-----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, VF8tnvRKiBxSeUb4jDzrmIp7sW/FaNPar0mujkjfvlB9keonRTSn8Suon8hA4ZvF Kq2KQW7NGT24KbcDIP89oQ== /in/edgar/work/0000950137-00-004796/0000950137-00-004796.txt : 20001114 0000950137-00-004796.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950137-00-004796 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUSERV CORP CENTRAL INDEX KEY: 0000025095 STANDARD INDUSTRIAL CLASSIFICATION: [5072 ] IRS NUMBER: 362099896 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: SEC FILE NUMBER: 333-49846 FILM NUMBER: 762352 BUSINESS ADDRESS: STREET 1: 8600 WEST BRYN MAWR AVE CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 7736955000 MAIL ADDRESS: STREET 1: 8600 W. BRYN MAWR AVENUE CITY: CHICAGO STATE: IL ZIP: 60631-3505 FORMER COMPANY: FORMER CONFORMED NAME: COTTER & CO DATE OF NAME CHANGE: 19920703 S-2 1 c53770s-2.txt FORM S-2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 2000 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM S-2 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------------ TRUSERV CORPORATION (Exact name of Registrant as specified in its charter) Delaware 36-2099896 (State of Incorporation) (IRS Employer Identification No.)
8600 West Bryn Mawr Avenue Chicago, Illinois 60631-3505 (773) 695-5000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Leonard G. Kuhr, Senior Vice President and Chief Financial Officer TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, Illinois 60631-3505 (773) 695-5000 Fax: (773) 695-6563 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy to: Geoffrey R. Morgan Michael Best & Friedrich LLP 100 East Wisconsin Avenue Milwaukee, Wisconsin 53202-4108 (414) 271-6560 Fax: (414) 277-0656 ------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If the Registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------ AMOUNT PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------ Variable Denomination Subordinated Fixed Rate Term Notes.................................... $50,000,000 100% $50,000,000 $13,200 - ------------------------------------------------------------------------------------------------------------------------
(1) Estimated in accordance with Rule 457 solely for purposes of calculating the registration fee. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED PROSPECTUS TRUSERV CORPORATION $50,000,000 VARIABLE DENOMINATION SUBORDINATED FIXED RATE TERM NOTES
PER UNIT TOTAL -------- -------------- Public Price................................................ $1,000 $50,000,000(1) Underwriting discounts...................................... none none (2) Proceeds to TruServ......................................... $1,000 $50,000,000(3)
(1) The minimum purchase required is $1,000. (2) There are no underwriters. We are offering the notes directly to you. (3) There are no firm commitments for the sale of these notes. If the entire offering is sold, we will receive $50,000,000 before estimated expenses of $87,200. The notes are designed to provide you with a convenient means of investing funds directly with us. If you invest in the notes, your investment will be represented by a program account at The Northern Trust Company, which is our agent bank, instead of by a certificate or other evidence of ownership. The notes have various maturity dates ranging from two to four years from the date of issuance and will pay fixed rates of interest for each maturity. There is neither a market for these notes nor is a market expected to develop. The notes have restricted transferability, and they may be redeemed by us. We also reserve the right to modify, withdraw or cancel this offer. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 IN THIS PROSPECTUS. THE NOTES ARE UNSECURED OBLIGATIONS AND ARE SUBORDINATED TO SENIOR NOTES, BANK DEBT, AMOUNTS DUE TRADE CREDITORS AND OTHER DEBT. YOUR PROGRAM ACCOUNT IS NOT A DEPOSIT OR OTHER BANK ACCOUNT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. ------------------ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ THESE SECURITIES ARE OFFERED THROUGH TRUSERV CORPORATION 8600 West Bryn Mawr Avenue Chicago, Illinois 60631-3505 THE DATE OF THIS PROSPECTUS IS 3 WHERE YOU CAN FIND MORE INFORMATION The term "TruServ," "Company," "Cooperative," "We," "Us" and similar words refer to TruServ Corporation. The terms "member," "retailer," "you," "your," and similar words refer to someone who purchases our notes. We file annual, quarterly and special reports, and other information with the SEC. Our SEC filings are available to the public over the Internet on the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. REPORTS TO SECURITY HOLDERS Each year, we distribute an annual report containing consolidated financial statements reported upon by our independent auditors to our stockholder-members. We may, from time to time, also furnish interim reports to our stockholder-members, as determined by our management. DOCUMENTS INCLUDED AND INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" information we file with them which means that we can disclose important information to you by referring you to those documents and delivering them to you with this prospectus. We are incorporating by reference our Annual Report on Form 10-K for the year ended December 31, 1999, our Quarterly Reports on Form 10-Q for the quarters ended April 1, 2000, July 1, 2000 and September 30, 2000 and our Current Reports on Form 8-K, filed June 28, 2000, July 6, 2000, and September 28, 2000, all of which we filed with the SEC under Section 15(d) of the Securities Exchange Act of 1934. We also are including the Annual Report on Form 10-K for the year ended December 31, 1999 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 with this prospectus for your information. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. 2 4 SUMMARY The summary highlights information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all the information that you should consider before buying notes in this offering. You should read the entire prospectus carefully, including our consolidated financial statements and the related notes included elsewhere in this prospectus. TruServ Corporation is a member-owned wholesaler of hardware, lumber/building materials and related merchandise. Our company is the largest member-owned wholesaler of these items in the United States. For financial reporting purposes, we operate in a single industry as a member-owned wholesaler cooperative. Our corporate headquarters are located at 8600 West Bryn Mawr Avenue, Chicago, Illinois 60631-3505. Our telephone number is (773) 695-5000. We are offering the notes exclusively to current company Members who own Class A common stock and to current holders of certain TruServ Corporation Variable Denomination Fixed Rate Redeemable Term Notes. You may purchase the notes in units of $1,000. Ownership of the notes can be issued in one of the following four types of accounts: 1. Single tenancy; 2. Joint tenancy with right of survivorship; 3. Tenancy by custodian (under the Uniform Gifts to Minors Act); or 4. Living trust. We will issue notes each calendar quarter in two, three, and four-year terms. You must pay for the notes with cash. You will have the option of receiving your semi-annual interest payments, or you may have the interest payments added to your account balance. The notes have a fixed interest rate that is reset each calendar quarter and is equivalent to the comparable United States Treasury Note rate plus two percent. The current interest rate is 7.67% per annum for two year notes, 7.90% per annum for three year notes and 7.89% per annum for four year notes. That interest rate will change in January, 2001. The notes are not the same as a deposit or other bank account. They are not insured by the Federal Deposit Insurance Corporation or any other government agency or insurer. All investments in the notes are investments in TruServ Corporation securities and are not obligations of any other bank or company. You may not transfer any of the notes that you purchase, nor can you pledge them as collateral for any of your debts. Additionally, we may redeem all or part of the notes prior to the redemption date. If we elect to redeem the notes, you will be paid the principal amount plus accrued interest up to the date of redemption. The notes are unsecured obligations and are subordinated to senior notes, bank debt, amounts due trade creditors and other debt. Because they are unsecured, they rank equally with all of our other unsecured and subordinated debt. There is no existing trading market for these notes, and we do not expect any market will develop. We plan to use the proceeds from this offering for general working capital, including the purchase of merchandise for resale to our Members. 3 5 CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for each of the periods indicated is as follows:
FOR THE FISCAL YEARS ------------------------------------------------- 1999 1998 1997 1996 1995 ----- ---- ---- ---- ---- (.60) 1.33 2.02 2.57 2.78
FOR THE THIRTY-NINE WEEKS ENDED -------------------------------- SEPTEMBER 30, OCTOBER 2, 2000 1999 ------------- ---------- 1.22 1.00
The ratio of earnings to fixed charges has been computed by dividing earnings before income taxes plus fixed charges by fixed charges. Fixed charges consist of interest expense and the portion of rental expense deemed to represent interest expense. For 1999, earnings were insufficient to cover fixed charges by $131,143,000. RISK FACTORS The following risks should be considered before investing in the Notes: SOURCES OF PAYMENTS TO HOLDERS OF THE NOTES No sinking fund will be created to repay the notes upon maturity or earlier redemption. The principal source of funds for the Company's payments of principal and interest and to meet expenses will be general revenues. See "General Business Risks." LACK OF MARKET FOR NOTES AND RESTRICTIONS ON TRANSFER There is currently no trading market for the notes and we do not foresee such a market developing at any time in the future. Additionally, ownership of the notes may not be transferred and the notes may not be pledged as collateral. Any probate proceeding or court decree affecting ownership of the notes will cause such notes to be redeemed and subject to a penalty. SUBORDINATION OF NOTES The notes are unsecured obligations and are subordinated to our senior notes, bank debt, amounts due trade creditors and other debts. Because they are unsecured, they rank equally with all of our other unsecured and subordinated debt. The notes have no secondary market and cannot be transferred or pledged as collateral. All of your investments in us, including the notes, are subject to our lien rights ensuring payment of your debts to us. The notes are uninsured. COMPETITION Our markets are subject to increasingly intense competition and changes. We expect continued intense competition from the so-called "Big Box" stores such as Home Depot, Menards and Lowes, as well as from additional emphasis on directly competitive lines of business by Home Depot and diversified retailers such as Sears. These competitors may have greater resources, larger market shares and more widespread presence than we do. We believe our cooperative structure best situates our Members to compete with the Big Boxes and other market competitors, but no assurances can be made that any Member or Members will be successful. VOLATILE PRICING OF MERCHANDISE/INVENTORY The price of merchandise and inventory in the lumber and building materials industry can change rapidly and such changes may affect our profit margins and competitive abilities adversely. We believe our cooperative structure creates the best opportunity for our Members to obtain lower prices and maximize their purchasing power but such efficiencies cannot be assured. 4 6 REGIONAL MARKET VARIATIONS We transact business nationwide. From time to time, significant variations in marketing opportunities may confront our Members due to economic conditions in the Member's specific geographic region. We are unable to predict any adverse regional economic conditions that may materially affect a Member or Members. ENVIRONMENTAL We engage in activities, such as the manufacture of paint and related products, that could have an environmental impact. These areas are subject to constant review and scrutiny by governmental authorities at the federal, state and local level. We are unable to predict whether, or to what extent, such business activities and governmental scrutiny may result in future costs or liabilities. MEMBER BASE The success of the company is dependent upon the continued support from its members and their purchases through the cooperative. The trend in the number of members participating in the company's programs has recently been unfavorable. If this trend continues the company's operating results and financial condition could be adversely effected. ACCESS TO CAPITAL The company is financed by debt capital obtained from various external sources. The majority of the short-term capital is mainly derived from a $300 million revolving credit agreement supported by nine major financial institutions. This agreement is subject to the company's compliance with certain financial and non-financial covenants, and any breach of these covenants would increase the cost of such financing and make it more difficult to access the necessary working capital requirements. KEY PERSONNEL Our success depends to a significant degree upon the continued contributions of key management, sales, marketing and merchandising personnel, many of whom would be difficult to replace. If certain of these associates were to leave, the company would be adversely effected. We also believe our future success is dependent upon our ability to attract and retain highly skilled managers, sales, marketing and merchandising associates. Competition for these types of associates is intense and there can be no assurance that we will be successful in attracting and retaining the necessary personnel. To the extent we are not successful, we could be adversely effected. 5 7 THE NOTE PROGRAM The program is designed to provide you with a convenient means of investing funds directly with us. The total amount being offered is $50,000,000 and notes are sold initially in units of $1,000. TERMS The notes will be issued quarterly and will be offered in two, three and four-year terms. The notes will not be subject to any sinking fund. When you invest in the notes, they will be issued in uncertificated form, and you will not receive a certificate or other instrument evidencing the note. Rather, your investment will be maintained in book-entry form by The Northern Trust Company, our agent bank. INTEREST RATE We will determine the notes' interest rate. We will set the fixed interest rate of the notes each quarter at a rate that is equivalent to the comparable Treasury Note rate plus two percent. The current interest rate is 7.67% per annum for two year notes, 7.90% per annum for three year notes and 7.89% per annum for four year notes. That interest rate will change in January, 2001. You may call a toll free number (1-800-507-9000), if you would like information concerning the notes' interest rate. You will have the option of receiving your semi-annual interest payments, or you may have the interest payments added to your account balance. Interest is calculated on a 365-day year and is paid semi-annually. Interest payments and principal at maturity are paid by check on the next business day. You may change your option of either receiving interest payments or having your interest reinvested by notifying The Northern Trust Company, our agent bank, in writing. TYPES OF ACCOUNTS You may hold ownership of the notes in one of the four following types of accounts: 1. Single tenancy; 2. Joint tenancy with right of survivorship; 3. Tenancy by custodian (under the Uniform Gifts to Minors Act); or 4. Living trust. You may not transfer the notes and you may not pledge them as collateral for any of your debts. You cannot hold the notes in a retirement savings plan as described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended. ACCOUNT INFORMATION You may call us toll-free at 1-800-507-9000 to obtain current information about your account. HOW TO INVEST You must request an application package by calling us toll-free at 1-800-507-9000. Upon request of an application, you will receive the Prospectus, the Program Description, an IRS W-9 Certification Form and an application, which you will need to complete and return to us. THE COMPLETED APPLICATION, THE IRS W-9 CERTIFICATION FORM AND THE CHECK FOR YOUR INVESTMENT AMOUNT MUST BE RECEIVED BY US AT OUR DESIGNATED LOCKBOX BANK ON OR BEFORE THE LAST BUSINESS DAY BEFORE THE START OF EACH CALENDAR-YEAR QUARTER. 6 8 USE OF PROCEEDS We intend to use the proceeds from the sale of the notes for general working capital, including the purchase of merchandise for resale to our Members. PLAN OF DISTRIBUTION We are offering the notes exclusively to our current Members who own Class A common stock and current holders of certain TruServ Corporation Variable Denomination Fixed Rate Redeemable Term Notes. You may purchase the notes only in denominations of $1,000. We are offering and selling the notes directly to you. There are no underwriters. 7 9 CERTAIN TERMS OF THE NOTES GENERAL The notes are issued under an indenture between us and our trustee, U.S. Bank Trust National Association. We have summarized selected provisions of the indenture below. This summary is not complete. The form of the indenture has been filed as an exhibit to the Registration Statement, and you should read the indenture for provisions that may be important to you. In the summary below, we have included references to section numbers of the indenture, so that you can easily locate these provisions. Terms used in the summary have the meanings specified in the indenture. We will send you, at no charge, a copy of the indenture upon written or oral request directed to Leonard G. Kuhr, Senior Vice President and Chief Financial Officer, TruServ Corporation, 8600 West Bryn Mawr Avenue, Chicago, Illinois 60631-3505 or telephone number (773) 695-5000. MODIFICATION OF THE INDENTURE The indenture permits us and the trustee, with the consent of the holders of not less than 66 2/3% of the aggregate principal amount of the notes outstanding at that time, to add, change in any manner or eliminate any of the provisions of the indenture or to modify in any way the rights of the note holders. However, we may not add or modify any provision that would, among other things: 1) reduce the principal amount of any note; or 2) reduce the aggregate principal amount of the notes outstanding, the holders of which need to consent to our adding, changing or eliminating any provision of the indenture (Section 802). EVENTS OF DEFAULT An event of default is defined in the indenture as non-payment of any principal or interest amount on any note when due. An administrative error is not considered an event of default unless the error has continued uncorrected for sixty days after written notice of the error was sent to the agent bank or trustee, with a copy to us. The trustee is the sole judge of whether the error has been corrected. Other events of default include default in the performance of any other note covenant after sixty days written notice to us of the default and certain events of bankruptcy, insolvency or reorganization. The indenture requires us to file an annual written statement with the trustee as to the presence or absence of certain defaults under the terms thereof. Within ninety days after a default has occurred, the trustee will notify note holders of all uncured and unwaived defaults of which it is aware. The indenture provides that, while an event of default continues, either the trustee or the holders of 50% of more of the aggregate principal amount of the outstanding notes may declare the principal of all such notes to be immediately due and payable. However, under certain conditions, the holders of a majority of the principal amount of the outstanding notes may annul the declaration. The indenture also provides that past defaults, except for an uncured default in payment of principal or interest, may be waived on behalf of the note holders by the holders of a majority of the principal amount of outstanding notes (Section 501). CONCERNING THE TRUSTEE The trustee acts as trustee under one other of our indentures. LIMITATIONS ON SUITS You may not file a lawsuit with respect to the indenture, unless: 1) you have first given notice to the trustee of a continuing event of default; 2) note holders of at least 50% of the outstanding principal amount of the notes have made written request to the trustee to institute the action; 8 10 3) note holders requesting the action have offered to indemnify the trustee against the costs, expenses, and liabilities that will be incurred as part of the action; 4) the trustee has failed to institute the action for at least sixty days; and 5) no direction inconsistent with such written request has been given to the trustee during that sixty-day period by note holders holding a majority of the principal amount of the notes (Section 507). SUBORDINATION The notes and all claims arising in connection with the notes are subordinated to the prior payment of all Senior Indebtedness of the Company. Senior Indebtedness is defined as all indebtedness of the Company, whether outstanding on the date of execution of the indenture or thereafter created, for money borrowed from banks, insurance companies and other financial institutions, to trade creditors, or for other indebtedness of the Company, unless in the instrument creating or evidencing such indebtedness it is provided that such indebtedness is not senior in right of payment to the notes (Sections 101 and 1001). Upon a distribution of assets, dissolution, winding up, total liquidation or reorganization of the Company, if any event of default has occurred and is continuing with respect to any Senior Indebtedness, or if the principal of the notes has been declared due and payable and such declaration has not been rescinded and annulled, then in any such instance all Senior Indebtedness must be paid in full before any payment of principal or interest on the notes can be made (Section 1002). Any subordination will not prevent the occurrence of an "Events of Default" (as defined above) under the Indenture. See "-- Events of Default." By reason of the subordination of the Notes, in the event of liquidation of the Company, the Holders will not receive payment until the holders of Senior Indebtedness have been satisfied. Also, by reason of the subordination provisions, the Holders may receive payments less ratably than other creditors of the Company. As of the date of this Prospectus, the Company had aggregate Senior Indebtedness outstanding of $ and the applicable borrowing under the Company's $300 million revolving credit agreement. OPTIONAL REDEMPTION BY US We can redeem the notes in whole or in part at any time. If we choose to redeem the notes prior to the redemption date, we will pay you the principal amount of the notes plus accrued and unpaid interest to the redemption date. Any partial note redemption will be effected by lot or pro rata or by any other method that the trustee deems fair and appropriate. If we redeem the notes at our option, you will receive a check for the principal amount of the notes plus accrued and unpaid interest to the date of redemption. Interest on all redeemed notes will cease to accrue on and after the effective date of redemption (Sections 301-304). SATISFACTION AND DISCHARGE Satisfaction and discharge of the indenture will occur when: 1) we terminate the program in accordance with its terms and all the notes become due and payable; 2) we deposit the entire amount needed to pay all the notes, including principal and interest due or to become due to the date of payment; and 3) we pay all other sums payable under the terms of the indenture (Section 401). 9 11 AGENT BANK AND ADMINISTRATION We have engaged The Northern Trust Company as our agent bank to administer the program. The agent bank will send the following information to you: 1) investment confirmation; 2) quarterly statements listing all notes held and all transaction information on a year-to-date basis; 3) advance maturity notices with renewal forms; 4) Form 1099INT; and 5) Form 1099B, if applicable. Additionally, the agent bank will provide an automated voice-response system at 1-800-507-9000. You may call this number to obtain aggregate account and individual note information. The agent bank will also respond to inquiries and provide you with information on your notes and accounts. Additional or other inquiries from you to the agent bank will be forwarded to us. TAXES The program is not qualified under Section 401(a) of the Internal Revenue Code. Accordingly, you will have to report all interest credited to your notes or paid to you as taxable income for federal income tax purposes. No part of the taxable interest is excludable from taxable income. Your December statement sent by the agent bank each year will indicate the full amount reportable as taxable income. The agent bank will also file tax information returns as required by law. State and local income taxes and tax reporting also may apply. You are individually responsible for complying with applicable federal, state and local tax laws and should consult with your individual tax advisor regarding the tax consequences that may apply to your particular situation. LEGAL MATTERS The legality of the notes has been passed upon for us by Michael Best & Friedrich LLP, Milwaukee, Wisconsin. 10 12 --------------------------------------------------------- --------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. TABLE OF CONTENTS
Page ---- Where You Can Find More Information....... 2 Reports to Security Holders............... 2 Documents Included and Incorporated by Reference............................... 2 Summary................................... 3 Consolidated Ratio of Earnings to Fixed Charges................................. 4 Risk Factors.............................. 4 Source of Payments to Holders of the Notes................................ 4 Lack of Market for Notes and Restrictions on Transfer............. 4 Subordination of Notes.................. 4 Competition............................. 4 Volatile Pricing of Merchandise/Inventory................ 4 Regional Market Variations.............. 5 Environmental........................... 5 Member Base............................. 5 Access to Capital....................... 5 Key Personnel........................... 5 The Truserv Variable Denomination Subordinated Fixed Rate Term Note Program................................. 6 How to Invest............................. 6 Use of Proceeds........................... 7 Plan of Distribution...................... 7 Certain Terms of the Notes................ 8 Agent Bank and Administration............. 10 Taxes..................................... 10 Legal Matters............................. 10
--------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- --------------------------------------------------------- $50,000,000 TRUSERV CORPORATION VARIABLE DENOMINATION SUBORDINATED FIXED RATE TERM NOTES FOR INFORMATION CONCERNING THE TRUSERV CORPORATION INVESTMENT PROGRAM, WRITE TO: THE TRUSERV CORPORATION INVESTMENT PROGRAM P.O. BOX 75933 CHICAGO, ILLINOIS 60675-5933 OR CALL: TOLL FREE 1-800-507-9000 PROSPECTUS ------------------------ DATED --------------------------------------------------------- --------------------------------------------------------- 13 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following are the actual or estimated expenses in connection with the issuance and distribution of the Variable Denomination Subordinated Fixed Rate Term Notes being registered: Registration Fee............................................ $13,200 Printing of Registration Statement and Prospectus........... 16,000 Accounting Fees and Expenses................................ 10,000 Legal Fees.................................................. 10,000 Trustee Fee................................................. 3,000 Fees and Expenses for Qualifying Securities under "Blue Sky" Laws of Various States.................................... 35,000 ------- Total....................................................... $87,200 =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's Certificate of Incorporation, as amended, provides that the Company shall indemnify, in accordance with and to the full extent permitted by the Delaware General Corporation Law, 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 (including, without limitation, an action by or in the right of the Company), by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another Company, partnership, joint venture, trust or other enterprise, against any liability or expense actually and reasonably incurred by such person in respect thereof. Such indemnification is not exclusive of any other right of such director, officer, or employee to indemnification provided by law or otherwise. Under the Company's by-laws, as against third parties, the Company shall indemnify any director, officer, employee or agent for any expenses (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred in defending any threatened, pending or completed suit or proceeding, whether civil, criminal, administrative or investigative brought against such person by reason of the fact that he was or is a director, officer, employee or agent, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company, and with respect to any criminal action or proceeding if he had no reasonable cause to believe his conduct unlawful. In any action or suit by or in the right of the Company, the Company shall indemnify any director, officer, employee or agent who is or was a party or threatened to be made a party to such threatened, pending or completed action or suit, for expenses (including attorney's fees and amounts paid in settlement) reasonably and actually incurred in connection with the defense or settlement of such suit or action, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company, except that no indemnification shall be made if such person has been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless and only to the extent that the Court of Chancery of Delaware or the court where the suit was brought finds that in view of all the circumstances of the case, such person is entitled to indemnification. Any indemnification, unless ordered by a court, shall be made by the Company only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because the party to be indemnified has met the applicable standard of conduct. Such determination shall be made by the Board of Directors by a majority vote of a quorum, consisting of directors who were not parties of such action, suit or proceeding, or if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the stockholders. S-1 14 Additionally, the Company's Certificate of Incorporation eliminates personal liability of directors to the Company or its stockholders for monetary damages for breach of fiduciary duty of care. The amendment provides that a director of the Company shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as the same exists or may hereafter be amended. Insofar as indemnification for liabilities arising under the Securities Act of 1933 is concerned, see Item 17 "Undertakings" below. ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION ------- ----------- *4 Form of Trust Indenture between TruServ Corporation and U.S. Bank Trust National Association dated ------------, 2000. *5 Opinion of Michael Best & Friedrich LLP. 10-A Current Form of "Retail Member Agreement with TruServ Corporation" between the Company and its Members that offer primarily hardware and related items. Incorporated by reference--Exhibit 10-A to Post-Effective Amendment No. 11 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-B Current form of "Subscription to Shares of TruServ Corporation". Incorporated by reference--Exhibit 10-B to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-C TruServ Corporation Defined Lump Sum Pension Plan (as amended and restated effective as of January 1, 1998). Incorporated by reference--Exhibit 10-C to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 10-D TruServ Corporation Employees' Savings and Compensation Deferral Plan (as amended and restated effective July 1, 2000). Incorporated by reference--Exhibit 10-D to Post-Effective Amendment No. 11 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-E TruServ Corporation Supplemental Retirement Plan between TruServ Corporation and selected executives of the Company (as amended effective July 24, 1998). Incorporated by reference--Exhibit 10-E to Post-Effective Amendment No. 10 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-F Retail Conversion Funds Agreement dated as of December 9, 1996 between the Company and SCC. Incorporated by reference--Exhibit 10-L to Registration Statement on Form S-4 (No. 333-18397). 10-G Employment Agreement between SCC and Donald J. Hoye dated September 1, 1996--Incorporated by reference to Exhibit 10-P to Amendment No 2 to Registration Statement on Form S-4 (No. 333-18397). 10-H Amended and Restated Trust Indenture between Cotter & Company and First Trust National Association. Incorporated by reference--Exhibit 4-K to Cotter & Company Registration Statement on Form S-2 (No. 333-26727). 10-I Credit Agreement dated July 1, 1997 for $300,000,000 Revolving credit between TruServ Corporation, various financial institutions, and Bank of America. Incorporated by reference--Exhibit 4-L to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-J Third amendment to Credit Agreement dated July 1, 1997 for $300,000,000 Revolving credit between TruServ Corporation, various financial institutions, and Bank of America. Incorporated by reference on Exhibit 4-K to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910).
S-2 15
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10-K Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. Incorporated by reference--Exhibit 4-M to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 to Form S-4 (No. 333-18397). 10-L Amendment dated May 12, 1999 to the Amended and Restated Private Shelf Agreement between TruServ Corporation and Prudential Insurance Company of America dated November 13, 1997 for $150,000,000. Incorporated by reference on Exhibit 4-M to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 10-M Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. Incorporated by reference--Exhibit 4-L to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 10-N Amendment No. 1 to Credit Agreement dated September 10, 1998 for $105,000,000 Note Purchase Agreement between TruServ Corporation and various Purchasers. Incorporated by reference on Exhibit 4-O to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 2-20910). 10-O Participation Agreement dated April 30, 1998 for $40,000,000 between TruServ Corporation, various financial institutions and Bank of Montreal. Incorporated by reference--Exhibit 4-M to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 10-S Credit Agreement dated September 30, 1998 for $100,000,000 Revolving Credit between TruServ Corporation, various financial institutions and Bank of America. Incorporated by reference--Exhibit 4-N to Post-Effective Amendment No. 6 to Registration Statement on Form S-4 (No. 333-18397). 10-T Cotter & Company Supplemental Retirement Plan between Cotter & Company and selected executives of the Company (As Amended and Restated January 2, 1996 Effective As of January 1, 1996). Incorporated by reference--Exhibit 10-E to Post-Effective Amendment No. 5 to Registration Statement on Form S-2 (No. 33-39477). *12 Schedule of Computation of Consolidated Ratio of Earnings to Fixed Charges for the Thirty-Nine Weeks Ended September 30, 2000 and October 2, 1999 and for the Fiscal Years 1999, 1998, 1997, 1996 and 1995 (included on page S-7). 13-A Annual Report on Form 10-K for the year ended December 31, 1999. Incorporated by reference (File No. 2-20910). 13-B Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. Incorporated by reference (File No. 2-20910). *23-A Consent of Michael Best & Friedrich LLP (included as Exhibit 5). *23-B Consent of Ernst & Young LLP (included on page S-8). *24 Powers of Attorney (contained on signature page hereof). *25 Statement of Eligibility of Trustee. *99 Current Application Package for TruServ Variable Denomination Subordinated Fixed Rate Term Note Investment Program.
- --------------- * Filed herewith S-3 16 ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions described in Item 15, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. S-4 17 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING THIS REGISTRATION STATEMENT ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHICAGO, ILLINOIS, ON NOVEMBER 13, 2000. TRUSERV CORPORATION By: /s/ LEONARD G. KUHR ------------------------------------ Leonard G. Kuhr Senior Vice President and Chief Financial Officer KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW, CONSTITUTES AND APPOINTS, LEONARD G. KUHR, AND DIANE T. NAUER, JOINTLY AND SEVERALLY, ATTORNEYS-IN-FACT AND AGENTS, EACH WITH FULL POWER OF SUBSTITUTION, FOR HIM OR HER IN ANY AND ALL CAPACITIES TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, AND ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, HEREBY SATISFYING AND CONFIRMING ALL THAT EACH OF SAID ATTORNEYS-IN-FACT AND AGENTS, OR HIS, HER OR THEIR SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DONALD J. HOYE President, Chief Executive November 13, 2000 - ----------------------------------------------------- Officer and Director Donald J. Hoye /s/ LEONARD G. KUHR Senior Vice President and November 13, 2000 - ----------------------------------------------------- Chief Financial Officer Leonard G. Kuhr (principal accounting officer) /s/ JOE W. BLAGG Chairman of the Board and November 13, 2000 - ----------------------------------------------------- Director Joe W. Blagg /s/ JAMES D. BURNETT Director November 13, 2000 - ----------------------------------------------------- James D. Burnett /s/ JAY B. FEINSOD Director November 13, 2000 - ----------------------------------------------------- Jay B. Feinsod /s/ WILLIAM H. HOOD Director November 13, 2000 - ----------------------------------------------------- William H. Hood /s/ JAMES D. HOWENSTINE Director November 13, 2000 - ----------------------------------------------------- James D. Howenstine /s/ JERRALD T. KABELIN Director November 13, 2000 - ----------------------------------------------------- Jerrald T. Kabelin /s/ PETER G. KELLY Director November 13, 2000 - ----------------------------------------------------- Peter G. Kelly /s/ ROBERT J. LADNER Director November 13, 2000 - ----------------------------------------------------- Robert J. Ladner
S-5 18
SIGNATURE TITLE DATE --------- ----- ---- /s/ GEORGE V. SHEFFER Director November 13, 2000 - ----------------------------------------------------- George V. Sheffer /s/ DENNIS A. SWANSON Director November 13, 2000 - ----------------------------------------------------- Dennis A. Swanson /s/ JOHN M. WEST, JR. Director November 13, 2000 - ----------------------------------------------------- John M. West, Jr. /s/ BARBARA B. WILKERSON Director November 13, 2000 - ----------------------------------------------------- Barbara B. Wilkerson /s/ BRYAN R. ABLEIDINGER Director November 13, 2000 - ----------------------------------------------------- Bryan R. Ableidinger /s/ BENJAMIN J. ANDRE Director November 13, 2000 - ----------------------------------------------------- Benjamin J. Andre /s/ HAROLD A. DOUTHITT Director November 13, 2000 - ----------------------------------------------------- Harold A. Douthitt
S-6 19 EXHIBIT 12 TRUSERV CORPORATION SCHEDULE OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999 AND FOR THE FISCAL YEARS 1999, 1998, 1997, 1996 AND 1995 (000'S OMITTED)
THIRTY-NINE WEEKS ENDED FOR THE FISCAL YEARS -------------------------- ---------------------------------------------------- SEPTEMBER 30, OCTOBER 2, 2000 1999 1999 1998 1997 1996 1995 ------------- ---------- --------- ------- ------- ------- ------- Net earnings after tax................... $12,446 $ (416) $(131,143) $20,480 $42,716 $52,410 $59,037 Add: Tax provision....................... 288 298 17,020 597 1,600 362 176 ------- ------- --------- ------- ------- ------- ------- Pretax income............................ 12,734 (118) (114,123) 21,077 44,316 52,772 59,213 ------- ------- --------- ------- ------- ------- ------- Add: Fixed charges Interest paid to members............. 8,407 10,532 14,498 16,390 17,865 18,460 20,627 Other interest paid.................. 42,906 34,906 46,204 38,710 19,100 10,175 9,298 ------- ------- --------- ------- ------- ------- ------- Total interest expense............... 51,313 45,438 60,702 55,100 36,965 28,635 29,925 ------- ------- --------- ------- ------- ------- ------- Rental expenses...................... 22,865 23,597 31,702 28,291 19,890 14,971 10,063 % of rental expenses................. 33.33% 33.33% 33.33% 33.33% 33.33% 33.33% 33.33% ------- ------- --------- ------- ------- ------- ------- Applicable rental expenses........... 7,621 7,865 10,566 9,430 6,629 4,990 3,354 ------- ------- --------- ------- ------- ------- ------- Total fixed charges.................. 58,934 53,303 71,268 64,530 43,594 33,625 33,279 ------- ------- --------- ------- ------- ------- ------- Pretax earnings/(loss) before fixed charges................................ $71,668 $53,185 $ (42,855) $85,607 $87,910 $86,397 $92,492 ======= ======= ========= ======= ======= ======= ======= Ratio of pretax earnings/(loss) to fixed charges................................ 1.22 1.00 (0.60)(a) 1.33 2.02 2.57 2.78 ======= ======= ========= ======= ======= ======= =======
- --------------- (a) For 1999, earnings were insufficient to cover fixed charges by $131,143,000 S-7 20 EXHIBIT 23-B CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement and related Prospectus of TruServ Corporation for the registration of $50,000,000 of Variable Denomination Subordinated Fixed Rate Term Notes of our report dated April 14, 2000, with respect to the consolidated financial statements of TruServ Corporation included in its Annual Report (Form 10-K) for the year ended December 31, 1999, filed with the Securities and Exchange Commission. Ernst & Young LLP Chicago, Illinois November 9, 2000 S-8 EX-4 2 c53770ex4.txt TRUST INDENTURE 1 EXHIBIT 4 US BANK TRUST NATIONAL ASSOCIATION TRUSTEE INDENTURE DATED AS OF _________, 2000 VARIABLE DENOMINATION SUBORDINATED FIXED RATE TERM NOTES Reconciliation and Tie between Trust Indenture Act of 1939 and Indenture
Trust Indenture Trust Indenture Act Section Indenture Section Act Section Indenture Section - -------------- ----------------- --------------- ----------------- Section 310 (a)(1) 609 Section 316 (a) 101 (a)(2) 609 (a)(a)(A) 502, 512 (a)(3) Not Applicable (a)(1)(B) 513 (a)(4) Not Applicable (a)(2) Not Applicable (a)(5) 609 (b) 508 (b) 608 and 610 (c) 104(5) Section 311 (a) 613(1) Section 317 (a)(1) 503 (b) 613(2) (a)(2) 504 (b)(2) 703(1)(b), 703(2) (b) 903 Section 312 (a) 701, 702(1) Section 318 (a) 107 (b) 702(2) (c) 702(3) Section 313 (a) 703(1) (b) 703(2) (c) 703(1), 703(2) (d) 703(3) Section 314 (a)(1) 704 (a)(2) 704 (a)(3) 704 (a)(4) 904 (b) Not Applicable (c)(1) 102 (c)(2) 102 (c)(3) Not Applicable (d) Not Applicable (e) 102 Section 315 (a) 601(1) (b) 602, 703(1)(f) (c) 601(2) (d) 601(3) (d)(1) 601(1)(a) (d)(2) 601(3)(b) (d)(3) 601(3)(c) (e) 514
Securities: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 2 TABLE OF CONTENTS
RECITALS OF THE COMPANY.................................................................................1 ARTICLE ONE.............................................................................................1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION............................................1 SECTION 101. Definitions..................................................................1 SECTION 102. Compliance Certificates and Opinions.........................................5 SECTION 103. Form of Documents Delivered to Trustee.......................................5 SECTION 104. Acts of Holders..............................................................6 SECTION 105. Notices, Etc., to Trustee and Company........................................6 SECTION 106. Notice to Holders; Waiver....................................................7 SECTION 107. Conflict with Trust Indenture Act............................................7 SECTION 108. Effect of Headings, Table of Contents, and Reconciliation and Tie............7 SECTION 109. Successors and Assigns.......................................................7 SECTION 110. Separability Clause..........................................................7 SECTION 111. Benefits of Indenture........................................................7 SECTION 112. Governing Law................................................................8 SECTION 113. Legal Holidays...............................................................8 SECTION 114. Persons Deemed Owners........................................................8 ARTICLE TWO.............................................................................................8 AMOUNT, PAYMENT AND RESTRICTION OF TRANSFER OF SECURITIES..........................................8 SECTION 201. Amount Limited...............................................................8 ARTICLE THREE...........................................................................................8 REDEMPTION OF SECURITIES...........................................................................8 SECTION 301. Redemption at Option of the Company..........................................8 SECTION 302. Notice of Redemption.........................................................8 SECTION 303. Payment of Redemption Price..................................................9 SECTION 304. Redemption of Notes if Holder is Not Eligible to Participate in the Program..9 ARTICLE FOUR............................................................................................9 SATISFACTION AND DISCHARGE OF INDENTURE............................................................9 SECTION 401. Satisfaction and Discharge of Indenture......................................9 SECTION 402. Application of Trust Money...................................................9 SECTION 403. Repayment by Paying Agents..................................................10 ARTICLE FIVE...........................................................................................10 REMEDIES..........................................................................................10 SECTION 501. Events of Default...........................................................10 SECTION 502. Acceleration of Maturity; Rescission and Annulment..........................12 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.............12 SECTION 504. Trustee May File Proofs of Claim............................................13
3 SECTION 505. Trustee May Enforce Claim Without Possession of Securities..................13 SECTION 506. Application of Money Collected..............................................13 SECTION 507. Limitation on Suits.........................................................14 SECTION 508. Unconditional Right of Holders to Receive Principal, and Interest...........14 SECTION 509. Restoration of Rights and Remedies..........................................14 SECTION 510. Rights and Remedies Cumulative..............................................14 SECTION 511. Delay or Omission Not Waiver................................................15 SECTION 512. Control by Holders..........................................................15 SECTION 513. Waiver of Past Defaults.....................................................15 SECTION 514. Undertaking for Costs.......................................................15 SECTION 515. Waiver of Stay or Extension Laws............................................16 ARTICLE SIX............................................................................................16 THE TRUSTEE.......................................................................................16 SECTION 601. Certain Duties and Responsibilities.........................................16 SECTION 602. Notice of Defaults..........................................................17 SECTION 603. Certain Rights of Trustee...................................................17 SECTION 604. Not responsible for Recitals or Issuance of Securities......................18 SECTION 605. May Hold Securities.........................................................18 SECTION 606. Money Held in Trust.........................................................18 SECTION 607. Compensation and Reimbursement..............................................18 SECTION 608. Disqualification; Conflicting Interests.....................................19 SECTION 609. Corporate Trustee Required; Eligibility.....................................19 SECTION 610. Resignation and Removal; Appointment of Successor...........................19 SECTION 611. Acceptance of Appointment by Successor......................................20 SECTION 612. Merger, Conversion, Consolidation or Succession to Business.................21 SECTION 613. Preferential Collection of Claim Against Company............................21 ARTICLE SEVEN..........................................................................................21 HOLDERS' LISTS, PROGRAM INFORMATION AND REPORTS BY TRUSTEE AND COMPANY............................21 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders...................21 SECTION 702. Preservation of Information; Communications to Holders......................21 SECTION 703. Reports by Trustee..........................................................23 SECTION 704. Reports by Company..........................................................23
4 ARTICLE EIGHT..........................................................................................23 SUPPLEMENTAL INDENTURES...........................................................................23 SECTION 801. Supplemental Indentures without Consent of Holders..........................23 SECTION 802. Supplemental Indentures with Consent of Holders.............................24 SECTION 803. Execution of Supplemental Indentures........................................24 SECTION 804. Effect of Supplemental Indentures...........................................25 SECTION 805. Conformity with Trust Indenture Act.........................................25 ARTICLE NINE...........................................................................................25 COVENANTS.........................................................................................25 SECTION 901. Administration of Program; Payment of Principal and Interest................25 SECTION 902. Maintenance of Security Register, Maintenance of Office or Agency...........25 SECTION 903. Money for Securities Payments to Be Held in Trust...........................26 SECTION 904. Certificate of Officers of the Company......................................26 SECTION 905. Waiver of Certain Covenants.................................................27 ARTICLE 10.............................................................................................27 SUBORDINATION.....................................................................................27 SECTION 1001. Agreement to Subordinate....................................................27 SECTION 1002. Subordination...............................................................27 SECTION 1003. Payments by Trustee or Securities Holders to Holders of Senior Indebtedness.28 SECTION 1004. Subrogation.................................................................28 SECTION 1005. Obligation of Company Unconditional.........................................28 SECTION 1006. Payments on Securities Permitted............................................29 SECTION 1007. Effectuation of Subordination by Trustee....................................29 SECTION 1008. Trustee Not Charged with Knowledge of Prohibition...........................29 SECTION 1009. Trustee May Hold Senior Indebtedness........................................29 SECTION 1010. Rights of Holders of Senior Indebtedness Not Impaired.......................29 SECTION 1011. Rights and Obligations Subject to Power of Court............................30
5 INDENTURE, dated as of __________, 2000 between TruServ Corporation, a corporation duly organized and existing under the laws of the State of Delaware, (herein called the "Company"), having its principal office at 8600 W. Bryn Mawr Avenue, Chicago, Illinois 60631 and U.S. Bank Trust National Association, having its principal offices at 111 E. Wacker Drive, Chicago, Illinois 60601, a national banking organization organized under the laws of the United States, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured subordinated variable denomination fixed rate term Securities (herein called the "Securities") pursuant subordinated to the Program (as defined below). All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act or by Commission rule under the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 6 "Agent Bank" means a bank or corporation, and its successors and assigns, appointed by the Company to act as agent under the Program and to perform all functions required of such agent pursuant to the provisions of the Program and to serve as Paying Agent pursuant to the provisions of this Indenture. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which the Agent Bank or Trustee is authorized or obligated by law to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Consolidated Net Tangible Assets" means as of any particular time the aggregate amount of assets after deducting therefrom (a) all current liabilities (excluding any such liability that by its terms is extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the amount thereof is being computed) and (b) all goodwill, excess of cost over assets acquired, patents, copyrights, trademarks, trade names, unauthorized debt discount and expense and other like intangibles, all as shown in the most recent consolidated financial statements of the Company and its Subsidiaries prepared in accordance with generally accepted accounting principles. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which at the date hereof is located at 111 E. Wacker Drive, Chicago, Illinois 60601. With respect to the Paying Agent, the Corporate Trust Office means the principal office of the Paying Agent at which any particular time its ____________ shall be administered, which at the date hereof is located at__________________________. "Corporation" includes corporations, associations, companies and business trusts. "Event of Default" has the meaning specified in Section 501. "Holder" means, with respect to a Security, a Person in whose name at the time a particular Security is registered in the Security Register. "Indebtedness" with respect to any Person at any date means and includes all items of indebtedness or liability which, in accordance with generally accepted accounting principles, would be included in determining total liabilities as shown on the liabilities side of a balance sheet of such Person at such date, and shall include (a) amounts due trade creditors, (b) all indebtedness guaranteed or endorsed (other than for purposes of collection in the ordinary course of business), directly or indirectly, in any manner, by such Person, and contingent obligations of such Person in respect of, or to purchase or otherwise acquire, indebtedness of others 2 7 (regardless of whether such indebtedness would appear on a balance sheet), and (c) all indebtedness secured by any mortgage, lien, pledge, charge or encumbrance upon property owned by such Person, whether or not the indebtedness so secured has been assumed by such Person (but if such Person has not assumed such indebtedness, the amount thereof shall be deemed the lesser of the amount of such indebtedness or the fair market value of the property that is subject to such lien, based on the appraisal of a reputable appraiser that is independent of the Company, which appraisal is as of a date not more than twelve months prior to the date of determination). "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for or an employee of the Company or other counsel satisfactory to the Trustee, which is delivered to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities in which Holders have made investments as shown on the Securities Register, except: (1) Securities or portions thereof theretofore redeemed by the Holders pursuant to the provisions of the Program and this Indenture; (2) Securities or portions thereof theretofore redeemed by the Company pursuant to the provisions of this Indenture; (3) Securities or portions thereof for whose payment or redemption money in the necessary amount has been theretofore deposited with the trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent), for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. The Agent Bank shall serve as Paying Agent pursuant to the terms of this Indenture. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Program" means the TruServ Corporation Variable Denomination Subordinated Fixed Rate Term Note Program established by the Company and in effect on the date hereof, as the same may be amended or supplemented by the Company from time to time. "Principal Amount", when used with reference to a Security, means, as of a particular time, the sum of the funds invested in a Security, plus the sum of interest accrued, paid and reinvested in a Security, less the sum of redemptions from time to time. 3 8 "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Secured Debt" means indebtedness for money borrowed which is secured by a mortgage, pledgee, lien, security interest or encumbrance on any property of any character of the Company. "Security" or "Securities" means any Variable Denomination Subordinated Fixed Rate Term Note or Notes, as the case may be, issued pursuant to the Program and under this Indenture, which are evidenced by an individual record or entries in the name of the Particular Holder established on the Security Register. "Security Register" has the meaning specified in Section 902. "Senior Indebtedness" means the principal amount of, and the interest on, fees, expenses, indemnities, reimbursement obligations and all other obligations with respect to any Indebtedness of the Company for money borrowed, whether presently outstanding or hereafter incurred, unless it is provided in the appropriate instruments that such Indebtedness for money borrowed is not senior to the Securities. "Subsidiary" means, with respect to the Company, a corporation more than fifty percent (50%) of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter. "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 805. "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "Vice President", when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Wholly-owned Subsidiary" means any Subsidiary of which, at the time of determination, all of the outstanding voting stock (other than directors' qualifying shares) is owned by the Company, directly or indirectly. For purposes of this definition, "voting stock" has the same meaning as under the definition of "Subsidiary". 4 9 SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than annual certificates provided pursuant to Section 905) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he/she has made such examination or investigation as is necessary to enable him/her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his/her certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 5 10 SECTION 104. Acts of Holders. (1) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (2) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (3) The ownership of Securities shall be proved by reference to the Security Register. (4) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (5) The Company may set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or other Act which record date shall be the later of ten (10) days prior to the first solicitation of such action or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 701 of this Indenture prior to such solicitation. If a record date is fixed, those persons who were Holders of Securities at such record date (or their duly designated proxies), and only those persons shall be entitled to take such action or to revoke any such previous action, whether or not such persons continue to be Holders after such record date. No such request, demand, authorization, direction, notice, consent, waiver or other Act shall be valid or effective for more than one hundred and twenty (120) days after such record date. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee and received at its Corporate Trust Office, Attention: Corporate Trust Department, or 6 11 (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing, to the Trustee or Holders by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address, as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. SECTION 108. Effect of Headings, Table of Contents, and Reconciliation and Tie. The Article and Section headings herein and the Table of Contents and Reconciliation and Tie are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. 7 12 SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with Federal law and with the laws of the State of Illinois. SECTION 113. Legal Holidays. In any case where any Redemption Date shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of the redemption price need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Redemption Date, provided that no interest shall accrue for the period from and after such Redemption Date. SECTION 114. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of or interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. ARTICLE TWO AMOUNT, PAYMENT AND RESTRICTION OF TRANSFER OF SECURITIES Section 201. Amount Limited. The Securities shall be issued pursuant to the Program and under this Indenture in a principal amount not to exceed the amount of Securities as stated in the Program's prospectus dated ____________, 2000. SECTION 202. Payment. The Securities shall be payable at the office or agency of the Agent Bank as may from time to time be designated in writing, maintained for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. SECTION 203. Restriction on Transfer and Pledge of Securities. The Securities may not be transferred or pledged, in whole or in part, either directly or by operation of law or otherwise. ARTICLE THREE REDEMPTION OF SECURITIES SECTION 301. Redemption at Option of the Company. The Company may redeem, at any time in its discretion, all or any portion of the Securities issued pursuant to the Program and under this Indenture. Any partial redemption of the entirety of the Notes will be effected by lot or pro rata or by any other method that is deemed fair and appropriate by the Trustee. SECTION 302. Notice of Redemption. The Company may give prior written notice of at least thirty (30) days but not more than ninety (90) days to Holders whose Notes are subject to full or partial redemption. A copy of any notices shall be given to the Trustee. Such notice from the Company will specify the effective date of redemption, the amount being redeemed and the effective date the redeemed amount shall become due and payable and that interest shall cease to accrue as of that date. All partial redemption notices will list the remaining, principal amount of the Security. 8 13 SECTION 303. Payment of Redemption Price. Upon redemption the full or partial Security being redeemed, plus accrued and unpaid interest therein to the date of redemption, shall be paid by check to the Holder. The Company covenants that it will pay or cause to be paid to the Trustee or to the Agent Bank or to another Paying Agent cash in an amount sufficient to pay the principal amount of the Security or portion thereof to be redeemed on such date. Interest on the redeemed amount shall cease to accrue on and after the effective date the redeemed amount shall have become due and payable. SECTION 304. Redemption of Notes if Holder is Not Eligible to Participate in the Program. The Company also may redeem, at any time in its sole and absolute discretion, any Security issued pursuant to the Program and under this Indenture if the Holder of such Security is not eligible to participate in the Program as defined in the annual Program Description. Notice of such redemption will be given in the manner provided in Section 302, and payment of the redemption price shall be made as provided in Section 303. ARTICLE FOUR SATISFACTION AND DISCHARGE OF INDENTURE SECTION 401. Satisfaction and Discharge of Indenture. If at any time: (1) the Company shall have terminated the Program pursuant to its provisions, (2) all the Notes shall have become due and payable, (3) the Company shall have deposited or caused to be deposited with the Trustee as trust funds the entire amount (other than moneys repaid by any Paying Agent to the Trustee in accordance with Section 403) sufficient to pay all the Notes, including principal and interest due or to become due to such date of maturity, and (4) the Company shall have paid or caused to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect, and the Trustee, on demand of and at the cost and expense of the Company shall execute proper instruments acknowledging satisfaction of and discharge of this Indenture, which instruments shall be prepared by the Company. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture, the Program or the Notes. SECTION 402. Application of Trust Money. All moneys deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), to the Holders of the Notes for the payment of which such moneys have been deposited with the Trustee of all sums due and to become due thereon for principal and interest. The Trustee shall be under no obligation to invest or pay interest on any moneys so held in trust. SECTION 403. Repayment by Paying Agents. In connection with the satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be repaid to it or paid to the Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. 9 14 ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Events of Default", means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any part of or all the principal of or interest on any Security as and when the same shall be due and payable, in accordance with the then current provisions and rules and regulations of the Program and this Indenture; provided, however, that: (a) the failure of the Company to make any payment of the principal of or interest on any Security, or any delay in making such payment shall not be considered in determining whether an "Event of Default" shall have occurred if: (i) the Trustee believes in good faith that the Security is subject to a conflicting claim, attachment, lien or proceeding, or any person demanding such payment is not, or may not be, legally entitled thereto, or the amount of the payment demanded exceeds the principal amount of the Security according to the Security Register, or the demand for payment has not been made in accordance with the then current provisions and rules and regulations of the Program, or the payment cannot be made in accordance with the then current provisions and rules and regulations of the Program, or (ii) the Company shall have paid over to the Trustee for deposit to an account not subject to offset, charge or encumbrance by the Trustee the amount of the principal of or interest on any Security which has become due and payable, and if requested by the Trustee the Company shall have furnished the Trustee with an Officers' Certificates as to the matters described in the foregoing clauses (i) and (ii); or (b) an administrative error relating to a Security or improperly identifying the Security of a Holder shall not be considered in determining whether an "Event of Default" shall have occurred unless such error shall have continued uncorrected for a period of sixty (60) days after written notification thereof to the Agent Bank or the Trustee by a Holder, the Trustee to be the sole judge of whether the error has been corrected (the above enumeration of specific examples of situations which shall not be considered in determining whether an "Event of Default" shall have occurred shall not be exclusive, and the Trustee may determine in any particular instance and, absence bad faith, shall incur no liability to any person in so determining whether the circumstances concerning a particular Security should be considered in determining whether an "Event of Default" shall have occurred); or (2) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of sixty (60) days after there has been given, by 10 15 registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least twenty-five per cent (25%) in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (3) the entry by a court having jurisdiction in the premises of: (a) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (b) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such decree or order remains unstayed and in effect for a period of sixty (60) consecutive days; or (4) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (5) in connection with any proceeding under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, involving the Company or one of its Subsidiaries an order for relief shall be entered by a court of competent jurisdiction which affects any significant part of the assets of the Company or any of its Subsidiaries. 11 16 SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to the Notes occurs and is continuing, then in every such case the Trustee or the Holders of not less than fifty percent (50%) in the principal amount of the Outstanding Securities may declare all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount shall become immediately due and payable. At any time after such a declaration of acceleration with respect to the Securities has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, shall rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (a) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities; (b) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (c) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to the Securities, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if default is made in the payment of the principal of or interest on any Security when the same shall have become due and payable the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to the Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 12 17 SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise: (1) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Securities, to participate as a member, voting or otherwise, of any official committee appointed in such matter, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel) and of the Holders allowed in such judicial proceeding, and (2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee and any predecessor Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claim Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively. 13 18 SECTION 507. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities; (2) the Holders of not less than fifty percent (50%) in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such sixty (60) day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Security on the applicable due date provided therefor pursuant to the Program (or, in the case of redemption, on the redemption date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 14 19 SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy acting upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) subject to Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee shall reasonably determine, in good faith, that the action or proceeding so directed would be unjustly prejudicial to any Holders not joining in such direction or would involve the Trustee in any personal liability unless indemnified to its reasonable satisfaction, and (3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default: (1) in the payment of the principal of or interest on any Security, or (2) in respect of a covenant or provision hereof which under Article Eight cannot be modified or amended without the consent of the Holders of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All Parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than ten percent (10%) in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or interest on the Security on or after the applicable due date therefor provided pursuant to the Program (or, in the case of redemption, on or after, the Redemption Date). SECTION 515. Waiver of Stay or Extension Laws. 15 20 The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. (1) Except during the continuance of an Event of Default, (a) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (2) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and would in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his/her own affairs. (3) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (a) this Subsection shall not be construed to limit the effect of Subsection (1) of this Section; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities, determined as provided in Section 512, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities; and (d) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall 16 21 have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (4) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. Within ninety (90) days after the occurrence of any default hereunder with respect to the Securities, the Trustee shall transmit by mail to all Holders of Securities, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities; and provided, further, that in the case of any default of the character specified in Section 501(3) with respect to the Securities, no such notice to Holders shall be given until at least thirty (30) days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Securities, other evidence of indebtedness or other paper or document believed to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice, or oral advice subsequently confirmed in writing, of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such 17 22 further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture. SECTION 604. Not responsible for Recitals or Issuance of Securities. The recitals contained herein and the statements in the Program prospectus shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of securities or the proceeds thereof. SECTION 605. May Hold Securities. Subject to the provisions of the Program with respect to Persons who may hold Securities, the Trustee, the Agent Bank, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Agent Bank, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company SECTION 607. Compensation and Reimbursement. The Company agrees: (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith or willful misconduct; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, bad faith or willful misconduct, on Trustee's or any predecessor Trustee's part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder or the performance of their duties hereunder, including the costs and expenses of enforcing this Indenture against the Company (including this Section 607), defending itself against any claim (whether 18 23 asserted by any Holder or the Company) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 607, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay particular Securities. The Company's payment obligations pursuant to this Section 607 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a default specified in Sections 501(3), (4) or (5), the expenses are intended to constitute expenses of administration, under federal or state bankruptcy laws. SECTION 608. Disqualification; Conflicting Interests. The Trustee shall be subject to the provisions of Section 310(b) of the Trustee Indenture Act during the period of time provided for therein. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second-to-last paragraph of Section 310(b) of the Trust Indenture Act. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority; provided, however, that if Section 310(a) of the Trust Indenture Act or the rules and regulations of the Commission under the Trust Indenture Act at any time permit a corporation organized and doing business under the laws of any other jurisdiction to serve as trustee of an indenture qualified under the Trust Indenture Act, this Section 609 shall be automatically amended to permit a corporation organized and doing business under the laws of any such other jurisdiction to serve as Trustee hereunder. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Neither the Company nor any person directly or indirectly controlling, controlled by or under common control with the Company may serve as Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (1) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (2) The Trustee may resign at any time with respect to the Securities by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (3) The Trustee may be removed at any time with respect to the Securities by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (4) If at any time: (a) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six (6) months, 19 24 unless the Trustee's duty to resign has been stayed as provided in Section 310(b) of the Trust Indenture Act, or (b) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (c) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. then, in any case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (5) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee and shall comply with the applicable requirements of Section 611. If, within one (1) year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (6) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. (1) In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (2) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and 20 25 confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (1) of this Section. (3) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 613. Preferential Collection of Claim Against Company. Upon and so long as the Indenture is qualified under the TIA, the Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed is subject to TIA Section 311(a) to the extent indicated. ARTICLE SEVEN HOLDERS' LISTS, PROGRAM INFORMATION AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (1) semi-annually, not later than March 1 and September 1 in each year, a list in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the preceding February 15 or August 15, as the case may be; (2) at such other times as the Trustee may request in writing, within thirty (30) days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished; and (3) from time to time, all current information and rules and regulations regarding the Program, including all amendments thereto. excluding from any such list names and addresses received by the Trustee in the event that it is the Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. (1) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (2) If three (3) or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six (6) months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then 21 26 the Trustee shall, within five (5) business days after the receipt of such application, at its election, either (a) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 702(1), or (b) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 702(1), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 702(1) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five (5) days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(2), regardless of the source from which such information was derived, and that the Trustee shall not be hold accountable by reason of mailing any material pursuant to a request made under Section 702. 22 27 SECTION 703. Reports by Trustee. (1) Within sixty (60) days after May 15 of each year beginning with the year 2001, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). (2) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall: (1) file with the Trustee, within fifteen (15) days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within thirty (30) days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 801. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or 23 28 (2) to add to the covenants of the Company for the benefit of the Holders of the Securities or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(2); or (5) to cure any ambiguity, or correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action shall not adversely affect the interests of the Holders of Securities in any material respect. SECTION 802. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than sixty-six and two-thirds percent (66 2/3%) in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) reduce the principal amount of any Security or impair the right to institute suit for the enforcement of any such payment on or after the applicable due date thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) Change any obligation of the Company, with respect to Outstanding Securities, to maintain an office or agency in the places and for the purposes specified in Section 902, or (4) modify any of the provisions of this Section, Section 513 or Section 904, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 904, or the deletion of this proviso, in accordance with the requirements of Sections 611(2) and 801(5). It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 803. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating 24 29 that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 804. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 805. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. ARTICLE NINE COVENANTS SECTION 901. Administration of Program; Payment of Principal and Interest. (1) The Company covenants and agrees to maintain and administer the Program and the Securities issued pursuant thereto in accordance with the provisions of the Program, as the same may from time to time be in force and effect, and this Indenture; provided, however, that nothing herein shall prevent the Company from exercising any of its rights to amend, modify or terminate the Program, or to adopt, amend or rescind the rules established under the Program, as provided therein. (2) The Company covenants and agrees for the benefit of Holders of Securities that it will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Program and this Indenture. Interest will accrue on the Securities in accordance with the provisions of the Program. The interest rate on the Securities shall be determined in accordance with the provisions of the Program. Interest rates will vary from time to time. There are no minimum or maximum interest rates. SECTION 902. Maintenance of Security Register, Maintenance of Office or Agency. (1) The Company will keep at an office or agency proper books of record and account (which books may be in written form or in any other form capable of being converted into written form) in which full and correct entries shall be made of all funds invested in the Securities, together with interest accrued thereon, and all redemptions thereof, in accordance with sound accounting practice and which shall contain the names and addresses of all Holders and the principal amounts of their respective Securities (collectively, the "Security Register"). (2) The Company will maintain in the City of Chicago or such other city where the Company maintains its corporate headquarters an office or agency where notices and demands hereunder may be given to or made upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee and the Holders of the location, and any change in the location, of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such notices and demands may be made or served at the Corporate Trust Office of the Trustee. SECTION 903. Money for Securities Payments to Be Held in Trust. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of, or interest on any Securities, deposit with a 25 30 Paying Agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest. If the Company fails to deposit such sums with the Paying Agent, unless such Paying Agent is the Trustee, the Company will promptly notify the Trustee of its failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject, to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal or interest on the Securities; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paving Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for three years after such principal or interest has become due and payable shall be paid to the Company upon the Company's request; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the City of Chicago, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 904. Certificate of Officers of the Company. On or before the last day of March of each year beginning with the year 2001, the Company will file with the Trustee a certificate of the principal executive officer, principal financial officer or principal accounting officer stating whether or not the signer has obtained knowledge of any action or failure to act on the part of the Company during the preceding calendar year in violation of any covenant, agreement, provision or condition contained in this Indenture and, if so, specifying, each such default of which the signers may have knowledge and the nature thereof. For purposes of this Section 904, compliance shall be determined without regard to any period of grace or requirement of notice provided pursuant to the terms of this Indenture. SECTION 905. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 902 to 904, inclusive, if before the time for such compliance the Holders of at least sixty-six and two-thirds percent (66 2/3%) in principal amount of the Outstanding Securities shall, by Act of such 26 31 Holders, either waive such compliance in such instance or general waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE 10 SUBORDINATION SECTION 1001. Agreement to Subordinate The Company covenants and agrees, and each Holder of Securities by his or her acceptance thereof, likewise covenants and agrees, that the Indebtedness represented by the Securities and the payment of the principal of and interest on each and all of the Securities and all claims arising in connection with the Securities, including without limitation, the payment of all fees, other costs, rescission claims and indemnities, is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all Senior Indebtedness and all liabilities of the Company and its Subsidiaries incurred in the ordinary course of business as provided in this Article 10. SECTION 1002. Subordination Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, reorganization or receivership proceedings) or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company or if an event of default shall have occurred and be continuing with respect to any Senior Indebtedness or if the principal of the Securities shall have been declared due and payable pursuant to Section 5.02 hereof and such declaration shall not have been rescinded and annulled as provided in such Section 5.02, then: (a) the holders of all Senior Indebtedness shall first be entitled to receive payment in full of the principal thereof and interest due thereon, or adequate provision shall be made for such payment, before the Holders are entitled to receive any further payment on account of the principal of or interest on indebtedness evidenced by the Securities; and (b) any further payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any Person provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 10 with respect to the Securities, to the payment of all Senior Indebtedness, provided that the rights of the holders of Senior Indebtedness are not altered by such reorganization or readjustment), to which the Holders or the Trustee would be entitled except for the provisions of this Article 10 shall be paid or delivered by the person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness and held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness or provision therefor. SECTION 1003. Payments by Trustee or Securities Holders to Holders of Senior Indebtedness 27 32 In the event that any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any Person provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 10 with respect to the Securities, to the payment of all Senior Indebtedness, provided that the rights of the holders of Senior Indebtedness are not altered by such reorganization or readjustment), shall be received by the Trustee or the Holders before all Senior Indebtedness is paid in full, contrary to the provisions of this Article 10, such payment or distribution shall be paid over to the holders of such Senior Indebtedness (which shall have been identified in writing to the Trustee) or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably as aforesaid, for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness or provision therefor. SECTION 1004. Subrogation Subject to the payment in full of all Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until all amounts owing on the Securities shall be paid in full, and, as between the Company, its creditors other than holders of Senior Indebtedness and the Holders, no such payment or distribution made to the holders of Senior Indebtedness by virtue of this Article 10 which otherwise would have been made to the Holders shall be deemed to be a payment by the Company on account of the Senior Indebtedness, it being understood that the provisions of this Article 10 are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Indebtedness on the other hand. SECTION 1005. Obligation of Company Unconditional Nothing contained in this Article 10 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or affect the relative rights of the Holders and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Securities from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 10 of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any such dissolution, winding-up, liquidation or reorganization proceeding affecting the affairs of the Company is pending or upon a certificate of the liquidating trustee or agent or other person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount paid or distributed therein and all other facts pertinent thereto or to this Article 10. SECTION 1006. Payments on Securities Permitted Nothing contained in this Indenture, or in any of the Securities, shall affect the obligation of the Company to make, or prevent the Company from making, payments of principal of or interest on the Securities, except as otherwise provided in this Article 10. SECTION 1007. Effectuation of Subordination by Trustee 28 33 Each Holder of Securities, by his or her acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 10 and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. SECTION 1008. Trustee Not Charged with Knowledge of Prohibition Notwithstanding the provisions of this Article or any other provision of this Indenture, but subject to the provisions of Section 601 as between the Holders of Securities and the Trustee, neither the Trustee nor any Paying Agent shall be charged with knowledge of any facts which would prohibit the making of any payment of moneys to or by the Trustee or any such Paying Agent, unless and until the Trustee or such Paying Agent shall have received written notice thereof at its Corporate Trust Office from the Company or any holder of Senior Indebtedness or the trustee or representative of any holder of such Senior Indebtedness on his behalf; and, prior to the receipt of any such written notice, the Trustee and any such Paying Agent shall be entitled to assume that no such facts exist. If the Trustee or Paying Agent, as the case may be, shall not have received, at least five Business Days prior to the date upon which by the terms hereof any such moneys may become payable for any purpose (including, without limitation, the payment of the principal of, premium, if any, or the interest on any Security) with respect to such moneys, the notice provided for in this Section, then, anything herein contained to the contrary notwithstanding, the Trustee and such Paying Agent, as the case may be, shall have full power and authority to receive such moneys and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within five Business Days prior to such date. SECTION 1009. Trustee May Hold Senior Indebtedness The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness at the time held by it, to the same extent as any other holder of Senior Indebtedness and nothing in Section 6.13 or elsewhere in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Sections 506 or 607. SECTION 1010. Rights of Holders of Senior Indebtedness Not Impaired No right of any present or future holder of any Senior Indebtedness to enforce the subordination herein shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. 29 34 SECTION 1011. Rights and Obligations Subject to Power of Court The right of the holders of Senior Indebtedness and the obligations of the Trustee and the Noteholders set forth in this Article 10 are subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred in this Indenture upon the Senior Indebtedness and the holders thereof with respect to the Securities and the Holders thereof by a plan of reorganization under applicable bankruptcy law. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. TruServ Corporation By: _________________________ Vice President U.S. Bank Trust National Association By: _________________________ Vice President 30 EX-5 3 c53770ex5.txt OPINION OF MICHAEL BEST & FRIEDNCH LLP 1 EXHIBIT 5 November 9, 2000 TruServ Corporation 8600 West Bryn Mawr Avenue Chicago, IL 60631-3505 Gentlemen: We have served as your counsel in connection with the filing by you of a Registration Statement on Form S-2 with the Securities and Exchange Commission (the "Commission") pursuant to the provisions of the Securities Act of 1933, as amended (the "Act"), covering the registration of $50,000,000 of Variable Denomination Subordinated Fixed Rate Term Notes (the "Notes"), of TruServ Corporation (the "Company"). As your counsel, we have reviewed the corporate proceedings ("Corporate Proceedings") taken and to be taken to authorize the execution and delivery by the Company of an indenture (the "Indenture") to be entered into with U.S. Bank Trust National Association, as Trustee, providing for the issuance of up to $50,000,000 principal amount of Notes of the Company. We have examined and are familiar with the Articles of Incorporation of the Company and its By-laws, both as amended and/or restated. We have also examined the proposed form of the Indenture, and such other documents, records and certificates of the Company as we consider necessary for the purpose of this opinion. Based upon such examination and consideration, it is our opinion that. 1. The Company is validly organized and existing under the laws of the State of Delaware and has the corporate power to carry on its present business and is duly qualified to own its properties and conduct its business in those states where such authorization is presently required, except where the failure to so qualify does not have a material adverse effect on the Company; 2. Upon completion of the Corporate Proceedings, the execution and delivery of the Indenture and the issuance of the Notes will have been validly authorized on behalf of the Company, and when the Indenture shall have been duly executed and delivered, the Indenture will constitute a valid, binding and enforceable obligation of the Company in accordance with its terms, except as enforcement of provisions thereof may be limited by bankruptcy or other applicable laws affecting the enforcement of creditors' rights; 2 TruServ Corporation November 9, 2000 Page 2 3. The Notes, when executed, manually or in facsimile, by the proper officers of the Company and authenticated by the Trustee under the Indenture, and issued and sold and paid for in accordance with the Corporate Proceedings, will constitute legally issued, valid, binding and enforceable obligations of the Company in accordance with their terms, except as enforcement of provisions thereof may be limited by bankruptcy or other applicable laws affecting the enforcement of creditors' rights, and will be entitled to the benefit of the Indenture. We hereby consent to the use of our name under the heading "Legal Opinions" in the Prospectus constituting part of the Registration Statement. Very truly yours, MICHAEL BEST & FRIEDRICH EX-25 4 c53770ex25.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------------------ FORM T - 1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305 (b) (2) _________ U.S. BANK TRUST NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) 13-3781471 (I. R. S. Employer Identification No.) 100 WALL STREET, NEW YORK, NY 10005 (Address of principal executive offices) (Zip Code) ------------------------ FOR INFORMATION, CONTACT: Thomas J. Kelly, President U.S. Bank Trust National Association 100 Wall Street, 16th Floor New York, NY 10005 Telephone: (212) 361-2506 TRUSERV CORPORATION (Exact name of obligor as specified in its charter) DELAWARE 36-2099896 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 8600 WEST BRYN MAWR AVENUE CHICAGO, ILLINOIS 60631-3505 (Address of principal executive offices) (Zip Code) ------------------------ VARIABLE DENOMINATION SUBORDINATED FIXED RATE TERM NOTES (Title of the Indenture Securities) 2 Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee - - (a) Name and address of each examining or supervising authority to which it is subject. Name Address Comptroller of the Currency Washington, D. C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. LIST OF EXHIBITS. Exhibit 1. Articles of Association of U.S. Bank Trust National Association, incorporated herein by reference to Exhibit 1 of Form T-1, Registration No. 22-22485. Exhibit 2. Certificate of Authority to Commence Business for First Trust of New York, National Association now known as U.S. Bank Trust National Association, incorporated herein by reference to Exhibit 2 of Form T-1, Registration No. 022-22485. Exhibit 3. Authorization to exercise corporate trust powers for U.S. Bank Trust National Association, incorporated herein by reference to Exhibit 3 of Form T-1, Registration No. 022-22485. Exhibit 4. By-Laws of U.S. Bank Trust National Association, incorporated herein by reference to Exhibit 4 of Form T-1, Registration No. 022-22485. Exhibit 5. Not applicable. Exhibit 6. Consent of First Trust of New York, National Association now known as U.S. Bank Trust National Association, required by Section 321(b) of the Act, incorporated herein by reference to Exhibit 6 of Form T-1, Registration No. 022-22485. 3 Exhibit 7. Report of Condition of U.S. Bank Trust National Association, as of the close of business on September 30, 2000, published pursuant to law or the requirements of its supervising or examining authority. Exhibit 8. Not applicable. Exhibit 9. Not applicable. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, U.S. Bank Trust National Association, a national banking association organized and existing under the laws of the United States, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 10th day of November, 2000. U.S. BANK TRUST NATIONAL ASSOCIATION By: /s/ John D. Bowman -------------------------------------- John D. Bowman Vice President 5 EXHIBIT 7 U.S. BANK TRUST NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 9/30/2000 ($000'S) 9/30/2000 --------- ASSETS Cash and Due From Depository Institutions $ 54,812 Federal Reserve Stock 3,396 Fixed Assets 500 Intangible Assets 57,136 Other Assets 8,571 -------- TOTAL ASSETS $124,415 LIABILITIES Other Liabilities 10,447 -------- TOTAL LIABILITIES 10,447 EQUITY Common and Preferred Stock 1,000 Surplus 120,932 -------- Undivided Profits (7,964) -------- TOTAL EQUITY CAPITAL 113,968 TOTAL LIABILITIES AND EQUITY CAPITAL $124,415 - --------------------------------------------------------------------- To the best of the undersigned's determination, as of this date the above financial information is true and correct. U.S. Bank Trust National Association By: /s/ John D. Bowman ----------------- Vice President Dated: November 10, 2000 EX-99 5 c53770ex99.txt CURRENT APPLICATION PACKAGE FOR TRUSERV VARIABLE 1 EXHIBIT 99 TruServ Investment Program TruServ Investment Program Instructions for Completing Payer's Request for Taxpayers Identification Certification: Under Federal tax law, you must provide TruServ Corporation with your correct Social Security or other Taxpayer ID number, a certification that the number provided is correct and a certification that you are not subject to backup withholding. Failure to furnish your correct Social Security or Taxpayer ID Number and required certifications will result in 31% of any interest earned being withheld and paid to the IRS. In addition, you may be subject to a penalty imposed by the IRS if you fail to provide your correct Social Security or Taxpayer ID number or if you make an incorrect certification. I/We request the investment, as indicated on the attached application form(s),in the TruServ Investment Program. I/We have identified on the application form() either the two, three and/or four-year term(s), and the election of semiannual interest compounding or payment by issuing a check semiannually. I/We acknowledge that I/We have received and reviewed the Program Description and Prospectus, and have reviewed and approved all schedules, and the W-9 application and this agreement . I/We agree to all terms and conditions of the TruServ Investment Program as set forth in the Program Description. I/We agree that TruServ Corporation may amend the Program Description from time to time and that such amendments shall be binding upon me/us. I/We agree that TruServ Corporation may comply with any levies, garnishments and court orders at the sole and absolute discretion of TruServ Corporation. I/We jointly and severally hereby agree to defend, indemnify, reimburse, exonerate, save and hold harmless TruServ Corporation and its agents for, from and against any and all losses, damages, claims, demands and expenses, including reasonable attorneys fees, of any and every nature, arising in whole or in part out of, or relating to the written information, tax identification number, certifications, renewal or other notice or instructions provided by me/us or out of my/our bad faith, negligence, willful misconduct, strict liability or breach of this agreement. I/We agree that this agreement may be terminated by TruServ Corporation at any time upon TruServ Corporation's written notice mailed to me/us at the address stated on the Application Form. I/We understand that the TruServ Investment Program is administered by The Northern Trust Company on behalf of TruServ Corporation. The Northern Trust Company is not a co-principal of the TruServ Investment Program and no investment dollars will be held by The Northern Trust Company. US Bank Trust National Association is the acting indenture trustee of the TruServ Investment Program pursuant to a written trust indenture between TruServ Corporation and US Bank Trust National Association. Custodial Account: If a minor is the beneficial owner of the account, an adult Custodian manages the account until the minor comes of age as specified in the Uniform Gift to Minors Act in the Custodian's state of residence. Custodian's signature is required for all transactions. Additional copies of the Program Description and Prospectus are available upon request by writing to: TruServ Investment Program, Investor Services, Attn: Agent of Issuer, P.O. Box 75933, Chicago, IL 60675-5933. This form is intended for the sole use of Investors by the agent of the TruServ Investment Program. INCOMPLETE FORMS OR MISSING SUPPORTING DOCUMENTATION FOR THE PURCHASE OF NOTE OR NOTES, WILL RESULT IN THE RETURN OF YOUR INVESTMENT. Summary of key features of the Program include, (full Program provisions are detailed in the Program Description and Prospectus): - - Investment(s) in the TruServ Investment Program cannot be pledged - - Note denominations cannot be altered once purchased - - Ownership cannot be transferred or changed - - It is a condition of this obligation of the Company, and the holder by the acceptance hereof agrees, that the indebtedness evidenced by and accruing on notes to be purchased shall be and at all times remain junior and subordinate in right of payment to any and all other indebtedness of TruServ Corporation. - - TruServ Corporation retains the sole right to call any and all TruServ Investment Program Notes at any time. AGREEMENT WILL BE REJECTED IF THIS FORM AND ALL ATTACHED DOCUMENTS ARE NOT COMPLETE. ALL APPLICANTS' SIGNATURES ARE REQUIRED. PLEASE SIGN Primary Signature Date ------------------------------------ --------------- Co-Applicant Signature Date ------------------------------------ --------------- Co-Applicant Signature Date ------------------------------------ --------------- Co-Applicant Signature Date ------------------------------------ --------------- TIPAG00 2 -------------------------------- If you are a current Investor in the TruServ Investment Program enter your Account number here. ACCOUNT NUMBER (Bank Reference 01) 9 4 2 -------------------------------- TYPE OF ACCOUNT [ ] INDIVIDUAL ACCOUNT (Bank Reference 01) [ ] JOINT ACCOUNT (Bank Reference 03) --------------------------------------------------- ------------------------------------------ Please check only one. NAME OF OWNER NAME OF OWNER Use one application per --------------------------------------------------- ------------------------------------------ Account. For additional SOCIAL SECURITY NUMBER SOCIAL SECURITY OWNER Application, photocopy --------------------------------------------------- ------------------------------------------ or Call 1-800-507-9000. NAME OF JOINT OWNER ------------------------------------------ [ ] GIFT TO MINOR (CUSTODIAL ACCOUNT) (Bank Reference 04) [ ] TRUST ACCOUNT (Bank Reference 05) MINOR IS THE BENEFICIAL OWNER OF THE ACCOUNT. AN ADULT ACCOUNT IS ESTABLISHED UNDER THE CUSTODIAN MANAGES THE ACCOUNT UNTIL THE MINOR COMES OF PROVISIONS OF A TRUST AGREEMENT. TRUSTEE'S AGE AS SPECIFIED IN THE UNIFORM GIFT TO MINORS ACT. OR DESIGNATED AGENT'S SIGNATURE IS CUSTODIAN'S SIGNATURE IS REQUIRED FOR ALL TRANSACTIONS. REQUIRED FOR ALL TRANSACTIONS. PLEASE ATTACH FIRST TWO AND LAST TWO PAGES OF TRUST AGREEMENT WITH THIS APPLICATION. --------------------------------------------------- ------------------------------------------ NAME OF CUSTODIAN TRUST TITLE --------------------------------------------------- ------------------------------------------ NAME OF MINOR TRUSTEE'S NAME --------------------------------------------------- ------------------------------------------ MINOR'S SOCIAL SECURITY NUMBER CO-TRUSTEE (IF ANY) --------------------------------------------------- ------------------------------------------ CUSTODIAN'S STATE OF RESIDENCE TRUST DATE TRUST TAX ID NUMBER --------------------------------------------------- ------------------------------------------ ------------------------------------------------------------------------------------------------------- MAILING ADDRESS ADDRESS EVENING PHONE NUMBER ( ) ------------------------------------------------------------------------------------------------------- CITY, STATE, ZIP DAYTIME PHONE NUMBER ( ) ------------------------------------------------------------------------------------------------------- INVESTMENT AMOUNTS NOTE: The minimum initial investment per term is $1,000.00 and in increments of $1,000.00. & MATURITY SELECTION ENCLOSED IS (ARE) MY CHECK(S) PAYABLE TO TRUSERV INVESTMENT PROGRAM FOR $ ----------------------- SEPARATE CHECKS MUST [ ] 2-YEAR TERM [ ] 3-YEAR TERM [ ] 4-YEAR TERM BE SENT FOR EACH TERM. ------------------------------- ------------------------------ ------------------------------- AMOUNT CHECK NUMBER AMOUNT CHECK NUMBER AMOUNT CHECK NUMBER $ $ $ ------------------------------- ------------------------------ ------------------------------- INTEREST PAYMENT [ ] COMPOUND INTEREST TO NOTE PRINCIPAL [ ] ISSUE AND MAIL CHECK TO REGISTERED ACCOUNT ADDRESS OPTION Accrued interest will be added to the principal balance semiannually NOTE: If no interest payment option is selected, interest will be automatically compounded. MEMBER/INVESTOR [ ] TRUSERV MEMBER (Bank Reference 03) [ ] IMMEDIATE FAMILY MEMBER OF TRUSERV MEMBER AFFILIATION (Bank Reference 04) --------------------------------------------------- ------------------------------------------ (if applicable) Please D/B/A NAME D/B/A NAME check the appropriate box --------------------------------------------------- ------------------------------------------ and complete the MEMBER NUMBER MEMBER NUMBER RELATIONSHIP information requested --------------------------------------------------- ------------------------------------------ I CERTIFY THAT THE ABOVE APPLICANT IS A MEMBER OF MY FAMILY. APPLICATIONS WILL NOT BE PROCESSED IF NOT SIGNED BY MEMBER. X X -------------------------------------------------- ----------------------------------------- W-9 TAX INFORMATION W-9 information must be completed or application will not be processed. Unless the box is checked, I am not subject to backup withholding because I have not been notified by the IRS that I am subject to such withholding, or the IRS has notified me that I am no longer subject to backup withholding. X BOX IF APPLICABLE. [ ] I am subject to backup withholding under provisions of selection 340(a)(1)(c) of the Internal Revenue Code. The Social Security or Tax-payer ID number provided on this form is correct. Return completed W-9 application and check to TruServ Investment Program, P.O. Box 75933, Chicago, Illinois 60675-5933.
OVER - INVESTOR SIGNATURE REQUIRED 3 QUESTIONS & ANSWERS I'M INTERESTED. The program package contains: HOW DO I INVEST? - a program description and prospectus, which you should review carefully before investing - an Agreement - rates for two, three, and four-year Notes - a W-9 form - an Investment Program Application & Agreement and - a return envelope Simply complete the Agreement, W-9 Form, and Investment Program Application and Agreement forms and attach any required documentation and a check for your investment amount. Return these items in the furnished envelope. WHAT IS THE See the rate card included with the program package, or INTEREST RATE? call 1-800-507-9000 for the latest rates. HOW IS INTEREST Interest is paid semiannually (every six months from, PAID? and on anniversary of issue date) and can be mailed to you by regular mail the next business day or added to your principal for compounding. IS THE INTEREST Yes. All income credited to your account is subject to INCOME TAXABLE? federal and applicable state and local taxes. The interest income information needed to prepare your tax returns will be sent to you shortly after the end of each calendar year on Form 1099INT. WILL MY INVESTMENT A notification will be mailed to you prior to maturity AUTOMATICALLY BE PAID giving you the option to reinvest at then-current OUT AT MATURITY? rates. If you do not elect this option, your investment will automatically redeem. ARE THERE ANY FEES? No. There are no up-front "sales load" management or redemption fees. WHAT INFORMATION WILL You will receive combined quarterly statements I RECEIVE ON MY detailing all transactions--investments, redemptions ACCOUNT? and interest payments, or reinvestments for all Notes held in your Account. You will receive confirmation of each new investment, advance notices of maturities and annual 1099INT forms for tax purposes. CAN I TRANSFER No. Ownership cannot be assigned, transferred or OWNERSHIP OF MY pledged. INVESTMENT? WHAT IF I HAVE Call 1-800-507-9000. You will receive general program QUESTIONS? information and renewal rates for the TruServ Investment Program as set by the company. You can call this number 24 hours a day, seven days a week for specific individual Account information as well as rate and general information. For personal answers to other questions, trained service representatives will be available Monday through Friday, 7:30 a.m. to 6 p.m. Central Time, except on federal holidays. EARLY REDEMPTION Early Redemption is not permitted If your question is not answered here, consult the following Program Description and Program Prospectus or call the toll-free hotline at 1-800-507-9000. Page 1 of 3 4 TRUSERV INVESTMENT PROGRAM DESCRIPTION GENERAL PROGRAM The TruServ Investment Program was established in 1994 DESCRIPTION to accommodate the continued investment of non-Members holding Subordinated Notes received as part of their patronage distribution. This program allows people who support and contribute to TruServ Corporation to benefit from its success. The Notes are available for purchase in one thousand dollar ($1,000.00) denominations. The Investor can elect for the Notes to be issued for two, three or four-year periods TruServ Corporation reserves the right to modify, withdraw or cancel the offer made hereby at any time. INTEREST RATE The rate of interest on the Notes are set by TruServ Corporation, and fixed for the term of the Note. Rate information for the current investment period is available by consulting the current rate information card or by calling 1-800-507-9000. Investors will have the option to elect to receive interest payments on a semiannual basis and will be paid every six months from and on anniversary of issue date, with payment mailed to you by regular mail the following business day, or to have the interest payments added to the Note principal resulting in compounded interest calculations. Interest is calculated on a 365-day year actual/actual basis. Interest payments and principal at maturity will be paid by check. Account statements and check payouts may be mailed separately. Each investor ("Investor") will have the ability to change the option on the way interest is paid or reinvested by notifying the Agent Bank at TruServ Investment Program, P.O. Box 75933, Chicago, Illinois 60675-5933. TYPE OF ACCOUNTS The Notes must be registered in one of the four categories listed below and investment Applications must include a W-9 and information and documentation as listed. SINGLE TENANCY: INCLUDE Social Security or Federal Tax Identification Number, Signature on the Application. Joint Tenancy with Rights of Survivorship: INCLUDE Social Security or Federal Tax Identification Numbers and Signatures of all parties on the Application. TENANCY BY CUSTODIAN (Uniform Gift to Minor Act): include Social Security or Federal Tax Identification Number and signatures of Guardian(s) on the Application (For a custodial account, the minor is considered the beneficial owner of the account. An adult Custodian manages the account until the minor comes of age as specified in the Uniform Gift to Minors Act in the custodians state of residence. The Custodian's signature is required for all transactions). LIVING TRUST: INCLUDE Copy of Living Trust (1st two and last two pages only), Social Security Number or Federal Tax Identification Number, Signature on the Application. (These Notes cannot be held by a retirement savings plan described in Section 4975 (e)(1) of the Internal Revenue Code of 1986, as amended.) NOTES CHARACTERISTICS Transfer assignment, pledging and subdivision of the Notes are not permitted. Please read the Prospectus carefully for details. A Note is not equivalent to a deposit or other bank account and is not subject to the protection of the Federal Deposit Insurance Corporation or any other insurance. The Program is not subject to the requirements of the Investment Company Act of 1940 (including diversification of Investment) or the Employee Retirement Income Security Act of 1974. There are no up-front "sales load," management or redemption fees. TAXES & APPLICABLE For information concerning important tax aspects of the LAWS Notes, please read your Prospectus carefully. AGENT BANK TruServ Corporation has engaged The Northern Trust Company as the Agent Bank to service this Program. The Agent Bank will send the following to the Investor: - Confirmation of new investment - Quarterly statements listing all Notes held and all transaction information on a year-to-date basis - Advance maturity notices with renewal forms Page 2 of 3 5 - Form 1099INT - Semiannual interest check with amount for multiple Notes (if the Investor owns more than one) combined The Northern Trust Company is not a co-principal of the TruServ Investment Program and no investment dollars will be held by The Northern Trust Company. Additionally, the Agent Bank provides an automated voice response system (1-800-507-9000) to allow Investors to call and obtain aggregate account and individual Note information. The Agent Bank will also set up new accounts and Notes, respond to inquiries and provide to Investors information on Notes and accounts. Additional or other inquiries from Investors will be forwarded to TruServ Corporation. Investments in a Note will be represented by a Program account (an "Account") established for the Investor by the Agent Bank. The Notes will not be represented by a certificate or any other instrument evidencing TruServ Corporation's indebtedness. Investors will be assigned a new Account number and Personal Identification Number (P.I.N.) for telephone access to their Account information. All investments in the Notes are investments in securities of TruServ Corporation and are not an obligation of the Agent Bank. TRUSTEE The Notes are issued under an Indenture between TruServ Corporation and US Bank Trust National Association. TRANSFERS Investors may not transfer ownership of the Notes(s). The Investors will not be able to break the Note into smaller denominations at any time during the life of the Note(s). AUTHORIZED SIGNATURES All signatures of registered owners are required. AND PAYOUTS Checks will be sent only to the Investor's registered Account address. REDEMPTION BY The Notes will be redeemable at the option of TruServ TruServ Corporation Corporation at any time, in whole or in part, at 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date. Any partial redemption of the Notes will be effected by lot or pro rata or by any other method that is deemed fair and appropriate by the Trustee. TruServ Corporation may also, at any time at its option, redeem one or more individual Notes. The Notes being redeemed by TruServ Corporation, plus accrued and unpaid interest thereon to the date of redemption, will be paid by check to the Investor of the Note(s). Interest on the redeemed amount shall cease to accrue on and after the effective date of redemption. ACCOUNT INFORMATION For current Account Information, Investors may call toll free 1-800-507-9000. NOTE SUBORDINATION The Notes will be subordinated in right of payment to senior notes indebtedness to banking institutions, trade creditors and other indebtedness of TruServ Corporation. ADDITIONAL INFORMATION The Prospectus for this offering the TruServ Investment Program Agreements and the TruServ Investment Program Application and Agreement Form are being delivered with this Program Description. Additional copies of the Prospectus may be obtained by contacting TruServ Corporation at 1-773-695-5388 or via the Internet at EODLE@TRUSERV.COM ACCOUNT SETUP AND All Account setup forms, (W-9, TruServ Investment INVESTMENT Program Agreement, TruServ Corporation Application and Agreement Form), accompanied by a personal, certified or cashier's check, should be mailed to: TruServ Investment Program, Investor Services, P.O. Box 75933, Chicago, Illinois 60675-5933 REDEMPTION BY THE Early redemption by the Note holder is not permitted. 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