<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
VANSTAR CORPORATION
VANSTAR FINANCING TRUST
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7373 94-2376431
DELAWARE 51-6504920
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C> <C>
COPY TO:
H. CHRISTOPHER COVINGTON, ESQ. STANLEY R. HULLER, ESQ.
SENIOR VICE PRESIDENT, ARTER & HADDEN
GENERAL COUNSEL AND SECRETARY 1717 MAIN STREET
5964 WEST POSITAS BOULEVARD 5964 WEST LAS POSITAS BOULEVARD SUITE 4100
PLEASANTON, CALIFORNIA 94588-9012 PLEASANTON, CALIFORNIA 94588-9012 DALLAS, TEXAS 75201-4605
(510) 734-4000 (510) 734-4000 (214) 761-2100
(Address, including zip code, and
telephone
(Name, address, including zip code, number, including area code, of
and telephone number, including registrant's
area code, of agent for service) principal executive offices)
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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, as amended (the Securities Act), 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, please 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 for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE OR PER NOTE AGGREGATE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Trust Convertible Preferred Securities of
Vanstar Financing Trust................... 4,025,000 $55.50(1)(2) $223,387,500(1)(2) $67,694
6 3/4% Convertible Subordinated Debentures
of Vanstar Corporation.................... (3) -- -- --
Common Stock of Vanstar Corporation......... (4) -- -- --
Preferred Securities Guarantee.............. (5) -- -- --
Total..................................... 4,025,000 100% $223,387,500 $67,694
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act.
(2) Exclusive of accrued interest and distributions, if any.
(3) $207,474,200 in aggregate principal amount of 6 3/4% Convertible
Subordinated Debentures due 2016 (the "Debentures") of Vanstar Corporation
were issued and sold to Vanstar Financing Trust (the "Trust") in connection
with the issuance by the Trust of its 6 3/4% Trust Convertible Preferred
Securities (the "Preferred Securities"). The Debentures may be distributed,
under certain circumstances, to holders of the Preferred Securities for no
additional consideration. Pursuant to Rule 457(i) of the Securities Act, no
separate filing fee is required in connection with this security.
(4) Such indeterminable number of shares of Vanstar Common Stock as may be
issuable upon conversion of the Preferred Securities registered hereunder,
including such shares as may be issued pursuant to anti-dilution
adjustments.No separate consideration will be received for the Vanstar
Common Stock. Pursuant to Rule 457(i) of the Securities Act, no separate
filing fee is required in connection with this security.
(5) Pursuant to Rule 457(n) of the Securities Act, no separate filing fee is
required in connection with this security.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT
WITHOUT NOTICE. THESE SECURITIES MAY NOT BE SOLD NOR MAY AN OFFER TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 18, 1996
4,025,000 TRUST CONVERTIBLE PREFERRED SECURITIES
VANSTAR FINANCING TRUST
6 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
VANSTAR CORPORATION
----------------
The 6 3/4% Trust Convertible Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial interests
in the assets of Vanstar Financing Trust, a statutory business trust formed
under the laws of the State of Delaware ("Vanstar Financing Trust" or the
"Trust"). 3,500,000 Preferred Securities were issued and sold (the "Original
Offering") on October 2, 1996 (the "Original Offering Date") and 525,000
Preferred Securities were issued and sold (the "Over-Allotment Offering") by the
Trust on October 28, 1996 to the Initial Purchasers (as defined herein) and were
simultaneously sold by the Initial Purchasers in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), in the United States to persons reasonably believed by the
Initial Purchasers of the Preferred Securities to be "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act), to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) and outside the United States to non-U.S. persons in offshore
transactions in reliance on Regulation S under the Securities Act. Vanstar
Corporation, a Delaware corporation (the "Company" or "Vanstar"), owns all of
the common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in an equivalent principal
amount of 6 3/4% Convertible Subordinated Debentures due 2016 (the "Convertible
Debentures") issued by the Company. Upon an event of default under the
Declaration (as defined herein), the holders of the Preferred Securities will
have a preference over the holders of the Common Securities with respect to
payments in respect of distributions and payments upon redemption, liquidation
and otherwise.
The Preferred Securities, the Convertible Debentures, the Vanstar common
stock, par value $.001 per share (the "Company Common Stock") issuable upon
conversion thereof and the associated Guarantee (as defined herein)
(collectively, the "Offered Securities") may be offered and sold from time to
time by the holders named herein or in any accompanying supplement to this
Prospectus (the "Prospectus Supplement") or by their transferees, pledgees,
donees or successors pursuant to this Prospectus. The Offered Securities may be
sold by the Selling Holders (as defined herein) from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in a Prospectus Supplement. The Selling
Holders will receive all of the net proceeds from the sale of the Offered
Securities and, in the event of an underwritten offering of the Offered
Securities, will pay all underwriting discounts, selling commissions and
transfer taxes, if any, applicable to any such sale. The Company is responsible
for payment of all other expenses incident to the offer and sale of the Offered
Securities. The Selling Holders and any broker/dealers, agents or underwriters
which participate in the distribution of the Offered Securities may be deemed to
be underwriters within the meaning of the Securities Act, and any commission
received by them in a profit on the resale of the Offered Securities purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act. See "Plan of Distribution" for a description of indemnification
arrangements.
Each Preferred Security is convertible at the option of the holder thereof
into 1.739 shares of Company Common Stock (equivalent to $28.75 per share of
Company Common Stock), subject to adjustment in certain circumstances. The
Company Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "VST". On November 12, 1996, the last reported sale price of the Company
Common Stock on the NYSE Composite Tape was $25.00 per share. The Preferred
Securities have been designated for trading on the PORTAL Market since the
Original Offering Date. However, Preferred Securities resold pursuant to this
Prospectus will no longer be eligible for trading in such PORTAL Market. The
Company and the Trust do not currently intend to list the Preferred Securities
resold pursuant to this Prospectus on any securities exchange or to seek
approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Preferred Securities resold under this Prospectus.
(CONTINUED ON FOLLOWING PAGE)
--------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 13.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
(CONTINUED FROM FRONT COVER)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 6 3/4% of the liquidation amount of $50 per
Preferred Security, accruing from the Original Offering Date, and payable
quarterly in arrears on each January 1, April 1, July 1 and October 1,
commencing January 1, 1997. See "Description of the Preferred
Securities--Distributions." The payment of distributions out of moneys held by
the Trust and payments on liquidation of the Trust or the redemption of
Preferred Securities, as described below, are guaranteed by the Company (the
"Guarantee") to the extent the Trust has funds available therefor as described
under Description of the Guarantee. The Guarantee, when taken together with the
Company's obligations under the Indenture (as defined herein) pursuant to which
the Convertible Debentures were issued and its obligations under the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the Preferred
Securities. The Company's obligations under the Guarantee rank (i) subordinate
and junior to all other liabilities of the Company except any liabilities that
may be PARI PASSU by their terms, (ii) PARI PASSU in right of payment with the
most senior preferred stock issued from time to time by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock or any preferred securities of any affiliate of
the Company and (iii) senior to the Company Common Stock. See "Description of
the Guarantee." The obligations of the Company under the Convertible Debentures
are subordinate and junior in right of payment to Senior Indebtedness (as
defined herein) of the Company, which aggregated approximately $113.2 million at
October 31, 1996. In addition, the Company's obligations under the Guarantee and
the Convertible Debentures are effectively subordinated to all liabilities of
its subsidiaries. See "Description of the Convertible Debentures--Subordination"
and "Capitalization."
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities correspond to the interest rate and interest
payment dates and other payment dates for the Convertible Debentures, which are
and will continue to be the sole assets of the Trust. If the Company fails to
make principal or interest payments on the Convertible Debentures, the Trust
will not have sufficient funds to make distributions on the Preferred
Securities, in which event the Guarantee will not apply to such distributions
until the Trust has sufficient funds available therefor.
The Company has the right to defer payments of interest on the Convertible
Debentures at any time for up to 20 consecutive quarters (each, an "Extension
Period"), but not beyond the maturity of the Convertible Debentures. If interest
payments are so deferred, distributions on the Preferred Securities also will be
deferred. During any Extension Period, distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at a rate of
6 3/4% per annum compounded quarterly. During any Extension Period, holders of
Preferred Securities will be required to include such deferred interest in their
gross income for United States Federal income tax purposes in advance of receipt
of the cash distributions with respect to such deferred interest payments.
Moreover, if a holder of Preferred Securities converts its Preferred Securities
into Company Common Stock during any Extension Period, the holder will not
receive any cash related to the deferred distributions. There could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures (but distributions would continue to accumulate quarterly and accrue
interest until the end of any such Extension Period). See "Risk Factors-- Option
to Extend Interest Payment Period; Tax Consequences," "Description of the
Preferred Securities-- Distributions" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period." The Company has not
previously exercised, and does not have any current intention of exercising, its
right to defer payments of interest by extending the interest payment period on
the Convertible Debentures.
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after October 5, 1999 at the redemption prices
set forth herein. The Convertible Debentures may also be redeemed in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems the Convertible Debentures, the Trust must redeem the Trust
Securities on a PRO RATA
2
<PAGE>
basis having an aggregate liquidation amount equal to the aggregate principal
amount of the Convertible Debentures so redeemed at a redemption price
corresponding to the redemption price of the Convertible Debentures plus accrued
and unpaid distributions thereon to the date fixed for redemption. See
"Description of the Preferred Securities--Redemption." The Preferred Securities
will be redeemed upon the maturity of the Convertible Debentures. In addition,
the Trust will be dissolved, except in certain limited circumstances, upon the
occurrence of a Tax Event arising from a change in law or a change in legal
interpretation regarding tax matters. In certain circumstances involving a Tax
Event, the Company will have the right to redeem the Convertible Debentures. The
Trust will also be dissolved upon the occurrence of an Investment Company Event
(as defined herein). Upon dissolution of the Trust, the Convertible Debentures
will be distributed to the holders of the Trust Securities, on a pro rata basis,
in lieu of any cash distribution. If the Convertible Debentures are distributed
to the holders of the Trust Securities, the Company will use its best efforts to
cause the Convertible Debentures to be listed on the NYSE or such other national
securities exchange or similar organization on which the Preferred Securities
are then listed or quoted. See "Description of the Preferred Securities--Special
Event Redemption or Distribution" and "Description of the Convertible
Debentures."
Upon the liquidation, winding up or termination of the Trust, the holders of
the Preferred Securities will be entitled to receive for each Preferred Security
a liquidation amount of $50 plus accrued and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection with
such dissolution, Convertible Debentures are distributed to the holders of the
Preferred Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Seven World Trade Center, Suite
1300, New York, New York 10048 and at the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Reports, proxy and information
statements and other information filed electronically by the Company with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov. In addition, copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such reports, proxy and information
statements and other information concerning the Company may also be inspected at
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-1 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the Offered
Securities offered by this Prospectus. This Prospectus, which constitutes part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules relating thereto, a
certain portion of which have been omitted as permitted by the Rules and
Regulations of the Commission. For further information with respect to the
Company and the securities offered by this Prospectus, reference is made to the
Registration Statement and the exhibits filed as part thereof, which are on file
at the offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, or may be examined without charge at the offices
of the Commission or on the Commission's World Wide Web site. Statements
contained in this Prospectus as to the contents of any documents referred to are
not necessarily complete, and in each such instance, are qualified in all
respects by reference to the applicable documents filed with the Commission.
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of Preferred Securities because (i) all of the voting securities of the
Trust are owned, directly or indirectly, by the Company, a reporting company
under the Exchange Act, (ii) the Trust has no independent operations and exists
for the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in the
Convertible Debentures issued by the Company and (iii) the obligations of the
Trust under the Trust Securities are fully and unconditionally guaranteed by the
Company to the extent that the Trust has funds available to meet such
obligations. See "Vanstar Financing Trust," "Description of the Convertible
Debentures" and "Description of the Guarantee."
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Certain of the matters discussed in this Prospectus include forward-looking
statements that involve risks and uncertainties. Among the risks and
uncertainties to which the Company is subject are the risks inherent in the
Company's substantial indebtedness, the fact that the Company has experienced
significant fluctuations in revenues and operating results, the Company's
relationship to and business dealings with and with regard to Merisel FAB, Inc.,
the risks associated with managing the Company's inventory in light of product
life cycles and technological change, the Company's relationship with its
significant customers, intense price competition in the Company's markets and
the Company's dependence upon its key vendors. As a result, the actual results
realized by the Company could differ materially from the statements made herein.
Potential investors in this offering are cautioned not to place undue reliance
on the forward-looking statements made in this Prospectus, which speak only as
of the date hereof.
------------------------
This Prospectus includes product names, trade names and trademarks of
Vanstar Corporation and its subsidiaries and other companies.
4
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." SEE "SAFE
HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
THE COMPANY
The Company is a leading provider of services and products designed to build
and manage personal computer ("PC") network infrastructures, primarily for
Fortune 1000 companies and other large enterprises. The Company provides
customized, integrated solutions for its customers' distributed computing
networks by combining a comprehensive offering of value-added services with its
expertise in sourcing and distributing PCs, network products, computer
peripherals and software from a variety of vendors. These integrated solutions
are designed to support the customer's client/server environments throughout its
life cycle. The Company refers to these solutions as "Life Cycle Management."
Life Cycle Management integrates the offerings of design and consulting,
acquisition and deployment, operation and support, and enhancement and
migration.
Large organizations are becoming increasingly dependent on information
technology to compete effectively in today's global markets. The decision-making
process that organizations face when planning, selecting and implementing
information technology solutions is growing more complex, and, as a result, many
organizations are outsourcing the management and support of their PC network
infrastructure needs. The Company believes that its customers require
increasingly sophisticated PC network systems and support infrastructures. The
Company seeks to satisfy these requirements while seeking to minimize its
customers' internal staff requirements and systems development risk. The Company
enhances the delivery of its services and products with proprietary automated
systems, such as the Vanstar Navigator, and proprietary process methodologies,
such as Horizon, to analyze, design and manage its customers' PC network
infrastructures better. The Company's goal, through the use of these systems and
methodologies, is to reduce the labor component of PC life cycle management and
thereby increase efficiency, reduce costs and make network systems more reliable
and easier to use. The Company's service and product offerings are developed,
delivered and managed by a technical force of over 3,400 employees nationwide,
including a rapidly expanding systems engineering force, which grew from
approximately 200 professionals in March 1994 to approximately 1,100 in October
1996.
The Company believes that certain segments of its industry have begun to
consolidate. In order to maintain its position as a leading provider of PC
network infrastructure solutions to large businesses, the Company believes that
expansion through acquisitions, as well as internal growth, will be necessary.
Effective May 24, 1996, the Company consummated the acquisition of certain of
the assets and business operations of Dataflex Corporation ("Dataflex"),
previously known as the Dataflex Western Region and Dataflex Southwest Region
(the "Dataflex Regions"). These Dataflex Regions offer PC product distribution,
service and support in the states of Arizona, California, Colorado, Nevada, New
Mexico and Utah and reported revenues of approximately $145 million for the
fiscal year ended March 31, 1996. Effective September 4, 1996, the Company
consummated the acquisition of Mentor Technologies, Ltd., an Ohio limited
partnership (the "Mentor Partnership"), providing information technology
training and education to individuals and corporations. The Mentor Partnership
reported revenues of $5.5 million for its fiscal year ended December 31, 1995.
The Company expects, for the foreseeable future, to continue to evaluate other
potential acquisition opportunities, and to make additional acquisitions as
economic and market conditions, and the availability of attractive candidates,
permit. See "Recent Developments."
5
<PAGE>
In fiscal 1996 and the first three months of fiscal 1997, the Company's
operating performance improved over prior periods due to increased professional
services and life cycle services revenue, decreased fixed costs as a percentage
of revenue as well as cost reduction efforts and operational improvements. In
order to achieve its objective of continuing to be a leading provider of PC
network infrastructure solutions to large businesses throughout the world, the
Company intends to leverage its broad customer base, to develop and enhance its
value-added service offerings and to expand its worldwide service capabilities.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The principal executive offices of the Company are located at 5964 West Las
Positas Boulevard, Pleasanton, California 94588, and its telephone number is
(510) 734-4000.
THE OFFERING
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The Issuer............................. Vanstar Financing Trust, a Delaware statutory
business trust. The assets of the Trust consist
solely of the Convertible Debentures.
Securities Offered..................... 4,025,000 6 3/4% Trust Convertible Preferred
Securities, 6 3/4% Convertible Subordinated
Debentures, Company Common Stock issuable upon
conversion thereof, and the associated Guarantee.
Selling Holders........................ The Preferred Securities were originally issued by
the Trust and sold by the Initial Purchasers in
transactions exempt from registration under the
Securities Act to (i) "qualified institutional
buyers" pursuant to Rule 144A under the Securities
Act, (ii) institutional "accredited investors"
pursuant to Rule 501(a)(1), (2), (3) or (7) under
the Securities Act or (iii) non-U.S. persons in
offshore transactions under Regulation S
promulgated under the Securities Act. These
purchasers or their transferees, pledgees, donees
or successors may from time to time offer and sell
the Offered Securities pursuant to this Prospectus.
See "Selling Holders." Prior to the resale of
Preferred Securities pursuant to this Prospectus,
each of the Preferred Securities was eligible for
trading in the PORTAL Market. Preferred Securities
sold pursuant to this Prospectus will no longer be
eligible for trading in the PORTAL Market.
Distributions.......................... Distributions on the Preferred Securities have
accrued from the Original Offering Date and are
payable at the annual rate of 6 3/4% of the
liquidation preference of $50 per Preferred
Security. Subject to the distribution deferral
provisions described below, distributions will be
payable quarterly in arrears on each January 1,
April 1, July 1 and October 1, commencing January
1, 1997. Corporate holders of Preferred Securities
will not be entitled to a dividends-received
deduction.
Option to Extend Distribution Payment The ability of the Trust to pay distributions on
Period............................... the Preferred Securities is solely dependent on its
receipt of interest payments on the Convertible
Debentures. The
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6
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Company has the right at any time, and from time to
time, to defer the interest payments due on the
Convertible Debentures for successive periods not
exceeding 20 consecutive quarters for each such
Extension Period. As a consequence of such
extension, quarterly distributions on the Preferred
Securities would be deferred by the Trust (but
would continue to accumulate quarterly and would
accrue interest) until the end of any such
Extension Period. The Company will give written
notice of deferral of an interest payment to the
Trust, and the Trust shall give notice thereof to
the holders of the Preferred Securities. See "Risk
Factors--Option to Extend Interest Payment Period;
Tax Consequences," "Description of the Preferred
Securities--Distributions" and "Description of the
Convertible Debentures--Option to Extend Interest
Payment Period." If an extension of an interest
payment occurs, the holders of the Preferred
Securities will continue to accrue income for
United States Federal income tax purposes in
advance of any corresponding cash distribution.
Moreover, if a holder of Preferred Securities
converts its Preferred Securities into Company
Common Stock during an Extension Period, the holder
will not receive any cash related to the deferred
distributions. See "Risk Factors--Option to Extend
Interest Payment Period; Tax Consequences" and
"Certain United States Federal Income Tax
Considerations--Potential Extension of Interest
Payment Period and Original Issue Discount."
Rights Upon Deferral of During any Extension Period, interest on the
Distributions........................ Convertible Debentures will compound quarterly and
quarterly distributions (compounded quarterly at
the distribution rate) will accrue on the Preferred
Securities. The Company has agreed, among other
things, not to declare or pay any dividend on any
class of its capital stock during any Extension
Period, subject to the right of the Company to pay
dividends or distributions in shares of Company
Common Stock on Company Common Stock or on the
preferred stock, par value $.01 per share, of the
Company (the "Preferred Stock"), and to certain
other exceptions. See "Description of the
Convertible Debentures--Option to Extend Interest
Payment Period" and "Description of the
Guarantee--Certain Covenants of the Company."
Conversion into Company Common Stock... Each Preferred Security is convertible at the
option of the holder into shares of Company Common
Stock, at the rate of 1.739 shares of Company
Common Stock for each Preferred Security
(equivalent to a conversion price of $28.75 per
share of Company Common Stock), subject to
adjustment in certain circumstances. The last
reported sale price of Company Common Stock on the
NYSE Composite Tape on November 12, 1996 was $25.00
per share. In connection with any conversion of a
Preferred
</TABLE>
7
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<TABLE>
<S> <C>
Security, the Conversion Agent (as defined herein)
will exchange such Preferred Security for the
appropriate principal amount of Convertible
Debentures and immediately convert such Convertible
Debentures into shares of Company Common Stock. No
fractional shares of Company Common Stock will be
issued as a result of conversion, but in lieu
thereof such fractional interest will be paid by
the Company in cash. See "Description of the
Preferred Securities--Conversion Rights."
Liquidation Amount..................... Upon any liquidation of the Trust, holders will be
entitled to receive $50 per Preferred Security plus
an amount equal to any accrued and unpaid
distributions thereon to the date of payment,
unless Convertible Debentures are distributed to
such holders. See "Description of the Preferred
Securities--Liquidation Distribution Upon
Dissolution."
Redemption............................. The Convertible Debentures will be redeemable for
cash, at the option of the Company, in whole or in
part, from time to time, on or after October 5,
1999 at the prices specified herein. Upon any
redemption of the Convertible Debentures, the
Preferred Securities will be redeemed at the
applicable redemption price. The Preferred
Securities will not have a stated maturity date,
although they will be subject to mandatory
redemption upon the repayment of the Convertible
Debentures at their stated maturity (October 1,
2016), upon acceleration, earlier redemption or
otherwise. See "Description of the Preferred
Securities--Redemption" and "Description of the
Convertible Debentures--Optional Redemption."
Guarantee.............................. The Company has irrevocably guaranteed, to the
extent set forth herein, the payment in full of (i)
the distributions on the Preferred Securities to
the extent of funds of the Trust available
therefor, (ii) the amount payable upon redemption
of the Preferred Securities to the extent of funds
of the Trust available therefor and (iii)
generally, the liquidation preference of the
Preferred Securities to the extent of the assets of
the Trust available for distribution to holders of
Preferred Securities. The Guarantee is unsecured
and (i) subordinate and junior to all other
liabilities of the Company except any liabilities
that may be PARI PASSU expressly by their terms,
(ii) PARI PASSU in right of payment with the most
senior preferred stock issued from time to time by
the Company and with any guarantee now or hereafter
entered into by the Company in respect of any
preferred or preference stock or preferred
securities of any affiliate of the Company and
(iii) senior to the Company Common Stock. Upon the
liquidation, dissolution or winding up of the
Company, its obligations under the Guarantee will
rank junior to all of its other liabilities,
</TABLE>
8
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<TABLE>
<S> <C>
except as aforesaid, and, as a result, funds may
not be available for payment under the Guarantee.
See "Risk Factors--Ranking of Obligations Under
Guarantee and Convertible Debentures," "Description
of the Guarantee" and "Description of the
Convertible Debentures-- Subordination."
Voting Rights.......................... Generally, holders of the Preferred Securities do
not have any voting rights. See "Description of the
Preferred Securities--Voting Rights."
Tax Event or Investment Company Event Upon the occurrence of a Tax Event or an Investment
Redemption or Distribution........... Company Event (each as defined herein), except in
certain limited circumstances, the Issuer Trustees
(as defined herein) shall cause the liquidation of
the Trust and cause the Convertible Debentures to
be distributed to the holders of the Preferred
Securities. In certain circumstances involving a
Tax Event, the Company will have the right to
redeem the Convertible Debentures, in whole (but
not in part), at the applicable redemption price
plus accrued and unpaid interest, in lieu of a
distribution of the Convertible Debentures, in
which event the Trust Securities will be redeemed
at the applicable redemption price. See
"Description of the Preferred Securities-- Special
Event Redemption or Distribution."
Convertible Debentures................. The Convertible Debentures are unsecured
obligations of the Company. The Convertible
Debentures mature on October 1, 2016, and bear
interest at the rate of 6 3/4% per annum, payable
quarterly in arrears. Interest payments may be
extended from time to time by the Company for
successive periods not exceeding 20 consecutive
quarters for each such period (during which
interest will continue to accrue and compound
quarterly). Prior to the termination of any
Extension Period, the Company may further extend
the Extension Period provided that such Extension
Period, together with all previous and further
extensions thereof, may not exceed 20 consecutive
quarters and may not extend beyond the stated
maturity date of the Convertible Debentures. Upon
the termination of any Extension Period and the
payment of all amounts then due, the Company may
commence a new Extension Period, subject to the
preceding sentence. No interest shall be due and
payable during an Extension Period until the end of
such period. During an Extension Period, the
Company and its subsidiaries (other than its
wholly-owned subsidiaries) will be prohibited from
paying dividends on any class of their preferred or
common stock (except for (i) dividends or
distributions in shares of Company Common Stock on
Company Common Stock or on its Preferred Stock,
(ii) purchases or acquisitions of shares of Company
Common Stock made in connection with employee
benefit
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
plans of the Company or its subsidiaries in the
ordinary course of business or purchases made from
employees or officers pursuant to employment
agreements, subject to certain limitations, (iii)
conversions or exchanges of common stock of one
class into common stock of another class, and (iv)
purchases of fractional interests in shares of the
Company's capital stock pursuant to the conversion
or exchange provisions of any of the Company's
securities being converted or exchanged) and making
certain other restricted payments until quarterly
interest payments are resumed and all accumulated
and unpaid interest (including any interest
thereon) on the Convertible Debentures is made
current. The Convertible Debentures have provisions
with respect to interest, optional redemption and
conversion into the Company Common Stock and
certain other terms substantially similar to those
of the Preferred Securities. See "Description of
the Convertible Debentures."
Form of Preferred Securities........... Beneficial interests in the Preferred Securities
resold pursuant to this Prospectus will be
evidenced by, and transfers thereof will be
effected only through, records maintained by DTC
(as defined herein) in a single, permanent global
security bearing a CUSIP number distinct from the
CUSIP number for the Preferred Securities issued in
the Original Offering and the Over-Allotment
Offering. Except under the limited circumstances
described herein, Preferred Securities in
certificated form will not be issued in exchange
for an interest in the global certificate or
certificates. In the event of a transfer of
securities that were initially issued in fully
registered, certificated form, the holder of such
certificates will be required to exchange them for
interests in the global certificates representing
the number of Preferred Securities transferred. See
"Description of the Preferred
Securities--Book-Entry Only Issuance--The
Depository Trust Company."
Use of Proceeds........................ The Selling Holders will receive all of the
proceeds from the sale of the Offered Securities.
Neither Vanstar nor the Trust will receive any
proceeds from the sale of the Offered Securities.
Trading................................ The Company Common Stock is listed on the NYSE
under the symbol "VST." Prior to the resale of the
Preferred Securities pursuant to this Prospectus,
each of the Preferred Securities was eligible for
trading in the PORTAL Market. Preferred Securities
sold pursuant to this Prospectus will no longer be
eligible for trading in the PORTAL Market. The
Company and the Trust do not currently intend to
list the Preferred Securities resold pursuant to
this Prospectus on any securities exchange or
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
to seek approval for quotation through any
automated quotation system. Accordingly, there can
be no assurance as to the development or liquidity
of any market for the Preferred Securities resold
under this Prospectus.
Risk Factors........................... An investment in the Offered Securities involves a
high degree of risk. See "Risk Factors" for a
discussion of certain factors that should be
considered in evaluating an investment in the
Offered Securities.
</TABLE>
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below (other than the
unaudited information as of and for the three months ended July 31, 1995 and
1996) have been derived from the consolidated audited financial statements of
the Company for the periods indicated. The summary unaudited consolidated
financial information as of and for the three months ended July 31, 1995 and
1996, in the opinion of management, reflects all adjustments, consisting only of
a normal recurring nature, necessary for a fair presentation of the consolidated
financial position and consolidated results of operations for interim periods.
The consolidated operating results for the three months ended July 31, 1996 are
not necessarily indicative of the results which may be expected for the full
fiscal year ending April 30, 1997. All of the following information should be
read in conjunction with "Selected Consolidated Financial Data," Management's
Discussion" and "Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements (including the Notes thereto) appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEVEN FISCAL YEAR ENDED THREE MONTHS ENDED JULY
SEPTEMBER 30, MONTHS APRIL 30, 31,
-------------------- ENDED APRIL -------------------- ------------------------
1992 1993 30, 1994 1995 1996 1995 1996
--------- --------- ----------- --------- --------- --------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue................................. $ 787,798 $1,099,813 $ 586,514 $1,385,392 $1,804,813 $ 427,169 $ 559,090
Cost of revenue......................... 696,518 921,789 489,512 1,174,854 1,559,886 368,274 480,968
Gross margin............................ 91,280 178,024 97,002 210,538 244,927 58,895 78,122
Selling, general and administrative
expenses.............................. 158,644 181,320 97,436 182,411 201,880 46,362 56,896
Operating income (loss)................. (76,272) (3,296) (434) 28,127 43,047 12,533 21,226
Interest expense, net................... 20,242 22,196 11,181 25,978 30,265 7,273 5,729
Income (loss) from continuing
operations............................ (54,228) (18,751) (6,969) 1,268 8,053 3,314 9,763
Income from discontinued operations..... 2,261 14,505 51,474 -- 9,194 -- --
Net income (loss)....................... (51,967) (4,246) 44,505 1,268 17,247 3,314 9,763
Earnings per share (1):
Continuing operations................. 0.04 0.23 0.10 0.23
Discontinued operations............... -- 0.27 -- --
Total earnings per share............ 0.04 0.50 0.10 0.23
Ratio of earnings to fixed charges
(2)................................... -- -- -- 1.06x 1.32x 2.95x
<CAPTION>
JULY 31, 1996
------------------------
ACTUAL PRO FORMA (3)
--------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......................... $ 250,767 $ 250,144
Total assets............................ 790,220 790,220
Current maturities of long-term debt.... 1,938 1,938
Long-term debt, less current
maturities............................ 233,216 38,004
Company-obligated mandatorily redeemable
convertible preferred securities of
financing trust holding solely
convertible debentures................ -- 194,589
Total stockholders' equity.............. 136,816 136,816
</TABLE>
- ------------------------------
(1) Earnings per share for the three months ended July 31, 1995 and the fiscal
years ended April 30, 1995 and 1996 give effect to the conversion of all
outstanding shares of Preferred Stock and Class B Common Stock into Company
Common Stock and the exchange of all outstanding warrants for shares of
Company Common Stock in connection with the Company's initial public
offering occurring March 11, 1996 (the "IPO") as if the conversion had
occurred at the later of the beginning of the period or the issuance date.
(2) The ratio of earnings to fixed charges is computed by dividing (x) the sum
of income before provision for income taxes, discontinued operations,
extraordinary items and fixed charges, less capitalized interest by (y)
fixed charges. Fixed charges consist of interest on all indebtedness,
amortization of debt expense and discount or premium related to indebtedness
and the interest element of rental expense. Earnings were inadequate to
cover fixed charges for the fiscal years ended September 30, 1992 and 1993
and the seven months ended April 30, 1994 in the amount of $96.5 million,
25.5 million and 11.6 million, respectively.
(3) Pro forma adjustments give effect to (i) the sale of $201.25 million of the
Preferred Securities by the Trust less the Initial Purchasers' discount and
estimated offering expenses totaling $6.7 million payable by the Company
with respect to the Original Offering and the Over-Allotment Offering and
(ii) the application of the net proceeds therefrom.
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<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE OFFERED SECURITIES. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD
LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED BELOW. SEE "SAFE HARBOR STATEMENT UNDER PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995."
SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
The Company's quarterly and annual revenues and operating results have
varied significantly in the past and are likely to continue to do so in the
future. Revenues and operating results may fluctuate as a result of the demand
for the Company's products and services, the introduction of new hardware and
software technologies offering improved features, the introduction of new
services by the Company and its competitors, changes in the level of operating
expenses, the timing of major service projects, inventory adjustments,
competitive conditions and economic conditions generally. In particular, the
Company's operating results are highly sensitive to changes in the mix of the
Company's product and service revenues, product margins and interest rates.
Further, the purchase of the Company's products and services generally involves
a significant commitment of capital, with the attendant delays frequently
associated with large capital expenditures and authorization procedures within
an organization. For these and other reasons, the Company's operating results
are subject to a number of significant risks over which the Company has little
or no control, including customers' technology life cycle needs, budgetary
constraints and internal authorization reviews. In addition, the Company
historically has experienced significant revenue fluctuations because of
shortages of supply from certain vendors. Shortages of supplies from vendors
have previously occurred due primarily to credit limitations placed on the
Company. Future limitations of credit by vendors could have a material adverse
effect on the Company. In addition, the general availability of certain
products, particularly state of the art computing and data communications
products, is occasionally restricted. While the Company has not historically
experienced significant product supply shortages, other than due to credit
restrictions as described above, any such shortages in the future could have a
material adverse effect on the Company. The Company is increasing its fixed
operating expenses, including a significant increase in personnel, based on
anticipated revenue growth. To the extent that increased personnel expenses are
incurred prior to related increases in revenues, the Company's operating results
may be adversely affected. In addition, in the event that the growth in the
Company's business does not meet its expectations, the Company may be unable to
adjust its spending levels rapidly enough to avoid an adverse effect upon
operating results. Accordingly, the Company believes that period-to-period
comparisons of its operating results should not be relied upon as an indication
of future performance. In addition, the results of any quarterly period are not
necessarily indicative of results to be expected for a full fiscal year. It is
possible that in certain future periods, the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the price of the Company Common Stock would likely be materially adversely
affected. See "Summary--Summary Consolidated Financial Data," "--Dependence on
Key Vendors and Product Supply," "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
LIMITED HISTORY OF PROFITABILITY; UNCERTAINTY OF FUTURE RESULTS
The Company has a limited history of profitability. The Company experienced
operating losses in the fiscal years ended September 30, 1992 and 1993 and
during the seven months ended April 30, 1994. The Company generated operating
income in fiscal 1995 and 1996 and for the three months ended July 31, 1996. The
Company derives its revenues from four primary sources: products, networking,
support services and other services. The Company has recently increased the
focus of its business on the provision of network services and expects to derive
an increasingly larger portion of its operating income from the
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provision of services. If the Company is not successful in implementing its
strategy of focusing on sales of services, the Company's operating margins could
decline and its ability to maintain profitability could be materially adversely
affected. There can be no assurance that the Company will be able to sustain
profitability on a quarterly or annual basis in the future. See
"Summary--Summary Consolidated Financial Data," "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
SUBSTANTIAL INDEBTEDNESS AND FIXED OBLIGATIONS; DEPENDENCE ON IBMCC; INTEREST
RATE SENSITIVITY
The Company's business requires significant working capital to finance
product inventory and accounts receivable. Since 1986, the Company has funded
its working capital requirement through its Financing Program Agreement (the
"Financing Program Agreement") with IBMCC. At October 31, 1996, the outstanding
principal balance under the Financing Program Agreement was approximately $245.7
million, out of a total of $300 million in available credit. Borrowings under
the line of credit are secured by certain assets of the Company, including
accounts receivable, inventory and equipment. The line of credit is currently
available through October 31, 1997 and is renewable thereafter for successive
six-month periods. The Financing Program Agreement also restricts the ability of
the Company to redeem the Convertible Debentures and the ability of the Trust to
redeem the Preferred Securities, even upon the occurrence of a Tax Event (as
defined below). See "--Limitations of Redemption of Debentures." IBMCC may
terminate the Financing Program Agreement at any time upon 90 days' notice to
the Company. In the event of such termination, the outstanding borrowings under
the Financing Program Agreement mature at the end of the term of the line of
credit. Although the entire net proceeds of the Original Offering and the
Over-Allotment Offering were used to reduce the Company's outstanding
indebtedness under the Financing Program Agreement, such proceeds were not
sufficient to retire the entire indebtedness. The Company currently contemplates
repayment of a portion of the remaining IBMCC indebtedness with the proceeds of
a revolving funding trade receivables securitization facility planned to be
consummated during the Company's third fiscal quarter. See "Recent
Developments." There can be no assurance that the planned securitization
facility will be consummated within the expected time frame, on terms
satisfactory to the Company or at all. There can be no assurance that IBMCC will
continue to finance the Company's operations, or if such financing is not
continued, that the Company will be able to secure additional debt financing.
Borrowings under the Financing Program Agreement currently bear interest at
the average of the prime rate announced by Citibank, N.A., The Chase Manhattan
Bank, N.A. and Bank of America National Trust and Savings Association (the
"Prime Rate") minus 0.50% (7.75% at October 31, 1996). As a result, the
Company's operating results are sensitive to changes in the Prime Rate. An
increase in the Prime Rate could have a material adverse effect on the Company's
financial condition and results of operations. In addition, there can be no
assurance that the Company will be able to generate sufficient operating cash
flow to cover required interest and principal payments when due. If the Company
is unable to meet interest and principal payments in the future, it may,
depending upon the circumstances, seek additional equity or debt financing or
attempt to refinance its existing indebtedness, certain of which transactions
could be dilutive to the holders of the Company Common Stock. There can be no
assurance that sufficient equity or debt financing will be available at all or
on terms acceptable to the Company. If the Company were unable to obtain any
required alternative or additional financing, it would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company currently has substantial fixed obligations (including
indebtedness) in relation to its stockholders' equity and there can be no
assurance that the Company's operating results will be sufficient for payment of
all of its fixed obligations. The degree to which the Company is leveraged could
have important consequences to holders of the Preferred Securities, including
the following: (i) the Company's ability to obtain other financing in the future
may be impaired; (ii) a substantial portion of the Company's
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<PAGE>
cash flow from operations must be dedicated to the payment of principal and
interest on its indebtedness; and (iii) a high degree of leverage may make the
Company more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures. The Company's ability to make scheduled
payments on or, to the extent not restricted pursuant to the terms thereof, to
refinance its indebtedness depends on its financial and operating performance,
which is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. The Indenture does not limit the amount of
additional indebtedness that the Company or any of its subsidiaries can create,
incur, assume or guarantee.
RANKING OF OBLIGATIONS UNDER GUARANTEE AND CONVERTIBLE DEBENTURES
The Company's obligations under the Guarantee rank (i) subordinate and
junior to all other liabilities of the Company except any liabilities that may
be PARI PASSU expressly by their terms, (ii) PARI PASSU in right of payment with
the most senior preferred stock issued from time to time by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock or preferred securities of any affiliate of the
Company and (iii) senior to the Company Common Stock. The obligations of the
Company under the Convertible Debentures are subordinate and junior in right of
payment to Senior Indebtedness of the Company. No payment of principal of
(including redemption payments, if any), premium, if any, or interest on, the
Convertible Debentures may be made if (i) any Senior Indebtedness of the Company
is not paid when due and any applicable grace period with respect to such
default has ended and such default has not been cured or waived, ceased to exist
or (ii) the maturity of any Senior Indebtedness of the Company has been
accelerated because of a default. At October 31, 1996, Senior Indebtedness of
the Company aggregated approximately $113.7 million. There are no terms of the
Preferred Securities, the Convertible Debentures or the Guarantee that limit the
ability of the Company or its subsidiaries to incur additional indebtedness or
liabilities, including indebtedness or liabilities that would rank senior or
effectively senior to the Convertible Debentures and the Guarantee. See
"Description of the Guarantee--Status of the Guarantee; Subordination" and
"Description of the Convertible Debentures--Subordination."
RESTRICTIVE COVENANTS
The Financing Program Agreement with IBMCC contains significant financial
covenants. The Company's ability to meet such covenants is dependent on its
financial and operating performance, which is subject, at least in part, to
prevailing economic conditions and to financial, business and other factors
beyond its control. There can be no assurance that financial results that comply
with the restrictive covenants and financial tests in the Financing Program
Agreement will be achieved, and the Company's inability to satisfy these
covenants, if not waived by IBMCC, could result in a default under such
financing arrangement. In the event of such a default, IBMCC could elect to
declare all amounts borrowed, together with accrued and unpaid interest, due and
payable. If the Company were unable to pay such amounts, IBMCC could proceed
against any collateral securing the obligations due to it. If such indebtedness
were to be accelerated, there can be no assurance that the assets of the Company
would be sufficient to repay in full such indebtedness and other indebtedness of
the Company or to pay principal of and interest on the Convertible Debentures in
order for the Trust to meet its obligations under the Preferred Securities.
LIMITATIONS ON REDEMPTION OF DEBENTURES
The Company's ability to redeem the Convertible Debentures for cash, either
in connection with an optional redemption on or after October 5, 1999 or in
certain circumstances in connection with a Tax Event, is subject to limitations.
There can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the applicable
redemption price for the Convertible Debentures. In addition, the terms of the
Company's Financing Program Agreement with IBMCC presently prohibit the Company
from redeeming the Convertible Debentures for cash, even following the
occurrence of a Tax Event. In the event a cash redemption by the Company
following a Tax
15
<PAGE>
Event were to be prohibited by the terms of the Financing Program Agreement, the
Company would be required to bear the burden of the change in tax treatment that
triggered the Tax Event. Any future financing arrangement to which the Company
becomes a party may contain a similar prohibition. See "--Substantial
Indebtedness and Fixed Obligations; Dependence on IBMCC; Interest Rate
Sensitivity."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
The Company has the right under the Indenture to defer interest payments
from time to time on the Convertible Debentures for successive periods not
exceeding 20 consecutive quarterly interest periods during which no interest
shall be due and payable, PROVIDED, that no such Extension Period may extend
beyond the maturity date of the Convertible Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
select a new Extension Period, subject to the requirements described herein. As
a consequence of such extension, quarterly distributions on the Preferred
Securities would be deferred (although such distributions would continue to
accrue with interest thereon compounded quarterly) by the Trust during any such
Extension Period. In the event that this right is exercised, then, during such
period the Company (i) may not, and shall not allow any of its subsidiaries
(other than its wholly-owned subsidiaries) to, declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of their capital stock (except for (a)
dividends or distributions in shares of Company Common Stock on Company Common
Stock or on its Preferred Stock, (b) purchases or acquisitions of shares of
Company Common Stock made in connection with employee benefit plans of the
Company or its subsidiaries in the ordinary course of business or pursuant to
employment agreements with officers or employees of the Company or its
subsidiaries (subject to certain limitations), (c) conversions or exchanges of
common stock of one class into common stock of another class and (d) purchases
of fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of any of the Company's securities being
converted or exchanged), (ii) may not, and shall not allow any of its
subsidiaries to, make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by the Company that
rank PARI PASSU with or junior to the Convertible Debentures, and (iii) may not,
and shall not allow any of its subsidiaries to, make any guarantee payments with
respect to the foregoing. Prior to the termination of any such Extension Period,
the Company may further extend the Extension Period; PROVIDED, that such
Extension Period, together with all previous and further extensions thereof, may
not exceed 20 consecutive quarters and that such Extension Period may not extend
beyond the maturity date of the Convertible Debentures. Consequently, there
could be multiple Extension Periods of varying lengths throughout the term of
the Convertible Debentures. See "Description of the Preferred Securities--
Distributions" and "Description of the Convertible Debentures--Option to Extend
Interest Payment Period."
Should the Company exercise the right to defer payments of interest on the
Convertible Debentures, each holder of Preferred Securities will continue to
accrue income (as original issue discount) in respect of the deferred interest
allocable to its Preferred Securities for United States Federal income tax
purposes, which will be allocated but not distributed to holders of record of
Preferred Securities. As a result, each such holder of Preferred Securities will
recognize income for United States Federal income tax purposes in advance of the
receipt of cash and will not receive the cash from the Trust related to such
income if such holder disposes of its Preferred Securities prior to the record
date for the date on which distributions of such amounts are made. Moreover, if
a holder of Preferred Securities converts its Preferred Securities into Company
Common Stock during any Extension Period, the holder will not receive any cash
related to the deferred distributions. Should the Company determine to exercise
such right in the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of or converts its Preferred Securities
during any Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of the right to defer interest payments,
the market price of the Preferred Securities (which represent an undivided
beneficial interest in the Convertible Debentures) may be more volatile than
other similar securities where
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the issuer does not have such rights to defer interest payments. See "Certain
United States Federal Income Tax Considerations--Potential Extension of Interest
Payment Period and Original Issue Discount."
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that, among other things, would treat as equity for United States
Federal income tax purposes instruments with a maximum term of more than 20
years that are not shown as indebtedness on the consolidated balance sheet of
the issuer. On March 29, 1996, Senate Finance Committee Chairman William V.
Roth, Jr. and House Ways and Means Committee Chairman Bill Archer issued a joint
statement (the "Joint Statement") indicating their intent that certain
legislative proposals initiated by the Clinton administration, including the
Proposed Legislation, that may be adopted by either of the tax-writing
committees of Congress, would have an effective date that is no earlier than the
date of "appropriate Congressional action." Based on the Joint Statement, it is
expected that if the Proposed Legislation were enacted, such legislation would
not apply to the Convertible Debentures since they were issued prior to the date
of any "appropriate Congressional action." There can be no assurance, however,
that any proposed legislation enacted after the date hereof will not otherwise
adversely affect the tax treatment of the Convertible Debentures. If legislation
is enacted that adversely affects the tax treatment of the Convertible
Debentures, such legislation could result in the distribution of the Convertible
Debentures to holders of the Preferred Securities or, in certain limited
circumstances, the redemption of the Convertible Debentures by the Company and
the distribution of the resulting cash in redemption of the Preferred
Securities. See "Description of the Preferred Securities--Special Event
Redemption or Distribution."
RIGHTS UNDER THE GUARANTEE
The Guarantee Trustee (as defined herein) will hold the Guarantee for the
benefit of the holders of the Preferred Securities. The Guarantee guarantees to
the holders of the Preferred Securities the payment of (i) any accrued and
unpaid distributions that are required to be paid on the Preferred Securities,
to the extent the Trust has funds available therefor, (ii) the applicable
redemption price with respect to the Preferred Securities called for redemption
by the Trust, to the extent the Trust has funds available therefor, and (iii)
upon a voluntary or involuntary dissolution, winding up or termination of the
Trust (other than in connection with a distribution of the Convertible
Debentures to holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred Securities to the date
of payment, to the extent the Trust has funds available therefor, and (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Preferred Securities upon the liquidation of the Trust. The holders of a
majority in liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee. Notwithstanding
the foregoing, any holder of Preferred Securities may directly institute a legal
proceeding directly against the Company to enforce the obligations of the
Guarantor under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee, or any other person or entity. If the
Company were to default on the obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, a holder
of the Preferred Securities would be required to rely on the enforcement (1) by
the Property Trustee (as defined herein) of its rights, as registered holder of
the Convertible Debentures, against the Company pursuant to the terms of the
Convertible Debentures or (2) by such holder of Preferred Securities of its
right against the Company to enforce payments on the Convertible Debentures. See
"Description of the Guarantee" and "Description
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of the Convertible Debentures." The Declaration provides that each holder of
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the sole holder of the
Convertible Debentures against the Company. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it
under the Indenture as a holder of the Convertible Debentures. If the Property
Trustee fails to enforce its rights under the Convertible Debentures, any holder
of Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Property Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the Property
Trustee or any other person or entity. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Convertible Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities may directly institute a proceeding for enforcement of
payment to such holder of the principal of or interest on the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
by the Company to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Convertible Debentures. See "Vanstar
Financing Trust."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event or an Investment Company Act Event (each
as defined herein, and each, a "Special Event"), the Trust will be dissolved,
except in the limited circumstance described below, with the result that the
Convertible Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In certain
circumstances, the Company shall have the right to redeem the Convertible
Debentures, in whole (but not in part), in lieu of a distribution of the
Convertible Debentures by the Trust, in which event the Trust will redeem the
Preferred Securities. See "Description of the Preferred Securities--Special
Event Redemption or Distribution."
Under current United States Federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. Upon the occurrence of a Special
Event, however, a dissolution of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See
"Taxation--Receipt of Convertible Debentures or Cash Upon Liquidation of the
Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Convertible Debentures that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
Because holders of Preferred Securities may receive Convertible Debentures upon
the occurrence of a Special Event, prospective purchasers of Preferred
Securities also are making an investment decision with regard to the Convertible
Debentures and should carefully review all the information
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regarding the Convertible Debentures contained herein. See "Description of the
Preferred Securities-- Special Event Redemption or Distribution" and
"Description of the Convertible Debentures--General."
RELATIONSHIP WITH MERISEL FAB, INC.
The Company provides product distribution services to franchisees and
affiliates of Merisel FAB, Inc. ("Merisel FAB") for a fee through its
distribution centers pursuant to a distribution services agreement entered into
in connection with the sale of the Company's United States franchise business to
Merisel FAB in January 1994. Merisel FAB is a wholly-owned subsidiary of
Merisel, Inc. ("Merisel") whose common stock is publicly traded (Nasdaq: MSEL)
and whose 12.5% senior notes were downgraded from B to CCC+ on April 1, 1996 and
to CCC- on August 16, 1996 by Standard & Poors Corporation. Merisel reported
losses of $2.82 and $4.75 per share for the fiscal year ended December 31, 1995
and the nine months ended September 30, 1996, respectively. Merisel announced
that it has engaged a financial advisor to assist in assessing its strategic
options in order to maximize stockholder value and that it is negotiating with
its lenders regarding potential non-compliance with certain financial covenants
under certain of its loan agreements. Merisel has guaranteed Merisel FAB's
obligations under the distribution services agreement. The distribution services
agreement expires in April 1997. Approximately 40% of the Company's inventory
shipments by dollar volume are made to satisfy its obligations under the
distribution services agreement. For the seven months ended April 30, 1994, the
fiscal year ended April 30, 1995, the fiscal year ended April 30, 1996 and the
three months ended July 31, 1996, revenues derived from Merisel FAB were
approximately $6.1 million, $25.0 million, $21.3 million, and $5.6 million
respectively, representing approximately 1.0%, 1.8%, 1.2%, and 1.0%,
respectively, of total revenue for such periods. Pursuant to its agreement with
the Company, Merisel FAB is obligated to pay the Company for its daily purchases
within two business days, as a result of which the Company typically carries a
receivable balance from Merisel FAB of approximately $9.0 million. Any further
deterioration in the business of Merisel FAB's franchisees and affiliates or in
Merisel FAB's or Merisel's financial condition, including operating losses of
Merisel that may continue beyond its anticipated losses through the third
quarter of 1996, could materially adversely affect the Company's ability to sell
the inventory it holds to satisfy its obligations under the Merisel distribution
and services agreement which would have a material adverse effect on the
Company's financial condition and results of operations, and could adversely
affect the Company's "other services" revenue. See "--Inventory Management."
DEPENDENCE ON AND NEED TO RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL
PERSONNEL
The Company's success depends to a significant extent on its ability to
attract and retain key personnel. In particular, the Company is dependent on its
senior management team and technical personnel. The Company has significantly
expanded its technical staff. The Company employs over 3,400 technical
professionals and has expanded its systems engineering force from approximately
200 in March 1994 to approximately 1,100 in October 1996. Competition for such
technical personnel is intense and no assurance can be given that the Company
will be able to recruit and retain such personnel. The failure to recruit and
retain management and technical personnel could have a material adverse effect
on the Company's growth, revenues and results of operations. See
"Business--Employees" and "Management."
MANAGEMENT OF EXPANDING OPERATIONS AND INCREASED SERVICE FOCUS
The Company's growth resulting from expanding operations and acquisitions
has placed significant demands on the Company's management, operational and
technical resources. Furthermore, the Company has increased the focus of its
business operations on the provision of network services. Such growth and
increased service focus are expected to continue to challenge the Company's
sales, marketing, technical and support personnel and senior management. The
Company's future performance will depend in part on its ability to manage
expanding domestic and international operations and to adapt its operational
systems to respond to changes in its business. In particular, the Company's
success will depend on its ability to
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attract, retain and train adequate numbers of technical field personnel and
effectively integrate any acquired business operations. The failure of the
Company to effectively manage its growth and increased service focus effectively
or to train its technical field personnel could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE
The markets for the Company's product and service offerings are
characterized by rapidly changing technology and frequent new product and
service offerings. The introduction of new technologies can render existing
products and services obsolete or unmarketable. The Company's continued success
will depend on its ability to enhance existing products and services and to
develop and introduce, on a timely and cost-effective basis, new products and
services that keep pace with technological developments and address increasingly
sophisticated customer requirements. There can be no assurance that the Company
will be successful in identifying, sourcing, developing and marketing product
and service enhancements or new products and services that respond to
technological change, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
product and service enhancements or new products and services, or that its
product and service enhancements and new products and services will adequately
meet the requirements of the marketplace and achieve market acceptance. The
Company's business, financial condition and results of operations could be
materially adversely affected if the Company were to incur delays in sourcing
and developing product and service enhancements or new products and services or
if such product and service enhancements or new products and services did not
gain market acceptance. In addition, the Company has developed proprietary
automated systems to enhance the delivery of its services. No assurance can be
given that the Company's automated systems will function as anticipated, will
result in lower costs to the Company or its customers or will not be rendered
obsolete as a result of technological change. See "Business--Automated Systems,
Process Methodologies and Technical Personnel."
DEPENDENCE ON KEY VENDORS AND PRODUCT SUPPLY
A significant portion of the Company's revenue is derived from sales of PC
network hardware, peripherals and software, including products of various major
vendors. The Company's agreements with those vendors from which it purchases
products directly, generally contain provisions for periodic renewals and for
termination by the vendor without cause, generally upon relatively short notice.
Although the Company believes its vendor relationships are good, there can be no
assurance that the Company's relationships will continue as presently in effect.
The loss of a major vendor, the deterioration of the Company's relationship with
a major vendor or the failure of the Company to establish good relationships
with major new vendors as they develop could have a material adverse effect on
the Company's business. As is typical in its industry, the Company receives
credits from most of its vendors for market development, which are used to
offset a portion of the Company's sales and marketing expense. Any change in the
availability of these credits could materially adversely affect the Company's
operating results at least until the Company made appropriate adjustments in its
expense levels. The Company is also dependent, in part, upon vendor financing
for working capital requirements. No assurance can be given that vendor
financing will continue to be available to the Company on satisfactory terms and
conditions, if at all. The failure of the Company to obtain vendor financing on
satisfactory terms and conditions could have a material adverse effect on the
Company's business, financial condition and results of operations.
The personal computer industry experiences product supply shortages and
customer order backlogs from time to time due to the inability of certain
manufacturers to supply certain products on a timely basis. In addition, certain
vendors have initiated new channels of distribution that increase competition
for the available product supply. There can be no assurance that vendors will be
able to maintain an adequate supply of products to fulfill the Company's
customer orders on a timely basis. The Company has
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experienced product supply shortages in the past and expects to experience such
shortages from time to time in the future. Failure to obtain adequate product
supplies or fulfill customer orders on a timely basis could have a material
adverse effect on the Company's business, financial condition and results of
operations.
INVENTORY MANAGEMENT
The personal computer industry is characterized by rapid product improvement
and technological change resulting in relatively short product life cycles and
rapid product obsolescence, which can place inventory at considerable valuation
risk. Although it is industry practice for the Company's suppliers to provide
price protection to the Company intended to reduce the risk of inventory
devaluation, such policies are subject to change. The Company also has the
option of returning, subject to certain limitations, a percentage of its current
product inventories each quarter to certain manufacturers as it assesses each
product's current and forecasted demand. The amount of inventory that can be
returned to suppliers varies under the Company's agreements and such return
policies may provide only limited protection against excess inventory. There can
be no assurance that suppliers will continue such policies, that unforeseen new
product developments will not materially adversely affect the Company or that
the Company can successfully manage its existing and future inventories.
Approximately 40% of the Company's inventory shipments by dollar volume are made
to satisfy its obligations under the distribution services agreement with
Merisel FAB. However, virtually all of the inventory maintained by the Company
is not customer specific and the Company believes that such inventory can be
sold through Merisel FAB franchisees or to other customers or other resellers
or, in some cases, returned to the vendor. Any inventory adjustments could
materially adversely affect the Company's financial condition and results of
operations.
CONCENTRATION OF REVENUES
During the fiscal years ended April 30, 1995 and 1996, and the quarter ended
July 31, 1996, Microsoft Corporation accounted for 10.8%, 12.0% and 12.8%,
respectively, of the Company's total revenues for such fiscal periods. During
such periods, no other customer accounted for more than 10% of the Company's
total revenues. However, during the first three months of fiscal 1997, the
Company derived approximately 55% of its revenues from its 50 largest customers.
To the extent that the Company is successful in expanding its relationship with
new and existing customers among large enterprises such as the Fortune 1000, its
revenues may become more concentrated. While the Company seeks to build long-
term customer relationships, revenues from any particular customer can fluctuate
from period to period due to such customer's purchasing patterns. Any
termination or significant disruption of the Company's relationships with any of
its principal customers could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, a
deterioration in the financial condition of any of its principal customers could
expose the Company to the possibility of large accounts receivable write-offs,
which would materially adversely affect the Company's financial condition and
results of operations. See "Business--Customers."
INTENSE COMPETITION
The markets in which the Company operates are characterized by intense
competition from several types of technical service providers, including
mainframe and mid-range computer manufacturers and outsourcers entering the
personal computer services marketplace, including Digital Equipment Corporation
MultiVendor Services, Electronic Data Systems Corporation, Hewlett-Packard
Company Multi-Vendor Services and Integrated Systems Solutions Corporation.
Other competitors include VARs, systems integrators and third-party service
companies, including AmeriData Technologies, Inc., CompuCom Systems, Inc.,
DecisionOne, Entex Information Services, InaCom Corp., MicroAge, Inc. and
Technology Service Solutions. The Company expects to face further competition
from new market entrants and possible alliances between competitors in the
future. Certain of the Company's current and potential
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competitors have greater financial, technical, marketing and other resources
than the Company. As a result, they may be able to respond more quickly to new
or emerging technologies and changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products and
services than the Company. No assurance can be given that the Company will be
able to compete successfully against current and future competitors. See
"Business--Competition."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on the Company
Common Stock and does not presently intend to pay cash dividends on its Common
Stock in the foreseeable future. The Company intends to retain future earnings
for reinvestment in its business. In addition, the Company's Financing Program
Agreement with IBMCC limits the Company's ability to pay cash dividends on its
capital stock. See "Market Prices and Dividend Policy."
ACQUISITIONS
As part of its growth strategy, the Company pursues the acquisition of
companies that sell products and services that either complement or expand its
existing business. As a result, the Company continually evaluates potential
acquisition opportunities, some of which may be material in size and scope.
Acquisitions involve a number of special risks, including the diversion of
management's attention to the assimilation of the operations and personnel of
the acquired companies, the incorporation of acquired products and services into
the Company's offerings, adverse short-term effects on the Company's operating
results, the amortization of acquired intangible assets, the loss of key
employees and the difficulty of presenting a unified corporate image.
Although the Company is currently in discussions with several acquisition
candidates, it is not now a party to any binding commitments or agreements to
proceed with regard thereto other than as discussed under "Recent Developments."
In addition, the Company anticipates that one or more other acquisition
opportunities may become available in the near future. The Company intends to
actively pursue existing and future acquisition opportunities. No assurance can
be given that the Company will have adequate resources to consummate any
acquisition, that any acquisition by the Company will or will not occur, that if
any acquisition does occur it will not materially adversely affect the Company
or that any such acquisition will be successful in enhancing the Company's
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company's ability to consummate acquisitions will be limited by the
availability of attractive candidates at appropriate terms, the Company's
capital resources and prevailing economic and market conditions. There can be no
assurance that the Company will be able to consummate any acquisitions or that,
if consummated, such acquisitions will be integrated into the Company's
operations successfully and on a timely basis. Similarly, there can be no
assurance that any such acquisitions will provide the anticipated economic
benefits to the Company.
PROTECTION OF INTELLECTUAL PROPERTY
The Company seeks to protect its proprietary software, systems and processes
through copyright, trademark and trade secret laws and contractual restrictions
on disclosure and copying. Despite such measures, it may be possible for
unauthorized third parties to copy aspects of the Company's software, systems
and processes or to obtain and use information that the Company regards as
proprietary. In addition, no assurance can be given that the protective measures
taken by the Company will be sufficient to preclude competitors from developing
competing or similar proprietary software, systems and processes.
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LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, the Issuer Trustees. See "Description of the Preferred
Securities--Voting Rights."
ABSENCE OF PUBLIC MARKET FOR THE PREFERRED SECURITIES ON RESALE
Prior to the resale of the Preferred Securities pursuant to this Prospectus,
each of the Preferred Securities was eligible for trading in the PORTAL Market.
Preferred Securities sold pursuant to this Prospectus will no longer be eligible
for trading in the PORTAL Market. Furthermore, the Company and the Trust do not
currently intend to list the Preferred Securities resold pursuant to this
Prospectus on any securities exchange or to seek approval for quotation through
any automated quotation system. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Preferred Securities resold
pursuant to this Prospectus.
Although the Initial Purchasers currently make a market in the Preferred
Securities, they are not obligated to do so and may discontinue such market
making at any time without notice. In addition, such market making activity will
be subject to the limits imposed by the Securities Act and the Exchange Act.
Accordingly, there can be no assurance that any market for the Preferred
Securities will develop or, if one does develop, that it will be maintained. If
an active market for the Preferred Securities fails to be sustained, the trading
price of such Preferred Securities could be materially adversely affected.
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
If a trading market for the Preferred Securities develops, such securities
may trade at prices that do not fully reflect the value of accrued but unpaid
distributions. In addition, as a result of the right of the Company to defer
interest payments, the market price of the Preferred Securities (which represent
undivided interests in the Convertible Debentures) may be more volatile than
other similar securities where the issuer does not have such right to defer
interest payments. A holder who disposes of or converts its Preferred Securities
between record dates for payments of distributions thereon will be required to
include for Federal income tax purposes accrued but unpaid interest on the
Convertible Debentures through the date of disposition or conversion in income
as ordinary income (I.E., original issue discount), and to add such amount to
its adjusted tax basis in its PRO RATA share of the underlying Convertible
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of original issue
discount, all accrued but unpaid interest), a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States Federal income tax purposes. See
"Certain United States Federal Income Tax Considerations."
SHARES SUBJECT TO SALE; POSSIBLE VOLATILITY OF THE PRICE OF THE COMPANY COMMON
STOCK
As of October 31, 1996, there were 41,165,599 shares of the Company Common
Stock outstanding, of which 15,987,571 shares were issued in the Company's IPO
in March 1996 and were tradeable in the public market without restriction unless
acquired by an affiliate of the Company. Of the remaining shares of outstanding
Company Common Stock, approximately 19,786,151 shares became eligible for sale
without registration pursuant to Rule 144 under the Securities Act (the
"Restricted Shares") within the 180 day period subsequent to the effective date
of the IPO. An aggregate of 18,337,864 of such Restricted Shares were subject to
lock-up agreements restricting the sale of such shares, the substantial majority
of which agreements expired or were terminated during the last week of August
1996. Although the sales of certain of the Restricted Shares are subject to
volume and other limitations set forth in Rule 144, which generally restrict the
number of such shares that can be sold and the manner in which they may be sold,
absent other restrictions, such shares may be sold in the public market. In
connection with the Original Offering, the
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directors and certain of the officers and stockholders of the Company holding of
record and beneficially approximately 17,891,840 shares of Company Common Stock
(including shares subject to exercisable options), entered into agreements (the
"New Lock-Ups") restricting their ability to sell or otherwise dispose of shares
of the Company Common Stock or any options to purchase any shares of Company
Common Stock or any securities convertible or exchangeable therefor, without the
prior written consent of Robertson, Stephens & Company LLC. Sales of a
substantial number of shares of Company Common Stock in the public market, or
the perception that such sales could occur, could materially adversely affect
the prevailing market price of the Company Common Stock. The market price of the
Company Common Stock may also be subject to wide fluctuations in price and
volume in response to quarterly variations in the Company's results of
operations, changes in earnings estimates by research analysts, conditions in
the personal computer industry or general market or economic conditions. In
recent years, the stock market has experienced extreme price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many technology companies, and often appear unrelated to the
operating performance of the specific companies involved. Such market
fluctuations could materially adversely affect the market price for the Company
Common Stock. See "Market Prices and Dividend Policy," "Security Ownership of
Principal Stockholders and Management," "Selling Holders," and "Plan of
Distribution."
CONTROL OF THE COMPANY
As of October 31, 1996, Warburg, Pincus Capital Company, L.P. ("CapCo")
which is controlled by Warburg, Pincus & Co. beneficially owned an aggregate of
13,878,401.21 shares of Company Common Stock (representing 33.6% of the issued
and outstanding shares of Company Common Stock as of such date). Due to its
ownership position, CapCo has significant influence over the management and
policies of the Company and, in turn, the Trust. CapCo's ownership position also
may render it more difficult for a third party to effect a change of control of
the Company without the consent of CapCo and may thereby discourage third
parties from any attempt to acquire control of the Company, which could have a
material adverse effect on the price of the Company Common Stock. See "Security
Ownership of Principal Stockholders and Management."
Moreover, as of October 31, 1996, the principal stockholders, directors and
executive officers of the Company beneficially owned approximately 41.3% of the
Company Common Stock. As a result, such stockholders, if they act in concert,
may be able to effectively control the election of members of the Company's
Board of Directors and generally to exercise control over the Company's
corporate actions. See "Security Ownership of Principal Stockholders and
Management."
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK AND DELAWARE LAW
Certain provisions of the Company's Certificate of Incorporation and
Delaware law may be deemed to have an anti-takeover effect. The Company's
Certificate of Incorporation provides that the Board of Directors may issue
additional shares of common stock or establish one or more classes or series of
preferred stock with such designations, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations that the Board of
Directors deems appropriate without stockholder approval. In addition, the
Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL"). In general, the statute prohibits
a publicly-held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. Each of the foregoing
provisions gives the Board of Directors, acting without stockholder approval,
the ability to prevent, or render more difficult or costly, the completion of a
takeover transaction that stockholders might view as being in their best
interests, including a takeover transaction that might result in a premium over
the market price for the shares of Company Common Stock.
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THE COMPANY
The Company is a leading provider of services and products designed to build
and manage PC network infrastructures. The Company Common Stock was listed on
the NYSE following its IPO on March 11, 1996 and trades under the symbol "VST."
The Company's current business capabilities were developed internally and
through acquisitions. These strategic acquisitions included: (i) the acquisition
from 1990 through 1992, of 23 of the Company's franchisees, operating in 33
major United States metropolitan markets; (ii) the 1991 acquisition of NYNEX
Business Centers; (iii) the 1992 acquisition of the Customer Services Division
of TRW, Inc.; and (iv) the 1996 acquisition of the Dataflex Regions. In fiscal
1994, the Company sold its remaining United States franchise business to Merisel
FAB, adopted the name Vanstar Corporation, and changed its fiscal year end from
September 30 to April 30.
The Company was incorporated in Delaware in September 1987 under the name
ComputerLand Corporation following the acquisition by William Y. Tauscher, CapCo
and Richard H. Bard of the majority of the capital stock of the Company's
predecessor, IMS Associates, Inc. ("IMS"), which was originally incorporated in
1976. IMS was merged with the Company after such acquisition. At the time of the
acquisition, the Company operated and franchised computer retail stores in the
United States.
The executive offices of the Company are located at 5964 West Las Positas
Boulevard, Pleasanton, California 94588, and the telephone number of the
executive offices is (510) 734-4000.
VANSTAR FINANCING TRUST
The Vanstar Financing Trust is a statutory business trust formed under
Delaware law pursuant to (i) the Declaration of Trust dated as of September 25,
1996, as amended by the Amended and Restated Declaration of Trust dated as of
October 2, 1996 (the "Declaration") executed by the Company as sponsor of the
Trust, and the trustees of the Trust (the "Issuer Trustees") and (ii) the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on September 25, 1996. The Company owns, directly or indirectly, all of the
Common Securities which have an aggregate liquidation amount equal to 3% of the
total capital of the Trust. The Common Securities of the Trust rank PARI PASSU,
and payments will be made thereon PRO RATA, with the Preferred Securities,
except that, upon the occurrence and during the continuance of an event of
default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The assets of the Trust consist entirely of the
Convertible Debentures. The Trust exists for the exclusive purpose of (i)
issuing and selling the Trust Securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Preferred Securities in the Convertible Debentures and (iii) engaging in only
those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Issuer Trustees is currently
five. Three of the Issuer Trustees (the "Regular Trustees") are individuals who
are employees or officers of or who are otherwise affiliated with the Company.
The fourth trustee is a financial institution that is unaffiliated with the
Company (the "Property Trustee"). The fifth trustee is an entity unaffiliated
with the Company that maintains its principal place of business in the State of
Delaware (the "Delaware Trustee"). The Property Trustee also serves as Delaware
Trustee. Jeffrey S. Rubin, Leslie J. Alvarez and John J. Dunican, Jr. currently
serve as the Regular Trustees. Wilmington Trust Company, a Delaware banking
corporation, currently acts as Property Trustee and as Delaware Trustee and will
continue in such capacities until, in each case, removed or replaced by the
holder of the Common Securities. Wilmington Trust Company also currently acts as
trustee under the Guarantee (the "Guarantee Trustee") and as trustee under the
Indenture (the "Indenture Trustee").
25
<PAGE>
The Property Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities, and the Property Trustee has the
power to exercise all rights, powers and privileges under the Indenture as the
holder of the Convertible Debentures. In addition, the Property Trustee
maintains exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The Guarantee
Trustee holds the Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, currently
has the right to appoint, remove or replace any of the Issuer Trustees and to
increase or decrease the number of trustees; PROVIDED that the number of
trustees shall be at least three; PROVIDED, FURTHER that at least one trustee
shall be a Delaware Trustee, at least one trustee shall be a Property Trustee
(which may also be the Delaware Trustee) and at least one trustee shall be a
Regular Trustee. The Company has agreed to pay all fees and expenses related to
the Trust and the offering of the Preferred Securities. See "Description of the
Convertible Debentures."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration and the Delaware Business Trust Act, as amended (the "Trust Act").
See "Description of the Preferred Securities." The Declaration, the Indenture
and the Guarantee also incorporate by reference the terms of the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Declaration, the
Indenture and the Guarantee will be qualified under the Trust Indenture Act upon
effectiveness of the Registration Statement to which this Prospectus forms a
part.
The place of business and the telephone number of the Trust are the
principal executive offices and telephone number of the Company. See "The
Company."
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included in
the consolidated financial statements of the Company. The Preferred Securities
will be presented as a separate line item in the consolidated balance sheet of
the Company entitled "Company-obligated mandatorily redeemable convertible
preferred securities of financing trust holding solely convertible debentures"
and appropriate disclosures about the Preferred Securities, the Guarantee and
the Convertible Debentures are included in the notes to the Company's
consolidated financial statements. For financial reporting purposes, the Company
will record distributions payable on the Preferred Securities as a financing
charge to earnings in the Company's consolidated statement of income.
26
<PAGE>
MARKET PRICES AND DIVIDEND POLICY
The Company Common Stock began trading publicly on the NYSE under the symbol
"VST" effective March 11, 1996. The following table sets forth, for the periods
indicated, the range of high and low closing sales prices for the Company Common
Stock on the NYSE since March 11, 1996.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended April 30, 1996
Fourth Quarter (March 11, 1996 through April 30, 1996)......................... $15 $ 9 3/8
Fiscal Year Ending April 30, 1997
First Quarter.................................................................. 17 1/8 13 3/4
Second Quarter................................................................. 29 16 3/4
Third Quarter (through November 12, 1996)...................................... 25 23 3/8
</TABLE>
As of October 31, 1996, there were approximately 335 holders of record of
the Company Common Stock. On November 12, 1996, the last sale price reported on
the NYSE for the Company Common Stock was $25.00 per share.
The Company has never declared or paid any cash dividends on the Company
Common Stock and does not presently intend to pay cash dividends on the Company
Common Stock in the foreseeable future. The Company intends to retain future
earnings for reinvestment in its business. The Company's Financing Program
Agreement with IBMCC limits the Company's ability to declare or pay cash
dividends on the Company Common Stock. See "Risk Factors--Restrictive
Covenants." Any determination to declare or pay cash dividends in the future
will be at the discretion of the Company's Board of Directors and will be
dependent upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant at the time by the
Company's Board of Directors.
Distributions on the Preferred Securities have accrued from the Original
Offering Date and are payable at the annual rate of 6 3/4% of the liquidation
amount of $50 per Preferred Security. Subject to the Company's right to defer
interest payments on the Convertible Debentures and the attendant deferral of
distributions on the Preferred Securities, distributions on the Preferred
Securities will be payable quarterly in arrears on each January 1, April 1, July
1 and October 1, commencing January 1, 1997. In the event the Company's interest
payment deferral option is exercised, then, during such period, the Company may
not, among other things, declare or pay dividends on, or make distributions with
respect to, its capital stock except dividends or distributions in shares of
Company Common Stock on Company Common Stock or on its Preferred Stock.
27
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization and cash
and cash equivalents of the Company at July 31, 1996 and (ii) the unaudited pro
forma consolidated capitalization and cash and cash equivalents of the Company
at July 31, 1996 as adjusted to give effect to the sale of $201.25 million of
Convertible Debentures to the Trust and the application of the net proceeds
therefrom (after deducting the Initial Purchasers' discount and estimated
offering expenses payable by the Company with respect to the Original Offering
and the Over-Allotment Offering). This table should be read in conjunction with
the Consolidated Financial Statements (including the Notes thereto) appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JULY 31, 1996
---------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS(2) PRO FORMA
---------- -------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Cash and cash equivalents................................................ $ 13,674 $ -- $ 13,674
---------- -------------- -----------
---------- -------------- -----------
Current maturities of long-term debt..................................... 1,938 -- 1,938
Long-term debt, less current maturities.................................. 233,216 (195,212) 38,004
---------- -------------- -----------
Total long-term debt................................................. 235,154 (195,212) 39,942
---------- -------------- -----------
Company-obligated mandatorily redeemable convertible preferred securities
of financing trust(1).................................................. -- 194,589 194,589
Stockholders' equity:
Common stock; $.001 par value; 100,000,000 shares authorized,
40,475,144 shares issued and outstanding............................. 40 -- 40
Additional paid-in capital............................................. 115,097 -- 115,097
Retained earnings...................................................... 21,679 -- 21,679
---------- -------------- -----------
Total stockholders' equity........................................... 136,816 -- 136,816
---------- -------------- -----------
Total capitalization............................................... $ 371,970 $ (623) $ 371,347
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
- ------------------------
(1) For financial reporting purposes, the Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of the Trust will be included
in the consolidated financial statements of the Company. Transactions
between the Company and the Trust, including those relating to the
Convertible Debentures, will be eliminated for consolidated financial
reporting. See "Accounting Treatment."
(2) Pro forma adjustments give effect to (i) the sale of $201.25 million of
Preferred Securities by the Trust less the Initial Purchasers' discount and
estimated offering expenses totaling $6.7 million payable by the Company
with respect to the Original Offering and the Over-Allotment Offering, and
(ii) the application of the net proceeds therefrom.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the years ended
April 30, 1996 and 1995, and the seven months ended April 30, 1994, and the year
ended September 30, 1993 were derived from the audited consolidated financial
statements, which are included elsewhere in this Prospectus. The selected
consolidated financial data presented below for the years ended September 30,
1992 and 1991 were derived from audited consolidated financial statements of the
Company, which are not included in this Prospectus. The selected consolidated
financial data presented below for the three months ended July 31, 1995 and 1996
are unaudited but have been prepared on the same basis as the audited
consolidated financial statements and, in the opinion of management, includes
all adjustments, consisting only of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial information
set forth therein. The results of operations for the three months ended July 31,
1996 are not necessarily indicative of results that may be expected for the
Company's fiscal year ending April 30, 1997. This selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements (including the Notes thereto) appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEVEN
FISCAL YEAR ENDED SEPTEMBER 30, MONTHS FISCAL YEAR ENDED THREE MONTHS ENDED
ENDED APRIL 30, JULY 31,
------------------------------- APRIL 30, ---------------------- ------------------
1991 1992 1993 1994 1995 1996 1995 1996
-------- --------- ---------- --------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Income Statement Data:
Revenue............................... $213,738 $ 787,798 $1,099,813 $586,514 $1,385,392 $1,804,813 $427,169 $559,090
Cost of revenue....................... 180,141 696,518 921,789 489,512 1,174,854 1,559,886 368,274 480,968
Gross margin.......................... 33,597 91,280 178,024 97,002 210,538 244,927 58,895 78,122
Selling, general and administrative
expenses............................ 48,485 158,644 181,320 97,436 182,411 201,880 46,362 56,896
Operating income (loss)............... (14,888) (76,272) (3,296) (434) 28,127 43,047 12,533 21,226
Interest expense, net................. 11,019 20,242 22,196 11,181 25,978 30,265 7,273 5,729
Income (loss) from continuing
operations.......................... (15,803) (54,228) (18,751) (6,969) 1,268 8,053 3,314 9,763
Income from discontinued operations... 25,320 2,261 14,505 51,474 -- 9,194 -- --
Net income (loss)..................... 9,517 (51,967) (4,246) 44,505 1,268 17,247 3,314 9,763
Earnings per share(1):
Continuing operations............... 0.04 0.23 0.10 0.23
Discontinued operations............. -- 0.27 -- --
Total earnings per share.......... 0.04 0.50 0.10 0.23
Shares used in computing earnings per
share(1)............................ 32,486 34,250 33,030 43,141
Ratio of earnings to fixed
charges(2).......................... -- -- -- 1.06x 1.32x 2.95x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30,
------------------------------- ------------------------------- JULY 31,
1991 1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Balance Sheet Data:
Working capital (deficit)......... $ (14,554) $(107,441) $(114,902) $ (73,511) $ 267,852 $ 315,742 $ 250,767
Total assets...................... 598,730 700,035 576,279 610,458 705,295 803,365 790,220
Short-term borrowings............. 158,124 227,692 194,660 262,783 -- -- --
Current maturities of long-term
debt............................ 6,836 14,898 23,190 12,788 7,685 1,759 1,938
Long-term debt, less current
maturities...................... 46,630 32,219 13,017 6,732 337,750 293,007 233,216
Redeemable preferred stock and
accrued dividends............... 3,559 3,986 4,464 4,777 -- -- --
Total stockholders' equity........ 56,049 684 13,584 24,797 22,589 127,053 136,816
</TABLE>
- ------------------------------
(1) Earnings per share for the three months ended July 31, 1995 and the fiscal
years ended April 30, 1995 and 1996 give effect to the conversion of all
outstanding shares of Preferred Stock and Class B Common Stock into Company
Common Stock and the exchange of all outstanding warrants for shares of
Company Common Stock in connection with the Company's IPO as if the
conversion had occurred at the later of the beginning of the period or the
issuance date.
(2) The ratio of earnings to fixed charges is computed by dividing (x) the sum
of income before provision for income taxes, discontinued operations,
extraordinary items and fixed charges, less capitalized interest by (y)
fixed charges. Fixed charges consist of interest on all indebtedness,
amortization of debt expense and discount or premium related to indebtedness
and the interest element of rental expense. Earnings were inadequate to
cover fixed charges for the fiscal years ended September 30, 1992 and 1993
and the seven months ended April 30, 1994 in the amount of $96.5 million,
$25.5 million and $11.6 million, respectively.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS AND OTHER PARTS OF THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." SEE "SAFE HARBOR STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
RESULTS OF OPERATIONS
The Company's four primary sources of revenue are: product, professional
services, life cycle services and other services. The Company refers to the
integration of its product and service offerings designed to provide customized
solutions to support its customers' PC network infrastructure throughout its
life cycle as "Life Cycle Management." Product revenue is primarily derived from
the sale of computer hardware, software, peripherals and communications devices
manufactured by third parties and sold by the Company. During the first quarter
of fiscal year 1997, the Company realigned its service offerings to position
itself to better meet its customers' growing need to gain control of the
management and the escalating cost of distributed computing network
infrastructures. Professional services (formerly networking) revenue is derived
from network installation, enhancement and migration plus consulting services to
plan, design, manage, and implement new client/server technologies. Life cycle
services (formerly support services) revenue is derived from desktop support
services which encompass customized service, enhancement, and support solutions
required as a result of customer's outsourcing the ownership and management of
client/ server environments. Desktop support services integrates the services of
desktop support, help desk, repair and maintenance, asset management, and
desktop installation. Other services revenue is primarily derived from fees
earned on the distribution services agreement with Merisel FAB and training and
education services. Pursuant to the distribution services agreement, the Company
provides product distribution to franchisees and affiliates of Merisel FAB (see
Note 2 of Notes to Consolidated Financial Statements).
The Company disposed of most of its franchise business during 1994. The
largest of these sales occurred on January 31, 1994, when the Company sold
certain assets and liabilities of its United States franchise business,
including all domestic franchise agreements, Datago distribution agreements and
the right to the "ComputerLand" name and trademark within the United States to
Merisel FAB (see Note 2 of Notes to Consolidated Financial Statements).
In April 1994, the Company changed its fiscal year from September 30 to
April 30. Therefore, the Company is using annualized information for the seven
months ended April 30, 1994 ("1994") for purposes of comparison to the year
ended April 30, 1995 ("1995") and the year ended September 30, 1993 ("1993").
The annualized information for the period ended April 30, 1994 does not
represent actual operating results that would have been achieved for a full
fiscal year.
The following tables set forth for the periods indicated, the Company's (i)
total revenue, gross margin and gross margin percentage by revenue source, (ii)
selling, general and administrative expenses in total
30
<PAGE>
and as a percentage of total revenue and (iii) operating income (loss) in total
and as a percentage of total revenue.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR ENDED THREE MONTHS ENDED
ENDED SEVEN MONTHS APRIL 30, JULY 31,
SEPTEMBER 30, ENDED APRIL -------------------- --------------------
1993 30, 1994 1995 1996 1995 1996
------------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenue:
Product.............................. $ 935,165 $ 490,576 $1,187,392 $1,578,298 $ 374,083 $ 490,065
Services:
Professional services.............. 15,652 9,829 31,842 58,127 10,855 21,698
Life cycle services................ 143,553 76,785 131,194 138,418 33,484 38,939
Other services..................... 5,443 9,324 34,964 29,970 8,747 8,388
------------- ------------- --------- --------- --------- ---------
Total revenue.................... $ 1,099,813 $ 586,514 $1,385,392 $1,804,813 $ 427,169 $ 559,090
------------- ------------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- ---------
GROSS MARGIN:
Product.............................. $ 110,651 $ 53,261 $ 113,513 $ 147,894 $ 34,200 $ 48,472
Services:
Professional services.............. 7,525 3,291 13,111 23,013 4,899 8,417
Life cycle services................ 57,320 33,001 55,053 49,131 12,423 14,485
Other services..................... 2,528 7,449 28,861 24,889 7,373 6,748
------------- ------------- --------- --------- --------- ---------
Total gross margin............... $ 178,024 $ 97,002 $ 210,538 $ 244,927 $ 58,895 $ 78,122
------------- ------------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- ---------
GROSS MARGIN PERCENTAGE:
Product.............................. 11.8% 10.9% 9.6% 9.4% 9.1% 9.9%
Services:
Professional services.............. 48.1% 33.5% 41.2% 39.6% 45.1% 38.8%
Life cycle services................ 39.9% 43.0% 42.0% 35.5% 37.1% 37.2%
Other services..................... 46.4% 79.9% 82.5% 83.0% 84.3% 80.4%
------------- ------------- --------- --------- --------- ---------
Total gross margin percentage.... 16.2% 16.5% 15.2% 13.6% 13.8% 14.0%
------------- ------------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- ---------
Selling, general and administrative
expenses........................... $ 181,320 $ 97,436 $ 182,411 $ 201,880 $ 46,362 $ 56,896
% of total revenue................... 16.5% 16.6% 13.2% 11.2% 10.9% 10.2%
Operating income (loss).............. $ (3,296) $ (434) $ 28,127 $ 43,047 $ 12,533 $ 21,226
% of total revenue................... (0.3)% (0.1)% 2.0% 2.4% 2.9% 3.8%
</TABLE>
THREE MONTHS ENDED JULY 31, 1996 AS COMPARED TO THREE MONTHS ENDED JULY 31, 1995
PRODUCT. Revenue increased 31.0% to $490.1 million for the three months
ended July 31, 1996 from $374.1 million for the three months ended July 31,
1995. This increase relates primarily to increased sales to new and existing
customers due to successful sales and marketing efforts and increased sales
resulting from the acquisition of the Dataflex Regions. Gross margin increased
41.7% to $48.5 million for the three months ended July 31, 1996 from $34.2
million for the three months ended July 31, 1995. Gross margin percentage
increased to 9.9% for the three months ended July 31, 1996 from 9.1% for the
three months ended July 31, 1995.
PROFESSIONAL SERVICES (FORMERLY NETWORKING). Revenue increased 99.9% to
$21.7 million for the three months ended July 31, 1996 from $10.9 million for
the three months ended July 31, 1995. This increase reflects the increased
customer demand for the Company's value-added PC network services offered, as
large corporate customers continued to transition to new higher performance
technologies and client/ server networks. Gross margin increased 71.8% to $8.4
million for the three months ended July 31, 1996 from $4.9 million for the three
months ended July 31, 1995. Gross margin percentage decreased to 38.8% for the
three months ended July 31, 1996 from 45.1% for the three months ended July 31,
1995. The decrease in gross margin percentage resulted from an increase in
transitional training and deployment costs reflecting the Company's continued
commitment to hire and train additional systems engineers to support Microsoft
NT.
31
<PAGE>
LIFE CYCLE SERVICES (FORMERLY SUPPORT SERVICES). Revenue increased 16.3% to
$38.9 million for the three months ended July 31, 1996 from $33.5 million for
the three months ended July 31, 1995. This increase reflects the increase in
demand for the Company's overall life cycle service offerings which more than
offset a decline in repair and maintenance services attributable to improved
product reliability and a shift by vendors to extended warranty programs. Gross
margin increased 16.6% to $14.5 million for the three months ended July 31, 1996
from $12.4 million for the three months ended July 31, 1995. Gross margin
percentage remained relatively constant at 37.2% for the three months ended July
31, 1996 as compared to 37.1% for the three months ended July 31, 1995.
OTHER SERVICES. Revenue decreased 4.1% to $8.4 million for the three months
ended July 31, 1996 from $8.7 million for the three months ended July 31, 1995.
Gross margin decreased 8.5% to $6.7 million for the three months ended July 31,
1996 from $7.4 million for the three months ended July 31, 1995. Gross margin
percentage decreased to 80.4% for the three months ended July 31, 1996 from
84.3% for the three months ended July 31, 1995. These declines were primarily
the result of a negotiated reduction in the distribution fees from Merisel FAB.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 22.7% to $56.9 million for the three months
ended July 31, 1996 from $46.4 million for the three months ended July 31, 1995.
Selling, general and administrative expenses as a percentage of revenue
decreased to 10.2% for the three months ended July 31, 1996 from 10.9% for the
three months ended July 31, 1995. This decrease is a result of higher product
and professional service revenues that more than offset the associated increase
in fixed costs as well as cost reduction efforts and operational improvements.
OPERATING INCOME. Operating income increased 69.4% to $21.2 million for the
three months ended July 31, 1996 from $12.5 million for the three months ended
July 31, 1995. This increase was the result of the increase in gross margin
percentage coupled with a decrease in selling, general and administrative
expenses as a percentage of total revenue. Operating income as a percentage of
total revenue increased to 3.8% for the three months ended July 31, 1996 from
2.9% for the three months ended July 31, 1995.
INTEREST. Interest expense is incurred primarily on borrowings to support
the working capital requirements of the product business and the Merisel FAB
distribution services agreement. Interest expense decreased 25.1% to $6.6
million for the three months ended July 31, 1996 from $8.8 million for the three
months ended July 31, 1995 due to lower average borrowings and interest rates.
TAXES. The effective tax rate for the three months ended July 31, 1996 of
37% was different than the U.S. statutory rate of 35% due to state tax
provisions. At July 31, 1996 and April 30, 1996, the Company has recorded net
deferred tax assets of $25.6 million and $31.3 million, respectively. The full
realization of the deferred tax assets carried at July 31, 1996 is dependent
upon the Company achieving future pretax earnings, prior to the expiration of
the net operating loss carryforwards, of $69.2 million. The net operating loss
carryforwards expire in the years 2000 through 2010. Management believes that
sufficient income will be generated from operations to realize the net deferred
tax assets.
YEAR ENDED APRIL 30, 1996 AS COMPARED TO THE YEAR ENDED APRIL 30, 1995
PRODUCT. Revenue increased 32.9% to $1.6 billion for the year ended April
30, 1996 from $1.2 billion for the year ended April 30, 1995 as a result of the
Company's successful sales and marketing efforts and strengthened market
position. Gross margin increased 30.3% to $147.9 million for the year ended
April 30, 1996 from $113.5 million for the year ended April 30, 1995. Gross
margin percentage decreased to 9.4% for the year ended April 30, 1996 from 9.6%
for the year ended April 30, 1995 due to the Company's emphasis on larger
customers which resulted in lower gross margin percentages but higher sales
volumes that more than offset the associated increase in distribution costs.
32
<PAGE>
PROFESSIONAL SERVICES (FORMERLY NETWORKING). Revenue increased 82.5% to
$58.1 million for the year ended April 30, 1996 from $31.8 million for the year
ended April 30, 1995. This increase reflects the increased customer demand for
the Company's value-added PC network service offerings. Gross margin increased
75.5% to $23.0 million for the year ended April 30, 1996 from $13.1 million for
the year ended April 30, 1995. Gross margin percentage decreased to 39.6% for
the year ended April 30, 1996 from 41.2% for the year ended April 30, 1995 due
to increased investments in systems engineers.
LIFE CYCLE SERVICES (FORMERLY SUPPORT SERVICES). Revenue increased 5.5% to
$138.4 million for the year ended April 30, 1996 from $131.2 million for the
year ended April 30, 1995. This increase reflects the growth in support services
related to increased product sales which more than offset a decline in repair
and maintenance services attributable to improved product reliability and a
shift by vendors to extended warranty programs. Gross margin decreased 10.8% to
$49.1 million for the year ended April 30, 1996 from $55.1 million for the year
ended April 30, 1995. Gross margin percentage decreased to 35.5% for the year
ended April 30, 1996 from 42.0% for the year ended April 30, 1995, as a result
of startup costs associated with newly obtained contracts.
OTHER SERVICES. Revenue decreased 14.3% to $30.0 million for the year ended
April 30, 1996 from $35.0 million for the year ended April 30, 1995. The
decrease was the result of a negotiated reduction in the distribution fee from
Merisel FAB and reduced demand for the Company's training services. Gross margin
decreased to $24.9 million for the year ended April 30, 1996 from $28.9 million
for the year ended April 30, 1995 while the gross margin percentage remained
relatively constant.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 10.7% to $201.9 million for the year ended
April 30, 1996 from $182.4 million for the year ended April 30, 1995. Selling,
general and administrative expenses as a percentage of total revenue decreased
to 11.2% for the year ended April 30, 1996 from 13.2% for the year ended April
30, 1995. This decrease is due to higher volumes of product and networking
revenue that more than offset the increase in associated fixed costs as well as
cost reduction efforts to consolidate administrative functions and centralize
branches.
OPERATING INCOME. Operating income increased 53.0% to $43.0 million for the
year ended April 30, 1996 from $28.1 million for the year ended April 30, 1995.
Operating income as a percentage of total revenue increased to 2.4% for the year
ended April 30, 1996 from 2.0% for the year ended April 30, 1995 as the decrease
in selling, general and administrative expenses as a percentage of total revenue
more than offset the decrease in the total gross margin percentage.
INTEREST. Interest expense is incurred primarily on borrowings to support
the working capital requirements of the products line of business and the
Merisel FAB distribution services agreement. Interest expense increased 10.0% to
$35.8 million for the year ended April 30, 1996 from $32.6 million for the year
ended April 30, 1995 due principally to higher average borrowings during fiscal
year 1996 related to increased inventory levels and receivable balances as a
result of the significant growth in products revenue. Interest income decreased
15.8% to $5.5 million from $6.6 million as the Company was paid in full on a
significant note receivable during the first quarter of fiscal year 1996.
TAXES. The effective tax rate for the year ended April 30, 1996 of 37.0%
and 1995 of 41.0% was different than the U.S. statutory rate of 35.0% primarily
due to state tax provisions.
FISCAL YEAR ENDED APRIL 30, 1995 AS COMPARED TO THE ANNUALIZED SEVEN MONTHS
ENDED APRIL 30, 1994
PRODUCT. Revenue increased 41.2% in 1995 from 1994, primarily because cash
generated from the sale of the Company's U.S. franchise business enabled the
Company to meet increased customer demand through improved product stocking
levels. Gross margin increased 24.3% in 1995 from 1994 while the gross margin
percentage decreased to 9.6% in 1995 from 10.9% in 1994. This decrease was the
result of the
33
<PAGE>
Company's emphasis on larger customers which resulted in lower gross margin
percentages but higher sales volumes that more than offset the associated
increase in distributed costs.
PROFESSIONAL SERVICES (FORMERLY NETWORKING.) Revenue increased 89.0% in
1995 from 1994 due to a significant increase in the Company's capacity to meet
increased demand for value-added networking services. This increase in capacity
was a result of the Company's investments in hiring and training systems
engineers in prior periods. Gross margin increased 132.4% in 1995 from 1994.
Gross margin percentage increased to 41.2% in 1995 from 33.5% in 1994 as a
result of the increased utilization of the Company's systems engineers.
LIFE CYCLE SERVICES (FORMERLY SUPPORT SERVICES.) Revenue decreased 0.3% in
1995 from 1994. Gross margin decreased 2.7% in 1995 from 1994. Gross margin
percentage decreased to 42.0% in 1995 from 43.0% in 1994, as a result of annual
wage rate increases which were not offset by increased revenue.
OTHER SERVICES. Revenue increased 118.7% in 1995 from 1994. This increase
is primarily attributable to the fees derived from the Merisel FAB distribution
services agreement, which began in February 1994. Gross margin increased 126.0%
in 1995 from 1994. Gross margin percentage increased to 82.5% in 1995 from 79.9%
in 1994 resulting from an increase in revenue without a commensurate increase in
cost of services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 9.2% in 1995 from 1994. Selling, general and
administrative expenses as a percentage of total revenue decreased to 13.2% in
1995 from 16.6% in 1994, due to the cost reduction efforts to consolidate sales
administration activities and to the effect of higher volumes of product and
networking that more than offset the increase in associated fixed costs.
OPERATING INCOME (LOSS). Operating income increased to $28.1 million in
1995 from an operating loss in 1994 as the decline in selling, general and
administrative expenses as a percentage of total revenue and the increase in
networking gross margin percentage more than offset the decline in the products
gross margin percentage.
INTEREST. Interest expense increased 48.5% in 1995 from 1994 due
principally to higher borrowings related to increased inventory levels and
receivable balances as a result of the significant growth in products revenue,
combined with increases in the prime rate throughout calendar 1994. Interest
income during 1994 consisted primarily of earnings on a long-term note
receivable. Interest income during 1995 consisted primarily of early pay
discounts.
TAXES. The effective tax rate for 1995 of 41.0% and 1994 of 40.0% was
different than the U.S. statutory rate of 35.0% primarily due to the state tax
provision and benefit, respectively.
ANNUALIZED SEVEN MONTHS ENDED APRIL 30, 1994 AS COMPARED TO THE FISCAL YEAR
ENDED SEPTEMBER 30, 1993
PRODUCT. Revenue decreased 10.1% in 1994 from 1993 primarily due to
limitations on product stocking levels resulting from working capital
constraints. Gross margin decreased 17.5% in 1994 from 1993. Gross margin
percentage also decreased to 10.9% in 1994 from 11.8% in 1993.
PROFESSIONAL SERVICES (FORMERLY NETWORKING.) Revenue increased 7.7% in 1994
from 1993 due to the increased demand for the Company's high-end, value-added
networking services. Gross margin decreased 25.0% in 1994 from 1993. Gross
margin percentage declined to 33.5% in 1994 from 48.1% in 1993 as a result of
costs associated with hiring and training new systems engineers in anticipation
of the future growth in networking revenue.
LIFE CYCLE SERVICES (FORMERLY SUPPORT SERVICES.) Revenue decreased 8.3% in
1994 from 1993 due to the elimination by the Company of several large contracts.
Gross margin decreased 1.3% in 1994 from 1993.
34
<PAGE>
Gross margin percentage increased to 43.0% in 1994 from 39.9% in 1993, due to
higher utilization of field engineers.
OTHER SERVICES. Revenue increased 193.7% in 1994 from 1993 due to the
inclusion of fees derived from the Merisel FAB distribution services agreement.
Gross margin significantly increased in 1994 from 1993. Gross margin percentage
increased to 79.9% in 1994 from 46.4% in 1993 due to the implementation of the
Merisel FAB distribution services agreement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased 7.9% in 1994 from 1993. Selling, general and
administrative expenses as a percentage of total revenue increased slightly to
16.6% in 1994 from 16.5% in 1993.
OPERATING LOSS. The operating loss was significantly reduced in 1994 from
1993 as the increase in other services gross margin percentage due to the new
Merisel FAB agreement more than offset the decrease in products and networking
gross margin.
INTEREST. Interest expense decreased 4.9% in 1994 from 1993. Interest
income during 1994 and 1993 consisted primarily of earnings on a long-term note
receivable.
TAXES. The effective income tax rate for the seven months ended April 30,
1994 of 40.0% was different than the U.S. statutory rate of 35.0% due primarily
to the state tax provision. The effective tax rate for 1993 of 26.4% was lower
than the U.S. statutory rate of 34.0% primarily due to unbenefitted current year
losses partially offset by state tax benefits.
35
<PAGE>
QUARTERLY OPERATING RESULTS
The following table sets forth the unaudited operating results for each of
the four quarters in fiscal 1995 and fiscal 1996 and for the first quarter of
fiscal 1997. In the opinion of management, this information has been prepared on
the same basis as the audited consolidated financial statements and includes all
necessary adjustments (consisting only of normal recurring adjustments) that the
Company considers necessary to present fairly such information. The table should
be read in conjunction with the audited consolidated financial statements of the
Company and notes thereto incorporated by reference in this Prospectus. The
Company's quarterly results have in the past been subject to fluctuations and,
as a result, the operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31,
1994 1994 1995 1995 1995
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE:
Product............................... $251,618 $289,819 $303,171 $342,784 $374,083
Services:
Professional services............... 6,247 7,552 8,508 9,535 10,855
Life cycle services................. 32,562 32,361 32,587 33,684 33,484
Other services...................... 9,382 8,822 8,587 8,173 8,747
-------- -------- -------- --------- --------
Total revenue..................... 299,809 338,554 352,853 394,176 427,169
-------- -------- -------- --------- --------
COST OF GOODS SOLD:
Product............................... 226,040 262,745 275,011 310,083 339,883
Services:
Professional services............... 3,604 4,018 5,124 5,985 5,956
Life cycle services................. 18,754 18,933 18,425 20,029 21,061
Other services...................... 1,625 1,592 1,549 1,337 1,374
-------- -------- -------- --------- --------
Total cost of goods sold.......... 250,023 287,288 300,109 337,434 368,274
-------- -------- -------- --------- --------
Gross margin............................ 49,786 51,266 52,744 56,742 58,895
Selling, general and administrative
expenses(1)......................... 44,189 44,778 45,610 47,834 46,362
-------- -------- -------- --------- --------
Operating income (loss)................. 5,597 6,488 7,134 8,908 12,533
Interest expense, net................. (5,568) (6,006) (7,006) (7,398) (7,273)
-------- -------- -------- --------- --------
Income (loss) from continuing operations
before taxes.......................... 29 482 128 1,510 5,260
Income tax benefit (provision)........ (12) (197) (52) (620) (1,946)
Gain on disposal of discontinued
businesses.......................... -- -- -- -- --
-------- -------- -------- --------- --------
NET INCOME (LOSS)....................... $ 17 $ 285 $ 76 $ 890 $ 3,314
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
Earnings (loss) per share:(2)
Continuing operations................. $ -- $ 0.01 $ -- $ 0.03 $ 0.10
Discontinued operations -- -- -- -- --
-------- -------- -------- --------- --------
TOTAL EARNINGS (LOSS) PER SHARE......... -- $ 0.01 -- $ 0.03 $ 0.10
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
<CAPTION>
OCT. 31, JAN. 31, APRIL 30, JULY 31,
1995 1996 1996 1996
-------- -------- --------- --------
<S> <C> <C> <C> <C>
REVENUE:
Product............................... $389,030 $391,130 $424,055 $490,065
Services:
Professional services............... 13,561 16,514 17,197 21,698
Life cycle services................. 34,031 34,758 36,145 38,939
Other services...................... 8,506 4,460 8,257 8,388
-------- -------- --------- --------
Total revenue..................... 445,128 446,862 485,654 559,090
-------- -------- --------- --------
COST OF GOODS SOLD:
Product............................... 352,433 354,876 383,212 441,593
Services:
Professional services............... 7,223 10,161 11,774 13,281
Life cycle services................. 21,940 21,683 24,603 24,454
Other services...................... 1,180 1,252 1,275 1,640
-------- -------- --------- --------
Total cost of goods sold.......... 382,776 387,972 420,864 480,968
-------- -------- --------- --------
Gross margin............................ 62,352 58,890 64,790 78,122
Selling, general and administrative
expenses(1)......................... 46,772 76,891 31,855 56,896
-------- -------- --------- --------
Operating income (loss)................. 15,580 (18,001) 32,935 21,226
Interest expense, net................. (7,721) (8,557) (6,714) (5,729)
-------- -------- --------- --------
Income (loss) from continuing operations
before taxes.......................... 7,859 (26,558) 26,221 15,497
Income tax benefit (provision)........ (2,908) 9,827 (9,700) (5,734)
Gain on disposal of discontinued
businesses.......................... -- 9,194 -- --
-------- -------- --------- --------
NET INCOME (LOSS)....................... $ 4,951 $ (7,537) $ 16,519 $ 9,763
-------- -------- --------- --------
-------- -------- --------- --------
Earnings (loss) per share:(2)
Continuing operations................. $ 0.15 $ (0.53) $ 0.44 $ 0.23
Discontinued operations -- 0.29 -- --
-------- -------- --------- --------
TOTAL EARNINGS (LOSS) PER SHARE......... $ 0.15 $ (0.24) $ 0.44 $ 0.23
-------- -------- --------- --------
-------- -------- --------- --------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31,
1994 1994 1995 1995 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product............................... 83.9% 85.6% 85.9% 87.0% 87.6% 87.4% 87.5%
Services:
Professional services............... 2.1% 2.2% 2.4% 2.4% 2.5% 3.0% 3.7%
Life cycle services................. 10.9% 9.6% 9.2% 8.5% 7.8% 7.6% 7.8%
Other services...................... 3.1% 2.6% 2.4% 2.1% 2.0% 1.9% 1.0%
--------- --------- --------- --------- --------- --------- ---------
Total revenue..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
COST OF GOODS SOLD:
Product............................... 75.4% 77.6% 77.9% 78.7% 79.6% 79.2% 79.4%
Services:
Professional services............... 1.2% 1.2% 1.5% 1.5% 1.4% 1.6% 2.3%
Life cycle services................. 6.3% 5.6% 5.2% 5.1% 4.9% 4.9% 4.9%
Other services...................... 0.5% 0.5% 0.4% 0.3% 0.3% 0.3% 0.3%
--------- --------- --------- --------- --------- --------- ---------
Total cost of goods sold.......... 83.4% 84.9% 85.1% 85.6% 86.2% 86.0% 86.8%
--------- --------- --------- --------- --------- --------- ---------
Gross margin............................ 16.6% 15.1% 14.9% 14.4% 13.8% 14.0% 13.2%
Selling, general, and administrative
expenses............................ 14.7% 13.2% 12.9% 12.1% 10.9% 10.5% 17.2%
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)................. 1.9% 1.9% 2.0% 2.3% 2.9% 3.5% (4.0)%
Interest expense, net................. (1.9)% (1.8)% (2.0)% (1.9)% (1.7)% (1.7)% (1.9)%
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before taxes.......................... 0.0% 0.1% 0.0% 0.4% 1.2% 1.8% (5.9)%
--------- --------- --------- --------- --------- --------- ---------
Income tax benefit (provision)........ (0.0)% (0.1)% (0.0)% (0.2)% (0.5)% (0.7)% 2.2%
Gain on disposal of discontinued
businesses.......................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.1%
--------- --------- --------- --------- --------- --------- ---------
NET INCOME (LOSS)....................... 0.0% 0.1% 0.0% 0.2% 0.8% 1.1% (1.7)%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
APRIL 30, JULY 31,
1996 1996
--------- ---------
<S> <C> <C>
Revenue:
Product............................... 87.3% 87.7%
Services:
Professional services............... 3.5% 3.9%
Life cycle services................. 7.4% 7.0%
Other services...................... 1.7% 1.5%
--------- ---------
Total revenue..................... 100.0% 100.0%
COST OF GOODS SOLD:
Product............................... 78.9% 79.0%
Services:
Professional services............... 2.4% 2.4%
Life cycle services................. 5.1% 4.4%
Other services...................... 0.3% 0.3%
--------- ---------
Total cost of goods sold.......... 86.7% 86.0%
--------- ---------
Gross margin............................ 13.3% 14.0%
Selling, general, and administrative
expenses............................ 6.6% 10.2%
--------- ---------
Operating income (loss)................. 6.8% 3.8%
Interest expense, net................. (1.4)% (1.0)%
--------- ---------
Income (loss) from continuing operations
before taxes.......................... 5.4% 2.8%
--------- ---------
Income tax benefit (provision)........ (2.0)% (1.0)%
Gain on disposal of discontinued
businesses.......................... 0.0% 0.0%
--------- ---------
NET INCOME (LOSS)....................... 3.4% 1.7%
--------- ---------
--------- ---------
</TABLE>
- ------------------------------
(1) During the third quarter of fiscal year 1996, the Company recorded a $31.1
million provision against its extended credit due from Merisel FAB. In the
fourth quarter of fiscal year 1996, the Company reversed $15.6 million of
this provision.
(2) Earnings per share give effect to the conversion of all outstanding shares
of Preferred Stock and Class B Common Stock into Company Common Stock and
the exchange of all outstanding warrants for shares of Company Common Stock
in connection with the Company's IPO as if the conversion had occurred at
the later of the beginning of fiscal year 1995 or the issuance date.
Earnings per share are calculated based upon the weighted average number of
shares of Company Common Stock and dilutive Company Common Stock equivalents
outstanding in each quarter. Consequently, the sum of the quarterly earnings
per share does not necessarily equal the year-to-date earnings per share.
The Company's quarterly revenues and operating results have varied
significantly in the past and will likely continue to do so in the future.
Quarterly revenues and operating results may fluctuate as a result of the demand
for the Company's products and services, the introduction of new hardware and
software technologies offering improved features, the introduction of new
services by the Company and its competitors, changes in the level of operating
expenses, the timing of major service projects, inventory adjustments,
competitive conditions and economic conditions generally. In particular, the
Company's operating results are highly sensitive to changes in the mix of the
Company's product and service revenues, product margins and interest rates.
Further, the purchase of the Company's products and services generally involves
a significant commitment of capital, with the attendant delays frequently
associated with large capital expenditures and authorization procedures within
an organization. For these and other reasons, the Company's operating results
are subject to a number of significant risks over which the Company has little
or no control, including customers' technology life cycle needs, budgetary
constraints and internal authorization reviews. In addition, the Company
historically has experienced significant revenue fluctuations because of
shortages of supply from certain vendors. Shortages of supplies from vendors
have previously occurred due primarily to credit limitations placed on the
Company. Future limitations of credit by vendors could materially adversely
affect the Company. In addition, the general availability of certain products,
particularly state of the art computing and data communications products, is
occasionally restricted. While the Company has not experienced significant
product supply shortages, other than due to
37
<PAGE>
credit restrictions as described above, any such product supply shortages in the
future could have a material adverse effect on the Company. Because revenues are
recognized upon the shipment of products to the customer, revenues from product
sales in any quarter are substantially dependent on orders shipped in any given
quarter. The Company is increasing its fixed operating expenses, including a
significant increase relating to additional personnel, based on anticipated
revenue growth in its professional services and life cycle services. The Company
may be unable to adjust spending sufficiently in a timely manner to compensate
for any unexpected revenue shortfall, which could adversely affect operating
results. Accordingly, the Company believes that period-to-period comparisons of
its operating results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not indicative
of results to be expected for a full fiscal year. It is possible that in certain
future quarters, the Company's operating results may be below the expectations
of public market analysts and investors. In such event, the price of Common
Stock would likely be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
The Company has utilized its line of credit with IBMCC and its operating
profits as well as cash proceeds from the issuance of Company Common Stock and
the sale of its franchise business to fund its significant revenue growth and
working capital requirements, to make payments on its long-term debt and to
purchase capital equipment.
The Company currently has a $300 million line of credit under the Financing
Program Agreement with IBMCC. At October 31, 1996, the Company had $246 million
outstanding under this facility of which $139 million is included in accounts
payable and $107 million is classified as long-term debt. Borrowings under the
line of credit are subject to certain borrowing base limitations and are secured
by portions of the Company's inventory, accounts receivable and certain other
assets. The line of credit currently has a term expiring October 31, 1997 and is
renewable thereafter for successive six-month periods. IBMCC may terminate the
line of credit at any time upon 90 days' notice to the Company. In the event of
such termination, the outstanding borrowings under the Financing Program
Agreement mature at the end of the term of the line of credit. As of October 31,
1996 amounts borrowed under the line of credit bear interest at prime minus
0.50%. Under the terms of the Financing Program Agreement, the Company is
required to apply all of the net proceeds of the offering made hereby to repay a
portion of the outstanding principal thereunder.
As a result of improved profitability, decreases in accounts receivable and
inventory and increases in accounts payable, the Company's operating activities
provided cash of $94.4 million for the first quarter of fiscal year 1997. The
decrease in receivables is primarily the result of payments received on the
Company's accounts receivable from Merisel FAB and collections on receivables
purchased in the acquisition of the Dataflex Regions. On May 29, 1996, the
Company entered into an agreement with a third party under which the Company
received $15.6 million in cash in exchange for providing the third party the
right to receive payments in May, June and July 1997 totaling $20.0 million out
of amounts collected from the extended credit owed to the Company by Merisel
FAB. The decrease in inventory was due to increased product sales in the quarter
ended July 31, 1996. The increase in accounts payable is the result of the
Company's ability to fund a greater percentage of its inventory through trade
payables. The Company used cash of $34.5 million to purchase the Dataflex
Regions (net of cash acquired) and $58.8 million to repay amounts borrowed under
its Financing Program Agreement with IBMCC. As a result, the Company's working
capital decreased and its debt to equity ratio improved to 1.7 at July 31, 1996
from 2.3 at April 30, 1996. The Company also used cash of $3.1 million for
capital expenditures during the first quarter of fiscal year 1997 and plans to
make additional significant investments in its automated systems and its capital
equipment throughout the remainder of fiscal year 1997.
In January 1994, the Company sold certain assets and liabilities of its U.S.
franchise business to Merisel FAB for $80.2 million in cash plus additional
contingent consideration. In February 1996, the Company received an additional
$14.6 million from the sale in settlement of the contingent consideration.
38
<PAGE>
Pursuant to its distribution and services agreement, the Company continues to
supply product to Merisel FAB for which it earns a monthly distribution fee.
Approximately 40% of the Company's inventory shipments by dollar volume are made
to fulfill the Company's obligations under the distribution services agreement.
Pursuant to such agreement, Merisel FAB is obligated to pay the Company for its
daily purchases within two business days.
In March 1996, the Company completed its IPO selling 9,215,770 shares of
Company Common Stock and raising $83.4 million after selling expenses and
underwriting discounts and commissions. The Company used the proceeds of the
offering primarily to repay amounts borrowed under the line of credit with
IBMCC.
Effective May 24, 1996, the Company acquired substantially all of the assets
and liabilities previously associated with the business operations of Dataflex
Corporation known as the Dataflex Western and Southwest Regions. The Company
paid $37.0 million against an estimated purchase price of $42.0 million. The
purchase price is subject to certain post-closing adjustments. On September 4,
1996, the Company issued 300,000 shares of Company Common Stock to acquire the
Mentor Partnership providing information technology training and education. In
addition to the acquisition of the Dataflex Regions and the Mentor Partnership
acquisition, the Company intends to continue to pursue the acquisition of other
companies that sell products and services that either complement or are expected
to expand its existing business. See "Risk Factors--Acquisitions" and "Recent
Developments."
On October 2, 1996, the Company consummated the Original Offering, resulting
in the sale of 3,500,000 shares of the Preferred Securities to the Initial
Purchasers. In connection with this transaction, the Company and the Trust
granted the Initial Purchasers a 30-day option to purchase up to 525,000
additional Preferred Securities (the "Over-Allotment Option") on the same terms
and conditions as the Original Offering, solely to cover over-allotments, if
any. The Initial Purchasers exercised the Over-Allotment Option in its entirety
on October 28, 1996. The aggregate net proceeds to the Company from the Original
Offering and the Over-Allotment Offering totaled $194.5 million after selling
expenses, discounts and commissions. The Company used all of the proceeds to
reduce its outstanding indebtedness to IBMCC.
The Company is currently in the process of structuring a revolving funding
trade receivables securitization facility, certain proceeds of which will be
used to repay a portion of the Company's remaining long-term indebtedness to
IBMCC. The Company expects to complete the securitization facility during its
third fiscal quarter ending January 31, 1997. There can be no assurance that the
planned securitization facility will be consummated within the expected time
frame, on terms satisfactory to the Company or at all. See "Recent
Developments."
The Company intends to continue to satisfy a significant portion of its
working capital needs with vendor credit facilities. The Company believes that
cash generated from operations and credit facilities will be sufficient to meet
its cash requirements through at least the end of fiscal 1998.
39
<PAGE>
BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS." SEE "SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995."
The Company is a leading provider of services and products designed to build
and manage PC network infrastructures primarily for Fortune 1000 companies and
other large enterprises. The Company provides customized, integrated solutions
for its customers' distributed computing networks by combining a comprehensive
offering of value-added services with its expertise in sourcing and distributing
PCs, network products, computer peripherals and software from a variety of
vendors. These integrated solutions are designed to support the customer's
client/server environments throughout its life cycle. The Company refers to
these solutions as "Life Cycle Management." Life Cycle Management integrates the
offerings of design and consulting, acquisition and deployment, operation and
support, and enhancement and migration.
The Company believes that its customers require increasingly sophisticated
PC network systems and support infrastructures. The Company seeks to satisfy
these requirements while seeking to minimize its customers' internal staff
requirements and systems development risk. The Company enhances the delivery of
its services and products with automated systems, such as the Vanstar Navigator,
and process methodologies, such as Horizon, to analyze, design and manage its
customers' PC network infrastructures better. The Company's goal is to reduce
the labor component of the management of the life cycle of the PCs and related
network systems and thereby increase efficiency, reduce costs and make systems
more reliable and easier to use for every customer.
INDUSTRY
Large organizations are becoming increasingly dependent on information
technology to compete effectively in today's global markets. Organizations are
re-engineering their businesses and are using microcomputer-based network
technology to enhance productivity. Distributed network solutions provide
dramatic computing performance relative to their price. PC networks increase
speed and flexibility and provide improved functionality to end users. Achieving
the optimal automation solution, however, is challenged by the complexity of the
distributed network environment and the lack of trained resources to design,
deploy and support networks.
The decision-making process that organizations face when planning, selecting
and implementing information technology solutions is growing more complex.
Organizations must select from numerous product options with shortening life
cycles. Networks are typically comprised of PCs, peripherals, communications
devices and software. Large enterprises must continually integrate the diverse
PC environments that have been developed internally. Enterprises must design new
networks, and upgrade and migrate to new systems. Although PC networks enhance
business productivity, they typically present complex management problems and
increased administrative costs. According to The Gartner Group, a leading
information technology research firm, the total cost of ownership of a PC over
five years may be as much as five times the initial capital expense. In
addition, the shortage of qualified information technology personnel limits many
organizations' ability to capitalize on the latest technologies. These
organizations find it increasingly difficult and costly to maintain the internal
infrastructure needed to support their networks. Since many businesses do not
consider the internal management of their technology infrastructure to be a core
business activity, companies increasingly seek to outsource the management and
support of their PC network infrastructure.
The Company believes that no other company in the marketplace today offers
customers a sufficient range of integrated PC network solutions. Many service
providers, including systems integrators, consulting firms and those emerging
from the traditional mainframe environment, offer limited services, lack the
40
<PAGE>
capacity to support large widespread enterprises, or focus primarily on
non-infrastructure services. Value-added resellers typically have a regional
focus or do not offer a broad line of products and services. They often are too
small to service the complex network requirements of the large multi-site
customer.
The Company believes that the key criteria which businesses consider when
evaluating PC network integration service providers include the provider's
ability: (i) to deliver one integrated solution spanning the PC network's life
cycle; (ii) to supply multi-vendor network products customized to specific
end-user demands; and (iii) to provide services on a national and international
basis.
THE VANSTAR SOLUTION
The Company's product and service offerings span the life cycle of the PC
network infrastructure. The Company provides customized, integrated solutions
for the network infrastructure needs of its customers by combining a
comprehensive offering of value-added services with its expertise in sourcing
and distributing products from a variety of vendors. The Company believes that a
single source solution enables customers to use fewer vendors, and provides
tighter integration, lower costs, fewer errors, and greater management control.
The Company has built substantial resource depth in all service areas and offers
its integrated services on a nationwide basis.
The Company believes that its customers are demanding increasingly
sophisticated PC network systems and support infrastructures. The Company seeks
to satisfy these requirements while minimizing its customers' internal staff
requirements and systems development risk. The Company enhances the delivery of
its services and products with automated systems that utilize open architecture
and are expandable. The Company believes that significant efficiency can be
gained by capturing data at the point of origin and controlling that data
throughout the life cycle. The Company also uses automation to give its
customers greater control over order management and provision of services. The
Company's automated systems permit direct links between the customer and the
Company, which the Company believes results in more efficient and faster
delivery of products and services at a lower overall cost. For example, the
Vanstar Navigator provides an easy-to-use customer interface for self-service
order management. The Vanstar Navigator connects to the Vanstar Cockpit, which
provides the Company's customer service representatives with real-time product
availability, pricing and customer-specific account information. Another example
is the Company's NOVA system, a service delivery system developed by the Company
for the management of many of the Company's services: systems engineering, help
desk, dispatch, repair, installation, moves/adds/changes and asset management.
NOVA is designed to reduce costs, to improve billing procedures to capture
additional revenue, and to improve resource utilization in delivering the
Company's support services. The Company expects to fully implement NOVA during
the third and fourth quarters of fiscal 1997. The Company believes that its
automated systems significantly enhance its ability to satisfy its customers'
needs.
STRATEGY
The Company's objective is to continue to be a leading provider of a
complete range of PC network infrastructure products and services to large
businesses throughout the world. The Company now offers a full array of services
including design and consulting, acquisition and deployment, operation and
support, and enhancement and migration. To achieve its objective, the Company
believes it must:
LEVERAGE ITS BROAD CUSTOMER BASE
The Company has approximately 300 current customers who purchased products
and services totaling at least $1 million during fiscal year 1996. Preserving
and enhancing its relationship with these customers is the Company's first
priority. In support of this effort, the Company recently brought its Starbase
Account Management system on-line. Starbase is an extensive database of customer
information that can be
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integrated with external data to pinpoint opportunities for application of the
Company's Life Cycle Management program.
DEVELOP AND ENHANCE VALUE-ADDED SERVICES
The Company believes that opportunities exist to increase its operating
margins by increasing the range of value-added services that it currently offers
its customers. The market for outsourced PC network services is expected to grow
at a compound annual rate of approximately 14%. These services are typically
sold at higher margins than more traditional services, such as product
procurement or repair and maintenance. The Company has developed expertise and
solutions in a number of value-added market segments, and will continue to
develop new services using its Horizon development methodology. The Company also
works with its suppliers, many of which provide leading technologies, to develop
new services. For example, the Company provides services to integrate Microsoft
Windows NT and Microsoft BackOffice into the Company's customers' environments.
The Company believes its relationship with Microsoft enhances its knowledge base
and expertise. The Company continually evaluates and pursues opportunities to
acquire technology and other resources that will enhance and extend the reach of
its value-added service offerings. The Company believes numerous opportunities
will exist in the future to acquire service providers who complement its
existing network services business.
EXPAND ITS WORLDWIDE SERVICE CAPABILITIES
The Company believes that in addition to being in all major United States
markets, it must also expand its global offerings. To expand its global
presence, the Company is implementing a program that overlays the Company's
systems and processes onto the service delivery and product distribution
capabilities of Groupe Bull, a European-based global computer and computer
services company, and Ingram Micro, an international computer products
distributor. This integrated program will provide to the Company's U.S.-based
multinational customers a common management interface covering the Company
performed services in the United States or services from the Company or its
alliance partners in other countries.
MAINTAIN A FOCUSED ACQUISITION STRATEGY
In order to maintain its position as a leading provider of PC network
infrastructure solutions to large businesses, the Company believes that
expansion through acquisitions, as well as internal growth, will be necessary.
Accordingly, the Company expects to pursue the acquisition of companies that
sell products and services that either complement or expand its existing
business. See "Risk Factors--Acquisitions" and "Recent Developments."
PRODUCTS AND SERVICES
The Company combines a full suite of products and services to deliver
custom, integrated solutions for the PC network infrastructure requirements of
its customers. The Company combines value-added services with its expertise in
sourcing and distributing products from a variety of vendors to provide network
integration solutions. These integrated Life Cycle Management solutions are
designed to support the PC network infrastructure throughout its life cycle.
Life Cycle Management integrates the offering of design and consulting,
acquisition and deployment, operation and support, and enhancement and
migration. The Company offers each service as a discrete service or as part of
an integrated Life Cycle Management program. The Company believes that proper
planning and management are essential to providing quality service and to
attaining customer satisfaction. Through planning and management, the Company
seeks to optimize solutions at any point in the PC network life cycle.
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DESIGN AND CONSULTING SERVICES
The Company offers network design and consulting services that address the
PC network life cycle. For network design, the Company uses a five-step
methodology to assist customers in selecting, designing, planning and executing
a network project: discovery, current state definition, requirements definition,
solution design, and implementation planning. The Company employs national
consulting teams, such as its Enterprise Communications Consulting Group, which
provides expertise in cabling systems design, hubbing architecture,
bridging/routing/switching systems, wide area transport and network management.
Other teams have expertise in process-mapping and re-engineering for outsourcing
PC life cycle management, asset management and disaster recovery planning.
ACQUISITION AND DEPLOYMENT SERVICES
The Company's network deployment services include product procurement,
configuration, distribution, installation, cabling and connectivity.
The Company sources PCs, servers, network products, computer peripherals and
software to equip the network environment. The Company provides products from
over 1,000 vendors, including Compaq Computer Corporation, International
Business Machines Corporation ("IBM"), Hewlett-Packard Company, Apple Computer,
Inc., Sun Microsystems, Inc., Microsoft Corporation, Novell, Inc., Lotus
Development, Cisco Systems, 3Com Corporation and Bay Networks, Inc. The Company
is authorized to sell a wide variety of network products, including servers,
desktop and mobile systems, bridges, routers, hubs and concentrators, operating
systems, applications, groupware and electronic mail products. The Company
provides a single point of contact for customers to place and track all product
orders. The Company's customer support groups in Indianapolis, Indiana and
Pleasanton, California provide complete order management services from quotation
to order processing, order tracking and fulfillment.
The Company has centralized its configuration and distribution facilities in
two highly-automated distribution centers located in Indianapolis, Indiana and
Livermore, California. The distribution facilities handle product receiving,
warehousing, central configuration, testing, order handling and shipping. The
Company ensures timely and reliable network equipment integration by providing
and coordinating a number of deployment services such as set-up, installation,
cabling, server connection and testing.
OPERATION AND SUPPORT SERVICES
The Company offers a variety of network operation and support services,
including moves, adds and changes, repair and maintenance, help desk and network
monitoring and asset management.
The Company installs additional hardware and software to increase the
capacity of, or otherwise upgrade, existing products and systems. Generally,
moves, adds and changes assist customers in avoiding the costs associated with
acquiring new systems.
The Company offers repair and maintenance services, including extended
warranty service, depot repair and preventive maintenance. These services are
designed to minimize product failures and to extend the useful life of
equipment. On all products for which the Company is authorized to provide
warranty coverage, the Company offers its customers extended warranty service on
standard manufacturer configurations and optional components, up to 24 hours per
day, 365 days per year, anywhere in the United States within 100 miles of any of
the Company's approximately 90 service locations.
The Company offers help desk support through its Field Sales and Service
Operations Center located in Roswell, Georgia. Help desk support is available
for all major software applications and operating systems, including network
software. Help desk support can also troubleshoot problems for all major
hardware products. Customers access the help desk via a toll-free number.
Support is available up to 24 hours per day, 7 days per week. The Company's help
desk support group utilizes a call management system to track customer calls, to
provide help desk with professionals on-line access to support standards,
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and to maintain a technical support database. The Company's help desk offerings
can be delivered either from its Service Operations Center or from an on-site
facility established at a customer's location. The Company also provides remote
LAN monitoring and administration services.
The Company provides asset management services. The Company's asset
management system captures and maintains detailed information about a customer's
installed base of PC hardware and software assets, and about all subsequent
service events related to those assets. It generates reports and schedules
through an end-user interface. The Company can provide a detailed analysis of
the installed base for use in managing asset costs.
ENHANCEMENT AND MIGRATION SERVICES
The Company offers enhancement and migration services to optimize the use of
information technology by its customers and reduce the cost and disruption of
changing technology platforms. The Company's tools and methods can migrate the
customer to new hardware and software platforms. These comprehensive tool kits
detail the full life cycle processes and procedures for planning and
implementing a migration project. Two of the Company's programs help customers
migrate to Windows 95 and Windows NT.
EDUCATION SERVICES
The Company's training and education services include a nationwide offering
of instructor-led and computer-based, self-paced training ("CBT") at both the
introductory and more advanced levels, and covering operating systems,
networking, electronic mail and personal productivity software. Through mobile
classrooms and a combination of CBT training with phone-based instructor
support, the Company can optimize delivery of education. The Company is a
Microsoft Authorized Technical Education Center, providing training for
Microsoft Windows 95, Windows NT, and BackOffice. Effective September 4, 1996,
the Company consummated the acquisition of the Mentor Partnership. Management of
the Company anticipates that this acquisition will strengthen the Company's
ability to offer training and education services in Ohio and throughout the
upper midwestern United States.
AUTOMATED SYSTEMS, PROCESS METHODOLOGIES AND TECHNICAL PERSONNEL
The Company enhances its service delivery with customized automated systems
which utilize open architecture and enable the Company's customers to change the
processes they use to manage their PC network support infrastructures, thereby
reducing cost and managing complexity. The Company believes efficiency can be
gained by capturing data at its point of origin and managing that data
throughout the life cycle. The Company believes that full life cycle automation
increases efficiency and reduces touch costs. Process methodologies allow the
Company to analyze, design and manage the PC network environment better. In
addition to the Company's systems and methodologies, the Company believes that
expert technical and consulting personnel are fundamental to its ability to
deliver complete network life cycle solutions.
AUTOMATED SYSTEMS
The Company has invested significant resources to automate its internal
service delivery systems and developing electronic links between the Company's
systems and its customers' systems. The Company believes that these systems
reduce costs, enhance service quality and improve reporting. The automated
systems include the Vanstar Navigator, Cockpit, DCMS, FLEX and Tracker, and
NOVA. The Company uses electronic links, including Electronic Data Interchange,
to connect to customers' systems.
THE VANSTAR NAVIGATOR. The Vanstar Navigator is an order management system
designed to give customers access to information about products available from
the Company. The Vanstar Navigator can be installed on either a single PC or in
a multi-user environment at the customer's site. The Vanstar
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Navigator provides customers with detailed information on product pricing and
availability, and can generate quotes, purchase orders, order status, invoice
history, on-line help and toll-free telephone support. With the Vanstar
Navigator, customers can place and track orders themselves.
COCKPIT. The Company's customer service representatives use the Company's
order management system, called Cockpit, to generate quotes and to enter and
track product orders. Cockpit provides real-time product availability and
pricing information, and maintains detailed, customer-specific account
information, including account history, standard product configurations, special
pricing, locations, authorized purchasing personnel and credit limits.
DCMS, FLEX AND TRACKER. The Company's Distribution Center Management System
("DCMS") and its FLEX systems operate the Company's automated distribution and
configuration centers located in Indianapolis, Indiana, and Livermore,
California. DCMS and FLEX manage the flow of orders through the distribution
process and provide the on-line information necessary to configure systems to
customers' standards. Operating on a LAN, DCMS assigns a unique barcode
fingerprint to each SKU as it arrives. Warehouse staff use radio frequency,
hand-held devices to manage and track the movement of product orders through the
centers. The Company's Tracker system tracks each package from the warehouse to
the customer site. The Company's distribution centers are colocated with Federal
Express depots. The Company's systems are integrated with Federal Express'
systems, providing complete point-to-point delivery and tracking.
NOVA. The Company has developed NOVA, a service delivery system for the
management of its systems engineering, help desk, dispatch, repair,
installation, moves/add/changes and asset management service offerings. The
Company expects to fully implement NOVA during the third and fourth quarters of
fiscal 1997. NOVA's resource allocation system is designed to insure that the
appropriate technical personnel are available to respond to customer service
calls. Service calls placed by customers are received through the Company's
First Touch program. NOVA automatically determines which field engineer is
available and sends all relevant customer information to the field engineer
through a field computing device via radio. NOVA is backed by more than 50
strategic parts stocking locations in the United States; spare parts can be
delivered the same day or shipped overnight to either the customer location or
the field service engineer. The Company believes that NOVA will result in
increased customer network uptime, more accurate matching of parts and field
service engineer skills to service needs, more accurate and comprehensive
information management, and lower costs.
ELECTRONIC LINKS. In order to create a cooperative service environment, the
Company uses electronic links to connect its systems to its customers' systems
through Electronic Data Interchange, the Internet or through private Wide Area
Networks.
PROCESS METHODOLOGIES
The Company believes that the complex and sometimes unpredictable technical
environment and the customization required by customers contribute to the
variability of service delivery requirements. To manage this complexity, the
Company uses several methods for capturing, codifying and disseminating
organizational knowledge to individuals in the field. Using Horizon, its
professional service development process, the Company has developed a series of
tool kits to provide standards and solutions for common network problems plus
tools for solving unique problems. Lotus Notes is the primary vehicle used by
the Company for electronic delivery of systematized procedures and processes.
The Company also employs flexible process-mapping, just-in-time training and
knowledge-based management techniques.
TECHNICAL PERSONNEL
The Company employs over 3,400 technical professionals in the United States.
The Company expanded its systems engineering force from approximately 200 in
March 1994 to approximately 1,100 in
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October 1996. The technical personnel are both client dedicated and centrally
dispatched, and provide service either on a contract basis or a project basis.
The Company is also developing groups of technical professionals who specialize
in the areas of operations, methods and practices, process management and
consulting. The Company's engineering staff is certified in the major network
operating systems and has experience with LAN and WAN networking products and
protocols. The Company supports major network operating systems, including
Microsoft Windows NT and BackOffice, Novell NetWare, IBM LAN Server and
AppleShare. In May 1995, the Company entered into an agreement with Microsoft
Corporation pursuant to which the Company hired a substantial number of systems
engineers to support Microsoft's BackOffice and Windows NT networking products.
CUSTOMERS
The Company's broad customer base of primarily Fortune 1000 companies and
other large enterprises includes, among others, the following, all of which
purchased products and services in excess of $1.0 million during the fiscal year
ended April 30, 1996 from the Company:
<TABLE>
<CAPTION>
CUSTOMER NAME INDUSTRY
- ---------------------------------------------------------------- ------------------------------
<S> <C>
Aluminum Company of America Manufacturing
American Greetings Corporation Manufacturing
Autodesk Inc. Software
BellSouth Corporation Telecommunications
Charles Schwab and Company Inc. Financial Services
Cigna Corporation Insurance
Duke Power Company Utility
Federal Express Corporation Transportation
Florida Power & Light Company Utility
Ford Motor Company Manufacturing
Hoechst Celanese Corporation Chemicals
Hoffmann-La Roche Inc. Pharmaceuticals
Integrated Systems Solutions Corporation Computer Services
International Business Machines Corporation Computers
International Paper Company Forest Products
Lehman Brothers Inc. Financial Services
Liberty Mutual Insurance Group Insurance
Lotus Development Corporation Software
MCI Communications Corporation Telecommunications
Microsoft Corporation Software
Mobil Oil Corporation Oil/Gas
Motorola Inc. High Technology
Owens-Corning Fiberglass Corporation Manufacturing
Phoenix Newspapers Inc. Publishing
Praxair Inc. Manufacturing
Sedgwick James Inc. Insurance
Signet Banking Corp. Financial Services
Sony Music Entertainment Inc. Entertainment
State of New Jersey State Government
Sybase Inc. Software
The Equitable Companies Inc. Insurance
United Technologies Corporation Aerospace and Manufacturing
UNUM Corporation Insurance
</TABLE>
During the fiscal years ended April 30, 1995 and 1996 and during the fiscal
quarter ended July 31, 1996, Microsoft Corporation accounted for 10.8%, 12.0%
and 12.8% of the Company's total revenues, respectively.
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MARKETING AND SALES
The Company markets its PC network Life Cycle Management services by
targeting executives of large enterprises who have information technology
decision-making authority. As of October 31, 1996, the Company's domestic sales
network consisted of over 800 field sales and service representatives. The
Company's direct sales force is comprised of account managers and technical
sales personnel. The Company's account manager force is responsible for
prospecting new business, maintaining and expanding relationships with current
customers, and ensuring customer satisfaction. Technical sales personnel provide
the technical expertise to support and supplement the sales effort. To improve
sales productivity, the Company equips its sales organization with sales force
automation tools that provide them with a complete suite of marketing and
account management tools. These tools reduce the sales representatives' physical
dependence on the branch offices, allowing the Company to operate a virtual
office environment while sharing information across multiple departments.
COMPETITION
The markets in which the Company operates are characterized by intense
competition from several types of technical service providers, including
mainframe and mid-range computer manufacturers and outsourcers entering the
personal computer services marketplace. These include Digital Equipment
Corporation Multi-Vendor Services, Electronic Data Systems Corporation,
Hewlett-Packard Company Multi-Vendor Services and Integrated Systems Solution
Corporation. Other competitors include VARs, systems integrators and third-party
service companies, such as AmeriData Technologies, Inc., CompuCom Systems, Inc.,
DecisionOne, Entex Information Services, InaCom Corp., MicroAge, Inc. and TSS.
The Company expects to face further competition from new market entrants and
possible alliances between competitors in the future. Certain of the Company's
current and potential competitors have greater financial, technical, marketing
and other resources than the Company. As a result, they may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sales of their services than the Company.
LEGAL PROCEEDINGS
On October 28, 1996, the Company entered into an Asset Purchase Agreement
("Memorex Agreement") with Memorex Telex Corporation and certain of its
subsidiaries (collectively "Memorex"), pursuant to which the Company, subject to
certain terms and conditions, agreed to purchase certain of the assets and
businesses and assume certain of the liabilities of Memorex for approximately
$10 million. Memorex filed bankruptcy on October 15, 1996 and the Memorex
Agreement was approved by an Order of the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") on November 1, 1996. On November
7, 1996, the Company notified Memorex that certain conditions precedent to the
Company's obligation to close the transactions contemplated by the Memorex
Agreement had not been and could not be fulfilled and requested that Memorex
agree to a termination of the Memorex Agreement. On November 11, 1996, Memorex
filed an adversary proceeding against the Company in the Bankruptcy Court,
seeking injunctive relief, unspecified damages for breach of contract, tortious
interference with Memorex business relationships and actual and punitive damages
for violation of the automatic stay. Memorex was subsequently granted a
temporary restraining order providing, inter alia, that the Company is
prohibited from soliciting Memorex' existing business and customers for the
purpose of obtaining business now being conducted by Memorex and from soliciting
Memorex employees for employment and requiring the Company to return any
confidential information of Memorex within its custody or control. The Company
intends to vigorously defend any and all claims made by Memorex in connection
with the events surrounding the Memorex Agreement and/or the employment of
certain Memorex employees. The Company believes that the TRO and any adverse
outcome would not have a material adverse effect on the Company.
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Various legal actions arising in the normal course of business have been
brought against the Company and certain of its subsidiaries. Management believes
that the ultimate resolution of these actions will not have a material adverse
effect on the Company's financial position or results of operations, taken as a
whole.
EMPLOYEES
As of October 31, 1996, the Company had approximately 4,900 employees. The
Company has never experienced a work stoppage and its employees are not covered
by a collective bargaining agreement. The Company believes that its relations
with its employees are good.
PROPERTIES
The Company leases approximately 134,475 square feet of office space for its
headquarters in Pleasanton, California, under a lease expiring in January 1998.
The Company has signed an agreement to extend the lease for 89,000 of the
134,475 square feet until 2006. In June 1996, the Company sold its approximately
180,000 square foot distribution center in Indianapolis, Indiana. Following the
sale of the facility, the Company leased back the premises through April 1997
for use during the construction of a new, approximately 400,000 square foot
build-to-specification distribution center in Indianapolis, Indiana with
occupancy targeted for May 1997. The lease on the new facility will expire in
April 2007. In June 1996, the Company reduced the amount of space leased in its
additional and separate warehouse facility in Indianapolis, Indiana from 129,000
square feet to approximately 64,000 square feet and extended the lease on the
property through February 2007. In addition, the Company leases an approximately
192,000 square foot distribution center and an approximately 29,000 square foot
return center in Livermore, California, an approximately 52,000 square foot
repair facility in Wharton, New Jersey, and approximately 87,000 square feet of
office space in Roswell, Georgia. The lease for the Livermore, California,
distribution center expires in September 1999; the lease for the Livermore,
California, return center expires in June 1997; the lease for the Wharton, New
Jersey, premises expires in March 2004, subject to one five-year option to renew
held by the Company; and the lease for the Roswell, Georgia, premises expires in
May 1998. The Company leases other properties that it does not consider material
to its operations. The Company believes that its facilities are suitable and
adequate for its present operations.
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RECENT DEVELOPMENTS
ACQUISITION OF MENTOR TECHNOLOGIES, LTD.
Effective September 4, 1996, the Company consummated the acquisition of the
Mentor Partnership by merging (the "Mentor Merger") each of Mentor Technologies,
Inc., an Ohio corporation and the sole general partner of the Mentor Partnership
("Mentor"), and Cybernetics Tutor, Inc., an Ohio corporation and sole limited
partner of the Mentor Partnership ("Cybernetics"), with and into VST Midwest,
Inc., a Delaware corporation and wholly-owned subsidiary of the Company. A total
of 300,000 shares of Company Common Stock (having an aggregate value on the
closing date of approximately $6.04 million) were issued in connection with the
Mentor Merger. Of these shares 27,000 shares of Company Common Stock will be
held in escrow until March 3, 1997 to satisfy certain indemnification
obligations of Mentor, Cybernetics and the Mentor Partnership. Any shares of
Company Common Stock remaining at the termination of the escrow will be
distributed pursuant to the terms of the merger agreement executed in connection
with the Mentor Merger. The Mentor Partnership designs, develops and implements
instructional programs to educate and familiarize individuals and corporations
with computers and computer software. Management of the Company anticipates that
this acquisition will strengthen the Company's ability to offer training and
education services in Ohio and throughout the upper midwestern United States.
For the calendar year ended December 31, 1995, the Mentor Partnership had
revenues of approximately $5.5 million.
ACQUISITION OF DATAFLEX CORPORATION
Effective May 24, 1996, the Company, through a wholly-owned subsidiary,
acquired certain of the assets and assumed certain of the liabilities of
Dataflex and of Dataflex's wholly-owned subsidiary, Dataflex Southwest
Corporation. The assets acquired and liabilities assumed comprise substantially
all of the assets and liabilities previously associated with the business
operations of Dataflex known as the Dataflex Western Region and Dataflex
Southwest Region. The two Dataflex Regions offer PC product distribution,
service and support in the states of Arizona, California, Colorado, Nevada, New
Mexico, and Utah and reported revenues of approximately $145 million for the
fiscal year ended March 31, 1996. The purchase price of the assets and
businesses acquired from Dataflex was approximately $42.0 million, subject to
certain post-closing adjustments. Of this amount, the Company paid approximately
$37.0 million in cash on May 29, 1996, with the remainder due following the
completion of an audit of the assets acquired and the liabilities assumed as of
May 31, 1996 and the completion of certain other post-closing matters.
AGREEMENT WITH DONALDSON, LUFKIN & JENRETTE FOR PAYMENT AGAINST MERISEL
RECEIVABLES
On May 24, 1996, the Company and Donaldson, Lufkin & Jenrette Securities
Corporation entered into an agreement pursuant to which the Company received
$15.6 million in exchange for providing Donaldson, Lufkin & Jenrette Securities
Corporation the right to receive an aggregate of $20 million in payments during
May, June and July of 1997 out of the amounts collected from receivables owed to
the Company by Merisel FAB under the distribution and services agreements dated
as of January 31, 1994, as amended, between the Company and Merisel. The Company
will continue to receive the related interest income from the Merisel
receivables.
PROPOSED SECURITIZATION FACILITY
As part of its overall plan to restructure its current indebtedness, the
Company currently contemplates repayment of a portion of the IBMCC indebtedness
with the proceeds of a revolving funding trade receivables securitization
facility (the "Securitization Facility") from selected multi-seller commercial
paper conduits and/or other financial institutions. Additionally, proceeds from
the Securitization Facility are intended to be used to provide working capital
to the Company and for potential future acquisitions of, or investments in, one
or more businesses by the Company. The Company currently anticipates that the
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Securitization Facility will be in place during the Company's third fiscal
quarter ending January 31, 1997. There can be no assurance that the planned
Securitization Facility will be consummated within the expected time frame, on
terms satisfactory to the Company, or at all. Donaldson, Lufkin & Jenrette
Securities Corporation, one of the Initial Purchasers, has been authorized to
act as the exclusive agent and financial advisor of the Company in connection
with this transaction.
PROPOSED ACQUISITION OF CONTRACT DATA SYSTEMS, INC.
On October 15, 1996, the Company executed a Letter of Intent to acquire
Contract Data Systems, Inc., a North Carolina corporation ("CDS"), and computer
training services business located in Durham, North Carolina. The Company and
CDS are currently negotiating the terms of a definitive agreement pursuant to
which the Company would acquire the assets and liabilities of CDS through a
merger of CDS with or into a wholly-owned subsidiary of the Company in a manner
which would constitute a tax-free reorganization and which would be accounted
for under the "pooling of interest" method of accounting (the "CDS
Acquisition"). The aggregate consideration to be received by the shareholders of
CDS in connection with the CDS Acquisition is expected to consist solely of
Company Common Stock equal to approximately $27.2 million divided by the
applicable exchange price. As currently proposed, the exchange price will be the
average closing price of the Company Common Stock as reported on the NYSE
Composite Tape for the ten trading days ending on and including the second
trading day prior to the closing; provided, however, that such exchange price
shall not be less than $23 or more than $31 5/8. Ten percent (10%) of the shares
issuable in connection with the CDS Acquisition are expected to be held in
escrow for a period of one year to satisfy certain indemnification obligations
of CDS. The parties contemplate that the shares of Company Common Stock to be
issued in connection with the CDS Acquisition will be registered under the
Securities Act on a Registration Statement on Form S-4. The transaction is
subject to execution of a definitive agreement, approval by the shareholders of
CDS, regulatory agencies, lenders of the Company and others, the due diligence
investigation by the Board of Directors of the Company, and certain other
customary conditions to closing. There can be no assurance that the CDS
Acquisition will be consummated on terms satisfactory to the Company, or at all.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
William Y. Tauscher(1)............. 46 Chairman of the Board and Chief Executive Officer
Jeffrey S. Rubin(1)(4)............. 52 Vice Chairman of the Board and Chief Financial Officer
Jay S. Amato....................... 37 President, Chief Operating Officer and Director
Richard N. Anderson................ 39 Senior Vice President and General Manager Life Cycle Services Group
H. Christopher Covington........... 46 Senior Vice President, General Counsel and Secretary
Robert C. Kuntzendorf.............. 51 Senior Vice President Operations
Chris M. Laney..................... 39 Senior Vice President Networking Services
Ahmad Manshouri.................... 55 Senior Vice President and General Manager Product Operations
Michael J. Moore................... 45 Senior Vice President Management Information Services
Coleman D. Sisson.................. 39 Senior Vice President and General Manager Learning Network
Thanos M. Triant................... 50 Senior Vice President and Chief Technology Officer
William R. Waas.................... 48 Senior Vice President Service
John W. Amerman(3)................. 64 Director
Richard H. Bard(1)(3).............. 48 Director
Stephen W. Fillo(2)................ 59 Director
Stewart K.P. Gross(1).............. 37 Director
William H. Janeway(3)(4)........... 53 Director
John R. Oltman(2).................. 51 Director
John L. Vogelstein................. 61 Director
Josh S. Weston(4).................. 67 Director
</TABLE>
- ------------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation and Stock Option Committee.
(4) Member of the Finance Committee.
JAY S. AMATO became President and Chief Operating Officer in July 1995 and a
director in December 1995. From January 1993 until July 1995, he was Senior Vice
President and President, North America Operations of the Company. From June 1991
until January 1993, he was Senior Vice President, Major Market Operations of the
Company, and from April 1989 until June 1991, he was Vice President of Business
Development of the Company. Mr. Amato was previously the New York regional
manager and director of operations of The Computer Factory, Inc.
JOHN W. AMERMAN became a director in June 1996. He has served as Chairman
and Chief Executive Officer of Mattel, Inc., a leading toy manufacturer, since
1987. Prior to his chairmanship with Mattel, Inc.,
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Mr. Amerman served as President of Mattel International. Before joining Mattel
in 1980, Mr. Amerman was President of the American Chicle division of Warner
Lambert Corp., a consumer health care products company. Mr. Amerman is also a
member of the Board of Directors of Unocal Corporation, a worldwide energy
resources company, a member of the Board of Governors of the Hugh O'Brian Youth
Foundation and a member of the Board of Overseers of Dartmouth's Amos Tuck
School.
RICHARD N. ANDERSON became Senior Vice President in December 1993 and
General Manager Life Cycle Services Group in May 1996. He was Vice President,
Field Sales from October 1992 until December 1993. From July 1991 to October
1992, he was an Area Director for the Company, responsible for sales in the New
England area. From December 1983 until July 1991, he was a founder and Chief
Operating Officer of New England Computer Corporation, one of the largest
Company franchisees. Prior thereto, he was a Financial Systems Consultant for
Digital Equipment Corporation.
RICHARD H. BARD became a director of the Company in September 1987 and
served as Vice Chairman of the Board of Directors from July 1989 to December
1991. He has been a director and Chief Executive Officer of Optical Security
Group, Inc., a materials technology company, since September 1993, and became
President and Chairman of the Board of that company in April 1995. From July
1989 to December 1991, he served at different times in the capacities of
Director, Chairman, President and Chief Executive Officer of ComputerLand
International Development, Inc. Since 1991, he has also been Chief Executive
Officer of Bard & Co., Inc., a diversified investment management company. From
May 1986 until December 1988, he was Chairman and Chief Executive Officer of
CoastAmerica Corporation, a franchisor of hardware product stores. Prior to that
time, he was President and Chief Operating Officer of FoxMeyer Corporation,
which he co-founded in 1978. Mr. Bard is also a director of Builder Marts of
America Inc., a supplier of building materials, and Polymedica Industries, Inc.,
a manufacturer of health care products.
H. CHRISTOPHER COVINGTON became Senior Vice President, General Counsel and
Secretary in August 1994. From April 1993 until August 1994, he was Vice
President. From November 1990 until April 1993, he was Assistant General Counsel
and Assistant Secretary of the Company. From January 1988 until November 1990,
he was a partner of the law firm of Hardin, Cook, Loper, Engel & Bergez.
STEPHEN W. FILLO became a director in September 1987. He has been President
of Fillo & Co., Inc., an independent investment firm, since December 1990. He
was a Managing Director of E.M. Warburg, Pincus & Co., Inc., a venture banking
and investment counselling firm, from 1981 to 1990. He is a director of LCI
International Inc., a long distance telephone carrier.
STEWART K.P. GROSS became a director in June 1994. Mr. Gross is a Managing
Director of E.M. Warburg, Pincus & Co., Inc. Mr. Gross has been with that firm
since July 1987 and has been a Managing Director since January 1993. He is a
director of OpenVision Technologies, Inc., a software company, and several
privately-held companies.
WILLIAM H. JANEWAY became a director in June 1994. He has been a Managing
Director and the head of the Venture Capital High Technology Team since 1988 of
E.M. Warburg, Pincus & Co., Inc. Mr. Janeway is a director of Maxis, Inc., an
entertainment software company, Zilog, Inc., a semiconductor manufacturer,
OpenVision Technologies, Inc., a software company, and several private
companies.
ROBERT C. KUNTZENDORF became Senior Vice President Operations in April 1990.
Before joining the Company, he served as Vice Chairman of FoxMeyer Corporation,
a wholesale pharmaceutical distributor and franchisor, which he joined in 1983.
CHRIS M. LANEY became Senior Vice President Networking Services in July
1995. From July 1993 until July 1995, he was Vice President Networking Services.
From April 1992 until July 1993, he was Western Regional Director of Networking
Services. From October 1989 until April 1992, he was Director of Networking
Services for Dataphaz, Inc., a Company franchisee.
52
<PAGE>
AHMAD MANSHOURI became Senior Vice President and General Manager Product
Operations in July 1995. He was Senior Vice President, Purchasing and Vendor
Management from January 1993 until July 1995. From July 1992 until January 1993,
he was a Vice President of the Company. Prior thereto, he was the founder and
Vice President of Infomax, Inc., one of the largest Company franchisees.
MICHAEL J. MOORE became Senior Vice President Management Information
Services in January 1993. From May 1987 until January 1993, he was Vice
President Information Systems. Prior thereto, he was President and Chief
Executive Officer of The Software Place, a retailer of computer software.
JOHN R. OLTMAN became a director of the Company in June 1996. Mr. Oltman is
the former Chairman and Chief Executive Officer of SHL Systemhouse, Inc., a
provider of client/server consulting, systems integration and technology
outsourcing. Before joining SHL Systemhouse, Mr. Oltman was Worldwide Managing
Partner for Integration Services for Andersen Consulting and a member of
Andersen's Worldwide Organization Board of Directors. Mr. Oltman joined the
Arthur Andersen Worldwide Organization in 1970 and held a number of positions
within that firm, including Managing Partner for Andersen's Chicago Consulting
Group. Mr. Oltman is a director of TSW International and IA Corporation,
application software companies.
JEFFREY S. RUBIN became Vice Chairman in June 1995, Chief Financial Officer
in November 1995 and a director in July 1991. From May 1994 to February 1995,
Mr. Rubin was Senior Vice President, Business Development and Planning for GTE
Corporation. He was Executive Vice President and Chief Financial Officer of
NYNEX Corporation from 1993 until April 1994. From January 1991 to 1993, he was
Senior Vice President and Chief Financial Officer of NYNEX Corporation. From
March 1990 to January 1991, he was Vice President--Finance of NYNEX Corporation.
Mr. Rubin is a director of Shared Medical Systems Corporation, a medical
financial services company.
COLEMAN D. SISSON became Senior Vice President and General Manager Learning
Network in July 1995. From 1992 until July 1995, he was Vice President, Customer
Services for Powersoft Corp., a software company, and from 1987 until 1992, he
was the Training and Customer Service Manager of Compaq Computer Corporation.
WILLIAM Y. TAUSCHER became Chairman of the Board of the Company in September
1987 and Chief Executive Officer in September 1988. He was President from
September 1988 to July 1995. Prior to September 1988, he was Chairman of the
Board, President and Chief Executive Officer of FoxMeyer Corporation, a
wholesale pharmaceutical distributor and franchisor that he co-founded in 1978
and a subsidiary of National Intergroup, Inc., a diversified holding
corporation. He is a director of The Vons Companies, Inc., a grocery store
chain.
THANOS M. TRIANT became Senior Vice President and Chief Technology Officer
for the Company in November 1995. Prior to joining the Company, Mr. Triant was
Vice President of Information Systems for the Times Mirror Company from January
1994 to November 1995. From January 1990 to January 1994, he was the Director of
Systems Architecture for Sun Microsystems Inc.
JOHN L. VOGELSTEIN became a director in January 1991. He has been President
of E.M. Warburg, Pincus & Co., Inc. since 1994, Vice Chairman of E.M. Warburg,
Pincus & Co., Inc. since 1982, President of Warburg, Pincus Ventures, Inc. since
1980 and a Partner of Warburg, Pincus & Co. since 1971. Mr. Vogelstein is a
director of ADVO, Inc., a direct mail marketing company, Aegis Group plc, a
media buying company, LCI International, Inc., a long distance telephone
carrier, Mattel, Inc., a toy manufacturer, Value Health, Inc., a managed care
company, and several private companies.
WILLIAM R. WAAS became Senior Vice President Service in July 1995. From
January 1989 until July 1995, he was Vice President Service. Prior to joining
the Company, he was Vice President of Systems Support of Grumman Data Systems
Corporation, a computer services company. He is currently Chairman of CompTIA,
an industry association.
53
<PAGE>
JOSH S. WESTON became a director of the Company in June 1996. Mr. Weston has
served as Chairman and Chief Executive Officer of Automatic Data Processing,
Inc., a computer services company, since 1985. Mr. Weston is also a member of
the Board of Directors of Public Service Enterprise Group Inc., an electric and
gas utility company, Olsten Corp., a provider of home health care and temporary
staffing services and Shared Medical Systems, a provider of health information
services.
Executive officers serve at the discretion of the Board of Directors. All
directors serve on the Board of Directors of the Company until the next annual
meeting of stockholders of the Company and until their successors are elected
and qualified. Non-employee directors receive reimbursement of out-of-pocket
expenses for attendance at Board meetings. In addition, certain directors may
receive stock options under the Company's stock option plans. See
"Management--Stock Option Plans."
The Board of Directors has established four committees. The Executive
Committee is comprised of Messrs. Tauscher, Rubin, Bard and Gross and generally
has all the powers of the Board of Directors, subject to limitations provided by
the Delaware General Corporation Law. The Audit Committee is comprised of
Messrs. Fillo and Oltman and oversees the activities of the Company's
independent auditors and reviews the Company's internal accounting procedures
and controls. The Compensation and Stock Option Committee is comprised of
Messrs. Amerman, Bard and Janeway and makes recommendations to the Board of
Directors with respect to general compensation and benefit levels, determines
the compensation and benefits for the Company's executive officers and
administers the Company's stock option plans. The Finance Committee is comprised
of Messrs. Rubin, Janeway and Weston and, in general, advises the Board with
regard to providing appropriate financing for the Company's activities,
including acquisitions.
54
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation earned by its
Chief Executive Officer and the four other most highly compensated executive
officers of the Company (collectively, the Named Executive Officers) for
services rendered in all capacities to the Company during the fiscal years ended
April 30, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------
AWARDS
ANNUAL COMPENSATION ----------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS/SARS (#)
- ------------------------------------- --------- ----------- ----------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
WILLIAM Y. TAUSCHER.................. 1995 550,008 30,000 -- 325,000(1)
CHAIRMAN OF THE BOARD AND CHIEF 1996 550,008 550,008 -- 1,187,434(1)
EXECUTIVE OFFICER
JAY S. AMATO......................... 1995 256,245 25,000 -- 47,726(1)
PRESIDENT AND CHIEF OPERATING
OFFICER 1996 312,498 312,293 -- 300,000(1)
JEFFREY S. RUBIN..................... 1995 -- -- -- 4,037(1)(5)
VICE CHAIRMAN OF THE BOARD AND
CHIEF 1996 243,756 242,424 -- 250,000(1)(6)
FINANCIAL OFFICER
AHMAD MANSHOURI...................... 1995 204,006 20,000 -- 15,000(1)
SENIOR VICE PRESIDENT AND GENERAL 1996 242,834 194,142 -- 75,000(1)
MANAGER PRODUCT OPERATIONS
RICHARD N. ANDERSON.................. 1995 182,508 20,000 1,940(7) 15,000(1)
SENIOR VICE PRESIDENT SALES 1996 219,168 175,258 -- 85,100(1)
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION ($)
- ------------------------------------- ------------------
<S> <C>
WILLIAM Y. TAUSCHER.................. 87,634(2)
CHAIRMAN OF THE BOARD AND CHIEF 1,566(3)
EXECUTIVE OFFICER
JAY S. AMATO......................... 1,014(3)
PRESIDENT AND CHIEF OPERATING
OFFICER 2,094(4)
JEFFREY S. RUBIN.....................
VICE CHAIRMAN OF THE BOARD AND
CHIEF 1,944(3)
FINANCIAL OFFICER
AHMAD MANSHOURI...................... 768(3)
SENIOR VICE PRESIDENT AND GENERAL 3,921(3)
MANAGER PRODUCT OPERATIONS
RICHARD N. ANDERSON.................. 1,669(8)
SENIOR VICE PRESIDENT SALES 2,105(9)
</TABLE>
- ------------------------------
(1) These shares are subject to exercise under stock options granted under the
Company's stock option plans.
(2) Comprised of $86,074 of forgiveness of interest on a promissory note payable
to the Company and $1,560 of premiums for insurance policies for which such
person is the beneficiary.
(3) Comprised of premiums for insurance policies where such persons are the
beneficiaries.
(4) Comprised of $1,500 matching contributions made to the Company's 401(k) plan
for the benefit of such person and $594 of premiums for insurance policies
for which such person is the beneficiary.
(5) Includes options to purchase 573 shares of Company Common Stock at a price
of $1.00 per share, options to purchase 2,309 shares of Company Common Stock
at a price of $4.51 per share and options to purchase 1,155 shares of
Company Common Stock at a price of $8.12 per share granted by CapCo to
Jeffrey S. Rubin.
(6) Includes options to purchase 7,457 shares at a price of $1.00 per share,
options to purchase 30,022 shares of Company Common Stock at a price of
$4.51 per share and options to purchase 15,011 shares of Company Common
Stock at a price of $8.12 per share granted by CapCo to Jeffrey S. Rubin.
(7) Comprised of $1,940 for relocation expenses.
(8) Comprised of a $967 matching contribution made to the Company's 401(k) plan
for the benefit of such person and $702 of premiums for insurance policies
for which such person is the beneficiary.
(9) Comprised of a $1,500 matching contribution made to the Company's 401(k)
plan for the benefit of such person and $605 of premiums for insurance
policies for which such person is the beneficiary.
55
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
pursuant to the Company's stock option plans granted to the Named Executive
Officers during fiscal year 1996. All options were granted at an exercise price
equal to the fair market value per share of the Company Common Stock on the date
of grant.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF
--------------------------------------------------------------- STOCK PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION
SECURITIES OPTIONS/SARS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE OR ($)(3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) FISCAL YEAR (2) ($/SH) DATE 5% 10%
- ------------------------------- ---------------- ----------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William Y. Tauscher............ 687,434(4)(5)(6) 23.2% 3.00 5/1/05 1,296,971 3,286,778
500,000(7) 16.9% 10.00 3/11/06 3,144,473 7,968,712
Jay S. Amato................... 300,000(6)(8) 10.1% 3.00 5/1/05 566,005 1,434,368
Jeffrey S. Rubin............... 250,000 8.4% 3.00 5/1/05 471,671 1,195,307
Ahmad Manshouri................ 75,000(6)(9) 2.5% 3.00 5/1/05 141,501 358,592
Richard N. Anderson............ 85,100(6)(10) 2.9% 3.00 5/1/05 160,557 406,882
</TABLE>
- ------------------------------
(1) All options vest in four or five equal annual installments, subject to
acceleration in the event of termination within six months of a change of
control (as defined in the Company's stock option plans), and have a term of
10 years.
(2) The Company granted options to purchase an aggregate of 2,966,943 shares of
Company Common Stock during fiscal year 1996.
(3) Potential realizable value is based on the assumption that the price of the
Company Common Stock appreciates at the annual rate shown, compounded
annually, from the date of grant until the end of the 10-year option term.
The values are calculated in accordance with rules promulgated by the
Commission and do not reflect the Company's estimate of future stock price
appreciation.
(4) Includes options to purchase 325,000 shares of Company Common Stock at an
exercise price of $3.00 per share which were granted on May 1, 1995, in
exchange for cancellation of options to purchase a like number of shares at
an exercise price of $6.00 per share.
(5) Includes options to purchase 362,434 shares of Company Common Stock at an
exercise price of $3.00 per share which were granted on May 1, 1995, in
exchange for cancellation of options to purchase a like number of shares at
an exercise price of $5.55 per share.
(6) The options vest in 20% installments on each of May 1, 1995, 1996, 1997,
1998 and 1999, subject to acceleration in the event of termination within
six months of a change of control (as defined in the Company's stock option
plans).
(7) The options vest in 20% installments on each of May 1, 1996, 1997, 1998,
1999 and 2000, subject to acceleration in the event of termination within
six months of a change of control (as defined in the Company's stock option
plans).
(8) Includes options to purchase 56,726 shares of Company Common Stock at an
exercise price of $3.00 per share which were granted on May 1, 1995, in
exchange for cancellation of options to purchase a like number of shares at
an exercise price of $6.00 per share and also includes options to purchase
43,274 shares of Company Common Stock at an exercise price of $3.00 per
share which were granted on May 1, 1995, in exchange for cancellation of
options to purchase a like number of shares at an exercise price of $5.55
per share.
(9) Includes options to purchase 15,000 shares of Company Common Stock at an
exercise price of $3.00 per share which were granted on May 1, 1995, in
exchange for cancellation of options to purchase a like number of shares at
an exercise price of $6.00 per share.
(10) Includes options to purchase 20,000 shares of Company Common Stock at an
exercise price of $3.00 per share which were granted on May 1, 1995, in
exchange for cancellation of options to purchase a like number of shares at
an exercise price of $6.00 per share.
The following table sets forth information with respect to each exercise of
stock options during fiscal 1996, by each of the Named Executive Officers and
the number of options held at fiscal year end and the aggregate value of
in-the-money options held at fiscal year end. None of the Named Executive
Officers exercised options in fiscal 1996.
56
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ON EXERECISE VALUE -------------------------- -------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- --------------- --------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Y. Tauscher............ -- -- 237,487 949,947 1,794,487 7,297,937
Jay S. Amato................... -- -- 60,000 240,000 637,800 2,551,200
Jeffrey S. Rubin............... -- -- 50,000 200,000 531,500 2,126,000
Ahmad Manshouri................ -- -- 15,000 60,000 159,450 637,800
Richard N. Anderson............ -- -- 31,920 68,080 345,619 723,690
</TABLE>
- ------------------------------
(1) Based on the fair market value of the Company Common Stock at year end
($13.63 per share), as reported by the NYSE at the close of business on
April 30, 1996.
Directors who are full-time employees of the Company receive no additional
compensation for services rendered as members of the Board or committees
thereof. Directors who are not full-time employees of the Company receive
reimbursement of out-of-pocket expenses for attendance at Board meetings. All
directors who are not full-time employees of the Company, other than those
directors affiliated with E. M. Warburg, Pincus & Co., Inc., receive an annual
fee of $20,000 and a meeting fee of $1,000 per meeting attended. Each director
who receives a $20,000 annual fee may elect to forego the $20,000 annual payment
and, in lieu thereof, receive an option to purchase 5,000 shares of Company
Common Stock. Messrs. Amerman, Oltman and Weston received options to purchase
20,000 shares of Company Common Stock upon their appointment to the Board.
STOCK OPTION PLANS
1988 STOCK OPTION PLAN. In July 1988, the Company adopted a stock option
plan (as amended, the "1988 Stock Option Plan") providing for the issuance to
key employees and directors of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
stock options that are non-qualified for federal income tax purposes. The 1988
Stock Option Plan is administered by the Compensation and Stock Option
Committee, which is comprised of Messrs. Amerman, Janeway and Bard. The
Compensation and Stock Option Committee may, in its discretion, grant tandem
stock appreciation rights that give the employee the right to elect an
alternative payment equal to the appreciation of the stock value instead of
exercising the stock options. Members of the Compensation and Stock Option
Committee are not eligible to receive options under the 1988 Stock Option Plan.
The total number of shares of the Company Common Stock for which options could
have been granted pursuant to the 1988 Stock Option Plan was previously
2,300,000; however, in connection with the adoption of the 1996 Option Plan (as
hereinafter defined) the Board reduced the number of shares of Company Common
Stock issuable under the 1988 Stock Option Plan by 200,000 shares and indicated
its intention that substantially all future grants be made under the 1996 Option
Plan.
To the extent future stock options are granted under the 1988 Stock Option
Plan the exercise price of incentive stock options may not be less than 100% of
the fair market value of the Company Common Stock at the time of grant and the
term of any option may not exceed 10 years. With respect to any employee who
owns stock representing more than 10% of the voting power of the outstanding
capital stock of the Company, the exercise price of any incentive stock option
may not be less than 110% of the fair market value of such shares at the time of
grant and the term of such option may not exceed five years. The exercise price
of a non-qualified stock option is determined by the Compensation and Stock
Option Committee at the time such option is granted.
Options granted under the 1988 Stock Option Plan are nontransferable and,
with certain exceptions in the event of the death or disability of an optionee,
may be exercised by the optionee only during employment or within the one or
three month period immediately following termination of employment.
57
<PAGE>
Options granted under the 1988 Stock Option Plan typically vest over a four- or
five-year period, subject to acceleration in the event of termination within six
months of a change of control (as defined in the plan), and expire after 10
years.
1993 STOCK OPTION/STOCK ISSUANCE PLAN. In April 1993, the Company adopted a
stock option/stock issuance plan (the "1993 Stock Plan"; and the 1988 Stock
Option Plan and the 1993 Stock Plan, collectively, the "Old Stock Option Plans")
providing for the issuance to highly compensated, managerial employees, officers
and directors of incentive stock options within the meaning of Section 422 of
the Code, stock options that are non-qualified for federal income tax purposes
and performance bonus shares of Company Common Stock. The 1993 Stock Plan is
administered by the Compensation and Stock Option Committee. The Compensation
and Stock Option Committee may, in its discretion, grant tandem stock
appreciation rights that give the employee the right to elect an alternative
payment equal to the appreciation of the stock value instead of exercising the
stock options. Members of the Compensation and Stock Option Committee are not
eligible to receive options under the 1993 Stock Plan. The total number of
shares of Company Common Stock originally issuable pursuant to the 1993 Stock
Plan, whether under options or directly, was 2,500,000; however, in connection
with the adoption of the 1996 Option Plan, the Board reduced the number of
shares of Company Common Stock issuable under the 1993 Stock Plan by 100,000
shares and indicated its intention that substantially all future grants be made
under the 1996 Option Plan.
To the extent future stock options are granted under the 1993 Stock Plan,
the exercise price and term of incentive stock options are subject to the same
limitations described above with respect to the 1988 Stock Option Plan. The
option price of a non-qualified stock option is determined by the Compensation
and Stock Option Committee at the time such option is granted; provided that the
exercise price of non-qualified stock options granted under the 1993 Stock Plan
and the purchase price of shares of Company Common Stock issued under such Plan
may not be less than 85% of the fair market value of the Company Common Stock at
the time of grant or issuance. As an additional component of the 1993 Option
Plan, shares of Company Common Stock may be issued under the 1993 Stock Plan as
a performance bonus.
Options granted under the 1993 Stock Plan are nontransferable and, with
certain exceptions in the event of the death or disability of an optionee, may
be exercised by the optionee only during employment or within a one or three
month period immediately following termination of employment. Options granted
under the 1993 Stock Plan typically vest over a four- or five-year period,
subject to acceleration in the event of termination within six months of a
change of control (as defined in the plan), and expire after 10 years.
Although future grants under the Old Stock Option Plans may be made, the
Board of Directors of the Company intends that substantially all future stock
option grants will be made pursuant to the 1996 Option Plan. Grants under the
Old Stock Option Plans will only be made to the extent of the shares remaining
reserved thereunder and to the extent that currently outstanding options
thereunder expire or are cancelled without being fully exercised, in which case
the underlying shares become available for future grants under the respective
terms of such plans. As of October 31, 1996 options exercisable for 1,788,254
shares of Company Common Stock were issued under the 1988 Stock Option Plan and
options exercisable for 2,289,739 shares of Company Common Stock were issued
under the 1993 Stock Plan.
1996 STOCK OPTION/STOCK ISSUANCE PLAN. In August 1996, the Company adopted
the 1996 Stock Option/Stock Issuance Plan (the "1996 Option Plan"), which
provides for the grant to directors, officers and employees of the Company and
independent consultants retained by the Company, of stock options, including
both incentive stock options and non-qualified stock options, and direct grants
of Company Common Stock. The maximum aggregate number of shares of Company
Common Stock reserved for issuance under the 1996 Option Plan is 3,300,000
shares.
Similar to the 1993 Option Plan, the 1996 Option Plan is divided into two
separate components: the Option Grant Program (the Option Grant Program) and the
Stock Issuance Program (the Stock Issuance Program). Under the Option Grant
Program, eligible individuals may be granted options to purchase
58
<PAGE>
shares of the Company Common Stock at an exercise price to be determined by the
Compensation and Stock Option Committee (except that, in the case of an
incentive stock option, such exercise price may not be less than 100% (or 110%
in the case of an incentive stock option granted to a 10% stockholder)) of the
fair market value of the Company Common Stock on the date of grant. Under the
Stock Issuance Program, eligible individuals may be issued shares of Company
Common Stock directly, either through the immediate purchase of such shares at a
price to be determined by the Compensation and Stock Option Committee or as a
bonus tied to the performance of services or the Company's attainment of
financial objectives, without any cash payment required of the recipient. Such
shares may be fully vested when issued or may vest over time.
The 1996 Option Plan is administered by the Compensation and Stock Option
Committee. The Compensation and Stock Option Committee has full authority to
determine (i) with respect to the option grants, the number of shares to be
covered by each such grant, the per share exercise price thereof, the status of
the granted option as either an incentive stock option or a non-qualified stock
option, the time or times at which each granted option is to become purchasable
under the option and the maximum term for which the option may remain
outstanding, and (ii) with respect to share issuances under the Stock Issuance
Program, the number of shares to be issued to each participant, the vesting
schedule (if any) to be applicable to the issued shares and the consideration to
be paid by the individual for such shares. The Compensation and Stock Option
Committee has the absolute discretion either to grant options in accordance with
the Option Grant Program or to effect share issuances in accordance with the
Stock Issuance Program. Options granted and stock issued pursuant to the 1996
Option Plan are evidenced by instruments (which need not be identical) in such
form as the Compensation and Stock Option Committee may, from time to time,
authorize.
Options granted pursuant to the 1996 Option Plan will be exercisable at such
rate as may be determined by the Compensation and Stock Option Committee.
Options granted under the 1996 Option Plan will generally expire after ten
years, unless terminated earlier or as otherwise determined by the Compensation
and Stock Option Committee at the time of grant. Options granted under the 1996
Option Plan will be nontransferable and, with certain exceptions in the event of
the death or disability of an optionee, may be exercised by the optionee only
during employment or within the one to three month period following termination
of employment in accordance with the plan.
EMPLOYEE STOCK PURCHASE PLAN
The Company adopted, effective with its IPO, an employee stock purchase plan
(the "Stock Purchase Plan"). Under the Stock Purchase Plan, eligible employees
are granted options (exercisable by electing to participate in the plan) to
purchase shares of Company Common Stock generally through regular payroll
deductions. The Stock Purchase Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Code. The total number of shares of
Company Common Stock that are authorized for issuance under the Stock Purchase
Plan is 1,000,000. All full-time and certain part-time employees of the Company
are eligible to participate in the Stock Purchase Plan, subject to certain
limited exceptions. Options are granted generally every six months to eligible
employees and, if not exercised, expire on the last day of the sixth-month
period in which granted. Employees electing to participate for any semi-annual
period authorize payroll deductions at a stated whole percentage ranging from 2%
to 10% of compensation, as determined by the participant. Options are
nontransferable other than by will or by operation of the laws of descent and
distribution. The purchase price for shares offered under the Stock Purchase
Plan each year will be equal to a percentage designated by the Board of
Directors (not less than 85%) of the lower of the fair market value of Company
Common Stock at the date of grant or the semi-annual date of exercise as
evidenced by the initial public offering price per share in the case of options
granted on the date of the IPO ($10.00 per share) or, in all other cases, by the
closing price of Company Common Stock on such date as reported on the NYSE. The
Stock Purchase Plan will expire on March 11, 2006, unless sooner terminated by
the Board of Directors or all shares of Company Common Stock available for
59
<PAGE>
issuance under the Stock Purchase Plan have been sold. The Board of Directors of
the Company may amend, suspend or terminate the Stock Purchase Plan at any time
and from time to time, subject to certain limitations. The Stock Purchase Plan
is administered by the Compensation and Stock Option Committee.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company Common Stock as of October 31, 1996 by (i) each person
known to the Company to own beneficially more than 5% of the outstanding Company
Common Stock, (ii) each director, (iii) each Named Executive Officer and (iv)
all directors and executive officers of the Company as a group. Except as
otherwise stated, the Company believes that each of the beneficial owners named
in the table has sole voting and investment power with respect to all shares
beneficially owned by such stockholder as set forth opposite such stockholder's
name, subject to applicable community property laws. Except as noted below, the
address of each director and Named Executive Officer is c/o Vanstar Corporation,
5964 West Las Positas Blvd., Pleasanton, California 94588.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------------
SHARES OF
NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT (1)
- ---------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P. (2)....................... 13,878,401.21 33.6%
466 Lexington Avenue
10th Floor
New York, NY 10017
William Y. Tauscher (3)......................................... 2,370,284.49 5.7
Jeffrey S. Rubin (4)............................................ 184,794.00 *
Ahmad Manshouri (5)............................................. 61,215.00 *
Richard N. Anderson (6)......................................... 7,801.00 *
Richard H. Bard (7)............................................. 667,528.26 1.6
Stephen W. Fillo (8)............................................ 5,000.00 *
Stewart K.P. Gross (9)(2)....................................... 13,878,401.21 33.6
William H. Janeway (9)(2)....................................... 13,878,401.21 33.6
John L. Vogelstein (9)(2)....................................... 13,878,401.21 33.6
Jay S. Amato (10)............................................... 164,998.50 *
John W. Amerman (11)............................................ 9,000.00 *
Josh S. Weston (11)............................................. 9,000.00 *
John R. Oltman (11)............................................. 9,000.00 *
All directors and executive officers as a group (20 persons)
(12)(9)....................................................... 17,509,911.69 41.3
</TABLE>
- ------------------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 41,165,599 shares of Company
Common Stock outstanding as of October 31, 1996, together with the
applicable options for such stockholder. Beneficial ownership is determined
in accordance with the rules of the Commission and generally includes voting
or investment power with respect to securities, subject to community
property laws, where applicable. Shares of Company Common Stock subject to
options that are presently exercisable or exercisable within 60 days are
deemed to be beneficially owned by the person holding such options for the
purpose of computing the percentage of ownership of such person but are not
treated as outstanding for the purpose of computing the percentage of any
other person.
(2) The sole general partner of CapCo is Warburg, Pincus & Co., a New York
general partnership ("WP"). Lionel I. Pincus is the Managing Partner of WP
and may be deemed to control WP. E.M. Warburg Pincus & Co., Inc. ("EMWP"),
through a wholly-owned subsidiary, manages CapCo. WP
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owns all of the outstanding stock of EMWP and, as the general partner of
CapCo, has a 20% interest in the profits of CapCo. EMWP owns 0.9% of the
limited partnership interests in CapCo. Number of shares includes 84,794
shares that are subject to options granted to Jeffrey S. Rubin as described
under note (4) below.
(3) Includes 374,974 shares of Company Common Stock reserved for issuance upon
the exercise of stock options granted under the Company's stock options
plans that are either presently exercisable or become exercisable within 60
days.
(4) Includes 100,000 shares of Company Common Stock reserved for issuance upon
the exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days,
48,500 shares subject to exercise within 60 days under a presently-
exercisable stock option issued by CapCo, exercisable at $4.51 per share
until 2005, 24,248 shares subject to exercise within 60 days under a
presently-exercisable stock option issued by CapCo, exercisable at $8.12 per
share until 2005, 911 shares subject to exercise within 60 days under a
presently-exercisable stock option issued by CapCo, exercisable at $1.00 per
share until 2000, and 11,135 shares subject to exercise within 60 days under
a presently-exercisable stock option issued by CapCo, exercisable at $1.00
per share until 2005.
(5) Includes 37,000 shares of Company Common Stock reserved for issuance upon
exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
Also includes 11,920 shares held of record by Mr. Manshouri's wife.
(6) Includes 7,000 shares of Company Common Stock reserved for issuance upon
exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
(7) Includes 367,434 shares of Company Common Stock reserved for issuance upon
the exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
(8) Consists of 5,000 shares of Company Common Stock reserved for issuance upon
exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
Pursuant to an arrangement between WP and Mr. Fillo, Mr. Fillo has an
indirect pecuniary interest in the capital stock of the Company owned by
CapCo. Mr. Fillo disclaims beneficial ownership of all such capital stock
within the meaning of the Exchange Act.
(9) Mr. Gross, Mr. Janeway and Mr. Vogelstein, directors of the Company, are
Managing Directors of EMWP and general partners of WP. As such, Mr. Gross,
Mr. Janeway and Mr. Vogelstein may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1 under the Exchange Act), in an
indeterminate portion of the shares beneficially owned by CapCo. All of the
shares indicated as owned by Mr. Gross, Mr. Janeway and Mr. Vogelstein are
owned beneficially by CapCo and are included because of the affiliation of
such persons with CapCo. Mr. Gross, Mr. Janeway and Mr. Vogelstein disclaim
beneficial ownership of these shares within the meaning of Rule 13d-3 under
the Exchange Act.
(10) Includes 140,000 shares of Company Common Stock reserved for issuance upon
exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
(11) Includes 9,000 shares of Company Common Stock reserved for issuance upon
exercise of stock options granted under the Company's stock option plans
that are either presently exercisable or become exercisable within 60 days.
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(12) Includes 1,196,956 shares of Company Common Stock reserved for issuance
upon exercise of stock options granted under the Company's stock option
plans that are either presently exercisable or become exercisable within 60
days and 84,794 shares reserved for issuance upon the exercise of
presently-exercisable options and options exercisable within 60 days granted
by CapCo to Jeffrey S. Rubin.
CERTAIN TRANSACTIONS
In March 1993, the Company sold and issued an aggregate of (i) 1,538,462
shares of Company Common Stock to WP CapCo, Inc., then a wholly-owned subsidiary
of CapCo, (ii) warrants to purchase an aggregate of 3,846,155 shares of Company
Common Stock to CapCo, (iii) 307,692 shares of Company Common Stock and warrants
to purchase an aggregate of 769,230 shares of Company Common Stock to William Y.
Tauscher, Chairman of the Board and Chief Executive Officer, and (iv) 769,230
shares of Company Common Stock and warrants to purchase an aggregate of
1,923,075 shares of Company Common Stock to Nynex Worldwide Services Group, Inc.
("Nynex Worldwide Services"). The foregoing shares were sold at $6.00 per share
and the foregoing warrants (the "1993 Warrants") were sold at a purchase price
of $.20 per warrant share, with an exercise price of $11.00 per share and a term
of ten years. Mr. Tauscher paid for such shares and 1993 Warrants by delivering
to the Company a $1,999,690 principal amount promissory note (the "Tauscher
Note") and paid the balance in cash. The Tauscher Note was secured by the shares
and 1993 Warrants purchased. On March 17, 1994, Mr. Tauscher repaid $1,000,000
of the aggregate principal amount of the Tauscher Note. In May 1994, the Company
repurchased from Mr. Tauscher an aggregate of 153,846 shares of Company Common
Stock and 1993 Warrants to purchase an aggregate of 384,615 shares of Company
Common Stock at a price of $6.00 per share and $.20 per Warrant share (or an
aggregate purchase price of $999,690). Such purchase price was paid by
cancellation of $999,690 of the principal amount of the Tauscher Note.
Simultaneously, the Company forgave $86,074 of interest accrued on the Tauscher
Note.
Upon consummation of the IPO, all of the 1993 Warrants that were outstanding
and additional warrants (the "1990 Warrants") originally issued by the Company
with an exercise price of $8.32 per share and a term expiring in 2000 were
exchanged for shares of Company Common Stock. The 1990 Warrants were issued to
CapCo to purchase an aggregate of 339,282.32 shares of Company Common Stock, to
William Y. Tauscher to purchase an aggregate of 72,703.35 shares of Company
Common Stock and to Richard H. Bard, a director of the Company, to purchase an
aggregate of 72,703.35 shares of Company Common Stock. Effective upon
consummation of the IPO the 1993 Warrants were exchanged for 2,545,151 and
254,515 shares of Company Common Stock, respectively, in respect of the 1993
Warrants held by CapCo and Mr. Tauscher and for 295,858 shares of Company Common
Stock in respect of the 1993 Warrant held by Nynex Worldwide Services. The 1990
Warrants were exchanged for an aggregate of 297,558 shares of Company Common
Stock. In addition, warrants to purchase an aggregate 54,261 shares of Company
Common Stock at an exercise price of $5.00 per share with a term expiring in May
2000 held by CapCo were exchanged for an aggregate of 39,966 shares of Company
Common Stock in connection with the IPO.
In June 1993, the Company issued 577,083 shares of Company Common Stock (at
a rate of $6.00 per share) to Nynex Worldwide Services in satisfaction of
certain accrued and unpaid dividends due June 1993 on the Senior Preferred Stock
held by Nynex Worldwide Services; and on October 1, 1994, the Company issued a
$2,462,500.25 promissory note to Nynex Worldwide Services and paid Nynex
Worldwide Services $1,000,000, which note and cash payment were delivered in
satisfaction of the accrued and unpaid dividends due June 1, 1994 on the Senior
Preferred Stock held by Nynex Worldwide Services. Such note, which matured on
June 1, 1995 and bore interest at a rate of 9.75%, was cancelled in exchange for
a cash payment of $2,462,500.25 plus accrued and unpaid interest out of funds
received in connection with the IPO, and such shares of Senior Preferred Stock
were converted on a one-for-one basis into shares of
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<PAGE>
Company Common Stock that were sold by Nynex Worldwide Services in the IPO (and
accrued and unpaid dividends thereon were forgiven).
In October 1993, the Company made a $150,000 interest-free loan to Robert
Kuntzendorf, an executive officer, to finance the purchase of a home. Such loan
was repaid in full in June 1994.
In July 1992, in connection with the purchase of a former Company
franchisee, the Company received a three year non-recourse promissory note in
the principal amount of $333,333.00 from Ahmad Manshouri, an executive officer,
and his wife. Payment of such note was secured by the pledge of 27,778 shares of
Company Common Stock held by Mr. and Mrs. Manshouri. In October 1995, Mr. and
Mrs. Manshouri transferred all of the pledged shares to the Company in lieu of
making payment on such note.
The Company has granted options to purchase Company Common Stock to certain
of its executive officers and directors. See "Management--Executive
Compensation."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors of the Board of
Directors.
DESCRIPTION OF THE PREFERRED SECURITIES
The following summary of certain material terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration. The Preferred
Securities were issued pursuant to the terms of the Declaration. The Declaration
incorporates by reference terms of the Trust Indenture Act. The Declaration will
be qualified under the Trust Indenture Act upon effectiveness of the
Registration Statement. The Property Trustee will act as indenture trustee for
the Declaration for purposes of compliance with the Trust Indenture Act.
Capitalized terms not otherwise defined herein have the meanings assigned to
them in the Declaration.
GENERAL
The Preferred Securities were issued in fully registered form without
interest coupons. Bearer Preferred Securities were not issued.
The Declaration authorized the Regular Trustees to issue the Trust
Securities on behalf of the Trust. The Preferred Securities represent undivided
beneficial ownership interests in the assets of the Trust and entitle the
holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Declaration.
All of the Common Securities are owned by the Company. The Common Securities
rank PARI PASSU, and payments will be made thereon on a PRO RATA basis, with the
Preferred Securities, except that upon the occurrence of a Declaration Event of
Default, the rights of the holders of the Common Securities to receive payment
of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of Preferred
Securities. See "--Subordination of Common Securities." Title to the Convertible
Debentures is held by the Property Trustee for the benefit of the holders of the
Trust Securities. The Declaration does not permit the issuance by the Trust of
any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. The payment of distributions out of money held by the
Trust, and payments upon redemption of the Preferred Securities or liquidation
of the Trust, are guaranteed by the Company to the extent described under
"Description of the Guarantee." The Guarantee is held by the Guarantee Trustee
for the benefit of the holders of the Preferred Securities. The Guarantee does
not cover payment of distributions when the Trust does not have sufficient
available funds to pay such distributions. In such event, the remedy of a holder
of Preferred
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Securities is to (i) vote to direct the Property Trustee to enforce the Property
Trustee's rights under the Convertible Debentures or (ii) if the failure of the
Trust to pay distributions is attributable to the failure of the Company to pay
interest or principal on the Convertible Debentures, to institute a proceeding
directly against the Company for enforcement of payment to such holder of the
principal of or interest on the Convertible Debentures having a principal amount
equal to the aggregate liquidation amount of the Preferred Securities of such
holder on or after the respective due date specified in the Convertible
Debentures. See "--Voting Rights."
DISTRIBUTIONS
Distributions on Preferred Securities is fixed at a rate per annum of 6 3/4%
of the stated liquidation amount of $50 per Preferred Security. Distributions in
arrears for more than one quarter will bear interest thereon at a rate per annum
of 6 3/4 thereof compounded quarterly. The term "distribution" as used herein
includes any such interest (including any Additional Interest and Liquidated
Damages, each as defined herein) payable unless otherwise stated. The amount of
distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the Original Offering Date and will be payable quarterly in arrears on each
January 1, April 1, July 1 and October 1, commencing January 1, 1997 when, as
and if available for payment, by the Property Trustee, except as otherwise
described below. The Company has the right under the Indenture to defer
interest, during which period no interest shall be due and payable. As a
consequence of such extension, quarterly distributions on the Preferred
Securities would be deferred (though such distributions would continue to accrue
with interest) during any such extended interest payment period. In the event
that the Company exercises this right, then, during such period, the Company (a)
shall not, and shall not allow any of its subsidiaries (other than its
wholly-owned subsidiaries) to, declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock (except for (i) dividends or
distributions in shares of Company Common Stock on Company Common Stock or on
its Preferred Stock, (ii) purchases or acquisitions of shares of Company Common
Stock made in connection with any employee benefit plan of the Company or its
subsidiaries in the ordinary course of business or pursuant to employment
agreements with officers or employees of the Company or its subsidiaries entered
into in the ordinary course of business, provided that such repurchases by the
Company made from officers or employees of the Company or its subsidiaries
pursuant to employment agreements shall be made at a price not to exceed market
value on the date of any such repurchase and shall not exceed $1 million in the
aggregate for all such employees and officers, (iii) conversions or exchanges of
common stock of one class into common stock of another class or (iv) purchases
of fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of any of the Company's securities being
converted or exchanged), (b) shall not, and shall not allow any of its
subsidiaries to, make any payment of interest, principal of or premium, if any,
on, or repay, repurchase or redeem any debt securities issued by the Company
that rank junior to or PARI PASSU with the Convertible Debentures and (c) shall
not, and shall not allow any of its subsidiaries to, make any guarantee payments
with respect to the foregoing (other than such payments made pursuant to the
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period; PROVIDED, HOWEVER, that such Extension
Period, together with all previous and further extensions thereof, may not
exceed 20 consecutive quarters and that such Extension Period may not extend
beyond the maturity date of the Convertible Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Convertible Debentures. See "Description of the
Convertible Debentures--Interest" and "Description of the Convertible
Debentures--Option to Extend Interest Payment Period." If distributions are
deferred, the deferred distributions and accrued interest thereon shall be paid
to the holders of
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record of Preferred Securities as they appear on the books and records of the
Trust on the record date next following the termination of such deferral period.
Distributions on the Preferred Securities will be made to the extent that
the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Preferred Securities will be limited to payments received by the Trust
from the Company for the Convertible Debentures net of taxes, if any, imposed on
the Trust with respect thereto. See "Description of the Convertible Debentures."
The payment of distributions out of funds held by the Trust is guaranteed by the
Company, as set forth under "Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be fifteen days prior to the relevant payment dates.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below. In the event that any date
on which distributions are payable on the Preferred Securities is not a Business
Day, payment of the distribution payable on such date will be made on the next
succeeding day which is a Business Day (without any distribution or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. A "Business Day" shall mean any day other than a day on which
banking institutions in New York, New York, San Francisco, California or
Wilmington, Delaware are authorized or required by law to close.
CONVERSION RIGHTS
GENERAL. Each Preferred Security is convertible at any time prior to the
close of business on the Business Day immediately preceding the date of
repayment of such Preferred Security, whether at maturity or upon redemption, at
the option of the holder thereof and in the manner described below, into the
number of shares of Company Common Stock obtained by dividing the liquidation
amount of such Preferred Security ($50 per Preferred Security) by the applicable
conversion price (initially $28.75 per share of Company Common Stock), rounded
to the nearest thousandth of a share (equivalent to a conversion rate of 1.739
shares of Company Common Stock per Preferred Security). The conversion price is
subject to adjustment as described under "--Conversion Price
Adjustments--General" and "--Conversion Price Adjustment--Merger, Consolidation
or Sale of Assets of the Company" below. The Trust has covenanted in the
Declaration not to convert Convertible Debentures held by it except pursuant to
a notice of conversion delivered to the Property Trustee, as conversion agent
(the "Conversion Agent"), by a holder of Preferred Securities. A holder of a
Preferred Security wishing to exercise its conversion right shall deliver an
irrevocable conversion notice, together, if the Preferred Security is a
Certificated Security (as defined herein), with such Certificated Security, to
the Conversion Agent, which shall, on behalf of such holder, exchange such
Preferred Security for a portion of the Convertible Debentures and immediately
convert such Convertible Debentures into Company Common Stock. Holders may
obtain copies of the required form of the conversion notice from the Conversion
Agent. Procedures for converting book-entry Preferred Securities into shares of
Company Common Stock will differ, as described under "--Book-Entry Only
Issuance--The Depository Trust Company."
Holders of Preferred Securities at the close of business on a distribution
record date will be entitled to receive the distribution payable on such
Preferred Securities on the corresponding distribution payment date
notwithstanding the conversion of such Preferred Securities following such
distribution record date but prior to such distribution payment date. Except as
provided in the immediately preceding sentence, neither the Trust nor the
Company will make, or will be required to make, any payment, allowance or
adjustment for accumulated and unpaid distributions, whether or not in arrears,
on the converted Preferred Securities. The Company will make no payment or
allowance for distributions on the shares of Company Common Stock issued upon
such conversion, except to the extent that such shares of Company
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Common Stock are held of record on the record date for any such distributions
and except as provided in the preceding sentence. Each conversion will be deemed
to have been effected immediately prior to the close of business on the day on
which the related conversion notice was received by the Conversion Agent.
No fractional shares of Company Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash based on the last reported sale price of Company Common Stock on
the date such Preferred Securities are surrendered for conversion.
CONVERSION PRICE ADJUSTMENTS--GENERAL. The conversion price is subject to
adjustment in certain events, including (a) the issuance of shares of Company
Common Stock as a dividend or a distribution with respect to Company Common
Stock, (b) subdivisions, combinations and reclassification of Company Common
Stock, (c) the issuance to all holders of Company Common Stock of rights or
warrants entitling them (for a period not exceeding 45 days) to subscribe for
shares of Company Common Stock at less than the then Current Market Price (as
defined below) of the Company Common Stock, (d) the distribution to holders of
Company Common Stock of evidences of indebtedness of the Company, securities or
capital stock, cash or assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to above and dividends and
distributions paid exclusively in cash), (e) the payment of dividends (and other
distributions) on Company Common Stock paid exclusively in cash, excluding cash
dividends if the annualized per share amount thereof does not exceed 10% of the
Current Market Price of Company Common Stock as of the trading day immediately
preceding the date of declaration of such dividend (such adjustment being
limited to the amount in excess of 10% of such Current Market Price), and (f)
payment to holders of Company Common Stock in respect of a tender or exchange
offer by the Company or any subsidiary for Company Common Stock at a price in
excess of the then Current Market Price of Company Common Stock as of the
trading day next succeeding the last date tenders or exchanges may be made
pursuant to such tender or exchange offer. "Current Market Price" means the
average of the daily closing prices for the five consecutive trading days
selected by the Company commencing not more than 20 trading days before, and
ending not later than, the earlier of the day in question or, if applicable, the
day before the "ex" date with respect to the issuance or distribution in
question.
The Company from time to time may reduce the conversion price of the
Convertible Debentures (and thus the conversion price of the Preferred
Securities) by any amount selected by the Company for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Company's Board
of Directors deems advisable to avoid or diminish any income tax to holders of
Company Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes. See "Certain United States Federal Income Tax
Considerations--Adjustment of Conversion Price."
No adjustment of the conversion price will be made upon the issuance of any
shares of Company Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of Company
Common Stock under any such plan. No adjustment in the conversion price will be
required unless such adjustment would require a change of at least one percent
(1%) in the price then in effect; PROVIDED, HOWEVER, that any adjustment that
would not be required to be made shall be carried forward and taken into account
in any subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holder of the Preferred
Securities.
CONVERSION PRICE ADJUSTMENT--MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. In the event that any transaction shall occur (including, without
limitation, and with certain exceptions, (a) recapitalization or
reclassification of the Company Common Stock, (b) consolidation of the Company
with, or merger of the Company into, any other Person, or any merger of another
Person into the
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Company, (c) any sale, transfer or lease of all or substantially all of the
assets of the Company or (d) any compulsory share exchange) pursuant to which
either shares of Company Common Stock shall be converted into the right to
receive other securities, cash or other property, or, in the case of a sale or
transfer of all or substantially all of the assets of the Company, the holders
of Company Common Stock shall be entitled to receive other securities, cash or
other property, then appropriate provision shall be made so that the holder of
each Preferred Security then outstanding shall have the right thereafter to
convert such Preferred Security only into:
(x) in the case of any such transaction that does not constitute a
Common Stock Fundamental Change (as defined below) and subject to funds
being legally available for such purpose under applicable law at the time of
such conversion, the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by
a holder of the number of shares of Company Common Stock issuable upon
conversion of such Preferred Security immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange, after giving effect, in the case of any Non-Stock
Fundamental Change (as defined below), to any adjustment in the conversion
price in accordance with clause (i) of the following paragraph, and
(y) in the case of any such transaction that constitutes a Common Stock
Fundamental Change, common stock of the kind received by holders of Company
Common Stock as a result of such Common Stock Fundamental Change in an
amount determined in accordance with clause (ii) of the following paragraph.
The Company shall require that the Person formed by such consolidation or
resulting from such merger or that acquires such assets or that acquires the
Company's shares, as the case may be, expressly assume all obligations under the
Indenture, the Declaration, the Guarantee and all outstanding Convertible
Debentures by becoming a party to the Declaration and the Guarantee and by
entering into a supplemental indenture to the Indenture (as applicable) and to
amend each of the foregoing to provide for such right with respect to the
Convertible Debentures and in turn the Preferred Securities. Such amendments and
supplemental indentures shall provide for adjustments that, for events
subsequent to the effective date thereof, shall be as nearly equivalent as may
be practicable to the relevant adjustments provided for in the preceding
paragraphs and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Fundamental Change (as defined below) occurs, then the
conversion price in effect will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
of the Preferred Securities immediately following such Non-Stock Fundamental
Change shall be the lower of (A) the conversion price in effect immediately
prior to such Non-Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs, and
(B) the product of (1) the greater of the Applicable Price (as defined
below) and the then applicable Reference Market Price (as defined below) and
(2) a fraction, the numerator of which is $50 and the denominator of which
is (x) the amount of the redemption price for one Preferred Security if the
redemption date were the date of such Non-Stock Fundamental Change (or, for
the period commencing on the first date of original issuance of the
Preferred Securities and through October 1, 1997 and the twelve-month
periods commencing October 1, 1997 and October 1, 1998, the product of
1.06750, 1.06075 and 1.05400, respectively, times $50) plus (y) any
then-accrued and unpaid distributions on one Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Securities immediately following such Common Stock
Fundamental Change shall be the conversion price in effect immediately prior
to such Common Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs,
multiplied by a fraction,
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the numerator of which is the Purchaser Stock Price (as defined below) and
the denominator of which is the Applicable Price; PROVIDED, HOWEVER, that in
the event of a Common Stock Fundamental Change in which (A) 100% of the
value of the consideration received by a holder of Company Common Stock is
common stock of the successor, acquiror or other third party (and cash, if
any, paid with respect to any fractional interests in such common stock
resulting from such Common Stock Fundamental Change) and (B) all of the
Company Common Stock shall have been exchanged for, converted into or
acquired for, common stock of the successor, acquiror or other third party
(and any cash with respect to fractional interests), the conversion price of
the Preferred Securities immediately following such Common Stock Fundamental
Change shall be the conversion price in effect immediately prior to such
Common Stock Fundamental Change multiplied by a fraction, the numerator of
which is one (1) and the denominator of which is the number of shares of
common stock of the successor, acquiror or other third party received by a
holder of one share of Company Common Stock as a result of such Common Stock
Fundamental Change.
Depending upon whether a Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Fundamental
Change, the holder has the right to convert Preferred Securities into the kind
and amount of the shares of stock and other securities or property or assets
(including cash), except as otherwise provided above, as is determined by the
number of shares of Company Common Stock receivable upon conversion at the
conversion price as adjusted in accordance with clause (i) of the preceding
paragraph. However, in the event of a Common Stock Fundamental Change in which
less than 100% of the value of the consideration received by a holder of Company
Common Stock is common stock of the successor, acquiror or other third party, a
holder of a Preferred Security who converts such Preferred Security following
the Common Stock Fundamental Change will receive consideration in the form of
such common stock only, whereas a holder who converted such Preferred Security
prior to the Common Stock Fundamental Change would have received consideration
in the form of such common stock as well as any other securities or assets
(which may include cash) issuable upon conversion of such Preferred Security
immediately prior to such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of Company Common Stock receive only
cash, the amount of cash received by a holder of one share of Company Common
Stock and (ii) in the event of any other Fundamental Change, the average of the
daily Closing Price (as defined in the Indenture) for one share of Company
Common Stock during the 10 Trading Days (as defined in the Indenture)
immediately prior to the record date for the determination of the holders of
Company Common Stock entitled to receive cash, securities, property or other
assets in connection with such Fundamental Change or, if there is no such record
date, prior to the date upon which the holders of Company Common Stock shall
have the right to receive such cash, securities, property or other assets.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Company
Common Stock consists of common stock that, for the 10 Trading Days immediately
prior to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on Nasdaq; PROVIDED, HOWEVER, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Preferred
Securities continue to exist as outstanding Preferred Securities, or (ii) not
later than the occurrence of such Fundamental Change, all obligations of the
Company under the Indenture, the Declaration, the Guarantee and all outstanding
Convertible Debentures are expressly assumed by the Person succeeding to the
business of the Company by becoming a party to the Declaration and the Guarantee
and by entering into a supplemental indenture to the Indenture (as applicable),
which obligations shall include the right of the holders of the Preferred
Securities to convert the Preferred
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Securities (and the Convertible Debentures) into the common stock of such
successor entity and providing for adjustments that, for events subsequent to
the effective date thereof, shall be as nearly equivalent as may be practicable
to the relevant adjustments provided for in the preceding paragraphs and in this
paragraph.
The term "Fundamental Change" means the occurrence of any transaction or
event or series of transactions or events pursuant to which all or substantially
all of the Company Common Stock shall be exchanged for, converted into, acquired
for or shall constitute solely the right to receive cash, securities, property
or other assets (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED, HOWEVER, in the case of any such series of transactions or
events, for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Company
Common Stock shall have been exchanged for, converted into or acquired for, or
shall constitute solely the right to receive, such cash, securities, property or
other assets, but the adjustment shall be based upon the consideration that the
holders of Company Common Stock received in the transaction or event as a result
of which more than 50% of the Company Common Stock shall have been exchanged
for, converted into or acquired for, or shall constitute solely the right to
receive, such cash, securities, property or other assets.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Price for one share of the
common stock received by holders of Company Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately priorto the date fixed
for the determination of the holders of Company Common Stock entitled to receive
such common stock or, if there is no such date, prior to the date upon which the
holders of Company Common Stock shall have the right to receive such common
stock.
The term "Reference Market Price" shall initially mean $16.25 (which is an
amount equal to 66 2/3% of the reported last sale price for Company Common Stock
on the NYSE on September 26, 1996) and, in the event of any adjustment to the
conversion price other than as a result of a Fundamental Change, the Reference
Market Price shall also be adjusted so that the ratio of the Reference Market
Price to the conversion price after giving effect to any such adjustment shall
always be the same as the ratio of the initial Reference Market Price to the
initial conversion price of $28.75 per share.
No adjustment to the conversion price will be required to be made in any
case until cumulative adjustments amount to 1% or more of the conversion price.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, be deemed to be distributions that could be taxable
as dividends to holders of Preferred Securities or to the holders of Company
Common Stock. See "Certain United States Federal Income Tax Considerations."
REDEMPTION
The Convertible Debentures will mature on October 1, 2016 and may be
redeemed, in whole or in part, at any time after October 5, 1999 or at any time
in certain circumstances upon the occurrence of a Tax Event (in whole, but not
in part). In the event of a redemption following the occurrence of a Tax Event,
the redemption price will, in the case of a redemption during the periods
commencing on October 2, 1996 through October 4, 1997 and the twelve month
periods commencing October 5, 1997 and October 5, 1998, be the product of
1.06750, 1.06075 and 1.05400, respectively, times $50, in each case plus accrued
and
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unpaid interest and Liquidated Damages, if any. Commencing with October 5, 1999,
the redemption price will be the optional redemption price for the Convertible
Debentures. See "Description of the Convertible Debentures--Optional
Redemption." Upon the repayment of the Convertible Debentures, whether at
maturity or upon redemption, the proceeds from such repayment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Convertible Debentures so repaid or redeemed at
the applicable redemption price, together with accrued and unpaid distributions
through the date of redemption; PROVIDED, HOWEVER, that holders of the Trust
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption. See "--Special Event Redemption or Distribution," "--Redemption
Procedures," "Description of the Convertible Debentures--General" and
"Description of the Convertible Debentures--Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event shall occur and
be continuing, the Trust shall, unless the Convertible Debentures are redeemed
in the limited circumstances described below, be dissolved with the result that,
after satisfaction of creditors, if any, of the Trust, Convertible Debentures
with an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, and
having the same record date for payment as the Preferred Securities and the
Common Securities outstanding at such time would be distributed on a PRO RATA
basis to the holders of the Preferred Securities and the Common Securities in
liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; PROVIDED, HOWEVER, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Preferred Securities will
not recognize any income, gain or loss for United States Federal income tax
purposes as a result of such dissolution and distribution of Convertible
Debentures; and, PROVIDED, FURTHER, that if at the time there is available to
the Trust the opportunity to eliminate, within such 90-day period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure which in the sole
judgment of the Company has or will cause no adverse effect on the Trust, the
Company or the holders of the Trust Securities and will involve no material
cost, the Trust will pursue such measure in lieu of dissolution. Furthermore, if
in the case of the occurrence of a Tax Event, (i) the Regular Trustees have
received an opinion (a "Redemption Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the Company would be
precluded from deducting the interest on the Convertible Debentures for United
States Federal income tax purposes even if the Convertible Debentures were
distributed to the holders of Preferred Securities and Common Securities in
liquidation of such holders' interests in the Trust as described above or (ii)
the Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered to the Trust, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to cause the
redemption of the Convertible Debentures in whole (but not in part) for cash
within 90 days following the occurrence of such Tax Event, and promptly
following such redemption, the Preferred Securities and Common Securities will
be redeemed by the Trust at the applicable redemption price; PROVIDED, HOWEVER,
that if at the time there is available to the Company or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure which in the sole judgment of the
Company has or will cause no adverse effect on the Trust, the Company or the
holders of the Trust Securities and will involve no material cost, the Company
or the Trust will pursue such measure in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that as a
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result of (a) any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position or (d)
any action taken by any governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is taken,
in each case, after the date of this Prospectus (collectively, a "Change in Tax
Law"), there is more than an insubstantial risk that (i) the Trust is, or will
be within 90 days of the date thereof, subject to United States Federal income
tax with respect to interest accrued or received on the Convertible Debentures,
(ii) the Trust is, or will be within 90 days of the date thereof, subject to
more than a DE MINIMIS amount of other taxes, duties or other governmental
charges or (iii) interest payable by the Company on the Convertible Debentures
is not, or within 90 days of the date thereof will not be, deductible for United
States Federal income tax purposes. Notwithstanding anything in the previous
sentence to the contrary, a Tax Event shall not include any Change in Tax Law
that requires the Company for United States Federal income tax purposes to defer
taking a deduction for any original issue discount ("OID") that accrues with
respect to the Convertible Debentures until the interest payment related to such
OID is paid in money; PROVIDED, that such Change in Tax Law does not create more
than an insubstantial risk that the Company will be prevented from taking a
deduction for OID accruing with respect to the Convertible Debentures at a date
that is no later than the date the interest payment related to such OID is
actually paid by the Company in money.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the 1940 Act),
that as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after September 26, 1996.
On the date fixed for any distribution of Convertible Debentures, upon
dissolution of the Trust, (i) the Preferred Securities and the Common Securities
will no longer be deemed to be outstanding and (ii) certificates representing
Trust Securities will be deemed to represent beneficial interests in the
Convertible Debentures having an aggregate principal amount equal to the stated
liquidation amount of, and bearing accrued and unpaid interest equal to accrued
and unpaid distributions on, such Trust Securities until such certificates are
presented to the Company or the Company's agent for transfer or reissuance.
There can be no assurance as to the market price for the Convertible
Debentures which may be distributed in exchange for Preferred Securities if a
dissolution and liquidation of the Trust were to occur. Accordingly, the
Convertible Debentures which the investor may subsequently receive on
dissolution and liquidation of the Trust may trade at a discount to the price of
the Preferred Securities exchanged.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
In the event of any redemption in part, the Trust shall not be required to
(i) issue, register the transfer of or exchange any Preferred Security during a
period beginning at the opening of business 15 days before
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any selection for redemption of Preferred Securities and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all holders of Preferred Securities to be so
redeemed and (ii) register the transfer of or exchange of any Preferred
Securities so selected for redemption, in whole or in part, except for the
unredeemed portion of any Preferred Securities being redeemed in part.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), and if the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Convertible Debentures, then, by 12:00 noon, New York time, on
the redemption date, the Trust will irrevocably deposit with DTC funds
sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
such amount in respect of Preferred Securities represented by the Global
Certificates (as defined herein) and will irrevocably deposit with the paying
agent for the Preferred Securities funds sufficient to pay such amount in
respect of any Certificated Securities and will give such paying agent
irrevocable instructions and authority to pay such amount to the holders of
Certificated Securities upon surrender of their certificates. If notice of
redemption shall have been given and funds are deposited as required, then upon
the date of such deposit, all rights of holders of such Preferred Securities so
called for redemption will cease, except the right of the holders of such
Preferred Securities to receive the applicable redemption price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
amount payable on such date will be made on the next succeeding day which is a
Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the applicable redemption price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by the Company pursuant to the Guarantee described under "Description of the
Guarantee," distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the amount payable upon redemption
(other than for calculating any premium).
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed PRO RATA.
Subject to the foregoing and applicable law (including, without limitation,
United States Federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made PRO RATA based on the liquidation
amount of the Trust Securities; PROVIDED, HOWEVER, that if on any distribution
date or redemption date a Declaration Event of Default shall have occurred and
be continuing, no payment of any distribution on, or amount payable upon
redemption of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid distributions on
all outstanding Preferred Securities for all distribution periods terminating on
or prior thereto, or in the case of payment of the amount payable upon
redemption of the Preferred Securities, the full amount of such amount in
respect of all outstanding Preferred Securities, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all distributions on, or the amount
payable upon redemption of, Preferred Securities then due and payable.
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In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until any such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Preferred Securities and not the holder of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Preferred Securities shall have been
distributed on a PRO RATA basis to holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a PRO RATA basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution PRO RATA with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the Preferred
Securities shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, the Trust will terminate (i) on October 1,
2025, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or the equivalent
with respect to the Company the filing of a certificate of cancellation with
respect to the Trust after having obtained the consent of at least a majority in
liquidation amount of the Trust Securities, voting together as a single class,
to file such certificate of cancellation, or the revocation of the charter of
the Company and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) upon the distribution of all of the Convertible
Debentures upon the occurrence of a Special Event, (v) upon the entry of a
decree of a judicial dissolution of the Company or the Trust or (vi) upon the
redemption or conversion of all the Preferred Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other entity, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee, consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; PROVIDED, that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Preferred Securities
other securities having substantially the same terms as the Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Securities rank with respect to distributions, assets and payments, (ii) the
Company expressly acknowledges a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Convertible
Debentures, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the
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Preferred Securities are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Preferred Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) the Company guarantees the
obligations of such successor entity under the Successor Securities to the same
extent as provided by the Guarantee and (viii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an opinion
of a nationally recognized independent counsel to the Trust reasonably
acceptable to the Property Trustee experienced in such matters to the effect
that: (A) such merger, consolidation, amalgamation or replacement will not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the holders' interest in the new
entity), (B) following such merger, consolidation amalgamation or replacement,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (C) following such merger,
consolidation, amalgamation or replacement, the Trust (or such successor trust)
will be treated as a grantor trust for United States Federal income tax
purposes.
Notwithstanding the foregoing, the Trust shall not, except with the consent
of holders of 100% in liquidation amount of the Common Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified as other than a grantor trust for United
States Federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); PROVIDED, HOWEVER, that pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred Securities
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the Preferred Securities have been so cured, waived
or otherwise eliminated, the Property Trustee will be deemed to be acting solely
on behalf of the holders of the Preferred Securities and only the holders of the
Preferred Securities will have the right to direct the Property Trustee with
respect to certain matters under the Declaration and, therefore the Indenture.
If the Property Trustee fails to enforce its rights under the Convertible
Debentures after a holder of Preferred Securities has made a written request,
such holder of record of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Property Trustee's rights under
the Convertible Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, the redemption date), then a
holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder directly of the principal of or interest
on the Convertible Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Debentures. In connection with
such Direct Action, the Company will be subrogated to the rights of such holder
of Preferred Securities under the Declaration to the extent of any payment made
to such holder of Preferred
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Securities in such Direct Action. The holders of Preferred Securities will not
be able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Convertible Debentures will have the right under the
Indenture to declare the principal of and interest on the Convertible Debentures
to be immediately due and payable. The Company and the Trust are each required
to file annually with the Property Trustee an officers' certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantee--Amendments and Assignment," and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as holder of the Convertible Debentures,
to (i) exercise the remedies available to it under the Indenture as a holder of
the Convertible Debentures, (ii) waive any past Indenture Event of Default that
is waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Convertible Debentures shall be due
and payable or (iv) consent to any amendment, modification, or termination of
the Indenture or the Convertible Debentures where such consent shall be
required; PROVIDED, HOWEVER, that where a consent or action under the Indenture
would require the consent or act of the holders of more than a majority of the
aggregate principal amount of Convertible Debentures affected thereby, only the
holders of the percentage of the aggregate stated liquidation amount of the
Preferred Securities which is at least equal to the percentage required under
the Indenture may direct the Property Trustee to give such consent or take such
action. If the Property Trustee fails to enforce its rights under the
Convertible Debentures after a holder of record of Preferred Securities has made
a written request, such holder of record of Preferred Securities may directly
institute a legal proceeding directly against the Company to enforce the
Property Trustee's rights under the Convertible Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption on the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Convertible Debentures. The Property Trustee shall notify all holders of the
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to the Convertible Debentures. Such notice shall state that
such Indenture Event of Default also constitutes a Declaration Event of Default.
The Property Trustee shall be under no obligation to take any of the actions
described in clause (i), (ii) or (iii) above unless the Property Trustee has
obtained an opinion of independent tax counsel to the effect that as a result of
such action, the Trust will not fail to be classified as a grantor trust for
United States Federal income tax purposes and each holder will be treated as
owning an undivided beneficial interest in the Convertible Debentures.
In the event the consent of the Property Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment,
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modification or termination as directed by a majority in liquidation amount of
the Trust Securities voting together as a single class; PROVIDED, HOWEVER, that
where a consent under the Indenture would require the consent of the holders of
more than a majority of the aggregate principal amount of the Convertible
Debentures, the Property Trustee may only give such consent at the direction of
the holders of at least the same proportion in aggregate stated liquidation
amount of the Trust Securities. The Property Trustee shall not take any such
action in accordance with the directions of the holders of the Trust Securities
unless the Property Trustee has obtained an opinion of tax counsel to the effect
that for the purposes of United States Federal income tax the Trust will not be
classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to redeem
and cancel Preferred Securities or distribute Convertible Debentures in
accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"--Book-Entry Only Issuance--The Depository Trust Company."
Holders of the Preferred Securities have no rights to appoint or remove the
Regular Trustees, who may be appointed, removed or replaced solely by the
Company as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Property Trustee and the Delaware
Trustee), PROVIDED that if any proposed amendment provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
PROVIDED that if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of at least a majority in liquidation amount of such class of securities.
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Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States Federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company and the Trust entered
into a registration rights agreement with the Initial Purchasers (the
"Registration Rights Agreement") pursuant to which the Company and the Trust
would, at the Company's expense, for the benefit of the holders of the Preferred
Securities, the Guarantee, the Convertible Debentures and the shares of Company
Common Stock issuable upon conversion of the Convertible Debentures (together,
the "Registrable Securities"), (i) file with the Commission within 75 calendar
days after the date of issuance of the Preferred Securities (December 16, 1996),
a registration statement (the "Shelf Registration Statement") covering resales
of the Registrable Securities, (ii) use their reasonable efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
within 135 calendar days after the date of the issuance of the Preferred
Securities (February 14, 1997) and (iii) use their reasonable efforts to keep
effective the Shelf Registration Statement until three years after the date it
is declared effective or such earlier date as all Registrable Securities shall
have been disposed of or on which all Registrable Securities held by persons
that are not affiliates of the Company or the Trust may be resold without
registration pursuant to Rule 144(k) under the Securities Act (the
"Effectiveness Period"). The Registration Statement to which this Prospectus
forms a part has been filed by the Company and the Trust pursuant to their
respective obligations under the Registration Rights Agreement. The Company will
provide to each holder of Registrable Securities copies of this Prospectus,
notify each holder when the Shelf Registration Statement has become effective
and take certain other actions as are required to permit unrestricted resales of
the Registrable Securities. A holder of Registrable Securities that sells such
Registrable Securities pursuant to the Shelf Registration Statement will be
required to be named as a selling security holder herein and, to the extent
required by the Act, to deliver a copy of this Prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement, including certain indemnification obligations.
If (i) the Shelf Registration Statement to which this Prospectus forms a
part was not filed with the Commission on or prior to December 16, 1996 or (ii)
such Shelf Registration Statement was not declared effective on or prior to
February 14, 1997 (each, a "Registration Default"), additional interest
("Liquidated Damages") would have accrued on the Convertible Debentures and,
accordingly, additional distributions would have accrued on the Preferred
Securities, in each case from and including the day following such Registration
Default.
The Company will be permitted under certain circumstances (whether or not
controlled by, or within the control of, the Company) to suspend the use of this
Prospectus which is part of the Shelf Registration Statement for a period not to
exceed 30 consecutive days or 90 days, whether or not consecutive, during any
12-month period. In the event that the Shelf Registration Statement ceases to be
effective during the Effectiveness Period for more than 30 consecutive days or
any 90 days, whether or not consecutive, during any 12-month period, then the
interest rate borne by the Debentures and the distribution rate borne by the
Preferred Securities would each increase by an additional one-half of one
percent (0.50%) per annum from such 31st or 91st day, as applicable.
The Company and the Trust agreed in the Registration Rights Agreement to use
their reasonable efforts to cause the Preferred Securities and the Company
Common Stock issuable upon conversion of the Debentures to be listed on the NYSE
upon effectiveness of the Shelf Registration Statement. However, due to the fact
that the Trust will be unable to meet all of the listing requirements of the
NYSE for the Preferred Securities sold pursuant to this Prospectus prior to the
time of original effectiveness of the Shelf
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Registration Statement, the Company and the Trust will not immediately seek to
list such Preferred Securities on the NYSE or any other securities exchange or
to obtain approval for quotation through any automated quotation system. The
Company and the Trust intend to reevaluate listing the Preferred Securities on
the NYSE if and to the extent the listing and maintenance requirements of the
exchange applicable thereto are met in the future.
The summary herein of certain provisions of the Registration Rights
Agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the Registration Rights Agreement, a copy of which is
available upon request to the Company or the Initial Purchasers.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus includes
summaries of certain rules and operating procedures of The Depository Trust
Company, New York, New York ("DTC") that affect transfers of interest in the
global certificate or certificates issued in connection with sales of Preferred
Securities made pursuant to this Prospectus. Except to the extent that Preferred
Securities were initially sold in the Original Offering or the Over-Allotment
Offering to institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) or in offshore transactions pursuant
to Regulation S under the Securities Act, the Preferred Securities were issued
only as fully registered securities registered in the name of Cede & Co. (as
nominee for DTC). One or more fully registered global Preferred Security
certificates (the "Global Certificates") bearing a CUSIP number distinct from
the CUSIP number for the Preferred Securities issued in the Original Offering
and the Over-Allotment Offering will be issued, representing, in the aggregate,
Preferred Securities sold pursuant to this Prospectus, and will be deposited
with DTC. In the event of a transfer of securities that were issued in fully
registered, certificated form, the holder of such certificates will be required
to exchange them for interests in the Global Certificates representing the
number of Preferred Securities being transferred.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of Preferred
Securities ("Beneficial Owner") is in turn to be recorded on the Participants'
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
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DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Preferred Securities are credited, which may or may not be the
Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Securities represented thereby for all
purposes under the Declaration and the Preferred Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is a
Declaration Event of Default under the Preferred Securities, DTC will exchange
the Global Certificates for Certificated Securities, which it will distribute to
its Participants.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Preferred Securities held in book-entry
form will be sent to DTC or its nominee. If less than all of the Preferred
Securities are being redeemed, DTC will determine the amount of the interest of
each Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor its nominee will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns DTC's consenting or voting
rights to those Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distributions on the Preferred Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust, or the Company
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Company, the Trust
or the Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its
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services as securities depository with respect to the Preferred Securities at
any time by giving notice to the Trust. Under such circumstances, in the event
that a successor securities depository is not obtained, Preferred Security
certificates are required to be printed and delivered. Additionally, the Trust
(with the consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository). In that event,
certificates for the Preferred Securities will be printed and delivered. In each
of the above circumstances, the Company will appoint a paying agent with respect
to the Preferred Securities.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a Global Certificate.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of certificated
securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address as shall appear on the Register. The
Paying Agent is currently Wilmington Trust Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Issuer
Trustees. In the event that Wilmington Trust Company shall no longer be the
Paying Agent, the Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or company).
REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
The Property Trustee acts as Registrar, Transfer Agent, Paying Agent and
Conversion Agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Company and certain of its subsidiaries may maintain deposit accounts
and conduct other banking transactions with the Property Trustee in the ordinary
course of their businesses. The Property Trustee, prior to the occurrence of a
default with respect to the Trust Securities, has undertaken to perform only
such duties as are specifically set forth in the Declaration and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising their
voting rights, direct the Property Trustee to take any action following a
Declaration Event of Default.
GOVERNING LAW
The Declaration and the Preferred Securities are governed by, and shall be
construed in accordance with, the internal laws of the State of Delaware.
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MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States Federal income tax
purposes so that the Convertible Debentures will be treated as indebtedness of
the Company for United States Federal income tax purposes. In this connection,
the Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust or the Declaration that the Regular
Trustees determine in their discretion to be necessary or desirable for such
purposes as long as such action does not adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
was executed and delivered by the Company for the benefit of the holders from
time to time of Preferred Securities. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Guarantee. The Guarantee incorporates by
reference the terms of the Trust Indenture Act. The Guarantee will be qualified
under the Trust Indenture Act upon effectiveness of the Registration Statement
of which this Prospectus forms a part. The Guarantee Trustee holds the Guarantee
for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company has
irrevocably and unconditionally agreed to pay in full to the holders of the
Preferred Securities (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set off or counterclaim which the Trust may
have or assert, the following payments (the "Guarantee Payments"), without
duplication: (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities to the extent the Trust has funds available
therefor, (ii) the applicable redemption price with respect to any Preferred
Securities called for redemption by the Trust, to the extent the Trust has funds
available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Convertible Debentures to the holders of Preferred Securities or
the redemption of all the Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Preferred Securities to the date of payment, to the extent the Trust has funds
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of Preferred Securities upon the
liquidation of the Trust. The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. Any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the obligations of
the Company under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, a holder
of the Preferred Securities would be required to rely on the enforcement (1) by
the Property Trustee of its rights, as registered holder of the Convertible
Debentures, against the Company pursuant to the terms of the Convertible
Debentures or (2) by such holder of Preferred Securities of its right against
the Company to enforce payments on the Convertible Debentures. See "Description
of the Convertible Debentures." The Declaration provides that each holder of
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee and the Indenture.
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The Guarantee does not apply to any payment of distributions or the
Redemption Price, or to payments upon the dissolution, winding-up or termination
of the Trust, except to the extent the Trust shall have funds available
therefor. If the Company does not make interest payments on the Convertible
Debentures, the Trust will not pay distributions on the Preferred Securities and
will not have funds available therefor. See "Description of the Convertible
Debentures." The Guarantee, when taken together with the Company's obligations
under the Convertible Debentures, the Indenture and the Declaration, including
its obligations to pay costs, expenses, debts and liabilities of the Trust
(other than with respect to the Trust Securities), will provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities issued by the Trust.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon the occurrence and during the continuation of a Declaration Event of
Default, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that, so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the interest
payment period and such extension shall be continuing, (ii) the Company shall be
in default with respect to its payment or other obligations under the Guarantee
or (iii) there shall have occurred and be continuing any event that, with the
giving of notice or the lapse of time or both, would constitute an Indenture
Event of Default, then the Company (a) shall not, and shall not allow any of its
subsidiaries (other than its wholly owned subsidiaries) to, declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(except for (i) dividends or distributions in shares of Company Common Stock on
Company Common Stock or on its Preferred Stock, (ii) purchases or acquisitions
of shares of Company Common Stock made in connection with employee benefit plans
of the Company or its subsidiaries in the ordinary course of business or
pursuant to employment agreements with officers or employees of the Company or
its subsidiaries entered into in the ordinary course of business, provided that
repurchases by the Company or its subsidiaries made from officers or employees
of the Company or its subsidiaries pursuant to employment agreements shall be
made at a price not to exceed market value on the date of any such repurchase
and shall not exceed $1 million in the aggregate for all such employees and
officers, (iii) conversions or exchanges of any class of common stock into any
other class of common stock or (iv) purchases of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of any of the Company's securities being converted or exchanged), (b) shall not,
and shall not allow any of its subsidiaries to, make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank junior to or PARI PASSU with the Convertible
Debentures and (c) shall not, and shall not allow any of its subsidiaries to,
make any guarantee payments with respect to the foregoing (other than such
payments made pursuant to the Guarantee).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of at least a majority in liquidation amount of all the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities will be as set forth under "Description of the
Preferred Securities--Voting Rights." All guarantees and agreements contained in
the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding. Except
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in connection with any permitted merger or consolidation of the Company with or
into another entity or any permitted sale, transfer or lease of the Company's
assets to another entity as described below under "Description of the
Convertible Debentures--Consolidation, Merger and Sale of Assets," the Company
may not assign its rights or delegate its obligations under the Guarantee
without the prior approval of the holders of at least a majority of the
aggregate stated liquidation amount of the Preferred Securities then
outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of Preferred Securities (i)
upon full payment of the applicable redemption price of all Preferred
Securities, (ii) upon distribution of the Convertible Debentures held by the
Trust to the holders of the Preferred Securities, (iii) upon liquidation of the
Trust and full payment of fee amounts payable in accordance with the Declaration
or (iv) upon the distribution of Company Common Stock to such holder in respect
of the conversion of such holder's Preferred Securities into Company Common
Stock, and will terminate completely upon full payment of the amounts payable in
accordance with the Declaration. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sum paid under such Preferred Securities
or such Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior to all other liabilities of the Company except any
liabilities that may be PARI PASSU expressly by their terms, (ii) PARI PASSU in
right of payment with the most senior preferred stock issued from time to time
by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred or preference stock or preferred securities
of any affiliate of the Company and (iii) senior to the common stock of the
Company. The terms of the Preferred Securities provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection (that
is, the guaranteed party may directly institute a legal proceeding against the
Company to enforce its rights under the Guarantee without instituting a legal
proceeding against any other person or entity including the Trust).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, has undertaken to perform only such duties as are specifically
set forth in the Guarantee and, after default with respect to the Guarantee,
shall exercise the same degree of care as a prudent man would exercise in the
conduct of his own affairs. Subject to such provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the Guarantee
at the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
GOVERNING LAW
The Guarantee is governed by, and shall be construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust has invested the proceeds from the issuance and
sale of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Indenture (the "Indenture") among the Company and the Indenture Trustee, a
copy of which may be obtained from the Company upon request. Certain capitalized
terms used herein are defined in the Indenture. The Indenture will be qualified
under the Trust Indenture Act upon effectiveness of the Registration Statement
of which this Prospectus forms a part.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Convertible Debentures may be distributed to
the holders of the Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution."
GENERAL
The Convertible Debentures have been issued as unsecured debt under the
Indenture. The Convertible Debentures were limited in aggregate principal amount
to $207.5 million, such amount being the sum of the aggregate stated liquidation
amount of the Preferred Securities and the Common Securities.
The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will become due and
payable, together with any accrued and unpaid interest thereon, including
Compounded Interest (as defined herein) and Additional Interest, if any, on
October 1, 2016.
The Convertible Debentures, if distributed to holders of Preferred
Securities in liquidation of such holders' interest in the Trust, will initially
be issued in the same form as the Preferred Securities that such Convertible
Debentures replace. Any Global Certificate will be replaced with one or more
Global Securities (as defined under "--Book-Entry and Settlement"). Under
certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security. In the event that
Convertible Debentures are issued in certificated form, such Convertible
Debentures will be in denominations of $50 and integral multiples thereof and
may be transferred or exchanged at the offices described below.
Payments on Convertible Debentures issued as a Global Security will be made
to DTC, a successor depository or, in the event that no depository is used, to a
Paying Agent for the Convertible Debentures. In the event Convertible Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Convertible Debentures will be registrable and Convertible
Debentures will be exchangeable for Convertible Debentures of other
denominations of a like aggregate principal amount at the corporate trust office
of the Indenture Trustee, or an agent of the Indenture Trustee, in The City of
New York; PROVIDED, HOWEVER, that unless the Convertible Debentures are held by
the Trust or any successor permissible under "Description of the Preferred
Securities--Merger, Consolidation or Amalgamation of the Trust," payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto.
There are no covenants or provisions in the Indenture that afford holders of
Convertible Debentures protection in the event of a highly leveraged transaction
or other similar transaction involving the Company that may adversely affect
such holders.
INTEREST
Each Convertible Debenture bears interest at the rate of 6 3/4% per annum
from the Original Offering Date, payable quarterly in arrears on January 1,
April 1, July 1 and October 1 (each, an "Interest Payment Date"), commencing
January 1, 1997, to the person in whose name such Convertible Debenture is
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registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. If any Preferred
Securities are held in certificated form, the record date for each Interest
Payment Date shall be 15 days prior to such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed. In the event that any date on which interest
is payable on the Convertible Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time during the term of the
Convertible Debentures to defer interest payments from time to time by extending
the interest payment period for successive periods not exceeding 20 consecutive
quarters for each such period; PROVIDED no Extension Period may extend beyond
the maturity date of the Convertible Debentures. At the end of each Extension
Period, the Company shall pay all interest then accrued and unpaid (including
any Additional Interest and Liquidated Damages) together with interest thereon
compounded quarterly at the rate specified for the Convertible Debentures to the
extent permitted by applicable law ("Compounded Interest"); PROVIDED that during
any Extension Period, the Company (a) shall not, and shall not allow any of its
subsidiaries (other than its wholly-owned subsidiaries) to, declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(except for (i) dividends or distributions in shares of Company Common Stock on
Company Common Stock or on its Preferred Stock, (ii) purchases or acquisitions
of shares of Company Common Stock made in connection with any employee benefit
plan of the Company or its subsidiaries in the ordinary course of business or
pursuant to employment agreements with officers or employees of the Company or
its subsidiaries entered into in the ordinary course of business, provided that
repurchases by the Company made from officers or employees of the Company or its
subsidiaries pursuant to employment agreements shall be made at a price not to
exceed the market value on the date of any such repurchase and shall not exceed
$1 million in the aggregate for all such employees and officers, (iii)
conversions or exchanges of any shares of any class of common stock into any
other class of common stock and (iv) purchases of fractional interests of shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of any of the Company's securities being converted or exchanged), (b) shall not,
and shall not allow any of its subsidiaries to, make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem, any debt
securities issued by the Company that rank junior to or PARI PASSU with the
Convertible Debenturesand (c) shall not, and shall not allow any of its
subsidiaries to,make any guarantee payments with respect to the foregoing. Prior
to the termination of any such Extension Period, the Company may further extend
such Extension Period; PROVIDED, that such Extension Period together with all
previous and further extensions thereof may not exceed 20 consecutive quarters
and may not extend beyond the maturity of the Convertible Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the above requirements.
No interest during an Extension Period, except at the end thereof, shall be due
and payable. The Company does not have any current intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Convertible Debentures. If the Property Trustee shall be the sole holder of
the Convertible Debentures, the Company shall give the Regular Trustees, the
Property Trustee and the Indenture Trustee notice of its selection of such
Extension Period at least one Business Day prior to the earlier of (i) the date
the distributions on the Preferred Securities are payable or (ii) the date the
Trust is required to give notice to the NYSE (or any applicable self-regulatory
organization) or to holders of the Preferred Securities of the record date or
the date such distribution is payable, but in any event not less
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than ten Business Days prior to such record date. The Trust shall give notice of
the selection of such Extension Period to the holders of the Preferred
Securities. If the Property Trustee shall not be the sole holder of the
Convertible Debentures, the Company shall give the holders of the Convertible
Debentures notice of its selection of such Extension Period at least ten
Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the
date the Company is required to give notice to the NYSE (or any applicable
self-regulatory organization) or to holders of the Convertible Debentures of the
record or payment date of such related interest payment, but in any event not
less than two Business Days prior to such record date.
ADDITIONAL INTEREST
If at any time while the Property Trustee is the holder of the Convertible
Debentures, the Trust or the Property Trustee would be required to pay any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as additional interest
("Additional Interest") such amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes, duties,
assessments or governmental charges will be not less than the amounts the Trust
would have received had no such taxes, duties, assessments or governmental
charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Company Common Stock at the
option of the holders of the Convertible Debentures at any time prior to the
close of business on the Business Day immediately preceding the date of
repayment of such Convertible Debentures, whether at maturity or upon
redemption, at the initial conversion price set forth on the cover page of this
Prospectus subject to the conversion price adjustments described under
"Description of the Preferred Securities--Conversion Rights." The Trust has
covenanted not to convert Convertible Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of Preferred
Securities. Upon surrender of a Preferred Security to the Conversion Agent for
conversion, the Trust will distribute $50 principal amount of the Convertible
Debentures to the Conversion Agent on behalf of the holder of the Preferred
Securities so converted, whereupon the Conversion Agent will convert such
Convertible Debentures to Company Common Stock on behalf of such holder. The
Company's delivery to the holders of the Convertible Debentures (through the
Conversion Agent) of the fixed number of shares of Company Common Stock into
which the Convertible Debentures are convertible (together with the cash
payment, if any, in lieu of fractional shares) will be deemed to satisfy the
Company's obligation to pay the principal amount of the Convertible Debentures
so converted, and the accrued and unpaid interest thereon attributable to the
period from the last date to which interest has been paid or duly provided for,
PROVIDED, HOWEVER, that if any Convertible Debenture is converted after a record
date for payment of interest, the interest payable on the related interest
payment date with respect to such Convertible Debenture shall be paid to the
Trust (which will distribute such interest to the holder of the Preferred
Securities on the record date) or other holder of Convertible Debentures as of
the record date, as the case may be, despite such conversion.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Convertible Debentures, in
whole or in part, at any time or from time to time on or after October 5, 1999
upon not less than 30 nor more than 60 days' notice, at the following optional
redemption prices (expressed as a percentage of the principal amount of
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Convertible Debentures), if redeemed during the 12-month period beginning
October 1 of the year shown below (October 5, in the case of 1999):
<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- -----------
<S> <C>
1999................................................................... 104.725%
2000................................................................... 104.050
2001................................................................... 103.375
2002................................................................... 102.700
2003................................................................... 102.025
2004................................................................... 101.350
2005................................................................... 100.675
2006 and thereafter.................................................... 100.000
</TABLE>
plus, in each case, accrued and unpaid interest, including Additional Interest
and Liquidated Damages, if any, to the redemption date.
If a partial redemption of the Preferred Securities resulting from a partial
redemption of the Convertible Debentures would result in the delisting of the
Preferred Securities, the Company may only redeem Convertible Debentures in
whole.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's fiscal 1997 Budget
Proposal, the Treasury Department proposed the Proposed Legislation that, among
other things, would treat as equity for United States Federal income tax
purposes instruments with a maximum term of more than 20 years that are not
shown as indebtedness on the consolidated balance sheet of the issuer. On March
29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways
and Means Committee Chairman Bill Archer issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action." Based on
the Joint Statement, it is expected that if the Proposed Legislation were
enacted, such legislation would not apply to the Convertible Debentures since
they are expected to be issued prior to the date of any "appropriate
Congressional action." There can be no assurance, however, that any proposed
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Debentures, such
legislation could result in the distribution of the Convertible Debentures to
holders of the Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities--Special Event Redemption or Distribution."
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SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of the
Company. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Convertible Debentures may be made if (i)
any Senior Indebtedness of the Company is not paid when due and any applicable
grace period with respect to such default has ended and such default has not
been cured or waived, or ceased to exist or (ii) the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution, winding
up, liquidation or reorganization, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal of, and
premium, if any, and interest due or to become due on, all Senior Indebtedness
of the Company must be paid in full before the holders of the Convertible
Debentures are entitled to receive or retain any payment. Upon satisfaction of
all claims related to all Senior Indebtedness of the Company then outstanding,
the rights of the holders of the Preferred Securities will be subrogated to the
rights of the holders of Senior Indebtedness of the Company to receive payments
or distributions applicable to Senior Indebtedness until all amounts owing on
the Convertible Debentures are paid in full.
The term "Senior Indebtedness" means in respect of the Company: (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds, notes or other similar instruments issued by such obligor or
credit facilities with lending institutions or commercial lenders, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) commitment or standby fees due and
payable to lending institutions with respect to credit facilities available to
the Company, (vi) obligations under interest rate and currency swaps, floors,
caps and other arrangements intended to fix interest rate obligations, (vii) all
obligations of the type referred to in clauses (i) through (vi) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (viii) all obligations of the type referred
to in clauses (i) through (vii) above of other persons secured by any lien on
any property or asset of such obligor (whether or not such obligation is assumed
by such obligor), except for (1) the Convertible Debentures, (2) any such
indebtedness that is by its terms subordinated to or PARI PASSU with the
Convertible Debentures and (3) any indebtedness between or among such obligor or
its affiliates, including all other debt securities and guarantees in respect of
those debt securities issued to any other trust, or trustee of such trust,
partnership or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in
connection with the issuance by such Financing Entity of preferred securities or
other securities that rank PARI PASSU with, or junior to, the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Convertible Debentures are obligations exclusively of the Company.
Certain of the Company's operations are conducted through subsidiaries. To the
extent that the Company conducts any material part of its operations in the
future through subsidiaries, the cash flow and the consequent ability to service
debt, including the Convertible Debentures of the Company, may become dependent
upon the earnings of such subsidiaries and the distribution of those earnings
to, or upon loans, royalties, license fees or other payments of funds by those
subsidiaries, to the Company. The Company's subsidiaries are and will in the
future be separate and distinct legal entities and will have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Convertible
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. In addition, the payment of dividends and the making of loans
and
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advances to the Company by its subsidiaries are subject to certain statutory or
contractual restrictions, are dependent upon the earnings of such subsidiaries
and are subject to various business considerations.
Any right of the Company to receive assets of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the holders of the
Convertible Debentures to participate in these assets) will be effectively
subordinated to the claims of any such subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company or its subsidiaries. At October 31, 1996,
Senior Indebtedness of the Company aggregated approximately $113.2 million. See
"Capitalization."
CERTAIN COVENANTS
In the Indenture, the Company has covenanted (i) to directly or indirectly
maintain 100% ownership of the Common Securities of the Trust; PROVIDED,
HOWEVER, that any permitted successor of the Company under the Indenture may
succeed to the Company ownership; (ii) not to cause, as sponsor of the Trust, or
to permit, as holder of the Common Securities, the dissolution, winding-up or
termination of the Trust, except in connection with certain mergers,
consolidations or amalgamations; and (iii) to use its reasonable efforts to
cause the Trust (x) to remain a statutory business trust, except in connection
with the distribution of Convertible Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States Federal income tax purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other entity or convey, transfer or lease its assets substantially as
an entirety unless (a) if the Company is not the survivor, the successor is a
corporation organized in the United States and expressly assumes the due and
punctual payment of the principal of (and premium, if any) and interest on all
Convertible Debentures issued thereunder and the performance of every other
covenant of the Indenture on the part of the Company as the case may be, and (b)
immediately thereafter no event of default under the Indenture and no event
which, after notice or lapse of time, or both, would become an event of default
under the Indenture, shall have happened and be continuing. Upon any such
consolidation, merger, conveyance or transfer, the successor corporation shall
succeed to and be substituted for the Company under the Indenture and thereafter
the predecessor corporation shall be relieved of all obligations and covenants
under the Indenture and the Convertible Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of the Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Convertible Debentures will
be issued in the same form as the Preferred Securities which such Convertible
Debentures replace. Any Global Certificate will be replaced by one or more
global certificates (each a "Global Security") registered in the name of the
depository or its nominee. Except under the limited circumstances described
below, the Convertible Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Convertible Debentures
in definitive form. The Global Securities described above may not be transferred
except by the depository to a nominee of the depository or by a nominee of the
depository to the depository or another nominee of the depository or to a
successor depository or its nominee.
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The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Convertible
Debentures in definitive form and will not be considered the holders thereof for
any purpose under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depository or its
nominee or to a successor depository or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of DTC or if such person is not a
Participant, on the procedures of the Participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITORY
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in the Trust and a Global Security is
issued, DTC will act as securities depository for the Convertible Debentures
represented by such Global Security. For a description of DTC and the specific
terms of the depository arrangements, see "Description of the Preferred
Securities--Book-Entry Only Issuance--The Depository Trust Company." As of the
date of this Prospectus, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and payments
with respect to the Preferred Securities apply in all material respects to any
debt obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depository in the event
DTC or such successor depository is unable or unwilling to continue as a
depository for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee has any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Convertible Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the Depository or its nominee only
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as a depository for such Global Security and no successor depository
shall have been appointed, (ii) the Depository, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depository
is required to be so registered to act as such depository and no successor
depository shall have been appointed, (iii) the Company in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Convertible
Debentures. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Convertible Debentures registered in such
names as the Depository shall direct. It is expected that such instructions will
be based upon directions received by the Depository from its Participants with
respect to ownership of beneficial interests in such Global Security.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Convertible Debentures: (i) failure for 30 days to pay
interest on the Convertible Debentures, including any Additional Interest,
Compounded Interest and Liquidated Damages in respect thereof, when due,
provided that a valid extension of an interest payment period will not
constitute a default in the payment of interest (including any Additional
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Interest, Compounded Interest or Liquidated Damages) for this purpose; (ii)
failure to pay principal of or premium, if any, on the Convertible Debentures
when due whether at maturity, upon redemption, by declaration or otherwise;
(iii) failure by the Company to deliver shares of Company Common Stock upon an
election by a holder of Preferred Securities to convert such Preferred
Securities; (iv) failure to observe or perform any other covenant contained in
the Indenture for 60 days after notice to the Company by the Trustee or by the
holders of not less than 25% in aggregate outstanding principal amount of the
Convertible Debentures; (v) default under any bond, debenture or any other
evidence relating to indebtedness for money borrowed of the Company or any of
its significant subsidiaries having an aggregate outstanding principal amount in
excess of $20 million, which default shall have resulted in such indebtedness
being accelerated, or failure to pay when due (beyond any applicable grace
periods) any such indebtedness, without such indebtedness being discharged, such
acceleration having been rescinded or annulled or such failure to pay having
been cured or waived, within 30 days after receipt of notice thereof by the
Company from the Trustee or by the Company and the Trustee from the holders of
not less than 25% in aggregate principal amount at maturity of the Convertible
Debentures then outstanding; (vi) the dissolution, winding up or termination of
the Trust, except in connection with the distribution of Convertible Debentures
to the holders of Preferred Securities in liquidation of the trust upon the
redemption of all outstanding Preferred Securities and in connection with
certain mergers, consolidations or amalgamations permitted by the Declaration;
or (vii) certain events in bankruptcy, insolvency or reorganization of the
Company or any of its significant subsidiaries.
The Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of the Convertible Debentures may declare the principal of and
interest on the Convertible Debentures due and payable immediately on the
occurrence of an Event of Default; PROVIDED, HOWEVER, that, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Convertible
Debentures may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of accelerated principal,
have been cured or waived as provided in the Indenture. For information as to
waiver of Defaults, see "--Modifications and Amendments of the Indenture."
Notwithstanding the foregoing, if an Indenture Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise payable, the Company acknowledges that, in
such event, a holder of Preferred Securities may institute a Direct Action for
payment on or after the respective due date specified in the Convertible
Debentures. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such holder
of Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of or interest on the
Convertible Debentures held by the Trust or the Property Trustee and the Company
shall be subrogated to the rights of the holder of such Preferred Securities
with respect to payments on the Preferred Securities to the extent of any
payments made by the Company to such holder in any Direct Action. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Convertible Debentures.
The holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past defaults except (i) a default in payment
of the principal of (or premium, if any) or interest, if any, on any Convertible
Debentures and (ii) a default in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the holder
of each Convertible Debenture; PROVIDED, HOWEVER, that if the Convertible
Debentures are held by the Trust or a trustee of such Trust, such waiver or
modulation to such waiver shall not be effective until the holders of a majority
in liquidation amount of Trust Securities shall have consented to such waiver or
modification to such waiver; and PROVIDED FURTHER, that if the consent of the
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holder of each outstanding Convertible Debenture is required, such waiver shall
not be effective until each holder of the Trust Securities shall have consented
to such waiver.
Except as provided above, a default under any other indebtedness of the
Company would not constitute an Event of Default under the Convertible
Debentures.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of
Convertible Debentures, unless such holders shall have offered to the Indenture
Trustee reasonable security or indemnity. Subject to such provisions for the
indemnification of the Indenture Trustee, the holders of a majority in aggregate
principal amount of the Convertible Debentures then outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or powers
conferred on the Indenture Trustee.
No holder of any Convertible Debenture has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to Indenture Trustee written notice
of a continuing Event of Default, (ii) if the Trust is not the sole holder of
Convertible Debentures, the holders of at least 25% in aggregate principal
amount of the Convertible Debentures then Outstanding shall also have made
written request, (iii) such holder has offered reasonable indemnity to the
Indenture Trustee to institute such proceeding as Indenture Trustee, (iv) the
Indenture Trustee shall have failed to institute such Proceeding within 60 days
of such notice and (v) the Indenture Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding
Convertible Debentures a direction inconsistent with such request. However, such
limitations do not apply to a suit instituted by a holder of a Convertible
Debenture for enforcement of payment of the principal of or interest on such
Convertible Debenture on or after the respective due dates expressed in such
Convertible Debenture.
The Company is required to file annually with the Indenture Trustee and the
Property Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to modify
the Indenture or the rights of the holders of Convertible Debentures; PROVIDED,
HOWEVER, that no such modification may, without the consent of the holder of
each outstanding Convertible Debenture affected thereby, (i) extend the stated
maturity of the Convertible Debentures or reduce the principal amount thereof,
or reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, or adversely affect the right
to convert Convertible Debentures or (ii) reduce the percentage in aggregate
principal amount of outstanding Convertible Debentures, the holders of which are
required to consent to any such supplemental indenture.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, to comply with the Trust Indenture Act and for certain
other customary purposes.
GOVERNING LAW
The Indenture and the Convertible Debentures are governed by, and shall be
construed in accordance with, the laws of the State of New York.
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INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, has undertaken to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Convertible Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Indenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust and to invest the proceeds from such issuance and sale in the
Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust Securities because of the following factors: (i)
the aggregate principal amount of Convertible Debentures will be equal to the
sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Convertible
Debentures will match the distribution rate and distribution and other payment
dates for the Preferred Securities; (iii) pursuant to the Indenture, the Company
shall, directly or indirectly,pay all, and the Trust shall not be obligated to
pay any, costs, expenses, debt and obligations of the Trust other than with
respect to the Trust Securities; and (iv) the Declaration further provides that
the Issuer Trustees will not cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Convertible Debentures purchased by the Trust, the Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The Guarantee
is a guarantee with respect to the Preferred Securities from the time of its
issuance but does not apply to any payment of distributions unless and until the
Trust has sufficient funds for the payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the Trust
as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provide a full and unconditional guarantee of amounts due on
the Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities-- Book-Entry
Only Issuance--The Depository Trust Company" and "Description of the Preferred
Securities--Voting Rights," may direct the Property Trustee to enforce its
rights under the Convertible Debentures. If the Property Trustee fails to
enforce its rights under the Convertible Debentures, any holder of Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the Property Trustee rights under the Convertible Debentures without
first instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
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Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise available (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the respective
due date specified in the Convertible Debentures. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action. The
Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Preferred Securities. If
the Company fails to make payments under the Guarantee, the Guarantee provides a
mechanism whereby the holders of the Preferred Securities may direct the
Guarantee Trustee to enforce its rights thereunder. Any holder of Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the Guarantee Trustee's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 100,000,000
shares of common stock, par value $.001 per share, and (ii) 15,000,000 shares of
preferred stock, par value $.01 per share, which are subject to future issuance
as determined by the Board of Directors of the Company.
COMMON STOCK
Holders of Company Common Stock are entitled to one vote per share on all
matters on which the holders of Company Common Stock are entitled to vote and do
not have any cumulative voting rights. Holders of Company Common Stock are
entitled to receive such dividends as may from time to time be declared by the
Board of Directors of the Company out of funds legally available therefor.
Holders of Company Common Stock have no preemptive, conversion, redemption or
sinking fund rights. In the event of a liquidation, dissolution of winding-up of
the Company, holders of Company Common Stock are entitled to share ratably in
the assets of the Company, if any, remaining after the payment of all debts and
liabilities of the Company and the liquidation preference of any outstanding
series of preferred stock. The outstanding shares of Company Common Stock are
fully paid and nonassessable. The rights, preferences and privileges of holders
of Company Common Stock are subject to any series of Preferred Stock that the
Company may issue in the future.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights, redemption
privileges, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the stockholders
of the Company. The issuance of Preferred Stock by the Board of Directors could
adversely affect the rights of holders of Company Common Stock. For example,
issuance of Preferred Stock could result in a series of securities outstanding
that would have preferences over the Company Common Stock with respect to
dividends and in liquidation and that could (upon conversion or otherwise) enjoy
all of the rights appurtenant to Company Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy, consent or otherwise by making
such attempts more difficult to achieve or more costly. The Board of Directors
may issue Preferred Stock without stockholder approval and with voting and
conversion rights that could adversely affect the voting power of holders of
Company Common Stock. There are no
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agreements or understandings for the issuance of Preferred Stock, and the Board
of Directors has no present intention to issue Preferred Stock.
REGISTRATION RIGHTS
The beneficial owners of 19,198,482.96 shares of Company Common Stock
(including 738,408 shares subject to exercise under presently-exercisable
options) have the right to request that the Company effect the registration of
any or all of such shares or to include any or all of such shares in any
registration statement to be filed by the Company relating to the registration
of Company Common Stock under the Securities Act (other than registration
statements on Form S-4 or Form S-8). Upon such request, the Company is required
to file a registration statement covering such shares or to include such shares
in such registration statement, as applicable, except that, in the case of a
requested registration, the Company is not obligated to file any registration
statement initiated pursuant to a request by any such holder within six months
of a prior request for registration by any such holder and the Company's
obligations to effect any such registration is subject to other limitations,
including a minimum aggregate offering price of the shares being registered.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL ("Section 203") prevents an "interested stockholder"
(defined in Section 203, generally, as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved either the business combination
or the transaction in which the interested stockholder became an interested
stockholder; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding stock held by directors who are
also officers of the corporation and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer); or (iii) following
the transaction in which such person became an interested stockholder, the
business combination is approved by the board of directors of the corporation
and authorized at a meeting of stockholders by the affirmative vote of the
holders of two-thirds of the outstanding voting stock of the corporation not
owned by the interested stockholder.
DIRECTORS' LIABILITY
The Certificate of Incorporation contains provisions that eliminate the
personal liability of its directors for monetary damages resulting from breaches
of their fiduciary duty other than liability for breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
DGCL or any transaction from which the director derived an improper personal
benefit. The Company's By-laws contain provisions requiring the indemnification
of the Company's directors and officers to the fullest extent permitted by
Section 145 of the DGCL, including circumstances in which indemnification is
otherwise discretionary. The Company has entered into indemnification agreements
with each of its directors that provide for indemnification of such directors to
the fullest extent permitted by the DGCL. The Company believes that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company Common Stock is ChaseMellon
Shareholder Services.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership, disposition and conversion
of Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets. This summary addresses the United
States Federal income tax considerations to holders of Preferred Securities who
are citizens or residents of the United States or any political subdivision
thereof or therein, or estates or trusts the income of which is subject to
United States Federal income taxation regardless of its source or other holders
who are otherwise subject to United States federal income taxation on a net
income basis with respect to Preferred Securities ("U.S. Holders") and does not
address the tax consequences to holders of Preferred Securities who are not U.S.
Holders. This summary does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons that will hold the Preferred Securities as other than a capital
asset. This summary also does not address the tax consequences to persons that
have a functional currency other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Preferred Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Preferred Securities. This summary is
based on the Code, Treasury regulations thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
The Company has taken the position that the Convertible Debentures will be
classified for United States Federal income tax purposes as indebtedness of the
Company under current law, and, by acceptance of a Preferred Security, each
holder covenants to treat the Convertible Debentures as indebtedness and the
Preferred Securities as evidence of an indirect beneficial ownership interest in
the Convertible Debentures. No assurance can be given, however, that such
position of the Company will not be challenged by the Internal Revenue Service
or, if challenged, that such a challenge will not be successful. The remainder
of this discussion assumes that the Convertible Debentures will be classified as
indebtedness of the Company for United States Federal income tax purposes.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Arter & Hadden,
special United States tax counsel to the Company and the Trust, has rendered its
opinion in connection with the Original Offering and the Over-Allotment Offering
to the effect that, under then current law and assuming full compliance with the
terms of the Declaration and the Indenture (and certain other documents relating
to the offering referred to herein), and based on certain facts and assumptions
contained in such opinion, the Trust was classified for United Stated Federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States Federal income tax purposes, each
holder of Preferred Securities generally will be considered the owner of an
undivided interest in the Convertible Debentures, and each holder will be
required to include in its gross income any original issue discount accrued with
respect to its allocable share of those Convertible Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest payments on the Convertible
Debentures will be treated as "original issue discount." Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis before the
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receipt of cash attributable to the interest, regardless of their method of tax
accounting. Generally, all of a holder's taxable interest income with respect to
the Convertible Debentures will be accounted for as OID. Actual payments and
distributions of stated interest (including payments of accrued interest upon
conversion of the Convertible Debentures) will not, however, be separately
reported as taxable income. The amount of OID that accrues in any quarter will
approximately equal the amount of the interest that accrues on the Convertible
Debentures in that quarter at the stated interest rate. In the event that the
interest payment period is extended, holders will continue to accrue OID
approximately equal to the amount of the interest payment due at the end of the
extended interest payment period on an economic accrual basis over the length of
the extended interest payment period.
Corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Convertible Debentures with market discount or
acquisition premium as such phrases are defined for United States Federal income
tax purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
Preferred Securities.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution," Convertible
Debentures may be distributed to holders in exchange for the Preferred
Securities and in liquidation of the Trust. Under current law, such a
distribution to holders, for United States Federal income tax purposes, would be
treated as a nontaxable event to each holder, and each holder would receive an
aggregate tax basis in the Convertible Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Convertible Debentures so received in liquidation of the Trust would include
the period during which the Preferred Securities were held by such holder. If,
however, the related Special Event is a Tax Event which results in the Trust
being treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Preferred Securities, in
which event the Company, if it elected to eliminate the Trust, would generally
be required to cause the redemption of the Convertible Debentures for cash and
distribute the redemption proceeds to the holders in liquidation of the Trust.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Convertible Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Preferred Securities. Under current law, such a redemption would, for United
States Federal income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder would recognize gain or loss as if
it sold such redeemed Preferred Securities for cash. See "--Sales of Preferred
Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. A
holder's adjusted tax basis in the Preferred Securities generally will be its
initial purchase price increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred Securities to the date of disposition. Such gain or loss will be a
capital gain or loss and will be a long-term capital gain or loss if the
Preferred Securities have been held for more than one year at the time of sale.
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The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Convertible Debentures. A holder who disposes of or converts his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Convertible Debentures
through the date of disposition or conversion in income as ordinary income, and
to add such amount to his adjusted tax basis in his PRO RATA share of the
underlying Convertible Debentures deemed disposed of or converted. To the extent
the selling price is less than the holder's adjusted tax basis (which basis will
include, in the form of OID, all accrued but unpaid interest), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States Federal income tax
purposes.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's fiscal 1997 Budget
Proposal, the Treasury Department proposed the Proposed Legislation that, among
other things, would treat as equity for United States Federal income tax
purposes instruments with a maximum term of more than 20 years that are not
shown as indebtedness on the consolidated balance sheet of the issuer. On March
29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways
and Means Committee Chairman Bill Archer issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action." Based on
the Joint Statement, it is expected that if the Proposed Legislation were
enacted, such legislation would not apply to the Convertible Debentures since
they are expected to be issued prior to the date of any "appropriate
Congressional action." There can be no assurances, however, that any proposed
legislation enacted after the date hereof will not otherwise adversely affect
the tax treatment of the Convertible Debentures. If legislation is enacted that
adversely affects the tax treatment of the Convertible Debentures, such
legislation could result in the distribution of the Convertible Debentures to
holders of the Preferred Securities or, in certain limited circumstances, the
redemption of such securities by the Company and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities--Special Event Redemption or Distribution."
CONVERSION OF PREFERRED SECURITIES INTO COMMON STOCK
A holder will not recognize income, gain or loss upon the conversion,
through the Conversion Agent, of Preferred Securities into Company Common Stock.
A holder will, however, recognize gain upon the receipt of cash in lieu of a
fractional share of Company Common Stock equal to the amount of cash received
less the holder's tax basis in such fractional share. A holder's tax basis in
the Company Common Stock received upon conversion should generally be equal to
the holder's tax basis in the Preferred Securities delivered to the Conversion
Agent for conversion less the basis allocated to any fractional share for which
cash is received and less the amount of cash a holder receives in payment of
accrued interest on the Convertible Debentures. A holder's holding period in the
Company Common Stock received upon conversion of its Preferred Securities should
generally begin on the date the holder acquired the Preferred Securities
delivered to the Conversion Agent for conversion.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible Debentures
were adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of Company Common Stock into or for which the
Convertible Debentures are convertible) of the holders of the Preferred
Securities in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable
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antidilution formula. An adjustment in the conversion ratio would not be
considered made pursuant to such a formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Company Common
Stock. Thus, under certain circumstances, a reduction in the conversion price
for the holders may result in deemed dividend income to holders to the extent of
the current or accumulated earnings and profits of the Company. Holders of the
Preferred Securities would be required to include their allocable share of such
deemed dividend income in gross income but would not receive any cash related
thereto.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, income on the Preferred Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States Federal income tax, provided the
required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
Generally, an employee benefit plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code ("Plan"), may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
The Department of Labor ("DOL") has issued a regulation (29 C.F.R. Section
2510.3-101) (the "DOL Regulation") defining what constitutes the assets of a
Plan. The DOL Regulation provides that, as a general rule, the underlying assets
and properties of corporations, partnerships, trusts and certain other entities
in which a Plan makes an "equity" investment will be deemed for purposes of
ERISA to be assets of the investing plan unless certain exceptions apply.
There can be no assurance that any of the exceptions set forth in the DOL
Regulation will apply to the purchase of Preferred Securities offered hereby
and, as a result, an investing Plan's assets could be considered to include an
undivided interest in the Convertible Debentures and any other assets held in
the Trust. In the event that assets of the Trust are considered assets of an
investing Plan, the Company, the Issuer Trustees and other persons, in providing
services with respect to the Convertible Debentures, may be considered
fiduciaries to such Plan and subject to the fiduciary responsibility provisions
of Title I of ERISA and the prohibited transaction provisions of Section 4975 of
the Code with respect to transactions involving such assets unless a statutory
or administrative exemption applies.
The Company and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to a Plan. The acquisition and
ownership of Preferred Securities by a Plan (or by an individual retirement
arrangement or other plan described in Section 4975(e)(1) of the Code) with
respect to which the Company or any of its affiliates is considered a party in
interest or a disqualified person may constitute or
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result in a prohibited transaction under ERISA or Section 4975 of the Code,
unless such Preferred Securities are acquired pursuant to and in accordance with
an applicable exemption.
As a result, any Plan with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable prohibited transaction exemption. A Plan or
other entity whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire Preferred Securities should consult with their
own counsel.
SELLING HOLDERS
The Preferred Securities were originally issued by the Trust and sold by
Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and The Robinson-Humphrey Company, Inc.
(collectively, the "Initial Purchasers"), in transactions exempt from the
registration requirements of the Securities Act, to persons reasonably believed
by such Initial Purchasers to be "qualified institutional buyers" (as defined in
Rule 144A of the Securities Act), to "institutional accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or outside
the United States to non-U.S. persons in off-shore transactions in reliance on
Regulation S under the Securities Act. These purchasers, or their transferees,
pledgees, donees or successors (the "Selling Holders") may from time to time
offer and sell pursuant to this Prospectus any or all of the Preferred
Securities, the Convertible Debentures, Company Common Stock issued upon
conversion of the Preferred Securities, and the associated Guarantee.
The Company and the Trust have filed a Registration Statement on Form S-1
(of which this Prospectus forms a part) with the Commission in order to register
the Offered Securities in accordance with the provisions of the Registration
Rights Agreement. The Registration Rights Agreement obligated the Company and
the Trust to, among other things, file a Registration Statement with regard to
the Offered Securities prior to December 16, 1996 and keep such Registration
Statement effective until three years after the date it is declared effective or
such earlier date as all Registerable Securities shall have been disposed of or
on which all Registerable Securities held by persons that are not affiliates of
the Company or the Trust may be sold without registration pursuant to Rule
144(k) under the Securities Act, or any successor provision. Although none of
the Selling Holders have advised the Company that they currently intend to sell
all or any of the Offered Securities pursuant to this Prospectus, the Selling
Holders may choose to sell the Offered Securities from time to time upon notice
to Company and the Trust. See "Plan of Distribution."
Prior to any use of this Prospectus in connection with an offering of the
Offered Securities, this Prospectus will be supplemented to set forth the name
and the number of shares beneficially owned by the Selling Holder intending to
sell such Offered Securities, and the number of Offered Securities to be
offered. The Prospectus Supplement will also disclose whether any Selling Holder
selling in connection with such Prospectus Supplement has held any position or
office with, been employed by or otherwise has a material relationship with, the
Company or any of its affiliates during the three (3) years prior to the date of
the Prospectus Supplement.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Offered Securities to or through underwriters, broker/dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
the Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act and to any profit on the sale of such securities and any
discounts,
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commissions, concessions or other compensation received by such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at the prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The sale of the Offered Securities may be effectuated in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market, or (iv)
through the writing and exercise of options. At the time a particular offering
of the Offered Securities is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount of the type of Offered
Securities being offered and the terms of the Offering, including the name or
names of any underwriters, broker/dealers or agents, any discounts, commissions
and other terms constituting compensation from the Selling Holders, if any,and
any discounts, commissions or concessions allowed or reallowed to be paid to
broker/dealers, if any. To comply with the securities laws of certain
jurisdictions, if applicable, the Offered Securities will be offered or sold in
such jurisdictions only through registered or licensed brokers or dealers.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and rules and regulations thereunder, which provisions may limit the timing
of purchases and sales of any of the Offered Securities by the Selling Holders.
The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Company shall pay all
expenses of the registration of the Offered Securities including, without
limitation, commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts, selling commissions and transfer taxes, if any,
in the event of an underwritten offering of the Offered Securities.
The Selling Holders will be indemnified by the Company and the Trust,
jointly and severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith.
LEGAL MATTERS
The validity of the Offered Securities and certain United States Federal
income taxation matters will be passed upon for the Company and Trust by Arter &
Hadden, Dallas, Texas.
EXPERTS
The consolidated financial statements and schedule of Vanstar Corporation at
April 30, 1996 and 1995, and for the years then ended, the seven month period
ended April 30, 1994 and the year ended September 30, 1993, included in this
Prospectus and Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as stated in their reports thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
101
<PAGE>
VANSTAR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report (Ernst & Young LLP)......................................................... F-2
Consolidated Balance Sheets.............................................................................. F-3
Consolidated Statements of Income........................................................................ F-4
Consolidated Statements of Stockholders' Equity.......................................................... F-5
Consolidated Statements of Cash Flows.................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets.............................................................................. F-19
Consolidated Statements of Income........................................................................ F-20
Consolidated Statements of Cash Flows.................................................................... F-21
Notes to Consolidated Financial Statements............................................................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Vanstar Corporation
We have audited the accompanying consolidated balance sheets of Vanstar
Corporation as of April 30, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for the years ended
April 30, 1996 and 1995, the seven month period ended April 30, 1994 and the
year ended September 30, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Vanstar
Corporation at April 30, 1996 and 1995, and the consolidated results of its
operations and its cash flows for years ended April 30, 1996 and 1995, the seven
month period ended April 30, 1994 and the year ended September 30, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Jose, California
June 10, 1996
F-2
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets:
Cash............................................ $ 14,498 $ 7,761
Receivables, net of allowance for doubtful
accounts of $14,812 and $12,326 at April 30,
1996 and 1995, respectively................... 298,484 261,308
Inventories..................................... 350,406 298,686
Deferred income taxes........................... 25,750 35,779
Prepaid expenses and other current assets....... 2,432 1,193
---------- ----------
Total current assets.......................... 691,570 604,727
Property and equipment, net....................... 23,183 19,832
Other assets, net................................. 48,899 39,296
Goodwill, net of accumulated amortization of
$3,453 and $1,726 at April 30, 1996 and 1995,
respectively.................................... 39,713 41,440
---------- ----------
$ 803,365 $ 705,295
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................ $ 305,374 $ 263,197
Accrued liabilities............................. 41,586 39,110
Deferred revenue................................ 27,109 26,883
Current maturities of long-term debt............ 1,759 7,685
---------- ----------
Total current liabilities..................... 375,828 336,875
Long-term debt, less current maturities........... 293,007 337,750
Other long-term liabilities....................... 7,477 8,081
Commitments and contingencies..................... -- --
Stockholders' equity:
Preferred stock................................. -- 153
Common stock:
Class A; $.001 par value: 100,000,000 shares
authorized, 40,475,144 shares issued and
outstanding at April 30, 1996; 50,000,000
shares authorized, 7,323,508 issued and
outstanding at April 30, 1995............... 40 7
Class B; $.001 par value; no shares
authorized, issued or outstanding at April
30, 1996; 18,800,000 shares authorized,
3,708,205 issued and outstanding at April
30, 1995.................................... -- 4
Additional paid-in capital...................... 115,097 24,768
Retained earnings (accumulated deficit) (since a
deficit elimination of $78,448 at April 30,
1994)......................................... 11,916 (2,343)
---------- ----------
Total stockholders' equity.................. 127,053 22,589
---------- ----------
$ 803,365 $ 705,295
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, SEVEN MONTHS YEAR ENDED
-------------------------- ENDED APRIL SEPTEMBER 30,
1996 1995 30, 1994 1993
------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Products............................................. $ 1,578,298 $ 1,187,392 $ 490,576 $ 935,165
Services............................................. 226,515 198,000 95,938 164,648
------------ ------------ ------------- -------------
Total revenue...................................... 1,804,813 1,385,392 586,514 1,099,813
------------ ------------ ------------- -------------
Cost of revenue:
Products............................................. 1,430,404 1,073,879 437,316 824,514
Services............................................. 129,482 100,975 52,196 97,275
------------ ------------ ------------- -------------
Total cost of revenue............................ 1,559,886 1,174,854 489,512 921,789
------------ ------------ ------------- -------------
Gross margin........................................... 244,927 210,538 97,002 178,024
Selling, general and administrative expenses........... 201,880 182,411 97,436 181,320
------------ ------------ ------------- -------------
Operating income (loss)................................ 43,047 28,127 (434) (3,296)
Interest income...................................... 5,539 6,577 1,608 849
Interest expense..................................... (35,804) (32,555) (12,789) (23,045)
------------ ------------ ------------- -------------
Income (loss) from continuing operations before income
taxes................................................ 12,782 2,149 (11,615) (25,492)
Income tax benefit (provision)....................... (4,729) (881) 4,646 6,741
------------ ------------ ------------- -------------
Income (loss) from continuing operations............... 8,053 1,268 (6,969) (18,751)
Income from operations of discontinued businesses
(less income taxes of $3,693 in 1994 and $6,811 in
1993).............................................. -- -- 6,426 14,258
Gain on disposal of discontinued businesses (less
income taxes of $5,400 in 1996 and $10,706 in 1994
and $0 in 1993).................................... 9,194 -- 45,048 247
------------ ------------ ------------- -------------
Net income (loss)...................................... $ 17,247 $ 1,268 $ 44,505 $ (4,246)
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Pro forma net income per share:
Continuing operations................................ $ 0.23 $ 0.04
Discontinued operations.............................. 0.27 --
------------ ------------
Total pro forma net income per share................... $ 0.50 $ 0.04
------------ ------------
------------ ------------
Shares used in pro forma per share calculation......... 34,250 32,486
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK A COMMON STOCK B
PREFERRED STOCK
-------------------- ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- --------- ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992.................. 9,766 $ 28,495 4,118 $ 4 3,708 $ 4
Issuance of Class A Common Stock............... -- -- 3,267 3 -- --
Amortization of deferred compensation.......... -- -- -- -- -- --
Issuance of warrants........................... -- -- -- -- -- --
Translation adjustments........................ -- -- -- -- -- --
Net loss....................................... -- -- -- -- -- --
Dividends...................................... -- -- -- -- -- --
--
--------- --------- ----------- --- -----------
Balance at September 30, 1993.................. 9,766 28,495 7,385 7 3,708 4
Conversion of Class A, C, and D Preferred Stock
and accrued dividends to Class F Preferred
Stock......................................... 5,543 (28,342) -- -- -- --
Payment on shareholder note receivable......... -- -- -- -- -- --
Issuance of Class A Common Stock............... -- -- 75 -- -- --
Translation adjustments........................ -- -- -- -- -- --
Sale of international businesses............... -- -- -- -- -- --
Net income..................................... -- -- -- -- -- --
Dividends...................................... -- -- -- -- -- --
Quasi-reorganization:
Revaluation adjustments, net................. -- -- -- -- -- --
Transfer from accumulated deficit............ -- -- -- -- -- --
--
--------- --------- ----------- --- -----------
Balance at April 30, 1994...................... 15,309 153 7,460 7 3,708 4
Redemption of Class A Common Stock............. -- -- (154) -- -- --
Issuance of Class A Common Stock............... -- -- 17 -- -- --
Redemption of Class E Preferred Stock.......... -- -- -- -- -- --
Net income..................................... -- -- -- -- -- --
Dividends...................................... -- -- -- -- -- --
--
--------- --------- ----------- --- -----------
Balance at April 30, 1995...................... 15,309 153 7,323 7 3,708 4
Redemption of Class A Common Stock............. -- -- (103) -- -- --
Issuance of warrants -- -- -- -- -- --
Conversion of Class F Preferred Stock and
Senior Preferred Stock to Class A Common
Stock......................................... (15,309) (153) 15,309 15 -- --
Conversion of Class B Common Stock to Class A
Common Stock.................................. -- -- 3,708 4 (3,708) (4)
Conversion of Warrants to Class A Common
Stock......................................... -- -- 4,996 5 -- --
Issuance of Class A Common Stock............... -- -- 9,216 9 -- --
Accrued Dividends Forgiven--Senior Preferred
Stock......................................... -- -- -- -- -- --
Exercise of Options............................ -- -- 26 -- -- --
Net income..................................... -- -- -- -- -- --
Dividends...................................... -- -- -- -- -- --
--
--------- --------- ----------- --- -----------
Balance at April 30, 1996...................... -- $ -- 40,475 $ 40 -- $ --
--
--
--------- --------- ----------- --- -----------
--------- --------- ----------- --- -----------
<CAPTION>
RETAINED
STOCKHOLDER ADDTL. EARNINGS
NOTE PAID-IN (ACCUM. TRANS
RECEIVABLE CAPTL. DEFICIT) ADJUST. TOTAL
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992.................. $ -- $ 84,758 $(112,434) $ (143) $ 684
Issuance of Class A Common Stock............... (1,846) 17,395 -- -- 15,552
Amortization of deferred compensation.......... -- 9 -- -- 9
Issuance of warrants........................... (154) 3,269 -- -- 3,115
Translation adjustments........................ -- -- -- 1,411 1,411
Net loss....................................... -- -- (4,246) -- (4,246)
Dividends...................................... -- -- (3,941) -- (3,941)
------------- --------- --------- --------- ---------
Balance at September 30, 1993.................. (2,000) 105,431 (120,621) 1,268 12,584
Conversion of Class A, C, and D Preferred Stock
and accrued dividends to Class F Preferred
Stock......................................... -- 28,342 -- -- --
Payment on shareholder note receivable......... 1,000 -- -- -- 1,000
Issuance of Class A Common Stock............... -- -- -- -- --
Translation adjustments........................ -- -- -- (86) (86)
Sale of international businesses............... -- -- -- (1,182) (1,182)
Net income..................................... -- -- 44,505 -- 44,505
Dividends...................................... -- -- (2,332) -- (2,332)
Quasi-reorganization:
Revaluation adjustments, net................. -- (29,692) -- -- (29,692)
Transfer from accumulated deficit............ -- (78,448) 78,448 -- --
------------- --------- --------- --------- ---------
Balance at April 30, 1994...................... (1,000) 25,633 -- -- 24,797
Redemption of Class A Common Stock............. 1,000 (1,000) -- -- --
Issuance of Class A Common Stock............... -- -- -- -- --
Redemption of Class E Preferred Stock.......... -- 135 -- -- 135
Net income..................................... -- -- 1,268 -- 1,268
Dividends...................................... -- -- (3,611) -- (3,611)
------------- --------- --------- --------- ---------
Balance at April 30, 1995...................... -- 24,768 (2,343) -- 22,589
Redemption of Class A Common Stock............. -- -- -- -- --
Issuance of warrants -- 500 -- -- 500
Conversion of Class F Preferred Stock and
Senior Preferred Stock to Class A Common
Stock......................................... -- 138 -- -- --
Conversion of Class B Common Stock to Class A
Common Stock.................................. -- -- -- -- --
Conversion of Warrants to Class A Common
Stock......................................... -- (5) -- -- --
Issuance of Class A Common Stock............... -- 83,382 -- -- 83,391
Accrued Dividends Forgiven--Senior Preferred
Stock......................................... -- 6,162 -- -- 6,162
Exercise of Options............................ -- 152 -- -- 152
Net income..................................... -- -- 17,247 -- 17,247
Dividends...................................... -- (2,988) -- -- (2,988)
------------- --------- --------- --------- ---------
Balance at April 30, 1996...................... $ -- $ 115,097 $ 11,916 $ -- $ 127,053
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, SEVEN MONTHS YEAR ENDED
---------------------- ENDED APRIL SEPTEMBER 30,
1996 1995 30, 1994 1993
---------- ---------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)........................................... $ 17,247 $ 1,268 $ 44,505 $ (4,246)
Adjustments:
Depreciation and amortization............................. 9,775 9,997 9,248 17,883
Provision for receivables and investments................. 14,393 95 356 5,287
Gain on sale of building.................................. -- -- -- (1,398)
Gain on disposal of discontinued businesses............... (14,594) -- (55,754) (247)
Changes in operating assets and liabilities:
Receivables............................................. (51,193) (58,354) (19,092) 53,253
Inventories............................................. (51,720) (38,900) (86,044) 2,504
Prepaid expenses and otherassets........................ (2,462) (1,257) 1,505 (4,409)
Deferred income taxes................................... 10,029 (1,097) 9,710 (1,730)
Accounts payable........................................ 42,177 37,556 (19,679) (9,871)
Accrued and other liabilities........................... 4,865 1,070 (21,713) (34,890)
---------- ---------- ------------- -------------
Total adjustments..................................... (38,730) (50,890) (181,463) 26,382
---------- ---------- ------------- -------------
Net cash provided by (used in) operating activities......... (21,483) (49,622) (136,958) 22,136
Cash Flows from Investing Activities:
Sales of businesses....................................... 14,594 -- 78,401 3,097
Capital expenditures...................................... (15,583) (12,835) (3,099) (6,383)
Proceeds from sale of building............................ -- -- -- 2,939
Repayment of notes receivable............................. -- 9,722 6,213 6,327
---------- ---------- ------------- -------------
Net cash provided by (used in) investing activities......... (989) (3,113) 81,515 5,980
Cash Flows from Financing Activities:
Payments on long-term debt................................ (7,836) (12,342) (16,322) (10,120)
Borrowings under line of credit, net of payments.......... (46,999) 73,287 68,123 (33,032)
Issuance of common stock and warrants..................... 84,044 -- -- 14,740
Redemption of preferred stock and accrued dividends....... -- (4,654) -- --
Dividends paid............................................ -- (1,000) -- --
---------- ---------- ------------- -------------
Net cash provided by (used in) financing activities......... 29,209 55,291 51,801 (28,412)
Net increase (decrease) in cash............................. 6,737 2,556 (3,642) (296)
Cash at beginning of the period............................. 7,761 5,205 8,847 9,143
---------- ---------- ------------- -------------
Cash at end of the period................................... $ 14,498 $ 7,761 $ 5,205 $ 8,847
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the period for:
Interest................................................ $ 38,761 $ 31,352 $ 13,094 $ 24,873
Income taxes, net of refunds.............................. 625 1,424 5 (349)
Non-cash investing activities:
Equipment acquired under capital leases................... 4,293 -- -- 699
Non-cash financing activities:
Payment of accrued dividends with common stock............ -- -- -- 3,462
Conversion of accrued dividends into a note payable....... -- 2,462 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Vanstar Corporation (the "Company") is a leading provider of services and
products designed to build and manage personal computer network infrastructures
primarily for Fortune 1000 companies and other large enterprises. The Company
provides customized, integrated solutions for its customers' network
infrastructure needs by combining a comprehensive offering of value-added
services with its expertise in sourcing and distributing PC's, network products,
computer peripherals and software from a variety of vendors. The consolidated
financial statements include the accounts of Vanstar Corporation and all
subsidiaries. All significant intercompany balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Products revenue is primarily derived from the sale of computer hardware,
software, peripherals and communications devices manufactured by third parties
and sold by the Company, principally to implement integration projects. Services
revenue is derived from value-added services, including services focused on the
server and communication segments of the PC network infrastructure, services
performed for the desktop and fees earned on a distribution services agreement.
Product sales are recognized at the time of shipment. Revenue from services is
recognized as services are performed or ratably if performed over a service
contract period. Deferred revenue primarily represents unrecognized service
revenue.
CHANGE OF COMPANY NAME AND FISCAL YEAR END
The Company changed its name from "ComputerLand Corporation" to "Vanstar
Corporation," effective March 21, 1994, in conjunction with the sale of its U.S.
franchise business, including the right to the "ComputerLand" name and trademark
within the United States.
The Company also changed its fiscal year end during fiscal 1994 from
September 30 to April 30. Accordingly, the Company's transition period ending
April 30, 1994 includes only seven months from October 1, 1993 to April 30,
1994.
FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance sheets for cash,
receivables, and accounts payable approximate the respective fair values due to
the short maturities of these instruments. The long-term debt consists of
variable rate instruments at terms the Company believes would be available if
similar financing were obtained from another party. As such, carrying amounts
also approximate their fair value.
F-7
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventory for resale and spare parts inventory are stated at the lower of
cost (first-in, first-out method) or market. Periodically, the Company assesses
the appropriateness of the inventory valuations giving consideration to
obsolete, slow-moving and nonsalable inventory.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful lives of the related assets as
follows:
<TABLE>
<S> <C>
Furniture and equipment 3 to 5 years
Lesser of term of lease or useful
Leasehold improvements life
Building 25 years
</TABLE>
ACQUISITION ACCOUNTING
All acquisitions have been accounted for using the purchase method whereby
the purchase price, including liabilities assumed, is allocated based upon the
fair value of the tangible and intangible assets of the acquired entity. The
Company's consolidated statements of operations include the results of
operations of the acquired businesses subsequent to the purchase dates. Goodwill
represents the excess of cost over the net assets of acquired businesses and is
amortized using the straight-line method over twenty-five years.
The carrying amount of goodwill was adjusted to fair value at April 30, 1994
in connection with the Company's quasi-reorganization. Periodically, the Company
assesses the appropriateness of the carrying amount of goodwill and the
amortization periods based on the undiscounted value of the current and
anticipated future cash flows and projected profitability of the acquired
business. If there are indicated impairments, a write down is recorded to the
extent the carrying amount exceeds the fair value.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued two standards which
will be applicable to the Company but which the Company has not yet adopted:
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS to be Disposed of and
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. The impairment standard is not expected to have a significant
impact on the Company. The Company has not yet determined which of the
acceptable approaches it will use under the stock compensation standard.
Adoption of certain approaches under the stock compensation standard could
result in noncash charges, which if made are not expected to be material. At a
minimum, the standard will require disclosures about the fair value of the
employee stock options.
2. DISCONTINUED OPERATIONS
The Company disposed of primarily all of its worldwide franchise business
during the seven months ended April 30, 1994 and the fiscal year ended September
30, 1993. Combined revenues of the franchise segment were $0.4 billion and $1.1
billion during the seven months ended April 30, 1994 and the fiscal year ended
September 30, 1993, respectively.
F-8
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. DISCONTINUED OPERATIONS (CONTINUED)
U.S. FRANCHISE DIVISION
On January 31, 1994, pursuant to an asset purchase agreement, the Company
sold certain assets and liabilities of its U.S. franchise business, including
all domestic franchise agreements, Datago distribution agreements and the right
to the "ComputerLand" name and trademark within the United States to Merisel
FAB, a wholly-owned subsidiary of Merisel, Inc. ("Merisel"). The purchase price
was $80.2 million in cash plus additional consideration based upon the
cumulative volume of product sold during the two-year period commencing February
1, 1994. The Company recorded a gain on the sale of $32.5 million, net of
related disposition costs and taxes during the seven-month period ended April
30, 1994. At April 30, 1995, no additional consideration was recorded based on
the inability to determine the amount of additional consideration earned, if
any.
Concurrent with the sale, the Company entered into a distribution services
agreement with Merisel FAB. Pursuant to this agreement, the Company continues to
supply product and provide certain logistics and other support services to
Merisel FAB. The Company receives a monthly distribution fee for such services.
The Company also granted Merisel FAB $20.0 million in extended, interest-bearing
credit on its product purchases.
Effective January 31, 1996, the Company and Merisel FAB signed amendments to
the asset purchase agreement and distribution services agreement. The amendments
provide that: the term of the distribution services agreement be extended
through April 30, 1997; the distribution fee be reduced retroactive to April 1,
1995; the additional consideration be fixed at $14.6 million; the maximum amount
of the extended credit be increased by $11.1 million, which will be reduced in
monthly installments from February 1996 through July 1997; and the original
amount of interest-bearing credit of $20.0 million be extended and reduced in
three equal monthly installments from May 15, 1997 through July 15, 1997.
As a result of announcements made by Merisel on February 20, 1996, the
Company decided to record a $31.1 million provision as of January 31, 1996
against its extended credit due from Merisel FAB. As of April 30, 1996 the
Company reversed a portion of such provision (see Note 15--Subsequent Events).
INTERNATIONAL SUBSIDIARIES
On April 29, 1994, the Company sold several of its international
subsidiaries which operated franchise businesses primarily in Europe, resulting
in a net gain of approximately $12.6 million. On June 28, 1993, the Company sold
the assets of a subsidiary in New Zealand for approximately $2.2 million and
recognized a gain of $0.3 million.
3. QUASI-REORGANIZATION
Effective April 30, 1994, and in connection with the Company's decision to
dispose of its franchise business, the Company elected to adjust its balance
sheet in accordance with quasi-reorganization accounting principles. A
quasi-reorganization is an elective accounting procedure intended to restate
assets and liabilities to fair values and eliminate any deficit in retained
earnings. The accumulated deficit at April 30, 1994 of $78.4 million was
eliminated against additional paid-in capital. The adjustments to fair value
included $22.7 million of non-cash write-downs of goodwill and other intangible
assets and the write-down of $7.0 million of property, plant and equipment.
Management utilized the services of outside experts in determining the fair
values. The carrying values of all other assets and liabilities at April 30,
1994 were determined to approximate their fair values and no further adjustment
to the historical basis was
F-9
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. QUASI-REORGANIZATION (CONTINUED)
required. Management believes that those adjustments reflected the significant
changes in the evolution of the Company and provided a more appropriate basis to
report future operating results.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Inventory for resale.................................................. $ 348,419 $ 296,458
Less reserve for obsolete inventory................................... (12,640) (11,435)
---------- ----------
335,779 285,023
Spare parts (current)................................................. 14,627 13,663
---------- ----------
$ 350,406 $ 298,686
---------- ----------
---------- ----------
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Furniture and equipment................................................. $ 57,093 $ 46,609
Building and improvements............................................... 14,377 13,707
--------- ---------
71,470 60,316
--------- ---------
Less accumulated depreciation and amortization.......................... (48,287) (40,484)
--------- ---------
$ 23,183 $ 19,832
--------- ---------
--------- ---------
</TABLE>
Depreciation and amortization associated with property and equipment was
$7.7 million, $8.3 million, $7.3 million, and $13.9 million for the fiscal years
ended April 30, 1996 and 1995, the seven months ended April 30, 1994 and the
year ended September 30, 1993.
F-10
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Spare parts (non-current)............................................... $ 28,883 $ 27,324
Capitalized software, net............................................... 13,353 4,974
Deferred income taxes................................................... 5,593 5,593
Other................................................................... 1,070 1,405
--------- ---------
$ 48,899 $ 39,296
--------- ---------
--------- ---------
</TABLE>
Capitalized software represents the costs associated with development of
software for the Company's internal use. Such costs are capitalized in
accordance with Statement of Financial Accounting Standards No. 86, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED,
and are amortized over the remaining useful economic life of the software of up
to five years. Accumulated amortization at April 30, 1996 and 1995 was $0.3 and
$0.0 million, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Line of Credit........................................................ $ 289,072 $ 336,071
Note to stockholder, due January 1996............................... -- 4,578
9.75% note to stockholder............................................. -- 2,463
9.25% note secured by real property, payable in monthly installments
of $26 through April 2003........................................... 1,356 1,721
Other (including obligations under capital leases).................... 4,338 602
---------- ----------
Total Outstanding Debt................................................ $ 294,766 $ 345,435
Less current maturities............................................... (1,759) (7,685)
---------- ----------
$ 293,007 $ 337,750
---------- ----------
---------- ----------
</TABLE>
The line of credit consists of amounts borrowed under a financing agreement
with IBM Credit Corporation ("IBMCC"), an affiliate of one of the Company's
principal vendors. The line of credit is established for $450 million, is
renewable every six months, is secured by portions of the Company's inventory,
accounts receivable and certain other assets and is terminable by the Company or
IBMCC at anytime upon 90 days' written notice. In the event of such termination,
the outstanding borrowings are not due until the end of the term, currently
expiring on October 31, 1997. The financing agreement contains various terms and
covenants which require the Company to maintain certain levels of tangible net
worth and certain other financial restrictions. The financing agreement also
limits the Company's ability to pay cash dividends on its Common Stock. At April
30, 1996, the Company had $386 million outstanding under this facility of which
$97 million is included in accounts payable and $289 million is classified as
long-term debt. The interest rate was prime plus 2.0% through March 31, 1995,
and prime plus 1.06% from April 1,
F-11
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
1995 to March 31, 1996, prime plus 0.45% from April 1, 1996 to April 30, 1996
and prime minus 0.50% thereafter.
Aggregate maturities of long-term debt, excluding the line of credit, are
approximately $1.7 million, $1.7 million, $1.2 million, and $0.3 million,
respectively each of the succeeding four years, and $0.8 million thereafter.
8. CONCENTRATION OF CREDIT RISK
The Company purchases multi-vendor PC products for sale primarily to
end-users and to customers of Merisel FAB, and provides various PC-related
services. Although receivables from end-users are uncollateralized, the credit
risk is limited due to the large number and diversity of customers comprising
the Company's customer base. During fiscal 1993 and the seven months ended April
30, 1994, no individual customer accounted for more than 10% of the Company's
total revenue. During fiscal year 1996 and 1995, Microsoft Corporation accounted
for 12.0%, and 10.8%, respectively, of the Company's total revenue.
9. LEASE COMMITMENTS
The Company leases certain administrative, warehousing and other facilities
under operating leases and equipment under a combination of operating and
capital leases. Most of the Company's operating leases are subject to annual
escalation clauses ranging from two to five percent. Several facilities under
operating leases have been sublet. The future minimum lease payments on
noncancelable operating leases with an initial term in excess of one year and
future sublease income under noncancelable subleases as of April 30, 1996 are as
follows:
<TABLE>
<CAPTION>
MINIMUM LEASE SUBLEASE
PAYMENT INCOME
-------------- -----------
(IN THOUSANDS)
<S> <C> <C>
1997................................................................ $ 12,251 $ 820
1998................................................................ 7,714 348
1999................................................................ 4,234 43
2000................................................................ 1,158 --
2001................................................................ 540 --
Thereafter.......................................................... 939 --
------- -----------
$ 26,836 $ 1,211
------- -----------
------- -----------
</TABLE>
In connection with leases on facilities associated with acquisitions, the
Company established reserves for future lease payments on certain duplicate or
excess facilities. The balance of these reserves at April 30, 1996 was
approximately $2.8 million, which has not reduced the amounts shown above.
Rental expense, under operating leases, charged to operations was $13.8
million, $14.2 million, $8.7 million and $15.2 million during fiscal year ended
April 30, 1996 and 1995, the seven month period ended April 30, 1994 and the
fiscal year ended 1993, respectively.
The cost of assets recorded under capital leases was $4.5 million and $3.3
million at April 30, 1996 and 1995, respectively. Accumulated amortization on
such assets was $0.5 million and $2.8 million at April 30, 1996 and 1995,
respectively. The present value of minimum lease payments under capital leases
as of April 30, 1996 was $4.1 million.
F-12
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
On March 11, 1996, the Company completed an initial public offering selling
8,000,000 shares of its Common Stock. In connection with the initial public
offering, the Company granted to the Underwriters a 30-day option to purchase up
to an additional 2,215,770 shares of Common Stock solely to cover over-
allotments, if any. The Underwriters exercised their option to purchase
1,215,770 of such shares in April 1996.
PREFERRED STOCK, COMMON STOCK AND WARRANTS
Concurrent with the consummation of the initial public offering, all
outstanding shares of Senior Preferred Stock, Class F Preferred Stock and Class
B Common Stock were converted into 19,018,088 shares of Common Stock.
Additionally, all outstanding warrants were exchanged for 4,995,691 shares of
Common Stock, all accrued dividends payable to the holder of the Senior
Preferred Stock totaling $6.2 million were forgiven and all such stock and
warrants converted to Common Stock were canceled.
As of April 30, 1996, 15,000,000 shares of undesignated Preferred Stock,
$0.01 par value are authorized; no shares of this newly authorized class have
been issued.
At April 30, 1996, the Company had 6,000,000 shares of Common Stock reserved
for future issuance for the Company's stock option and stock purchase plans and
29,800 shares of Common Stock reserved for future issuance upon the exercise of
options granted to certain of the Company's former franchisees.
STOCK OPTION PLANS
The Company has two stock option plans which provide for the issuance of
incentive stock options ("ISOs"), stock options that are non-qualified for
Federal income tax purposes ("NQSOs") and stock appreciation rights ("SARs").
The 1988 Stock Option Plan was adopted in July 1988 and provides for the
issuance of ISOs, NQSOs and SARs to key employees and directors. The 1993 Stock
Option Plan was adopted in April 1993 and provides for the issuance of shares of
common stock, ISOs, NQSOs or SARs to highly compensated, managerial employees,
officers and directors. The exercise price of the ISOs under both plans may not
be less than 100% of the fair market value of the Common Stock at the time of
grant. Under the 1993 plan, the exercise price of the NQSOs may not be less than
85% of the fair market value at the time of grant. At April 30, 1996, the total
number of shares of Common Stock for which options may be granted pursuant to
the 1988 and 1993 plans were 2,500,000 and 2,500,000, respectively. Under both
plans, options generally become exercisable ratably over a four or five year
period and expire in ten years. At April 30, 1996, options to purchase 1,403,034
shares were exercisable. At April 30, 1996, no SARs had been issued.
Effective as of May 1, 1995, the Company offered to all current employees
who held options, the right to exchange their options for new options that are
exercisable at a price of $3.00 per share. The new options are subject to a new
four-year vesting schedule commencing May 1, 1995. In connection with this
transaction, 1,164,505 options were exchanged.
F-13
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes option activity through April 30, 1996 under
both plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------------
OPTIONS EXERCISE AGGREGATE
AVAILABLE PRICE PER EXERCISE
FOR GRANT SHARES SHARE PRICE
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at September 30, 1992........................... 119,421 1,803,421 $0.18- 6.00 $ 9,627,876
Granted............................................... (61,800) 61,800 6.00 370,800
Canceled.............................................. 128,390 (128,390) 5.55- 6.00 (746,118)
Expired............................................... 101,876 (101,876) 5.55- 6.00 (572,499)
------------ ----------- ------------- -------------
Balance at September 30, 1993........................... 287,887 1,634,955 0.18- 6.00 8,680,059
Increase in authorized shares......................... 429,800 -- -- --
Granted............................................... (12,500) 12,500 6.00 75,000
Exercised............................................. -- (74,380) 0.18 (13,388)
Canceled.............................................. 22,324 (22,324) 5.55- 6.00 (130,536)
Expired............................................... 132,822 (132,822) 5.55- 6.00 (745,459)
------------ ----------- ------------- -------------
Balance at April 30, 1994............................... 860,333 1,417,929 0.18- 6.00 7,865,676
Granted............................................... (883,726) 883,726 6.00 5,302,356
Canceled.............................................. 69,964 (69,964) 5.55- 6.00 (417,775)
Expired............................................... 70,147 (70,147) 5.55- 6.00 (413,278)
------------ ----------- ------------- -------------
Balance at April 30, 1995............................... 116,718 2,161,544 0.18- 6.00 12,336,979
Increase in authorized shares......................... 2,677,158 -- -- --
Exercised............................................. -- (26,125) 3.00- 6.00 (152,250)
Granted............................................... (2,966,943) 2,966,943 3.00-10.00 12,896,829
Canceled.............................................. 1,229,630 (1,229,630) 3.00- 6.00 (7,139,304)
Expired............................................... 55,247 (55,247) 5.55- 6.00 (315,565)
------------ ----------- ------------- -------------
Balance at April 30, 1996............................... 1,111,810 3,817,485 $0.18-10.00 $ 17,626,689
------------ ----------- ------------- -------------
------------ ----------- ------------- -------------
</TABLE>
STOCK PURCHASE PLAN
On March 11, 1996, the Company adopted an employee purchase plan (the "Stock
Purchase Plan") allowing eligible employees to purchase shares of the Company's
Common Stock. The Stock Purchase Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Code. The total number of shares
of Common Stock authorized for issuance under the plan is 1,000,000. All
full-time employees of the Company are eligible to participate, subject to
certain limited exceptions. The Stock Purchase Plan provides a means for the
Company's employees to purchase stock through payroll deductions of up to 10% of
their gross compensation. The purchase price for shares offered under the Stock
Purchase Plan is equal to 85% of the lower of the closing price of the Common
Stock on the first day of the six month offer period or the last day of the six
month offer period. The initial offer period is from March 11, 1996 to August
31, 1996. At April 30, 1996, no shares were issued to employees participating in
the plan.
F-14
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFITS
The Company provides a savings plan under Section 401(k) of the Internal
Revenue Code to substantially all domestic employees who are over the age of 21.
Employees can contribute up to 12% of their annual salary to the plan up to a
maximum allowed by the Internal Revenue Code. The Company will match 100% of the
employee's contributions up to $200 not to exceed the maximum of 1% of the
employee's eligible compensation. If the employee contributes more than $200 to
the plan, the Company will contribute an amount equal to the greater of $200 or
25% of the employee's contribution up to a maximum of 1% of the employee's
eligible compensation. The amount charged to expense for the matching
contribution was $0.7 million, $0.7 million, $0.5 million, and $0.7 million for
the fiscal years ended April 30, 1996 and 1995, the seven month period ended
April 30, 1994, and the year ended September 30, 1993, respectively.
12. INCOME TAXES
The income tax benefit (provision) computed under Statement of Financial
Accounting Standards No. 109, consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 30, SEVEN MONTHS FISCAL YEAR
--------------------- ENDED APRIL ENDED SEPTEMBER
1996 1995 30, 1994 30, 1993
---------- --------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal...................................................... $ -- $ -- $ (500) $ --
State........................................................ (100) (200) (500) --
Foreign...................................................... -- -- -- (260)
---------- --------- ------------- ---
(100) (200) (1,000) (260)
---------- --------- ------------- ---
Deferred:
Federal...................................................... (8,561) (562) (7,631) 190
State........................................................ (1,468) (119) (1,122) --
---------- --------- ------------- ---
(10,029) (681) (8,753) 190
---------- --------- ------------- ---
Total gross margin....................................... $ (10,129) $ (881) $ (9,753) $ (70)
---------- --------- ------------- ---
---------- --------- ------------- ---
</TABLE>
The income tax benefit (provision) is allocated between discontinued and
continuing operations as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, SEVEN MONTHS ENDED
--------------------- ENDED APRIL SEPTEMBER 30,
1996 1995 30, 1994 1993
---------- --------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Provision allocated to operations of discontinued businesses
and income on disposal of discontinued business.............. $ (5,400) $ -- $ (14,399) $ (6,811)
---------- --------- ------------- -------------
---------- --------- ------------- -------------
Income tax benefit (provision) allocated to continuing
operations................................................... $ (4,729) $ (881) $ 4,646 $ 6,741
---------- --------- ------------- -------------
---------- --------- ------------- -------------
</TABLE>
F-15
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
Significant components of deferred tax liabilities and assets consist of the
following:
<TABLE>
<CAPTION>
APRIL 30,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Capital leases...................................................... $ -- $ 91
Other............................................................... -- 106
---------- ----------
Total deferred tax liabilities.................................... -- 197
---------- ----------
Deferred tax assets:
Reserves............................................................ 8,220 9,504
Inventory reserves.................................................. 6,446 9,441
Other expenses, not currently deductible............................ 2,751 6,454
Net operating loss carryforward..................................... 13,926 10,381
Other............................................................... -- 5,789
---------- ----------
Total deferred tax assets......................................... 31,343 41,569
---------- ----------
Total net deferred tax assets......................................... $ 31,343 $ 41,372
---------- ----------
---------- ----------
</TABLE>
The net operating loss carryforwards listed above expire in the years 2000
through 2010.
Realization of the total net deferred tax assets is dependent on generating
future taxable income. The
full realization of the $31.3 million of deferred tax assets carried at April
30, 1996 is dependent upon the Company achieving future pretax earnings, prior
to the expiration of the net operating loss carryforwards, of $84.7 million.
Although realization is not assured, Management believes that sufficient taxable
income will be generated through operations to realize the net deferred tax
assets. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
Income before income taxes from foreign operations was $0.0 million, $0.0
million, $0.9 million and, $3.4 million for fiscal years ended April 30, 1996
and 1995, the seven months ended April 30, 1994, and the fiscal year ended
September 30, 1993, respectively.
A reconciliation of the U.S. statutory income tax rate and the effective
rate of the income tax benefit (provision) allocated to continuing operations is
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, SEVEN MONTHS ENDED
-------------------- ENDED APRIL SEPTEMBER 30,
1996 1995 30, 1994 1993
--------- --------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Statutory tax rate at 35% (34% for 1993)........................ $ (4,473) $ (752) $ 4,065 $ 8,667
State income taxes, net of federal benefit...................... (536) (108) 210 725
Losses not benefited............................................ -- -- -- (2,736)
Other........................................................... 280 (21) 371 85
--------- --------- ------ ------
$ (4,729) $ (881) $ 4,646 $ 6,741
--------- --------- ------ ------
--------- --------- ------ ------
</TABLE>
F-16
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Pro forma net income per share and shares used in per share calculation for
fiscal year 1996 and 1995 have been presented on the consolidated statements of
income as if the conversion of the Company's preferred stock and warrants had
occurred at the later of the beginning of fiscal year 1995 or the issuance date.
Both pro forma and historical income (loss) per share is computed using the
weighted average number of shares of Common Stock and dilutive common stock
equivalents outstanding during the period. Common stock equivalents are computed
on the preferred stock using the if-converted method and on the outstanding
options using the treasury stock method. During the fiscal years ended 1995 and
1993 the effect upon the historical income (loss) per share of common stock
equivalents was antidilutive and is therefore excluded from the calculations.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common stock equivalents also include amounts computed on options and warrants
issued within twelve months of the filing date as if they were outstanding for
all periods presented using the treasury stock method and the initial public
offering price.
The following is a summary of the historical income (loss) per common and
common equivalent share and historical shares used in per share calculation:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, SEVEN MONTHS ENDED
-------------------- ENDED APRIL SEPTEMBER 30,
1996 1995 30, 1994 1993
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Historical income (loss) per share:
Continuing operations...................................... $ 0.27 $ (0.17) $ (0.24 ) $ (1.89 )
Discontinued operations.................................... 0.30 -- 1.76 1.21
--------- --------- ------------- -------------
Total historical income (loss) per share..................... $ 0.57 $ (0.17) $ 1.52 $ (0.68 )
--------- --------- ------------- -------------
--------- --------- ------------- -------------
Weighted average number of shares
(in thousands):
Common stock............................................... 14,247 11,040 11,168 9,282
Common stock equivalents................................... 15,974 2,671 18,053 2,671
--------- --------- ------------- -------------
Historical shares used in per share calculation.............. 30,221 13,711 29,221 11,953
--------- --------- ------------- -------------
--------- --------- ------------- -------------
</TABLE>
14. LITIGATION AND CONTINGENCIES
Various legal actions arising in the normal course of business have been
brought against the Company and certain of its subsidiaries. Management believes
that the ultimate resolution of these actions will not have a material adverse
effect on the Company's financial position or results of operations, taken as a
whole.
15. SUBSEQUENT EVENTS
Effective May 24, 1996, the Company, through a wholly-owned subsidiary,
acquired certain of the assets and assumed certain of the liabilities of
Dataflex Corporation and of Dataflex's wholly-owned subsidiary, Dataflex
Southwest Corporation. The assets acquired and liabilities assumed comprise
substantially all of the assets and liabilities previously associated with the
business operations of Dataflex known as the Dataflex Western Region and
Dataflex Southwest Region. The two Dataflex regions offer PC product
F-17
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS (CONTINUED)
distribution, service and support in the states of Arizona, California,
Colorado, New Mexico, Nevada and Utah and reported revenues of approximately
$145 million for the fiscal year ended March 31, 1996. The purchase price of the
assets and businesses acquired from Dataflex was approximately $42.0 million,
subject to certain post-closing adjustments. Of this amount, the Company paid
approximately $37.0 million in cash on May 29, 1996, with the remainder due
following the completion of an audit of the assets acquired and the liabilities
assumed as of May 31, 1996 and the completion of certain other post closing
matters.
On May 29, 1996, the Company entered into an agreement with a third party
under which the Company received $15.6 million in cash in exchange for providing
the third party the right to receive payments in May, June and July 1997
totaling $20.0 million out of amounts collected from the extended credit owed to
the Company by Merisel FAB. As a result of the agreement, the Company adjusted a
portion of the reserve on its extended credit from Merisel FAB resulting in
additional pre-tax income of $15.6 million during the quarter ended April 30,
1996.
On June 5, 1996, the Company entered into an agreement to acquire Mentor
Technologies LTD, ("Mentor"), an Ohio limited partnership providing information
technology training and education. Mentor reported revenues of approximately
$5.5 million for the year ended December 31, 1995. The Company anticipates
accounting for the acquisition as a "pooling of interests" as defined by
Accounting Principals Board Opinion No. 16., BUSINESS COMBINATIONS. Consummation
of the transaction is subject to certain closing conditions and compliance with
applicable law.
F-18
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JULY 31, APRIL 30,
1996 1996
----------- ----------
<S> <C> <C>
(UNAUDITED)
Current assets:
Cash................................................................................... $ 13,674 $ 14,498
Receivables, net of allowance for doubtful accounts of $12,532 at July 31, 1996, and
$14,812 at April 30,1996............................................................. 292,061 298,484
Inventories............................................................................ 337,021 350,406
Deferred income taxes.................................................................. 20,016 25,750
Prepaid expenses and other current assets.............................................. 2,114 2,432
----------- ----------
Total current assets................................................................. 664,886 691,570
Property and equipment, net.............................................................. 22,883 23,183
Other assets, net........................................................................ 49,530 48,899
Goodwill, net of accumulated amortization of $3,687 at July 31, 1996, and $3,453 at April
30, 1996............................................................................... 52,921 39,713
----------- ----------
$ 790,220 $ 803,365
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 343,260 $ 305,374
Accrued liabilities.................................................................... 44,573 41,586
Deferred revenue....................................................................... 24,348 27,109
Current maturities of long-term debt................................................... 1,938 1,759
----------- ----------
Total current liabilities............................................................ 414,119 375,828
Long-term debt, less current maturities.................................................. 233,216 293,007
Other long-term liabilities.............................................................. 6,069 7,477
Commitments and contingencies............................................................ -- --
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares authorized, 40,475,144 shares issued
and outstanding...................................................................... 40 40
Additional paid-in capital............................................................. 115,097 115,097
Retained earnings (since a deficit elimination of $78,448 at April 30, 1994)........... 21,679 11,916
----------- ----------
Total stockholders' equity........................................................... 136,816 127,053
----------- ----------
$ 790,220 $ 803,365
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Revenue:
Product................................................................................. $ 490,065 $ 374,083
Services................................................................................ 69,025 53,086
---------- ----------
Total revenue......................................................................... 559,090 427,169
Cost of revenue:
Product................................................................................. 441,593 339,883
Services................................................................................ 39,375 28,391
---------- ----------
Total cost of revenue................................................................. 480,968 368,274
---------- ----------
Gross margin.............................................................................. 78,122 58,895
Selling, general and administrative expenses.............................................. 56,896 46,362
---------- ----------
Operating income.......................................................................... 21,226 12,533
Interest income......................................................................... 882 1,557
Interest expense........................................................................ (6,611) (8,830)
---------- ----------
Income before income taxes................................................................ 15,497 5,260
Income tax provision.................................................................... (5,734) (1,946)
---------- ----------
Net income................................................................................ $ 9,763 $ 3,314
---------- ----------
---------- ----------
Primary and fully diluted earnings per share (pro forma prior to March 11, 1996--see note
2)...................................................................................... $ 0.23 $ 0.10
---------- ----------
---------- ----------
Shares used in per share calculation...................................................... 43,141 33,030
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
VANSTAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31,
--------------------------
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 9,763 $ 3,314
Adjustments:
Depreciation and amortization................... 3,870 2,393
Change in provision for doubtful accounts....... (1,779) 631
Changes in operating assets and liabilities:
Receivables................................... 30,867 16,798
Inventories................................... 20,379 (26,695)
Prepaid expenses and other assets............. 294 (276)
Deferred income taxes......................... 5,734 1,946
Accounts payable.............................. 31,726 (10,288)
Accrued and other liabilities................. (6,448) (2,706)
------------ ------------
Total adjustments........................... 84,643 (18,197)
------------ ------------
Net cash provided by (used in) operating
activities........................................ 94,406 (14,883)
Cash flows from investing activities:
Capital expenditures.............................. (3,148) (4,163)
Proceeds from sale of building.................... 3,125 --
Purchase of business, net of cash acquired........ (34,532) --
------------ ------------
Net cash used in investing activities............... (34,555) (4,163)
Cash flows from financing activities:
Payments on long-term debt........................ (1,903) (196)
Borrowings (repayments) under line of credit,
net............................................. (58,772) 21,711
Issuance of warrants.............................. -- 500
------------ ------------
Net cash provided by (used in) financing
activities........................................ (60,675) 22,015
------------ ------------
Net increase (decrease) in cash..................... (824) 2,969
Cash at beginning of the period................... (14,498 7,761
------------ ------------
Cash at end of the period........................... $ 13,674 $ 10,730
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The financial statements for Vanstar Corporation (the "Company") for the
three month periods ended July 31, 1996 and July 31, 1995 are unaudited and have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the financial statements reflect all adjustments (of a
normal and recurring nature) which are necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods. The results of operations for the three months endedJuly 31, 1996 are
not necessarily indicative of the results to be expected for the entire fiscal
year.
2. EARNINGS PER SHARE
Earnings per share and shares used in per share calculation for periods
prior to March 11, 1996, the date of the Company's initial public offering, have
been presented on the consolidated statements of income as if the conversion of
the Company's preferred stock and warrants had occurred at the later of the
beginning of the period or the issuance date.
Primary and fully diluted earnings per share is computed using the weighted
average number of shares of Common Stock and dilutive common stock equivalents
outstanding during the period. Common stock equivalents are computed for the
Company's outstanding options using the treasury stock method. Pursuant to the
Securities and Exchange Commission Staff AccountingBulletins, common stock
equivalents also include amounts computed on options and warrants issued during
the twelve months immediately preceding the date of the initial filing of the
Company's Registration Statement on Form S-1 relating to the Company's initial
public offering as if they were outstanding for all periods prior to the closing
on March 11, 1996 (using the treasury stock method and the initial public
offering price of $10.00).
3. LITIGATION AND CONTINGENCIES
Various legal actions arising in the normal course of business have been
brought against the Company. Management believes that the ultimate resolution of
these actions will not have a material adverse effect on the Company's financial
position or results of operations, taken as a whole.
4. ACQUISITION
Effective May 24, 1996, the Company, through a wholly-owned subsidiary,
acquired certain of the assets and assumed certain of the liabilities of
Dataflex Corporation and of Dataflex's wholly-owned subsidiary, Dataflex
Southwest Corporation. The assets acquired and liabilities assumed comprise
substantially all of the assets and liabilities previously associated with the
business operations of Dataflex known as the Dataflex Western Regionand Dataflex
Southwest Region. The two Dataflex regions offer PC product distribution,
service and support in the states of Arizona, California, Colorado, New Mexico,
Nevada and Utah and reported revenues of approximately $145 million for the
fiscal year ended March 31, 1996. The purchase price of the assets and
businesses acquired from Dataflex was approximately $42.0 million, subject to
certain post-closing adjustments. Of this amount, the Company paid approximately
$37.0 million in cash on May 29, 1996, with the remainder due following the
completion of an audit of the assets acquired and the liabilities assumed as of
May 31, 1996 and the completion of certain other post closing matters.
F-22
<PAGE>
VANSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SUBSEQUENT EVENTS
On August 27, 1996, the Company announced that it plans to offer
approximately $125.0 million ($143.8 million if the underwriter's over-allotment
option is exercised in full) of convertible preferred trust interests to
qualified institutional buyers and a limited number of other institutional
accredited investors and foreign investors. The trust interests will be
convertible to shares of the Company's Common Stock and will entitle holders to
quarterly distribution payments. The Company intends to use the net proceeds of
the offering to reduce the outstanding indebtedness to IBM Credit Corporation
("IBMCC") as part of a refinancing plan directed at converting its long-term
variable rate debt to fixed rate debt and reducing its overall interest costs.
The refinancing plan also contemplates repayment of the remainder of the IBMCC
indebtedness with the proceeds of an accounts receivable-based asset
securitization transaction promptly following the consummation of the offering.
The Companyexpects to complete the refinancing plan duringthe second quarter of
its current fiscal year.
Effective September 4, 1996, the Company consummated the acquisition of
Mentor Technologies, Ltd. ("Mentor"), an Ohio limited partnership providing
information technology training and education. Mentor reported revenues of
approximately $5.5 million for the year ended December 31, 1995.
F-23
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR ANY OF THEIR AGENTS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE SUCH DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Available Information.......................... 4
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995..... 4
Summary........................................ 5
Risk Factors................................... 13
The Company.................................... 25
Vanstar Financing Trust........................ 25
Accounting Treatment........................... 26
Market Prices and Dividend Policy.............. 27
Capitalization................................. 28
Selected Consolidated Financial Data........... 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 30
Business....................................... 40
Recent Developments............................ 49
Management..................................... 51
Security Ownership of Principal Stockholders
and Management............................... 60
Certain Transactions........................... 62
Description of the Preferred Securities........ 63
Description of the Guarantee................... 81
Description of the Convertible Debentures...... 84
Effect of Obligations under the Convertible
Debentures and the Guarantee................. 93
Description of Capital Stock................... 94
Certain United States Federal Income Tax
Considerations............................... 96
Certain ERISA Considerations................... 99
Selling Holders................................ 100
Plan of Distribution........................... 100
Legal Matters.................................. 101
Experts........................................ 101
Index to Consolidated Financial Statements..... F-1
</TABLE>
VANSTAR FINANCING TRUST
4,025,000
6 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
VANSTAR CORPORATION
[LOGO]
Dated , 1996.
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered other than underwriting
discounts and commissions.All of the amounts shown are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee......................... $ 67,694
Accounting fees and expenses.......................................... 75,000
Legal fees and expenses (exclusive of Blue Sky)....................... 300,000
Printing and engraving expenses....................................... 125,000
Transfer agent and Trustees fees and expenses......................... 37,500
Blue Sky fees and expenses............................................ 7,500
Miscellaneous......................................................... 10,000
---------
Total............................................................... $ 622,694
---------
---------
</TABLE>
The Company will bear all of the foregoing fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article VI of the Registrant's Restated Certificate of Incorporation
(the "Certificate of Incorporation") eliminates the liability of the
Registrant's directors to the Registrant or its stockholders, except for
liabilities related to breach of duty of loyalty, actions not in good faith and
certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Registrant of
its directors and officers. In addition, Article IX, Section 1 of the
Registrant's Restated By-Laws (the "By-laws") requires the Registrant to
indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. In addition, the Registrant has entered into indemnity
agreements with its directors which obligate the Registrant to indemnify such
directors to the fullest extent permitted by the DGCL. The Registrant has also
obtained officers and directors liability insurance which insures against
liabilities that officers and directors of the Registrant may incur in such
capacities.
The Declaration provides for full indemnification of any Regular Trustee,
the Delaware Trustee and the Property Trustee, any affiliate of any such
Trustee, any officers, directors, shareholders, members, partners, employees,
representatives or agents of any such Trustee and any officer, employee or agent
of the Trust or its affiliates (each an "Indemnified Person") by the Company in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of such Indemnified Person's status
as an Indemnified Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The Declaration
also provides that the Company shall indemnify, to the fullest extent permitted
by law, any Indemnified Person in connection with any threatened, pending or
completed action or suit by or in the right of the Trust by reason of such
Indemnified Person's status as an Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust and except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such Indemnified Person shall have been
adjudged to be liable to the Trust unless the appropriate court shall determine
upon application that, despite the adjudication of liability, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper. Further, the Declaration provides that
II-1
<PAGE>
expenses (including legal fees) incurred by an Indemnified Person in defending
any such claim, demand, action, suit or proceeding, shall from time to time be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by or an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified for the underlying cause of
action as authorized by the Declaration.
The Selling Holders will be indemnified by the Company and the Trust,
jointly and severally, against certain civil liabilities, including certain
liabilities under the Securities Act or will be entitled to contribution in
connection therewith. The Company and the Trust will be indemnified by the
Selling Holders severally against certain civil liabilities, including certain
liabilities under the Securities Act or will be entitled to contribution in
connection therewith.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since December 31, 1993, the Company has sold the following unregistered
securities:
1. In May 1995, the Company issued and sold a warrant to purchase 2,000,000
shares of Common Stock at an exercise price of $5.00 per share for an aggregate
purchase price of $500,000. In connection with the Company's initial public
offering, the holder of that portion of such warrant representing the right to
acquire 1,945,739 shares of Common Stock has foregone the right to acquire
523,096 shares under such warrant and has waived certain registration rights in
exchange for the Company's issuing 1,562,643 shares of Common Stock to such
holder.
2. In December 1995 and February 1996, the Company issued an aggregate of
25,225 shares of Common Stock to former employees who had exercised options for
an aggregate exercise price of $149,650.
3. In October 1996, the Company issued $180,412,350 of its 6 3/4%
Convertible Subordinated Debentures Due 2016 to the Trust in connection with the
Original Offering.
4. In November 1996, the Company issued $27,061,850 of its 6 3/4%
Convertible Subordinated Debentures Due 2016 to the Trust in connection with the
over-allotment option granted the Initial Purchasers as part of the Original
Offering.
5. The Company has granted outstanding options to purchase up to an
aggregate of 4,094,593 shares of Common Stock at a weighted average exercise
price of approximately $6.90 per share.
All transactions described above were effected in reliance upon the
exemption from the registration requirements of the Securities Act contained in
Section 4(2) of the Securities Act or Rule 701 promulgated thereunder. In
connection with each of these transactions, the securities were sold to a
limited number of persons, such persons were provided access to all relevant
information regarding the Company and/or represented to the Company that they
were "sophisticated" investors, and such persons represented to the Company that
the securities were purchased for investment purposes only and with no view
toward distribution.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The following is a list of all exhibits filed as part of this Registration
Statement on Form S-1, including those incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Registrant (1)
3.2 By-laws of the Registrant (1)
*4.1 Certificate of Trust of Vanstar Financing Trust
*4.2 Amended and Restated Declaration of Trust of Vanstar Financing Trust dated as of October 2, 1996 among
Jeffrey S. Rubin, Leslie J. Alvarez, John J. Dunican, Jr. and Wilmington Trust Company as trustees
and Vanstar Corporation as sponsor
*4.3 Indenture dated as of October 2, 1996 between Vanstar Corporation as issuer and Wilmington Trust
Company as trustee
4.4 Form of 6 3/4% Preferred Securities (included as Exhibit A-1 to Exhibit 4.2 above)
4.5 Form of 6 3/4% Convertible Subordinated Debentures Due 2016 (included as Exhibit B to Exhibit 4.2
above)
*4.6 Preferred Securities Guarantee Agreement dated October 2, 1996 between Vanstar Corporation as guarantor
and Wilmington Trust Company as preferred guarantee trustee
*5.1 Opinion of Arter & Hadden (including the consent of such firm) as to the legality of the Vanstar
Corporation Common Stock, 6 3/4% Convertible Subordinated Debentures Due 2016, 6 3/4% Preferred
Securities and the Preferred Securities Guarantee being registered hereby and as to certain tax
matters
*8.1 Opinion of Arter & Hadden (including the consent to such firm) as to certain tax matters (included in
Exhibit 5.1 above)
10.1 Form of Indemnity Agreement between the Company and each of its directors and certain officers (1)
10.2 Second Amended and Restated Financing Program Agreement dated April 30, 1995, between the Registrant
and IBM Credit Corporation ("IBMCC"), as amended (1)
**10.3 Distribution and Services Agreement dated January 31, 1994, between the Registrant and Merisel FAB,
Inc., as amended (1)
10.4 Amended and Restated Registration Rights Agreement dated as of May 18, 1995, among the Registrant,
NYNEX Worldwide Services Group, Inc., Warburg, Pincus Capital Company, L.P., WP Capco, Inc., William
Y. Tauscher, Richard H. Bard and Microsoft Corporation (1)
10.5 Lease Agreement dated as of July 14, 1988, entered into between the Registrant and Rosewood Associates
(1)
10.6 Real Estate Mortgage dated as of April 6, 1978, entered into between Danners, Inc. and New England
Mutual Life Insurance Company and the subsequent Contract for Purchase of Real Estate/Offer to
Purchase Real Estate dated as of April 26, 1991, entered into between the Registrant and Cheyenne
Plaza Associates (1)
10.7 Lease Agreement dated as of December 9, 1993, entered into between the Registrant and WRC Properties,
Inc. (1)
10.8 Lease Agreement dated as of August 21, 1991, entered into among the Registrant, Lincoln Las Positas and
Patrician Associates, Inc. (1)
10.9 Standard Industrial/Commercial Single-Tenant Lease-Gross dated as of March 27, 1995, entered into among
the Registrant, Thomas G. Allan and Annie L. Henry (1)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.10 Lease Agreement dated as of March 29, 1994, entered into between the Registrant and TMC Properties,
Inc. (1)
10.11 Lease Agreement dated as of November 1, 1991, entered into between the Registrant and ASC North Fulton
Associates Joint Venture (1)
10.12 Asset Purchase Agreement with Dataflex Corporation, Dataflex Southwest Corporation (2)
10.13 Agreement with Donaldson Lufkin & Jenrette Securities Corporation (3)
10.14 Agreement for Purchase and Sale of Property dated June 3, 1996 entered into between the Registrant and
Duke Realty Limited Partnership (4) (incorporated by reference to Exhibit 10.13)
10.15 Lease Agreement dated as of June 3, 1996 entered into between the Registrant and Duke Realty Limited
Partnership (4) (incorporated by reference to Exhibit 10.14)
10.16 Lease Agreement dated as of May 30, 1996 entered into between the Registrant and Dugan Realty, L.L.C.
(4) (incorporated by reference to Exhibit 10.15)
10.17 Lease Agreement dated as of June 3, 1996 entered into between the Registrant and Duke Realty Limited
Partnership (4) (incorporated by reference to Exhibit 10.16)
10.18 Lease Amendment dated May 15, 1996 entered into between the Registrant and Rosewood Associates (4)
(incorporated by reference to Exhibit 10.17)
10.19 1988 Stock Option Plan (1) (incorporated by reference to Exhibit 4.1)
10.20 Form of Nontransferable Non-Qualified Stock Option Agreement under the 1988 Stock Option Plan of the
Registrant (1) (incorporated by reference to Exhibit 4.2)
10.21 1993 Stock Option/Stock Issuance Plan (1) (incorporated by reference to Exhibit 4.3)
10.22 Form of Stock Option Grant and Stock Purchase Agreement under the 1993 Stock Option Plan (1)
(incorporated by reference to Exhibit 4.4)
10.23 Employee Stock Purchase Plan (1) (incorporated by reference to Exhibit 4.5)
*10.24 Registration Rights Agreement dated October 2, 1996 by and among the Registrant and the Initial
Purchasers
*11.1 Statement re Calculation of Earnings Per Share
*12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
*21.1 List of subsidiaries
*23.1 Consent of Arter & Hadden (included as part of its opinion filed as Exhibit 5.1 hereto)
*23.2 Consent of Ernst & Young LLP, independent auditors
*24.1 Power of Attorney (included on signature page hereto)
*25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), of Wilmington Trust Company as Trustee under the Indenture relating to
the 6 3/4% Convertible Subordinated Debentures Due 2016
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of Wilmington Trust Company as Property
Trustee under the Amended and Restated Declaration of Trust
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of Wilmington Trust Company as
Preferred Guarantee Trustee under the Preferred Securities Guarantee Agreement
</TABLE>
- ------------------------
(1) Incorporated by reference to Exhibits with the corresponding number (except
as otherwise noted) filed with Registrant's Registration Statement on Form
S-1 (Reg. No. 33-80297) as declared effective by the Commission on March 8,
1996.
(2) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated May 24, 1996.
II-4
<PAGE>
(3) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated June 14, 1996.
(4) Incorporated by reference to Exhibits with the corresponding number (except
as otherwise noted) filed with Registrant's Annual Report on Form 10-K for
the fiscal year ended April 30, 1996.
* Filed herewith.
** Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 406 under the Securities Act.
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is included in this Registration
Statement:
II Valuation and Qualifying Accounts
All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.
ITEM 17. UNDERTAKINGS.
(a) RULE 415 OFFERING. 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;
(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.
(h) REQUEST FOR ACCELERATION OF EFFECTIVE DATE. Insofar as indemnification
for liabilities arising out of the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant 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 Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by each director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit it 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.
II-5
<PAGE>
COMPANY SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pleasanton, State of
California, on the 14th day of November 1996.
VANSTAR CORPORATION
By: /s/ WILLIAM Y. TAUSCHER
-----------------------------------------
William Y. Tauscher
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
We, the undersigned directors and officers of the VANSTAR CORPORATION, do
hereby constitute and appoint WILLIAM Y. TAUSCHER and H. CHRISTOPHER COVINGTON,
or either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto; and we do
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall 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 on the 14th day of November, 1996, by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ WILLIAM Y. TAUSCHER
------------------------------------------- Chairman of the Board, Chief Executive Officer and
William Y. Tauscher Director (PRINCIPAL EXECUTIVE OFFICER)
/s/ JEFFREY S. RUBIN
------------------------------------------- Vice Chairman, Chief Financial Officer and Director
Jeffrey S. Rubin (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ JAY S. AMATO
------------------------------------------- President, Chief Operating Officer and Director
Jay S. Amato
/s/ JOHN W. AMERMAN
------------------------------------------- Director
John W. Amerman
/s/ RICHARD H. BARD
------------------------------------------- Director
Richard H. Bard
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ STEPHEN W. FILLO
------------------------------------------- Director
Stephen W. Fillo
/s/ STEWART K. P. GROSS
------------------------------------------- Director
Stewart K. P. Gross
/s/ WILLIAM H. JANEWAY
------------------------------------------- Director
William H. Janeway
/s/ JOHN R. OLTMAN
------------------------------------------- Director
John R. Oltman
/s/ JOHN L. VOGELSTEIN
------------------------------------------- Director
John L. Vogelstein
/s/ JOSH S. WESTON
------------------------------------------- Director
Josh S. Weston
</TABLE>
II-7
<PAGE>
TRUST SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Vanstar
Financing Trust has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pleasanton,
State of California, on the 14th day of November, 1996.
VANSTAR FINANCING TRUST
By: /s/ LESLIE J. ALVAREZ
-----------------------------------------
Leslie J. Alvarez,
TRUSTEE
By: /s/ JOHN J. DUNICAN, JR.
-----------------------------------------
John J. Dunican, Jr.,
TRUSTEE
II-8
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated balance sheets of Vanstar Corporation as of
April 30, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended April 30, 1996 and 1995,
the seven month period ended April 30, 1994 and the year ended September 30,
1993, and have issued our report thereon dated June 10, 1996 (included elsewhere
in this Registration Statement on Form S-1). Our audits also included the
financial statement schedule of Vanstar Corporation listed in item 16(b). This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
San Jose, California
June 10, 1996
S-1
<PAGE>
VANSTAR CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGED
BEGINNING OF TO COSTS AND WRITE-OFFS/ BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS PERIOD EXPENSES OTHER END OF PERIOD
- ------------------------------------------------------ ------------ ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Year ended September 30, 1993........................ $ 23,533 $ 5,287 $ 12,621 $ 16,199
Seven months ended April 30, 1994................... 16,199 356 2,457 14,098
Year ended April 30, 1995........................... 14,098 95 1,867 12,326
Year ended April 30, 1996........................... 12,326 $ 14,393* $ 8,407** 18,312
<CAPTION>
INVENTORY RESERVES
- ------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended September 30, 1993........................ $ 23,698 $ 6,760 $ 17,564 $ 12,894
Seven months ended April 30, 1994................... 12,894 1,213 2,660 11,447
Year ended April 30, 1995........................... 11,447 5,400 5,412 11,435
Year ended April 30, 1996........................... 11,435 3,854 2,649 12,640
</TABLE>
- ------------------------
* Includes a provision for $4.4 million against the extended interest-bearing
credit and $7.8 million against the extended credit both due from Merisel
FAB (see Notes 2 and 15 to the Notes to Consolidated Financial Statements).
** Includes the write-off of $4.4 million of the extended interest-bearing
credit due from Merisel FAB.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Registrant (1)
3.2 By-laws of the Registrant (1)
*4.1 Certificate of Trust of Vanstar Financing Trust
*4.2 Amended and Restated Declaration of Trust of Vanstar Financing Trust dated as of October 2, 1996 among
Jeffrey S. Rubin, Leslie J. Alvarez, John J. Dunican, Jr. and Wilmington Trust Company as trustees and
Vanstar Corporation as sponsor
*4.3 Indenture dated as of October 2, 1996 between Vanstar Corporation as issuer and Wilmington Trust
Company as trustee
4.4 Form of 6 3/4% Preferred Securities (included as Exhibit A-1 to Exhibit 4.2 above)
4.5 Form of 6 3/4% Convertible Subordinated Debentures Due 2016 (included as Exhibit B to Exhibit 4.2
above)
*4.6 Preferred Securities Guarantee Agreement dated October 2, 1996 between Vanstar Corporation as guarantor
and Wilmington Trust Company as preferred guarantee trustee
*5.1 Opinion of Arter & Hadden (including the consent of such firm) as to the legality of the Vanstar
Corporation Common Stock, 6 3/4% Convertible Subordinated Debentures Due 2016, 6 3/4% Preferred
Securities and the Preferred Securities Guarantee being registered hereby and as to certain tax matters
*8.1 Opinion of Arter & Hadden (including the consent to such firm) as to certain tax matters (included in
Exhibit 5.1 above)
10.1 Form of Indemnity Agreement between the Company and each of its directors and certain officers (1)
10.2 Second Amended and Restated Financing Program Agreement dated April 30, 1995, between the Registrant
and IBM Credit Corporation ("IBMCC"), as amended (1)
**10.3 Distribution and Services Agreement dated January 31, 1994, between the Registrant and Merisel FAB,
Inc., as amended (1)
10.4 Amended and Restated Registration Rights Agreement dated as of May 18, 1995, among the Registrant,
NYNEX Worldwide Services Group, Inc., Warburg, Pincus Capital Company, L.P., WP Capco, Inc., William Y.
Tauscher, Richard H. Bard and Microsoft Corporation (1)
10.5 Lease Agreement dated as of July 14, 1988, entered into between the Registrant and Rosewood Associates
(1)
10.6 Real Estate Mortgage dated as of April 6, 1978, entered into between Danners, Inc. and New England
Mutual Life Insurance Company and the subsequent Contract for Purchase of Real Estate/Offer to Purchase
Real Estate dated as of April 26, 1991, entered into between the Registrant and Cheyenne Plaza
Associates (1)
10.7 Lease Agreement dated as of December 9, 1993, entered into between the Registrant and WRC Properties,
Inc. (1)
10.8 Lease Agreement dated as of August 21, 1991, entered into among the Registrant, Lincoln Las Positas and
Patrician Associates, Inc. (1)
10.9 Standard Industrial/Commercial Single-Tenant Lease-Gross dated as of March 27, 1995, entered into among
the Registrant, Thomas G. Allan and Annie L. Henry (1)
10.10 Lease Agreement dated as of March 29, 1994, entered into between the Registrant and TMC Properties,
Inc. (1)
10.11 Lease Agreement dated as of November 1, 1991, entered into between the Registrant and ASC North Fulton
Associates Joint Venture (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.12 Asset Purchase Agreement with Dataflex Corporation, Dataflex Southwest Corporation (2)
10.13 Agreement with Donaldson Lufkin & Jenrette Securities Corporation (3)
10.14 Agreement for Purchase and Sale of Property dated June 3, 1996 entered into between the Registrant and
Duke Realty Limited Partnership (4) (incorporated by reference to Exhibit 10.13)
10.15 Lease Agreement dated as of June 3, 1996 entered into between the Registrant and Duke Realty Limited
Partnership (4) (incorporated by reference to Exhibit 10.14)
10.16 Lease Agreement dated as of May 30, 1996 entered into between the Registrant and Dugan Realty, L.L.C.
(4) (incorporated by reference to Exhibit 10.15)
10.17 Lease Agreement dated as of June 3, 1996 entered into between the Registrant and Duke Realty Limited
Partnership (4) (incorporated by reference to Exhibit 10.16)
10.18 Lease Amendment dated May 15, 1996 entered into between the Registrant and Rosewood Associates (4)
(incorporated by reference to Exhibit 10.17)
10.19 1988 Stock Option Plan (1) (incorporated by reference to Exhibit 4.1)
10.20 Form of Nontransferable Non-Qualified Stock Option Agreement under the 1988 Stock Option Plan of the
Registrant (1) (incorporated by reference to Exhibit 4.2)
10.21 1993 Stock Option/Stock Issuance Plan (1) (incorporated by reference to Exhibit 4.3)
10.22 Form of Stock Option Grant and Stock Purchase Agreement under the 1993 Stock Option Plan (1)
(incorporated by reference to Exhibit 4.4)
10.23 Employee Stock Purchase Plan (1) (incorporated by reference to Exhibit 4.5)
*10.24 Registration Rights Agreement dated October 2, 1996 by and among the Registrant and the Initial
Purchasers
*11.1 Statement re Calculation of Earnings Per Share
*12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
*21.1 List of subsidiaries
*23.1 Consent of Arter & Hadden (included as part of its opinion filed as Exhibit 5.1 hereto)
*23.2 Consent of Ernst & Young LLP, independent auditors
*24.1 Power of Attorney (included on signature page hereto)
*25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), of Wilmington Trust Company as Trustee under the Indenture relating to the
6 3/4% Convertible Subordinated Debentures Due 2016
*25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of Wilmington Trust Company as Property
Trustee under the Amended and Restated Declaration of Trust
*25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of Wilmington Trust Company as
Preferred Guarantee Trustee under the Preferred Securities Guarantee Agreement
</TABLE>
- ------------------------
(1) Incorporated by reference to Exhibits with the corresponding number (except
as otherwise noted) filed with Registrant's Registration Statement on Form
S-1 (Reg. No. 33-80297) as declared effective by the Commission on March 8,
1996.
(2) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated May 24, 1996.
(3) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated June 14, 1996.
<PAGE>
(4) Incorporated by reference to Exhibits with the corresponding number (except
as otherwise noted) filed with Registrant's Annual Report on Form 10-K for
the fiscal year ended April 30, 1996.
* Filed herewith.
** Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the Registrant's Application
Requesting Confidential Treatment under Rule 406 under the Securities Act.
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF TRUST OF VANSTAR FINANCING TRUST
THIS Certificate of Trust of Vanstar Financing Trust (the "Trust"), dated
September 25, 1996, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is Vanstar
Financing Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware, 19890-0001, Attention: Corporate
Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By: /s/ Patricia A. Evans
--------------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
VANSTAR FINANCING TRUST
DATED AS OF OCTOBER 2, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - INTERPRETATION AND DEFINITIONS. . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions.. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1 Trust Indenture Act; Application. . . . . . . . . . . . . 8
SECTION 2.2 Lists of Holders of Securities. . . . . . . . . . . . . . 8
SECTION 2.3 Reports by the Property Trustee.. . . . . . . . . . . . . 9
SECTION 2.4 Periodic Reports to Property Trustee. . . . . . . . . . . 9
SECTION 2.5 Evidence of Compliance with Conditions Precedent. . . . . 9
SECTION 2.6 Events of Default; Waiver.. . . . . . . . . . . . . . . . 9
SECTION 2.7 Event of Default; Notice. . . . . . . . . . . . . . . . . 11
ARTICLE III - ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.1 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.2 Office. . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3 Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.4 Authority.. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.5 Title to Property of the Trust. . . . . . . . . . . . . . 13
SECTION 3.6 Powers and Duties of the Regular Trustees . . . . . . . . 13
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. . . 16
SECTION 3.8 Powers and Duties of the Property Trustee.. . . . . . . . 17
SECTION 3.9 Certain Duties and Responsibilities of the Property
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.10 Certain Rights of Property Trustee. . . . . . . . . . . . 20
SECTION 3.11 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.12 Not Responsible for Recitals or Issuance of Securities. . 22
SECTION 3.13 Duration of Trust . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.14 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.15 Filing of Amendments to Certificate of Trust. . . . . . . 24
ARTICLE IV - SPONSOR AND THE DEBENTURE ISSUER . . . . . . . . . . . . . . . . 24
SECTION 4.1 Sponsor's Purchase of Common Securities.. . . . . . . . . 24
SECTION 4.2 Responsibilities of the Debenture Issuer. . . . . . . . . 24
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE V - TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.1 Number of Trustees. . . . . . . . . . . . . . . . . . . . 25
SECTION 5.2 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.3 Property Trustee; Eligibility.. . . . . . . . . . . . . . 26
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.5 Initial Trustees. . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.6 Appointment, Removal and Resignation of Trustees. . . . . 27
SECTION 5.7 Vacancies among Trustees. . . . . . . . . . . . . . . . . 28
SECTION 5.8 Effect of Vacancies.. . . . . . . . . . . . . . . . . . . 29
SECTION 5.9 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.10 Delegation of Power . . . . . . . . . . . . . . . . . . . 29
SECTION 5.11 Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI - DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.1 Distributions.. . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VII - ISSUANCE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.1 General Provisions Regarding Securities.. . . . . . . . . 30
SECTION 7.2 Execution and Authentication. . . . . . . . . . . . . . . 31
SECTION 7.3 Form and Dating.. . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.4 Registrar, Paying Agent and Conversion Agent. . . . . . . 33
SECTION 7.5 Paying Agent to Hold Money in Trust.. . . . . . . . . . . 34
SECTION 7.6 Replacement Securities. . . . . . . . . . . . . . . . . . 34
SECTION 7.7 Outstanding Preferred Securities. . . . . . . . . . . . . 35
SECTION 7.8 Preferred Securities in Treasury. . . . . . . . . . . . . 35
SECTION 7.9 Temporary Securities; Rule 144A Global Preferred
Securities . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.10 Cancellation. . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII - DISSOLUTION OF TRUST . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.1 Dissolution of Trust . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX - TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.2 Transfer Procedures and Restrictions. . . . . . . . . . . 38
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 9.3 Deemed Security Holders.. . . . . . . . . . . . . . . . . 46
SECTION 9.4 Book Entry Interests. . . . . . . . . . . . . . . . . . . 46
SECTION 9.5 Notices to Clearing Agency. . . . . . . . . . . . . . . . 47
SECTION 9.6 Appointment of Successor Clearing Agency. . . . . . . . . 47
ARTICLE X - LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.1 Liability . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.3 Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . 49
SECTION 10.5 Outside Businesses. . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI - ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 11.2 Certain Accounting Matters. . . . . . . . . . . . . . . . 52
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 11.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XII - AMENDMENTS AND MEETINGS . . . . . . . . . . . . . . . . . . . . 53
SECTION 12.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent. . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XIII - REPRESENTATIONS OF PROPERTY TRUSTEE AND
DELAWARE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 13.1 Representations and Warranties of Property Trustee. . . . 56
SECTION 13.2 Representations and Warranties of Delaware Trustee. . . . 57
ARTICLE XIV - REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 14.1 Registration Rights . . . . . . . . . . . . . . . . . . . 58
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE XV - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 15.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 15.3 Intention of the Parties. . . . . . . . . . . . . . . . . 60
SECTION 15.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 15.5 Successors and Assigns. . . . . . . . . . . . . . . . . . 60
SECTION 15.6 Partial Enforceability. . . . . . . . . . . . . . . . . . 61
SECTION 15.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 61
-iv-
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
VANSTAR FINANCING TRUST
OCTOBER 2, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of October 2, 1996, by the undersigned trustees (together with
all other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), Vanstar
Corporation, a Delaware corporation, as trust sponsor (the "Sponsor"), and by
the holders, from time to time, of undivided beneficial interests in the
Trust issued pursuant to this Declaration.
WHEREAS, the Trustees and the Sponsor established Vanstar Financing
Trust (the "Trust"), a trust under the Business Trust Act (as defined herein)
pursuant to a Declaration of Trust dated as of September 25, 1996 (the
"Original Declaration") and a Certificate of Trust filed with the Secretary
of State of the State of Delaware on September 25, 1996 for the sole purpose
of issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures (as defined herein) of the Debenture Issuer (as defined
herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration.
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
<PAGE>
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"ADDITIONAL INTEREST" means, if the Trust is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other taxing authority,
such amounts as shall be required so that the net amounts received and retained
by the Trust after paying such taxes, duties, assessments and governmental
charges will not be less than the amounts the Trust would have received had no
such taxes, duties, assessments or governmental charges been imposed.
"AFFILIATE" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"AGENT" means any Registrar, Paying Agent, Conversion Agent or co-
registrar.
"AUTHORIZED OFFICER" of a Person means any Person that is authorized to
bind such Person.
"BOOK ENTRY INTEREST" means a beneficial interest in a Global Certificate,
ownership and transfers of which shall be maintained and made through book
entries by a Depositary as described in Section 9.4.
"BUSINESS DAY" means any day other than a day on which banking institutions
in New York, New York, San Francisco, California or in Wilmington, Delaware are
authorized or required by law to close.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code,
12 DEL. CODE Section 3801 ET SEQ., as it may be amended from time to time, or
any successor legislation.
"CERTIFICATE" means a certificate in global or definitive form representing
a Common Security or a Preferred Security.
"CLEARING AGENCY" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act.
-2-
<PAGE>
"CLOSING DATE" means October 2, 1996.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SECURITIES" has the meaning specified in Section 7.1(a).
"COMMON SECURITIES GUARANTEE" means the guarantee agreement dated as of
October 2, 1996, of the Sponsor in respect of the Common Securities.
"COMPANY" means the Sponsor.
"COMPANY INDEMNIFIED PERSON" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"COMPOUNDED INTEREST" means interest compounded quarterly at the rate
specified for the Debentures, to the extent permitted by applicable law, upon
interest accrued and unpaid (including Additional Interest and Liquidated
Damages) at the end of each Extension Period.
"CONVERSION AGENT" has the meaning specified in Section 7.4.
"COVERED PERSON" means (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) any of the
Trust's Affiliates; and (b) any Holder of Securities.
"DEBENTURE ISSUER" means the Sponsor in its capacity as issuer of the
Debentures under the Indenture.
"DEBENTURE TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"DEBENTURES" means the series of Convertible Subordinated Debentures to be
issued by the Debenture Issuer under the Indenture to be held by the Property
Trustee, a specimen certificate for such series of Debentures being Exhibit B.
"DEFINITIVE PREFERRED SECURITIES" means the Regulation S Definitive
Preferred Security, the Restricted Definitive Preferred Security and any other
Preferred Securities in definitive form issued by the Trust.
-3-
<PAGE>
"DELAWARE TRUSTEE" has the meaning set forth in Section 5.2.
"DEPOSITARY" means The Depository Trust Company, the initial Clearing
Agency.
"DISTRIBUTION" means a distribution payable to Holders of Securities in
accordance with Section 6.1.
"EFFECTIVENESS PERIOD" has the meaning specified in Section 14.1.
"EVENT OF DEFAULT" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Debentures.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"EXCHANGED GLOBAL PREFERRED SECURITIES" shall have the meaning set forth in
Section 9.2(b).
"EXCHANGED PREFERRED SECURITIES" means any Preferred Security issued in
connection with a sale pursuant to an effective Shelf Registration Statement and
not bearing any Restricted Securities Legend.
"FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in
Section 10.4(b).
"GLOBAL CERTIFICATE" means a fully registered global certificate
representing undivided interests in the Preferred Securities in which the
interests therein are registered on a book entry basis.
"HOLDER" means a Person in whose name a Certificate representing a Security
is registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"INDEMNIFIED PERSON" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"INDENTURE" means the Indenture dated as of October 2, 1996, between the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.
"INITIAL PURCHASERS" has the meaning set forth in the Purchase Agreement.
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act.
-4-
<PAGE>
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"INVESTMENT COMPANY EVENT" has the meaning set forth in the terms of the
Securities as set forth in Annex I hereto.
"LEGAL ACTION" has the meaning set forth in Section 3.6(g).
"LIQUIDATED DAMAGES" means the additional interest which shall accrue on
the Debentures and, accordingly on the Preferred Securities, if, (i) on or prior
to 75 days following the date of original issuance of the Preferred Securities,
a Shelf Registration Statement has not been filed with the Commission, or
(ii) on or prior to the 135th day following the issuance of Registrable
Securities (as defined in Section 14.1 herein), such Registration Statement is
not declared effective.
"MAJORITY IN LIQUIDATION AMOUNT OF THE SECURITIES" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of more than 50% of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"MINISTERIAL ACTION" has the meaning set forth in the terms of the
Securities as set forth in Annex I hereto.
"OFFERING CIRCULAR" means the confidential offering circular, dated as of
September 26, 1996, relating to the issuance by the Trust of Preferred
Securities, as amended or supplemented from time to time.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read
the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
-5-
<PAGE>
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"PARTICIPANTS" has the meaning set forth in Section 7.3(b).
"PAYING AGENT" has the meaning specified in Section 3.8(h).
"PAYMENT AMOUNT" shall have the meaning set forth in Section 6.1.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PREFERRED SECURITIES" has the meaning specified in Section 7.1(a).
"PREFERRED SECURITIES GUARANTEE" means the guarantee agreement dated as of
October 2, 1996, of the Sponsor in respect of the Preferred Securities.
"PREFERRED SECURITY BENEFICIAL OWNER" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Depositary, or on the books of a Person
maintaining an account with such Depositary (directly as a Participant or as an
indirect Participant, in each case in accordance with the rules of such
Depositary).
"PROPERTY TRUSTEE" means the Trustee meeting the eligibility requirements
set forth in Section 5.3.
"PROPERTY TRUSTEE ACCOUNT" has the meaning set forth in Section 3.8(c)(i).
"PURCHASE AGREEMENT" shall have the meaning set forth in Section 7.3(a).
"QUORUM" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both of them.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated October 2, 1996, among the Debenture Issuer, the Trust, and the Initial
Purchasers named in the Purchase Agreement.
"REGISTRAR" has the meaning set forth in Section 7.4.
"REGULAR TRUSTEE" means any Trustee other than the Property Trustee, the
Guarantee Trustee and the Delaware Trustee.
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"REGULATION S DEFINITIVE PREFERRED SECURITY" has the meaning set forth in
Section 7.3(c).
"RELATED PARTY" means, with respect to the Sponsor, any direct or indirect
wholly owned subsidiary of the Sponsor or any other Person that owns, directly
or indirectly, 100% of the outstanding voting securities of the Sponsor.
"RESPONSIBLE OFFICER" means, with respect to the Property Trustee, any
vice-president, any assistant vice-president, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer or any other officer
in the Corporate Trust Department of the Property 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
that officer's knowledge of and familiarity with the particular subject.
"RESTRICTED DEFINITIVE PREFERRED SECURITY" has the meaning set forth in
Section 7.3(c).
"RESTRICTED PERIOD" means the one-year period following the last issue date
for the Preferred Securities (including Preferred Securities issued to cover
over allotments and Common Securities issued in connection with related capital
contributions). The Sponsor shall inform the Trustee as to the termination of
the restricted period and the Trustee may rely conclusively thereon.
"RESTRICTED PREFERRED SECURITIES" shall include the Regulation S Definitive
Preferred Securities, the Restricted Definitive Preferred Securities and the
Rule 144A Global Preferred Securities.
"RULE 144A GLOBAL PREFERRED SECURITY" has the meaning set forth in
Section 7.3(a).
"RULE 3a-5" means Rule 3a-5 under the Investment Company Act.
"SECURITIES" means the Common Securities and the Preferred Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"SECURITIES CUSTODIAN" means the custodian with respect to the Rule 144A
Global Preferred Security and any other Preferred Security in global form.
"SHELF REGISTRATION STATEMENT" has the meaning specified in Section 14.1.
"SPECIAL EVENT" has the meaning set forth in Annex I hereto.
"SPONSOR" means Vanstar Corporation, a Delaware corporation, or any
successor entity in a merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
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"SUPER MAJORITY" has the meaning set forth in Section 2.6(a)(ii).
"TAX EVENT" has the meaning set forth in Annex I hereto.
"10% IN LIQUIDATION AMOUNT OF THE SECURITIES" means, except as provided in
the terms of the Preferred Securities or by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Preferred Securities or Holders of outstanding
Common Securities, voting separately as a class, who are the record owners of
10% or more of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUSTEE" or "TRUSTEES" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"UNRESTRICTED DEFINITIVE PREFERRED SECURITY" has the meaning set forth in
Section 9.2(c).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration, which are incorporated by
reference in and made part of this Declaration and shall, to the extent
applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee for
the purposes of the Trust Indenture Act.
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(c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) Each of the Debenture Issuer and the Regular Trustees on behalf of the
Trust shall provide the Property Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Holders of the
Securities ("List of Holders") as of such record date, PROVIDED that neither the
Debenture Issuer nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Property Trustee by
the Debenture Issuer and the Regular Trustees on behalf of the Trust, and
(ii) at any other time, within 30 days of receipt by the Trust of a written
request for a List of Holders as of a date no more than 14 days before such List
of Holders is given to the Property Trustee. The Property Trustee shall
preserve, in as current a form as is reasonably practicable, all information
contained in Lists of Holders given to it or which it receives in the capacity
as Paying Agent (if acting in such capacity), PROVIDED that the Property Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Property Trustee shall comply with its obligations under Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE.
Within 60 days after May 15 of each year, the Property Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
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Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Declaration that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, PROVIDED that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "Super Majority") to be
waived under the Indenture, the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion in liquidation
amount of the Preferred Securities that the relevant required Super Majority
represents of the aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising exclusively therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or an Event of Default with respect to the
Preferred Securities or impair any right consequent thereon. Any waiver by the
Holders of the Preferred Securities of an Event of Default with respect to the
Preferred Securities shall also be deemed to constitute a waiver by the Holders
of the Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, PROVIDED that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of Default
under the Declaration as provided below in this Section 2.6(b), the Event of
Default under the Declaration shall also not be waivable; or
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(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration may only be waived
by the vote of the Holders of at least the proportion in liquidation amount
of the Common Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding;
PROVIDED further, that each Holder of Common Securities will be deemed to
have waived any such Event of Default and all Events of Default with respect
to the Common Securities and its consequences until all Events of Default
with respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely
on behalf of the Holders of the Preferred Securities and only the Holders of
the Preferred Securities will have the right to direct the Property Trustee
in accordance with the terms of the Securities. The foregoing provisions of
this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from
this Declaration and the Securities, as permitted by the Trust Indenture Act.
Subject to the foregoing provisions of this Section 2.6(b), upon such
waiver, any such default shall cease to exist and any Event of Default with
respect to the Common Securities arising therefrom shall be deemed to have
been cured for every purpose of this Declaration, but no such waiver shall
extend to any subsequent or other default or Event of Default with respect to
the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration.
The foregoing provisions of this Section 2.6(c) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Property Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities actually known to a Responsible Officer of the Property Trustee,
unless such defaults have been cured before the giving of such notice (the
term "defaults" for the purposes of this Section 2.7(a) being hereby defined
to be an Event of Default as defined in the Indenture, not including any
periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment
of principal of (or premium, if any) or interest on any of the Debentures or
in the payment of any sinking fund installment established for the
Debentures, the Property 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 and/or Responsible Officers of the Property
Trustee
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in good faith determines that the withholding of such notice is in the
interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 501(l) and 501(2) of the Indenture;
or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer of the Property
Trustee charged with the administration of the Declaration shall have actual
knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME.
The Trust is named "Vanstar Financing Trust," as such name may be
modified from time to time by the Regular Trustees following written notice
to the Holders of Securities. The Trust's activities may be conducted under
the name of the Trust or any other name deemed advisable by the Regular
Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o Vanstar
Corporation, 5964 West Las Positas Boulevard, Pleasanton, California
94588-9012, Attention: Chief Financial Officer. At any time, the Regular
Trustees may designate another principal office.
SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to issue and
sell the Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only
those other activities necessary or incidental thereto including, without
limitation, the execution and performance of those documents, instruments and
agreements necessary to effectuate the transactions contemplated hereby. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 3.4 AUTHORITY.
(a) Subject to the limitations provided for in this Declaration and to
the specific duties of the Property Trustee, any Regular Trustee shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by any Regular Trustee in accordance with the powers granted to
each of the Regular Trustees under this Declaration shall constitute the act
of
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and serve to bind the Trust and an action taken by the Property Trustee on
behalf of the Trust in accordance with its powers shall constitute the act of
and serve to bind the Trust. In dealing with the Trustees acting on behalf
of the Trust, no person shall be required to inquire into the authority of
the Trustees to bind the Trust. Persons dealing with the Trust are entitled
to rely conclusively on the power and authority of the Trustees as set forth
in this Declaration.
(b) Unless this Declaration requires a specific vote or consent of the
Regular Trustees or if the Regular Trustees in their discretion determine to
require a vote or consent on such matter, any power of the Regular Trustees
may be exercised by, or with the consent of, any one such Regular Trustee.
(c) Unless this Declaration requires a specific vote or consent of the
Regular Trustees or if the Regular Trustees in their discretion determine to
require a vote or consent on such matter, and except as otherwise required by
the Business Trust Act or applicable law, any Regular Trustee is authorized
to execute on behalf of the Trust any documents which the Regular Trustees
have the power and authority to cause the Trust to execute pursuant to
Section 3.6, PROVIDED, that the registration statement referred to in Section
3.6, including any amendments thereto, shall be signed by a Regular Trustee,
or if there are more than two, a majority of the Regular Trustees.
SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 3.8 with respect to the Debentures and the
Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES.
Any of the Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; PROVIDED, however, that the
Trust may issue no more than one series of Preferred Securities and no more
than one series of Common Securities, and, PROVIDED, FURTHER, that there
shall be no interests in the Trust other than the Securities, and the
issuance of Securities shall be limited to simultaneous issuance of both
Preferred Securities and Common Securities on the Closing Date and any other
date Preferred Securities and Common Securities are sold pursuant to the
over-allotment option granted to the Initial Purchasers in the Purchase
Agreement;
(b) in connection with the issue and sale of the Preferred Securities, at
the direction of the Debenture Issuer, to:
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(i) prepare, execute, and amend and supplement, if necessary,
an offering circular (the "Offering Circular") in preliminary and final form,
in relation to the offering and sale of Preferred Securities to qualified
institutional buyers in reliance on Rule 144A under the Securities Act, to
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) and outside the United States to non-U.S.
persons in offshore transactions in reliance on Regulation S under the
Securities Act and to execute and file with the Commission, at such time as
determined by the Sponsor, a registration statement prepared by the Sponsor,
including any amendments and supplements thereto in relation to the resale of
the Preferred Securities;
(ii) execute and file any documents prepared by the Debenture
Issuer, or take any acts as determined by the Debenture Issuer to be
necessary in order to qualify or register all or part of the Preferred
Securities in any State or foreign jurisdiction in which the Debenture Issuer
has determined to qualify or register such Preferred Securities for sale;
(iii) execute and file an application, prepared by the
Sponsor, to the PORTAL Market and, at such time as determined by the Sponsor,
to the New York Stock Exchange, Inc. ("NYSE") or any other national stock
exchange or similar organization for listing or quotation of the Preferred
Securities and the common stock issuable on conversion thereof;
(iv) to execute and deliver letters, documents, or instruments
with The Depository Trust Company relating to the Preferred Securities;
(v) execute and file with the Commission, at such time as
determined by the Sponsor, a registration statement on Form 8-A, including
any amendments thereto, prepared by the Debenture Issuer relating to the
registration of the Preferred Securities and the common stock issuable on
conversion thereof under Section 12(b) of the Exchange Act; and
(vi) execute and enter into, on behalf of the Trust, the
Purchase Agreement, Registration Rights Agreement and other related
agreements and instruments providing for or entered into in connection with
the sale of the Preferred Securities and perform its obligations under such
agreements and instruments;
(c) to acquire as Trust assets the Debentures with the proceeds of the
sale of the Preferred Securities and the Common Securities; PROVIDED,
however, that the Regular Trustees shall cause legal title to the Debentures
to be held of record in the name of the Property Trustee for the benefit of
the Holders of the Preferred Securities and the Holders of the Common
Securities;
(d) to give the Debenture Issuer and the Property Trustee prompt
written notice of the occurrence of a Special Event; PROVIDED that the
Regular Trustees shall consult with the Debenture Issuer and the Property
Trustee before taking or refraining from taking any Ministerial Action in
relation to a Special Event;
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(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms o fthe Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate required by 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by
any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out any
of the purposes of the Trust or seek reimbursement from the Debenture Issuer;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of an election by the Debenture
Issuer to defer payments of interest on the Debentures by extending the
interest payment period under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing and the transactions contemplated
thereby;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust
was created;
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(p) to take any action ( provided that such action does not adversely
affect the interests of Holders), not inconsistent with this Declaration or
with applicable law, that the Regular Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as
set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States
federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that
the Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes; and
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and timely filed by the Regular Trustees, on behalf
of the Trust.
The Regular Trustees must exercise the powers set forth in this Section
3.6 in a manner that is consistent with the purposes and functions of the
Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Property Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this Section
3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity other than as required or
authorized by this Declaration. In particular, the Trust shall not and the
Trustees (including the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
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(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;
or
(vii) other than as provided in this Declaration or Annex
I hereto, (A) direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under the Indenture, (C) exercise
any right to rescind or annul any declaration that the principal of all the
Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received an opinion of
counsel to the effect that such modification will not cause more than an
insubstantial risk that (x) the Trust will be deemed an Investment Company
required to be registered under the Investment Company Act, or (y) for United
States federal income tax purposes the Trust will not be classified as a
grantor trust.
SECTION 3.8 POWERS AND DUTIES OF THE PROPERTY TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Property Trustee does not act as the Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of the
Debentures held by the Property Trustee, deposit such funds into the Property
Trustee Account and make payments to the Holders of the Preferred Securities
and Holders of the Common Securities from the Property Trustee Account in
accordance with Section 6.1. Funds in the Property Trustee Account shall be
held uninvested until disbursed in accordance with this Declaration. The
Property Trustee Account shall be an account that is maintained with a
banking institution the rating on whose long-term unsecured indebtedness is
at
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least equal to the rating assigned to the Preferred Securities by a
"nationally recognized statistical rating organization," as that term is
defined for purposes of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as so directed and
as shall be necessary or appropriate to effect the redemption of the
Preferred Securities and the Common Securities to the extent the Debentures
are redeemed or mature; and
(iii) upon written notice of a distribution issued by the
Regular Trustees in accordance with the terms of the Securities, engage in
such ministerial activities as so directed as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain Special Events arising from a
change in law or a change in legal interpretation or other specified
circumstances pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms
of the Securities.
(e) The Property Trustee shall take any Legal Action which arises out
of or in connection with (i) an Event of Default of which a Responsible
Officer of the Property Trustee has actual knowledge or (ii) the Property
Trustee's duties and obligations under this Declaration or the Trust
Indenture Act.
(f) The Property Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer
of the Property Trustee occurs and is continuing, the Property Trustee shall,
for the benefit of Holders of the Securities, enforce its rights as holder of
the Debentures subject to the rights of the Holders pursuant to the terms of
such Securities.
(h) The Property Trustee (or any of its affiliates so designated by it)
will act as Paying Agent and Registrar in New York (each, a "Paying Agent")
to pay Distributions, redemption payments or liquidation payments on behalf
of the Trust with respect to all securities and any such Paying Agent shall
comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may
be removed by the Property Trustee at any time and a successor Paying Agent
or additional Paying Agents may be appointed at any time by the Property
Trustee.
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(i) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees
set forth in Section 3.6.
The Property Trustee must exercise the powers set forth in this Section
3.8 in a manner that is consistent with the purposes and functions of the
Trust set out in Section 3.3, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.3.
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE.
(a) The Property Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6) of which a Responsible
Officer of the Property Trustee has actual knowledge, the Property Trustee
shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this Declaration and
the Property Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Declaration, and
no implied covenants or obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Property Trustee and conforming
to the requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are specifically
required to be furnished to the Property Trustee, the Property Trustee shall
be under a duty to examine the same to determine whether or not they conform
to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made or in
taking or omitting to take the pertinent action;
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(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority in
liquidation amount of the Securities relating to the time, method and place
of conducting any proceeding for any remedy available to the Property
Trustee, or exercising any trust or power conferred upon the Property Trustee
under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Property Trustee against such risk or liability is not
reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Property Trustee Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded to
the Property Trustee under this Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in
writing with the Debenture Issuer. Money held by the Property Trustee need
not be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 3.8(c)(i) and except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Debenture Issuer
with their respective duties under this Declaration, nor shall the Property
Trustee be liable for any default or misconduct of the Regular Trustees or
the Debenture Issuer.
SECTION 3.10 CERTAIN RIGHTS OF PROPERTY TRUSTEE.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
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(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall reasonably deem it desirable that a matter be proved
or established before taking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing
or continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of its
choice or other experts and the advice or opinion of such counsel and experts
with respect to legal matters or advice within the scope of such expert's
area of expertise 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 accordance with such advice or opinion. Such counsel may be
counsel to the Debenture Issuer or any of its Affiliates, and may include any
of its employees. The Property Trustee shall have the right at any time to
seek instructions concerning the administration of this Declaration from any
court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any Holder, unless such Holder shall have provided to
the Property Trustee adequate security and indemnity, reasonably satisfactory
to the Property Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Property Trustee's agents, nominees
or custodians) and liabilities that might be incurred by it in complying with
such request or direction, including such reasonable advances as may be
requested by the Property Trustee, PROVIDED that, nothing contained in this
Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights
and powers vested in it by this Declaration;
(vii) the Property 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, security, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit;
(viii) the Property 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 Property 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;
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(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Property Trustee or its agents alone shall be sufficient and
effective to perform any such action and no third party shall be required to
inquire as to the authority of the Property Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Property Trustee's or its
agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder, the
Property Trustee (i) may request instructions from the Holders of the
Securities which instructions may only be given by the Holders of the same
proportion in liquidation amount of the Securities as would be entitled to
direct the Property Trustee under the terms of the Securities in respect of
such remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this Declaration,
the Property Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action
taken, suffered or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property
Trustee shall be construed to be a duty.
SECTION 3.11 DELAWARE TRUSTEE.
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
SECTION 3.12 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness.
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The Trustees make no representations as to the value or condition of the
property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration or the
Securities.
SECTION 3.13 DURATION OF TRUST.
The Trust, unless terminated pursuant to the provisions of Article VIII
hereof, shall exist until October 1, 2025, PROVIDED that such date may be
extended to the extent necessary to permit the winding up of the affairs of
the Trust.
SECTION 3.14 MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other entity or body,
except as described in Section 3.14(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees, and without the
consent of the Holders of the Securities, the Delaware Trustee or the
Property Trustee, consolidate, amalgamate, merge with or into, or be replaced
by a trust organized as such under the laws of any State of the United
States; PROVIDED that:
(i) if the Trust is not the survivor, such successor entity
(the "Successor Entity") either:
(A) expressly assumes all of the obligations of the
Trust under the Declaration and the Securities; or (B)
substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the
Preferred Securities with respect to Distributions, assets and payments upon
liquidation, redemption and otherwise;
(ii) the Debenture Issuer expressly agrees that a trustee of
the Successor Entity that possesses the same powers and duties as the
Property Trustee may act as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any Successor Securities)
to be downgraded by any nationally recognized statistical rating organization;
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(v) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the
Holders of the Preferred Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the Holders'
interest in the Successor Entity);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) the Company guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally recognized
independent counsel to the Trust, reasonably acceptable to the Property
Trustee, experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences and privileges
of the Holders of the Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the Holders'
interest in the new entity);
(B) following such merger, consolidation, amalgamation
or replacement, neither the Trust nor the Successor Entity will be required
to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation
or replacement, the Trust (or the Successor Entity) will be treated as a
grantor trust for United States federal income tax purposes.
(c) Notwithstanding Section 3.14(b), the Trust shall not, except with
the consent of the Holders of 100% in liquidation amount of the Common
Securities, consolidate, amalgamate, merge with or into, or be replaced by
any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes.
SECTION 3.15 FILING OF AMENDMENTS TO CERTIFICATE OF TRUST.
The Certificate of Trust as filed with the Secretary of State of the
State of Delaware on September 25, 1996 is attached hereto as Exhibit E. On
or after the date of execution of this Declaration, the Trustees shall cause
the filing with the Secretary of State of the State of Delaware of such
amendments to the Certificate of Trust as the Trustees deem necessary or
desirable to reflect this Declaration.
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ARTICLE IV
SPONSOR AND THE DEBENTURE ISSUER
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
On the Closing Date and on any other date Preferred Securities and
Common Securities are sold pursuant to the over-allotment option granted in
the Purchase Agreement, the Sponsor will purchase all of the Common
Securities issued by the Trust, in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 RESPONSIBILITIES OF THE DEBENTURE ISSUER.
In connection with the issue and sale of the Preferred Securities, the
Debenture Issuer shall have the exclusive right and responsibility to engage
in the following activities:
(a) to prepare the Offering Circular and any amendment thereto and to
prepare for filing by the Trust with the Commission the Shelf Registration
Statement, including any amendments thereto;
(b) to determine the States and foreign jurisdictions in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than actions that
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by
the Trust, as the Debenture Issuer deem necessary or advisable in order to
comply with the applicable laws of any such States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to PORTAL and to
the NYSE or any other national stock exchange or automated quotation system
for listing or quotation of the Preferred Securities and the Common Stock
issuable on conversion;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Preferred Securities and the common stock issuable on conversion under
Section 12(b) of the Exchange Act, including any amendments thereto; and
(e) to negotiate the terms of the Purchase Agreement, Registration
Rights Agreement and other related agreements providing for the sale of the
Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES.
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The number of Trustees shall be three (3), one of which shall initially be
a Regular Trustee, and:
(a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders
of the Common Securities;
PROVIDED, however, that the number of Trustees shall in no event be less than
three (3); PROVIDED FURTHER that (1) one Trustee, the Delaware Trustee, shall
be a Person who, in the case of a natural person, is a resident of the State
of Delaware or that, if not a natural person, is an entity which has its
principal place of business in the State of Delaware; (2) there shall be at
least one Regular Trustee who is an employee or officer of, or is affiliated
with the Sponsor; and (3) one Trustee shall be the Property Trustee for so
long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if
it meets the applicable requirements.
SECTION 5.2 DELAWARE TRUSTEE.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law,
PROVIDED that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as Property
Trustee which shall:
(i) not be an Affiliate of the Debenture Issuer;
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Commission to
act as an institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a
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combined capital and surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 5.3(a)(ii), 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; and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-5 and to the extent Rule 3a-5
requires a trustee having certain qualifications to hold title to the
"eligible assets" of the trust, the Property Trustee shall possess those
qualifications.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a) or 5.3(c), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(c) and
5.6(d).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Property Trustee and the Holder of the Common Securities (as if it were
the obligor referred to in Section 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be set forth in Section 5.5
hereof.
SECTION 5.4 QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE GENERALLY.
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who
is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 INITIAL TRUSTEES.
(a) The initial Regular Trustee shall be:
John J. Dunican, Jr.
The initial Delaware Trustee shall be:
Wilmington Trust Company
The initial Property Trustee shall be:
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Wilmington Trust Company
SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of any Securities, by the vote of the
Holders of a Majority in liquidation amount of the Common Securities.
(b) (i) The Trustee that acts as Property Trustee shall not
be removed in accordance with Section 5.6(a) until a Successor Property
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Property Trustee and delivered to the
Regular Trustees and the Sponsor; and
(ii) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.2
and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted
such appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered
to the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; PROVIDED, however,
that:
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such Successor
Property Trustee and delivered to the Trust, the Sponsor and the resigning
Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee has
been appointed and has accepted such appointment by instrument executed by
such Successor Delaware Trustee and delivered to the Trust, the Sponsor and
the resigning Delaware Trustee.
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(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Property Trustee, Successor Delaware Trustee,
or, if there is one Regular Trustee, a Regular Trustee, as the case may be,
if the Property Trustee or the Delaware Trustee or such sole Regular Trustee
delivers an instrument of resignation in accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this
Section 5.6 within 60 days after delivery pursuant to this Section 5.6 of an
instrument of resignation or removal, the Property Trustee or Delaware
Trustee resigning or being removed, as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with
a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee
shall not operate to annul the Trust. Whenever a vacancy in the number of
Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in
office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.9 MEETINGS.
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Regular Trustees or any
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committee thereof shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than
24 hours before a meeting. Notices shall contain a brief statement of the
time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of a Regular Trustee at a meeting shall constitute
a waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any
activity on the ground that the meeting has not been lawfully called or
convened. If this Declaration requires a specific vote or consent of the
Regular Trustees or if the Regular Trustees in their discretion determine to
require a vote on any matter, such action of the Regular Trustees may be
taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees. Subject to any specific
requirement in this Declaration that requires a vote of the Regular Trustees,
nothing in this section shall be deemed to restrict the authority granted to
any Regular Trustee pursuant to Section 3.4 of this Declaration.
SECTION 5.10 DELEGATION OF POWER.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in
Section 3.6(b), including any registration statement or amendment thereto
filed with the Commission, or making any other governmental filing; and
(b) The Regular Trustees shall have power to delegate from time to time
to such of their number or to officers of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law
or contrary to the provisions of the Trust, as set forth herein.
SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Property Trustee or the Delaware Trustee,
as the case may be, may be merged or converted or with which either may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Property Trustee or the
Delaware Trustee, as the case may be, shall be the successor of the Property
Trustee or the Delaware Trustee, as the case may be, 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, unless otherwise required by the Business Trust
Act.
ARTICLE VI
DISTRIBUTIONS
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SECTION 6.1 DISTRIBUTIONS.
Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Preferred Securities and the Common Securities in
accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes payment of interest (including
Compounded Interest (as defined in the Indenture), Additional Interest (as
defined in the Indenture) and Liquidated Damages), premium and/or principal
on the Debentures held by the Property Trustee (the amount of any such
payment being a "Payment Amount"), the Property Trustee shall and is
directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Regular Trustees shall, on behalf of the Trust, issue one class
of convertible preferred securities, representing undivided beneficial
interests in the assets of the Trust (the "Preferred Securities"), having
such terms (the "Terms") as are set forth in Annex I and one class of
convertible common securities, representing undivided beneficial interests in
the assets of the Trust (the "Common Securities"), having such terms as are
set forth in Annex I. The Trust shall issue no securities or other interests
in the assets of the Trust other than the Preferred Securities and the Common
Securities. The Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
nonassessable.
(d) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and
shall be bound by, this Declaration.
(e) The Securities shall have no preemptive rights.
SECTION 7.2 EXECUTION AND AUTHENTICATION.
(a) The Securities shall be signed on behalf of the Trust by a Regular
Trustee. In case any Regular Trustee of the Trust who shall have signed any
of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not
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ceased to be such Regular Trustee; and any Securities may be signed
on behalf of the Trust by such persons who, at the actual date of execution
of such Security, shall be the Regular Trustees of the Trust, although at the
date of the execution and delivery of the Declaration any such person was not
such a Regular Trustee.
(b) One Regular Trustee shall sign the Preferred Securities for the
Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Preferred Securities for original
issue in accordance with paragraph 5 of the Securities. The aggregate number
of Preferred Securities outstanding at any time shall not exceed the number
set forth in the Terms in Annex I hereto except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so.
Each reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee to deal with the Debenture Issuer or an
Affiliate thereof.
SECTION 7.3 FORM AND DATING.
The Preferred Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the
Common Securities shall be substantially in the form of Exhibit A-2, each of
which is hereby incorporated in and expressly made a part of this
Declaration. Certificates may be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof. The Securities may have
letters, numbers, notations or other marks of identification or designation
and such legends or endorsements required by law, stock exchange rule,
agreements to which the Trust is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Trust).
The Trust at the direction of the Sponsor shall furnish any such legend not
contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred
Security shall be dated the date of its authentication. The terms and
provisions of the Securities set forth in Annex I and the forms of Securities
set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration
and to the extent applicable, the Property Trustee and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby.
(a) GLOBAL SECURITIES. The Preferred Securities are being offered and
sold by the Trust pursuant to a Purchase Agreement relating to the Preferred
Securities, dated September 26, 1996
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among the Trust, the Debenture Issuer and the Initial Purchasers named
therein (the "Purchase Agreement").
Securities offered and sold to Qualified Institutional Buyers ("QIBs")
in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided
in the Purchase Agreement, shall be issued in the form of one or more,
permanent global Securities in definitive, fully registered form without
distribution coupons with the appropriate global legends and Restricted
Securities Legend set forth in Exhibit A-1 hereto (each, a "Rule 144A Global
Preferred Security"), which shall be deposited on behalf of the purchasers of
the Preferred Securities represented thereby with the Property Trustee, at
its office or the designated office of one of its affiliates in the City of
New York, as custodian for the Depositary, and registered in the name of a
nominee of the Depositary, duly executed by the Trust and authenticated by
the Property Trustee as hereinafter provided. The number of Preferred
Securities represented by the Rule 144A Global Preferred Security may from
time to time be increased or decreased by adjustments made on the records of
the Property Trustee and the Depositary or its nominee as hereinafter
provided.
(b) BOOK-ENTRY PROVISIONS. This Section 7.3(b) shall apply only to the
Rule 144A Global Preferred Securities and such other Preferred Securities in
global form as may be authorized by the Trust to be deposited with or on
behalf of the Depositary.
The Trust shall execute and the Property Trustee shall, in accordance
with this Section 7.3, authenticate and make available for delivery initially
one or more Rule 144A Global Preferred Securities that (a) shall be
registered in the name of Cede & Co. or another nominee of such Depositary
and (b) shall be delivered by the Property Trustee to such Depositary or
pursuant to such Depositary's written instructions or held by the Property
Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Declaration with respect to any Rule 144A Global
Preferred Security held on their behalf by the Depositary or by the Property
Trustee as the custodian of the Depositary or under such Rule 144A Global
Preferred Security, other than as pursuant to the terms of any agreement such
Depositary shall have with the Participants, and the Depositary may be
treated by the Trust, the Property Trustee and any agent of the Trust or the
Property Trustee as the absolute owner of such Rule 144A Global Preferred
Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust,
the Property Trustee or any agent of the Trust or the Property Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its
Participants, the operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a beneficial interest in
any Rule 144A Global Preferred Security.
(c) CERTIFICATED SECURITIES. Except as provided in Section 7.9, owners
of beneficial interests in the Rule 144A Global Preferred Security will not
be entitled to receive physical delivery of certificated Preferred
Securities. Preferred Securities offered and sold in reliance on
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Regulation S under the Securities Act ("Regulation S"), as provided in the
Purchase Agreement, shall be issued initially in the form of individual
certificates in definitive, fully registered form without distribution
coupons and shall bear the Restricted Securities Legend set forth in Exhibit
A-1 hereto (the "Regulation S Definitive Preferred Securities"). Purchasers
of Securities who are institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and did not
purchase Preferred Securities in reliance on Regulation S under the
Securities Act will receive Preferred Securities in the form of individual
certificates in definitive, fully registered form without distribution
coupons and with the Restricted Securities Legend set forth in Exhibit A-1
hereto ("Restricted Definitive Preferred Securities"); PROVIDED, HOWEVER,
that upon transfer of such Restricted Definitive Preferred Securities to a
QIB, such Restricted Definitive Preferred Securities will, unless the Rule
144A Global Preferred Security has previously been exchanged, be exchanged
for an interest in a Rule 144A Global Preferred Security pursuant to the
provisions of Section 9.2. Restricted Definitive Preferred Securities will
bear the Restricted Securities Legend set forth on Exhibit A-1 unless removed
in accordance with this Section 7.3 or Section 9.2.
SECTION 7.4 REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
The Trust (directly or through an affiliate) shall maintain in the
Borough of Manhattan, City of New York, State of New York (i) an office or
agency where Preferred Securities may be presented for registration of
transfer or exchange ("Registrar"), (ii) an office or agency where Preferred
Securities may be presented for payment ("Paying Agent") and an office or
agency where Securities may be presented for conversion ("Conversion Agent").
The Registrar shall keep a register of the Preferred Securities and of their
transfer and exchange. The Trust may appoint the Registrar, the Paying Agent
and the Conversion Agent and may appoint one or more co-registrars, one or
more additional paying agents and one or more additional conversion agents in
such other locations as it shall determine. The term "Paying Agent" includes
any additional paying agent and the term "Conversion Agent" includes any
additional conversion agent. The Trust may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice to any
Holder. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Regular Trustees. The Trust shall notify the
Property Trustee of the name and address of any Agent not a party to this
Declaration. If the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent or Conversion Agent, the Property Trustee shall act
as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar or Conversion Agent. The Trust shall act as Paying Agent,
Registrar, co-registrar and Conversion Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar, Paying
Agent and Conversion Agent for the Preferred Securities.
SECTION 7.5 PAYING AGENT TO HOLD MONEY IN TRUST.
The Trust shall require each Paying Agent other than the Property Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Property Trustee
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all money held by the Paying Agent for the payment of principal or
distribution on the Securities, and will notify the Property Trustee if there
are insufficient funds. While any such insufficiency continues, the Property
Trustee may require a Paying Agent to pay all money held by it to the
Property Trustee. The Trust at any time may require a Paying Agent to pay
all money held by it to the Property Trustee and to account for any money
disbursed by it. Upon payment over to the Property Trustee, the Paying Agent
(if other than the Trust or an Affiliate of the Trust) shall have no further
liability for the money. If the Trust or the Debenture Issuer or an
Affiliate of the Trust or the Debenture Issuer acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.
SECTION 7.6 REPLACEMENT SECURITIES.
If the holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Preferred Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. If required by the Property
Trustee or the Trust, an indemnity bond must be sufficient in the judgment of
both to protect the Trustees, the Property Trustee, the Debenture Issuer and
any authenticating agent from any loss which any of them may suffer if a
Security is replaced. The Company may charge for its expenses in replacing a
Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by
the Debenture Issuer, the Debenture Issuer in its discretion may, instead of
issuing a new Security, pay or purchase such Security, as the case may be.
Every replacement Security is an additional Security of the Trust
entitled to the same benefits hereunder as the Security being replaced.
SECTION 7.7 OUTSTANDING PREFERRED SECURITIES.
The Preferred Securities outstanding at any time are all the Preferred
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this
Section as not outstanding.
If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased
Preferred Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in full in accordance with the
terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because one of the
Trust, the Debenture Issuer or an Affiliate of the Debenture Issuer holds the
Security.
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SECTION 7.8 PREFERRED SECURITIES IN TREASURY.
In determining whether the Holders of the required amount of Securities
have concurred in any direction, waiver or consent, Preferred Securities
owned by the Trust, the Debenture Issuer or an Affiliate of the Debenture
Issuer, as the case may be, shall be disregarded and deemed not to be
outstanding, except that for the purposes of determining whether the Property
Trustee shall be fully protected in relying on any such direction, waiver or
consent, only Securities which the Property Trustee knows are so owned shall
be so disregarded.
SECTION 7.9 TEMPORARY SECURITIES; RULE 144A GLOBAL PREFERRED SECURITIES.
(a) Until definitive Securities are ready for delivery, the Trust may
prepare and, in the case of the Preferred Securities, the Property Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations
that the Trust considers appropriate for temporary Securities. Without
unreasonable delay, the Trust shall prepare and, in the case of the Preferred
Securities, the Property Trustee shall authenticate definitive Securities in
exchange for temporary Securities.
(b) A Rule 144A Global Preferred Security deposited with the Depositary
or with the Property Trustee as custodian for the Depositary pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form
of certificated Preferred Securities only if such transfer complies with
Section 9.2 and (i) the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for such Rule 144A Global Preferred
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed
by the Debenture Issuer within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing.
(c) Any Rule 144A Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.9 shall be surrendered by the Depositary to the
Property Trustee at its office or the designated office of one of its
affiliates located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and
the Property Trustee shall authenticate and make available for delivery, upon
such transfer of each portion of such Global Preferred Security, an equal
aggregate liquidation amount of Securities of authorized denominations in the
form of certificated Securities. Any portion of a Rule 144A Global Preferred
Security transferred pursuant to this Section shall be registered in such
names as the Depositary shall direct. Any Preferred Security in the form of
certificated Preferred Securities delivered in exchange for an interest in
the Rule 144A Global Preferred Security shall, except as otherwise provided
by Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in
Exhibit A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the registered holder
of a Rule 144A Global Preferred Security may grant proxies and otherwise
authorize any person, including Participants and persons that may hold
interests through Participants, to take any action which a holder is entitled
to take under this Declaration or the Securities.
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(e) In the event of the occurrence of either of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property
Trustee a reasonable supply of certificated Securities in definite, fully
registered form without interest coupons.
SECTION 7.10 CANCELLATION.
The Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent
shall forward to the Property Trustee any Preferred Securities surrendered to
them for registration of transfer, redemption, conversion, exchange or
payment. The Property Trustee shall promptly cancel all Preferred Securities,
surrendered for registration of transfer, redemption, conversion, exchange,
payment, replacement or cancellation and shall dispose of canceled Preferred
Securities as the Trust directs. The Trust may not issue new Preferred
Securities to replace Preferred Securities that it has paid or that have been
delivered to the Property Trustee for cancellation (other than pursuant to
Section 7.6) or that any Holder has converted.
ARTICLE VIII
DISSOLUTION OF TRUST
SECTION 8.1 DISSOLUTION OF TRUST.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of
at least a Majority in liquidation amount of the Securities, voting together
as a single class, to file such certificate of cancellation, or the
revocation of the charter of the Sponsor and the expiration of 90 days after
the date of revocation without a reinstatement thereof;
(iii) upon the entry of a decree of judicial dissolution
of the Sponsor or the Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
Additional Interest, Compounded Interest and Liquidated Damages, shall have
been paid to the Holders in accordance with the terms of the Securities;
(v) upon the occurrence and continuation of a Special Event
pursuant to which the Trust shall have been dissolved in accordance with the
terms of the Securities and all of the Debentures endorsed thereon shall have
been distributed to the Holders of Securities in exchange for all of the
Securities;
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(vi) the expiration of the term of the Trust on October 1,
2025, subject to extension as necessary in accordance with Section 3.13;
(vii) before the issuance of any Securities, with the
consent of all the Regular Trustees and the Sponsor; or
(viii) upon the exchange of all of the Securities into the
Debentures and the conversion of such Debentures into Common Stock of the
Debenture Issuer and delivery of all such shares (and any cash in lieu of
fractional shares) to the exchanging Holders.
(b) As soon as is practicable after the occurrence of an event referred
to in Section 8.1(a), the Trustees shall file a certificate of cancellation
with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article X shall survive the
dissolution of the Trust.
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 GENERAL.
(a) Where Preferred Securities are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal number of Preferred Securities represented by different certificates,
the Registrar shall register the transfer or make the exchange if its
requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Trust shall issue and the Property Trustee shall
authenticate Preferred Securities at the Registrar's request.
(b) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration, in
the terms of the Securities and in accordance with applicable securities
laws. Any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void.
Subject to this Article IX, the Sponsor and any Related Party may only
transfer Common Securities to the Sponsor or a Related Party of the Sponsor;
PROVIDED that, any such transfer is subject to the condition precedent that
the transferor obtain the written opinion of nationally recognized
independent counsel experienced in such matters that such transfer would not
cause more than an insubstantial risk that:
(i) the Trust would not be classified for United States federal
income tax purposes as a grantor trust; and
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(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(c) The Regular Trustees shall provide for the registration of
Securities and of transfers of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of
any Securities, the Regular Trustees shall cause one or more new Securities
to be issued in the name of the designated transferee or transferees. Every
Security surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Security surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Security shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Security. By acceptance of a
Security, each transferee shall be deemed to have agreed to be bound by this
Declaration.
(d) The Trust shall not be required (i) to issue, register the transfer
of, or exchange, Preferred Securities during a period beginning at the
opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms of the Preferred Securities
and ending at the close of business on the day of selection, or (ii) to
register the transfer or exchange of any Preferred Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Preferred Security being redeemed in part.
SECTION 9.2 TRANSFER PROCEDURES AND RESTRICTIONS.
(a) GENERAL. Except in connection with the resale thereof pursuant to a
Shelf Registration Statement contemplated by and in accordance with the terms
of the Registration Rights Agreement, if Preferred Securities are issued upon
the transfer, exchange or replacement of Preferred Securities bearing the
Restricted Securities Legend set forth in Exhibit A-1 hereto ("Restricted
Securities"), or if a request is made to remove such Restricted Securities
Legend on Preferred Securities, the Preferred Securities so issued shall bear
the Restricted Securities Legend, or the Restricted Securities Legend shall
not be removed, as the case may be, unless there is delivered to the Trust
and the Property Trustee such satisfactory evidence, which may include an
opinion of counsel, as may be reasonably required by the Company, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A, Rule 144 or Regulation S under the Securities Act or, with respect to
Restricted Securities, that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Property Trustee, at the written direction of the
Trust, shall authenticate and deliver Preferred Securities that do not bear
the legend.
(b) TRANSFERS AFTER EFFECTIVENESS OF SHELF REGISTRATION STATEMENT.
During the period of effectiveness of a Shelf Registration Statement for any
Preferred Securities (except during periods within such period during which
the Shelf Registration Statement is not available for
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effecting resales of the Preferred Securities), all requirements pertaining
to legends on such Preferred Security will cease to apply, and beneficial
interests in a Preferred Security in global form without legends will be
available to transferees of such Preferred Securities (but not prior to the
applicable transfer), upon exchange of the transferring holder's Restricted
Definitive Preferred Security or directions to transfer such Holder's
beneficial interest in the Rule 144A Global Preferred Security, as the case
may be. No such transfer or exchange of a Restricted Definitive Preferred
Security or of an interest in the Rule 144A Global Preferred Security shall
be effective unless the transferor delivers to the Trust a certificate in the
form of Exhibit D hereto as to compliance by such person with the provisions
of the Registration Rights Agreement applicable thereto. Promptly after the
effectiveness of the Shelf Registration Statement, the Trust shall issue and
the Property Trustee, upon instruction from the Trust, shall authenticate a
Preferred Security in global form without the Restricted Securities Legend
(the "Exchanged Global Preferred Security") to deposit with the Depositary to
evidence transfers pursuant to the Shelf Registration Statement of (i)
beneficial interests from the Rule 144A Global Preferred Security, (ii)
Restricted Definitive Preferred Securities and (iii) Unrestricted Definitive
Preferred Securities.
(c) REGULATION S DEFINITIVE PREFERRED SECURITY TO UNRESTRICTED
DEFINITIVE PREFERRED SECURITY; TERMINATION OF RESTRICTED PERIOD. Following
the termination of the "restricted period" with respect to the issuance of
the Preferred Securities, Regulation S Definitive Preferred Securities may be
exchanged for an interest in a Preferred Security in definitive, fully
registered form without distribution coupons, but without the Restricted
Securities Legend (an "Unrestricted Definitive Preferred Security"), that is
free from any restriction on transfer (other than such as are solely
attributable to any Holder's status). Unrestricted Definitive Preferred
Securities will bear a CUSIP number different from that of the Exchanged
Global Preferred Securities and transfers or exchanges from an Unrestricted
Definitive Preferred Security or Regulation S Definitive Preferred Security
to an Exchanged Preferred Security must be effected pursuant to Section
9.2(b).
(d) TRANSFER AND EXCHANGE OF DEFINITIVE PREFERRED SECURITIES. When
Definitive Preferred Securities are presented to the Registrar or co-registrar
(x) to register the transfer of such Definitive Preferred
Securities; or
(y) to exchange such Definitive Preferred Securities for an equal
number of Definitive Preferred Securities of another number,
the Registrar or co-registrar shall register the transfer or make the
exchange as requested if its reasonable requirements (including any
applicable requirements of law) for such transaction are met; PROVIDED,
HOWEVER, that the Definitive Preferred Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Trust and the
Registrar or co-registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
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(ii) in the case of Definitive Preferred Securities that are
Restricted Definitive Preferred Securities, are being transferred or exchanged
pursuant to an effective registration statement under the Securities Act or,
prior to the time of the effectiveness of such registration statement (or
anytime after the effectiveness of such registration statement when it is not
available for effecting resales of the Preferred Securities), pursuant to clause
(A) or (B) below, and are accompanied by the following additional information
and documents, as applicable:
(A) if such Restricted Preferred Securities are being
delivered to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Preferred Security); or
(B) if such Restricted Preferred Securities are being
transferred pursuant to an exemption from registration in accordance with Rule
144 or Regulation S or any other exemption available under the Securities Act,
including to an institutional "accredited investor," (i) a certification to that
effect (in the form set forth on the reverse of the Preferred Security) and
(ii) if the Trust or Registrar so requests, evidence reasonably satisfactory to
them as to the compliance with the restrictions set forth in the Restricted
Securities Legend, including a letter in the form of Exhibit A to the Offering
Circular.
Definitive Preferred Securities that are transferred to QIBs in accordance
with Rule 144A under the Securities Act must take delivery of the Preferred
Securities in the form of a beneficial interest in the Rule 144A Global
Preferred Security in accordance with Section 9.2(e).
(e) RESTRICTIONS ON TRANSFER OF A DEFINITIVE PREFERRED SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL PREFERRED SECURITY. A Definitive Preferred
Security may not be exchanged for a beneficial interest in a Global Preferred
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with:
(i) if such Definitive Preferred Security is a Restricted
Preferred Security, certification, in the form set forth on the reverse of the
Preferred Security, that such Definitive Preferred Security is being transferred
to a QIB in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Preferred Security is a
Restricted Preferred Security, written instructions directing the Property
Trustee to make, or to direct the Depositary to make, an adjustment on its books
and records with respect to such Global Preferred Security to reflect an
increase in the number of the Preferred Securities represented by the Global
Preferred Security,
then the Property Trustee shall cancel such Definitive Preferred Security and
cause, or direct the Depositary to cause, the aggregate number of Preferred
Securities represented by the Global Preferred Security to be increased
accordingly. If no Global Preferred Securities are then
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outstanding, the Trust shall issue and the Property Trustee shall
authenticate, upon written order of any Regular Trustee, an appropriate
number of Preferred Securities in global form.
(f) TRANSFER AND EXCHANGE OF GLOBAL PREFERRED SECURITIES. The transfer
and exchange of Global Preferred Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Declaration
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor.
(g) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL PREFERRED SECURITY FOR A
DEFINITIVE PREFERRED SECURITY.
(i) Any person having a beneficial interest in a Global
Preferred Security that is being transferred or exchanged pursuant to clause (A)
or (B) below, and not pursuant to an effective registration statement, may upon
request, and if accompanied by the information specified below, exchange such
beneficial interest for a Definitive Preferred Security representing the same
number of Preferred Securities. Upon receipt by the Property Trustee from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in a Global Preferred Security of written instructions or such other form of
instructions as is customary for the Depositary or the Person designated by the
Depositary as having such a beneficial interest in a Restricted Preferred
Security and the following additional information and documents (all of which
may submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the owner of a beneficial interest
in a Global Preferred Security, a certification from such Person to that effect
(in the form set forth on the reverse of the Preferred Security); or
(B) if such beneficial interest is being transferred
pursuant to an exemption from registration in accordance with Rule 144 or
Regulation S or any other exemption available under the Securities Act,
including to an institutional "accredited investor," (i) a certification to that
effect from the transferee or transferor (in the form set forth on the reverse
of the Preferred Security) and (ii) if the Property Trustee or Registrar so
requests, evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section 9.2(j), including a
letter in the form of Exhibit A to the Offering Circular,
then the Property Trustee or the Securities Custodian, at the direction of the
Property Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of the Global Preferred Security to be reduced on its
books and records and, following such reduction, the Trust will execute and the
Property Trustee will authenticate and deliver to the transferee a Definitive
Preferred Security.
(ii) Definitive Preferred Securities issued in exchange for a
beneficial interest in a Global Preferred Security pursuant to this
Section 9.2(g) shall be registered in such names and
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in such authorized denominations as the Depositary, pursuant to instructions
from its Participants or indirect participants or otherwise, shall instruct
the Property Trustee. The Property Trustee shall deliver such Preferred
Securities to the persons in whose names such Preferred Securities are so
registered in accordance with the instructions of the Depositary.
Beneficial interests in the Rule 144A Global Security may not be exchanged
for a Definitive Preferred Security except a Regulation S Definitive Preferred
Security and except as provided in Section 9.2(i).
(h) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL PREFERRED SECURITIES.
Notwithstanding any other provisions of this Declaration (other than the
provisions set forth in this Section 9.2(i)), a Global Preferred Security may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Definitive Preferred Securities that are transferred to QIBs in accordance
with Rule 144A under the Securities Act prior to the effectiveness of a
registration statement under the Securities Act must take delivery of their
interests as the Preferred Securities in the form of a beneficial interest in
the Rule 144A Global Preferred Security in accordance with Section 9.2(e).
(i) AUTHENTICATION OF DEFINITIVE PREFERRED SECURITIES. If at any time:
(i) the Depositary notifies the Trust that the Depositary is
unwilling or unable to continue as Depositary for the Global Preferred
Securities and a successor Depositary for the Global Preferred Securities is not
appointed by the Trust at the direction of the Sponsor within 90 days after
delivery of such notice; or
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the issuance of Definitive Preferred
Securities under this Declaration,
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Regular Trustee requesting the authentication
and delivery of Definitive Preferred Securities to the Persons designated by the
Trust, will authenticate and deliver Definitive Preferred Securities, in an
aggregate principal amount equal to the principal amount of Global Preferred
Securities, in exchange for such Global Preferred Securities.
(j) LEGEND.
(i) Except as permitted by the following paragraph (ii), each
Preferred Security certificate evidencing the Global Preferred Securities and
the Definitive Preferred Securities (and all Preferred Securities issued in
exchange therefor or substitution thereof) shall bear a legend (the "Restricted
Securities Legend") in substantially the following form:
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THIS SECURITY, ANY CONVERTIBLE DEBENTURE ISSUED IN EXCHANGE FOR THIS
SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER (OR
SUCH SHORTER PERIOD UNDER RULE 144A UNDER THE SECURITIES ACT OR ANY
SUCCESSOR RULE) THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH VANSTAR CORPORATION (THE "COMPANY") OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT ITS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY AND THE TRANSFER
AGENTS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRANSFER AGENT, THIS
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LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Restricted Preferred Security
(including any Restricted Preferred Security represented by a Global Preferred
Security) pursuant to an effective registration statement under the Securities
Act or pursuant to Rule 144 under the Securities Act:
(A) in the case of any Restricted Preferred Security that
is a Definitive Preferred Security, the Registrar shall permit the Holder
thereof to exchange such Restricted Preferred Security for a Definitive
Preferred Security that does not bear the Restricted Securities Legend and
rescind any restriction on the transfer of such Restricted Preferred Security;
and
(B) in the case of any Restricted Preferred Security that
is represented by a Rule 144A Global Preferred Security, the Registrar shall
permit the Holder thereof to exchange its interest in such Restricted Preferred
Security for an interest in a Global Preferred Security that does not bear the
Restricted Securities Legend.
(k) CANCELLATION OR ADJUSTMENT OF GLOBAL PREFERRED SECURITY. At such time
as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the extent permitted by the
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Preferred Security shall be returned to the
Depositary for Cancellation or retained and canceled by the Property Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Preferred Security is exchanged for Definitive Preferred Securities, Preferred
Securities represented by such Global Preferred Security shall be reduced and an
adjustment shall be made on the books and records of the Property Trustee (if it
is then the Securities Custodian for such Global Preferred Security) with
respect to such Global Preferred Security, by the Property Trustee or the
Securities Custodian, to reflect such reduction.
(l) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF PREFERRED
SECURITIES.
(i) To permit registrations of transfers and exchanges, the
Trust shall execute and the Property Trustee shall authenticate Definitive
Preferred Securities and Global Preferred Securities at the Registrar's or a co-
registrar's request.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.
(iii) The Registrar or a co-registrar shall not be required
to register the transfer of or exchange of (a) any Definitive Preferred Security
selected for Redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Preferred Security being redeemed in part,
or (b) any Preferred Security for a period beginning 15 Business Days
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before the mailing of a notice of an offer to repurchase or redeem Preferred
Securities or 15 Business Days before a quarterly distribution date.
(iv) Prior to the due presentation for registrations of transfer
of any Preferred Security, the Trust, the Property Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in whose name a
Preferred Security is registered as the absolute owner of such Preferred
Security for the purpose of receiving Distributions on such Preferred Security
and for all other purposes whatsoever, and none of the Trust, the Property
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
(v) All Preferred Securities issued upon any transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration as
the Preferred Securities surrendered upon such transfer or exchange.
(m) NO OBLIGATION OF THE PROPERTY TRUSTEE.
(i) The Property Trustee shall have no responsibility or
obligation to any Preferred Security Beneficial Owner, a Participant in the
Depositary or other Person with respect to the accuracy of the records of the
Depositary or its nominee or of any Participant thereof, with respect to any
ownership interest in the Preferred Securities or with respect to the delivery
to any Participant, beneficial owner or other Person (other than the Depositary)
of any notice (including any notice of redemption) or the payment of any amount,
under or with respect to such Preferred Securities. All notices and
communications to be given to the Holders and all payments to be made to Holders
under the Preferred Securities shall be given or made only to or upon the order
of the registered Holders (which shall be the Depositary or its nominee in the
case of a Global Preferred Security). The rights of beneficial owners in any
Global Preferred Security shall be exercised only through the Depositary subject
to the applicable rules and procedures of the Depositary. The Property Trustee
may conclusively rely and shall be fully protected in relying upon information
furnished by the Depositary or any agent thereof with respect to its
Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no obligation
or duty to monitor, determine or inquire as to compliance with any restrictions
on transfer imposed under this Declaration or under applicable law with respect
to any transfer of any interest in any Preferred Security (including any
transfers between or among Participants or beneficial owners in any Global
Preferred Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to examine
the same to determine substantial compliance as to form with the express
requirements hereof.
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SECTION 9.3 DEEMED SECURITY HOLDERS.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 9.4 BOOK ENTRY INTERESTS.
Global Preferred Securities shall initially be registered on the books and
records of the Trust in the name of Cede & Co., the nominee of the Depositary,
and no Preferred Security Beneficial Owner will receive a definitive Preferred
Security Certificate representing such Preferred Security Beneficial Owner's
interests in such Global Preferred Securities, except as provided in
Section 9.2. Unless and until definitive, fully registered Preferred Securities
Certificates have been issued to the Preferred Security Beneficial Owners
pursuant to Section 9.2:
(a) the provisions of this Section 9.4 shall be in full force and effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Depositary for all purposes of this Declaration (including the payment of
Distributions on the relevant Global Preferred Securities and receiving
approvals, votes or consents hereunder) as the Holder of the Preferred
Securities and the sole holder of the Global Preferred Securities and shall have
no obligation to the Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict with
any other provisions of this Declaration, the provisions of this Section 9.4
shall control; and
(d) the rights of the Preferred Security Beneficial owners shall be
exercised only through the Depositary and shall be limited to those established
by law and agreements between such Preferred Security Beneficial owners and the
Depositary and/or the Participants and receive and transmit payments of
Distributions on the Global Certificates to such Participants. The Depositary
will make book entry transfers among the Participants.
SECTION 9.5 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Preferred Security Holders
is required under this Declaration, the Regular Trustees shall, in the case of
any Global Preferred Security, give all such notices and communications
specified herein to be given to the Preferred Security Holders to the
Depositary, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
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SECTION 9.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If the Depository elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
such Preferred Securities.
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS
OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 LIABILITY.
(a) Except as expressly set forth in this Declaration or as required under
applicable law, the Securities Guarantees and the terms of the Securities, the
Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions.
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(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions
of this Declaration, to the extent that they restrict the duties and liabilities
of an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person to the fullest extent permitted.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the Trust
or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or obligation
to give any consideration to any interest of or factors affecting the Trust or
any other Person; or
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(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
SECTION 10.4 INDEMNIFICATION.
(a) (i) The Sponsor shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the Company Indemnified Person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Trust to procure a judgment in its favor by reason of the fact that
he is or was a Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust
and except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that the Court
of Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such Court of Chancery
or such other court shall deem proper.
(iii) To the extent that a Company Indemnified Person shall
be successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of liability)
in defense of any action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a), or in defense of any claim, issue or matter
therein, he shall be indemnified, to the full extent permitted by law, against
expenses (including attorneys, fees) actually and reasonably incurred by him in
connection therewith.
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(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 10.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a determination
that indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set forth
in paragraphs (i) and (ii). Such determination shall be made (1) by the
Regular Trustees by a majority vote of a quorum consisting of such Regular
Trustees who were not parties to such action, suit or proceeding, (2) if such
a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the Common Security Holder of the Trust.
(v) Expenses (including attorneys, fees) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in advance
of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to
be indemnified by the Debenture Issuer as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Debenture
Issuer if a determination is reasonably and promptly made (i) by the Regular
Trustees by a majority vote of a quorum of disinterested Regular Trustees,
(ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested Regular Trustees so directs, by independent legal counsel in
a written opinion or (iii) the Common Security Holder of the Trust, that,
based upon the facts known to the Regular Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such person did not
believe to be in or not opposed to the best interests of the Trust, or, with
respect to any criminal proceeding, that such Company Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Regular Trustees,
independent legal counsel or Common Security Holder reasonably determine that
such person deliberately breached his duty to the Trust or its Common or
Preferred Security Holders.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this Section
10.4(a) shall not be deemed exclusive of any other rights to which those
seeking indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Debenture
Issuer or Preferred Security Holders of the Trust or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. All rights to indemnification under this Section
10.4(a) shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such capacity at any
time while this Section 10.4(a) is in effect. Any repeal or modification of
this Section 10.4(a) shall not adversely affect any rights or obligations
then existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such,
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whether or not the Debenture Issuer would have the power to indemnify him
against such liability under the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a constituent) absorbed
in a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was serving
at the request of such constituent entity as a director, trustee, officer,
employee or agent of another entity, shall stand in the same position under
the provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent entity if
its separate existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 10.4(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a Company Indemnified Person and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss, liability
or expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration or
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in
this Section 10.4(b) shall survive the satisfaction and discharge of this
Declaration.
SECTION 10.5 OUTSIDE BUSINESSES.
Any Covered Person, the Debenture Issuer, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business ventures
of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. No Covered Person, the Debenture Issuer,
the Delaware Trustee or the Property Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Debenture Issuer, the Delaware Trustee and the
Property Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary)
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or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction
with the Debenture Issuer or any Affiliate of the Debenture Issuer, or may
act as depositary for, trustee or agent for, or act on any committee or body
of holders of, securities or other obligations of the Debenture Issuer or its
Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or
such other year as is required by the Code.
SECTION 11.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail, each transaction of the
Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year by a firm of independent certified public accountants selected by the
Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to each
of the Holders of Securities, within 90 days after the end of each Fiscal Year
of the Trust, annual financial statements of the Trust, including a balance
sheet of the Trust as of the end of such Fiscal Year, and the related statements
of income or loss;
(c) The Regular Trustees shall cause to be duly prepared and delivered to
each of the Holders of Securities, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed with
the appropriate taxing authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
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SECTION 11.3 BANKING.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; PROVIDED, HOWEVER, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such accounts shall
be designated by the Regular Trustees; PROVIDED, HOWEVER, that the Property
Trustee shall designate the signatories for the Property Trustee Account.
SECTION 11.4 WITHHOLDING.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Regular Trustee shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Trust is required to
withhold and pay over any amounts to any authority with respect to distributions
or allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. In the event of
any claimed over withholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not withheld
from actual Distributions made, the Trust may reduce subsequent Distributions by
the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two
Regular Trustees, a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware Trustee;
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(b) no amendment shall be made, and any such purported amendment shall be
void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate from each
of the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the Property
Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust and may include an employee thereof) that such amendment
is permitted by, and conforms to, the terms of this Declaration (including
the terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be
classified for purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of
the Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment
Company that is required to be registered under the Investment Company Act;
(c) at such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the Holders of
a majority in liquidation amount of the Common Securities;
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(f) the rights of the holders of the Common Securities under Article V to
increase or decrease the number of, and appoint and remove Trustees shall not be
amended without the consent of the Holders of a Majority in liquidation amount
of the Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or obligations of
the Sponsor; and
(iv) conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the rights, preferences or privileges of the
Holders.
SECTION 12.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders of any class of Securities may be called at
any time by the Regular Trustees (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of such class of Securities
are entitled to act under the terms of this Declaration, the terms of the
Securities or the rules of any national stock exchange, the Nasdaq National
Market or any inter-dealer quotation system on which the Preferred Securities
are listed or admitted for trading. The Regular Trustees shall call a meeting
of the Holders of such class if directed to do so by the Holders of at least 10%
in liquidation amount of such class of Securities then outstanding. Such
direction shall be given by delivering to the Regular Trustees one or more calls
in a writing stating that the signing Holders of Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of Securities calling a meeting shall specify in
writing the Certificates held by the Holders of Securities exercising the right
to call a meeting and only those Securities represented by the Certificates so
specified shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days and not
more than 60 days before the date of such meeting. Whenever a vote, consent
or approval of the Holders of Securities is permitted or required under this
Declaration or the rules of any stock exchange, over the counter market or
inter-dealer quotation system on which the Preferred Securities are listed or
admitted for trading,
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such vote, consent or approval may be given at a meeting of the Holders of
Securities. Any action that may be taken at a meeting of the Holders of
Securities may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders of Securities owning not
less than the minimum amount of Securities in liquidation amount that would
be necessary to authorize or take such action at a meeting at which all
Holders of Securities having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be given to
the Holders of Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot submitted to the
Holders for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or voting
or participating at a meeting. No proxy shall be valid after the expiration
of 11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies by Holders, and
judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities were stockholders of a Delaware
corporation.
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act, or the listing rules of any
national stock exchange, the Nasdaq National Market, over-the-counter market
or inter-dealer quotation system on which the Preferred Securities are then
listed or trading provide otherwise, the Regular Trustees, in their sole
discretion, shall establish all other provisions relating to meetings of
Holders of Securities, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Holders of Securities,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.
The Property Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration, and each Successor Property Trustee
represents and warrants to the Trust and the Sponsor at the time of the
Successor Property Trustee's acceptance of its appointment as Property Trustee
that:
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(a) The Property Trustee is a banking corporation with trust powers,
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Declaration.
(b) The execution, delivery and performance by the Property Trustee of the
Declaration has been duly authorized by all necessary corporate action on the
part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors, rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law).
(c) The execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee will be the record holder of
the Debentures and the Property Trustee has not knowingly created any liens or
encumbrances on such Debentures.
(e) No consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the execution,
delivery or performance by the Property Trustee of the Declaration.
SECTION 13.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Delaware Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration and at the time of Closing, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:
(a) The Delaware Trustee is a duly organized, validly existing and in good
standing under the laws of the State of Delaware, with trust power and authority
to execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(b) The execution, delivery and performance by the Delaware Trustee of the
Declaration has been duly authorized by all necessary corporate action on the
part of the Delaware Trustee. The Declaration has been duly executed and
delivered by the Delaware Trustee, and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors, rights generally and to
general
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principles of equity and the discretion of the court (regardless of whether
the enforcement of such remedies is considered in a proceeding in equity or
at law).
(c) The execution, delivery and performance of the Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of this Declaration.
(e) The Delaware Trustee is an entity which has its principal place of
business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and the Declaration.
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 REGISTRATION RIGHTS.
The Holders of the Preferred Securities, the Debentures and the Preferred
Securities Guarantee and the shares of Common Stock of the Company issuable upon
conversion of the Debentures (collectively, the "Registrable Securities") are
entitled to the benefits of the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, the Debenture Issuer has agreed for the benefit
of the Holders of Registrable Securities that (i) it will, at its cost, within
75 days after the date of issuance of the Registrable Securities, file a shelf
registration statement (the "Shelf Registration Statement") with the Commission
with respect to resales of the Registrable Securities, (ii) it will use its
reasonable efforts to cause such Shelf Registration Statement to be declared
effective by the Commission within 135 days after the date of issuance of the
Registrable Securities and (iii) the Debenture Issuer will use its reasonable
efforts to maintain such Shelf Registration Statement continuously effective
under the Securities Act until the third anniversary of the effectiveness of the
Shelf Registration Statement or such earlier date as is provided in the
Registration Rights Agreement (the "Effectiveness Period").
Reference is made to the Registration Rights Agreement for a description
of, among other things, the circumstances under which a "Registration Default"
may be declared if such Shelf Registration Statement is not filed or declared
effective within the specified periods of time, and additional interest
"Liquidated Damages" may accrue and be payable on the Securities as a result of
such a Registration Default.
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ARTICLE XV
MISCELLANEOUS
SECTION 15.1 NOTICES.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, sent by
facsimile or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
c/o Vanstar Corporation
5964 West Las Positas
Pleasanton, California 99588-9012
Attention: Chief Financial Officer
Facsimile: (510) 734-0760
(b) if given to the Property Trustee, at the mailing address set forth
below (or such other address as the Property Trustee may give notice of to the
Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Facsimile: 302-651-8882
(c) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Facsimile: 302-651-8882
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
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Vanstar Corporation
5964 West Las Positas
Pleasanton, California 99588-9012
Attention: Chief Financial Officer
Facsimile: (510) 734-0760
(e) if given to any other Holder, at the address set forth on the books
and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 15.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
SECTION 15.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be classified for
United States federal income tax purposes as a grantor trust. The provisions of
this Declaration shall be interpreted to further this intention of the parties.
SECTION 15.4 HEADINGS.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 15.5 SUCCESSORS AND ASSIGNS
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the Sponsor and the Trustees
shall bind and inure to the benefit of their respective successors and assigns,
whether so expressed.
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SECTION 15.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
SECTION 15.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the parties to one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
VANSTAR FINANCING TRUST
By: /s/ JOHN J. DUNICAN, JR.
-------------------------------------
John J. Dunican, Jr.
as Regular Trustee
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: /s/ JAMES P. LAWLER
-------------------------------------
Name: James P. Lawler
Title: Vice President
WILMINGTON TRUST COMPANY,
as Property Trustee
By: /s/ JAMES P. LAWLER
-------------------------------------
Name: James P. Lawler
Title: Vice President
VANSTAR CORPORATION,
as Sponsor
By: /s/ H. CHRISTOPHER COVINGTON
-------------------------------------
Name: H. Christopher Covington
Title: Senior Vice President, General
Counsel and Secretary
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ANNEX I
TERMS OF
6 3/4% TRUST CONVERTIBLE PREFERRED SECURITIES
6 3/4% TRUST CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of October 2, 1996 (as amended from time to time, the "Declaration"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities and the Common Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration or, if not defined in such Declaration, as defined in
the Offering Circular referred to below):
1. DESIGNATION AND NUMBER.
(a) "Preferred Securities." 3,500,000 Trust Convertible Preferred
Securities of the Trust with an aggregate liquidation amount with respect to the
assets of the Trust of One Hundred Seventy Five Million Dollars ($175,000,000),
plus up to an additional 525,000 Preferred Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of Twenty-
Six Million Two Hundred Fifty Thousand Dollars ($26,250,000) solely to cover
over-allotments, as provided for in the Purchase Agreement (the "Additional
Preferred Securities"), and a liquidation amount with respect to the assets of
the Trust of $50 per preferred security, are hereby designated for the purposes
of identification only as "6 3/4 Trust Convertible Preferred Securities
(liquidation amount $50 per Trust Convertible Preferred Security)" (the
"Preferred Securities"). The Preferred Security Certificates evidencing the
Preferred Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the rules
of any stock exchange, inter-dealer quotation system or other organization on
which the Preferred Securities are listed or accepted for trading.
(b) "Common Securities." 108,247 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of Five
Million Four Hundred Twelve Thousand Three Hundred Fifty Dollars ($5,412,350)
plus up to an additional 16,237 Common Securities of the Trust with an aggregate
liquidation amount with respect to the assets of the Trust of Eight Hundred
Eleven Thousand Eight Hundred Fifty Dollars ($811,850) to meet the capital
requirements of the Trust in the event of an issuance of Additional Preferred
Securities, and a liquidation amount with respect to the assets of the Trust of
$50 per Common Security, are hereby designated for the purposes of
identification only as "6 3/4% Trust Convertible Common Securities (liquidation
amount $50 per Trust Convertible Common Security)" (the "Common Securities").
The Common Security Certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
<PAGE>
2. DISTRIBUTIONS.
(a) Distributions payable on each Security will be fixed at a rate per
annum of 6 3/4% (the "Coupon Rate") of the stated liquidation amount of $50 per
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the Coupon Rate (to
the extent permitted by applicable law). The term "Distribution" as used herein
includes any such interest including any Additional Interest, Compounded
Interest and Liquidated Damages payable unless otherwise stated. A Distribution
is payable only to the extent that payments are made in respect of the
Debentures held by the Property Trustee and to the extent the Property Trustee
has funds available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed.
(b) Distributions on the Securities will be cumulative, will accrue from
the date of initial issuance and will be payable quarterly in arrears, on the
following dates, which dates correspond to the interest payment dates on the
Debentures: January 1, April 1, July 1 and October 1, commencing on January 1,
1997, when, as and if available for payment by the Property Trustee, except as
otherwise described below. The Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
from time to time on the Debentures for successive periods not exceeding 20
consecutive quarters (each an "Extension Period"), during which Extension Period
no interest shall be due and payable on the Debentures; PROVIDED, that no
Extension Period shall last beyond the date of maturity of the Debentures. As a
consequence of such extension, Distributions will also be deferred. Despite
such deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate
compounded quarterly during any such Extension Period. Prior to the termination
of any such Extension Period, the Debenture Issuer may further extend such
Extension Period; PROVIDED, that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarters
and that such Extension Period may not extend beyond the maturity date of the
Debentures. Payments of accrued Distributions will be payable to Holders as
they appear on the books and records of the Trust on the first record date after
the end of the Extension Period. Upon the termination of any Extension Period
and the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be the day 15 days prior to
the relevant payment dates, except as otherwise described in this Annex I to
the Declaration. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment in respect of the Preferred
Securities being held in book-entry form through The Depository Trust Company
(the "Depositary") will be made as described under the heading "Description
of the Preferred Securities--Book-Entry Only Issuance--The Depository Trust
Company" in the Offering Circular. The relevant record dates for the
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<PAGE>
Common Securities shall be the same record dates as for the Preferred
Securities. Distributions payable on any Securities that are not punctually
paid on any Distribution payment date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures, will cease to be
payable to the Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead be payable
to the Person in whose name such Securities are registered on the special
record date or other specified date determined in accordance with the
Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distribution payable on such date
will be made on the next succeeding day that is a Business Day (and without
any distribution or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with
the same force and effect as if made on such date.
(d) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Common Stock of the Debenture Issuer
pursuant to the terms of the Securities as forth in this Annex I to the
Declaration, no payment, allowance or adjustment shall be made with respect
to accumulated and unpaid Distributions on such Securities, or be required to
be made; PROVIDED that Holders of Securities at the close of business on any
record date for the payment of Distributions will be entitled to receive the
Distributions payable on such Securities on the corresponding payment date
notwithstanding the conversion of such Securities into Common Stock of the
Debenture Issuer following such record date.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust (each a "Liquidation"), the then Holders of the
Securities on the date of the Liquidation will be entitled to receive out of
the assets of the Trust available for distribution to Holders of Securities
after satisfaction of liabilities of creditors, distributions in an amount
equal to the aggregate of the stated liquidation amount of $50 per Security
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"), unless, in connection with such
Liquidation, Debentures in an aggregate principal amount equal to the
aggregate stated liquidation amount of such Securities, with an interest rate
equal to the Coupon Rate of, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on, such Securities,
shall be distributed on a Pro Rata basis to the Holders of the Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis in
accordance with paragraph 10 below.
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4. REDEMPTION AND DISTRIBUTION.
(a) Upon the repayment of the Debentures in whole or in part, whether
at maturity or upon redemption (either at the option of the Debenture Issuer
or pursuant to a Special Event (as defined below)), the proceeds from such
repayment or payment shall be simultaneously applied to redeem Securities
having an aggregate liquidation amount equal to the aggregate principal
amount of the Debentures so repaid or redeemed at a redemption price equal to
the redemption price of such repaid or redeemed Debentures, together with
accrued and unpaid Distributions thereon through the date of the redemption,
payable in cash (the "Redemption Price"). Holders will be given not less than
30 nor more than 60 days' notice of such redemption. Upon the repayment of
the Debentures at maturity or upon any acceleration, earlier redemption or
otherwise, the proceeds from such repayment will be applied to redeem the
Securities, in whole, upon not less than 30 nor more than 60 days' notice.
(b) If fewer than all the outstanding Securities are to be so redeemed,
the Common Securities and the Preferred Securities will be redeemed Pro Rata
and the Preferred Securities to be redeemed will be as described in paragraph
4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company Event (each
as defined below and each a "Special Event") shall occur and be continuing
the Regular Trustees shall, unless the Debentures are redeemed in the limited
circumstances in relation to a Tax Event described in this Section 4(c),
dissolve the Trust and, after satisfaction of creditors of the Trust, if any,
cause Debentures held by the Property Trustee, having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the Coupon Rate of, and accrued and unpaid Distributions
on, and having the same record date for payment as the Securities, to be
distributed to the Holders of the Securities in liquidation of such Holders'
interest in the Trust on a Pro Rata basis, within 90 days following the
occurrence of such Special Event (the "90 Day Period"); PROVIDED, HOWEVER,
that in the case of a Tax Event, such dissolution and distribution shall be
conditioned on the Regular Trustees' receipt of an opinion of a nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the Holders of the Preferred
Securities will not recognize any income, gain or loss for United States
federal income tax purposes as a result of such dissolution and distribution
of Debentures, and PROVIDED, FURTHER, that if at the time there is available
to the Trust the opportunity to eliminate, within the 90 Day Period, the
Special Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure which
in the sole judgment of the Sponsor, has or will cause no adverse effect on
the Trust, the Sponsor or the Holders of the Securities and will involve no
material cost ("Ministerial Action"), the Trust will pursue such Ministerial
Action in lieu of dissolution.
If in the event of a Tax Event, (i) after receipt of a Tax Event Opinion
(as defined hereinafter) by the Trust, the Regular Trustees have received an
opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax
counsel experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that the Debenture Issuer would
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be precluded from deducting the interest on the Debentures for United States
federal income tax purposes even if the Debentures were distributed to the
Holders of Securities in liquidation of such Holders' interest in the Trust
as described in this paragraph 4(c), or (ii) after receipt of a Tax Event
Opinion, the Regular Trustees shall have been informed by such tax counsel
that a No Recognition Opinion cannot be delivered to the Trust, the Debenture
Issuer shall have the right, upon not less than 30 nor more than 60 days'
notice, to redeem the Debentures in whole (but not in part) for cash within
90 days following the occurrence of such Tax Event, and promptly following
such redemption, the Securities shall be redeemed, on a Pro Rata basis at a
redemption price equal to the redemption price of such redeemed Debentures,
together with accrued and unpaid Distributions thereon through the date of
redemption, payable in cash; PROVIDED, HOWEVER, that if at the time there is
available to the Debenture Issuer or the Trust the opportunity to eliminate,
within such 90 Day Period, the Tax Event by taking some Ministerial Action
which has no adverse effect on the Trust, the Holders of Securities or the
Debenture Issuer, the Trust or the Debenture Issuer will pursue such
Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an
opinion of a nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that, as a result of
(a) any amendment to, or change (including any announced prospective change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, (b) any
amendment to, or change in, an interpretation or application of any such laws
or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case after the date of the Offering Circular
(collectively, a "Change in Tax Law"), there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days of the date thereof,
subject to United States federal income tax with respect to interest accrued
or received on the Debentures, (ii) the Trust is, or will be within 90 days
of the date thereof, subject to more than a de minimis amount of other taxes,
duties or other governmental charges, or (iii) interest payable by the
Debenture Issuer to the Trust on the Debentures is not, or within 90 days of
the date thereof will not be, deductible by the Debenture Issuer for United
States federal income tax purposes. Notwithstanding anything in the previous
sentence to the contrary, a Tax Event shall not include any Change in Tax Law
that requires the Debenture Issuer for United States federal income tax
purposes to defer taking a deduction for any original issue discount ("OID")
that accrues with respect to the Debentures until the interest payment
related to such OID is paid by the Debenture Issuer in money; PROVIDED, that
such Change in Tax Law does not create more than an insubstantial risk that
the Debenture Issuer will be prevented from taking a deduction for OID
accruing with respect to the Debentures at a date that is no later than the
date the interest payment related to such OID is actually paid by the
Debenture Issuer in money.
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"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel
experienced in practice under the Investment Company Act (an "Investment
Company Event Opinion") that, as a result of an occurrence of a change in law
or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of the Offering Circular.
On the date fixed for any distribution of Debentures, upon dissolution of
the Trust: (i) the Securities will no longer be deemed to be outstanding and
(ii) certificates representing Securities will be deemed to represent beneficial
interests in Debentures having an aggregate principal amount equal to the stated
liquidation amount, and bearing accrued and unpaid interest equal to accrued and
unpaid Distributions, on such Securities until such certificates are presented
to the Debenture Issuer or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities for
all quarterly Distribution periods terminating on or before the date of
redemption.
(e) If the Debentures are distributed to the Holders of the Securities,
pursuant to the terms of the Indenture, the Debenture Issuer will use its best
efforts to have the Debentures listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities were listed immediately prior to the
distribution of the Debentures.
(f) "Redemption or Distribution Procedures."
(i) Notice of any redemption of Securities, or notice of
distribution of Debentures in exchange for the Securities (a
"Redemption/Distribution Notice"), will be given by the Trust by mail to
each Holder of Securities to be redeemed or exchanged not fewer than 30 nor
more than 60 days before the date fixed for redemption or exchange thereof
which, in the case of a redemption, will be the date fixed for redemption
of the Debentures. For purposes of the calculation of the date of
redemption or exchange and the dates on which notices are given pursuant to
this paragraph 4(f)(i), a Redemption/ Distribution Notice shall be deemed
to be given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the address of
each such Holder appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in the mailing of either
thereof with respect to any Holder shall affect the validity of the
redemption or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Securities
are to be redeemed, the Securities to be redeemed shall be redeemed Pro
Rata from each Holder of Preferred Securities, it being understood that, in
respect of Preferred Securities registered
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in the name of and held of record by the Depositary or its nominee (or any
successor Clearing Agency or its nominee), the distribution of the proceeds
of such redemption will be made to each Clearing Agency Participant (or
Person on whose behalf such nominee holds such securities) in accordance
with the procedures applied by such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this paragraph 4 (which notice
will be irrevocable), then (A) with respect to Preferred Securities
held in book-entry form, by 12:00 noon, New York City time, on the
redemption date, provided that the Debenture Issuer has paid the
Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Debentures, the Trust will
deposit irrevocably with the Depositary or its nominee (or successor
Clearing Agency or its nominee) funds sufficient to pay the applicable
Redemption Price with respect to such Preferred Securities and will
give the Depositary irrevocable instructions and authority to pay the
applicable Redemption Price to the Holders of such Preferred Securities
represented by the Global Certificates, and (B) with respect to
Preferred Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Trust will irrevocably deposit with the
Paying Agent funds sufficient to pay the amount payable on redemption
to the Holders of such Securities upon surrender of their certificates.
If a Redemption/Distribution Notice shall have been given and funds
deposited as required, then on the date of such deposit, all rights of
Holders of such Securities so called for redemption will cease, except
the right of the Holders of such Securities to receive the Redemption
Price, but without interest on such Redemption Price. Neither the
Regular Trustees nor the Trust shall be required to register or cause
to be registered the transfer of any Securities that have been so
called for redemption. If any date fixed for redemption of Securities
is not a Business Day, then payment of the amount payable on such date
will be made on the next succeeding day that is a Business Day (without
any interest or other payment in respect of any such delay) except
that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date fixed for
redemption. If payment of the redemption price in respect of any
Securities is improperly withheld or refused and not paid either by the
Trust or by the Sponsor as guarantor pursuant to the relevant
Securities Guarantee, Distributions on such Securities will continue to
accrue at the then applicable rate, from the original redemption date
to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating
the amount payable upon redemption (other than for purposes of
calculating any premium).
(iv) In the event of any redemption in part, the Trust shall
not be required to (i) issue, register the transfer of or exchange of any
Preferred Security during a period beginning at the opening of business
15 days before any selection for redemption of
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Preferred Securities and ending at the close of business on the
earliest date in which the relevant notice of redemption is deemed to
have been given to all holders of Preferred Securities to be so
redeemed or (ii) register the transfer of or exchange of any Preferred
Securities so selected for redemption, in whole or in part, except for
the unredeemed portion of any Preferred Securities being redeemed in
part.
(v) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in the case of Preferred
Securities held in book-entry form, the Depositary and, in the case of
Securities held in certificated form, the Holders of such certificates
and (B) in respect of the Common Securities, the Holder thereof.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), the Sponsor
or any of its subsidiaries may at any time and from time to time
purchase outstanding Preferred Securities by tender, in the open market
or by private agreement.
5. CONVERSION RIGHTS.
The Holders of Securities shall have the right at any time prior to the
Business Day immediately preceding the date of repayment of such Securities,
whether at maturity or upon redemption (either at the option of the Company or
pursuant to a Special Event), at their option, to cause the Conversion Agent to
convert Securities, on behalf of the converting Holders, into shares of Common
Stock of the Company in the manner described herein on and subject to the
following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Common Stock of the Company
pursuant to the Holder's direction to the Conversion Agent to exchange such
Securities for a portion of the Debentures theretofore held by the Trust on the
basis of one Security per $50 principal amount of Debentures, and immediately
convert such amount of Debentures into fully paid and nonassessable shares of
Common Stock of the Company at an initial conversion rate of 1.739 shares of
Common Stock of the Company per $50 principal amount of Debentures (which is
equivalent to a conversion price of $28.75 per share of Common Stock of the
Company, subject to certain adjustments set forth in the terms of the Debentures
(as so adjusted, "Conversion Price")). In addition, subject to the provisions
of Section 1309 of the Indenture, in case the Company shall, by dividend or
otherwise, declare or make a distribution on its Common Stock referred to in
Section 1303(c) or 1303(d) of the Indenture, the Holder of the Securities, upon
the conversion thereof, shall also be entitled to receive for each share of
Common Stock of the Company into which the Securities are converted, the portion
of the shares of such Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash and assets so distributed applicable to one share
of Common Stock.
(b) In order to convert Securities into Common Stock of the Company the
Holder shall submit to the Conversion Agent at the office referred to above an
irrevocable request to convert
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Securities on behalf of such Holder (the "Conversion Request"), together, if
the Securities are in certificated form, with such certificates. The
Conversion Request shall (i) set forth the number of Securities to be
converted and the name or names, if other than the Holder, in which the
shares of Common Stock of the Company should be issued and (ii) direct the
Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the
preceding paragraph) and (b) to immediately convert such Debentures on behalf
of such Holder, into Common Stock of the Company (at the conversion rate
specified in the preceding paragraph). The Conversion Agent shall notify the
Trust of the Holder's election to exchange Securities for a portion of the
Debentures held by the Trust and the Trust shall, upon receipt of such
notice, deliver to the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section. The Conversion
Agent shall thereupon notify the Company of the Holder's election to convert
such Debentures into shares of Common Stock of the Company. Holders of
Securities at the close of business on a Distribution record date will be
entitled to receive the Distribution payable on such securities on the
corresponding Distribution payment date notwithstanding the conversion of
such Securities following such record date but prior to such distribution
payment date. Except as provided above, neither the Trust nor the Debenture
Issuer will make, or be required to make, any payment, allowance or
adjustment upon any conversion on account of any accumulated and unpaid
Distributions accrued on the Securities (including any Additional Interest,
Compounded Interest and Liquidation Damages accrued thereon) surrendered for
conversion, or on account of any accumulated and unpaid dividends on the
shares of Common Stock of the Company issued upon such conversion. The
Company shall make no payment or allowance for distributions on the shares of
Common Stock of the Company issued upon such conversion, except to the extent
that such shares of Common Stock of the Company are held of record on the
record date for any such distributions and except as provided in Section 1309
of the Indenture. Securities shall be deemed to have been converted
immediately prior to the close of business on the day on which a Notice of
Conversion relating to such Securities is received by the Trust in accordance
with the foregoing provision (the "Conversion Date"). The Person or Persons
entitled to receive the Common Stock of the Company issuable upon conversion
of the Debentures shall be treated for all purposes as the record holder or
holders of such Common Stock of the Company at such time. As promptly as
practicable on or after the Conversion Date, the Company shall issue and
deliver at the office of the Conversion Agent a certificate or certificates
for the number of full shares of Common Stock of the Company issuable upon
such conversion, together with the cash payment, if any, in lieu of any
fraction of any share to the Person or Persons entitled to receive the same,
unless otherwise directed by the Holder in the notice of conversion, and the
Conversion Agent shall distribute such certificate or certificates to such
Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints
Wilmington Trust Company as "Conversion Agent" for the purpose of effecting the
conversion of Securities in accordance with this Section. In effecting the
conversion and transactions described in this Section, the Conversion Agent
shall be acting as agent of the Holders of Securities directing it to effect
such conversion transactions. The Conversion Agent is hereby authorized (i) to
exchange Securities from time to time for Debentures held by the Trust in
connection with the conversion of such Securities in accordance with this
Section and (ii) to convert all or a portion of the
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Debentures into Common Stock of the Company and thereupon to deliver such
shares of Common Stock of the Company in accordance with the provisions of
this Section and to deliver to the Trust a new Debenture or Debentures for
any resulting unconverted principal amount.
(d) No fractional shares of Common Stock of the Company will be issued as
a result of conversion, but in lieu thereof, such fractional interest will be
paid in cash (based on the last reported sale price of the Common Stock of the
Company on the date such Securities are surrendered for conversion) by the
Debenture Issuer to the Trust, which in turn will make such payment to the
Holder or Holders of Securities so converted.
(e) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock of the Company, solely for issuance upon
the conversion of the Debentures, free from any preemptive or other similar
rights, such number of shares of Common Stock of the Company as shall from time
to time be issuable upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Company shall be entitled to deliver upon
conversion of Debentures, shares of Common Stock of the Company reacquired and
held in the treasury of the Company (in lieu of the issuance of authorized and
unissued shares of Common Stock of the Company), so long as any such treasury
shares are free and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock of the Company issued upon conversion
of the Debentures shall be duly authorized, validly issued and fully paid and
nonassessable. The Trust shall deliver the shares of Common Stock of the
Company received upon conversion of the Debentures to the converting Holder free
and clear of all liens, charges, security interests and encumbrances, except for
United States withholding taxes. Each of the Debenture Issuer and the Trust
shall prepare and shall use its best efforts to obtain and keep in force such
governmental or regulatory permits or other authorizations as may be required by
law, and shall comply with all applicable requirements as to registration or
qualification of the Common Stock of the Company (and all requirements to list
the Common Stock of the Company issuable upon conversion of Debentures that are
at the time applicable), in order to enable the Company to lawfully issue Common
Stock of the Company to the Trust upon conversion of the Debentures and the
Trust to lawfully deliver the Common Stock of the Company to each Holder upon
conversion of the Securities.
(f) The Debenture Issuer will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock of the Company on
conversion of Debentures and the delivery of the shares of Common Stock of the
Company by the Trust upon conversion of the Securities. The Debenture Issuer
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock of
the Company in a name other than that in which the Securities so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Trust the amount of any such tax,
or has established to the satisfaction of the Trust that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities or set forth
in this Annex I to the
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Declaration or to the Declaration itself or otherwise require the Property
Trustee or the Trust to pay any amounts on account of such withholdings.
(h) The Trust covenants not to convert the Debenture held by it into
Common Stock of the Company except pursuant to a Conversion Request in
compliance with the terms of this paragraph 5.
6. VOTING RIGHTS - PREFERRED SECURITIES.
(a) Except as provided under paragraphs 6(b) and 9, in the Business Trust
Act and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) Subject to the requirements set forth in this paragraph, the Holders
of a majority in liquidation amount of the Preferred Securities, voting
separately as a class, may direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as holder of
the Debentures, to (i) exercise the remedies available to it under the Indenture
as a holder of the Debentures, (ii) waive any past default and its consequences
that is waivable under the Indenture, (iii) exercise any right to rescind or
annul a declaration that the principal of all the Debentures shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required; PROVIDED,
however, that where a consent or action under the Indenture would require the
consent or act of the Holders of greater than a majority of the Holders in
principal amount of Debentures affected thereby (a "Super Majority"), the
Property Trustee may only give such consent or take such action at the written
direction of the Holders of at least the proportion in liquidation amount of the
Preferred Securities which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. The Property Trustee
shall be under no obligation to revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting any remedy
available to the Property Trustee or the Debenture Trustee as set forth above,
the Property Trustee shall be under no obligation to take any action in
accordance with the directions of the Holders of the Preferred Securities under
this paragraph unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action and each Holder will be treated as owning an
undivided beneficial interest in the Debentures. If the Property Trustee fails
to enforce its rights under the Debentures after a Holder of Preferred
Securities has made a written request, such Holder of Preferred Securities, to
the extent permitted by applicable law, may directly institute a legal
proceeding against the Debenture Issuer to enforce the Property Trustee's rights
under the Debentures without first instituting any legal proceeding against the
Property Trustee or any other Person. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such
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interest or principal is otherwise payable (or in the case of redemption on
the redemption date), then a holder of Preferred Securities may, to the
extent permitted by applicable law, directly institute a proceeding for
enforcement of payment to such holder (a "Direct Action") of the principal of
or interest on the Debenture having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such holder on or after the
respective due date specified in the Debentures. Except as provided in the
preceding sentence, the holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the
Debentures. In connection with such Direct Action, the Debenture Issuer will
be subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Debenture Issuer to such
holder of Preferred Securities in such Direct Action, and such holder shall
be deemed to have assigned its rights with regard to such payment to the
Debenture Issuer.
(c) Any required approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Securities in the Trust
or pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Preferred Securities. Each such notice
will include a statement setting forth the following information (i) the date of
such meeting or the date by which such action is to be taken, (ii) a description
of any resolution proposed for adoption at such meeting on which such Holders
are entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
(d) No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities. Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Sponsor or any Affiliate of
the Sponsor controlled by the Sponsor shall not be entitled to vote or consent
and shall, for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
7. VOTING RIGHTS--COMMON SECURITIES.
(a) Except as provided under paragraphs 7(b), (c) and 8, in the Business
Trust Act and as otherwise required by law and the Declaration, the Holders of
the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any Trustee
or to increase or decrease the number of Trustees.
(c) Subject to Section 3.9 of the Declaration and only after the Event of
Default with respect to the Preferred Securities has been cured, waived or
otherwise eliminated, and subject to
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the requirements of the second to last sentence of this paragraph, the
Holders of a Majority in liquidation amount of the Securities, voting
separately as a class, may direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee under the
Declaration, including (i) directing the time, method or place of conducting
any proceeding for any remedy available to the Debenture Trustee, or
exercising any trust or power conferred on the Debenture Trustee with respect
to the Debentures, (ii) waiving any past default and its consequences that is
waivable under Section 513 of the Indenture, (iii) exercising any right to
rescind or annul a declaration that the principal of all the Debentures shall
be due and payable, or (iv) consenting to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required; PROVIDED that, where a consent or action under the Indenture would
require the consent or act of the Holders of greater than a majority in
principal amount of Debentures affected thereby (a "Super Majority"), the
Property Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities which the relevant Super Majority represents
of the aggregate principal amount of the Debentures outstanding. Pursuant to
this paragraph 7(c), the Property Trustee shall not revoke any action
previously authorized or approved by a vote of the Holders of the Preferred
Securities. Other than with respect to directing the time, method and place
of conducting any remedy available to the Property Trustee or the Debenture
Trustee as set forth above, the Property Trustee shall be under no obligation
to take any action in accordance with the directions of the Holders of the
Common Securities under this paragraph unless the Property Trustee has
obtained an opinion of independent tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified
as other than a grantor trust on account of such action and each Holder will
be treated as owning an undivided beneficial interest in the Debentures. If
the Property Trustee fails to enforce its rights under the Debentures after a
Holder of Common Securities has made a written request, such Holder of Common
Securities may, to the extent permitted by applicable law, institute a legal
proceeding directly against the Debenture Issuer or any other Person to
enforce the Property Trustee's rights under the Debentures, without first
instituting any legal proceeding against the Property Trustee or any other
Person.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
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No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
8. REGISTRATION RIGHTS.
The Holders of the Preferred Securities, the Debentures, the Preferred
Securities Guarantee and the shares of Common Stock of the Company issuable upon
conversion of the Debentures (collectively, the "Registrable Securities") are
entitled to the benefits of a Registration Rights Agreement dated October 2,
1996. Pursuant to the Registration Rights Agreement, the Debenture Issuer and
the Trust have agreed for the benefit of the Holders of Registrable Securities
that (i) they will, at their cost, within 75 days after the date of issuance of
the Registrable Securities, file a shelf registration statement (the "Shelf
Registration Statement") with the Commission with respect to resales of the
Registrable Securities, (ii) they will use their reasonable efforts to cause
such Shelf Registration Statement to be declared effective by the Commission
within 135 days after the date of issuance of the Registrable Securities and
(iii) they will use their reasonable efforts to maintain such Shelf Registration
Statement continuously effective under the Securities Act until the third
anniversary of the effectiveness of the Shelf Registration Statement or such
earlier date as is provided in the Registration Rights Agreement (the
"Effectiveness Period").
Reference is made to the Registration Rights Agreement for a description
of, among other things, the circumstances under which a "Registration Default"
may be declared if such Shelf Registration Statement is not filed or declared
effective within the specified periods of time, and additional interest
"Liquidated Damages" may accrue and be payable on the Securities as a result of
such a Registration Default, which terms are hereby incorporated herein.
9. AMENDMENTS TO DECLARATION AND INDENTURE.
(a) In addition to any requirements under Section 12.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up
or termination of the Trust, other than as described in Section 8.1 of the
Declaration, then the Holders of Securities as a class, will be entitled to vote
on such amendment or proposal (but not on any other amendment or proposal) and
such amendment or proposal shall not be effective except with the approval of
the Holders of at least a Majority in liquidation amount of the Securities
affected thereby, voting together as a single class; PROVIDED, HOWEVER, if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in liquidation amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the holder of the
Debentures is required under the Indenture with respect to any amendment,
modification or termination of the
I-14
<PAGE>
Indenture or the Debentures, the Property Trustee shall request the written
direction of the Holders of the Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a Majority in liquidation amount
of the Securities voting together as a single class; PROVIDED, HOWEVER, that
where a consent under the Indenture would require the consent of the Holders
of a Super Majority of the Debentures, the Property Trustee may only give
such consent at the written direction of the Holders of at least the same
proportion in aggregate stated liquidation preference of the Securities;
PROVIDED, FURTHER, that the Property Trustee shall not take any action in
accordance with the directions of the Holders of the Securities under this
paragraph 8(b) unless the Property Trustee has obtained an opinion of a
nationally recognized independent tax counsel to the effect that for the
purposes of United states federal income tax the Trust will not be classified
as other than a grantor trust on account of such action.
(c) In the event of any Fundamental Change (as defined in the
Indenture), the Declaration shall be amended as contemplated by, and in
accordance with the requirements of, Section 1304 of the Indenture. The
Regular Trustees, the Property Trustee and the Delaware Trustee shall be
authorized to execute and deliver any such amendment. Such amendment shall
not require the vote or consent of the Holders of any of the Securities.
10. PRO RATA.
A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
11. RANKING.
The Preferred Securities rank PARI PASSU and payment thereon shall be made
Pro Rata with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Debentures held
by the Property Trustee, the rights of Holders of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights to payment of the Holders of the
Preferred Securities.
12. ACCEPTANCE OF SECURITIES GUARANTEE AND INDENTURE.
I-15
<PAGE>
Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
13. NO PREEMPTIVE RIGHTS.
The Holders of the Securities shall have no preemptive rights.
14. MISCELLANEOUS.
The terms of this Annex I constitute a part of the Declaration.
The Debenture Issuer will provide a copy of the Declaration, Preferred
Securities Guarantee or the Common Securities Guarantee (as may be appropriate),
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.
I-16
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include if Preferred Security is in global form and the Depository Trust
Company is the U. S. Depositary--UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[Include if Preferred Security is in global form--TRANSFERS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO
BELOW.]
THIS SECURITY, ANY CONVERTIBLE DEBENTURE ISSUED IN EXCHANGE FOR THIS
SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER (OR SUCH SHORTER PERIOD UNDER
RULE 144A UNDER THE SECURITIES ACT OR ANY SUCCESSOR RULE) THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH VANSTAR CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
A1-1
<PAGE>
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
Certificate Number Number of Preferred Securities
[CUSIP NO [ ]]
[ISIN NO. [ ]]
Preferred Securities
of
Vanstar Financing Trust
6 3/4% Trust Convertible Preferred Securities
(liquidation amount $50 per Trust Convertible Preferred Security)
A1-2
<PAGE>
Vanstar Financing Trust, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that _________________
______________ (the "Holder") is the registered owner of ______________(______)
) preferred securities of the Trust representing undivided beneficial interests
in the assets of the Trust designated the 6 3/4% Trust Convertible Preferred
Securities (liquidation amount $50 per Trust Convertible Preferred Security)
(the "Preferred Securities"). The Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities represented hereby are issued and
shall in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of October 2, 1996, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits
of the Preferred Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Preferred Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Reference is hereby made to select provisions of the Preferred Securities
set forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Debentures as indebtedness and the Preferred Securities as
evidence of indirect beneficial ownership in the Debentures.
A1-3
<PAGE>
Unless the Property Trustee's Certificate of Authentication hereon has
been properly executed, these Preferred Securities shall not be entitled to
any benefit under the Declaration or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Trust has executed this certificate on
__________ __, 1996.
VANSTAR FINANCING TRUST
By:
---------------------------------------
Name:
Title: Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the within-mentioned
Declaration.
Dated: ___________________, _____
WILMINGTON TRUST COMPANY
as Property Trustee
By:
---------------------------------------
Authorized Signatory
A1-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a rate
per annum of 6 3/4% (the "Coupon Rate") of the stated liquidation amount of $50
per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distribution" as used herein includes any such interest including Additional
Interest, Compounded Interest and Liquidated Damages payable unless otherwise
stated, and any premium and/or principal on the Debentures. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the Preferred
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on January 1, April 1, July 1 and
October 1 of each year, commencing on January 1, 1997, to Holders of record
fifteen (15) days prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures. The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for
successive periods not exceeding 20 consecutive quarters (each an "Extension
Period") during which Extension Period no interest shall be due and payable on
the Debentures; PROVIDED, that no Extension Period shall extend beyond the date
of maturity of the Debentures. As a consequence of such extension,
Distributions will also be deferred. Despite such extension, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period; PROVIDED, that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters. Payments of accrued
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
The Preferred Securities shall be redeemable as provided in the
Declaration.
The Preferred Securities shall be convertible into shares of Common Stock
of Vanstar Corporation, through (i) the exchange of Preferred Securities for a
portion of the Debentures and (ii) the immediate conversion of such Debentures
into Common Stock of Vanstar Corporation, in the manner and according to the
terms set forth in the Declaration.
A1-5
<PAGE>
CONVERSION REQUEST
To: Wilmington Trust Company
as Property Trustee of
Vanstar Financing Trust
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion below
designated, into Common Stock of VANSTAR CORPORATION (the "Vanstar Common
Stock") in accordance with the terms of the Amended and Restated Declaration of
Trust (the "Declaration"), dated as of October 2, 1996, by John J. Dunican, Jr.,
as Regular Trustee, Wilmington Trust Company, as Delaware Trustee, Wilmington
Trust Company, as Property Trustee, Vanstar Corporation, as Sponsor, and by the
Holders, from time to time, of individual beneficial interests in the Trust to
be issued pursuant to the Declaration. Pursuant to the aforementioned exercise
of the option to convert these Preferred Securities, the undersigned hereby
directs the Conversion Agent (as that term is defined in the Declaration) to (i)
exchange such Preferred Securities for a portion of the Debentures (as that term
is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Preferred Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures, on behalf of the
undersigned, into Vanstar Common Stock (at the conversion rate specified in the
terms of the Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
A1-6
<PAGE>
Any holder, upon the exercise of its conversion rights in accordance with
the terms of the Declaration and the Preferred Securities, agrees to be bound by
the terms of the Registration Rights Agreement relating to the Vanstar Common
Stock issuable upon conversion of the Preferred Securities.
Date:__________________, ____
in whole ___ in part ___
Number of Preferred Securities to be
converted:
------------------------------------------
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Vanstar Common Stock are to be issued,
along with the address or addresses of such
person or persons:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number:
------------------------------------------
------------------------------------------
------------------------------------------
Signature Guarantee:*
-------------------
- ------------------------
* Signature Guarantee:(Signature must be guaranteed by an "eligible
guarantor institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the Registrar,
which requirements include membership or participation in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for,
A1-7
<PAGE>
ASSIGNMENT FORM
To assign this Preferred Security, fill in the form below:
(I) or (we) assign and transfer this Preferred Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
agent to transfer this Preferred Security on the books of the Company. The
agent may substitute another to act for him.
Your Signature:
--------------------------------
(Sign exactly as your name appears on the other
side of this Security)
Date:
------------------------------------------
Signature Guarantee:
---------------------------
[Include the following if the Preferred Security bears a Restricted Securities
Legend --
In connection with any transfer of any of the Preferred Securities evidenced by
this certificate, the undersigned confirms that such Preferred Securities are
being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer; or
(2) / / transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
- ------------------------
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
** Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
A1-8
<PAGE>
(3) / / transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) / / transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Preferred Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3) or
(4) is checked, the Trustee may require, prior to registering any such transfer
of the Preferred Securities such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act.
-------------------------------------
Signature
Signature Guarantee:*
- ---------------------------------- -------------------------------------]
Signature must be guaranteed Signature
- -----------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Preferred Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:------------------------ ------------------------------------------
NOTICE: To be executed by an executive
officer.]
- ---------------------
*Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
A1-9
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY
[FORM OF FACE OF SECURITY]
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE
REGISTRATION STATEMENT.
OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO
A RELATED PARTY (AS DEFINED IN THE DECLARATION) OF VANSTAR CORPORATION.
Certificate Number Number of Common Securities
Common Securities
of
Vanstar Financing Trust
6 3/4% Trust Convertible Common Securities
(liquidation amount $50 per Trust Convertible Common Security)
Vanstar Financing Trust, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
___________________________________________________________________________
(the "Holder") is the registered owner of ________________ (_______) common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the 6 3/4% Trust Convertible Common Securities
(liquidation amount $50 per Trust Convertible Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Trust dated as of October 2, 1996, as the same
may be amended from time to time (the "Declaration"), including the designation
of the terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the
A2-1
<PAGE>
Declaration. The Holder is entitled to the benefits of the Common Securities
Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Common Securities Guarantee and the Indenture to a
Holder without charge upon written request to the Sponsor at its principal
place of business.
Reference is hereby made to select provisions of the Common Securities
set forth on the reverse hereof, which select provisions shall for all
purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal
income tax purposes the Debentures as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Debentures.
A2-2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate on
____________,_____.
VANSTAR FINANCING TRUST
By:
----------------------------------------
Name:
Title: Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Common Securities referred to in the within-mentioned
Declaration.
Dated: __________, _____
WILMINGTON TRUST COMPANY
as Property Trustee
By:
---------------------------------------
Authorized Signatory
A2-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate
per annum of 6 3/4% (the "Coupon Rate") of the stated liquidation amount of
$50 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distribution" as used herein includes any such interest including any
Additional Interest, Compounded Interest and Liquidated Damages payable
unless otherwise stated, and any premium and/or principal payable on the
Debentures. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Property Trustee and to the
extent the Property Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months,
and for any period shorter than a full quarterly Distribution period for
which Distributions are computed, Distributions will be computed on the basis
of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears, on January 1, April 1, July 1 and
October 1 of each year, commencing on January 1, 1997, to Holders of record
fifteen (15) days prior to such payment dates, which payment dates shall
correspond to the interest payment dates on the Debentures. The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for
successive periods not exceeding 20 consecutive quarters (each an "Extension
Period") during which Extension Period no interest shall be due and payable
on the Debentures; PROVIDED, that no Extension Period shall last beyond the
date of maturity of the Debentures. As a consequence of such extension,
Distributions will also be deferred. Despite such extension, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during
any such Extension Period. Prior to the termination of any such Extension
Period, the Debenture Issuer may further extend such Extension Period;
PROVIDED, that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters. Payments
of accrued Distributions will be payable to Holders as they appear on the
books and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
The Common Securities shall be redeemable as provided in the Declaration.
The Common Securities shall be convertible into shares of Common Stock
of Vanstar Corporation, through (i) the exchange of Common Securities for a
portion of the Debentures and (ii) the immediate conversion of such
Debentures into Common Stock of Vanstar Corporation, in the manner and
according to the terms set forth in the Declaration.
A2-4
<PAGE>
CONVERSION REQUEST
To: Wilmington Trust Company
as Property Trustee of
Vanstar Financing Trust
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of VANSTAR CORPORATION (the "Vanstar Common
Stock") in accordance with the terms of the Amended and Restated Declaration
of Trust (the "Declaration"), dated as of October 2, 1996, by John J.
Dunican, Jr., as Regular Trustee, Wilmington Trust Company, as Delaware
Trustee, Wilmington Trust Company, as Property Trustee, Vanstar Corporation,
as Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to
the aforementioned exercise of the option to convert these Common Securities,
the undersigned hereby directs the Conversion Agent (as that term is defined
in the Declaration) to (i) exchange such Common Securities for a portion of
the Debentures (as that term is defined in the Declaration) held by the Trust
(at the rate of exchange specified in the terms of the Common Securities set
forth as Annex I to the Declaration) and (ii) immediately convert such
Debentures on behalf of the undersigned, into Vanstar Common Stock (at the
conversion rate specified in the terms of the Common Securities set forth as
Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the
A2-5
<PAGE>
assignment below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Date: ___________________, ___
in whole ___ in part ___
Number of Common Securities to be
converted:
------------------------------------------
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Vanstar Common Stock are to be issued,
along with the address or addresses of such
person or persons:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number:
------------------------------------------
------------------------------------------
------------------------------------------
Signature Guarantee:*
--------------------
- -------------------
* (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
A2-6
<PAGE>
ASSIGNMENT FORM
To assign this Common Security, fill in the form below:
(I) or (we) assign and transfer this Common Security to
- -----------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint______________________________________________________
agent to transfer this Common Security on the books of the Company. The agent
may substitute another to act for him.
Your Signature:________________________________
(Sign exactly as your name appears on the other
side of this Security)
Date:__________________________________________
Signature Guarantee:*__________________________
[Include the following if the Common Security bears a Restricted Securities
Legend --
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer; or
(2) / / transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
- ------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
<PAGE>
(3) / / transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) / / transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Common Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if
box (3) or (4) is checked, the Trustee may require, prior to registering any
such transfer of the Common Securities such legal opinions, certifications
and other information as the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act of 1933, such as the exemption provided by Rule 144 under such Act.
------------------------------------------
Signature
Signature Guarantee:*
- ------------------------------ ------------------------------------------]
Signature must be guaranteed Signature
- -----------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Common Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:
------------------------- ------------------------------------------
NOTICE: To be executed by an executive
officer.]
- -------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
-2-
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
[FORM OF FACE OF SECURITY]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER (OR SUCH SHORTER
PERIOD UNDER RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR RULE) THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH VANSTAR
CORPORATION (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRANSFER AGENTS RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
-1-
<PAGE>
VANSTAR CORPORATION
6 3/4% Convertible Subordinated
Debenture due 2016
No.________ $_________________
CUSIP No.
VANSTAR CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which terms include
any successor corporation under the Indenture hereinafter referred to) for value
received, hereby promises to pay to __________________________________________,
or registered assigns, the principal sum [indicated on Schedule A
hereof]* [of ____________________________ Dollars]
($ ) on October 1, 2016.
Interest Payment Dates: January 1, April 1, July 1 and October 1,
commencing January 1, 1997
Regular Record Dates: the close of business on the Business Day
immediately preceding each Interest Payment Date,
except as otherwise provided in clause 4 set forth
on the reverse side of this Security
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
- -------------------
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated:
VANSTAR CORPORATION
By:
--------------------------------------------
Title:
-----------------------------------------
[Seal]
Attest:
- -----------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:
--------------------------------------------
Authorized Signatory
-3-
<PAGE>
[FORM OF REVERSE OF SECURITY]
VANSTAR CORPORATION
6 3/4% Convertible Subordinated
Debenture due 2016*
(i) INTEREST. Vanstar Corporation, a Delaware corporation (the
"Company"), is the issuer of this 6 3/4% Convertible Subordinated Debenture
due 2016 (the "Security") limited in aggregate principal amount to
$180,412,350 (or $207,474,200 if the over-allotment option is exercised),
issued under the Indenture hereinafter referred to. The Company promises to
pay interest on the Securities in cash from October 2, 1996 or from the most
recent interest payment date to which interest has been paid or duly provided
for, quarterly (subject to deferral for up to 20 consecutive quarters as
described in Section 3 hereof) in arrears on January 1, April 1, July 1, and
October 1 of each year (each such date, an "Interest Payment Date"),
commencing January 1, 1997, at the rate of 6 3/4% per annum (subject to
increase as provided in Section 12 hereto) PLUS Additional Interest, Compound
Interest and Liquidated Damages if any, until the principal hereof shall have
become due and payable.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed will be computed
on the basis of the actual number of days elapsed. In the event that any
date on which interest is payable on the Securities is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if
made on such date.
(ii) ADDITIONAL INTEREST. The Company shall pay to Vanstar Financing
Trust (and its permitted successors or assigns under the Declaration) (the
"Trust") such amounts as shall be required so that the net amounts received and
retained by the Trust after paying any taxes, duties, assessments or other
governmental charges of whatever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority ("Additional
Interest") will be not less than the amounts the Trust would have received had
no such taxes, duties, assessment or governmental charges been imposed.
- ---------------------------
* All terms used in this Security which are defined in the Indenture or
in the Declaration attached as Annex A thereto shall have the meanings assigned
to them in the Indenture or the Declaration, as the case may be.
-4-
<PAGE>
(iii) OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company
shall have the right at any time during the term of the Securities to defer
interest payments from time to time by extending the interest payment period
for successive periods (each, an "Extension Period") not exceeding 20
consecutive quarters for each such period; PROVIDED, no Extension Period may
extend beyond the maturity date of the Securities. At the end of each
Extension Period, the Company shall be responsible for the payment of, and
the Company shall pay all interest then accrued and unpaid (including
Additional Interest and Liquidated Damages) together with interest thereon
compounded quarterly at the rate specified for the Securities to the extent
permitted by applicable law ("Compounded Interest"); PROVIDED, that during
any Extension Period, the Company shall not, and shall not allow any of its
Subsidiaries (other than, with respect to clause (i) below only, its wholly
owned Subsidiaries) to, (i) declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of its capital stock (except for (1) dividends
or distributions in shares of Common Stock on Common Stock or on the
Preferred Stock, (2) purchases or acquisitions of shares of Common Stock made
in connection with any employee benefit plan of the Company or its
subsidiaries in the ordinary course of business or pursuant to employment
agreements with officers or employees of the Company or its subsidiaries
entered into in the ordinary course of business, provided that such
repurchases by the Company made from officers or employees of the Company or
its subsidiaries pursuant to employment agreements shall be made at a price
not to exceed market value on the date of any such repurchase and shall not
exceed $1 million in the aggregate for all such employees and officers, (3)
conversions or exchanges of shares of Common Stock of any one class into
shares of Common Stock of another class or (4) purchases of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of any of the Company's securities being converted or
exchanged), (ii) make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem, any debt securities issued by the Company
that rank junior to or PARI PASSU with the Securities and (iii) make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extension Period, the Company may further extend such Extension
Period; PROVIDED, that such Extension Period together with all previous and
further extensions thereof may not exceed 20 consecutive quarters and may not
extend beyond the maturity of the Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. No
interest during an Extension Period, except at the end thereof, shall be due
and payable.
If the Property Trustee is the sole holder of the Securities at the
time the Company selects an Extension Period, the Company shall give notice
to the Regular Trustees, the Property Trustee and the Trustee of its
selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities are
payable or (ii) if the Preferred Securities are listed on the New York Stock
Exchange, Inc. ("NYSE") or other stock exchange or quotation system, the date
the Trust is required to give notice to the NYSE or other applicable
self-regulatory organization or to holders of the Preferred Securities on the
record date or the date such distributions are payable, but in any event not
less than ten Business Days prior to such record date.
-5-
<PAGE>
If the Property Trustee is not the sole holder of the Securities at
the time the Company selects an Extension Period, the Company shall give the
Holders and the Trustee notice of its selection of an Extension Period at
least ten Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) if the Preferred Securities are listed on the
NYSE or other stock exchange or quotation system, the date the Company is
required to give notice to NYSE or other applicable self-regulatory
organization or to holders of the Securities on the record or payment date of
such related interest payment, but in any event not less than two Business
Days prior to such record date.
The quarter in which any notice is given pursuant to the second and
third paragraphs of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under the first paragraph
of this Section 3.
(iv) METHOD OF PAYMENT. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
the Indenture, be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the
regular record date for such interest installment, which shall be the close
of business on the Business Day immediately preceding each Interest Payment
Date; provided, however, that, for so long as the Securities are held by the
Trust or the Property Trustee of the Trust, if any Preferred Securities (or
if the Trust is liquidated in connection with Special Event, any Securities)
are held in certificated form, the Record Date for each Interest Payment Date
shall be 15 days prior to such Interest Payment Date (in each case, a
"Regular Record Date"). Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close
of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice of which shall be given to
Holders of Securities not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
Payment of the principal of and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in
New York, New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; PROVIDED, however, that, at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
(v) PAYING AGENT, SECURITY REGISTRAR AND CONVERSION AGENT. The
Trustee will act as Paying Agent, Security Registrar and Conversion Agent.
The Company may change any Paying Agent, Security Registrar, co-registrar or,
with the consent of the Trust, Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity.
-6-
<PAGE>
(vi) INDENTURE. The Company issued the Securities under an
indenture, dated as of October 2, 1996 (the "Indenture"), between the Company
and Wilmington Trust Company, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders, and of the
terms upon which the Securities are, and are to be, authenticated and
delivered. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) ("TIA") as in effect on the date of the
Indenture. The Securities are subject to, and qualified by, all such terms,
certain of which are summarized hereon, and Holders are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured general obligations of the Company limited to $180,412,350 in
aggregate principal amount (or $207,474,200 if the overallotment option is
exercised). No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
(vii) OPTIONAL REDEMPTION. The Securities are redeemable, in
whole or in part, at the Company's, option at any time and from time to time
on or after October 5, 1999, upon not less than 30 nor more than 60 days'
notice, at the following optional redemption prices (expressed as a
percentage of the principal amount of the Securities) if redeemed during the
12-month period beginning October 1 of the year shown below (October 5, in
the case of 1999):
Percentage of
Year Principal Year Amount
---- ---------------------
2000. . . . . . . . . . . . . . . . . . 104.050%
2001. . . . . . . . . . . . . . . . . . 103.375
2002. . . . . . . . . . . . . . . . . . 102.700
2003. . . . . . . . . . . . . . . . . . 102.025
2004. . . . . . . . . . . . . . . . . . 101.350
2005. . . . . . . . . . . . . . . . . . 100.675
2006 and thereafter. . . . . . . . . . 100.000
plus, in each case, accrued and unpaid interest, including Additional
Interest, Compounded Interest and Liquidated Damages, if any, to the
Redemption Date. On or after the Redemption Date, interest will cease to
accrue on the Securities, or portion thereof, called for redemption.
(viii) OPTIONAL REDEMPTION UPON TAX EVENT. The Securities are
subject to redemption in whole (but not in part), at any time within 90 days
thereafter, if a Tax Event (as defined in the Declaration) shall occur and be
continuing, at the applicable redemption price set forth above (or, for the
period commencing on the date of issuance of the Securities through October
4, 1997 and the twelve month periods commencing October 5, 1997 and October
5, 1998, the product of 106.750%, 106.075% and 105.400%, respectively, times
$50), in each case
-7-
<PAGE>
plus accrued but unpaid interest, including Additional Interest, Compounded
Interest and Liquidated Damages, if any, to the Redemption Date. Any
redemption pursuant to this Section 8 will be made upon not less than 30 nor
more than 60 days' notice.
(ix) NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of the Securities to be redeemed at his address of record. The
Securities in denominations larger than $50 may be redeemed in part but only
in integral multiples of $50. In the event of a redemption of less than all
of the Securities, the Securities will be chosen for redemption by the
Trustee in accordance with the Indenture. On and after the Redemption Date,
interest ceases to accrue on the Securities or portions of them called for
redemption. If this Security is redeemed subsequent to a Regular Record Date
with respect to any Interest Payment Date specified above and on or prior to
such Interest Payment Date, then any accrued interest will be paid to the
person in whose name this Security is registered at the close of business on
such record date.
(x) REDEMPTION. The Securities will mature on October 1,
2016, and may be redeemed, in whole or in part, at any time after October 5,
1999 as set forth above or at any time in certain circumstances upon the
occurrence of a Tax Event as set forth above. Upon the repayment of the
Securities, whether at maturity or upon redemption, the proceeds from such
repayment or payment shall simultaneously be applied to redeem Trust
Securities having an aggregate liquidation amount equal to the Securities so
repaid or redeemed at the applicable redemption price together with accrued
and unpaid distributions through the date of redemption; PROVIDED, that
holders of the Trust Securities shall be given not less than 30 nor more than
60 days notice of such redemption. Upon the repayment of the Securities at
maturity or upon any acceleration, earlier redemption or otherwise, the
proceeds from such repayment will be applied to redeem the Preferred
Securities, in whole, upon not less than 30 nor more than 60 days' notice.
There are no sinking fund payments with respect to the Securities.
(xi) CONVERSION. The Holder of any Security has the right,
exercisable at any time prior to the close of business (New York time) on the
Business Day immediately preceding the date of repayment of such Security
whether at maturity or upon redemption (either at the option of the Company
or pursuant to a Tax Event), to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $50) into the number of
shares of Common Stock obtained by dividing $50 per Security by the
applicable conversion price (initially $28.75 per share of Common Stock for
each Security) (equivalent to a conversion rate of 1.739 shares per share of
Common Stock of the Company per Security), subject to adjustment under
certain circumstances as set forth in the Indenture.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender
the Security to a Conversion Agent, (3) furnish appropriate endorsements or
transfer documents if required by the Security Registrar or Conversion Agent
and (4) pay any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but if any
Holder surrenders a Security for conversion after the close of business on
the Regular Record Date for the payment of
-8-
<PAGE>
an installment of interest and prior to the opening of business on the next
Interest Payment Date, then, notwithstanding such conversion, the interest
payable on such Interest Payment Date will be paid to the registered Holder
of such Security on such Regular Record Date. In such event, such Security,
when surrendered for conversion, need not be accompanied by payment of an
amount equal to the interest payable on such Interest Payment Date on the
portion so converted. The number of shares issuable upon conversion of a
Security is determined by dividing the principal amount of the Security
converted by the conversion price in effect on the Conversion Date. No
fractional shares will be issued upon conversion but a cash adjustment will
be made for any fractional interest. The Outstanding principal amount of any
Security shall be reduced by the portion of the principal amount thereof
converted into shares of Common Stock.
(xii) REGISTRATION RIGHTS. The holders of the Preferred
Securities, the Securities, the Guarantee and the shares of Common Stock of
the Company issuable upon conversion of the Securities (collectively, the
"REGISTRABLE SECURITIES") are entitled to the benefits of a Registration
Rights Agreement, dated as of October 2, 1996, among the Company, the Trust
and the Initial Purchasers (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, the Company has agreed for the benefit
of the holders of Registrable Securities that (i) it will, at its cost,
within 75 days after the date of issuance of the Registrable Securities, file
a shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Registrable Securities, (ii) it
will use its reasonable efforts to cause, such Shelf Registration Statement
to be declared effective by the Commission within 135 days after the date of
issuance of the Registrable Securities and (iii) the Company will use its
reasonable efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act until the third anniversary of the
effectiveness of the Shelf Registration Statement or such earlier date as is
provided in the Registration Rights Agreement. Reference is made to the
Registration Rights Agreement for a description of, among other things, the
circumstances under which a "Registration Default" may be declared if such
Shelf Registration Statement is not filed or is not declared effective within
a specified period of time, and additional interest "Liquidated Damages" may
accrue and by payable on the Securities as a result of such a Registration
Default.
(xiii) REGISTRATION, TRANSFER, EXCHANGE AND DENOMINATIONS. As
provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in New York, New York or Wilmington, Delaware, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons
in denominations of $50 and integral multiples thereof. No service charge
shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior
-9-
<PAGE>
to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for
all purposes, whether or not this Security be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary. In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
(xiv) PERSONS DEEMED OWNERS. Except as provided in Section 4
hereof, the registered Holder of a Security may be treated as its owner for
all purposes.
(xv) UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent
shall pay the money back to the Company at its written request. After that,
holders of Securities entitled to the money must look to the Company for
payment unless an abandoned property law designates another Person and all
liability of the Trustee and such Paying Agent with respect to such money
shall cease.
(xvi) DEFAULTS AND REMEDIES. The Securities shall have the
Events of Default as set forth in Section 501 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company, or the holders of at least
25% in aggregate principal amount of the then Outstanding Securities by
notice to the Company and the Trustee, may declare all the Securities to be
due and payable immediately.
The holders of a majority in principal amount of the Securities
then Outstanding by written notice to the Trustee may rescind an acceleration
and its consequences if the rescission is prior to a judgment or decree for
the payment of the money due has been obtained by the Trustee as provided in
the Indenture and if all existing Events of Default have been cured or waived
except nonpayment of principal and/or interest that has become due solely
because of the acceleration. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then
Outstanding Securities issued under the Indenture may direct the Trustee in
its exercise of any trust or power. The Company must furnish annually
compliance certificates to the Trustee. The above description of Events of
Default and remedies is qualified by reference to, and subject in its
entirety by, the more complete description thereof contained in the
Indenture.
(xvii) AMENDMENTS, SUPPLEMENTS AND WAIVERS. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof
and the modification of the rights and obligations of the Company and the
rights of the Holders of the Securities under the Indenture at any time by
the Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder
-10-
<PAGE>
of this Security shall be conclusive and binding upon such Holder and upon
all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
(xviii) TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the
same rights it would have, as if it were not Trustee, subject to certain
limitations provided for in the Indenture and in the TIA. Any Agent may do
the same with like rights.
(xix) NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
(xx) GOVERNING LAW. THE INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
(xxi) AUTHENTICATION. The Securities shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Trustee or an authenticating agent.
The Company will furnish to any Holder of the Securities upon
written request and without charge a copy of the Indenture. Request may be
made to:
Vanstar Corporation
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
Attention of: Chief Financial Officer
Facsimile: (510) 734-0760
-11-
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- -----------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
---------------------------
(Sign exactly as your name appears on the
other side of this Security)
Date:
-------------------------------------
Signature Guarantee:*
---------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer;
or
(2) / / transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
- -------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
<PAGE>
(3) / / transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) / / transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3)
or (4) is checked, the Trustee may require, prior to registering any such
transfer of the Securities such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such
as the exemption provided by Rule 144 under such Act.
------------------------------------------
Signature
Signature Guarantee:*
- ----------------------------- ------------------------------------------]
Signature must be guaranteed Signature
- -----------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:-------------------------- ---------------------------------------
NOTICE: To be executed by an executive
officer.]
- -------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the NYSE.
-2-
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be $__________.
The following increases or decreases in the principal amount of this Global
Security have been made:
<TABLE>
<CAPTION>
Amount of increase in
Principal Amount of
this Global Security Principal Amount of Signature of
including upon Amount of decrease in this Global Security authorized officer of
exercise of over- Principal Amount of following such Trustee or Securities
Date Made allotment option this Global Security decrease or increase Custodian
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
ELECTION TO CONVERT
To: Vanstar Corporation
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into Common
Stock of Vanstar Corporation in accordance with the terms of the Indenture
referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If
shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Indenture and the Security, agrees to be bound by the
terms of the Registration Rights Agreement relating to the Common Stock
issuable upon conversion of the Securities.
Date:
---------------------
in whole ___ Portions of Security to be in part
in part ___ converted ($50 or integral multiples
thereof):
$
----------------------------------------------
----------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
----------------------------------------------
----------------------------------------------
----------------------------------------------
Signature Guarantee:*
-------------------------
- -------------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
<PAGE>
EXHIBIT D
FORM OF TRANSFEROR CERTIFICATE FOR TRANSFER DURING THE EFFECTIVENESS OF A
SHELF REGISTRATION STATEMENT (UNLESS THE USE THEREOF HAS BEEN SUSPENDED)
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE
RODNEY SQUARE NORTH
1100 NORTH MARKET STREET
WILMINGTON, DELAWARE 19890-0001
ATTN: CORPORATE TRUST ADMINISTRATION
RE: VANSTAR FINANCING TRUST
Reference is hereby made to the Amended and Restated Declaration of Trust
dated as of __________ __, 1996 (the "Declaration"), by _______________,
_______________ and ________________, as Regular Trustees, Wilmington Trust
Company, as Delaware Trustee, Wilmington Trust Company, as Property Trustee and
Vanstar Corporation, as Sponsor. Capitalized terms used but not defined herein
shall have the meanings given them in the Declaration.
This letter relates to Preferred Securities which are held in the form of
the [Rule 144A Global Preferred Security with the Depositary (CUSIP
No. )] [a Restricted Definitive Preferred Security (CUSIP
No. )] in the name of name of transferor] (the "Transferor") to effect
the transfer of such Preferred Securities in exchange for an equivalent
beneficial interest in the Exchanged Global Preferred Security.
In connection with such request, and in respect of such Preferred
Securities, the Transferor does hereby certify that (i) such Preferred
Securities are being transferred in accordance with and pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
and in accordance with any applicable securities laws of any state of the United
States and (ii) the Transferor has complied with its obligations to provide
information to the Issuer, as required by the Registration Rights Agreement, and
with its obligations, if any, under the Act with regard to the delivery of a
prospectus.
[NAME OF TRANSFEROR]
By:
---------------------------------
Name:
Title:
Dated:
----------------------------
cc: Chief Financial Officer,
Vanstar Corporation
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE OF TRUST
CERTIFICATE OF TRUST OF VANSTAR FINANCING TRUST
THIS Certificate of Trust of Vanstar Financing Trust (the "Trust"), dated
September 25, 1996, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is Vanstar
Financing Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware, 19890-0001, Attention: Corporate
Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY, as trustee
By: /s/ PATRICIA A. EVANS
-------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
---------------------------------------------------------------------
VANSTAR CORPORATION,
AS ISSUER
TO
WILMINGTON TRUST COMPANY,
AS TRUSTEE
---------------------------------------------------------------------
INDENTURE
DATED AS OF OCTOBER 2, 1996
---------------------------------------------------------------------
$180,412,350
(SUBJECT TO INCREASE TO UP TO $207,474,200 IN
THE EVENT AN OVER-ALLOTMENT OPTION IS EXERCISED)
6 3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2016
---------------------------------------------------------------------
<PAGE>
VANSTAR CORPORATION
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318 OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE ACT SECTION INDENTURE SECTION
Section 310. . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a) (1)
609
(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .609
(a) (3) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608, 610
Section 311. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .613
Section 312. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
701, 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
703(a)
(a) (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
704
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
Section 315. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .514
Section 316. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
101
(a) (1) (A) . . . . . . . . . . . . . . . . . . . . . . . . . 502, 512
(a) (1) (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . .513
(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104(c)
Section 317. . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a) (1)
503, 504
(a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .504
-i-
<PAGE>
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .402, 1003
Section 318. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(a)
107
______________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE - Definitions and Other Provisions of General Application. . . . . 2
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . .10
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . .10
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . .11
SECTION 105. Notices, Etc., to Trustee and the Company . . . . . . . . .12
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . .12
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . .13
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . .13
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . .13
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . .13
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . .13
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE TWO - Security Forms . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . .14
SECTION 202. Initial Issuance to Property Trustee. . . . . . . . . . . .14
ARTICLE THREE - The Securities . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . .16
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 303. Execution, Authentication, Delivery and Date. . . . . . . .17
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . .18
SECTION 305. Registration, Registration of Transfer and Exchange . . . .18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . .19
SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . .20
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . .21
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 310. Right of Set Off. . . . . . . . . . . . . . . . . . . . . .22
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 312. Option to Extend Interest Payment Period. . . . . . . . . .22
SECTION 313. Paying Agent, Security Registrar and Conversion Agent . . .24
SECTION 314. Global Security . . . . . . . . . . . . . . . . . . . . . .24
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE FOUR - Satisfaction and Discharge. . . . . . . . . . . . . . . . . . .25
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . .25
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . .26
ARTICLE FIVE - Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . .26
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . .28
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . .29
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities. . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . .30
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . .30
SECTION 508. Unconditional Right of Holders to Receive Principal and
Interest and Convert. . . . . . . . . . . . . . . . . . . .31
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . .31
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . .31
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . .32
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . .32
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . .32
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . .33
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . .33
SECTION 516. Enforcement by Holders of Preferred Securities. . . . . . .33
ARTICLE SIX - The Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . .34
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . .34
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . .34
SECTION 604. Not Responsible for Recitals or Issuance of Securities. . .35
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . .35
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . .35
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . .36
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . .36
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . .36
SECTION 610. Resignation and Removal; Appointment of Successor . . . . .37
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . .38
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business. . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 613. Preferential Collection of Claims Against Company . . . . .39
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE SEVEN - Holders' Lists and Reports by Trustee and Company. . . . . . .39
SECTION 701. Company to Furnish Trustee Names and Addressees of Holders.39
SECTION 702. Preservation of Information; Communications to Holders. . .39
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . .40
SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . . . .40
ARTICLE EIGHT - Consolidation, Merger, Conveyance, Transfer or Lease . . . . .40
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. . . .40
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . .41
ARTICLE NINE - Supplemental Indentures . . . . . . . . . . . . . . . . . . . .42
SECTION 901. Supplemental Indentures without Consent of Holders. . . . .42
SECTION 902. Supplemental Indentures with Consent of Holders . . . . . .42
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . .44
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . .44
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . .44
SECTION 906. Reference in Securities to Supplemental Indentures. . . . .44
ARTICLE TEN - Covenants; Representations and Warranties. . . . . . . . . . . .44
SECTION 1001. Payment of Principal and Interest. . . . . . . . . . . . .44
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . .45
SECTION 1003. Money for Security Payments to Be Held in Trust. . . . . .45
SECTION 1004. Statement by Officers as to Default. . . . . . . . . . . .46
SECTION 1005. Limitation on Dividends; Transactions with Affiliates;
Covenants as to the Trust. . . . . . . . . . . . . . . . .46
SECTION 1006. Payment of Expenses of the Trust . . . . . . . . . . . . .47
SECTION 1007. Registration Rights. . . . . . . . . . . . . . . . . . . .48
SECTION 1008. Rule 144A Information Requirement. . . . . . . . . . . . .48
SECTION 1009. Listing the Securities . . . . . . . . . . . . . . . . . .48
ARTICLE ELEVEN - Redemption of Securities. . . . . . . . . . . . . . . . . . .49
SECTION 1101. Right of Redemption. . . . . . . . . . . . . . . . . . . .49
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . .49
SECTION 1103. Election to Redeem; Notice to Trustee. . . . . . . . . . .49
SECTION 1104. Selection by Trustee of Securities to Be Redeemed. . . . .50
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . .50
SECTION 1106. Deposit of Redemption Price. . . . . . . . . . . . . . . .51
SECTION 1107. Securities Payable on Redemption Date. . . . . . . . . . .51
SECTION 1108. Securities Redeemed in Part. . . . . . . . . . . . . . . .51
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
SECTION 1109. Optional Redemption. . . . . . . . . . . . . . . . . . . .52
SECTION 1110. Tax Event Redemption . . . . . . . . . . . . . . . . . . .53
SECTION 1111. No Sinking Fund. . . . . . . . . . . . . . . . . . . . . .53
ARTICLE TWELVE - Subordination of Securities . . . . . . . . . . . . . . . . .53
SECTION 1201. Agreement to Subordinate . . . . . . . . . . . . . . . . .53
SECTION 1202. Default on Senior Indebtedness . . . . . . . . . . . . . .54
SECTION 1203. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . .54
SECTION 1204. Subrogation. . . . . . . . . . . . . . . . . . . . . . . .55
SECTION 1205. Trustee to Effectuate Subordination. . . . . . . . . . . .56
SECTION 1206. Notice by the Company. . . . . . . . . . . . . . . . . . .56
SECTION 1207. Rights of the Trustee; Holders of Senior Indebtedness. . .57
SECTION 1208. Subordination May Not Be Impaired. . . . . . . . . . . . .58
SECTION 1209. Certain Conversions Deemed Payment . . . . . . . . . . . .58
SECTION 1210. Article Applicable to Paying Agents. . . . . . . . . . . .59
ARTICLE THIRTEEN - Conversion of Securities. . . . . . . . . . . . . . . . . .59
SECTION 1301. Conversion Rights. . . . . . . . . . . . . . . . . . . . .59
SECTION 1302. Conversion Procedures. . . . . . . . . . . . . . . . . . .59
SECTION 1303. Conversion Price Adjustments . . . . . . . . . . . . . . .61
SECTION 1304. Fundamental Change . . . . . . . . . . . . . . . . . . . .65
SECTION 1305. Notice of Adjustments of Conversion Price. . . . . . . . .67
SECTION 1306. Prior Notice of Certain Events . . . . . . . . . . . . . .68
SECTION 1307. Certain Defined Terms. . . . . . . . . . . . . . . . . . .68
SECTION 1308. Dividend or Interest Reinvestment Plans. . . . . . . . . .70
SECTION 1309. Certain Additional Rights. . . . . . . . . . . . . . . . .70
SECTION 1310. Restrictions on Common Stock Issuable Upon Conversion. . .71
SECTION 1311. Trustee Not Responsible for Determining Conversion Price
or Adjustments . . . . . . . . . . . . . . . . . . . . . .71
ARTICLE FOURTEEN - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . .72
SECTION 1401. No Recourse; Immunity of Incorporators, Stockholders,
Officers and Directors . . . . . . . . . . . . . . . . . .72
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INDENTURE, dated as of October 2, 1996, between Vanstar Corporation, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 5964 West Las
Positas, Pleasanton, California 94588-9012, and Wilmington Trust Company, a
Delaware banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Vanstar Financing Trust, a Delaware business trust (the "Trust"),
formed under the Amended and Restated Declaration of Trust among the Company, as
sponsor, Wilmington Trust Company, as property trustee (the "Property Trustee"),
Wilmington Trust Company, as Delaware trustee (the "Delaware Trustee") and John
R. Dunican, Jr., as regular trustee (the "Regular Trustee"), dated as of
October 2, 1996 (the "Declaration"), pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated September 26, 1996, among the Company, the Trust
and the Initial Purchasers named therein, will issue and sell up to 3,500,000
(or 4,025,000 if the over-allotment option is exercised) of its 6 3/4% Trust
Convertible Preferred Securities (the "Preferred Securities") with a liquidation
amount of $50 per Preferred Security having an aggregate liquidation amount with
respect to the assets of the Trust of $175,000,000 (or $201,250,000 if the over-
allotment option is exercised);
WHEREAS, the Regular Trustees of the Trust, on behalf of the Trust, will
execute and deliver to the Company or one of Company's subsidiaries Common
Securities evidencing an ownership interest in the Trust, registered in the name
of the Company or one of Company's subsidiaries, in an aggregate amount equal to
three percent of the capitalization of the Trust, equivalent to 108,247 Common
Securities (or 124,484 Common Securities if the over-allotment option is
exercised), with a liquidation amount of $50 per Common Security, having an
aggregate liquidation amount with respect to the assets of the Trust of
$5,412,350 (or $6,224,200 if the over-allotment option is exercised) (the
"Common Securities"), pursuant to the Purchase Agreement of Common Securities,
dated as of October 2, 1996, between the Trust and the Company;
WHEREAS, the Trust will use the proceeds from the sale of the Preferred
Securities and the Common Securities to purchase from the Company the Securities
(as defined below) in an aggregate principal amount of $180,412,350 (or
$207,474,200 if the over-allotment option is exercised);
WHEREAS, the Company is guaranteeing the payment of distributions on the
Preferred Securities, and payment of the Redemption Price and payments on
liquidation with respect to the Preferred Securities, to the extent provided in
the Preferred Securities Guarantee Agreement (the "Guarantee") between the
Company and Wilmington Trust Company, as guarantee trustee, for the benefit of
the holders of the Preferred Securities from time to time;
WHEREAS, the Company has duly authorized the creation of an issue of 6 3/4%
Convertible Subordinated Debentures due 2016 (the "Securities"), of
substantially the tenor and amount hereinafter set forth and to provide therefor
the Company has duly authorized the execution and delivery of this Indenture;
and
<PAGE>
WHEREAS, so long as the Trust is a Holder of Securities, and any Preferred
Securities are outstanding, the Declaration provides that the holders of
Preferred Securities may cause the Conversion Agent to (a) exchange such
Preferred Securities for Securities held by the Trust and (b) immediately
convert such Securities into Common Stock;
WHEREAS all things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and 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 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, 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 as
of the relevant date; and
(4) except as otherwise indicated, 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.
"ACT," when used with respect to any Holder, has the meaning specified in
Section 104(a).
"ADDITIONAL INTEREST" has the meaning specified in Section 301.
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"ADDITIONAL PAYMENTS" means Compounded Interest and Additional Interest, if
any.
"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.
"AGENT" means any Registrar, Paying Agent, Conversion Agent or co-
registrar.
"BOARD OF DIRECTORS" means the board of directors of the Company or any
duly authorized committee of such 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
applicable 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 any day other than a day on which banking institutions
in New York, New York, San Francisco, California or in Wilmington, Delaware are
authorized or required by law to close.
"CLOSING PRICE" has the meaning specified in Section 1307(b).
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"COMMON SECURITIES" has the meaning specified in the recitals to this
Instrument.
"COMMON SECURITIES GUARANTEE" means any guarantee that the Company may
enter into that operates, directly or indirectly, for the benefit of holders of
Common Securities of the Trust.
"COMMON STOCK" includes any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company pursuant to its terms.
However, subject to the provisions of Article Thirteen, shares issuable on
conversion of Securities shall include only shares of the class designated as
Common Stock of the Company at the date of this instrument or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or
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<PAGE>
involuntary liquidation, dissolution or winding up of the Company and which
are not subject to redemption by the Company pursuant to their terms;
PROVIDED, that if at any time there shall be more than one such resulting
class, the shares of each such class then so issuable on conversion shall be
substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"COMPANY" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"COMPANY'S REQUEST" or "COMPANY'S ORDER" means a written request or order
delivered to the Trustee and signed in the name of the Company by its Chairman
of the Board, its Vice 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.
"COMPOUNDED INTEREST" has the meaning specified in Section 312(a) .
"CONVERSION AGENT" means the Person appointed to act on behalf of the
holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 1302
hereof.
"CONVERSION DATE" has the meaning specified in Section 1302(a).
"CORPORATE TRUST OFFICE" means the principal office of the Trustee in the
State of Delaware, at which at any particular time its corporate trust business
shall be administered and which at the date of this Indenture is Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
"DECLARATION" has the meaning specified in the Recitals of this instrument.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DELAWARE TRUSTEE" has the meaning given it in the Recitals of this
instrument.
"DEPOSITARY" means, with respect to any Securities issued in the form of
one or more Global Security, a clearing agency registered under the Exchange Act
that is dedicated to act as Depositary for the Securities.
"DIRECT ACTION" means a proceeding directly instituted by a holder of
Preferred Securities for enforcement of payment to such holder of the principal
of or interest on the Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder on or
after the respective due date specified in the Securities, if a Declaration
Event of Default has occurred and is continuing and such event is attributable
to the failure of the
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<PAGE>
Company to pay interest or principal on the Securities on the date such
interest or principal is otherwise payable (or in the case of redemption, on
the redemption date.)
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration and the Securities held by the Property Trustee are to be
distributed to the holders of Trust Securities issued by the Trust PRO RATA in
accordance with the Declaration.
"DISSOLUTION TAX OPINION" has the meaning specified in the Declaration.
"EFFECTIVENESS PERIOD" has the meaning specified in Section 1007.
"EVENT OF DEFAULT" has the meaning specified in Section 501.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"EXPIRATION TIME" has the meaning specified in Section 1303(e).
"EXTENSION PERIOD" has the meaning specified in Section 312(a).
"GLOBAL SECURITY" has the meaning specified in Section 314(a)(i).
"GUARANTEE" has the meaning specified in the Recitals to this instrument.
"HOLDER" means a Person in whose name a Security is registered in the
Security Register.
"INDENTURE" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.
"INITIAL PURCHASERS," with respect to the Preferred Securities, means
Robertson, Stephens & Company LLC, Alex. Brown & Sons Incorporated, Donaldson
Lufkin & Jenrette Securities Corporation and The Robinson-Humphrey Company, Inc.
"INTEREST PAYMENT DATE" has the meaning specified in Section 301.
"INVESTMENT COMPANY EVENT" has the meaning specified in the Declaration.
"LIQUIDATED DAMAGES" has the meaning specified in Section 1007.
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<PAGE>
"MATURITY," when used with respect to any Security, means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"MINISTERIAL ACTION" has the meaning specified in Section 1110.
"90-DAY PERIOD" has the meaning specified in Section 1110.
"NO RECOGNITION OPINION" has the meaning specified in the Declaration.
"NON BOOK-ENTRY PREFERRED SECURITIES" has the meaning specified in
Section 314(a)(ii).
"NOTICE OF CONVERSION" means the notice to be given by a holder of
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Securities and to convert such Securities
into Common Stock on behalf of such holder.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board, the Vice 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. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel who shall be
reasonably acceptable to the Trustee.
"OUTSTANDING," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, EXCEPT: (i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; (ii) Securities 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 Paying Agent on
its own behalf) 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; and (iii) Securities that have been paid pursuant to Section 306,
converted into Common Stock pursuant to Section 1301, or in exchange for or in
lieu of which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such Securities
are held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; 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 Company upon the
Securities or any Affiliate of the Company controlled by the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such
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<PAGE>
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the
pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company controlled by the Company.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"PERSON" means any individual, corporation, company, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREDECESSOR SECURITY' of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"PREFERRED SECURITIES" has the meaning specified in the Recitals to this
instrument.
"PREFERRED STOCK" means the Company's Preferred Stock, $.01 per share par
value.
"PROPERTY TRUSTEE" has the meaning specified in the Recitals of this
instrument.
"PURCHASE AGREEMENT" has the meaning specified in the Recitals to this
instrument.
"PURCHASED SHARES" has the meaning specified in Section 1303 (e) .
"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.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REDEMPTION TAX OPINION" has the meaning set forth in the Declaration.
"REFERENCE DATE" has the meaning specified in Section 1303 (c).
"REGISTRABLE SECURITIES" has the meaning specified in Section 1007.
"REGISTRATION DEFAULT" has the meaning specified in Section 1007.
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in Section 1007.
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<PAGE>
"REGULAR RECORD DATE" has the meaning specified in Section 301.
"REGULAR TRUSTEES" has the meaning specified in the Declaration.
"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, any assistant vice
president, the treasurer, any assistant treasurer, 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.
"RESTRICTED SECURITIES LEGEND" has the meaning specified in Section 202.
"SECURITIES" has the meaning specified in the Recitals to this instrument.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings
specified in Section 305(a).
"SENIOR INDEBTEDNESS" means in respect of the Company (i) the principal,
premium, if any, and interest in respect of (A) indebtedness of such obligor for
money borrowed and (B) indebtedness evidenced by securities, debentures, bonds,
notes or other similar instruments issued by such obligor or credit facilities
with lending institutions or commercial lenders, (ii) all capital lease
obligations of such obligor, (iii) all obligations of such obligor issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such obligor and all obligations of such obligor under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) commitment or standby fees due and
payable to lending institutions with respect to credit facilities available to
the Company, (vi) obligations under interest rate and currency swaps, floors,
caps and other arrangements intended to fix interest rate obligations; (vii) all
obligations of the type referred to in clauses (i) through (vi) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise, and (viii) all obligations of the type referred
to in clauses (i) through (vii) above of other persons secured by any lien on
any property or asset of such obligor (whether or not such obligation is assumed
by such obligor), except for (1) the Securities, (2) any such indebtedness that
is by its terms subordinated to or PARI PASSU with the Securities and (3) any
indebtedness between or among such obligor or its affiliates, including all
other debt securities and guarantees in respect of those debt securities issued
to any other trust, or a trustee of such trust, partnership, or other entity
affiliated with the Company that is, directly or indirectly, a financing vehicle
of the Company (a "Financing Entity") in connection with the issuance by such
Financing Entity of preferred securities or other securities which rank PARI
PASSU with, or junior to, the Preferred
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<PAGE>
Securities. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.
"SHELF REGISTRATION STATEMENT" has the meaning specified in Section 1007.
"SIGNIFICANT SUBSIDIARY" has the meaning specified in Rule 1-02(w) of
Regulation S-X under the Securities Act of 1933.
"SPECIAL EVENT" has the meaning specified in the Declaration.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"STATED MATURITY," when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal, together with any accrued and unpaid
interest (including Compounded Interest), of such Security or such installment
of interest is due and payable.
"SUBSIDIARY" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"TAX EVENT" has the meaning specified in the Declaration.
"TRADING DAY" has the meaning specified in Section 1307(h).
"TRUST" has the meaning specified in the Recitals to this instrument.
"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
such successor Trustee.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; PROVIDED, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"TRUST SECURITIES" means Common Securities and Preferred Securities.
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<PAGE>
"VICE PRESIDENT," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"VOTING STOCK" of any Person means capital stock of such Person which
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to take any action under any
provision of this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act or
reasonably requested by the Trustee in connection with such application or
request. Each such certificate or opinion shall be given in the form of an
Officers, Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture 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 has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(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.
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<PAGE>
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 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.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
(a) 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 an 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.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by 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 or the Company, as the case may be, deems
or deem sufficient.
(c) The Company may, in the circumstances permitted by the Trust Indenture
Act, fix any day as the record date for the purpose of determining the Holders
of Outstanding Securities entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any
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Person in respect of any such action, or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th
day (or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote,
as the case may be. With regard to any record date, only the Holders on such
date (or their duly designated proxies) shall be entitled to give or take, or
vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security Register.
(e) 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.
(f) Without limiting the foregoing, a Holder entitled hereunder to give or
take any such action with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any different part of such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND THE 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 at its Corporate Trust Office, Attention: Corporate Trust
Administration, or
(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 its principal offices specified in the first paragraph of this instrument or
at any other address previously furnished in writing to the Trustee 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 such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the
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earliest date (if any), 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.
Any notice when mailed to a Holder in the aforesaid manner shall be
conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. 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 a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 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, the holders of Preferred
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Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security or the last date on which a Holder has the right to
convert his Securities shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal or conversion of the Securities need not be made on such date, but may
be made on the next succeeding Business Day (except that, if such Business Day
is in the next succeeding calendar year, such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, shall be the immediately preceding
Business Day) with the same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated Maturity or on such last day for
conversion, PROVIDED, that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
ARTICLE TWO
Security Forms
SECTION 201. FORMS GENERALLY.
The Securities and the Trustee's certificates of authentication shall be
substantially in the form of Exhibit A which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). The Company
shall furnish any such legend not contained in Exhibit A to the Trustee in
writing. Each Security shall be dated the date of its authentication. The
terms and provisions of the Securities set forth in Exhibit A are part of the
terms of this Indenture and to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may
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be listed, all as determined by the officers executing such Securities,
as evidenced by their execution of such Securities.
SECTION 202. INITIAL ISSUANCE TO PROPERTY TRUSTEE.
The Securities initially issued to the Property Trustee of the Trust shall
be in the form of one or more individual certificates in definitive, fully
registered form without distribution coupons and shall bear the following legend
(the "Restricted Securities Legend") unless the Company determines otherwise in
accordance with applicable law:
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER (OR SUCH SHORTER PERIOD UNDER
RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR RULE) THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH VANSTAR CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(i) PURSUANT
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TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
ARTICLE THREE
The Securities
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is limited to the sum of (a) $180,412,350 and (b)
such aggregate principal amount (which may not exceed $207,474,200 aggregate
principal amount) of Securities, if any, as shall be purchased by the Trust
pursuant to an over-allotment option in accordance with the terms and provisions
of the Purchase Agreement except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 306, 906, 1108 or 1301.
The Securities shall be known and designated as the "6 3/4% Convertible
Subordinated Debentures due 2016" of the Company. Their Stated Maturity shall
be October 1, 2016, and they shall bear interest at the rate of 6 3/4% per
annum, from October 2, 1996 or from the most recent Interest Payment Date (as
defined below) to which interest has been paid or duly provided for, as the case
may be, payable quarterly (subject to deferral as set forth herein), in arrears,
on January 1, April 1, July 1 and October 1 (each an "Interest Payment Date") of
each year, commencing January 1, 1997 until the principal thereof is paid or
made available for payment, and they shall be paid to the Person in whose name
the Security is registered at the close of business on the regular record date
for such interest installment, which shall be the close of business on the
Business Day immediately preceding such Interest Payment Date; PROVIDED,
HOWEVER, that for so long as the Securities are held by the Trust or the
Property Trustee of the Trust, if any Preferred Securities (or if the Trust is
liquidated in connection with a Special Event, any Securities) are held in
certificated form, the Record Date for each Interest Payment Date shall be 15
days prior to such Interest Payment Date (in each case, a "Regular Record
Date"). Interest will compound quarterly and will accrue at the rate of 6 3/4%
per annum on any interest installment in arrears for more than one quarter or
during an extension of an interest payment period as set forth in Section 312
hereof.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. Except as provided in the following
sentence, the amount of interest payable for any period shorter than a full
quarterly period for which interest is computed
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will be computed on the basis of the actual number of days elapsed. In the
event that any date on which interest is payable on the Securities is not a
Business Day, then payment of interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
If at any time while the Property Trustee is the Holder of any Securities,
the Trust or the Property Trustee is required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Securities held by the Property Trustee, such amounts as shall be
required so that the net amounts received and retained by the Trust and the
Property Trustee after paying any such taxes, duties, assessments or other
governmental charges will be not less than the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other governmental charges been imposed.
The principal of and interest on the Securities shall be payable at the
office or agency in the United States maintained by the Company for such purpose
and at any other office or agency maintained by the Company for such purpose in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; PROVIDED, HOWEVER, that
unless the Securities are held by the Trust or any successor permissible under
the Declaration, at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be redeemable as provided in Article Eleven hereof.
The Securities shall be convertible as provided in Article Thirteen hereof.
SECTION 302. DENOMINATIONS.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $50 and integral multiples thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATE.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries or its Treasurer or one of its
Assistant Treasurers. The signature of any of these officers on the Securities
may be manual or facsimile.
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Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with Company's Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such
Company's Order shall authenticate and make available for delivery such
Securities as provided in this Indenture, and not otherwise.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may execute,
and upon receipt of an Company's Order, the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) GENERAL.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security
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Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. The Trustee is hereby appointed "Security
Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at an office or
agency of the Company designated pursuant to Section 1002 for such purpose, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denominations and of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 or 1301 not involving any transfer.
The Company shall not be required (i) in the case of a partial redemption
of the Securities, to issue, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Securities selected for redemption
under Section 1104 and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
(b) TRANSFER PROCEDURES AND RESTRICTIONS.
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The Securities may not be transferred except in compliance with the
Restricted Securities Legend unless otherwise determined by the Company in
accordance with applicable law. Upon any distribution of the Securities to the
holders of the Preferred Securities in accordance with the Declaration, the
Company and the Trustee shall enter into a supplemental indenture pursuant to
Section 901(f) to provide for transfer procedures and restrictions with respect
to the Securities substantially similar to those contained in the Declaration to
the extent applicable in the circumstances existing at the time of such
distribution.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of like tenor and principal amount and bearing a number not
contemporaneously Outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies of the Holders with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
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Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date, subject to any right to defer the
payment of Interest hereunder.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the-Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall
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carry the rights to interest accrued and unpaid, and to accrue (including in
each such case Compounded Interest), which were carried by such other
Security.
In the case of any Security which is converted after any Regular Record
Date and on or prior to the next succeeding Interest Payment Date (other than
any Security whose Maturity is prior to such Interest Payment Date), interest
whose Stated Maturity is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable, and the Company shall
not make nor be required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest (including Additional Interest,
Compounded Interest and Liquidated Damages) on the Securities being converted,
which shall be deemed to be paid in full.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer, 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 and (subject to
Section 307) interest (including Additional Interest, Compounded Interest and
Liquidated Damages) 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.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by an Company's
Order; PROVIDED, HOWEVER, that the Trustee shall not be required to destroy the
certificates representing such canceled Securities.
SECTION 310. RIGHT OF SET OFF.
Notwithstanding anything to the contrary in this Indenture, the Company
shall have the right to set off any payment it is otherwise required to make
hereunder to the extent the
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Company has theretofore made, or is concurrently on the date of such payment
making, a payment under the Guarantee.
SECTION 311. CUSIP NUMBERS.
The Company, as Company, in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; PROVIDED, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 312. OPTION TO EXTEND INTEREST PAYMENT PERIOD.
(a) The Company shall have the right at any time during the term of the
Securities to defer interest payments from time to time by extending the
interest payment period for successive periods (each, an "Extension Period") not
exceeding 20 consecutive quarters for each such period; PROVIDED, no Extension
Period may extend beyond the maturity date of the Securities. At the end of
each Extension Period, the Company shall be responsible for the payment of, and
the Company shall pay all interest then accrued and unpaid (including Additional
Interest and Liquidated Damages) together with interest thereon compounded
quarterly at the rate specified for the Securities to the extent permitted by
applicable law ("Compounded Interest"); PROVIDED, that during any Extension
Period, the Company shall not, and shall not allow any of its Subsidiaries
(other than, with respect to clause (i) below only, its wholly-owned
Subsidiaries) to, (i) declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (except for (1) dividends or distributions
in shares of Common Stock on Common Stock or on the Preferred Stock, (2)
purchases or acquisitions of shares of Common Stock made in connection with any
employee benefit plan of the Company or its subsidiaries in the ordinary course
of business or pursuant to employment agreements with officers or employees of
the Company or its subsidiaries entered into in the ordinary course of business,
provided that such repurchases by the Company made from officers or employees of
the Company or its subsidiaries pursuant to employment agreements shall be made
at a price not to exceed the market value on the date of any such repurchase and
shall not exceed $1 million in the aggregate for all such employees and
officers, (3) conversions or exchanges of shares of common stock of any one
class into shares of common stock of another class or (4) purchases of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of any of the Company's securities being
converted or exchanged), (ii) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem, any debt securities issued
by the Company that rank junior to or PARI PASSU with the Securities and
(iii) make any guarantee payments with respect to the foregoing. Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period; PROVIDED, that such Extension Period together with all
previous and further extensions thereof may not exceed
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20 consecutive quarters and may not extend beyond the maturity of the
Securities. Upon the termination of any Extension Period and the payment of
all amounts then due, the Company may commence a new Extension Period,
subject to the above requirements. No interest during an Extension Period,
except at the end thereof, shall be due and payable.
(b) If the Property Trustee is the sole Holder of the Securities at the
time the Company selects an Extension Period, the Company shall give written
notice to the Regular Trustees, the Property Trustee and the Trustee of its
selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date the distributions on the Preferred Securities are
payable or (ii) if the Preferred Securities are listed on the New York Stock
Exchange, Inc. ("NYSE") or other stock exchange or quotation system, the date
the Trust is required to give notice to the NYSE or other applicable self-
regulatory organization or to holders of the Preferred Securities of the record
date or the date such distributions are payable, but in any event not less than
ten Business Days prior to such record date.
(c) The Trustee shall promptly give notice of the Company's selection of
such Extension Period to the holders of the Preferred Securities. If the
Property Trustee is not the sole Holder at the time the Company selects an
Extension Period, the Company shall give the Holders and the Trustee written
notice of its selection of such Extension Period at least ten Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) if
the Preferred Securities are listed on the NYSE or other stock exchange or
quotation system, the date the Company is required to give notice to the NYSE or
other applicable self-regulatory organization or to Holders of the Securities on
the record or payment date of such related interest payment, but in any event
not less than two Business Days prior to such record date.
(d) The quarter in which any notice is given pursuant to paragraphs (b)
and (c) hereof shall be counted as one of the 20 quarters permitted in the
maximum Extension Period permitted under paragraph (a) hereof.
SECTION 313. PAYING AGENT, SECURITY REGISTRAR AND CONVERSION AGENT.
The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or, with the consent of the Trust, Conversion Agent without prior
notice. The Company or any of its Affiliates may act in any such capacity.
SECTION 314. GLOBAL SECURITY.
(a) In connection with a Dissolution Event,
(i) the Securities in certificated form (other than as set forth in
clause (ii) below) may be presented to the Trustee by the Property Trustee in
exchange for a global Security in an aggregate principal amount equal to the
aggregate principal amount of all Outstanding Securities (a "Global Security"),
to be registered in the name of the Depositary, or
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its nominee, and delivered by the Trustee to the Depositary for crediting to
the accounts of its participants pursuant to the instructions of the Regular
Trustees. The Company upon any such presentation shall execute a Global
Security in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with this Indenture.
Payments on the Securities issued as a Global Security will be made to the
Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Securities in non book-entry certificated form may be
presented to the Trustee by the Property Trustee and any certificate which
represents Preferred Securities (a "Preferred Security Certificate") other than
Preferred Securities held by the Depositary or its nominee ("Non Book-Entry
Preferred Securities") will be deemed to represent beneficial interests in
Securities presented to the Trustee by the Property Trustee having an aggregate
principal amount equal to the aggregate liquidation amount of the Non Book-Entry
Preferred Securities until such Preferred Security Certificates are presented to
the Security Registrar for transfer or reissuance at which time such Preferred
Security Certificates will be canceled and a Security, registered in the name of
the holder of the Preferred Security Certificate or the transferee of the holder
of such Preferred Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Security Certificate canceled, will be executed by the Company and delivered to
the Trustee for authentication and delivery in accordance with this Indenture.
On issue of such Securities, Securities with an equivalent aggregate principal
amount that were presented by the Property Trustee to the Trustee will be deemed
to have been canceled.
(b) If (i) the Depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determine that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Event of Default with respect to such
Securities, as the case may be, the Company will execute, and, subject to
Article Three of this Indenture, the Trustee, upon written notice from the
Company and receipt of an Company's Order, will authenticate and deliver the
Securities in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security in exchange for such Global Security. In
addition, upon an Event of Default or if the Company shall at any time determine
that the Securities shall no longer be represented by a Global Security, the
Company will execute, and subject to Section 305 of this Indenture, the Trustee,
upon receipt of an Officers' Certificate evidencing such determination by the
Company, will authenticate and make available for delivery the Securities in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. Upon the exchange of the Global
Security for such Securities in definitive registered form without coupons, in
authorized denominations, the Global Security shall be canceled by the Trustee.
Such Securities in definitive registered form issued in exchange for the Global
Security shall be registered in such names and in such
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authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Securities to the Depositary for delivery to
the Persons in whose names such Securities are so registered.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of the
Company and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable, and the Company has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
an amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal and interest (including Compounded Interest and Liquidated Damages) to
the date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that, in their opinion, all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
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SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee. All moneys
deposited with the Trustee pursuant to Section 401 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall be returned to
the Company promptly following such conversion or, if sooner, upon receipt of an
Company's Request.
ARTICLE FIVE
Remedies
SECTION 501. EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following
events that has occurred and is continuing (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure for 30 days to pay interest on the Securities, including
any Additional Interest, Compounded Interest and Liquidated Damages in respect
thereof, when due; PROVIDED that a valid extension of an interest payment period
will not constitute a default in the payment of interest (including any
Additional Interest, Compounded Interest or Liquidated Damages) for this
purpose;
(2) failure to pay principal of or premium, if any, on the Securities
when due whether at maturity, upon redemption, by declaration or otherwise;
(3) failure by the Company to deliver shares of its Common Stock upon
an election by a holder of Preferred Securities to convert such Preferred
Securities;
(4) failure to observe or perform in all material respects any other
covenant contained in the Indenture for 60 days after notice to the Company by
the Trustee or by the Holders of not less than 25% in aggregate Outstanding
principal amount of the Securities;
(5) entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization
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or other similar law or (B) a decree or order adjudging the Company or any of
its Significant Subsidiaries a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or its Significant Subsidiary, as
the case may be, under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or its Significant Subsidiary, as the case
may be, or of substantially all of the property of the Company or its
Significant Subsidiary, as the case may be, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days;
(6) the commencement by the Company or any of its Significant
Subsidiaries 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 the Company or any of its Significant Subsidiaries to the entry of a
decree or order for relief in respect of itself 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 the Company or its Significant Subsidiary,
as the case may be, or the filing by the Company or any of its Significant
Subsidiaries of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by the Company or any
of its Significant Subsidiaries to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or its
Significant Subsidiary, as the case may be, or of substantially all of the
property of Company, or the making by the Company or any of its Significant
Subsidiaries of a general assignment for the benefit of creditors, or the
admission by the Company or any of its Significant Subsidiaries in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company or any of its Significant Subsidiaries in
furtherance of any such action;
(7) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the distribution of
Securities to holders of Preferred Securities in liquidation of the Trust upon
the redemption of all of the outstanding Preferred Securities of the Trust or
(ii) certain mergers, consolidations or amalgamations, each as permitted by the
Declaration; or
(8) DEFAULT UNDER ANY BOND, DEBENTURE OR ANY OTHER EVIDENCE OF
INDEBTEDNESS FOR MONEY BORROWED BY THE COMPANY OR ANY OF ITS SIGNIFICANT
SUBSIDIARIES HAVING AN AGGREGATE OUTSTANDING PRINCIPAL AMOUNT IN EXCESS OF $20
MILLION, WHICH DEFAULT SHALL HAVE RESULTED IN SUCH INDEBTEDNESS BEING
ACCELERATED, OR FAILURE TO PAY WHEN DUE (BEYOND ANY APPLICABLE GRACE PERIODS)
ANY SUCH INDEBTEDNESS, WITHOUT SUCH INDEBTEDNESS BEING DISCHARGED, SUCH
ACCELERATION HAVING BEEN RESCINDED OR ANNULLED OR SUCH FAILURE TO PAY HAVING
BEEN CURED OR WAIVED, WITHIN 30 DAYS AFTER RECEIPT OF NOTICE THEREOF BY THE
COMPANY FROM THE TRUSTEE OR BY THE COMPANY
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AND THE TRUSTEE FROM THE HOLDERS OF NOT LESS THAN 25% IN AGGREGATE OUTSTANDING
PRINCIPAL AMOUNT OF THE SECURITIES.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities, all
accrued interest thereon and any other amounts payable hereunder 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, all accrued
interest and such other amounts shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as provided in this Article hereinafter, the Holders of a majority
in aggregate principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may 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) all overdue interest (including any Additional Interest,
Compounded Interest and Liquidated Damages) on all Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the 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, other than the non-payment of the
principal of and/or interest on and/or all other amounts in respect 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:
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(1) default is made in the payment of any interest (including any
Additional Interest or Compounded Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of any Security
at the Maturity thereof,
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 (including any Additional Payments and
Liquidated Damages) and, to the extent that payment thereof shall be legally
enforceable, interest on any overdue principal and on any overdue interest
(including any Additional Payments and Liquidated Damages), at the rate borne by
the 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 an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders 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.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; 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, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture 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 CLAIMS WITHOUT POSSESSION OF SECURITIES.
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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 in respect of which such judgment has been
recovered.
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 and,
in case of the distribution of such money on account of principal or interest
(including any Additional Payments and Liquidated Damages), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
and
SECOND: To the payment of the amounts then due and unpaid for principal
of and interest (including any Additional Payments and Liquidated Damages) 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
(including any Compounded Interest), respectively.
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;
(2) if the Trust is not the sole holder of the Outstanding
Securities, the Holders of at least 25% in aggregate 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 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
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(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST
AND CONVERT.
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 (subject to Section 307) interest (including any
Additional Payments and Liquidated Damages) on such Security on the Stated
Maturity expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to convert such Security in accordance with
Article Thirteen and to institute suit for the enforcement of any such payment
and right to convert, 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.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, 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.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
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No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing 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; PROVIDED, that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture; and
(2) 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.
Subject to Section 902 hereof, the Holders of greater than 50% 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, premium, if any, or interest
(including any Additional Payments and Liquidated Damages) on any Security
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest (including any Additional Payments and Liquidated
Damages) and principal due otherwise than by acceleration has been deposited
with the Trustee); or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected; PROVIDED, HOWEVER, that if the Securities
are held by the Trust or a trustee of the Trust, such waiver shall not be
effective until the holders of greater than 50% in liquidation amount of Trust
Securities shall have consented to such waiver; PROVIDED, FURTHER, that if the
consent of the Holder of each Outstanding Security is required, such waiver
shall not be effective until each holder of the Trust Securities shall have
consented to such waiver.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
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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, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee or in
any suit for the enforcement of the right to receive the principal of and
interest (including any Additional Payments) on any Security or to convert any
Security in accordance with Article Thirteen.
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 516. ENFORCEMENT BY HOLDERS OF PREFERRED SECURITIES.
Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such Event of Default is attributable to the
failure of the Company to pay interest or principal on the Securities on the
date such interest or principal is otherwise payable, the Company acknowledges
that, in such event, a holder of Preferred Securities may institute a Direct
Action for payment on or after the respective due date specified in the
Securities. The Company may not amend the Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such
holder of Preferred Securities by the Company in connection with a Direct
Action, the Company shall remain obligated to pay the principal of or interest
on the Securities held by the Trust or the Property Trustee and the Company
shall be subrogated to the rights of the holders of such Preferred Securities
with respect to payments on the Preferred Securities to the extent of any
payments made by the Company to any such holders in any Direct Action. Except
as set forth elsewhere herein or in the Declaration, the holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the Holders.
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ARTICLE SIX
The Trustee
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, 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 have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it. Whether or not therein expressly so provided, every provision of this
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.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; PROVIDED, however,
that in the case of any default of the character specified in Section 501(4),
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) 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, note,
other evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by an Company's Request or Company's Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
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(d) the Trustee may consult with counsel of its choice and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee 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 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 reasonable examination of the books, records and
premises of the Company, personally or by agent or attorney;
(g) 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
(h) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith, without negligence or willful
misconduct, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities. The Trustee shall not be accountable
for the use or application by the Company of the Securities or the proceeds
thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner
or pledgee of Securities and, subject to Sections 608 and 613, may otherwise
deal with the Company or any Affiliate thereof with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar, or such other
agent.
SECTION 606. MONEY HELD IN TRUST.
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Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under
no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(a) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for all services rendered by it hereunder;
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, fees, 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; and
(c) to indemnify the Trustee and any predecessor Trustee for, and to
hold it harmless against, any loss, liability, claim, action, suit, cost,
damage or reasonable expense, including taxes (other than taxes based on the
income of the Trustee), incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
trust, including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(6) or Section 501(7), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency
or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 and has (or has an
affiliate that has) its Corporate Trust Office in New York,
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New York. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its federal, state, District of
Columbia or territorial supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the 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.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of removal, the removed Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(1) 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 months, or
(2) 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
(3) 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 such case, (i) the
Company by Board Resolution may remove the Trustee, or (ii) subject to
Section 514, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one 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, become the successor Trustee and 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 hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in
the manner provided in Section 106. 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.
Every successor Trustee appointed hereunder 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; PROVIDED, that on 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. Upon request
of any such successor Trustee, the Company shall execute any and all
instruments required to more fully and certainly vest in and confirm to such
successor Trustee all such rights, powers and trusts.
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. In
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case any Securities shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation
to such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSEES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) quarterly, within one Business Day prior to January 1, April 1,
July 1 and October 1 of each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of a date
not more than 15 days prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
EXCLUDING from any such list names and addresses received by the Trustee in
its capacity as Security Registrar and PROVIDED that the Company shall not be
obligated to provide a list of Holders at any time such list of Holders does
not differ from the most recent list of Holders given to the Trustee by the
Company or the Securities are represented by one or more Global Securities.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 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.
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(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(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 any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act or this Indenture.
SECTION 703. REPORTS BY TRUSTEE.
(a) Within 60 days after October 15 of each year, commencing October
15, 1996, the Trustee shall transmit by mail to the Holders such reports
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such transmission
to the Holders, be filed by the Trustee with each stock exchange upon which
the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and transmit
to the Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; PROVIDED, that any
such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed
with the Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of their covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
The Company shall also provide to the Trustee on a timely basis such
information as the Trustee requires to enable the Trustee to prepare and file
any form required to be submitted by the Company with the Internal Revenue
Service and the holders of the Preferred Securities relating to original
issue discount, including, without limitation, Form 1099-OID or any successor
form.
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge with or into any other
Person or, directly or indirectly, convey, transfer or lease all or
substantially all its assets substantially as an entirety to any Person,
unless:
(a) the Person formed by such consolidation or into which the Company
is merged (if the Company is not the survivor) or the Person which acquires
by conveyance, transfer or lease, all or substantially all the Company's
assets substantially as an entirety shall be a corporation, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the due and punctual
payment of the principal of (and premium, if any) and interest on all the
Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed and shall
have provided for conversion rights in accordance with Article Thirteen;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that, in their opinion, such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with.
This Section shall only apply to (i) a merger or consolidation in which
the Company is not the surviving corporation, and (ii) to conveyances, leases
and transfers by the Company as transferor or lessor.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all the Company's assets substantially as an entirety in
accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named as
the Company herein, and thereafter the predecessor Person shall be relieved
of all obligations and covenants under this Indenture and the Securities.
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ARTICLE NINE
Supplemental Indentures
SECTION 901. 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:
(a) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and
in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to make provision with respect to the conversion rights of Holders
pursuant to the requirements of Article Thirteen; or
(d) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture;
(e) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(f) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if any, to
be placed on Securities, and all other matters required pursuant to Section
305(b) or otherwise necessary, desirable or appropriate in connection with
the issuance of Securities to holders of Preferred Securities in the event of
a distribution of Securities by the Trust if a Special Event occurs and is
continuing.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of greater than 50% 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 under this Indenture; PROVIDED, however,
that no such supplemental indenture shall, without the consent of the Holder
of each Outstanding Security affected thereby,
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(a) extend the Stated Maturity of the principal of, or any installment
of interest (including any Additional Payments or Liquidated Damages) on, any
Security, or reduce the principal amount thereof, or reduce the rate or
extend the time for payment of interest thereon (including any Additional
Payments or Liquidated Damages), or reduce any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Security or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or adversely affect the right to convert any Security as
provided in Article Thirteen (except as permitted by Section 901(c)) or
modify the provisions of Article Twelve with respect to the subordination of
the Notes in a manner adverse to the Holders in any material respect,
(b) 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
(c) modify any of the provisions of this Section or Section 513, 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 that if the
Securities are held by the Trust or a trustee of the Trust, such supplemental
indenture shall not be effective until the holders of greater than 50% in
liquidation amount of Trust Securities shall have consented to such
supplemental indenture; PROVIDED, further, that if the consent of the Holder
of each Outstanding Security is required, such supplemental indenture shall
not be effective as to a given holder of Trust Securities of the Trust until
such holder of the Trust Securities of the Trust shall have consented to such
supplemental indenture.
Notwithstanding the foregoing, the Company may not amend the Indenture
to remove the rights of holders of Preferred Securities to institute a Direct
Action pursuant to Section 516 without the consent of each Holder of
Preferred Securities.
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.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record
date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture, whether or not such
Holders remain Holders after such record date; PROVIDED that unless such
consent shall have become effective by virtue of the requisite percentage
having been obtained prior to the date which is 90 days after such record
date, any such consent previously given shall automatically and without
further action by any Holder be canceled and of no further effect.
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SECTION 903. 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 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 904. 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 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act; PROVIDED, that this
requirement shall not constitute an admission or acknowledgment by any party
hereto that any qualification is required prior to the time this Indenture
and the Trustee are required by the Trust Indenture Act to be so qualified.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities. Failure to undertake the foregoing
shall have no effect on such supplemental indenture.
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.
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The Company will duly and punctually pay the principal of and interest
(including any Additional Payments and Liquidated Damages) on the Securities
in accordance with the terms of the Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York an office or agency
where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company will give prompt written
notice to the Trustee 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 presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoint the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such purposes and may from time to
time rescind such designations; PROVIDED, however, that no such designation
or rescission shall in any manner relieve the Company of its obligations to
maintain an office or agency in the United States for such purposes. The
Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of their
action or failure so to act.
Whenever the Company shall have one or more Paying Agents other than the
Company, the Company will, prior to each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to
pay such amount, such sum to be held as provided by the Trust Indenture Act,
and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of such action or 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 (i) comply with the provisions of the Trust Indenture
Act applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the
making of any payment
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in respect of the Securities, upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent as
such.
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 the Company's Order direct any Paying Agent to pay, to the Trustee all
sums held in trust by the Company or such Paying Agent, such sums to be held
by the Trustee upon the same terms 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 two years after such principal or
interest has become due and payable shall be paid to the Company upon the
Company's Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of any such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof,
unless an abandoned property law designates another person, 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.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the material terms, provisions and conditions of this Indenture (without
regard to any period of grace or requirement of notice provided hereunder)
and, if the Company shall be in default, specifying all such defaults and the
nature and status thereof of which they may have knowledge.
SECTION 1005. LIMITATION ON DIVIDENDS; TRANSACTIONS WITH AFFILIATES;
COVENANTS AS TO THE TRUST.
(a) The Company covenants that so long as the Securities are
Outstanding, if (i) there shall have occurred and be continuing any event
that with the giving of notice or the lapse of time or both, would constitute
an Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Guarantee, or (iii) the Company has
exercised its option to defer interest payments on the Securities by
extending the interest payment period and such period, or any extension
thereof, shall be continuing, then the Company shall not, and shall not allow
any of its Subsidiaries (other than, with respect to clause (x) below only,
its wholly-owned Subsidiaries) to, (x) declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (except for (i)
dividends or distributions in shares of Common Stock on Common Stock or on
the Preferred Stock, (ii) purchases or acquisitions of
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shares of Common Stock made in connection with any employee benefit plan of
the Company or its subsidiaries in the ordinary course of business or
pursuant to employment agreements with officers or employees of the Company
or its subsidiaries entered into in the ordinary course of business, provided
that such repurchases by the Company made from officers or employees of the
Company or its subsidiaries pursuant to employment agreements shall be made
at a price not to exceed the market value on the date of any such repurchase
and shall not exceed $1 million in the aggregate for all such employees and
officers, (iii) conversions or exchanges of shares of Common Stock of one
class into shares of Common Stock of another class or (iv) purchases of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of any of the Company's securities being
converted or exchanged), (y) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Company that rank junior to or PARI PASSU with the Securities (except
by conversion into or exchange for shares of its capital stock), and (z) make
any guarantee payments with respect to the foregoing (other than such
payments made pursuant to the Guarantee).
(b) The Company also covenants and agrees (i) that it shall directly
or indirectly maintain 100% ownership of the Common Securities of the Trust;
PROVIDED, HOWEVER, that any permitted successor of the Company hereunder may
succeed to the Company's ownership of such Common Securities (ii) NOT TO
CAUSE OR PERMIT THE DISSOLUTION, WINDING-UP OR TERMINATION OF THE TRUST,
EXCEPT IN CONNECTION WITH A DISTRIBUTION OF THE SECURITIES TO THE HOLDERS OF
PREFERRED SECURITIES IN LIQUIDATION OF THE TRUST OR IN CONNECTION WITH
CERTAIN MERGERS, CONSOLIDATIONS OR AMALGAMATIONS PERMITTED BY THE DECLARATION
AND (iii) that it shall use its reasonable efforts, consistent with the terms
and provisions of the Declaration, to cause the Trust (x) to remain a
statutory business trust, except in connection with the distribution of the
Securities to the holders of Trust Securities in liquidation of the Trust,
the redemption of all of the Trust Securities of the Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (y) to otherwise continue to be classified as a grantor
trust for United States Federal income tax purposes.
SECTION 1006. PAYMENT OF EXPENSES OF THE TRUST.
In connection with the offering, sale and issuance of the Securities to
the Property Trustee in connection with the sale of the Trust Securities by
the Trust, the Company shall be responsible for the payment of:
(a) all costs, fees and expenses relating to the offering, sale and
issuance of the Securities, including commissions to the Initial Purchasers
payable pursuant to the Purchase Agreement and compensation of the Trustee
under the Indenture in accordance with the provisions of Section 607 of the
Indenture;
(b) all debts and obligations (other than with respect to the Trust
Securities) of the Trust, all costs and expenses of the Trust (including, but
not limited to, costs and expenses relating to the organization of the Trust,
the offering, sale and issuance of the Trust Securities
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(including commissions to the Initial Purchasers in connection therewith),
the fees and expenses of the Property Trustee and the Delaware Trustee
(including the payment of counsel fees and expenses), the costs and expenses
relating to the operation of the Trust, including without limitation, costs
and expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses
incurred in connection with the acquisition, financing and disposition of
Trust assets); and
(c) all taxes (other than United States withholding taxes attributable
to the Trust or its assets) and all liabilities, costs and expenses with
respect to such taxes of the Trust.
SECTION 1007. REGISTRATION RIGHTS.
The holders of the Preferred Securities, the Securities, the Guarantee
and the shares of Common Stock of the Company issuable upon conversion of the
Securities (collectively, the "Registrable Securities") are entitled to the
benefits of a Registration Rights Agreement, dated as of October 2, 1996,
among the Company and the Initial Purchasers (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Company has
agreed for the benefit of the holders of Registrable Securities that (i) it
will, at its cost, within 75 calendar days after the date of issuance of the
Preferred Securities, file a shelf registration statement (the "Shelf
Registration Statement") with the Commission with respect to the resales of
the Registrable Securities, (ii) it will use reasonable efforts to cause such
Shelf Registration Statement to be declared effective by the Commission
within 135 calendar days after the date of issuance of the Registrable
Securities and (iii) the Company will use reasonable efforts to maintain such
Shelf Registration Statement continuously effective under the Securities Act
until the third anniversary of the effectiveness of the Shelf Registration
Statement or such earlier date as is provided in the Registration Rights
Agreement (the "Effectiveness Period"). Reference is made to the Registration
Rights Agreement for a description of, among other things, the circumstances
under which a "Registration Default" may be declared if such Shelf
Registration Statement is not filed or declared effective within the
specified periods of time, and additional interest "Liquidated Damages" may
accrue and by payable on the Securities as a result of such a Registration
Default, which provisions are hereby incorporated herein by such reference.
SECTION 1008. RULE 144A INFORMATION REQUIREMENT.
During the period beginning on the latest date of the original issuance
of the Securities and ending on Resale Restriction Termination Date (as
defined in the legend set forth in Section 202), the Company covenants and
agrees that it shall, during any period in which it is not subject to Section
13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Securities or any Common Stock issued upon conversion
thereof which continue to be restricted securities in connection with any
sale thereof and any prospective purchaser of Securities or such Common Stock
from such holder or beneficial holder, the information required pursuant to
Rule 144A(d)(4) under the Securities Act upon the request of
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any holder or beneficial holder of the Securities or such Common Stock and it
will take such further action as any holder or beneficial holder of such
Securities or such Common Stock may reasonably request, all to the extent
required from time to time to enable such holder or beneficial holder to sell
its Securities or Common Stock without registration under the Securities Act
within the limitation of the exemption provided by Rule 144A, as such Rule
may be amended from time to time. Upon the request of any holder or any
beneficial holder of the Securities or such Common Stock, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
SECTION 1009. LISTING THE SECURITIES.
In the event that the Securities are distributed to the holders of
Preferred Securities, the Company will use its best efforts to list the
Securities on the NYSE or on such other national securities exchange or
automated quotation system on which the Preferred Securities are then listed
or quoted.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Securities may be redeemed at the election of the Company, in
whole or in part, at any time or from time to time after October 5, 1999, at
the Redemption Prices set forth in Section 1109 below upon not less than 30
or more than 60 days' notice. The Company may not redeem fewer than all of
the outstanding Securities unless all accrued and unpaid Distributions have
been paid on all Securities for all quarterly Distribution periods
terminating on or before the date of redemption. The Trust may not redeem
fewer than all the outstanding Securities unless all accrued and unpaid
Distributions have been paid on all Securities for all quarterly Distribution
periods terminating on or before the date of redemption.
(b) As set forth more fully in Section 1110 below, the Securities may
also be redeemed, in whole (but not in part), at the election of the Company
at any time within 90 days following the occurrence of a Tax Event (in whole
but not in part); PROVIDED, HOWEVER, that if, at the time there is available
to the Company or the Trust the opportunity to eliminate, within such 90-day
period, the Tax Event by taking some ministerial action, such as filing a
form or making an election, or pursuing some other similar reasonable
measure, which in the sole judgment of the Company has or will cause no
adverse effect on the Trust, the holders of the Trust Securities or the
Company or will involve no material cost, then the Company or the Trust shall
pursue such measure in lieu of redemption.
SECTION 1102. APPLICABILITY OF ARTICLE.
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Redemption of Securities at the election of the Company, as permitted by
Section 1101, shall be made in accordance with such provision and this
Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company, the Company shall, at least 30 days and no more
than 60 days prior to the Redemption Date fixed by the Company, notify the
Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed and provide a copy of the notice of redemption
given to Holders of Securities to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $50
or any integral multiple thereof) of the principal amount of the Securities.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has
been or is to be redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at such
Holder's address appearing in the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if relevant, the CUSIP or ISIN number) and shall state:
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(a) the Redemption Date,
(b) the Redemption Price,
(c) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest thereon
will cease to accrue on and after said date, and
(d) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's Request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities which are to be redeemed on that date.
If any Security called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust
for the redemption of such Security shall (subject to any right of the Holder
of such Security or any Predecessor Security to receive interest as provided
in the last paragraph of Section 307) be paid to the Company upon the
Company's Request or, if then held by the Company, shall be discharged from
such trust.
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest (including Additional Payments and Liquidated Damages, if
any) to the Redemption Date; PROVIDED, however, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to the terms and the provisions of Section 307.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
SECTION 1108. SECURITIES REDEEMED IN PART.
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before any
selection for redemption of Securities and ending at the close of business on
the earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of Securities to be so redeemed and (ii)
register the transfer of or exchange any Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Securities being redeemed in part.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery
to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
SECTION 1109. OPTIONAL REDEMPTION.
(a) The Company shall have the right to redeem the Securities, in whole
or in part, at any time or from time to time on or after October 5, 1999 upon
not less than 30 nor more than 60 days' notice, at a redemption price equal
at the following optional redemption prices (expressed as a percentage of the
principal amount of Securities) if redeemed during the 12-month period
beginning October 1 of the respective years shown below (October 5, in the
case of 1999):
Percentage of
Year Principal Year Amount
-------------------- ---------------------
1999 . . . . . . . . . . . . . . . 104.725%
2000 . . . . . . . . . . . . . . . 104.050
2001 . . . . . . . . . . . . . . . 103.375
2002 . . . . . . . . . . . . . . . 102.700
2003 . . . . . . . . . . . . . . . 102.025
2004 . . . . . . . . . . . . . . . 101.350
2005 . . . . . . . . . . . . . . . 100.675
2006 and thereafter. . . . . . . . 100.000
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plus any accrued and unpaid interest, including Additional Payments and
Liquidated Damages, if any, to the Redemption Date.
Any redemption pursuant to this Section 1109 shall be made pursuant to the
provisions of Sections 1101 through 1108 hereof.
(b) If a partial redemption of the Securities would result in the
delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities
are listed, the Company shall not be permitted to effect such partial
redemption and may only redeem the Securities in whole.
SECTION 1110. TAX EVENT REDEMPTION.
If a Tax Event has occurred and is continuing and:
(a) The Company has received a Redemption Tax Opinion; or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel rendering the Dissolution Tax Opinion
that a No Recognition Opinion cannot be delivered to the Trust,
then, notwithstanding Section 1109(a) but subject to Section 1109(b), the
Company shall have the right upon not less than 30 days nor more than 60 days
notice to the Holders of the Securities to redeem the Securities in whole
(but not in part) for cash at the redemption price that would then be
applicable in accordance with Section 1109(a) (or, in the case of the period
commencing on the date of issuance of the Securities through October 4, 1997
and the twelve month periods commencing October 5, 1997 and October 5, 1998,
the product of 106.750%, 106.075% and 105.400%, respectively, times $50), in
each case plus accrued and unpaid interest and Additional Payments and
Liquidated Damages, if any, within 90 days following the occurrence of such
Tax Event (the "90-Day Period"); PROVIDED, HOWEVER, that if, at the time
there is available to the Company or the Trust the opportunity to eliminate
within the 90-Day Period, the Tax Event by taking some ministerial action
("Ministerial Action"), such as filing a form or making an election, or
pursuing some other similar reasonable measure which, in the sole judgment of
the Company, has or will cause no adverse effect on the Company, the Trust or
the holders of the Trust Securities and will involve no material cost, the
Company or the Trust shall pursue such Ministerial Action or other measure in
lieu of redemption, and PROVIDED, FURTHER, that the Company shall have no
right to redeem the Securities while the Trust is pursuing any Ministerial
Action. The redemption payment, including accrued and unpaid interest,
including Additional Payments, if any, shall be made prior to 12:00 noon, New
York time, on the date of such redemption or such earlier time as the Company
determine, PROVIDED, that the Company shall deposit with the Trustee an
amount sufficient to make such redemption payment by 10:00 a.m. on the date
such redemption payment is to be made.
SECTION 1111. NO SINKING FUND.
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The Securities are not entitled to the benefit of any sinking fund.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each Holder of Securities by such
Holder's acceptance thereof likewise covenants and agrees, that all Securities
shall be issued subject to the provisions of this Article Twelve; and each
Holder of a Security, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. The payment by the
Company of the principal of, premium, if any, and interest (including Additional
Payments) on all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all existing and future Senior Indebtedness,
whether outstanding at the date of this Indenture or thereafter incurred;
provided however, that no provision of this Article Twelve shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 1202. DEFAULT ON SENIOR INDEBTEDNESS.
In the event and during the continuation of any default by the Company in
the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness continuing beyond the period of grace, if any, specified in
the instrument evidencing such Senior Indebtedness, unless and until such
default shall have been cured or waived or shall have ceased to exist, and in
the event that the maturity of any Senior Indebtedness has been accelerated
because of a default, then no payment shall be made by the Company with respect
to the principal of (including redemption payments, if any), premium, if any, or
interest on the Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 1202, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
SECTION 1203. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
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Upon any payment by the Company or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or liquidation or reorganization of the
Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness must be paid in full
before any payment is made on account of the principal (and premium, if any) or
interest on the Securities; and upon any such dissolution or winding up or
liquidation or reorganization, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee would be entitled, except for
the provisions of this Article Twelve, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the Holders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the Holders before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article Twelve, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Twelve with
respect to the Securities to the payment of all Senior Indebtedness which may at
the time be outstanding; provided, that (i) such Senior Indebtedness is assumed
by the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company
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following the conveyance, transfer or lease of all or substantially all its
properties and assets on a consolidated basis to another Person upon the
terms and conditions provided for in Article Eight hereof shall not be deemed
a dissolution, winding up, liquidation or reorganization for the purposes of
this Section 1203 if such other Person shall, as a part of such
consolidation, merger" conveyance, transfer or lease, comply with the
conditions stated in Article Eight hereof. Nothing in Section 1202 or in
this Section 1203 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 607 hereof.
SECTION 1204. SUBROGATION.
Subject to the payment in full of all Senior Indebtedness, the rights of
the Holders shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company, as the case may be, applicable to such Senior
Indebtedness until the principal of (and premium, if any,) and interest on the
Securities shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Holders or the Trustee would be
entitled except for the provisions of this Article Twelve, and no payment over
pursuant to the provisions of this Article Twelve, to or for the benefit of the
holders of such Senior Indebtedness by Holders or the Trustee, shall, as between
the Company, its creditors other than holders of Senior Indebtedness, and the
Holders, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article
Twelve are and are intended solely for the purposes of defining the relative
rights of the Holders, on the one hand, and the holders of such Senior
Indebtedness on the other hand.
Nothing contained in this Article Twelve 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 premium, if any) and interest on the Securities as
and when the same shall become due and payable in accordance with their terms,
or is intended to or shall affect the relative rights of the Holders and
creditors of the Company, as the case may be, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Twelve of the holders of such Senior Indebtedness in respect of cash, property
or securities of the Company, as the case may be, received upon the exercise of
any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article Twelve, the Trustee, subject to the provisions of Section 603, and
the Holders, shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders,
for the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior
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Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.
SECTION 1205. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder by such Holder's 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 Twelve and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes.
SECTION 1206. NOTICE BY THE COMPANY.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company which would prohibit the making of
any payment of monies to or by the Trustee in respect of the Securities pursuant
to the provisions of this Article Twelve. Notwithstanding the provisions of
this Article Twelve or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provision of this Article Twelve, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof at
the Corporate Trust Office of the Trustee from the Company or a holder or
holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 603 hereof, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 1206 at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 603, shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Twelve, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the right of such
Person under this Article
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Twelve, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 1207. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article Twelve in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article Twelve, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Section 603, the Trustee shall not be liable to any
holder of such Senior Indebtedness if it shall pay over or deliver to Holders,
the Company or any other Person money or assets to which any holder of such
Senior Indebtedness shall be entitled by virtue of this Article Twelve or
otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes ,to perform or to observe only such of its covenants or obligations
as are specifically set forth in this Article Twelve and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 1208. SUBORDINATION MAY NOT BE IMPAIRED.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders, without incurring
responsibility to the holders of the Securities and without impairing or
releasing the subordination provided in this Article Twelve or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior
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Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 1209. CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purposes of this Article Twelve only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with
Article Thirteen shall not be deemed to constitute a payment or distribution on
account of the principal of (or premium, if any) or interest on Securities or on
account of the purchase or other acquisition of Securities, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares),
property or securities (other than junior securities) upon conversion of a
Security shall be deemed to constitute payment on account of the principal of
such Security. For the purposes of this Section 1209, the term "junior
securities" means (a) shares of any stock of any class of the Company, or
(b) securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. Nothing
contained in this Article Twelve or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders, the right, which is
absolute and unconditional, of the Holder to convert such Security in accordance
with Article Thirteen.
SECTION 1210. ARTICLE APPLICABLE TO PAYING AGENTS.
If at any time any paying agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall (unless the context otherwise requires) be construed
as extending to and including such paying agent within its meaning as fully for
all intents and purposes as if such paying agent were named in this Article in
addition to or in place of the Trustee; PROVIDED, HOWEVER, that the first
paragraph of Section 1207 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as paying agent.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. CONVERSION RIGHTS.
Subject to and upon compliance with the provisions of this Article, the
Securities are convertible, at the option of the Holder, at any time on or
before the close of business on the Business Day immediately preceding the date
of repayment of such Securities, whether at maturity or upon redemption (either
at the option of the Company or pursuant to a Tax Event), into the number of
fully paid and nonassessable shares of Common Stock obtained by dividing $50 per
Security by the applicable conversion price (initially $28.75 per share of
Common Stock for each Security), rounded to the nearest one thousand of one
share (equivalent to conversion
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rate of 1.739 Shares per share of Common Stock per Security), subject to
adjustment as described in this Article Thirteen. A Holder may convert any
portion of the principal amount of the Securities into that number of fully
paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/1000th of a share) obtained by dividing the
principal amount of the Securities to be converted by such conversion price.
In case a Security or portion thereof is called for redemption, such
conversion right in respect of the Security or portion so called shall expire
at the close of business on the Business Day immediately preceding the
corresponding Redemption Date, unless the Company defaults in making the
payment due upon redemption. The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for
issuance upon the conversion of the Securities, free from any preemptive or
other similar rights, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the Securities then
outstanding.
SECTION 1302. CONVERSION PROCEDURES.
(a) In order to convert all or a portion of the Securities, the Holder
thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the Holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the Declaration to
convert such Preferred Securities into Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $50 principal amount of Securities for
each Preferred Security) and (ii) to immediately convert such Securities, on
behalf of such holder, into Common Stock of the Company pursuant to this
Article Thirteen and, if such Preferred Securities are in definitive form,
surrendering such Preferred Securities, duly endorsed or assigned to the Company
or in blank. So long as any Preferred Securities are Outstanding, the Trust
shall not convert any Securities except pursuant to a Notice of Conversion
delivered to the Conversion Agent by a holder of Preferred Securities.
If a Notice of Conversion is delivered on or after the Regular Record Date
and prior to the subsequent Interest Payment Date, the Holder will be entitled
to receive the interest payable on the subsequent Interest Payment Date on the
portion of Securities to be converted notwithstanding the conversion thereof
prior to such Interest Payment Date. Except as otherwise provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose Stated Maturity is on or after the date of conversion of such
Security shall not be payable, and the Company shall not make nor be required to
make any other payment, adjustment or allowance with respect to accrued but
unpaid interest on the Securities being converted, which shall be deemed to be
paid in full. Each conversion shall be deemed to have been effected immediately
prior to the close of business on the day on which the Notice of
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Conversion was received (the "Conversion Date") by the Conversion Agent from
the Holder or from a holder of the Preferred Securities effecting a
conversion thereof pursuant to its conversion rights under the Declaration,
as the case may be. The Person or Persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock as of the Conversion Date and
such Person or Persons will cease to be a record holder or record holders of
the Securities on that date. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment,
if any, in lieu of any fraction of any share to the Person or Persons
entitled to receive the same. The Conversion Agent shall deliver such
certificate or certificates to such Person or Persons.
(b) The Company's delivery upon conversion of the fixed number of shares
of Common Stock into which the Securities are convertible (together with the
cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy
the Company's obligation to pay the principal amount at Maturity of the portion
of Securities so converted and any unpaid interest (including Compounded
Interest, Additional Interest and Liquidated Damages) accrued on such Securities
at the time of such conversion.
(c) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a
cash adjustment in an amount equal to the same fraction of the last reported
sale price of such fractional interest on the date on which the Securities or
Preferred Securities, as the case may be, were duly surrendered to the
Conversion Agent for conversion, or, if such day is not a Trading Day, on the
next Trading Day, and the Conversion Agent in turn will make such payment, if
any, to the Holder or the holder of the Preferred Securities so converted.
(d) In the event of the conversion of any Security in part only, a new
Security or Securities for the unconverted portion thereof will be issued in the
name of the Holder thereof upon the cancellation of the Security converted in
part in accordance with Section 305.
(e) In effecting the conversion transactions described in this Section,
the Conversion Agent is acting as agent of the holders of Preferred Securities
(in the exchange of Preferred Securities for Securities) and as agent of the
Holders of Securities (in the conversion of Securities into Common Stock), as
the case may be, directing it to effect such conversion transactions. The
Conversion Agent is hereby authorized (i) to exchange Securities held by the
Trust from time to time for Preferred Securities in connection with the
conversion of such Preferred Securities in accordance with this Article Thirteen
and (ii) to convert all or a portion of the Securities into Common Stock and
thereupon to deliver such shares of Common Stock in accordance with the
provisions of this Article Thirteen and to deliver to the Trust a new Security
or Securities for any resulting unconverted principal amount.
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(f) All shares of Common Stock delivered upon any conversion of Securities
required to bear the Restricted Securities Legend shall bear a restrictive
legend substantially in the form of the legend required to be set forth on such
Securities and shall be subject to the restrictions on transfer provided in such
legend and in Section 305(b) hereof. Neither the Trustee nor the Conversion
Agent shall have any responsibility for the inclusion or content of any such
restrictive legend on such Common Stock; PROVIDED, however, that the Trustee or
the Conversion Agent shall have provided to the Company or to the Company's
transfer agent for such Common Stock, prior to or concurrently with a request to
the Company to deliver to such Conversion Agent certificates for such Common
Stock, written notice that the Securities delivered for conversion are
Securities required to bear the Restricted Securities Legend.
SECTION 1303. CONVERSION PRICE ADJUSTMENTS.
The conversion price shall be subject to adjustment (without duplication)
from time to time as follows:
(a) In case the Company shall, while any of the Securities are
Outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the conversion
privilege and the conversion price in effect immediately prior to such action
shall be adjusted so that the Holder of any Securities thereafter surrendered
for conversion shall be entitled to receive the number of shares of capital
stock of the Company which he would have owned immediately following such action
had such Securities been converted immediately prior thereto. An adjustment
made pursuant to this subsection (a) shall become effective immediately after
the record date in the case of a dividend or other distribution and shall become
effective immediately after the effective date in case of a subdivision,
combination or reclassification (or immediately after the record date if a
record date shall have been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of any Security
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes or series of capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
Board Resolution filed with the Trustee) shall determine the allocation of the
adjusted conversion price between or among shares of such classes or series of
capital stock. In the event that such dividend, distribution, subdivision,
combination or issuance is not so paid or made, the conversion price shall again
be adjusted to be the conversion price which would then be in effect if such
record date had not been fixed.
(b) In case the Company shall, while any of the Securities are
Outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock (as
determined pursuant to subsection (f) below) on the record date mentioned below,
the conversion price for the Securities shall be adjusted so that the same shall
equal the price determined by
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multiplying the conversion price in effect immediately prior to the date of
issuance of such rights or warrants by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such current market price, and of
which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company. The Company shall not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of the
Company. In case any rights or warrants referred to in this subsection in
respect of which an adjustment shall have been made shall expire unexercised
within 45 days after the same shall have been distributed or issued by the
Company, the conversion price shall be readjusted at the time of such
expiration to the conversion price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in case the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness, shares of any class or series of capital stock,
cash or assets (including securities, but excluding any rights or warrants
referred to in subparagraph (b), any dividend or distribution paid exclusively
in cash and any dividend or distribution referred to in subparagraph (a) of this
Section 1303), the conversion price shall be reduced so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (c) by a fraction of which the numerator shall
be the current market price per share (determined as provided in subparagraph
(f)) of the Common Stock on the date fixed for the payment of such distribution
(the "Reference Date") less the fair market value (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors), on the Reference Date, of the
portion of the evidences of indebtedness, shares of capital stock, cash and
assets so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the conversion price shall again be
adjusted to be the conversion price which would then be in effect if such
dividend or distribution had not occurred. If the Board of Directors determines
the fair market value of any distribution for purposes of this subparagraph (c)
by reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the prices in such
market over the same period used in computing the current market price per share
of Common Stock (determined as provided in subparagraph (f)). For purposes of
this subparagraph (c), any dividend or distribution that includes shares of
Common Stock or rights or warrants to subscribe for or purchase shares of Common
Stock shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, shares of capital stock, cash or assets
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other than such shares of Common Stock or such rights or warrants (making any
conversion price reduction required by this subparagraph (c)) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (making any further conversion price reduction
required by subparagraph (a) or (b)), except (A) the Reference Date of such
dividend or distribution as defined in this subparagraph shall be substituted
as (a) "the record date in the case of a dividend or other distribution," and
(b) "the record date for the determination of stockholders entitled to
receive such rights or warrants" and (c) "the date fixed for such
determination" within the meaning of subparagraphs (a) and (b) and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed outstanding for purposes of computing any adjustment of the conversion
price in subparagraph (a).
(d) In case the Company shall pay or make a dividend or other distribution
on its Common Stock exclusively in cash (excluding all regular cash dividends,
if the annualized amount thereof per share of Common Stock does not exceed 10%
of the current market price per share, determined as provided in subparagraph
(f), of the Common Stock on the Trading Day immediately preceding the date of
declaration of such dividend), the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph by a fraction of which the numerator shall be
the current market price per share (determined as provided in subparagraph (f))
of the Common Stock on the date fixed for the payment of such distribution less
the amount of cash so distributed (excluding that portion of such distribution
that does not exceed 10% of the current market price per share, determined as
provided above) applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution; PROVIDED,
HOWEVER, that in the event the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the current market price
per share (as defined in subparagraph (f)) of the Common Stock on the record
date mentioned above (excluding that portion of such distribution that does not
exceed 10% of the current market price per share, determined as provided above),
in lieu of the foregoing adjustment, adequate provision shall be made so that
each Holder of shares of Securities shall have the right to receive upon
conversion the amount of cash such Holder would have received had such Holder
converted each share of the Securities immediately prior to the record date for
the distribution of the cash (less that portion of such distribution that does
not exceed 10% of the current market price per share, determined as provided
above). In the event that such dividend or distribution is not so paid or made,
the conversion price shall again be adjusted to be the conversion price which
would then be in effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an odd-lot offer) made
by the Company or any Subsidiary of the Company for all or any portion of the
Common Stock shall expire and such tender or exchange offer shall involve the
payment by the Company or such Subsidiary of consideration per share of Common
Stock having a fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) at the last time (the "Expiration Time")
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tenders or exchanges may be made pursuant to such tender or exchange offer
(as it shall have been amended) that exceeds the current market price per
share (determined as provided in subparagraph (f)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, the conversion price shall
be reduced so that the same shall equal the price determined by multiplying
the conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subparagraph (e) by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration
Time multiplied by the current market price per share (determined as provided
in subparagraph (f)) of the Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") (excluding that portion of such consideration that does not exceed
the current market price per share, determined as provided above) and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the current market price per
share (determined as provided in subparagraph (f)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following
the Expiration Time. In the event that such tender or exchange offer is not
so made, the conversion price shall again be adjusted to be the conversion
price which would then be in effect if such record date had not been fixed.
(f) For the purpose of any computation under subparagraphs (b), (c), (d)
or (e), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
five consecutive Trading Days selected by the Company commencing not more than
20 Trading Days before, and ending not later than, the earlier of the day in
question or, if applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; PROVIDED, HOWEVER, that if
another event occurs that would require an adjustment pursuant to subparagraph
(a) through (e), inclusive, the Board of Directors may make such adjustments to
the Closing Prices during such five Trading Day period as it deems appropriate
to effectuate the intent of the adjustments in this Section 1303, in which case
any such determination by the Board of Directors shall be set forth in a Board
Resolution and shall be conclusive. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the NYSE, or if the
security is not listed on the NYSE, the Nasdaq National Market or on such
successor securities exchange or inter-dealer quotation system as the Common
Stock may be listed or in the relevant market from which the Closing Prices were
obtained without the right to receive such issuance or distribution, and (2)
when used with respect to any tender or exchange offer means the first date on
which the Common Stock trades regular way on such securities exchange or inter-
dealer quotation system or in such market after the Expiration Time of such
offer.
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(g) The Company may make such reductions in the conversion price, in
addition to those required by subparagraphs (a) through (e), as it considers to
be advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. The Company from time to time may reduce the conversion price by
any amount for any period of time if the period is at least twenty (20) days,
the reduction is irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such reduction would be in the
best interest of the Company, which determination shall be conclusive. Whenever
the conversion price is reduced pursuant to the preceding sentence, the Company
shall mail to holders of record of the Securities a notice of the reduction at
least fifteen (15) days prior to the date the reduced conversion price takes
effect, and such notice shall state the reduced conversion price and the period
it will be in effect.
(h) No adjustment of the conversion price shall be required upon the
issuance of any shares of Common Stock pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in shares of
Common Stock under any such plan. No adjustment in the conversion price shall
be required unless such adjustment would require an increase or decrease of at
least 1% in the conversion price; PROVIDED, however, that any adjustments which
by reason of this subparagraph are not required to be made shall be carried
forward and taken into account in determining whether any subsequent adjustment
shall be required.
(i) If any action would require adjustment of the conversion price
pursuant to more than one of the provisions described above, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value to the Holder of the Securities.
SECTION 1304. FUNDAMENTAL CHANGE.
(a) In the event that the Company shall be a party to any transaction
(including without limitation (i) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (ii) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (iii) any sale or transfer of all or substantially all of the
assets of the Company or (iv) any compulsory share exchange) pursuant to which
either shares of Common Stock shall be converted into the right to receive other
securities, cash or other property, or, in the case of a sale or transfer of all
or substantially all of the assets of the Company, the holders of Common Stock
shall be entitled to receive other securities, cash or other property, then
lawful provision shall be made as part of the terms of such transaction whereby
the Holder of each Security then outstanding shall have the right thereafter to
convert such Security only into:
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(1) in the case of any such transaction that does not constitute a
Common Stock Fundamental Change (as defined below) and subject to funds being
legally available for such purpose under applicable law at the time of such
conversion, the kind and amount of the securities, cash or other property that
would have been receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock issuable upon conversion of such Security
immediately prior to such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange, after giving effect, in the case of
any Non-Stock Fundamental Change (as defined below), to any adjustment in the
Conversion Price in accordance with Section 1304(c)(1); and
(2) in the case of any such transaction that constitutes a Common
Stock Fundamental Change, common stock of the kind received by holders of Common
Stock as a result of such Common Stock Fundamental Change in an amount
determined in accordance with Section 1304(c)(2).
(b) The Company or the Person formed by such consolidation or resulting
from such merger or that acquired such assets or that acquires the Company's
shares, as the case may be, shall expressly assume all obligations under this
Indenture, the Declaration, the Guarantee and all Outstanding Securities by
entering into a supplemental indenture to this Indenture and by becoming a party
to the Declaration and the Guarantee (as applicable) to amend each of such
agreements to provide for such right provided for above with respect to the
Securities and the Preferred Securities. Such amendments and supplements shall
provide for adjustments which, for events subsequent to the effective date of
such agreement, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article Thirteen. The above provisions shall
similarly apply to successive transactions of the foregoing type.
(c) Notwithstanding any other provision of this Section 1304 to the
contrary, but without duplication with Section 1303, if any Fundamental Change
(as defined below) occurs, then the Conversion Price in effect will be adjusted
immediately after such Fundamental Change as follows:
(1) in the case of a Non-Stock Fundamental Change, the Conversion
Price of the Securities immediately following such Non-Stock Fundamental Change
shall be the lower of (A) the Conversion Price in effect immediately prior to
such Non-Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to Section 1303, and (B) the product of (1) the
greater of the Applicable Price (as defined in Section 1307) and the then
applicable Reference Market Price (as defined in Section 1307) and (2) a
fraction, the numerator of which is $50 and the denominator of which is (x) the
amount of the Redemption Price set forth in Section 1109 for $50 in principal
amount of Securities if the Redemption Date were the date of such Non-Stock
Fundamental Change (or, for the period commencing on the first date of original
issuance of the Preferred Securities and to October 1, 1997 and the twelve month
periods commencing October 1, 1997, October 1, 1998 and October 1, 1999, the
product of 106.750%, 106.075%, 105.400% and 104.725%, respectively, times $50)
plus (y) any then-
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accrued and unpaid interest, including Additional Interest, Compounded
Interest and Liquidated Damages, if any on one Preferred Security; and
(2) in the case of a Common Stock Fundamental Change, the
conversion price of the Securities immediately following such Common Stock
Fundamental Change shall be the conversion price in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to Section 1303, multiplied by a fraction, the
numerator of which is the Purchaser Stock Price (as defined in Section 1307) and
the denominator of which is the Applicable Price; PROVIDED, however, that in the
event of a Common Stock Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Common Stock is common stock of the
successor, acquiror or other third party (and cash, if any, paid with respect to
any fractional interests in such common stock resulting from such Common Stock
Fundamental Change) and (B) all of the Common Stock shall have been exchanged
for, converted into or acquired for, common stock of the successor, acquiror or
other third party (and any cash with respect to fractional interests or with
respect to appraisal or similar rights), the conversion price of the Securities
immediately following such Common Stock Fundamental Change shall be the
conversion price in effect immediately prior to such Common Stock Fundamental
Change multiplied by a fraction, the numerator of which is one and the
denominator of which is the number of shares of common stock of the successor,
acquiror or other third party received by a holder of one share of Common Stock
as a result of such Common Stock Fundamental Change.
SECTION 1305. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Preferred Securities and the Securities; and
(b) a notice stating the conversion price has been adjusted and setting
forth the adjusted conversion price shall as soon as practicable be mailed by
the Company to all record holders of Preferred Securities and the Securities at
their last addresses as they appear upon the stock transfer books of the Company
and the Trust.
SECTION 1306. PRIOR NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall (1) declare any dividend (or any other distribution)
on its Common Stock, other than (A) a dividend payable in shares of Common Stock
or (B) a dividend payable in cash that would not require an adjustment pursuant
to Section 1303(c) or (d) or (2)
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authorize a tender or exchange offer that would require an adjustment
pursuant to Section 1303(e);
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a subdivision or
combination of the outstanding Common Stock, or a change in par value, or from
par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the stock transfer books the Trust or (b)
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least 15 days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 1307. CERTAIN DEFINED TERMS.
The following definitions shall apply to terms used in this
Article Thirteen:
(a) "APPLICABLE PRICE" means (i) in the event of a Non-Stock Fundamental
Change in which the holders of Common Stock receive only cash, the amount of
cash received by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the average of the daily Closing Price for one
share of Common Stock during the 10 Trading Days immediately prior to the record
date for the determination of the holders of Common Stock
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entitled to receive cash, securities, property or other assets in connection
with such Fundamental Change or, if there is no such record date, prior to
the date upon which the holders of Common Stock shall have the right to
receive such cash, securities, property or other assets.
(b) "CLOSING PRICE" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices regular
way of such common stock, in each case on the NYSE Composite Tape or, if the
common stock is not listed or admitted to trading on such exchange, on the
principal national securities exchange or interdealer quotation system on which
such common stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange or inter-dealer
quotation system, the average of the closing bid and asked prices as furnished
by any NYSE member firm selected from time to time by the Board of Directors of
the Company for that purpose or, if not so available in such manner, as
otherwise determined in good faith by the Board of Directors.
(c) "COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors) of the consideration received by holders of Common Stock consists of
common stock, that, for the 10 Trading Days immediately prior to such
Fundamental Change, has been admitted for listing or admitted for listing
subject to notice of issuance on a national securities exchange or quoted on the
Nasdaq Stock Market; PROVIDED, HOWEVER, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Securities
continue to exist as outstanding Securities or (ii) not later than the
occurrence of such Fundamental Change, all obligations of the Company under this
Indenture, the Declaration, the Guarantee and all outstanding Securities are
expressly assumed by the Person succeeding to the business of the Company by
becoming a party to the Declaration and the Guarantee and by entering into a
supplemental indenture to this Indenture (as applicable), which obligations
shall include the right of the holders of the Preferred Securities to convert
the Preferred Securities (and the Securities) into the common stock of such
successor entity and providing for adjustments that, for events subsequent to
the effective date thereof, shall be as nearly equivalent as may be practicable
to the relevant adjustments provided for in this Article Thirteen.
(d) "FUNDAMENTAL CHANGE" means the occurrence of any transaction or event
or series of transactions or events pursuant to which all or substantially all
of the Common Stock shall be exchanged for, converted into, acquired for or
shall constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED, however, in the case of any such series of transactions or
events, for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all of the Common
Stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets, but the adjustment shall be based upon the consideration that the
holders of Common Stock received in the transaction or event as a result of
which more than 50% of the
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Common Stock outstanding shall have been exchanged for, converted into or
acquired for, or shall constitute solely the right to receive, such cash,
securities, property or other assets.
(e) "NON-STOCK FUNDAMENTAL CHANGE", means any Fundamental Change other
than a Common Stock Fundamental Change.
(f) "PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Price for one share of the
common stock received by holders of Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of Common Stock entitled to receive
such common stock or, if there is no such date, prior to the date upon which the
holders of Common Stock shall have the right to receive such common stock.
(g) "REFERENCE MARKET PRICE" initially means $16.25 and, in the event of
any adjustment to the conversion price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the conversion price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial conversion price of $28.75 per share.
(h) "TRADING DAY" shall mean a day on which securities are traded on the
national securities exchange or quotation system used to determine the Closing
Price.
SECTION 1308. DIVIDEND OR INTEREST REINVESTMENT PLANS.
Notwithstanding the foregoing provisions, the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan, and the issuance
of any shares of Common Stock or options or rights to purchase such shares
pursuant to any employee benefit plan or program of the Company or pursuant to
any option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Securities were first issued, shall not be deemed
to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies. There shall also be no adjustment of the conversion
price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically described in this
Article Thirteen.
SECTION 1309. CERTAIN ADDITIONAL RIGHTS.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section 1303(c) or 1303(d)
(including, without limitation, dividends or distributions referred to in the
last sentence of Section 1303(c)), the Holder, upon the conversion thereof
subsequent to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution and prior to the
effectiveness of the
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conversion price adjustment in respect of such distribution, shall also be
entitled to receive for each share of Common Stock into which the Securities
are converted, the portion of the shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock; PROVIDED, HOWEVER, that,
at the election of the Company (whose election shall be evidenced by a
resolution of the Board of Directors) with respect to all Holders so
converting, the Company may, in lieu of distributing to such Holder any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors). If any conversion of Securities described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the Holder of Securities so converted is
entitled to receive in accordance with the immediately preceding sentence,
the Company may elect (such election to be evidenced by a resolution of the
Board of Directors) to distribute to such Holder a due bill for the shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets to which such Holder is so entitled, PROVIDED, that
such due bill (i) meets any applicable requirements of the principal national
securities exchange or other market on which the Common Stock is then traded
and (ii) requires payment or delivery of such shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash or assets
no later than the date of payment or delivery thereof to holders of shares of
Common Stock receiving such distribution.
SECTION 1310. RESTRICTIONS ON COMMON STOCK ISSUABLE UPON CONVERSION.
(a) Shares of Common Stock to be issued upon conversion of a Security in
respect of Preferred Securities bearing a Restricted Securities Legend (as
defined in the Declaration) shall bear such restrictive legends as the Company
may provide in accordance with applicable law.
(b) If shares of Common Stock to be issued upon conversion of a Security
in respect of Preferred Securities bearing a Restricted Securities Legend are to
be registered in a name other than that of the holder of such Preferred
Security, then the Person in whose name such shares of Common Stock are to be
registered must deliver to the Conversion Agent a certificate satisfactory to
the Company and signed by such Person, as to compliance with the restrictions on
transfer applicable to such Preferred Security. Neither the Trustee nor any
Conversion Agent or Registrar shall be required to register in a name other than
that of the Holder shares of Common Stock issued upon conversion of any such
Security in respect of such Preferred Securities not so accompanied by a
properly completed certificate.
SECTION 1311. TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION PRICE OR
ADJUSTMENTS.
Neither the Trustee nor any Conversion Agent shall at any time be under any
duty or responsibility to any Holder of any Security to determine whether any
facts exist which may require any adjustment of the conversion price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any
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supplemental indenture provided to be employed, in making the same. Neither
the Trustee nor any Conversion Agent shall be accountable with respect to the
validity or value (or the kind of account) of any shares of Common Stock or
of any securities or property, which may at any time be issued or delivered
upon the conversion of any Security; and neither the Trustee nor any
Conversion Agent makes any representation with respect thereto. Neither the
Trustee nor any Conversion Agent shall be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any shares
of Common Stock or stock certificates or other securities or property upon
the surrender of any Security for the purpose of conversion, or, except as
expressly herein provided, to comply with any of the covenants of the Company
contained in Article Ten or this Article Thirteen.
ARTICLE FOURTEEN
Miscellaneous
SECTION 1401. NO RECOURSE; IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any such
predecessor or successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the obligations
issued hereunder are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director as such, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Securities or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture and
the issuance of such Securities.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
VANSTAR CORPORATION
By: /s/ H. CHRISTOPHER COVINGTON
---------------------------------------
Name: H. Christopher Covington
-------------------------------------
Title: Senior Vice President, General
Counsel and Secretary
------------------------------------
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ JAMES P. LAWLER
---------------------------------------
Name: James P. Lawler
-------------------------------------
Title: Vice President
------------------------------------
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<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ALAMEDA )
On October 2, 1996 before me personally came H. Christopher Covington,
to me known, who, being by me duly sworn, did depose and say that he/she is
the Senior Vice President, General Counsel and Secretary of Vanstar
Corporation, one of the corporations described in and which executed the
foregoing instrument; and that he/she signed his/her name thereto by
authority of the Board of Directors of such corporation.
By: /s/ JOHN J. DONOHUE
-----------------------------------
Notary Public State of California
No.
-----------------------------------
Qualified in __________________ County
Certificate Filed in _____________ County
Commission Expires ______________ 199__
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<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ALAMEDA )
On October 2, 1996 before me personally came James P. Lawler, to me
known, who, being by me duly sworn, did depose and say that he/she is the
Vice President of Wilmington Trust Company, one of the corporations described
in and which executed the foregoing instrument; and that he/she signed
his/her name thereto by authority of the Board of Directors of such
corporation.
By: /s/ JOHN J. DONOHUE
-----------------------------------
Notary Public State of California
No.
-----------------------------------
Qualified in __________________ County
Certificate Filed in ______________ County
Commission Expires _________________ 199__
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EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER (OR SUCH SHORTER PERIOD UNDER
RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR RULE) THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH VANSTAR CORPORATION (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENTS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT
TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
VANSTAR CORPORATION
6 3/4% Convertible Subordinated
Debenture due 2016
No. $
-------------------------- -----------------------
CUSIP No.
VANSTAR CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which terms include
any successor corporation under the Indenture hereinafter referred to) for value
received, hereby promises to pay to _____________________________________ ,
or registered assigns, the principal sum [indicated on Schedule A hereof]* [of
_______________ Dollars]**
($ ) on October 1, 2016.
Interest Payment Dates: January 1, April 1, July 1 and October 1,
commencing January 1, 1997
Regular Record Dates: the close of business on the Business Day immediately
preceding each Interest Payment Date, except as
otherwise provided in clause 4 set forth on the
reverse side of this Security
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
______________
*Applicable to Global Securities only.
**Applicable to certificated Securities only.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated:
VANSTAR CORPORATION
By:
----------------------------------
Title:
----------------------------------
[Seal]
Attest:
- --------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
VANSTAR CORPORATION
6 3/4% Convertible Subordinated
Debenture due 2016*
(1) INTEREST. Vanstar Corporation, a Delaware corporation (the
"Company"), is the issuer of this 6 3/4% Convertible Subordinated Debenture due
2016 (the "Security") limited in aggregate principal amount to $180,412,350 (or
$207,474,200 if the over-allotment option is exercised), issued under the
Indenture hereinafter referred to. The Company promises to pay interest on the
Securities in cash from October 2, 1996 or from the most recent interest payment
date to which interest has been paid or duly provided for, quarterly (subject to
deferral for up to 20 consecutive quarters as described in Section 3 hereof) in
arrears on January 1, April 1, July 1, and October 1 of each year (each such
date, an "Interest Payment Date"), commencing January 1, 1997, at the rate of
6 3/4% per annum (subject to increase as provided in Section 12 hereto) PLUS
Additional Interest, Compound Interest and Liquidated Damages if any, until the
principal hereof shall have become due and payable.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. Except as provided in the following
sentence, the amount of interest payable for any period shorter than a full
quarterly period for which interest is computed will be computed on the basis of
the actual number of days elapsed. In the event that any date on which interest
is payable on the Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day which is a Business
Day (without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date.
(2) ADDITIONAL INTEREST. The Company shall pay to Vanstar
Financing Trust (and its permitted successors or assigns under the Declaration)
(the "Trust") such amounts as shall be required so that the net amounts received
and retained by the Trust after paying any taxes, duties, assessments or other
governmental charges of whatever nature (other than withholding taxes) imposed
on the Trust by the United States or any other taxing authority ("Additional
Interest") will be not less than the amounts the Trust would have received had
no such taxes, duties, assessment or governmental charges been imposed.
_____________
*All terms used in this Security which are defined in the Indenture or in
the Declaration attached as Annex A thereto shall have the meanings assigned to
them in the Indenture or the Declaration, as the case may be.
A-4
<PAGE>
(3) OPTION TO EXTEND INTEREST PAYMENT PERIOD. The Company shall
have the right at any time during the term of the Securities to defer interest
payments from time to time by extending the interest payment period for
successive periods (each, an "Extension Period") not exceeding 20 consecutive
quarters for each such period; PROVIDED, no Extension Period may extend beyond
the maturity date of the Securities. At the end of each Extension Period, the
Company shall be responsible for the payment of, and the Company shall pay all
interest then accrued and unpaid (including Additional Interest and Liquidated
Damages) together with interest thereon compounded quarterly at the rate
specified for the Securities to the extent permitted by applicable law
("Compounded Interest"); PROVIDED, that during any Extension Period, the Company
shall not, and shall not allow any of its Subsidiaries (other than, with respect
to clause (i) below only, its wholly owned Subsidiaries) to, (i) declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(except for (1) dividends or distributions in shares of Common Stock on Common
Stock or on the Preferred Stock, (2) purchases or acquisitions of shares of
Common Stock made in connection with any employee benefit plan of the Company or
its subsidiaries in the ordinary course of business or pursuant to employment
agreements with officers or employees of the Company or its subsidiaries entered
into in the ordinary course of business, provided that such repurchases by the
Company made from officers or employees of the Company or its subsidiaries
pursuant to employment agreements shall be made at a price not to exceed market
value on the date of any such repurchase and shall not exceed $1 million in the
aggregate for all such employees and officers, (3) conversions or exchanges of
shares of Common Stock of any one class into shares of Common Stock of another
class or (4) purchases of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of any of the
Company's securities being converted or exchanged), (ii) make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem, any
debt securities issued by the Company that rank junior to or PARI PASSU with the
Securities and (iii) make any guarantee payments with respect to the foregoing.
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period; PROVIDED, that such Extension Period together with
all previous and further extensions thereof may not exceed 20 consecutive
quarters and may not extend beyond the maturity of the Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the above requirements.
No interest during an Extension Period, except at the end thereof, shall be due
and payable.
If the Property Trustee is the sole holder of the Securities at the
time the Company selects an Extension Period, the Company shall give notice to
the Regular Trustees, the Property Trustee and the Trustee of its selection of
such Extension Period at least one Business Day prior to the earlier of (i) the
date the distributions on the Preferred Securities are payable or (ii) if the
Preferred Securities are listed on the New York Stock Exchange, Inc. ("NYSE") or
other stock exchange or quotation system, the date the Trust is required to give
notice to the NYSE or other applicable self-regulatory organization or to
holders of the Preferred Securities on the record date or the date such
distributions are payable, but in any event not less than ten Business Days
prior to such record date.
A-5
<PAGE>
If the Property Trustee is not the sole holder of the Securities at
the time the Company selects an Extension Period, the Company shall give the
Holders and the Trustee notice of its selection of an Extension Period at least
ten Business Days prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) if the Preferred Securities are listed on the NYSE or other
stock exchange or quotation system, the date the Company is required to give
notice to NYSE or other applicable self-regulatory organization or to holders of
the Securities on the record or payment date of such related interest payment,
but in any event not less than two Business Days prior to such record date.
The quarter in which any notice is given pursuant to the second and
third paragraphs of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under the first paragraph of
this Section 3.
(4) METHOD OF PAYMENT. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the Business Day immediately preceding each Interest Payment Date; provided,
however, that, for so long as the Securities are held by the Trust or the
Property Trustee of the Trust, if any Preferred Securities (or if the Trust is
liquidated in connection with Special Event, any Securities) are held in
certificated form, the Record Date for each Interest Payment Date shall be 15
days prior to such Interest Payment Date (in each case, a "Regular Record
Date"). Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice of which shall be given to Holders of Securities not less than
10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Company maintained for that purpose in New York,
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
PROVIDED, however, that, at the option of the Company, payment of interest may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
(5) PAYING AGENT, SECURITY REGISTRAR AND CONVERSION AGENT. The
Trustee will act as Paying Agent, Security Registrar and Conversion Agent. The
Company may change any Paying Agent, Security Registrar, co-registrar or, with
the consent of the Trust, Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.
A-6
<PAGE>
(6) INDENTURE. The Company issued the Securities under an
indenture, dated as of October 2, 1996 (the "Indenture"), between the Company
and Wilmington Trust Company, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Trustee, the Company and the Holders, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) ("TIA") as in effect on the date of the Indenture. The Securities are
subject to, and qualified by, all such terms, certain of which are summarized
hereon, and Holders are referred to the Indenture and the TIA for a statement of
such terms. The Securities are unsecured general obligations of the Company
limited to $180,412,350 in aggregate principal amount (or $207,474,200 if the
overallotment option is exercised). No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed or to convert this Security as provided
in the Indenture.
(7) OPTIONAL REDEMPTION. The Securities are redeemable, in whole
or in part, at the Company's, option at any time and from time to time on or
after October 5, 1999, upon not less than 30 nor more than 60 days' notice, at
the following optional redemption prices (expressed as a percentage of the
principal amount of the Securities) if redeemed during the 12-month period
beginning October 1 of the year shown below (October 5, in the case of 1999):
Percentage of
Year Principal Year Amount
--------------- ---------------------
2000 . . . . . . . . . . . . . . . 104.050%
2001 . . . . . . . . . . . . . . . 103.375
2002 . . . . . . . . . . . . . . . 102.700
2003 . . . . . . . . . . . . . . . 102.025
2004 . . . . . . . . . . . . . . . 101.350
2005 . . . . . . . . . . . . . . . 100.675
2006 and thereafter . . . . . . . 100.000
plus, in each case, accrued and unpaid interest, including Additional Interest,
Compounded Interest and Liquidated Damages, if any, to the Redemption Date. On
or after the Redemption Date, interest will cease to accrue on the Securities,
or portion thereof, called for redemption.
(8) OPTIONAL REDEMPTION UPON TAX EVENT. The Securities are subject
to redemption in whole (but not in part), at any time within 90 days thereafter,
if a Tax Event (as defined in the Declaration) shall occur and be continuing, at
the applicable redemption price set forth above (or, for the period commencing
on the date of issuance of the Securities through October 4, 1997 and the twelve
month periods commencing October 5, 1997 and October 5, 1998, the product of
106.750%, 106.075% and 105.400%, respectively, times $50), in each
A-7
<PAGE>
case plus accrued but unpaid interest, including Additional Interest,
Compounded Interest and Liquidated Damages, if any, to the Redemption Date.
Any redemption pursuant to this Section 8 will be made upon not less than 30
nor more than 60 days' notice.
(9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of the Securities to be redeemed at his address of record. The
Securities in denominations larger than $50 may be redeemed in part but only in
integral multiples of $50. In the event of a redemption of less than all of the
Securities, the Securities will be chosen for redemption by the Trustee in
accordance with the Indenture. On and after the Redemption Date, interest ceases
to accrue on the Securities or portions of them called for redemption. If this
Security is redeemed subsequent to a Regular Record Date with respect to any
Interest Payment Date specified above and on or prior to such Interest Payment
Date, then any accrued interest will be paid to the person in whose name this
Security is registered at the close of business on such record date.
(10) REDEMPTION. The Securities will mature on October 1, 2016, and
may be redeemed, in whole or in part, at any time after October 5, 1999 as set
forth above or at any time in certain circumstances upon the occurrence of a Tax
Event as set forth above. Upon the repayment of the Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Securities so repaid or redeemed at the
applicable redemption price together with accrued and unpaid distributions
through the date of redemption; PROVIDED, that holders of the Trust Securities
shall be given not less than 30 nor more than 60 days notice of such redemption.
Upon the repayment of the Securities at maturity or upon any acceleration,
earlier redemption or otherwise, the proceeds from such repayment will be
applied to redeem the Preferred Securities, in whole, upon not less than 30 nor
more than 60 days' notice. There are no sinking fund payments with respect to
the Securities.
(11) CONVERSION. The Holder of any Security has the right,
exercisable at any time prior to the close of business (New York time) on the
Business Day immediately preceding the date of repayment of such Security
whether at maturity or upon redemption (either at the option of the Company or
pursuant to a Tax Event), to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $50) into the number of shares
of Common Stock obtained by dividing $50 per Security by the applicable
conversion price (initially $28.75 per share of Common Stock for each Security)
(equivalent to a conversion rate of 1.739 shares per share of Common Stock of
the Company per Security), subject to adjustment under certain circumstances as
set forth in the Indenture.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment
A-8
<PAGE>
of an installment of interest and prior to the opening of business on the
next Interest Payment Date, then, notwithstanding such conversion, the
interest payable on such Interest Payment Date will be paid to the registered
Holder of such Security on such Regular Record Date. In such event, such
Security, when surrendered for conversion, need not be accompanied by payment
of an amount equal to the interest payable on such Interest Payment Date on
the portion so converted. The number of shares issuable upon conversion of a
Security is determined by dividing the principal amount of the Security
converted by the conversion price in effect on the Conversion Date. No
fractional shares will be issued upon conversion but a cash adjustment will
be made for any fractional interest. The Outstanding principal amount of any
Security shall be reduced by the portion of the principal amount thereof
converted into shares of Common Stock.
(12) REGISTRATION RIGHTS. The holders of the Preferred Securities,
the Securities, the Guarantee and the shares of Common Stock of the Company
issuable upon conversion of the Securities (collectively, the "REGISTRABLE
SECURITIES") are entitled to the benefits of a Registration Rights Agreement,
dated as of October 2, 1996, among the Company, the Trust and the Initial
Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, the Company has agreed for the benefit of the holders of
Registrable Securities that (i) it will, at its cost, within 75 days after the
date of issuance of the Registrable Securities, file a shelf registration
statement (the "Shelf Registration Statement") with the Commission with respect
to resales of the Registrable Securities, (ii) it will use its reasonable
efforts to cause, such Shelf Registration Statement to be declared effective by
the Commission within 135 days after the date of issuance of the Registrable
Securities and (iii) the Company will use its reasonable efforts to maintain
such Shelf Registration Statement continuously effective under the Securities
Act until the third anniversary of the effectiveness of the Shelf Registration
Statement or such earlier date as is provided in the Registration Rights
Agreement. Reference is made to the Registration Rights Agreement for a
description of, among other things, the circumstances under which a
"Registration Default" may be declared if such Shelf Registration Statement is
not filed or is not declared effective within a specified period of time, and
additional interest "Liquidated Damages" may accrue and by payable on the
Securities as a result of such a Registration Default.
(13) REGISTRATION, TRANSFER, EXCHANGE AND DENOMINATIONS. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York or Wilmington, Delaware, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $50 and integral multiples thereof. No service charge shall be
made for any
A-9
<PAGE>
such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Prior to due presentment of this Security
for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security
be overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. In the event of redemption or conversion
of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
(14) PERSONS DEEMED OWNERS. Except as provided in Section 4 hereof,
the registered Holder of a Security may be treated as its owner for all
purposes.
(15) UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, holders
of Securities entitled to the money must look to the Company for payment unless
an abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
(16) DEFAULTS AND REMEDIES. The Securities shall have the Events of
Default as set forth in Section 501 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company, or the holders of at least 25% in
aggregate principal amount of the then Outstanding Securities by notice to the
Company and the Trustee, may declare all the Securities to be due and payable
immediately.
The holders of a majority in principal amount of the Securities then
Outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if the rescission is prior to a judgment or decree for the payment
of the money due has been obtained by the Trustee as provided in the Indenture
and if all existing Events of Default have been cured or waived except
nonpayment of principal and/or interest that has become due solely because of
the acceleration. Holders may not enforce the Indenture or the Securities
except as provided in the Indenture. Subject to certain limitations, holders of
a majority in principal amount of the then Outstanding Securities issued under
the Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference to, and
subject in its entirety by, the more complete description thereof contained in
the Indenture.
(17) AMENDMENTS, SUPPLEMENTS AND WAIVERS. The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities,
A-10
<PAGE>
to waive compliance by the Company with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any
such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver
is made upon this Security.
(18) TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
(19) NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
(20) GOVERNING LAW. THE INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
(21) AUTHENTICATION. The Securities shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
The Company will furnish to any Holder of the Securities upon written
request and without charge a copy of the Indenture. Request may be made to:
Vanstar Corporation
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
Attention of: Chief Financial Officer
Facsimile: (510) 734-0760
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
-----------------------------
(Sign exactly as your name appears on the
other side of this Security)
Date:
---------------------------------------
Signature Guarantee:*
-----------------------
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer;
or
(2) / / transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
__________________
*Signature must be guaranteed by a commercial bank, trust company or member
firm of the NYSE.
<PAGE>
(3) / / transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) / / transferred pursuant to an effective Shelf Registration
Statement.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3) or (4) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
-----------------------------------
Signature
Signature Guarantee:*
- ----------------------------- --------------------------------- ]
Signature must be guaranteed Signature
- --------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
------------------------- ---------------------------------------
NOTICE: To be executed by an executive
officer.]
______________
*Signature must be guaranteed by a commercial bank, trust company or member
firm of the NYSE.
-2-
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be $__________.
The following increases or decreases in the principal amount of this Global
Security have been made:
<TABLE>
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<S> <C> <C> <C> <C>
AMOUNT OF INCREASE IN
PRINCIPAL AMOUNT OF THIS
GLOBAL SECURITY INCLUDING AMOUNT OF DECREASE IN PRINCIPAL AMOUNT OF THIS SIGNATURE OF AUTHORIZED
UPON EXERCISE OF OVER- PRINCIPAL AMOUNT OF THIS GLOBAL SECURITY FOLLOWING OFFICER OF TRUSTEE OR
DATE MADE ALLOTMENT OPTION GLOBAL SECURITY SUCH DECREASE OR INCREASE SECURITIES CUSTODIAN
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
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</TABLE>
-3-
<PAGE>
ELECTION TO CONVERT
To: Vanstar Corporation
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into Common
Stock of Vanstar Corporation in accordance with the terms of the Indenture
referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance with
the terms of the Indenture and the Security, agrees to be bound by the terms of
the Registration Rights Agreement relating to the Common Stock issuable upon
conversion of the Securities.
Date:
-------------------------
in whole _____ Portions of Security to be in part converted
in part _____ ($50 or integral multiples thereof):
$
-----------------------------------------
-------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number
-------------------------------------------
-------------------------------------------
-------------------------------------------
Signature Guarantee:*
---------------------
__________________
*Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
PREFERRED SECURITIES GUARANTEE AGREEMENT
VANSTAR CORPORATION
DATED AS OF OCTOBER 2, 1996
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions and Interpretation . . . . . . . . . . . . . . 1
ARTICLE II TRUST INDENTURE ACT . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . 4
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . 5
SECTION 2.3 Reports by the Preferred Guarantee Trustee . . . . . . . . 5
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee. . . . . . 5
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . 5
SECTION 2.6 Events of Default; Waiver. . . . . . . . . . . . . . . . . 6
SECTION 2.7 Event of Default Notice. . . . . . . . . . . . . . . . . . 6
SECTION 2.8 Conflicting Interests. . . . . . . . . . . . . . . . . . . 6
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE . . . . . 6
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee . . . 6
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee. . . . . . . 8
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. . .10
ARTICLE IV PREFERRED GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . . . .10
SECTION 4.1 Preferred Guarantee Trustee; Eligibility . . . . . . . . .10
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees . . . . . . . . . . . . . . . . . . . .11
ARTICLE V GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 5.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 5.2 Subordination. . . . . . . . . . . . . . . . . . . . . . .12
SECTION 5.3 Waiver of Notice and Demand. . . . . . . . . . . . . . . .12
SECTION 5.4 Obligations Not Affected . . . . . . . . . . . . . . . . .12
SECTION 5.5 Rights of Holders. . . . . . . . . . . . . . . . . . . . .13
SECTION 5.6 Guarantee of Payment . . . . . . . . . . . . . . . . . . .14
SECTION 5.7 Subrogation. . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 5.8 Independent Obligations. . . . . . . . . . . . . . . . . .14
SECTION 5.9 Conversion . . . . . . . . . . . . . . . . . . . . . . . .14
-i-
<PAGE>
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION . . . . . . . . . . . . .14
SECTION 6.1 Limitation of Transactions . . . . . . . . . . . . . . . .14
SECTION 6.2 Ranking. . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 8.1 Exculpation. . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . .16
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 9.1 Successors and Assigns . . . . . . . . . . . . . . . . . .16
SECTION 9.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 9.4 Benefit. . . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . .18
-ii-
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred Securities
Guarantee"), dated as of October 2, 1996, is executed and delivered by Vanstar
Corporation, a Delaware corporation (the "Guarantor"), and Wilmington Trust
Company as trustee (the "Preferred Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of Vanstar Financing Trust, a Delaware statutory business trust
(the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
Declaration"), dated as of October 2, 1996, among the trustees of the Trust
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof 3,500,000 preferred securities, having an aggregate
liquidation amount of $175,000,000 (plus up to an additional 525,000 preferred
securities, having an aggregate liquidation amount of $26,250,000, to cover
over-allotments), designated the 6 3/4% Trust Convertible Preferred Securities
(the "Preferred Securities").
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to guarantee the obligations
of the Trust to the Holders of the Preferred Securities on the terms and
conditions set forth herein.
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Indenture (as defined herein)), has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments (as
defined in the Common Securities Guarantee) under the Common Securities
Guarantee shall be subordinated to the rights of Holders of Preferred Securities
to receive Guarantee Payments (as defined herein) under this Preferred
Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
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(a) Capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
(c) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(d) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
(g) a reference to any Person shall include its successors and assigns;
(h) a reference to any agreement or instrument shall mean such agreement
or instrument, as supplemented, modified, amended, or amended and restated, and
in effect from time to time; and
(i) a reference to any statute, law, rule or regulation, shall include any
amendments thereto applicable to the relevant Person, and any successor statute,
law, rule or regulation.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which banking institutions
in New York, New York, San Francisco, California or Wilmington, Delaware are
authorized or required by law to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall at any particular time, be principally administered which office at the
date of execution of this Agreement is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
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"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the 6 3/4% Convertible Subordinated Debentures due 2016
of the Guarantor held by the Property Trustee (as defined in the Declaration).
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (i) any accrued and unpaid Distributions (as defined in the
Declaration) that are required to be paid on such Preferred Securities to the
extent the Trust shall have funds available therefor, (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption (the
"Redemption Price"), with respect to any Preferred Securities called for
redemption by the Trust to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with a distribution of the Debentures to
the Holders in exchange for Preferred Securities or the redemption of all of the
Preferred Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid Distributions on
the Preferred Securities to the date of payment, to the extent the Trust shall
have funds available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to Holders upon liquidation of the Trust
(in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records of
the Trust of any Preferred Securities, PROVIDED, HOWEVER, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of October 2, 1996 among the
Guarantor (the "Convertible Debenture Issuer") and Wilmington Trust Company, a
Delaware banking corporation, as trustee, pursuant to which the Debentures are
to be issued to the Property Trustee of the Trust.
"Indenture Trustee" means the Person acting as trustee under the Indenture,
initially Wilmington Trust Company.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on
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redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all
Preferred Securities.
"Officers' Certificate" means, with regard to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, the treasurer, any assistant or other officer of the
Corporate Trust Office of the Preferred Guarantee 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 that officer's knowledge of
and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
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ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall to the extent applicable, be governed by such
provisions; and
(b) If and to the extent that any provision of this Preferred Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within 14 days after each record date for payment
distributions, if any, payable to a Holder, of any payment or interest,
principal or premium amount due on the Preferred Securities, PROVIDED that the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Preferred Guarantee Trustee by the Guarantor and (ii) at any other time,
within 30 days of receipt by the Guarantor of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 of the Trust
Indenture Act (if any) and the
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compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions, if any, provided for in this
Preferred Securities Guarantee that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any certificate or opinion to be
given by an officer pursuant to Section 314(c)(l) may be given in the form of an
Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT NOTICE.
(a) The Preferred Guarantee Trustee shall within 90 days after the
occurrence of an Event of Default transmit by mail, first class postage prepaid,
to the Holders of the Preferred Securities, notices of all Events of Default
actually known to a Responsible Officer of the Preferred Guarantee Trustee,
unless such defaults have been cured before the giving of such notice; PROVIDED
that the Preferred Guarantee Trustee shall be protected in withholding such
notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default, unless the Preferred Guarantee Trustee shall have
received written notice thereof or a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge thereof.
SECTION 2.8 CONFLICTING INTERESTS.
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.5(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred,
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the provisions of this Preferred
Securities Guarantee, and the Preferred Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as
are specifically set forth in this Preferred Securities Guarantee, and
no implied covenants or obligations shall be read into this Preferred
Guarantee Trustee; and
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(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred Securities Guarantee;
but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the Preferred
Guarantee Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a Majority
in liquidation amount of the Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy available to
the Preferred Guarantee Trustee or exercising any trust or power conferred
upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if the
Preferred Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to
it under the terms of this Preferred Securities Guarantee or indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee, against such
risk or liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently evidenced by an
Officers' Certificate.
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(iii) Whenever, in the administration of this Preferred Securities
Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting any
action hereunder, the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see to
any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel of
its selection, and the advice or opinion of such counsel with respect to
legal matters 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 accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its affiliates and may include any of
its employees. The Preferred Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder, unless such
Holder shall have provided to the Preferred Guarantee Trustee such security
and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Preferred Guarantee Trustee; PROVIDED that nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Preferred Securities
Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Guarantee
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the Preferred
Guarantee 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.
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(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities, and
the signature of the Preferred Guarantee Trustee or its agents alone shall
be sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Preferred Securities Guarantee, both of which shall be
conclusively evidenced by the Preferred Guarantee Trustee's or its agent's
taking such action.
(x) Whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Preferred Guarantee Trustee (i) may
request instructions from the Holders of a Majority in liquidation amount
of the Preferred Securities, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance
with such instructions.
(xi) The Preferred Guarantee Trustee shall not be liable for any
action taken, suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
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(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation and doing business under the laws of the
United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.1(a)(ii), 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.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor
(b) The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the
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Guarantor of an instrument of removal or resignation, the resigning or removed
Preferred Guarantee Trustee may petition any court of competent jurisdiction
for appointment of a Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Preferred Guarantee Trustee all amounts accrued to
the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or upon payment of such amounts by the
Trust.
SECTION 5.2 SUBORDINATION.
If an Event of Default (as defined in the Indenture) has occurred and is
continuing, the rights of Holders of Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinate to the rights of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee.
SECTION 5.3 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.4 OBLIGATIONS NOT AFFECTED.
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The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance by the Trust of any express or implied agreement, covenant, term or
condition relating to the Preferred Securities to be performed or observed by
the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.4 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.5 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of this Preferred Securities Guarantee or
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exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may directly institute a legal
proceeding against the Guarantor to enforce the obligations of the Guarantor
under this Preferred Securities Guarantee without first instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
Person.
(c) If an Event of Default with respect to the Debentures (an "Indenture
Event of Default"), constituting the failure to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable has
occurred and is continuing, then a Holder of Preferred Securities may, to the
extent permissible under applicable law, directly, at any time, institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder on or after the
respective due date specified in the Debentures. The Holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures unless the Property Trustee (as defined in the
Indenture fails to do so.
SECTION 5.6 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION 5.7 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; PROVIDED,
HOWEVER, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Preferred Securities
Guarantee, if at the time of any such payment, any amounts are due and unpaid
under this Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.8 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Trust with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.4 hereof.
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<PAGE>
SECTION 5.9 CONVERSION.
The Guarantor agrees and acknowledges its obligations, to issue and deliver
common stock of the Guarantor and, if applicable, other securities and assets
upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if (i) the
Guarantor has exercised its option to defer interest payments on the Debentures
by extending the interest payment period and such period or extension thereof
shall be continuing, (ii) there shall have occurred any Event of Default or
(iii) there shall have occurred and be continuing any event that is or, with the
giving of notice or the lapse of time or both, would constitute an Indenture
Event of Default, then the Guarantor shall not, and shall not allow any of its
subsidiaries (other than, in the case of clause (a) only, its wholly owned
subsidiaries) to (a) declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock, except for (i) dividends or distributions
in shares of Guarantor common stock on Guarantor common stock or its preferred
stock, (ii) purchases or acquisitions of shares of Guarantor common stock made
in connection with any employee benefit plan of the Guarantor or any of its
subsidiaries in the ordinary course of business or pursuant to employment
agreements with officers or employees of the Guarantor or its subsidiaries
entered into in the ordinary course of business, provided that such repurchases
by the Guarantor and its subsidiaries made from officers or employees of the
Guarantor or its subsidiaries pursuant to employment agreements shall be made at
a price not to exceed market value on the date of any such repurchase and shall
not exceed $1 million in the aggregate for all such employees and officers,
(iii) conversions or exchanges of Guarantor common stock of one class into its
common stock of another class or (iv) purchases of fractional interests in
shares of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of any of the Guarantor's securities being converted or exchanged,
(b) make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities of the Guarantor that rank junior to or
PARI PASSU with the Debentures and (c) make any guarantee payments with respect
to the foregoing.
SECTION 6.2 RANKING.
(a) This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior to other
liabilities of the Guarantor except any liabilities that may be PARI PASSU
expressly by their terms, (ii) PARI PASSU with the most senior preferred or
preference stock now or hereafter issued by the Guarantor and with any guarantee
now or hereafter entered into by the Guarantor in respect of any preferred or
preference stock or
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<PAGE>
preferred securities of any Affiliate of the Guarantor, and (iii) senior to
the Guarantor's common stock.
(b) The holders of any obligations of the Guarantor that are senior in
priority to the obligations under this Preferred Securities Guarantee will be
entitled to all of the rights inuring to the holders of "Senior Indebtedness"
under Article 12 of the Indenture, and the Holders of the Preferred Securities
will be subject to all of the terms and conditions of such Article 12 with
respect to any claims or rights hereunder with the same effect as though fully
set forth herein.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate as to each Holder of
Preferred Securities upon (i) full payment of the Redemption Price of all
Preferred Securities, (ii) the distribution of the Debentures held by the Trust
to the Holders of all of the Preferred Securities of the Trust,
(iii) liquidation of the Trust and full payment of the amounts payable in
accordance with the Declaration of the Trust, or (iv) the distribution of
Guarantor's common stock to such Holder in respect of the conversion of such
Holder's Preferred Securities into common stock of the Guarantor.
Notwithstanding the foregoing, this Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission preformed or omitted by such
Indemnified Person in good faith in accordance with this Preferred Securities
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Preferred Securities Guarantee or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within
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<PAGE>
such other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Guarantor, including
information, opinions, reports or statements as to the value and amount of
the assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders of
Preferred Securities might properly be paid.
SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
merger or consolidation of the Guarantor with or into another entity or any
sale, transfer or lease of the Guarantor's assets to another equity (provided
such transaction is permitted by the Indenture and the requirements of the
Indenture with respect thereto are complied with), the Guarantor may not assign
its rights or delegate its obligations under this Preferred Securities Guarantee
without the prior approval of the Holders of at least a Majority in liquidation
amount of the Preferred Securities.
SECTION 9.2 AMENDMENTS.
Except with respect to any changes that do not materially adversely affect
the rights of Holders (in which case no consent of Holders will be required),
this Preferred Securities Guarantee may be amended only with the prior approval
of the Holders of at least a Majority in liquidation amount of the Preferred
Securities. The provisions of Section 12.2 of the Declaration with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
SECTION 9.3 NOTICES.
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<PAGE>
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
sent by facsimile or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
Vanstar Corporation
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
Attention: Chief Financial Officer
Facsimile: (510) 734-0760
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.
SECTION 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
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<PAGE>
STATE OF NEW YORK AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
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<PAGE>
This PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
VANSTAR CORPORATION,
as Guarantor
By: /s/ H. Christopher Covington
----------------------------------
Name: H. Christopher Covington
Title: Senior Vice President, General
Counsel and Secretary
WILMINGTON TRUST COMPANY,
as Preferred Guarantee Trustee
By: /s/ James P. Lawler
----------------------------------
Name: James P. Lawler
Title: Vice President
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<PAGE>
EXHIBIT 5.1
ARTER & HADDEN
1717 MAIN STREET, SUITE 4100
DALLAS, TEXAS 75201
TEL: (214) 761-2100
FAX: (214) 741-7139
November 15, 1996
Vanstar Corporation
Vanstar Financing Trust
5964 W. Las Positas Blvd.
Pleasanton, California 94588
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have been advised that on or about November 18, 1996, Vanstar Corporation
(the "Company"), a Delaware corporation, and Vanstar Financing Trust (the
"Issuer"), a Delaware business trust, expect to file with the Securities and
Exchange Commission a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"). Such
Registration Statement relates to the offering and resale (the "Offering") by
certain holders (the "Selling Holders") of up to (i) 4,025,000 6 3/4% Trust
Convertible Preferred Securities of the Issuer (the "Preferred Securities"),
(ii) $207,474,200 aggregate principal amount of 6:% Convertible Subordinated
Debentures due 2016 of the Company (the "Debentures"), (iii) an indeterminable
number of shares of the common stock, par value $.001 per share of the Company
issuable upon conversion thereof (the "Common Stock") and (iv) the Preferred
Securities Guarantee of the Company associated therewith (the "Preferred
Securities Guarantee") (collectively, the "Offered Securities"). This firm has
acted as counsel to you in connection with the preparation and filing of the
Registration Statement and you have requested our opinion with respect to
certain legal aspects of the Offering of the Offered Securities.
In rendering our opinion, we have participated in the preparation of the
Registration Statement and have examined and relied upon the originals or
copies, certified to our satisfaction, of such documents and instruments of the
Company and the Issuer as we have deemed necessary and have made such other
investigations as we have deemed appropriate in order to express the opinions
set forth herein. In our examinations, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents submitted to us as
certified or reproduction copies.In addition, we have assumed and have not
verified (i) the accuracy as to factual matters of each document we have
reviewed and (ii) that the Debentures have been duly authenticated under that
Indenture dated October 2, 1996 between the Company as sponsor and Wilmington
Trust Company as trustee (the "Indenture").
As to certain questions of fact material to the opinions contained herein,
we have, where appropriate, relied upon the certificates or statements of public
officials, and a certificate of officers of the Company and the Issuer, in each
case without independent verification of their accuracy.
Based upon and subject to the foregoing, we are of the opinion as follows:
1. The Debentures and the Preferred Securities Guarantee, as issued, are
valid and binding obligations of the Company and each is enforceable against the
Company in accordance with its respective terms.
<PAGE>
Vanstar Corporation
Vanstar Financing Trust
November 15, 1996
Page 2
2. The Preferred Securities to be sold by the Selling Holders in the
Offering were validly issued and fully paid and are nonassessable by the Trust.
3. The Common Stock, when issued upon the conversion of the Debentures or
the Preferred Securities in accordance with the terms of the Indenture or the
Amended and Restated Declaration of Trust dated October 2, 1996 (the
"Declaration"), as the case may be, will be validly issued, fully paid and
nonassessable.
Insofar as the foregoing opinions relate to the legality, validity, binding
effect or enforceability of any agreement or obligation of the Company, (a) we
have assumed that each other party to such agreement or obligation has satisfied
those legal requirements that are applicable to it to the extent necessary to
make such agreement or obligation enforceable against it, (b) such opinions are
subject to applicable bankruptcy, insolvency, reorganization, liquidation,
receivership, fraudulent conveyance or similar laws, now or hereafter in effect,
relating to creditors' rights generally, and (c) such opinions are subject to
general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding at law or in equity).
In connection with the Offering, we have prepared the discussion set forth
under the caption "Certain United States Federal Income Tax Considerations" (the
"Discussion") contained in the Prospectus forming a part of the Registration
Statement. We have assumed the Trustees will conduct the affairs of the Trust in
accordance with the Declaration. We hereby confirm our opinion as set forth in
the Discussion which is a summary of the material United States Federal income
tax consequences of the ownership and disposition of the Preferred Securities.
This opinion letter is limited to the matters stated herein and no opinion
is implied or may be inferred beyond the matters expressly stated.This opinion
letter is limited in all respects to the law of the State of New York and the
General Corporation Law of the State of Delaware, each as in effect on the date
hereof. We bring to your attention the fact that our legal opinions are an
expression of professional judgment and are not a guarantee of result. This
opinion letter is rendered as of the date hereof, and we undertake no, and
hereby disclaim any, obligation to advise you of any changes or any new
developments which might affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the headings "Certain
United States Federal Income Tax Considerations" and "Legal Matters" in the
Prospectus. In so doing, we do not thereby admit that we are experts for the
purposes of the Act.
Very truly yours,
/s/ ARTER & HADDEN
ARTER & HADDEN
<PAGE>
VANSTAR FINANCING TRUST
6 3/4% Trust Convertible Preferred Securities
("Preferred Securities")
Guaranteed to a limited extent by, and convertible into shares of
common stock of,
Vanstar Corporation
REGISTRATION RIGHTS AGREEMENT
October 2, 1996
ROBERTSON, STEPHENS & COMPANY LLC
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the several Initial Purchasers
c/o Robertson, Stephens & Company LLC
555 California Street, Suite 2600
San Francisco, California 94104
Ladies and Gentlemen:
Vanstar Financing Trust, a statutory business trust formed under the laws
of the State of Delaware (the "Trust") by Vanstar Corporation ("the Company"), a
Delaware corporation, as sponsor, among others, proposes to issue and sell to
the Initial Purchasers named in the Purchase Agreement referred to below (the
"Initial Purchasers"), for whom Robertson, Stephens & Company, LLC, Alex.
Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation
and The Robinson-Humphrey Company, Inc. are acting as representatives (the
"Representatives"), upon the terms set forth in a purchase agreement dated
September 26, 1996 (the "Purchase Agreement"), among the Initial Purchasers, the
Company and the Trust, 6 3/4% Trust Convertible Preferred Securities
(liquidation amount $50 per Convertible Preferred Security) (the "Preferred
Securities") (the "Initial Placement"). As an inducement to the Initial
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Initial Purchasers thereunder, the Trust and
the Company agree with you, (i) for the benefit of the Initial Purchasers and
(ii) for the benefit of the holders from time to time of the Preferred
Securities, the 6 3/4% Convertible Subordinated Debentures due 2016 (the
"Debentures") issued by the Company and the common stock, par value $0.001 per
share, of the Company (the "Common Stock") issuable upon conversion of the
Preferred Securities and the Debentures and any shares of Common Stock issued
with respect to such Common Stock upon any dividend, stock split,
reclassification merger, reorganization or similar event (collectively, together
with the Guarantee of the Company of the Preferred Securities, the "Registrable
Securities"), including the Initial Purchasers (each of the foregoing, a
"Holder" and, together, the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have their respective meanings set forth in or pursuant to the Purchase
Agreement or the Offering Circular,
<PAGE>
dated September 26, 1996, in respect of the Preferred Securities, as
applicable. All references to Sections herein are to Sections of this
Agreement unless otherwise indicated. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:
"Act" or "Securities Act" means the Securities Act of 1933, as amended.
"Affiliate" of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by ownership, contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Company Offering" means the sale of Common Stock pursuant to a
registration statement filed by the Company under the Act (other than (i) a
registration statement filed on Form S-4 or any successor form or (ii) a
registration statement filed on Form S-8 or any successor form) respecting an
underwritten offering, whether primary or secondary, that is declared effective
by the Commission.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning set forth in Section 2(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Declaration" means the Amended and Restated Declaration of Trust dated as
of October 2, 1996, among the Company and the Regular Trustee, the Property
Trustee and the Delaware Trustee named therein.
"Indenture" means the Indenture dated as of October 2, 1996, among the
Company and Wilmington Trust Company as trustee.
"Managing Underwriters" means the investment banker or investment bankers
and manager or managers that shall administer an underwritten offering, if any,
as set forth in Section 6 hereof.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under
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<PAGE>
the Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities.
"Shelf Registration" means a registration effected pursuant to Section 2
hereof.
"Shelf Registration Statement" means a Shelf Registration statement of the
Trust and the Company pursuant to the provisions of Section 2 hereof filed with
the Commission which covers some or all of the Registrable Securities, as
applicable, on an appropriate form under Rule 415 under the Act, or any similar
rule that may be adopted by the Commission, amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"underwriter" means any underwriter of Registrable Securities in connection
with an offering thereof under a Shelf Registration Statement.
2. SHELF REGISTRATION. (a) The Trust and the Company shall, within 75
days following the date of original issuance (the "Issue Date") of the Preferred
Securities, file with the Commission a Shelf Registration Statement relating to
the offer and sale of the Registrable Securities by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and
set forth in such Shelf Registration Statement and, thereafter, shall each use
their reasonable efforts to cause such Shelf Registration Statement to be
declared effective under the Act within 135 calendar days following the Issue
Date; PROVIDED, HOWEVER, that no Holder shall be entitled to sell or otherwise
transfer any Registrable Securities held by it unless such Holder is in
compliance with Section 3(m) hereof.
(b) The Trust and the Company shall each use its reasonable efforts
to keep the Shelf Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by Holders for a period
of three years from the date the Shelf Registration Statement is declared
effective or such shorter period that will terminate upon the earliest of the
following: (A) when all outstanding Preferred Securities have been sold pursuant
to a registration statement, all Debentures issued to Holders in respect of
Preferred Securities that had not been sold pursuant to a registration statement
have been sold pursuant to a registration statement, all shares of Common Stock
issued upon conversion of any such Preferred Securities or any such Debentures
(or in respect of such shares of Common Stock) that had not been sold pursuant
to a registration statement have been sold pursuant to a registration statement,
(B) when, in the written opinion of counsel to the Trust and the Company, all
outstanding Registrable Securities held by persons which are not affiliates of
the Trust or the Company may be resold without registration under the Act
pursuant to Rule 144(k) under the Act or any successor provision thereto or any
other applicable law, rule or regulation, whether now in effect or hereinafter
promulgated, adopted or issued (in any such case, such period being called the
"Effectiveness Period") or (C) when all Registrable Securities (or their
predecessor securities) have been sold pursuant to a registration statement or
redeemed.
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<PAGE>
(c) In the event that a Shelf Registration Statement with respect to
the Registrable Securities is not (i) filed on or prior to the 75th calendar day
following the Issue Date or (ii) declared effective on or prior to the 135th
calendar day following the Issue Date (each, a "Registration Default"), the
interest rate borne by the Debentures and, accordingly, the distribution rate
borne by the Preferred Securities, shall be increased by one-quarter of one
percent (0.25 %) per annum, from and including the day following the
Registration Default to and including the 90th day following such Registration
Default and by one-half of one percent (0.50%) thereof from and after the 91st
day following such Registration Default. Upon (x) the filing of the Shelf
Registration Statement after the 75-day period described in clause (i) above or
(y) the effectiveness of the Shelf Registration Statement after the 135-day
period described in clause (ii) above, the interest rate borne by the Debentures
and the distribution rate borne by the Preferred Securities from the date of
such filing or effectiveness, as the case may be, will be reduced to the
original interest rate in respect of all periods thereafter. In the event that
the Shelf Registration Statement ceases to be effective or otherwise becomes
unavailable for effecting resales during the Effectiveness Period for more than
30 consecutive days or 90 days, whether or not consecutive, during any 12-month
period, then the interest rate borne by the Debentures and the distribution rate
borne by the Preferred Securities will each increase by one-half of one percent
(0.50%) per annum from such 31st or 91st day, as applicable, until such time as
the Shelf Registration Statement again becomes effective or available for
effecting resales, as applicable. Any interest payments contemplated by this
Section 2(c) shall be made pursuant to the terms of the Indenture and the
Declaration.
(d) The Trust and the Company shall be deemed not to have used their
reasonable efforts to keep the Shelf Registration Statement effective during the
requisite period if the Trust or the Company voluntarily takes any action that
would result in Holders of Registrable Securities covered thereby not being able
to offer and sell any such Registrable Securities during that period, unless
(i) such action is required by applicable law or (ii) upon the occurrence of any
event contemplated by paragraph 3(c)(2)(iii) below (even if such event results
from a voluntary action of the Company or is within the control of the Company),
and such action is taken by the Trust or the Company in good faith and for valid
business reasons or (iii) the continued effectiveness of the Shelf Registration
Statement would require the Company to disclose a material financing,
acquisition or other corporate development, and the proper officers of the
Company shall have determined in good faith that such disclosure is not in the
best interests of the Company and its stockholders, and, in the case of clause
(ii) above, the Trust and the Company thereafter promptly comply with the
requirements of Section 3(i) below.
3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Trust and the Company shall furnish to the Initial Purchasers
and their counsel, prior to the filing thereof with the Commission, a copy of
any Shelf Registration Statement, and each amendment thereof and each amendment
or supplement, if any, to the Prospectus included therein and shall each use its
reasonable efforts to reflect in each such
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<PAGE>
document, when so filed with the Commission, such comments as the Initial
Purchasers and such counsel reasonably may propose.
(b) The Trust and the Company shall take such action as may be
necessary so that (i) any Shelf Registration Statement, and any amendment
thereto, and any Prospectus forming a part thereof, and any amendment or
supplement thereto (and each report or other document incorporated therein by
reference in each case) complies in all material respects with the Securities
Act and the Exchange Act and the respective rules and regulations thereunder,
(ii) any Shelf Registration Statement, and any amendment thereto, does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any amendment or supplement to such Prospectus, does
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchasers and, in the
case of clause (i) of this Section 3(c), the Holders, and, if requested by the
Initial Purchasers or any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement, and any
amendment thereto, has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus included
therein or for additional information.
(2) The Company shall advise the Initial Purchasers and the
Holders and, if requested by the Initial Purchasers or any such Holder, confirm
such advice in writing of:
(i) the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement or the initiation
of any proceedings for that purpose;
(ii) the receipt by the Trust or the Company of any
notification with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or the initiation of
any proceeding for such purpose; and
(iii) the happening of any event (which event need not be
described (if such disclosure would, in the good faith judgment of the Company,
be detrimental to the Company or the Holders) absent confidentiality
arrangements reasonably satisfactory to the Company) that requires the making of
any changes in the Shelf Registration Statement or the
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Prospectus so that, as of such date, the Shelf Registration Statement and the
Prospectus do not contain an untrue statement of a material fact and do not
omit to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice shall
be accompanied by an instruction to suspend the use of the Prospectus until
the requisite changes have been made).
(d) The Company and the Trust shall use their reasonable efforts to
prevent the issuance, and, if issued, to obtain the withdrawal, of any order
suspending the effectiveness of any Shelf Registration Statement at the earliest
possible time.
(e) The Trust and the Company shall furnish to each Holder of
Registrable Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendments thereto, including financial
statements and schedules contained therein, provided, that such parties shall
not be required to furnish to the Holders reports and other documents
incorporated by reference in the Shelf Registration Statement or any exhibits
thereto (including those incorporated by reference).
(f) The Trust and the Company shall, during the Effectiveness Period,
deliver to each Holder of Registrable Securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request, and each of the Trust and the Company consents (except
upon and during the continuance of any event described in paragraphs 2(d) or
3(c)(2)(iii) above) to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto during the Effectiveness
Period.
(g) Prior to any offering of Registrable Securities pursuant to any
Shelf Registration Statement, the Trust and the Company shall register or
qualify or cooperate with the Holders of Registrable Securities included therein
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions in the United States as any
such Holders reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Registrable Securities covered by such Shelf Registration Statement;
PROVIDED, HOWEVER, that in no event shall the Trust or the Company be obligated
to (1) qualify generally to do business or as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify but for this Section 3(g), (ii) file any general consent
to service of process in any jurisdiction where it is not as of the date hereof
then so subject or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject.
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(h) Unless any Registrable Securities shall be in book-entry only
form, the Trust and the Company shall cooperate with the Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to any Shelf
Registration Statement free of any restrictive legends and in such permitted
denominations and registered in such names as Holders may request in connection
with the sale of Registrable Securities pursuant to such Shelf Registration
Statement.
(i) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Trust and the Company shall, as promptly as reasonably
practicable, file with the Commission a post-effective amendment to any Shelf
Registration Statement or an amendment or supplement to the related Prospectus
or file any report required under the Exchange Act or other required document so
that, as thereafter delivered to purchasers of the Registrable Securities
included therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except, in each case, for an untrue statement of a
material fact or omission of a material fact made in reliance on and in
conformity with written information furnished to the Company or the Trust by or
on behalf of Holders specifically for use therein). The Trust and the Company
agree to notify the Holders to suspend use of the Prospectus, and the Holders
shall suspend use of the Prospectus, and not communicate such material non-
public information to any third party, and not sell or purchase, or offer to
sell or purchase, any securities of the Trust or the Company, until the Trust or
the Company has amended or supplemented the Prospectus so it does not contain
any such misstatement or omission. Subject to Section 2(d) above, at such time
as such public disclosure is otherwise made or the Trust and the Company
determine in good faith that such disclosure is not necessary, the Trust and the
Company agree to notify the Holders of such determination and to amend or
supplement the Prospectus if necessary, so that the Prospectus does not contain
any such untrue statement or omission therein and to furnish the Holders such
numbers of copies of the Prospectus as so amended or supplemented as the Holders
may reasonably request.
(j) Not later than the effective date of any Shelf Registration
Statement hereunder, the Trust and the Company shall provide a CUSIP number for
the Preferred Securities registered under such Shelf Registration Statement. In
the event of and at the time of any distribution of the Debentures to Holders
the Company shall provide a CUSIP number for the Debentures and provide the
applicable trustee with certificates for such Registrable Securities, in a form
eligible for deposit with DTC (to the extent that such Registrable Securities
are so eligible).
(k) The Trust and the Company shall use their reasonable efforts to
comply with all applicable rules and regulations of the Commission and shall
make generally available to their security holders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as practicable after
the effective date of the applicable Shelf Registration Statement an earnings
statement satisfying the provisions of Section 11 (a) of the Securities Act.
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<PAGE>
(l) The Trust and the Company shall use their reasonable efforts to
cause the Indenture, the Declaration and the Preferred Securities Guarantee
Agreement to be qualified under the Trust Indenture Act in a timely manner.
(m) The Trust and the Company may require each Holder of Registrable
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Trust and the Company such information regarding the Holder and the
distribution by such Holder of such Registrable Securities required by law to be
disclosed in the Shelf Registration Statement (the "Requisite Information") or
as the Trust and the Company may otherwise from time to time reasonably require
for inclusion in such Shelf Registration Statement and the Company or the Trust
may exclude from such registration statement such information as to any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
The Company shall file, within five business days of the receipt
of notice from any Holder which includes the Requisite Information with respect
to such Holder, a Prospectus supplement pursuant to Rule 424 to amend or
supplement such Shelf Registration Statement to include in the Shelf
Registration Statement the Requisite Information as to such Holder (and the
Registrable Securities held by such Holder), and the Company shall provide such
Holder within five business days of such notice with a copy of such Prospectus
as so amended or supplemented containing the Requisite Information in order to
permit such Holder to comply with the Prospectus delivery requirements of the
Securities Act in a timely manner with respect to any proposed disposition of
such Holder's Registrable Securities.
No Holder shall be entitled to use the Prospectus unless and
until such Holder shall have furnished the information required by this
Section 3(m).
(n) The Trust and the Company will each use their reasonable efforts
to cause the Preferred Securities and the Common Stock issuable upon conversion
thereof to be listed on the New York Stock Exchange on or prior to the effective
date of any Shelf Registration Statement hereunder.
(o) The Trust and the Company shall use their reasonable efforts to
take all other steps necessary to effect the registration, offering and sale of
the Registrable Securities covered by the Shelf Registration Statement
contemplated hereby pursuant to such Shelf Registration Statement.
4. REGISTRATION EXPENSES. Except as otherwise provided in Section 6
hereof, the Company shall bear all fees and expenses incurred in connection with
the performance of its obligations under Sections 2 and 3 hereof and shall bear
or reimburse the Holders for the reasonable fees and disbursements of one firm
of counsel designated by the Company and reasonably acceptable to the Initial
Purchasers on behalf of the Holders to act as counsel therefor in connection
therewith.
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<PAGE>
5. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any Shelf
Registration Statement, the Company and the Trust, jointly and severally, shall
indemnify and hold harmless the Initial Purchasers, each Holder, each
underwriter who participates in an offering of Registrable Securities, each
person, if any, who controls any of such parties within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and each of
their respective directors, officers, employees, trustees and agents, as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Shelf Registration
Statement (or any amendment thereto) covering Registrable Securities, including
all documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the written consent
of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by the Holders,
such Holder or any underwriter (except to the extent otherwise expressly
provided in Section 5(c) hereof)), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense is not
paid under subparagraph (i) or (ii) of this Section 5(a);
PROVIDED that this indemnity shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to the Trust or the Company by the
Initial Purchasers through Robertson, Stephens & Company, LLC, such Holder or
any underwriter participating in an offering of Registrable Securities in
writing expressly for use in the Shelf Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) or
(ii) contained in any preliminary prospectus if the Initial Purchasers, such
Holder or any such underwriter failed to send or deliver a copy of the
Prospectus (or any amendment or supplement thereto) to the Person
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asserting such losses, claims, damages or liabilities on or prior to the
delivery of written confirmation of any sale of securities covered thereby to
such Person in any case where such Prospectus (or any amendment or supplement
thereto) would have cured the defect giving rise to such loss, claim, damage
or liability. Any amounts advanced by the Company to an indemnified party
pursuant to this Section 5 as a result of such losses shall be returned to
the Company if it shall be finally determined by such a court in a judgment
not subject to appeal or final review that such indemnified party was not
entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Trust, the Company, the Initial Purchasers, each underwriter
who participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each officer
of the Company who signed the Shelf Registration Statement), employees, trustees
and agents and each Person, if any, who controls the Trust, the Company, the
Initial Purchasers, any such underwriter or any other selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all loss, liability, claim, damage and expense
whatsoever described in the indemnity contained in Section 5(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto); PROVIDED, HOWEVER, that no such Holder shall be liable for
any claims hereunder in excess of the amount of net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the Shelf
Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers served on such
indemnified party, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have otherwise
than under this Section 5 unless and to the extent it is not prejudiced as a
proximate result of such failure. An indemnifying party may participate at its
own expense in the defense of any such action. If an indemnifying party so
elects within a reasonable time after receipt of such notice, such indemnifying
party, jointly with any other indemnifying party, may assume the defense of such
action with counsel chosen by it (subject to the approval of the indemnified
parties defendant in such action, which approval shall not be unreasonably
withheld), unless such indemnified party reasonably determines that there may be
legal defenses available to such indemnified party which are different from or
in conflict with those available to such indemnifying party. If an indemnifying
party is not entitled to assume the defense of such action as a result of the
proviso to the preceding sentence, counsel for such indemnifying party shall be
entitled to conduct the defense of such indemnifying party and counsel for each
indemnified party or parties shall be entitled to conduct the defense of such
indemnified party or parties. If an indemnifying party assumes the defense of
an action in accordance with and as permitted by the provisions of this
paragraph, such indemnifying party shall not be liable for any
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<PAGE>
fees and expenses of counsel for the indemnified parties incurred thereafter
in connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provision agreement provided for in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Initial
Purchasers and the Holders shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company, the Initial Purchasers and the
Holders, as incurred; PROVIDED, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Company, the Initial Purchasers
and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company, on the one hand, and the Initial Purchasers and
the Holders, on the other hand, with respect to the statements or omissions
which resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Initial Purchasers
and the Holders, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by or on behalf of the
Initial Purchasers or the Holders, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Initial Purchasers and the Holders
of the Registrable Securities agree that it would not be just and equitable if
contributions pursuant to this Section 5 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the relevant equitable considerations. For purposes of this Section 5(d), each
director, officer, employee, trustee, agent and Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Initial Purchaser or Holder, and each director, officer, employee,
trustee and agent of each of the Company and the Trust, and each Person, if any,
who controls the Company or the Trust within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company or the Trust, as the case may be. No party shall be
liable for contribution with respect to any action, suit, proceeding or claim
settled without its written consent.
6. UNDERWRITTEN OFFERING.
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(a) The Holders of Registrable Securities covered by the Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an underwritten offering in accordance with the conditions set forth below.
In any such underwritten offering, the investment banker or bankers and manager
or managers that will administer such offering will be selected by, and the
underwriting arrangements with respect thereto will be approved by, the Holders
of a majority of the Registrable Securities to be included in such offering;
PROVIDED, HOWEVER, that (i) such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Company and the
Trust and (ii) subject to Section 6(d) below, neither of the Company nor the
Trust shall be obligated to arrange for more than one underwritten offering
during the Effectiveness Period. No Holder may participate in any underwritten
offering contemplated hereby unless (i) such Holder agrees to sell such Holder's
Registrable Securities in accordance with any approved underwriting
arrangements, (ii) such Holder completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements, lock-
up letters and other documents required under the terms of such approved
underwriting arrangements and (iii) at least 30% of the Registrable Securities
outstanding as of the Closing Time (giving effect to antidilution adjustments,
if applicable) are included in such underwritten offering (including for
purposes of this clause (iii) any Additional Preferred Securities actually
issued and sold under the Purchase Agreement). The Holders participating in any
underwritten offering shall be responsible for any expenses customarily borne by
selling securityholders, including underwriting discounts and commissions, fees
and expenses of counsel to the selling securityholders and transfer taxes, if
any, and shall reimburse the Trust and the Company for the fees and
disbursements of their counsel, their independent public accountants, any
printing expenses incurred in connection with such underwritten offering and any
other reasonable expenses incurred solely in connection therewith.
Notwithstanding the foregoing, upon receipt of a request from the Managing
Underwriter or a representative of Holders of a majority of the Registrable
Securities outstanding to prepare and file an amendment or supplement to the
Shelf Registration Statement and Prospectus in connection with an underwritten
offering, the Company and the Trust may delay the filing of any such amendment
or supplement for up to 90 days if the Company in good faith has a valid
business reason for such delay, which reason shall not be required to be
disclosed if such disclosure would, in the good faith judgment of the Company,
be detrimental to the Company or the Holders, absent confidentiality
arrangements reasonably satisfactory to the Company.
(b) The Trust and the Company shall enter into such customary
agreements (including underwriting agreements in customary form) which are
reasonably acceptable to the Trust and the Company, and take all other
reasonably requested actions in order to expedite or facilitate the registration
or the disposition of the Registrable Securities (subject to the last sentence
of paragraph (a) above), and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in Section 5 hereof
(or such other customary provisions and procedures acceptable to the Managing
Underwriters, if any, the Company and the Trust) with respect to all parties to
be indemnified pursuant to Section 5 hereof.
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(c) The Trust and the Company shall (i) make available for inspection
by the Holders of Registrable Securities to be registered thereunder, any
underwriter participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by such Holders
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Trust and the Company and its
subsidiaries; (ii) cause the Regular Trustees and the officers, directors and
employees of the Company to make reasonably available for inspection all other
relevant information reasonably requested by such Holders or any such
underwriter, attorney, accountant or agent in connection with any such Shelf
Registration Statement, in each case as is customary for similar due diligence
examinations; PROVIDED, HOWEVER, that any information that is designated in
writing by the Trust or the Company, in good faith, as confidential at the time
of delivery of such information shall be kept confidential by such Holders or
any such underwriter, attorney, accountant or agent, unless such disclosure is
made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality, and PROVIDED further that
the foregoing inspection and information gathering shall, to the greatest extent
possible, be coordinated on behalf of the Holders and the other parties entitled
thereto by one counsel designated by and on behalf of such Holders and other
parties reasonably acceptable to the Company and the Trust; (iii) make such
representations and warranties in the related underwriting agreement to the
Holders of Registrable Securities registered thereunder and the underwriters, if
any, in form, substance and scope as are customarily made in primary
underwritten offerings; (iv) obtain opinions of counsel to the Trust and the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters, if
any) in customary form addressed to each selling Holder and the underwriters, if
any, covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such Holders and underwriters (it being agreed that the matters to be covered by
such opinion or a written statement by such counsel delivered in connection with
such opinions shall include, without limitation, as of the date of the opinion
and as of the effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the Prospectus included therein, as then
amended or supplemented, including the documents incorporated by reference
therein, of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading); (v) obtain "comfort letters" and updates thereof from the
independent public accountants of the Company (and, if necessary, any other
independent public accountants of any subsidiary of the Company or of any
business acquired by the Company including without limitation for which
financial statements and financial data are, or are required to be, included in
the Shelf Registration Statement, addressed to each such Holder of Registrable
Securities registered thereunder and the underwriters, in customary form and
covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings; and (vi) deliver such other
customary documents and certificates as may be reasonably requested by any such
Holders and the Managing Underwriters, if any, including those to evidence
compliance with Section 3(i) and with any customary conditions contained in
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the underwriting agreement or other agreement entered into by the Trust or
the Company. The foregoing actions set forth in clauses (iii), (iv), (v) and
(vi) of this Section 3(c) shall be performed at each closing under any
underwritten offering to the extent required thereunder.
(d) Notwithstanding any other provision of this Section 6, if the
Managing Underwriters advise the Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the number of
shares included in the underwriting by each Holder shall be reduced on a pro
rata basis (based on the number of shares originally proposed to be so included
by such Holder) by such minimum number of shares as is necessary to comply with
such request. If any Holder who has requested inclusion in such underwriting as
provided above disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the Managing
Underwriters. In the event that the provisions of this Section 6(d) result in a
reduction of in excess of 33 1/3%, such underwritten offering shall not count
for purposes of the limit on the number of required underwritten offerings set
forth in Section 6(a) above.
7. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS; OTHER REGISTRATION RIGHTS. The
Company shall not enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company is not currently a
party to any agreement granting any registration rights with respect to any of
its securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto (except in each case, as have been
waived). Without limiting the generality of the foregoing, the Company shall
not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are not in
conflict or inconsistent with the provisions of this Agreement. The Company
shall not grant to any of its security holders (other than the Holders in such
capacity) the right to include any of its securities in any Shelf Registration
Statement.
(b) AMENDMENTS AND WAIVERS. The provision of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Trust and the Company have
obtained the written consent of the Initial Purchasers on behalf of the Holders
from time to time.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
1. if to a Holder, at the as it appears on the register for
the Preferred Securities, the Debentures or the Common Stock, as applicable
address of such Holder;
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2. if to the Initial Purchasers, initially at the address set
forth in the Purchase Agreement; and
3. if to the Trust or the Company, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have duly given when
received, if delivered in person or by fax; five days after mailing, if sent by
mail; or the day following transmission, if sent by overnight courier.
The Initial Purchasers, the Trust and the Company by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each of
the parties and the Holders, including, without the need for an express
assignment or any consent by the Trust or the Company thereto, subsequent
Holders of Registrable Securities. The Trust and the Company hereby agree to
extend the benefits of this Agreement to any Holder of Registrable Securities
and any such Holder may specifically enforce the provisions of this Agreement as
if an original party hereto. In the event of any Fundamental Change (as such
term is defined in the Indenture occurring prior to the end of the Effectiveness
Period, the Company shall require that the Person formed by such consolidation
or resulting from such merger or that acquires the assets or shares of the
Company, as the case may be (and its parent corporation, if appropriate), assume
the obligations under this Agreement and amend this Agreement to provide for
registration of the Preferred Securities, the Debenture and any securities of
such Persons into which the Preferred Securities of Debenture may become
convertible as a result of such transaction or transactions as appropriate to
provide for the continued benefits hereof are thereby made applicable to such
securities.
(e) COUNTERPARTS. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. This agreement shall be governed by the internal
laws of the State of New York, without regard to principles of conflicts of law.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
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impaired or affected thereby, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent
permitted by law.
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Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Trust and you.
Very truly yours,
VANSTAR FINANCING TRUST
By: /s/ JOHN J. DUNICAN, JR.
----------------------------------
Name: John J. Dunican, Jr.
Title: Regular Trustee
VANSTAR CORPORATION
By: /s/ H. CHRISTOPHER COVINGTON
----------------------------------
Name: H. Christopher Covington
Title: Senior Vice President, General
Counsel and Secretary
<PAGE>
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
ROBERTSON, STEPHENS & COMPANY LLC
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
THE ROBINSON-HUMPHREY COMPANY, INC.
On their behalf and on behalf of each of the
several Initial Purchasers named in Schedule A hereto.
By ROBERTSON, STEPHENS & COMPANY LLC
By ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By /s/ SIGNATURE ILLEGIBLE
----------------------------------
Authorized Signatory
<PAGE>
SCHEDULE A
<TABLE>
Number of Preferred
Securities to be
Initial Purchaser Purchased
- ------------------------------------------------------------ -------------------
<S> <C>
Robertson, Stephens & Company LLC........................... 1,225,000
Alex. Brown & Sons Incorporated............................. 875,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 875,000
The Robinson-Humphrey Company, Inc. ........................ 525,000
---------
Total................................................. 3,500,000
---------
---------
</TABLE>
<PAGE>
EXHIBIT 11.1
VANSTAR CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, SEPTEMBER 30,
1996 1995 1994 1993
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
HISTORICAL CALCULATION:
Weighted average number of common shares outstanding (Common
A & B)...................................................... 14,247 11,040 11,168 9,282
Common equivalent shares from stock options and warrants
using the treasury stock method............................. 360 -- 72 --
Common equivalent shares from preferred stock using the as-if
converted method (F & SP)................................... 13,169 -- 15,310 --
Common equivalent shares from stock options and warrants
related to SAB No. 83 using the treasury stock method....... 2,445 2,671 2,671 2,671
----------- ----------- ------------- -------------
Shares used in per share calculation......................... 30,221 13,711 29,221 11,953
----------- ----------- ------------- -------------
Net income (loss)............................................ $ 17,247 $ 1,268 $ 44,505 $ (4,246)
Preferred stock dividends.................................... (2,988) (3,611) (2,332) (3,941)
----------- ----------- ------------- -------------
Income (loss) applicable to common stock..................... $ 14,259 $ (2,343) $ 42,173 $ (8,187)
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
Income (loss) per share...................................... $ 0.57 $ (0.17) $ 1.52 $ (0.68)
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
PROFORMA CALCULATION:
Weighted average number of common shares outstanding......... 12,107 11,040
Common equivalent shares from stock options using the
treasury stock method....................................... 310 72
Common shares from the assumed conversion of all outstanding
preferred stock and warrants................................ 20,306 18,703
Common equivalent shares from stock options and warrants
related to SAB No. 83 using the treasury stock method....... 1,528 2,671
----------- -----------
Pro forma shares used in computing net income per share...... 34,251 32,486
----------- -----------
----------- -----------
Net income................................................... $ 17,247 $ 1,268
----------- -----------
----------- -----------
Pro forma net income per share............................... $ 0.50 $ 0.04
----------- -----------
----------- -----------
</TABLE>
<PAGE>
EXHIBIT 12.1
VANSTAR CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEVEN MONTHS FISCAL YEAR ENDED
SEPTEMBER 30, ENDED APRIL 30, THREE MONTHS
-------------------- APRIL 30, -------------------- ENDED JULY
1992 1993 1994 1995 1996 31, 1996
--------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations before provision for
income taxes........................................ $ (96,514) $ (25,492) $ (11,615) $ 2,149 $ 12,782 $ 15,496
Add:
Interest expense.................................... 21,337 23,045 12,789 32,555 35,804 6,611
Portion of rents representative of the interest
factor............................................ 4,033 5,067 2,900 4,733 4,600 1,346
--------- --------- ------------- --------- --------- -------------
Earnings.......................................... $ (71,144) $ 2,620 $ 4,074 $ 39,437 $ 53,186 $ 23,453
--------- --------- ------------- --------- --------- -------------
--------- --------- ------------- --------- --------- -------------
Fixed Charges:
Interest expense...................................... $ 21,337 $ 23,045 $ 12,789 $ 32,555 $ 35,804 $ 6,611
Portion of rents representative of the interest
factor.............................................. 4,033 5,067 2,900 4,733 4,600 1,346
--------- --------- ------------- --------- --------- -------------
Total Fixed Charges................................. $ 25,370 $ 28,112 $ 15,689 $ 37,288 $ 40,404 $ 7,957
--------- --------- ------------- --------- --------- -------------
--------- --------- ------------- --------- --------- -------------
Ratio of earnings to fixed charges...................... -- 0.09 0.26 1.06 1.32 2.95
--------- --------- ------------- --------- --------- -------------
--------- --------- ------------- --------- --------- -------------
(Deficiency)............................................ $ (96,514) $ (25,492) $ (11,615) $ 2,149 $ 12,782 $ 15,496
--------- --------- ------------- --------- --------- -------------
--------- --------- ------------- --------- --------- -------------
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF VANSTAR CORPORATION
<TABLE>
<CAPTION>
VANSTAR FOREIGN
PLACE OF DOMICILE DOMESTIC SUBSIDIARIES OWNERSHIP OWNERSHIP
- ------------------------ --------------------------------------------------------------- ------------- ---------------
<S> <C> <C> <C>
California ComputerLand International Development, Inc. 100%
Delaware ComputerPort World Trade, Inc. 100%
Texas CLand Tex, Inc. 100%
Delaware Vanstar Asia Pacific Corporation 100%
(FORMERLY C/L GOVERNMENT ACCOUNTS CORP)
Delaware VST West, Inc. 100%
Delaware VST Midwest, Inc. 100%
<CAPTION>
VANSTAR FOREIGN
PLACE OF DOMICILE FOREIGN SUBSIDIARIES OWNERSHIP OWNERSHIP
- ------------------------ --------------------------------------------------------------- ------------- ---------------
<S> <C> <C> <C>
Belgium Vanstar Belgium N.V. (1)
Chile ComputerLand de Chile, SA 100%
Hong Kong ComputerLand Corporation of America 50% 50%(2)
(China) Limited (BEING DISSOLVED)
ComputerLand Corporation of America 50% 50%(2)
(China) Asia Pacific Limited (BEING DISSOLVED)
ComputerPort World Trade Limited 100%
(BEING DISSOLVED)
Luxembourg Vanstar Europe 99.9%(3)
Mexico ComputerLand de Mexico, S.A. de C.V. 49% 51%(4)
Singapore ComputerLand Far East Pte. Limited 100%
Thailand ComputerLand Corporation (Thailand) Co., Ltd. 100%
United Kingdom Vanstar UK Limited (5)
</TABLE>
- ------------------------
(1) 99.96% owned by Vanstar Europe; .04% owned by William Y. Tauscher
(2) Fanlaw ltd., a Hong Kong company holding shares for Vanstar Corporation
(3) .1% owned by William Y. Tauscher
(4) Mexicanos de Datos, a Mexican company
(5) 100% owned by Vanstar Europe
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption Experts and to the
use of our reports dated June 10, 1996, in the Registration Statement (Form S-1)
and related Prospectus of Vanstar Corporation and Vanstar Financing Trust dated
November 18, 1996.
/s/ Ernst & Young LLP
San Jose, California
November 12, 1996
<PAGE>
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
VANSTAR CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 94-2376431
(State of incorporation) (I.R.S. employer identification no.)
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
(Address of principal executive offices) (Zip Code)
6 3/4% Convertible Subordinated Debentures
of Vanstar Corporation
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th
day of November, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------------ ------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "WILMINGTON TRUST COMPANY" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is WILMINGTON TRUST
COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and from
all fiduciaries, and from all other persons and individuals, and
from all corporations whether state, municipal, corporate or
private, and to rent boxes, safes, vaults and other receptacles
for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding places
of responsibility or trust; to become surety for any person, or
persons, for the faithful performance of any trust, office, duty,
contract or agreement, either by itself or in conjunction with
any other person, or persons, corporation, or corporations, or in
like manner become surety upon any bond, recognizance,
obligation, judgment, suit, order, or decree to be entered in any
court of record within the State of Delaware or elsewhere, or
which may now or hereafter be required by any law, judge, officer
or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons, corporations,
court, officer, or authority, in the State of Delaware or
elsewhere; and whenever this Corporation is so appointed by any
person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security
for the performance of the duties devolving upon it by such
appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of any
foreign government or country; to receive, collect, receipt for,
and dispose of interest, dividends and income upon and from any
of the bonds, mortgages, debentures, notes, shares of capital
stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as it
may think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the whole
or any part of the property held or owned by the Corporation,
and to sell and pledge such bonds, as and when the Board of
Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized
by law, to lease, purchase, hold, sell, assign, transfer,
pledge, mortgage and convey real and personal property of any
name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent
as natural persons might or could do, to purchase or otherwise
acquire, to hold, own, to mortgage, sell, convey or otherwise
dispose of, real and personal property, of every class and
description, in any State, District, Territory or Colony of the
United States, and in any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding;
and, subject to the provisions of subparagraph 1 of Paragraph (c) of
this Article FOURTH, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences
and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of the
Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or any
other class or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions on which,
Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under
such circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall have
been met and after the Corporation shall have complied with all the
requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts (fixed in accordance
with the provisions of section (b) of this Article FOURTH), and
subject further to any conditions which may be fixed in accordance
with the provisions of section (b) of this Article FOURTH, then and
not otherwise the holders of Common Stock shall be entitled to receive
such dividends as may be declared from time to time by the Board of
Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
6
<PAGE>
receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind
available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by
them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted by
the Board of Directors pursuant to section (b) of this Article
FOURTH, each holder of Common Stock shall have one vote in
respect of each share of Common Stock held on all matters voted
upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article FOURTH and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the issuance
by the Board of Directors of any other series of Preferred Stock whether
or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the
powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a majority
of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for a
term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a majority
of the directors then in office, although less than a quorum, and any
directors so chosen shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a successor
to such director to hold office until the next election of the class for
which such director shall have been chosen and until his successor shall
be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter
or Act of Incorporation or the By-Laws of the Corporation), any director
or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but
only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the election
of directors; provided, however, that if less than 21 days' notice of
the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the Corporation
not later than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of nominations
which are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General Corporation
Law", approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Stockholder), which, after
such merger or consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market value
of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or
more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or
any similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder, or any Affiliate of
any Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities
Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect
in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration
received for the issuance or transfer of securities by the
Corporation, or any Subsidiary has an aggregate fair market value
of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH
or SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation 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 Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or
at such other date, time, or place as may be designated by resolution by the
Board of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10 days before said meeting, at
his last known address, a written or printed notice fixing the time and place
of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined,
shall constitute a quorum at all meetings of stockholders for the transaction
of any business, but the holders of a small number of shares may adjourn,
from time to time, without further notice, until a quorum is secured. At
each annual or special meeting of stockholders, each stockholder shall be
entitled to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the
Company, provided, however, that this limitation shall not apply to any
person who was serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held
on the third Thursday of each month at the principal office of the Company,
or at such other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the
Board, or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President,
and shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time
or place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of
Directors, although less than a quorum, shall have the right to elect the
successor who shall hold office for the remainder of the full term of the
class of directors in which the vacancy occurred, and until such director's
successor shall have been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine
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<PAGE>
members who shall be selected by the Board of Directors from its own members
and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at least once a week in
each week the Board is not regularly scheduled to meet. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any
time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall
direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be subject to implementation
by Resolutions of the Board of Directors presently existing or hereafter
passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to
the provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall
be determined by any interim Executive Committee acting under this section
that it shall be to the advantage of the Company to resume the conduct and
management of its affairs and business under all of the other provisions of
these By-Laws.
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<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a month. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Trust Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of
the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers
and shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such
duties as may from time to time be agreed upon between himself and the
President of the Company.
Section 2. The President shall have the powers and duties pertaining
to the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him
by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 5. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of
the expenditures of the Company and shall report to the Board of Directors at
each regular meeting of the condition of the Company, and perform such other
duties as may be assigned to him from time to time by the Board of Directors
of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller
and such duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
<PAGE>
Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 9. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 10. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices,
subject to the direction of the Board of Directors, the Executive Committee,
Chairman of the Board of Directors or the President and the officer in charge
of the department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders
entitled to notice of, and to vote at, any meeting of stockholders and any
adjournment thereof, or entitled to receive payment of any dividend, or to
any allotment or rights, or to exercise any rights in respect of any change,
conversion or exchange of capital stock, or in connection with obtaining the
consent of stockholders for any purpose, which record date shall not be more
than 60 nor less than 10 days proceeding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or
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<PAGE>
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as although expressly authorized by the Board of
Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable
honoraria or fees for attending meetings of the Board of Directors as the
Board of Directors may from time to time
8
<PAGE>
determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the
Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services
as the Board of Directors may from time to time determine and shall be paid
for such special services so performed reasonable compensation as may be
determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or
may hereafter be amended, any person who was or is made or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of
payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
9
<PAGE>
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all
the members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1996 By: /s/ Emmett R. Harmon
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It
has not been approved by any state banking authorities.
Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
-------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins. . . . . . . 197,600
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,483,407
LESS: Allowance for loan and lease losses. . . . . . 48,992
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve 3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. . 127
Customers' liability to this bank on acceptances outstanding . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . 3,389,271
Noninterest-bearing . . . . . . . . 731,169
Interest-bearing. . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . 962,500
With original maturity of more than one year . . . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale securities (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and equity capital. . 5,241,268
2
<PAGE>
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
VANSTAR CORPORATION
VANSTAR FINANCING TRUST
(Exact name of obligor as specified in its charter)
Delaware 94-2376431
Delaware 51-6504920
(State of incorporation) (I.R.S. employer identification no.)
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
(Address of principal executive offices) (Zip Code)
Trust Convertible Preferred Securities
of Vanstar Financing Trust
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th
day of November, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------------- --------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "WILMINGTON TRUST COMPANY" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver
bullion and foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue
bonds and secure the same by pledges or deeds of trust or mortgages
of or upon the whole or any part of the property held or owned by
the Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its
said corporate business of investment and to the extent authorized
by law, to lease, purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any name and
nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation 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 Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or
at such other date, time, or place as may be designated by resolution by the
Board of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of
any business, but the holders of a small number of shares may adjourn, from
time to time, without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall be entitled
to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on
the third Thursday of each month at the principal office of the Company, or
at such other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the
Board, or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine
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<PAGE>
members who shall be selected by the Board of Directors from its own members
and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at least once a week in
each week the Board is not regularly scheduled to meet. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any
time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall
direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be subject to implementation
by Resolutions of the Board of Directors presently existing or hereafter
passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to
the provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall
be determined by any interim Executive Committee acting under this section
that it shall be to the advantage of the Company to resume the conduct and
management of its affairs and business under all of the other provisions of
these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a month. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Trust Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such
duties as may from time to time be agreed upon between himself and the
President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him
by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 5. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the
transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at
each regular meeting of the condition of the Company, and perform such other
duties as may be assigned to him from time to time by the Board of Directors
of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
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Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or
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conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as although expressly authorized by the Board of
Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time
8
<PAGE>
determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the
Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services
as the Board of Directors may from time to time determine and shall be paid
for such special services so performed reasonable compensation as may be
determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of
payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
9
<PAGE>
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1996 By: /s/ Emmett R. Harmon
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It
has not been approved by any state banking authorities.
Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . 197,600
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,483,407
LESS: Allowance for loan and lease losses. . . . . . 48,992
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve. 3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. . 127
Customers' liability to this bank on acceptances outstanding . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . .3,389,271
Noninterest-bearing . . . . . . . . 731,169
Interest-bearing. . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less. . . . . . . . . . . . 962,500
With original maturity of more than one year. . . . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . .
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale securities (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and equity capital. .5,241,268
2
<PAGE>
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
VANSTAR CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 94-2376431
(State of incorporation) (I.R.S. employer identification no.)
5964 West Las Positas Boulevard
Pleasanton, California 94588-9012
(Address of principal executive offices) (Zip Code)
Guarantee with respect to Trust Convertible
Preferred Securities by Vanstar Corporation
(Title of the indenture securities)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th
day of November, 1996.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By: /s/ Emmett R. Harmon
------------------------------- ---------------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate
the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and
the name of which company was changed to "WILMINGTON TRUST COMPANY" by an
amendment filed in the Office of the Secretary of State on March 18, A.D.
1903, and the Charter or Act of Incorporation of which company has been from
time to time amended and changed by merger agreements pursuant to the
corporation law for state banks and trust companies of the State of Delaware,
does hereby alter and amend its Charter or Act of Incorporation so that the
same as so altered and amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address is
Rodney Square North, in said City. In addition to such principal office,
the said corporation maintains and operates branch offices in the City of
Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville,
New Castle County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as
may be authorized from time to time by the agency or agencies of the
government of the State of Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary
for the transaction of the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation, association,
state or municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two parties,
and in like manner may act as Treasurer of any corporation or
municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit, order,
or decree to be entered in any court of record within the State of
Delaware or elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so appointed
by any person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance
of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages, debentures,
shares of capital stock, and other securities, obligations, contracts
and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony,
or possession thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights, powers and
privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the Corporation
upon such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such investments;
to issue bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held or
owned by the Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property of
any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that the
said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in any
manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount, execute
and issue promissory notes, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any foreign
country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted
by reference to or inference from the terms of any other clause of
this or any other paragraph in this charter, but that the objects,
purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million (41,000,000)
shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-
up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section (b)
of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of Common
Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in the resolution or resolutions as to
any series of Preferred Stock adopted pursuant to section (b) of this
Article FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be reduced
so as to shorten the term of any director at the time in office, and
provided further, that the number of directors constituting the whole Board
shall be twenty-four until otherwise fixed by a majority of the whole
Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting
and directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the Board of
Directors, acting by a majority of the directors then in office, although
less than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen and
until his successor shall be elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on behalf
of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such nominee
and (iii) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find necessary
or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized under
the Act entitled "An Act Providing a General Corporation Law", approved
March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be adopted only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from time
to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not
itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder or
any Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than 10%
of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the
Corporation 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 Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 21, 1991
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or
at such other date, time, or place as may be designated by resolution by the
Board of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10 days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of
any business, but the holders of a small number of shares may adjourn, from
time to time, without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall be entitled
to one vote, either in person or by proxy, for each shares of stock
registered in the stockholder's name on the books of the Company on the
record date for any such meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall be held on
the third Thursday of each month at the principal office of the Company, or
at such other place and
<PAGE>
time as may be designated by the Board of Directors, the Chairman of the
Board, or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting,
which shall be mailed not less than two days before the time of holding such
meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint
at any time such other committees and elect or appoint such other officers as
it may deem advisable. The Board of Directors may also elect at such meeting
one or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine
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members who shall be selected by the Board of Directors from its own members
and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and
in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at least once a week in
each week the Board is not regularly scheduled to meet. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any
time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as
the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws
any two available members of the Executive Committee as constituted
immediately prior to such disaster shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the provisions of Article III of these
By-Laws; and if less than three members of the Trust Committee is constituted
immediately prior to such disaster shall be available for the transaction of
its business, such Executive Committee shall also be empowered to exercise
all of the powers reserved to the Trust Committee under Article III Section 2
hereof. In the event of the unavailability, at such time, of a minimum of
two members of such Executive Committee, any three available directors shall
constitute the Executive Committee for the full conduct and management of the
affairs and business of the Company in accordance with the foregoing
provisions of this Section. This By-Law shall be subject to implementation
by Resolutions of the Board of Directors presently existing or hereafter
passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to
the provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall
be determined by any interim Executive Committee acting under this section
that it shall be to the advantage of the Company to resume the conduct and
management of its affairs and business under all of the other provisions of
these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority
of whom shall be members of the Board of Directors and who shall hold office
during the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at least once a month. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Trust Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the
Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of
examination of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such recommendations
to the Board of Directors with respect thereto or with respect to any other
matters pertaining to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such
duties as may from time to time be agreed upon between himself and the
President of the Company.
Section 2. The President shall have the powers and duties pertaining to
the office
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<PAGE>
of the President conferred or imposed upon him by statute or assigned to him
by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and
shall at all times exercise general supervision over the interest, affairs
and operations of the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and
such other powers and duties as may from time to time be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or division to
which they are assigned.
Section 5. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings
and to recording the same in the minute books of the Company. In addition to
the other notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well
in advance of the scheduled date of any other meeting. He shall have custody
of the corporate seal and shall affix the same to any documents requiring
such corporate seal and to attest the same.
Section 6. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the
transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at
each regular meeting of the condition of the Company, and perform such other
duties as may be assigned to him from time to time by the Board of Directors
of the Executive Committee.
Section 7. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including
accounting, and shall render to the Board of Directors at appropriate times a
report relating to the general condition and internal operations of the
Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 8. The officer designated by the Board of Directors to be in
charge of the
6
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Audit Division of the Company with such title as the Board of Directors shall
prescribe, shall report to and be directly responsible only to the Board of
Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom
they are assigned.
Section 10. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of
Directors and countersigned by the Secretary or Treasurer or an Assistant
Secretary, and the seal of the corporation shall be engraved thereon. Each
certificate shall recite that the stock represented thereby is transferrable
only upon the books of the Company by the holder thereof or his attorney,
upon surrender of the certificate properly endorsed. Any certificate of
stock surrendered to the Company shall be cancelled at the time of transfer,
and before a new certificate or certificates shall be issued in lieu thereof.
Duplicate certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the Executive
Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment
or rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the
date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or
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conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full
power and authority to enter into, make, sign, execute, acknowledge and/or
deliver and the Secretary or any Assistant Secretary shall have full power
and authority to attest and affix the corporate seal of the Company to any
and all deeds, conveyances, assignments, releases, contracts, agreements,
bonds, notes, mortgages and all other instruments incident to the business of
this Company or in acting as executor, administrator, guardian, trustee,
agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or
authority in the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of Directors
or the Executive Committee, and any and all such instruments shall have the
same force and validity as although expressly authorized by the Board of
Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time
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determine. Directors and associate directors who serve as members of
committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the
Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services
as the Board of Directors may from time to time determine and shall be paid
for such special services so performed reasonable compensation as may be
determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of
a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by such person.
The Corporation shall indemnify a person in connection with a proceeding
initiated by such person only if the proceeding was authorized by the Board
of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, PROVIDED,
HOWEVER, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be ultimately
determined that the Director or officer is not entitled to be indemnified
under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file
suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of
payment of expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested Directors or otherwise.
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(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1996 By: /s/ Emmett R. Harmon
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember
banks and savings banks with state publication
requirements. It has not been approved by any state
banking authorities. Refer to your appropriate state
banking authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------------------- -------------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1996.
-------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins. . . . . . . 197,600
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . . . . . . . . 495,691
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . 851,207
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Securities purchased under agreements to resell. . . . . . . . . . . . 44,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . 3,483,407
LESS: Allowance for loan and lease losses. . . . 48,992
LESS: Allocated transfer risk reserve. . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve 3,434,415
Assets held in trading accounts. . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . 80,629
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . 6,713
Investments in unconsolidated subsidiaries and associated companies. . 127
Customers' liability to this bank on acceptances outstanding . . . . . 0
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,164
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,722
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,241,268
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . 3,389,271
Noninterest-bearing . . . . . . . . 731,169
Interest-bearing. . . . . . . . . . 2,658,102
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . . . 69,265
Securities sold under agreements to repurchase . . . . . . . . . . . . 200,471
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . 74,421
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:. . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . 962,500
With original maturity of more than one year . . . . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases . . . . 0
Bank's liability on acceptances executed and outstanding . . . . . . . 0
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . . 0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 97,430
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,358
Limited-life preferred stock and related surplus . . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,115
Undivided profits and capital reserves . . . . . . . . . . . . . . . . 359,327
Net unrealized holding gains (losses) on available-for-sale securities (2,032)
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . 419,910
Total liabilities, limited-life preferred stock, and equity capital. . 5,241,268
2
