connection therewith shall be payable by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of such Seller Party (i) to execute on behalf of Seller as debtor and to file financing statements necessary or desirable in the Agent's sole discretion to perfect and to maintain the perfection and priority of the interest of the Purchasers in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Purchasers in the Receivables. This appointment is coupled with an interest and is irrevocable. 40 Section 13.5 Confidentiality. (a) Each Seller Party and each Purchaser shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to the Agent, the Managing Agents and the Purchasers and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Seller Party and such Purchaser and its officers and employees may disclose such information to such Seller Party's and such Purchaser's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, each Seller Party hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Agent, the Managing Agents or the Purchasers by each other, (ii) by the Agent, the Managing Agents or the Purchasers to any prospective or actual assignee or participant of any of them and (iii) by the Agent or the Managing Agents to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to the Conduits or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which either Managing Agent acts as the administrative agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided that any Person receiving information shall be advised by the Agent or the applicable Managing Agent, as applicable, of the obligation to keep such information confidential. In addition, the Purchasers, the Managing Agents and the Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law), provided that Purchasers, the Managing Agents and Agent shall, if practicable, notify Seller in advance prior to disclosure and will use reasonable efforts to cooperate with Seller at Seller's expense in obtaining any protective order for such information. Section 13.6 Bankruptcy Petition. Each of the Seller, the Servicer, the Agent, each Managing Agent and each Financial Institution hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of a Conduit, it will not institute against, or join any other Person in instituting against, such Conduit or any such entity any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 13.7 Limitation of Liability; Limitation on Payment; No Recourse. (a) Except with respect to any claim arising out of the willful misconduct or gross negligence of any Purchaser, Financial Institution, Managing Agent or the Agent, no claim may be made by any Seller Party or any other Person against any Conduit, the Agent, any Managing Agent, or any Financial Institution or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in 41 connection therewith; and each Seller Party hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. (b) No Conduit shall be required to make payment of the amounts required to be paid pursuant hereto unless, and then only to the extent that, such Conduit has Excess Funds (as defined below). If a Conduit does not have Excess Funds, the excess of the amount due hereunder over the amount paid shall not constitute a "claim" (as defined in Section 101(5) of the Bankruptcy Code) against such Conduit until such time as such Conduit has Excess Funds. If a Conduit does not have sufficient Excess Funds to make any payment due hereunder, then such Conduit may pay a lesser amount and make additional payments that in the aggregate equal the amount of deficiency as soon as possible thereafter. The term "Excess Funds" means with respect to a Conduit the excess of (1) the aggregate projected value of such Conduit's assets and other property (including cash and cash equivalents), over (2) the sum of (A) the sum of all scheduled payments of principal, interest and other amounts payable on publicly or privately placed indebtedness of such Conduit for borrowed money, plus (B) the sum of all other liabilities, indebtedness and other obligations of such Conduit for borrowed money or owed to any credit or liquidity provider, together with all unpaid interest then accrued thereon, plus (C) all taxes payable by such Conduit to the Internal Revenue Service, plus (D) all other indebtedness, liabilities and obligations of such Conduit then due and payable, but the amount of any liability, indebtedness or obligation of such Conduit shall not exceed the projected value of the assets to which recourse for such liability, indebtedness or obligation is limited. Excess Funds shall be calculated once each Business Day. Section 13.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, BUT NOT LIMITED TO, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS. Section 13.9 CONSENT TO JURISDICTION. EACH SELLER PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY 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 LIMIT THE RIGHT OF THE AGENT, ANY MANAGING AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE AGENT, ANY MANAGING AGENT OR ANY PURCHASER OR ANY AFFILIATE OF SUCH PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR 42 ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. Section 13.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES 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 THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Section 13.11 Integration; Binding Effect; Survival of Terms. (a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Seller Party pursuant to Article V, (ii) the indemnification and payment provisions of Article X, and Sections 13.5 and 13.6 shall be continuing and shall survive any termination of this Agreement. Section 13.12 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. Section 13.13 Agent Roles. (a) Bank One Roles. Each of the Financial Institutions acknowledges that Bank One acts, or may in the future act, (i) as Agent for the Purchasers, (ii) as Managing Agent for Falcon, (iii) as issuing and paying agent for Falcon's Commercial Paper, (iv) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper and (v) to provide other services from time to time for some or all of the Conduits (collectively, the "Bank One Roles"). Without limiting the generality of this Section 13.13(a), each Financial Institution 43 hereby acknowledges and consents to any and all Bank One Roles and agrees that in connection with any Bank One Role, Bank One may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as Agent and Managing Agent for the related Conduits, and the giving of notice to the Agent or Managing Agent of a mandatory purchase pursuant its Liquidity Agreement. (b) Managing Agent Institution Roles. Each of the Financial Institutions acknowledges that each Financial Institution that serves as a Managing Agent hereunder (a "Managing Agent Institution") acts, or may in the future act, (i) as Managing Agent for a Conduit or Conduits, (ii) as issuing and paying agent for such Conduit's Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper and (iv) to provide other services from time to time for some or all of the Conduits (collectively, the "Managing Agent Institution Roles"). Without limiting the generality of this Section 13.13(b), each Financial Institution hereby acknowledges and consents to any and all Managing Agent Institution Roles and agrees that in connection with any Managing Agent Institution Role, the applicable Managing Agent Institution may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as Managing Agent for the related Conduits, and the giving of notice to the Agent or Managing Agent of a mandatory purchase pursuant to its liquidity back-stop program. Section 13.14 Characterization. (a) It is the intention of the parties hereto that each purchase hereunder shall constitute and be treated as an absolute and irrevocable sale, which purchase shall provide the applicable Purchaser with the full benefits of ownership of the applicable Purchaser Interest. Except as specifically provided in this Agreement, each sale of a Purchaser Interest hereunder is made without recourse to Seller; provided, however, that (i) Seller shall be liable to each Purchaser and the Agent for all representations, warranties, covenants and indemnities made by Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by any Purchaser or the Agent or any assignee thereof of any obligation of Seller or Originator or any other person arising in connection with the Receivables, the Related Security, or the related Contracts, or any other obligations of Seller or Originator. (b) In addition to any ownership interest which the Agent may from time to time acquire pursuant hereto, Seller hereby grants to the Agent for the ratable benefit of the Purchasers a valid and perfected security interest in all of Seller's right, title and interest in, to and under all Receivables now existing or hereafter arising, the Collections, each Lock-Box, each Collection Account, all Related Security, all other rights and payments relating to such Receivables, and all proceeds of any thereof prior to all other liens on and security interests therein to secure the prompt and complete payment of the Aggregate Unpaids. The Agent and the Purchasers shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative. [SIGNATURE PAGES FOLLOW] 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof. ANIXTER RECEIVABLES CORPORATION By: --------------------------- Name: Title: Address: ANIXTER INC. By: --------------------------- Name: Title: Address: Signature Page to Amended and Restated Receivables Purchase Agreement FALCON ASSET SECURITIZATION CORPORATION, as a Conduit By: ------------------------------------- Authorized Signatory Address: c/o Bank One, NA, as Managing Agent Asset Backed Finance Suite IL1-0079, 1-19 1 Bank One Plaza Chicago, Illinois 60670-0079 FAX: (312) 732-1844 BANK ONE, NA (MAIN OFFICE CHICAGO), as a Financial Institution, a Managing Agent and as Agent By: ------------------------------------- Name: Title: Address: Bank One, NA Asset Backed Finance Suite IL1-0596, 1-21 1 Bank One Plaza Chicago, Illinois 60670-0596 Fax: (312) 732-4487 Signature Page to Amended and Restated Receivables Purchase Agreement THREE PILLARS FUNDING CORPORATION, as a Conduit By: ------------------------------------- Name: Title: Address: Three Pillars Funding Corporation c/o Amacar Group, L.L.C. 6525 Morrison Boulevard Suite 318 Charlotte, NC 28211 Fax: (704) 365-1362 SUNTRUST BANK, as a Financial Institution By: ------------------------------------- Name: Title: Address: SunTrust Bank 24th Floor MC 3950 303 Peachtree Street Atlanta, GA 30308 Fax: (404) 230-1344 Signature Page to Amended and Restated Receivables Purchase Agreement SUNTRUST CAPITAL MARKETS, INC., as a Managing Agent By: ------------------------------------- Name: Title: Address: SunTrust Capital Markets, Inc. 24th Floor MC 3950 303 Peachtree Street Atlanta, GA 30308 Fax: (404) 230-1344 Signature Page to Amended and Restated Receivables Purchase Agreement EXHIBIT I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Accrual Period" means each calendar month, provided that the initial Accrual Period hereunder means the period from (and including) the date of the initial purchase hereunder to (and including) the last day of the calendar month thereafter. "Adjusted Pro Rata Share" means, for each Financial Institution, the Back-up Commitment of such Financial Institution within a given Purchase Group divided by the sum of the Back-up Commitments of each Financial Institution in such Purchase Group, adjusted as necessary to give effect to any assignments pursuant to Section 12.1(b) and to the termination of the Back-up Commitment of any Terminating Financial Institution in such Purchase Group. "Adverse Claim" means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person. "Affected Financial Institution" has the meaning specified in Section 12.1(c). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling Person owns 20% or more of any class of voting securities 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" has the meaning set forth in the preamble to this Agreement. "Aggregate Capital" means, as of any date of determination, the aggregate amount of Capital of all Purchaser Interests outstanding on such date. "Aggregate Reduction" has the meaning set forth in Section 1.3. "Aggregate Reserves" means, on any date of determination, the sum of the Loss Reserve, the Servicer Reserve, the Yield Reserve, and the Dilution Reserve. "Aggregate Unpaids" means, at any time, an amount equal to the sum of all accrued and unpaid fees under the Fee Letter, Yield, Aggregate Capital and all other unpaid Obligations (whether due or accrued) at such time. "Agreement" means this Receivables Purchase Agreement, as it may be amended or modified and in effect from time to time. Exh. I-1 "Amortization Date" means the earliest to occur of (i) the day on which any of the conditions precedent set forth in Section 6.2 (except for Section 6.2(d)(iii)) are not satisfied, (ii) the Business Day immediately prior to the occurrence of an Amortization Event set forth in Section 9.1(d)(ii), (iii) the Business Day specified in a written notice from the Agent pursuant to Section 9.2 following the occurrence of any other Amortization Event, and (iv) the date which is thirty (30) days after the Agent's receipt of written notice from Seller that it wishes to terminate the facility evidenced by this Agreement. "Amortization Event" has the meaning set forth in Article IX. "Assignment Agreement" has the meaning set forth in Article IX. "Applicable Margin" means, as of any date of determination, the percentage set forth in the table below opposite the then applicable Debt Rating:
Debt Ratings Pricing Level S&P/Moody's/Fitch Applicable Margin ------------- -------------------- ----------------- 1 less than A-/A3 0.750% 2 BBB+/Baa1 0.875% 3 BBB/Baa2 1.000% 4 BBB-/Baa3 1.125% 5 BB+/Ba1 1.375% 6 greater than BB+/Ba1 1.625%
"Authorized Officer" means, with respect to any Person, its president, corporate controller, treasurer or chief financial officer. "Back-up Commitment" means, for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from the Seller, in an amount not to exceed (x) in the aggregate, the amount set forth opposite such Financial Institution's name under the Back-up Commitment column on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof, and (y) with respect to any individual purchase from the Seller hereunder, its Pro Rata Share of the Purchase Price therefor. "Bank One" means Bank One, NA (Main Office Chicago) in its individual capacity and its successors. "Bank One Federal Funds Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such Exh. I-2 day on such transactions received by Bank One from three Federal funds brokers of recognized standing selected by Bank One in its sole discretion. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as amended, and any successor statute thereto. "Base Rate" means a rate per annum equal to: (a) with respect to each Financial Institution in the Falcon Purchase Group, the greater of (i) the Bank One Federal Funds Rate plus one half of one percent (0.50%), and (ii) the corporate base rate of interest announced by Bank One from time to time, changing as and when said corporate base rate changes; and (b) with respect to each Financial Institution in the Three Pillars Purchase Group, the greater of (i) the SunTrust Federal Funds Rate most recently determined by SunTrust Bank plus one half of one percent (0.50%), and (ii) the SunTrust Prime Rate. "Broken Funding Costs" means, with respect to the Falcon Purchase Group, Falcon Broken Funding Costs and, with respect to the Three Pillars Purchase Group, Three Pillars Broken Funding Costs. "Business Day" means any day on which banks are not authorized or required to close in New York, New York or Chicago, Illinois and The Depository Trust Company of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market. "Capital" means with respect to any Purchaser Interest, at any time, (A) the Purchase Price of such Purchaser Interest, minus (B) the sum of the aggregate amount of Collections and other payments received by the Agent or the applicable Managing Agent which in each case have been applied to reduce the Capital of such Purchaser Interest in accordance with the terms and conditions of this Agreement; provided that such Capital shall be restored (in accordance with Section 2.5) in the amount of any Collections or other payments so received and applied if at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason. "Capital Pro Rata Share" means, for any Purchaser at any time, the amount of Capital allocated to the Purchaser Interests of such Purchaser at such time divided by the Aggregate Capital at such time. "Change of Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of any Seller Party. "Charged-Off Receivable" means a Receivable: (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(d) (as if Exh. I-3 references to Seller Party therein refer to such Obligor); (ii) as to which the Obligor thereof, if a natural person, is deceased, (iii) which, consistent with the Credit and Collection Policy, would be written off Seller's books as uncollectible, (iv) which has been identified by Seller as uncollectible or (v) as to which any payment, or part thereof, remains unpaid for 120 days or more from the original invoice date for such Receivable. "Collection Account" means each concentration account, depositary account, lock-box account or similar account in which any Collections are collected or deposited and which is listed on Exhibit IV. "Collection Account Agreement" means an agreement substantially in the form of Exhibit VI among Originator, Seller, the Agent and a Collection Bank. "Collection Bank" means, at any time, any of the banks holding one or more Collection Accounts. "Collection Notice" means a notice, in substantially the form of Annex A to Exhibit VI, from the Agent to a Collection Bank. "Collection Period" means each fiscal month of the Seller Parties. "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all yield, Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable. "Commercial Paper" means promissory notes of any Conduit issued by such Conduit in the commercial paper market. "Conduit" means each of Falcon and Three Pillars, and their respective successors and assigns as Conduits hereunder. "Contingent Obligation" means, with respect to any Person, any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit. "Contract" means, with respect to any Receivable, any and all instruments, agreements, invoices or other writings pursuant to which such Receivable arises or which evidences such Receivable. "CP Rate" means for any Accrual Period, with respect to any Purchaser Interest owned by the Falcon Purchase Group, the Falcon CP Rate and with respect to any Purchaser Interest owned by the Three Pillars Purchase Group, the Three Pillars CP Rate. Exh. I-4 "Credit Agreement" means that certain Credit Agreement dated as of October 6, 2000 by and among Anixter, the Subsidiaries of Anixter identified as Borrowing Subsidiaries thereunder, Bank One, as Syndication Agent, The Bank of Nova Scotia, as Documentation Agent, and Bank of America, N.A., as Administrative Agent, and the lenders party thereto from time to time, as amended, supplemented or otherwise modified from time to time. "Credit and Collection Policy" means Seller's credit and collection policies and practices relating to Contracts and Receivables existing on the date hereof and summarized in Exhibit VIII, as modified from time to time in accordance with this Agreement. "Debt Rating" means, as of any date of determination, the rating as determined by either S&P, Moody's or Fitch (provided that the Originator shall have at least two such ratings and at least one of such ratings shall be from S&P or Moody's) (collectively, the "Debt Ratings") of the Originator's noncredit-enhanced, senior unsecured long-term debt; provided that if the existing Debt Ratings are not the same level, then (i) if there are two Debt Ratings, the higher of such Debt Ratings shall apply (with Pricing Level 1 being the highest and Pricing Level 6 being the lowest), (ii) if there are three Debt Ratings and no two Debt Ratings are at the same level, the intermediate Debt Rating shall apply, or (iii) if there are three Debt Ratings and two Debt Ratings are at the same level, then the level with the two Debt Ratings shall apply. "Deemed Collections" means the aggregate of all amounts Seller shall have been deemed to have received as a Collection of a Receivable. Seller shall be deemed to have received a Collection in full of a Receivable if at any time (i) the Outstanding Balance of any such Receivable is either (x) reduced as a result of any defective or rejected goods or services, any discount or any adjustment or otherwise by Seller (other than cash Collections on account of the Receivables) or (y) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (ii) any of the representations or warranties in Article V are no longer true with respect to such Receivable. "Default Fee" means with respect to any amount due and payable by Seller in respect of any Aggregate Unpaids, an amount equal to interest on any such unpaid Aggregate Unpaids at a rate per annum equal to 2% above the Base Rate. "Default Proxy Ratio" means, for any Collection Period, a fraction (calculated as a percentage) equal to (i) the aggregate Outstanding Balance of all Receivables (without duplication) which, as of the last day of such Collection Period, remain unpaid for at least one hundred twenty (120) but less than one hundred fifty (150) days from the original invoice date plus the aggregate Outstanding Balance of all Receivables (without duplication) which, consistent with the Credit and Collection Policy, were or should have been written off the Seller's books as uncollectible and are less than one hundred twenty (120) days past invoice date during such period, divided by (ii) the aggregate Outstanding Balance of all Receivables generated during the Collection Period which ended on the date four (4) months prior to the last day of the current Collection Period. Exh. I-5 "Delinquency Ratio" means, at any time, a percentage equal to (i) the aggregate Outstanding Balance of all Receivables that were Delinquent Receivables at such time divided by (ii) the aggregate Outstanding Balance of all Receivables at such time. "Delinquent Receivable" means a Receivable as to which any payment, or part thereof, remains unpaid for 91 days or more from the original invoice date for such Receivable. "Determination Date" means the third Business Day prior to each Monthly Settlement Date. "Dilution Horizon Ratio" means, as of any date as set forth in the most recent Monthly Report, a ratio computed by dividing (i) the aggregate of all Receivables generated during the two (2) most recently ended Collection Periods by (ii) the aggregate Outstanding Balance of non-Delinquent Receivables as at the last day of the most recently ended Collection Period. "Dilution Ratio" means, for any Collection Period, the ratio (expressed as a percentage) computed as of the last day of such Collection Period by dividing (i) the aggregate amount of Dilutions during such Collection Period by (ii) the aggregate Outstanding Balance of all Receivables generated during the preceding Collection Period. "Dilution Reserve" means, on any date, an amount equal to (x) the Dilution Reserve Ratio then in effect times (y) the Net Receivables Balance as of the close of business on the immediately preceding Business Day. "Dilution Reserve Ratio" means, as of any date, an amount calculated as follows: DRR = [(2.0 x ADR) + [(HDR-ADR) x (HDR/ADR)]] x DHR where: DRR = the Dilution Reserve Ratio; ADR = the average of the Dilution Ratios for the past twelve Collection Periods; HDR = the highest average Dilution Ratio for any two (2) consecutive Collection Periods during the most recent twelve months; and DHR = the Dilution Horizon Ratio. The Dilution Reserve Ratio shall be calculated monthly in each Monthly Report and such Dilution Reserve Ratio shall, absent manifest error, be effective from the corresponding Monthly Settlement Date until the next succeeding Monthly Settlement Date. "Dilutions" means, at any time, the aggregate amount of reductions or cancellations described in clause (i) of the definition of "Deemed Collections". Exh. I-6 "Dilution Trigger Ratio" means, as of the end of any Collection Period, the ratio (expressed as a percentage), computed as of the last day of such Collection Period by dividing (i) the aggregate amount of Dilutions during such Collection Period by (ii) the aggregate Outstanding Balance of all Receivables at the end of such Collection Period minus the aggregate outstanding amount of all credit memos from Originators outstanding at the end of such Collection Period. "Discount Rate" means, the LIBO Rate or the Base Rate, as applicable, with respect to each Purchaser Interest of the Financial Institutions, and any Purchaser Interest of a Conduit, an undivided interest in which has been assigned by such Conduit to a Financial Institution pursuant to the applicable Liquidity Agreement. "Eligible Receivable" means, at any time, a Receivable: (i) the Obligor of which (a) if a natural person, is a resident of the United States or, if a corporation or other business organization, is organized under the laws of the United States or any political subdivision thereof and has its chief executive office in the United States; (b) is not an Affiliate of any of the parties hereto; (c) is not the subject of a proceeding under the Bankruptcy Code or any other insolvency proceeding and (d) is not a government or a governmental subdivision or agency; (ii) due from an Obligor that is the Obligor on another Receivable or Receivables, and the Outstanding Balance of all Receivables from such Obligor which are Charged-Off Receivables is less than 20% of the Outstanding Balance of all Receivables from such Obligor; (iii) which is not a Charged-Off Receivable or a Delinquent Receivable; (iv) which by its terms is due and payable within 90 days of the original billing date therefor and has not had its payment terms extended; provided, however, that no more than 25% of the aggregate Outstanding Balance of all Receivables which are due and payable between 61 and 90 days of the original billing date therefor will be deemed to be "Eligible Receivables"; (v) which is "an "account" within the meaning of Section 9-102(a)(2) of the UCC of all applicable jurisdictions, and which represents all or part of the sales price of merchandise, insurance and services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (vi) which is denominated and payable only in United States dollars in the United States; (vii) which arises under a Contract in substantially the form of one of the form contracts set forth on Exhibit IX hereto or otherwise approved by the Managing Agents in writing, which, together with such Receivable, is in full force and effect and Exh. I-7 constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms; (viii) which arises under a Contract which (A) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and duties of Originator or any of its assignees under such Contract (unless such consent has been obtained) and (B) does not contain a confidentiality provision that purports to restrict the ability of any Purchaser to exercise its rights under this Agreement, including, without limitation, its right to review the Contract; (ix) which arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services by Originator; (x) which, together with the Contract related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation; (xi) which satisfies all applicable requirements of the Credit and Collection Policy; (xii) which was generated in the ordinary course of Originator's business; (xiii) which arises solely from the sale of goods or the provision of services to the related Obligor by Originator, and not by any other Person (in whole or in part); (xiv) as to which the Agent has not notified Seller that the Agent has determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable arises under a Contract that is not acceptable to the Agent; provided, that Agent shall not determine a Receivable to be ineligible pursuant to this clause (xiv) because the Obligor is in a particular industry if on the date hereof the Originator has outstanding Receivables from Obligors in such industry; and provided further, that Agent shall not determine a Receivable to be ineligible pursuant to this clause (xiv) because it is generated by a particular type of business of the Originator if the Originator is engaged in such type of business on the date hereof. (xv) except to the extent (but then only to the extent) that it is subject to any right of rescission, set-off, counterclaim, any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor against Originator or any other Adverse Claim; Exh. I-8 (xvi) due from an Obligor that holds no right as against Originator to cause Originator to repurchase the goods or merchandise the sale of which shall have given rise to such Receivable (except with respect to sale discounts effected pursuant to the Contract, or defective goods returned in accordance with the terms of the Contract); (xvii) as to which Originator has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor; (xviii) all right, title and interest to and in which has been validly transferred by Originator directly to Seller under and in accordance with the Receivables Sale Agreement, and Seller has good and marketable title thereto free and clear of any Adverse Claim; (xix) for which Seller has given reasonably equivalent value to Originator in consideration therefor pursuant to the Receivables Sale Agreement, which was not made for or on account of an antecedent debt and which is not voidable under any section of the Bankruptcy Code; and (xx) in which the Agent, for the benefit of the Purchasers, has a valid and perfected first priority undivided percentage ownership or security interest, free and clear of any Adverse Claim. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Facility Account" means Seller's Account No. 1069533 at Bank One. "Facility Termination Date" means the earliest of (i) the Liquidity Termination Date, (ii) the Amortization Date and (iii) September 29, 2005. "Falcon" has the meaning set forth in the preamble in this Agreement. "Falcon Broken Funding Costs" means (a) for any Purchaser Interest owned by Bank One on behalf of the Purchasers in the Falcon Purchase Group which: (i) has its Capital reduced without compliance by Seller with the notice requirements hereunder or (ii) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice or (iii) is assigned pursuant to the Falcon Liquidity Agreement or has a Tranche Period to which it is subject terminated prior to the date on which it was originally scheduled to end; an amount equal to the excess, if any, of (A) the Yield that would have accrued during the remainder of the Tranche Periods or the tranche periods for Commercial Paper determined by Bank One to relate to such Purchaser Interest (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (ii) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the Capital of such Purchaser Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to Exh. I-9 another Purchaser Interest with respect to the same Purchaser, the amount of Yield actually accrued during the remainder of such period on such Capital for the new Purchaser Interest, and (y) to the extent such Capital is not allocated to another Purchaser Interest, the income, if any, actually received during the remainder of such period by the holder of such Purchaser Interest from investing the portion of such Capital not so allocated, and (b) any loss or expense incurred by any Purchaser (including any loss or expense incurred by reason of the liquidation or reemployment of funds acquired by such Purchaser in order to make any such requested Incremental Purchase) as a result of any Incremental Purchase not being made in accordance with a request therefor under Section 1.2 (whether because of the failure of the conditions precedent with respect to such Incremental Purchase to be satisfied or for any other reason, other than default by the relevant Purchaser). All Falcon Broken Funding Costs shall be due and payable upon demand. "Falcon CP Rate" means for any Accrual Period for any Purchaser Interest owned by Falcon if and to the extent it funds the Purchase or maintenance of its Purchaser Interest by the issuance of commercial paper notes during such Settlement Period, the per annum rate that reflects, for each day during such Settlement Period, the sum of (i) discount accrued on Pooled Commercial Paper of Falcon on such day, plus (ii) any and all accrued commissions in respect of placement agents and commercial paper dealers, and issuing and paying agent fees incurred, in respect of Pooled Commercial Paper of such Conduit for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper of Falcon for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase facilities funded substantially with Pooled Commercial Paper of Falcon, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs related to the prepayment of any Purchaser Interest of Falcon pursuant to the terms of any receivable purchase facilities funded substantially with Pooled Commercial Paper; provided, however, that in addition to the foregoing costs, if the Seller shall request any additional Purchase by Falcon during any period of time determined by Falcon's Managing Agent in its sole discretion to result in an incrementally higher CP Rate applicable to such additional Purchase, the Capital associated with any such additional Purchase shall, during such period, be deemed to be funded by Falcon in a special pool (which may include capital associated with other receivable purchase facilities) for purposes of determining such higher CP Rate applicable only to such special pool and charged each day during such period against such Capital. "Falcon LIBO Rate" means, with respect to any Tranche Period, the rate per annum equal to the sum of: (i) (a) the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first day of the relevant Tranche Period, and having a maturity equal to such Tranche Period, provided that, (1) if Reuters Screen FRBD is not available to the Agent for any reason, the applicable LIBO Rate for the relevant Tranche Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two Exh. I-10 Business Days prior to the first day of such Tranche Period, and having a maturity equal to such Tranche Period, and (2) if no such British Bankers' Association Interest Settlement Rate is available to the Agent, the applicable LIBO Rate for the relevant Tranche Period shall instead be the rate determined by the applicable Managing Agent to be the rate at which such Managing Agent offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Tranche Period, in the approximate amount to be funded at the LIBO Rate and having a maturity equal to such Tranche Period, divided by (b) one minus the maximum aggregate reserve requirement (including all basic, supplemental, marginal or other reserves) which is imposed against the Agent (or, in the case of clause (ii), such Managing Agent) in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time (expressed as a decimal), applicable to such Tranche Period; plus (ii) the Applicable Margin in effect from time to time. "Falcon Liquidity Agreement" means an agreement entered into by Falcon with its Financial Institutions in connection herewith for the purpose of providing liquidity with respect to the Capital funded by Falcon under this Agreement. "Falcon Purchase Group" means Falcon, Bank One and each of the Financial Institutions identified as a member of the Falcon Purchase Group on Schedule A hereto, together with their respective successors, assigns and participants. "Fee Letter" means that certain letter agreement dated as of the date hereof among Seller, Originator and each Managing Agent, as it may be amended or modified and in effect from time to time. "Finance Charges" means, with respect to a Contract, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Contract. "Financial Institutions" has the meaning set forth in the preamble in this Agreement. "Funding Agreement" means this Agreement and any agreement or instrument executed by any Funding Source with or for the benefit of a Conduit, including any Liquidity Agreement. "Funding Source" means (i) any Financial Institution or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to a Conduit. "GAAP" means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement. "Group Pro Rata Share" means, with respect to any Purchase Group and as of any date of determination, an amount equal to (expressed as a percentage) the Back-Up Commitment of such Purchase Group on such date divided by the Purchase Limit as of such date. Exh. I-11 "Group Purchase Limit" means, for each Purchase Group, the sum of the Back-up Commitments of the Financial Institutions in such Purchase Group, adjusted as necessary to give effect to the termination of the Back-up Commitment of any Terminating Financial Institution in such Purchase Group. "Incremental Purchase" means a purchase of one or more Purchaser Interests which increases the total outstanding Aggregate Capital hereunder. "Indebtedness" means, with respect to any Person, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "Independent Director" means a member of the Board of Directors of Seller who is not, (A) and has not been at any time during the five (5) years preceding his or her election to such Board of Directors, a director, officer, employee or affiliate of Seller, Originator, or any of their respective Subsidiaries or Affiliates, or (B) the beneficial owner (at the time of such individual's appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of Seller, Originator, or any of their respective Subsidiaries or Affiliates, having general voting rights; "LIBO Rate" means the Falcon LIBO Rate or the Three Pillars LIBO Rate, as the case may be. "Liquidity Agreement" means the Falcon Liquidity Agreement and/or the Three Pillars Liquidity Agreement, as the case may be. "Liquidity Commitment" means, for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from the Conduit in its Purchase Group in an amount not to exceed (a) in the aggregate, the amount set forth opposite such Financial Institution's name under the Liquidity Commitment Column on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof, and (b) with respect to any individual purchase from such Conduit, its Adjusted Pro Rata Share of the Purchase Price therefor. "Liquidity Termination Date" means October 2, 2003. "Lock-Box" means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Exhibit IV. Exh. I-12 "Loss Horizon Ratio" means, for any Collection Period, a fraction (calculated as a percentage) computed by dividing (i) the aggregate Outstanding Balance of all Receivables generated during the three (3) most recently ended Collection Periods by (ii) the aggregate Outstanding Balance of all non-Delinquent Receivables as at the last day of the most recently ended Collection Period. "Loss Reserve" means, on any date, an amount equal to (x) the greater of (i) 12% and (ii) the Loss Reserve Ratio then in effect times (y) the aggregate Net Receivables Balance as of the close of business on the immediately preceding Business Day. "Loss Reserve Ratio" means, as of any date, an amount calculated as follows: LRR = 2.0 x DPR x LHR, where LRR = the Loss Reserve Ratio; DPR = the highest average of the Default Proxy Ratios for any three consecutive Collection Periods during the most recent twelve months; and LHR = the Loss Horizon Ratio. The Loss Reserve Ratio shall be calculated monthly in each Monthly Report and such Loss Reserve Ratio shall, absent manifest error, be effective from the corresponding Monthly Settlement Date until the next succeeding Monthly Settlement Date. "Loss-to Liquidation Ratio" means, for any Collection Period, a fraction (calculated as a percentage) equal to (i) the aggregate Outstanding Balance of all Receivables (without duplication) which, as of the last day of such Collection Period, remain unpaid for at least one hundred twenty (120) but less than one hundred fifty (150) days from the original invoice date plus the aggregate Outstanding Balance of all Receivables (without duplication) which, consistent with the Credit and Collection Policy, were or should have been written off the Seller's books as uncollectible and are less than one hundred twenty (120) days past invoice date during such period, divided by (ii) the aggregate amount of Collections during such Collection Period. "Managing Agent" means, as to any Conduit, the financial institution responsible for the administration of such Conduit's Commercial Paper program and related activities. As of the date hereof, Bank One is the Managing Agent for Falcon and its Financial Institutions, and SunTrust is the Managing Agent for Three Pillars and its Financial Institutions. "Mandate Letter" means that certain mandate letter dated as of July 24, 2000 addressed to Anixter from Banc One Capital Markets, Inc. "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of any Seller Party and its Subsidiaries, (ii) the ability of any Seller Party to perform its obligations under this Agreement, (iii) the legality, validity or enforceability of this Exh. I-13 Agreement or any other Transaction Document, (iv) any Purchaser's interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Mid-Month Report" means a report, in substantially the form of Exhibit XI hereto (appropriately completed), furnished by the Servicer to the Managing Agents pursuant to Section 8.5. "Mid-Month Report Date" has the meaning set forth in Section 8.5. "Monthly Report" means a report, in substantially the form of Exhibit X hereto (appropriately completed), furnished by the Servicer to the Managing Agents pursuant to Section 8.5. "Monthly Settlement Date" means the 17th day of each month, or if such day is not a Business Day, the next succeeding Business Day. "Moody's" means Moody's Investors Service, Inc., and any successor thereto. "Net Receivables Balance" means, at any time, the aggregate Outstanding Balance of Eligible Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of Eligible Receivables from each Obligor and its Affiliates exceeds the Standard Concentration Limit or Special Concentration Limit for such Obligor, as the case may be. "Non-Renewing Financial Institution" has the meaning set forth in Section 12.3. "Obligations" has the meaning set forth in Section 2.1. "Obligor" means a Person obligated to make payments pursuant to a Contract. "Originator" means Anixter, in its capacity as seller under the Receivables Sale Agreement. "Outstanding Balance" means, with respect to any Receivable at any time, the then outstanding principal balance thereof. "Outstanding Balance of Eligible Receivables" means, for purposes of the definitions of "Net Receivables Balance", "Special Concentration Limit" and "Standard Concentration Limit", the Outstanding Balance of all Eligible Receivables (the Outstanding Balance of an Eligible Receivable subject to any right of rescission, set-off, counterclaim or other defense as described in clause (xv) of the definition of "Eligible Receivable" being the outstanding principal balance of such Receivable less the amount of such right of rescission, set-off, counterclaim or other defense). "Participant" has the meaning set forth in Section 12.2. Exh. I-14 "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Pooled Commercial Paper" means Commercial Paper notes of a Conduit subject to any particular pooling arrangement by such Conduit, but excluding Commercial Paper issued by such Conduit for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by such Conduit. "Potential Amortization Event" means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event. "Proposed Reduction Date" has the meaning set forth in Section 1.3. "Pro Rata Share" means, (1) for each Financial Institution, the Back-up Commitment of such Financial Institution divided by the Purchase Limit, adjusted as necessary to give effect to the application of any assignments pursuant to Article XII and (2) for each Conduit, the Group Pro Rata Share of its Purchase Group. "Purchase Group" means each Conduit, its Financial Institutions and their related Managing Agent. "Purchase Limit" means $225,000,000, as such amount may be increased or decreased in accordance with the provisions of Article XII. "Purchase Notice" has the meaning set forth in Section 1.2. "Purchase Price" means, with respect to any Incremental Purchase of a Purchaser Interest, the amount paid to Seller for such Purchaser Interest which shall not exceed the least of the amount requested by Seller in the applicable Purchase Notice, the Unused Purchase Limit on the applicable purchase date and the excess, if any, of the Net Receivables Balance (less the Aggregate Reserves) on the applicable purchase date over the aggregate outstanding amount of Aggregate Capital determined as of the date of the most recent Monthly Report. "Purchaser" means any Conduit or Financial Institution, as applicable and "Purchasers" means, collectively, all Conduits and Financial Institutions. "Purchaser Interest" means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Capital, selected pursuant to the terms and conditions hereof in (i) each Receivable arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to each such Receivable, and (iii) all Collections with respect to, and other proceeds of, each such Receivable. Each such undivided percentage interest shall equal: C - -------- NRB - AR Exh. I-15 where: C = the aggregate outstanding Capital of such Purchaser Interest. AR = the Aggregate Reserves. NRB = the Net Receivables Balance. Such undivided percentage ownership interest shall be initially computed on its date of purchase. Thereafter, until the Amortization Date, each Purchaser Interest shall be automatically recomputed (or deemed to be recomputed) on each day prior to the Amortization Date. The variable percentage represented by any Purchaser Interest as computed (or deemed recomputed) as of the close of the business day immediately preceding the Amortization Date shall remain constant at all times thereafter. "Purchasing Financial Institution" has the meaning set forth in Section 12.1(b). "Receivable" means all indebtedness and other obligations owed to Seller or Originator (at the time it arises, and before giving effect to any transfer or conveyance under the Receivables Sale Agreement or hereunder) or in which Seller has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by Originator, and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or Seller treats such indebtedness, rights or obligations as a separate payment obligation. Receivables Sale Agreement" means that certain Amended and Restated Receivables Sale Agreement, dated as of October 3, 2002, between Originator and Seller, as the same may be amended, restated or otherwise modified from time to time. "Records" means, with respect to any Receivable, all Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable, any Related Security therefor and the related Obligor. "Reduction Notice" has the meaning set forth in Section 1.3. "Reference Bank" means Bank One or such other bank as Bank One shall designate with the consent of Seller. "Reinvestment" has the meaning set forth in Section 2.2. Exh. I-16 "Related Security" means, with respect to any Receivable: (A) all of Seller's interest in the inventory and goods (including returned or repossessed inventory or goods), if any, the sale, financing or lease of which by Originator gave rise to such Receivable, and all insurance contracts with respect thereto, (B) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (C) all guaranties, letters of credit, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise, (D) all service contracts and other contracts and agreements associated with such Receivable, (E) all Records related to such Receivable, (F) all of Seller's right, title and interest in, to and under the Receivables Sale Agreement in respect of such Receivable, and (G) all proceeds of any of the foregoing. "Required Financial Institutions" means, at any time, (a) if any Conduit holds any Purchaser Interests, the Managing Agent for each such Conduit and Financial Institutions with Back-Up Commitments equal to or greater than 50% of the Purchase Limit, and (b) if no Conduit holds any Purchaser Interests, Financial Institutions with Back-up Commitments equal to or greater than 50% of the Purchase Limit. "Required Ratings" has the meaning set forth in Section 12.1(b). "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto. "Seller" has the meaning set forth in the preamble to this Agreement. "Seller Parties" has the meaning set forth in the preamble to this Agreement. "Servicer" means at any time the Person (which may be the Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables. Exh. I-17 "Servicer Reserve" means, on any date, an amount equal to (a) if Anixter or any Affiliate of Anixter is the Servicer on such date, the product of (x) 0.36% and (y) the Outstanding Balance of all Receivables generated during the most recently ended Collection Period immediately preceding such date, or (b) if a Person other than Anixter or any Affiliate of Anixter is the Servicer on such date, the product of (i) 0.33% and (ii) the Outstanding Balance of all Receivables as at the end of the most recently ended Collection Period immediately preceding such date, or such other amount as the Managing Agents shall determine in its reasonable judgment. "Servicing Fee" has the meaning set forth in Section 8.6. "Settlement Date" means (A) the Monthly Settlement Date, and (B) the last day of the relevant Tranche Period in respect of each Purchaser Interest of the Financial Institutions. "Settlement Period" means (A) in respect of each Purchaser Interest of the Conduits, the immediately preceding Accrual Period, and (B) in respect of each Purchaser Interest of the Financial Institutions, the entire Tranche Period of such Purchaser Interest. "Significant Subsidiary" has the meaning set forth in Regulation S-X of the Securities and Exchange Commission, 17 C.F.R. Part 210, as in effect on the date hereof. "Special Concentration Limit" means, at any time, with respect to any Special Obligor, a dollar amount equal to a percentage of the aggregate Outstanding Balance of Eligible Receivables or such other limit as the Agent, with the consent of Moody's and S&P, may designate for such Special Obligor; provided, that the Agent may, upon notice to Seller, cancel or reduce any Special Concentration Limit. "Special Obligor" means any Obligor as may be designated by the Agent from time to time as a "Special Obligor." "Standard Concentration Limit" means, at any time, with respect to any Obligor other than a Special Obligor, 4% of the aggregate Outstanding Balance of Eligible Receivables at such time. "Subsidiary" means, with respect to any Person, (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, limited liability company, 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 Anixter. "SunTrust" has the meaning set forth in the preamble to this Agreement. "SunTrust Bank" means SunTrust Bank in its individual capacity and its successors. Exh. I-18 "SunTrust Federal Funds Rate" means, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the federal funds rates as quoted by SunTrust Bank and confirmed in the Federal Reserve Board Statistical Release as H.15(519), or any successor or substitute publication selected by SunTrust Bank (or, if such day is not a Business Day, for the next preceding Business Day), or if, for any reason, such rate is not available on any day, the rate determined in the sole opinion of SunTrust Bank, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (New York time). "SunTrust Prime Rate" means, as of any date of determination, the rate of interest most recently announced by SunTrust Bank at its principal office in Atlanta, Georgia as its prime rate (it being understood that at any one time there shall exist only one such prime rate so announced, which rate is not necessarily intended to be the lowest rate of interest determined by SunTrust Bank in connection with extensions of credit). "Terminating Financial Institution" means (i) any Affected Financial Institution or Non-Renewing Financial Institution which has not assigned all of its rights and obligations hereunder pursuant to Article XII, and (ii) a Financial Institution (a) to which the related Conduit has assigned such Financial Institution's Pro Rata Share of the Purchaser Interests then held by such Conduit, or (b) which, pursuant to the applicable Liquidity Agreement, has had its Liquidity Commitment under the Liquidity Agreement and Back-up Commitment hereunder terminated by the Conduit, in either such case in connection with such Financial Institution's decision not to renew its Liquidity Commitment under such Liquidity Agreement or its Back-up Commitment hereunder or such Financial Institution's becoming an Affected Financial Institution. "Terminating Tranche" has the meaning set forth in Section 4.3(b). "Termination Date" has the meaning set forth in Section 2.2. "Termination Percentage" has the meaning set forth in Section 2.2. "Three Pillars" has the meaning set forth in the preamble to this Agreement. "Three Pillars Broken Funding Costs" means, with respect to any Purchaser Interest owned by SunTrust on behalf of the Members of the Three Pillars Purchase Group, any net loss or expense which any member of the Three Pillars Purchase Group may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Person to fund or maintain any Purchaser Interest hereunder), as reasonably determined by such Person, as a result of any payment or prepayment (including any mandatory prepayment) of any Capital on a date other than the last day of the Accrual Period or Tranche Period, as the case may be, for such Purchaser Interest, or any failure of the Seller to sell any Purchaser Interest on a date specified therefor in a related Purchase Notice. The Managing Agent's calculation of such Three Pillars Broken Funding Costs shall, in the absence of manifest error, be rebuttably presumptive evidence of the subject matter thereof. All Three Pillars Broken Funding Costs shall be payable upon demand. Exh. I-19 "Three Pillars Credit Agreement" means any program-wide agreement entered into by any Three Pillars Credit Bank providing for the issuance of one or more letters of credit for the account of Three Pillars, the issuance of one or more surety bonds for which Three Pillars is obligated to reimburse the applicable Three Pillars Credit Bank for any drawings hereunder, the sale by Three Pillars to any Three Pillars Credit Bank of receivables or other financial assets owned or held by Three Pillars (or portions thereof) and/or the making of loans and/or other extensions of credit to Three Pillars in connection with its commercial paper program, together with any cash collateral agreement, letter of credit, surety bond or other agreement or instrument executed and delivered in connection therewith (but excluding the Three Pillars Liquidity Agreement, or similar agreement, or any voluntary advance agreement). "Three Pillars Credit Bank" means SunTrust Bank and any other or additional bank or other Person (other than the Seller or any other customer of Three Pillars or any liquidity provider as such) now or hereafter extending credit or a purchase commitment to or for the account of Three Pillars or issuing a letter of credit, surety bond or other instrument, in each case to support any obligations arising under or in connection with Three Pillar's commercial paper program. "Three Pillars CP Rate" means, for any day during any Accrual Period, the per annum rate equivalent to the sum of the weighted average of the per annum rates paid or payable by Three Pillars from time to time as interest on or otherwise in respect of the Commercial Paper issued by Three Pillars that are allocated, in whole or in part, by the Managing Agent for the Three Pillars Purchase Group (on behalf of Three Pillars) to fund or maintain the Purchaser Interests owned by Three Pillars, the commissions and charges charged by placement agents and commercial paper dealers with respect to such Commercial Paper. "Three Pillars LIBO Rate" means, for any Tranche Period (i) the rate per annum, determined by SunTrust Bank, on the Rate Setting Day (as defined below) of such Tranche Period on the basis of the offered rates shown on Telerate Page 3750 or any successor page as the composite offered rate for London interbank deposits, as shown under the heading "USD" as of 11:00 a.m. (London time); provided that in the event no such rate is shown, the LIBOR Rate shall be the rate per annum (rounded upwards, if necessary, to the nearest one thousandth of one percent), determined by SunTrust Bank, based on the offered rates at which Dollar deposits for are displayed on the Reuters Screen as of 11:00 a.m. (London time) on the Rate Setting Day (it being understood that if at least two such offered rates appear on such page, the rate will be the arithmetic mean of such displayed rates); provided further, that in the event fewer than two such rates are displayed, or if no such offered rate is relevant, the LIBO Rate shall be the rate per annum, determined by SunTrust Bank, equal to the average of the rates at which deposits in Dollars are offered by the Managing Agent for the Three Pillars Purchase Group at approximately 11:00 a.m. (London time) on the Rate Setting Day to prime banks in the London interbank market plus (ii) the Applicable Margin. The "Rate Setting Day" for any Tranche Period shall mean, two (2) Business Days prior to the commencement of such Tranche Period. In the event such day is not a Business Day, then the Rate Setting Day shall be the immediately preceding Business Day. Exh. I-20 "Three Pillars Liquidity Agreement" means (i) the Liquidity Asset Purchase Agreement (regarding the Seller), dated as of October 3, 2002, among Three Pillars, as borrower, SunTrust Bank, as liquidity agent for the Liquidity Banks, SunTrust Capital Markets, Inc., as administrator for Three Pillars, and the Liquidity Banks, and (ii) any other agreement hereafter entered into by Three Pillars providing for the sale by Three Pillars of Purchaser Interests owned by it (or portions thereof), or the making of loans or other extensions of credit to Three Pillars secured by security interests in the Purchaser Interests owned by it (or portions thereof), to support all or part of Three Pillar's payment obligations under its Commercial Paper or to provide an alternate means of funding Three Pillars' investments in accounts receivable or other financial assets, in each case as amended, supplemented or otherwise modified from time to time. "Three Pillars Liquidity Bank" means SunTrust Bank and the various financial institutions as are, or may become, parties to the Three Pillars Liquidity Agreement, as purchasers thereunder. "Three Pillars Purchase Group" means Three Pillars, SunTrust, each Three Pillars Credit Bank and each of the Financial Institutions identified as a member of the Three Pillars Purchase Group on Schedule A hereto, together with each of their respective successors, assigns and participants. "Tranche Period" means, with respect to any Purchaser Interest held by a Financial Institution, including any Purchaser Interest or undivided interest in a Purchaser Interest assigned to a Financial Institution pursuant to a Liquidity Agreement: (a) if Yield for such Purchaser Interest is calculated on the basis of the LIBO Rate, a period of one, two, three or six months, or such other period as may be mutually agreeable to the applicable Managing Agent and Seller, commencing on a Business Day selected by Seller or such Managing Agent pursuant to this Agreement. Such Tranche Period shall end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period shall end on the last Business Day of such succeeding month; or (b) if Yield for such Purchaser Interest is calculated on the basis of the Base Rate, a period selected by Seller and agreed to by the applicable Managing Agent, commencing and ending on a Business Day, provided no such period shall exceed one month. If any Tranche Period would end on a day which is not a Business Day, such Tranche Period shall end on the next succeeding Business Day, provided, however, that in the case of Tranche Periods corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Tranche Period shall end on the immediately preceding Business Day. In the case of any Tranche Period for any Purchaser Interest which commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such Tranche Period shall end on the Amortization Date. The duration of each Tranche Period which commences after the Amortization Date shall be of such duration as selected by the applicable Exh. I-21 Managing Agent. In no event shall any Tranche Period extend beyond the Facility Termination Date. "Transaction Documents" means, collectively, this Agreement, each Purchase Notice, the Receivables Sale Agreement, each Collection Account Agreement, the Fee Letter, the Subordinated Note (as defined in the Receivables Sale Agreement) and all other instruments, documents and agreements executed and delivered in connection herewith. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. "Unused Back-up Commitment" means, with respect to any Financial Institution at any time, such Financial Institution's Back-up Commitment at such time minus such Financial Institution's Pro Rata Share of the Aggregate Capital outstanding at such time. "Unused Purchase Limit" means, at any time, the Purchase Limit at such time minus the Aggregate Capital outstanding at such time. "Yield" means (a) for each respective Tranche Period relating to Purchaser Interests of the Financial Institutions, including any Purchaser Interests or undivided interest in a Purchaser Interest assigned to a Financial Institution pursuant to a Liquidity Agreement, an amount equal to the product of the applicable Discount Rate for each Purchaser Interest multiplied by the Capital of such Purchaser Interest for each day elapsed during such Tranche Period, annualized on a 360 day basis, and (b) for each respective Settlement Period relating to Purchaser Interests of the Conduits, other than a Purchaser Interest which, or an undivided interest in which, has been assigned by a Conduit to a Financial Institution pursuant to a Liquidity Agreement, an amount equal to the product of the applicable CP Rate multiplied by the Capital of such Purchaser Interest for each day elapsed during such Settlement Period, annualized on a 360 day basis. "Yield Reserve" means, on any date, an amount equal to the product of (a) the Purchase Limit and (b) 1.875%. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Illinois, and not specifically defined herein, are used herein as defined in such Article 9. Exh. I-22 EXHIBIT II FORM OF PURCHASE NOTICE [Date] Bank One, NA, as Managing Agent 1 Bank One Plaza, 21st Floor Asset-Backed Finance Chicago, Illinois 60670-0596 SunTrust Capital Markets, Inc., as Managing Agent 303 Peachtree Street, 24th Floor Mail Code 3950 Atlanta, Georgia 30308 Attention: Re: PURCHASE NOTICE Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002, by and among Anixter Receivables Corporation, a Delaware corporation (the "Seller"), Anixter Inc., as Servicer, the Financial Institutions, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation (collectively, the "Conduits"), certain Financial Institutions parties thereto, Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc., as Managing Agents and Bank One, as Agent for the Conduits and Financial Institutions (the "Receivables Purchase Agreement"). Capitalized terms used herein shall have the meanings assigned to such terms in the Receivables Purchase Agreement. The Managing Agents are hereby notified of the following Incremental Purchase: Purchase Price: $ -------------------------- Date of Purchase: -------------------------- Requested Discount Rate: [LIBO Rate] [Base Rate] [Commercial Paper rate] Request CP Maturity for Matched Commercial Paper: --------------------------
Exh. II-1 Please credit the Purchase Price in immediately available funds to our Facility Account [and then wire-transfer the Purchase Price in immediately available funds on the above-specified date of purchase to: [Account Name] [Account No.] [Bank Name & Address] [ABA #] Reference: Telephone advice to: [Name] @ tel. No. ( ) Please advise [Name] at telephone no ( ) _________________ if the Conduits will not be making this purchase. In connection with the Incremental Purchase to be made on the above listed "Date of Purchase" (the "Purchase Date"), the Seller hereby certifies that the following statements are true on the date hereof, and will be true on the Purchase Date (before and after giving effect to the proposed Incremental Purchase): (i) the representations and warranties of the Seller set forth in Section 5.1 of the Receivables Purchase Agreement are true and correct on and as of the Purchase Date as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from the proposed Incremental Purchase, that will constitute an Amortization Event or a Potential Amortization Event; (iii) the Facility Termination Date has not occurred, the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%; and (iv) the amount of Aggregate Capital is $_________ after giving effect to the Incremental Purchase to be made on the Purchase Date. Very truly yours, Anixter Receivables Corporation By: ---------------------------- Name: Title: Exh. II-2 EXHIBIT III PLACES OF BUSINESS OF THE SELLER PARTIES; LOCATIONS OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER(S) Exh. III-1 EXHIBIT IV NAMES OF COLLECTION BANKS; COLLECTION ACCOUNTS
Lock-Box Related Collection Account -------- -------------------------- -------- --------------------------
Exh. IV-1 EXHIBIT V FORM OF COMPLIANCE CERTIFICATE To: Bank One, NA, as Agent This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002, by and among Anixter Receivables Corporation, a Delaware corporation (the "Seller"), Anixter Inc., as Servicer, the Financial Institutions, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation (collectively, the "Conduits"), certain Financial Institutions parties thereto, Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc. ("SunTrust"), as Managing Agents and Bank One, as Agent for the Conduits and Financial Institutions (the "Agreement", capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Agreement). THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected __________ of Seller. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Seller and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Amortization Event or Potential Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in paragraph 5 below. 4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. 5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Seller has taken, is taking, or proposes to take with respect to each such condition or event: ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this ______ day of ______, _________. Exh. V-1 SCHEDULE I TO COMPLIANCE CERTIFICATE A. Schedule of Compliance as of __________, ____ with Section ___ of the Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. This schedule relates to the month ended: ------------- Exh. V-2 EXHIBIT VI FORM OF COLLECTION ACCOUNT AGREEMENT [On letterhead of Anixter Inc.] , 2000 ---------- [Lock-Box Bank/Concentration Bank/Depositary Bank] Re: Anixter Inc. Ladies and Gentlemen: Reference is hereby made to P.O. Box # in [city, state, zip code] (the "Lock-Box") of which you have exclusive control for the purpose of receiving mail and processing payments therefrom pursuant to that certain [name of lock-box agreement) between you and Anixter Inc. (the "Company") dated _________, _____ (the "Agreement"). You hereby confirm your agreement to perform the services described therein. Among the services you have agreed to perform therein, is to endorse all checks and other evidences of payment, and credit such payments to the Company's checking account no. maintained with you in the name of the Company (the "Lock-Box Account"). The Company hereby informs you that pursuant to that certain Amended and Restated Receivables Sale Agreement, dated as of October 3, 2002 between the Company and Anixter Receivables Corporation (the "Seller"), the Company has transferred all of its right, title and interest in and to, and exclusive ownership and control of, the Lock-Box and the Lock-Box Account to Seller. The Company and Seller hereby request that the name of the Lock-Box Account be changed to "Anixter Inc., as Servicer." The Company and Seller hereby irrevocably instruct you, and you hereby agree, that upon receiving notice from Bank One, NA ("Bank One") in the form attached hereto as Annex A: (i) the name of the Lock-Box Account will be changed to Bank One for itself and as agent (or any designee of Bank One) and Bank One will have exclusive ownership of and access to the Lock-Box and the Lock-Box Account, and neither the Company, Seller, nor any of their respective affiliates will have any control of the Lock-Box or the Lock-Box Account or any access thereto, (ii) you will either continue to send the funds from the Lock-Box to the Lock-Box Account, or will redirect the funds as Bank One may otherwise request, (iii) you will transfer monies on deposit in the Lock-Box Account, at any time, as directed by Bank One, (iv) all services to be performed by you under the Agreement will be performed on behalf of Bank One, and (v) all correspondence or other mail which you have agreed to send to the Company or Seller will be sent to Bank One at the following address: Exh. VI-1 Bank One, NA Suite _____, 21st Floor 1 Bank One Plaza Chicago, Illinois 60670- ____ Attention: Credit Manager, Asset Backed Securities Division Moreover, upon such notice, Bank One for itself and as agent will have all rights and remedies given to the Company (and Seller, as the Company's assignee) under the Agreement. Seller agrees, however, to continue to pay all fees and other assessments due thereunder at any time. You hereby acknowledge that monies deposited in the Lock-Box Account or any other account established with you by Bank One for the purpose of receiving funds from the Lock-Box are subject to the liens of Bank One for itself and as agent, and will not be subject to deduction, set-off, banker's lien or any other right you or any other party may have against the Company or Seller except that you may debit the Lock-Box Account for any items deposited therein that are returned or otherwise not collected and for all charges, fees, commissions and expenses incurred by you in providing services hereunder, all in accordance with your customary practices for the charge back of returned items and expenses. THIS LETTER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. This letter agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument. This letter agreement contains the entire agreement between the parties, and may not be altered, modified, terminated or amended in any respect, nor may any right, power or privilege of any party hereunder be waived or released or discharged, except upon execution by all parties hereto of a written instrument so providing. In the event that any provision in this letter agreement is in conflict with, or inconsistent with, any provision of the Agreement, this letter agreement will exclusively govern and control. Each party agrees to take all actions reasonably requested by any other party to carry out the purposes of this letter agreement or to preserve and protect the rights of each party hereunder. Exh. VI-2 Please indicate your agreement to the terms of this letter agreement by signing in the space provided below. This letter agreement will become effective immediately upon execution of a counterpart of this letter agreement by all parties hereto. Very truly yours, Anixter Inc. By: ----------------------------- Name: Title: Anixter Receivables Corporation By: ----------------------------- Name: Title: Acknowledged and agreed to this day of ---- -------- [Collection Bank] By: ----------------------------- Name: Title: Bank One, NA, as Agent By: ----------------------------- Name: Title: Exh. VI-3 ANNEX A FORM OF NOTICE [On letterhead of Bank One] , ------------ -------- [Collection Bank/Depositary Bank/Concentration Bank] Re: Anixter Inc./Anixter Receivables Corporation Ladies and Gentlemen: We hereby notify you that we are exercising our rights pursuant to that certain letter agreement among Anixter Inc., Anixter Receivables Corporation, you and us, to have the name of, and to have exclusive ownership and control of, account number ______ (the "Lock-Box Account") maintained with you, transferred to us. [The Lock-Box Account will henceforth be a zero-balance account, and funds deposited in the Lock-Box Account should be sent at the end of each day to ______ .] You have further agreed to perform all other services you are performing under that certain agreement dated ______ between you and [Anixter Inc.] on our behalf. We appreciate your cooperation in this matter. Very truly yours, BANK ONE, NA, as Agent By: ---------------------------- Title: ------------------------- Annex A-1 EXHIBIT VII FORM OF ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT (this "Assignment Agreement") is entered into as of the ___ day of ____________, ____, by and between _____________________ ("Assignor") and __________________ ("Assignee"). PRELIMINARY STATEMENTS A. This Assignment Agreement is being executed and delivered in accordance with Section 12.1(b) of that certain Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002, by and among Anixter Receivables Corporation, a Delaware corporation (the "Seller"), Anixter Inc., as Servicer, the Financial Institutions, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation (collectively, the "Conduits"), certain Financial Institutions parties thereto, Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc. ("SunTrust"), as Managing Agents and Bank One, as Agent for the Conduits and Financial Institutions (as amended, modified or restated from time to time, the "Purchase Agreement"). Capitalized terms used and not otherwise defined herein are used with the meanings set forth or incorporated by reference in the Purchase Agreement. B. Assignor is a Financial Institution party to the Purchase Agreement, and is also a party to a Liquidity Agreement dated as of October 3, 2002 among Assignor, [Falcon] [Three Pillars], and [Bank One][SunTrust], as agent (the "Liquidity Agreement"). Assignee wishes to become a Financial Institution thereunder; and C. Assignor is selling and assigning to Assignee an undivided ____________% (the "Transferred Percentage") interest in all of Assignor's rights and obligations under the Purchase Agreement, the Liquidity Agreement and the Transaction Documents, including, without limitation, Assignor's Back-up Commitment and Liquidity Commitment and (if applicable) the Capital of Assignor's Purchaser Interests as set forth herein. AGREEMENT The parties hereto hereby agree as follows: 1. The sale, transfer and assignment effected by this Assignment Agreement shall become effective (the "Effective Date") two (2) Business Days (or such other date selected by the Agent in its sole discretion) following the date on which a notice substantially in the form of Schedule II to this Assignment Agreement ("Effective Notice") is delivered by the Agent to Conduit or Conduits which are in Assignor's Purchase Group, Assignor and Assignee. From and after the Effective Date, Assignee shall be a Financial Institution party to the Purchase Agreement for all purposes thereof as if Assignee were an original party thereto and Assignee agrees to be bound by all of the terms and provisions contained therein. Exh. VII-1 2. If Assignor has no outstanding Capital under the Purchase Agreement, on the Effective Date, Assignor shall be deemed to have hereby transferred and assigned to Assignee, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor's Back-up Commitment and Liquidity Commitment and all rights and obligations associated therewith under the terms of the Purchase Agreement and the Liquidity Agreement, including, without limitation, the Transferred Percentage of Assignor's future funding obligations under Section 4.1 of the Purchase Agreement and under the Liquidity Agreement. 3. If Assignor has any outstanding Capital under the Purchase Agreement or the Liquidity Agreement, at or before 12:00 noon, local time of Assignor, on the Effective Date Assignee shall pay to Assignor, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of the outstanding Capital of Assignor's Purchaser Interests (such amount, being hereinafter referred to as the "Assignee's Capital"); (ii) all accrued but unpaid (whether or not then due) Yield attributable to Assignee's Capital; and (iii) accruing but unpaid fees and other costs and expenses payable in respect of Assignee's Capital for the period commencing upon each date such unpaid amounts commence accruing, to and including the Effective Date (the "Assignee's Acquisition Cost"); whereupon, Assignor shall be deemed to have sold, transferred and assigned to Assignee, without recourse, representation or warranty (except as provided in paragraph 6 below), and Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor's Back-up Commitment and Liquidity Commitment and the Capital of Assignor's Purchaser Interests (if applicable) and all related rights and obligations under the Purchase Agreement, the Liquidity Agreement and the Transaction Documents, including, without limitation, the Transferred Percentage of Assignor's future funding obligations under Section 4.1 of the Purchase Agreement and under the Liquidity Agreement. 4. Concurrently with the execution and delivery hereof, Assignor will provide to Assignee copies of all documents requested by Assignee which were delivered to Assignor pursuant to the Purchase Agreement. 5. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement. 6. By executing and delivering this Assignment Agreement, Assignor and Assignee confirm to and agree with each other, the Agent, the Managing Agents and the Financial Institutions as follows: (a) other than the representation and warranty that it has not created any Adverse Claim upon any interest being transferred hereunder, Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with the Purchase Agreement, the Liquidity Agreement or the Transaction Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of Assignee, the Purchase Agreement or any other instrument or document furnished pursuant thereto or the perfection, priority, Exh. VII-2 condition, value or sufficiency of any collateral; (b) Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Seller, any Obligor, any Affiliate of Seller or the performance or observance by the Seller, any Obligor, any Affiliate of Seller of any of their respective obligations under the Transaction Documents or any other instrument or document furnished pursuant thereto or in connection therewith; (c) Assignee confirms that it has received a copy of the Purchase Agreement and the Liquidity Agreement and copies of such other Transaction Documents, and other documents and information as it has requested and deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (d) Assignee will, independently and without reliance upon the Agent, any Conduit, any Managing Agent, the Seller or any other Financial Institution or Purchaser 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 the Purchase Agreement, the Liquidity Agreement and the Transaction Documents; (e) Assignee appoints and authorizes the Agent and the Managing Agent of Assignor's Purchase Group to take such action as agent on its behalf and to exercise such powers under the Transaction Documents as are delegated to the Agent and such Managing Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (f) Assignee agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Purchase Agreement, the Liquidity Agreement and the other Transaction Documents, are required to be performed by it as a Financial Institution or, when applicable, as a Purchaser. 7. Each party hereto represents and warrants to and agrees with the Agent and the Managing Agent of its Purchase Group that it is aware of and will comply with the provisions of the Purchase Agreement (including, without limitation, Sections 4.1 and 14.6 thereof) and the Liquidity Agreement. 8. Schedule I hereto sets forth the revised Back-up Commitment and Liquidity Commitment of Assignor and the Back-up Commitment and Liquidity Commitment of Assignee, as well as administrative information with respect to Assignee. 9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS. 10. Assignee hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all senior indebtedness for borrowed money of Company, it will not institute against, or join any other Person in instituting against, Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Exh. VII-3 IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers of the date hereof. [ASSIGNOR] By: ------------------------- Title: [ASSIGNEE] By: ------------------------- Title: Exh. VII-4 SCHEDULE I TO ASSIGNMENT AGREEMENT LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS DATE: , --------------- ---- TRANSFERRED PERCENTAGE: % --------
- ----------------------------------------------------------------------------------------------------------------------- A-1 A-2 A-3 A-4 B-1 B-2 - ----------------------------------------------------------------------------------------------------------------------- ASSIGNOR BACK-UP BACK-UP LIQUIDITY LIQUIDITY COMMITMENT COMMITMENT COMMITMENT COMMITMENT (PRIOR TO GIVING (AFTER GIVING (PRIOR TO GIVING (AFTER GIVING RATABLE EFFECT TO THE EFFECT TO THE EFFECT TO THE EFFECT TO THE OUTSTANDING SHARE OF ASSIGNMENT ASSIGNMENT ASSIGNMENT ASSIGNMENT CAPITAL OUTSTANDING AGREEMENT) AGREEMENT) AGREEMENT) AGREEMENT) (IF ANY) CAPITAL - ----------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ A-2 A-4 B-1 B-2 - ----------------------------------------------------------------------------------------------------------------------- ASSIGNEE BACK-UP LIQUIDITY COMMITMENT COMMITMENT (AFTER GIVING (AFTER GIVING RATABLE EFFECT TO THE EFFECT TO THE OUTSTANDING SHARE OF ASSIGNMENT ASSIGNMENT CAPITAL OUTSTANDING AGREEMENT) AGREEMENT) (IF ANY) CAPITAL - ----------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------
ADDRESS FOR NOTICES - ------------------- - ------------------- Attention: Phone: Fax: Exh. VII-5 SCHEDULE II TO ASSIGNMENT AGREEMENT EFFECTIVE NOTICE TO: , Assignor ------------------------ ------------------------ ------------------------ ------------------------ TO: , Assignee ------------------------ ------------------------ ------------------------ ------------------------ The undersigned, as Agent under the Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002, by and among Anixter Receivables Corporation, a Delaware corporation (the "Seller"), Anixter Inc., as Servicer, the Financial Institutions, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation (collectively, the "Conduits"), certain Financial Institutions parties thereto, Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc. ("SunTrust"), as Managing Agents and Bank One, as Agent for the Conduits and Financial Institutions, hereby acknowledges receipt of executed counterparts of a completed Assignment Agreement dated as of ____________, ____ between __________________, as Assignor, and __________________, as Assignee. Terms defined in such Assignment Agreement are used herein as therein defined. 1. Pursuant to such Assignment Agreement, you are advised that the Effective Date will be --------------, ----. 2. The Managing Agent, on behalf of the affected Conduit(s), hereby consents to the Assignment Agreement as required by Section 12.1(b) of the Receivables Purchase Agreement. Exh. VII-6 [3. Pursuant to such Assignment Agreement, the Assignee is required to pay $____________ to Assignor at or before 12:00 noon (local time of Assignor) on the Effective Date in immediately available funds.] Very truly yours, BANK ONE, NA, individually and as Agent [and as Managing Agent] By: ------------------------------ Title: ---------------------------- SUNTRUST CAPITAL MARKETS, INC., as Managing Agent By: ------------------------------ Title: ---------------------------- Exh. VII-7 EXHIBIT VIII CREDIT AND COLLECTION POLICY See Exhibit V to Receivables Sale Agreement Exh. VIII-1 EXHIBIT IX FORM OF CONTRACT(S) See Attached Exh. IX-1 EXHIBIT X FORM OF MONTHLY REPORT In addition to such other information as may be included on this exhibit, each Monthly Report should set forth the following with respect to the related Calculation Period (as defined in the Receivables Sale Agreement): (i) the aggregate Outstanding Balance of Receivables created and conveyed by Originator to Seller in purchases pursuant to the Receivables Sale Agreement during such Calculation Period, as well as the Net Receivables Balance included therein, (ii) the aggregate purchase price payable to Originator in respect of such purchases, specifying the Discount Factor (as defined in the Receivables Sale Agreement) in effect for such Calculation Period and the aggregate Purchase Price Credits (as defined in the Receivables Sale Agreement) deducted in calculating such aggregate purchase price, (iii) the aggregate amount of funds received by the Servicer during such Calculation Period which are to be applied as Reinvestments, (iv) the increase or decrease in the amount outstanding under the Subordinated Note (as defined in the Receivables Sale Agreement) as of the end of such Calculation Period after giving effect to the application of funds toward the aggregate purchase price and the restrictions on Subordinated Loans (as defined in the Receivables Sale Agreement) set forth in Section 1.2(a)(ii) of the Receivables Sale Agreement, and (v) the amount of any capital contribution made by Originator to Seller as of the end of such Calculation Period pursuant to Section 1.2(b) of the Receivables Sale Agreement. The above is a true and accurate accounting pursuant to the terms of the Amended and Restated Receivables Purchase Agreement, dated as of October 3, 2002 (the "Agreement"), by and among Anixter Receivables Corporation, a Delaware corporation (the "Seller"), Anixter Inc., as Servicer, the Financial Institutions, Falcon Asset Securitization Corporation and Three Pillars Funding Corporation (collectively, the "Conduits"), certain Financial Institutions parties thereto, Bank One, NA (Main Office Chicago) ("Bank One") and SunTrust Capital Markets, Inc. ("SunTrust"), as Managing Agents and Bank One, as Agent for the Conduits and Financial Institutions, and I have no knowledge of the existence of any conditions or events which constitute an Amortization Event or Potential Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by this monthly report or as of the date of this certificate, except as set forth below. By: ----------------------- Name: --------------------- Title: -------------------- Company Name: ------------- Date: --------------------- Exh. X-1 EXHIBIT X FORM OF MID-MONTH REPORT (Attached) Exh. X-2 SCHEDULE A COMMITMENTS OF FINANCIAL INSTITUTIONS; PURCHASE LIMITS FALCON PURCHASE GROUP PURCHASE GROUP LIMIT: $125,000,000
Financial Institution Back-up Commitment Liquidity Commitment --------------------- ------------------ -------------------- Bank One, NA $125,000,000 $127,500,000
THREE PILLARS PURCHASE GROUP PURCHASE GROUP LIMIT: $100,000,000
Financial Institution Back-up Commitment Liquidity Commitment --------------------- ------------------ -------------------- SunTrust Bank $100,000,000 $[_________]
Sch. A-1 SCHEDULE B CLOSING DOCUMENTS (Attached) i SCHEDULE 1 LIST OF FISCAL MONTHS (Attached) i EX-10.12(E) 7 c75506exv10w12xey.txt AMEND NO.3 TO 1999 RSTD DEFERRED COMPENSATION PLAN EXHIBIT 10.12(e) ANIXTER INC. DEFERRED COMPENSATION PLAN 1999 RESTATEMENT AMENDMENT NO. 3 This Amendment No. 3 to the Plan is effective as of November 1, 2002, and is executed as of the date shown below. Capitalized words used herein without definition shall have the meaning ascribed to them in the Plan. WHEREAS, the Company desires to permit Participants to choose the time and method in which benefits will be distributed in the event of termination due to Disability; and WHEREAS, the Board has approved this Amendment. NOW, THEREFORE, the Plan is amended as follows: FIRST: Section 5.2(b) is hereby amended in its entirety to read as follows: (b) FORM OF BENEFIT. A Participant may elect to have his Account balance attributable to all Deferral Periods paid in any manner described in Section 5.1(b) of the Plan. If the Participant does not make an election, the benefit shall be paid in a single lump sum. A Participant may change this election on a form approved by the Committee, and such election shall supercede the Participant's prior elections, provided it is received at least two (2) calendar years prior to the date any amounts are to be distributed. SECOND: Section 5.2(c) is hereby amended in its entirety to read as follows: (c) COMMENCEMENT. The amount of the benefit shall be based on the value of the Participant's Account on the Valuation Date and shall be paid on the settlement date. The date on which lump-sum payments are made and on which installment payments commence shall be the settlement date. If a combination of lump sum and installments is elected, the lump sum and the first installment payment shall be paid on the settlement date. The settlement date shall be no more than sixty-five (65) days after the Valuation Date. Earnings shall continue to accrue on the Participant's Account to the settlement date, and Earnings on any remaining Account balance after the settlement date shall continue to accrue and be included in all payments made under this Section 5.2. All payments shall be made as of the first day of the month. From and after the Valuation Date, Earnings shall accrue without the one hundred forty percent (140%) multiplier. If payment is by installments, the amount of the installments shall be redetermined each January 1 based upon the remaining Account balance, remaining number of installments and an Earnings Rate (without the one hundred forty percent (140%) multiplier) equal to the rate in effect for the preceding quarter. PAGE 1 - AMENDMENT NO.3 IN WITNESS WHEREOF, the Board has caused this Amendment to be executed as of this ____ day of ________________20____. ANIXTER INC. By: -------------------------------------- Its Dated: -------------------------------------- PAGE 2 - AMENDMENT NO.3 EX-10.19 8 c75506exv10w19.txt 2001 MID-LEVEL STOCK OPTION PLAN EXHIBIT 10.19 ANIXTER INTERNATIONAL INC. 2001 MID-LEVEL STOCK OPTION PLAN 1. PURPOSE AND EFFECTIVE DATE. Anixter International Inc. (the "Company") has established this 2001 Mid-Level Stock Option Plan (the "Plan") to facilitate the retention and continued motivation of key mid-level employees and to align more closely their interests with those of the Company and its stockholders. The effective date of the Plan shall be February 14, 2001. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors, or the Compensation Committee of the Company's Board of Directors or such other Board committee as the Board may designate (the "Committee"). The Committee has the authority and responsibility for the interpretation, administration and application of the provisions of the Plan, and the Committee's interpretations of the Plan, and all actions taken by it and determinations made by it shall be binding on all persons. No Board or Committee member shall be liable for any determination, decision or action made in good faith with respect to the Plan. 3. SHARES SUBJECT TO PLAN. A total of 700,000 shares of Common Stock of the Company ("Shares") may be issued pursuant to the Plan. The Shares may be authorized but unissued Shares or Shares reacquired by the Company and held in its treasury. Grants of incentive awards under the Plan will reduce the number of Shares available thereunder by the maximum number of Shares obtainable under such grants. The number of Shares covered by or specified in the Plan and the number of Shares and the purchase price for Shares under any outstanding awards, may be adjusted proportionately by the Committee for any increase or decrease in the number of issued Shares or any change in the value of the Shares resulting from a subdivision or consolidation of Shares, reorganization, recapitalization, spin-off, payment of stock dividends on the Shares, any other increase or decrease in the number of issued Shares made without receipt of consideration by the Company, or the payment of an extraordinary cash dividend. 4. ELIGIBILITY. All mid-level employees, of the Company and its subsidiaries are eligible to be selected to receive a grant under the Plan by the Committee. The Committee may condition eligibility under the Plan or participation under the Plan, and any grant or exercise of an incentive award under the Plan on such conditions, limitations or restrictions as the Committee determines to be appropriate for any reason. 5. AWARDS. The Committee may grant awards under the Plan to eligible persons in the form of stock options and shall establish the number of Shares subject to each such grant and the terms thereof, including any adjustments for reorganizations and dividends, subject to the following: (a) All options granted under the Plan shall be evidenced by agreements in such form and containing such terms and conditions not inconsistent with the Plan as the Committee shall prescribe. (b) The exercise price of any option shall not be less than the fair market value of a corresponding number of Shares as of the date of grant. (c) No person may be granted options under the Plan for more than 25,000 Shares. (d) No options may be granted under the Plan to any officer of the Company. (e) No options may be granted under the Plan after the 2001 annual meeting of stockholders of the Company. 6. ADMINISTRATION OF THE PLAN. The Board of Directors or the Committee may from time to time suspend, terminate, revise or amend the Plan or the terms of any grant in any respect whatsoever. Adopted on the 14th of February, 2001, by the Compensation Committee of the Board of Directors of Anixter International Inc. ----------------------- James E. Knox Secretary 2 EX-10.20 9 c75506exv10w20.txt 1998 MID-LEVEL STOCK OPTION PLAN EXHIBIT 10.20 ANIXTER INTERNATIONAL INC. 1998 MID-LEVEL STOCK OPTION PLAN 1. PURPOSE AND EFFECTIVE DATE. Anixter International Inc. (the "Company") has established this 1998 Mid-Level Stock Option Plan (the "Plan") to facilitate the retention and continued motivation of key mid-level employees and to align more closely their interests with those of the Company and its stockholders. The effective date of the Plan shall be February 18, 1998. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors, or the Compensation Committee of the Company's Board of Directors or such other Board committee as the Board may designate (the "Committee"). The Committee has the authority and responsibility for the interpretation, administration and application of the provisions of the Plan, and the Committee's interpretations of the Plan, and all actions taken by it and determinations made by it shall be binding on all persons. No Board or Committee member shall be liable for any determination, decision or action made in good faith with respect to the Plan. 3. SHARES SUBJECT TO PLAN. A total of 360,500 shares of Common Stock of the Company ("Shares") may be issued pursuant to the Plan. The Shares may be authorized but unissued Shares or Shares reacquired by the Company and held in its treasury. Grants of incentive awards under the Plan will reduce the number of Shares available thereunder by the maximum number of Shares obtainable under such grants. The number of Shares covered by or specified in the Plan and the number of Shares and the purchase price for Shares under any outstanding awards, may be adjusted proportionately by the Committee for any increase or decrease in the number of issued Shares or any change in the value of the Shares resulting from a subdivision or consolidation of Shares, reorganization, recapitalization, spin-off, payment of stock dividends on the Shares any other increase or decrease in the number of issued Shares made without receipt of consideration by the Company, or the payment of an extraordinary cash dividend. 4. ELIGIBILITY. All mid-level employees, of the Company and its subsidiaries are eligible to be selected to receive a grant under the Plan by the Committee. The Committee may condition eligibility under the Plan or participation under the Plan, and any grant or exercise of an incentive award under the Plan on such conditions, limitations or restrictions as the Committee determines to be appropriate for any reason. 5. AWARDS. The Committee may grant awards under the Plan to eligible persons in the form of stock options, and shall establish the number of Shares subject to each such grant and the terms thereof, including any adjustments for reorganizations and dividends, subject to the following: (a) All awards granted under the Plan shall be evidenced by agreements in such form and containing such terms and conditions not inconsistent with the Plan as the Committee shall prescribe. (b) The exercise price of any option shall not be less than 85% of the fair market value of a corresponding number of Shares as of the date of grant. (c) No person may be granted awards under the Plan for more than 5,000 Shares. (d) No stock options may be granted under the Plan after December 31, 1998. 6. ADMINISTRATION OF THE PLAN. The Board of Directors or the Committee may from time to time suspend, terminate, revise or amend the Plan or the terms of any grant in any respect whatsoever. 2 EX-21.1 10 c75506exv21w1.txt LIST OF SUBSIDIARIES OF THE REGISTRANT . . . EXHIBIT 21.1 ANIXTER INTERNATIONAL SCHEDULE 21 LIST OF SUBSIDIARIES
JURISDICTION COMPANY NAME OF INCORPORATION - ------------ ---------------- Anixter Inc. Delaware Accu-Tech Corporation Georgia Accu-Tech Enterprises, Inc. Georgia (formerly Wallace Electronics, Inc.) AIS, S.A. Dominican Republic Anixter Australia Pty. Ltd. Australia allNET Technologies Pty. Ltd. Australia Anixter Cables y Manufacturas, S.A. de C.V. Mexico Anixter Chile S.A. Chile Anixter Colombia S.A. Colombia Anixter Costa Rica S.A. Costa Rica Anixter del Peru, S.A.C. Peru Anixter de Mexico, S.A. de C.V. Mexico Anixter do Brazil Ltda. Brazil Anixter Information Systems Corporation Illinois Anixter Korea Limited Korea Anixter New Zealand Limited New Zealand Anixter Pentacon Inc. Delaware Anixter Philippines Inc Delaware Anixter Procurement Corporation Illinois Anixter Puerto Rico, Inc. Delaware Anixter -- Real Estate Inc. Illinois Anixter Receivables Corporation Delaware Anixter Venezuela Inc. Delaware Anixter Financial Inc. Delaware Anixter Communications (Malaysia) Sdn Bhd Malaysia Anixter Singapore Pte Ltd. Singapore Anixter Hong Kong Limited Hong Kong Anixter International Trading (Qingdao) Company Ltd. China Anixter Trading (Shanghai) Company Limited China Anixter Thailand Inc. Delaware Anixter Holdings, Inc. Delaware Anixter Argentina S.A. Argentina Anixter AEH Holdings Inc. Delaware Anixter Europe Holdings B.V. Netherlands Anixter Austria GmbH Austria Anixter (CIS) L.L.C. (Russia) Russia Anixter Danmark A/S Denmark Anixter Deutschland GmbH Germany Anixter Hungary Ltd. Hungary Anixter Iletsim Sistemleri Pazarlama ve Ticaret A.S. Turkey Anixter Network Systems Greece L.L.C. Greece Anixter Norge A.N.S. Norway Anixter Poland Sp.z.o.o. Poland Anixter Portugal S.A. Portugal Anixter Sverige AB Sweden B.E.L. Corporation Delaware
Anixter Eurofin B.V. Netherlands Anixter Canada Inc. Canada WireXpress Ltd. Canada Anixter Eurinvest B.V. Netherlands Anixter Belgium B.V.B.A. Belgium Anixter Espana S.L. Spain Anixter France SARL France Anixter International B.V.B.A. Belgium Anixter Italia S.r.l. Italy Anixter International Ltd. United Kingdom Anixter Power & Construction Ltd. United Kingdom Anixter U.K. Ltd. United Kingdom Anixter Distribution Ireland Ltd. Ireland Anixter Logistics, Europe B.V.B.A. Belgium Anixter Nederland B.V. Netherlands Anixter Switzerland Sarl Switzerland Anixter Finance Ltd. United Kingdom GL Holding of Delaware, Inc. Delaware Itel Corporation California Itel Container Ventures Inc. Delaware ICV GP Inc. Delaware ICV LP Inc. Delaware Itel Rail Holdings Corporation Delaware Fox River Valley Railroad Corporation Wisconsin Green Bay & Western Railroad Company Wisconsin Michigan & Western Railroad Company Michigan Rex Railways, Inc. New Jersey Signal Capital Corporation Delaware Richdale, Ltd. Delaware Signal Capital Projects, Inc. Delaware Signal Capital Norwalk Inc. Delaware Railcar Services Corporation Delaware
EX-23.1 11 c75506exv23w1.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in each of the following Registration Statements of Anixter International Inc. of our report dated February 3, 2003, with respect to the consolidated financial statements and schedules of Anixter International Inc. included in this Annual Report (Form 10-K) for the year ended January 3, 2003. FORM AND REGISTRATION STATEMENT NO. PURPOSE -------------- ------- Form S-8 No. 2-93173 1983 Stock Incentive Plan Form S-8 No. 33-13486 Key Executive Equity Plan Form S-8 No. 33-21656 1988 Employee Stock Purchase Plan Form S-8 No. 33-38364 1989 Employee Stock Incentive Plan Form S-8 No. 33-60676 1993 Director Stock Option Plan Form S-8 No. 333-05907 1996 Stock Incentive Plan Form S-3 No. 333-09185 8% Senior Notes Due 2003 Form S-8 No. 333-56815 1998 Mid-level Stock Option Plan Form S-8 No. 333-56935 1998 Stock Incentive Plan Form S-3 No. 333-42788 Zero-coupon convertible notes due 2020 Form S-8 No. 333-103270 2001 Stock Incentive Plan ERNST & YOUNG LLP Chicago, Illinois March 17, 2003 EX-24.1 12 c75506exv24w1.txt POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director and/or officer of Anixter International Inc., a Delaware corporation (the "Corporation"), which is about to file an annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, on Form 10-K hereby constitutes and appoints Dennis J. Letham and John A. Dul, and each of them, his or her true and lawful attorney-in-fact and agent, with full power and all capacities, to sign the Corporation's Form 10-K and any or all amendments thereto, and any other documents in connection therewith, to be filed 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 premises, as fully to all intents and purposes as she or he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned and hereunto set her or his hand and seal as of the 14th day of March 2003. /s/ Lord James Blyth /s/ Stuart M. Sloan /s/ Robert L. Crandall /s/ Thomas C. Theobald /s/ Robert W. Grubbs /s/ Mary Agnes Wilderotter /s/ F. Philip Handy /s/ Matthew Zell /s/ Melvyn N. Klein /s/ Samuel Zell /s/ John R. Petty EX-99.1 13 c75506exv99w1.txt CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Anixter International Inc. (the "Company") on Form 10-K for the period ending January 3, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert W. Grubbs, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. - ---------------------------------------- Robert W. Grubbs President and Chief Executive Officer March 18, 2003 EX-99.2 14 c75506exv99w2.txt CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Anixter International Inc. (the "Company") on Form 10-K for the period ending January 3, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dennis J. Letham, Senior Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. - ---------------------------------------- Dennis J. Letham Senior Vice President-Finance Chief Financial Officer March 18, 2003 -----END PRIVACY-ENHANCED MESSAGE-----