As filed with the Securities and Exchange Commission on September 4, 1998
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Praegitzer Industries, Inc.
(Exact name of registrant as specified in its charter)
Oregon
(State or other jurisdiction of incorporation)
3672
(Primary Standard Industrial Classification Code Number)
93-0790158
(I.R.S. Employer Identification Number)
Praegitzer Industries Trust I
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
6719
(Primary Standard Industrial Classification Code Number)
applied for
(I.R.S. Employer Identification Number)
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
(503) 623-1000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-------------------
Scott D. Gilbert
Vice President and Treasurer
PRAEGITZER INDUSTRIES, INC.
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
(503) 623-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies To:
Stephen E. Babson Edmund M. Kaufman
Robert J. Moorman Eric A. Webber
Stoel Rives LLP Irell & Manella LLP
900 SW Fifth Avenue, Suite 2300 333 South Hope Street, Suite 3300
Portland, Oregon 97204 Los Angeles, California 90071
(503) 224-3380 (213) 620-1555
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Approximate date of commencement of proposed
sale to the public: As soon as practicable after
this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Amount to be Proposed Maximum Offering Proposed Aggregate
to be Registered Registered Price Offering Price
Per Security (1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
% Cumulative Trust Preferred 4,600,000 (2) $10.00 $46,000,000
Securities of Praegitzer
Industries Trust I.............
- ---------------------------------------------------------------------------------------------------------------------------------
% Junior Subordinated Deferrable
Interest Debentures of
Praegitzer Industries, Inc. (3)
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Title of Each Class of Securities Amount to be Proposed Maximum Offering Proposed Aggregate
to be Registered Registered Price Offering Price
Per Security (1)
- ---------------------------------------------------------------------------------------------------------------------------------
Praegitzer Industries, Inc.
Guarantee with respect to %
Cumulative Trust Preferred
Securities (4).................
- ---------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee(5)............................................................................. $13,570
=================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
(2) Includes 600,000 additional ($6,000,000 aggregate liquidation amount of) %
Cumulative Trust Preferred Securities that the Underwriters have an option
to purchase to cover over-allotments, if any.
(3) The % Junior Subordinated Deferrable Interest Debentures will be purchased
by Praegitzer Industries Trust I with the proceeds from the sale of the %
Cumulative Trust Preferred Securities. These debentures may later be
distributed for no additional consideration to the holders of the %
Cumulative Trust Preferred Securities of Praegitzer Industries Trust I
upon its dissolution and the distribution of its assets.
(4) No separate consideration will be received for the Praegitzer Industries,
Inc. Guarantee, which will also extend to any % Cumulative Trust Preferred
Securities issued pursuant to the Underwriters' over-allotment option.
(5) This Registration Statement is deemed to cover the % Junior Subordinated
Deferrable Interest Debentures of Praegitzer Industries, Inc., the rights
of holders of % Junior Subordinated Deferrable Interest Debentures of
Praegitzer Industries, Inc. under the Indenture, the rights of holders of
the % Cumulative Trust Preferred Securities of Praegitzer Industries Trust
I under the Trust Agreement, the rights of holders of the % Cumulative
Trust Preferred Securities under the Guarantee and the Expense Agreement
entered into by Praegitzer Industries, Inc. and certain backup
undertakings as described herein, which, taken together, fully,
irrevocably and unconditionally guarantee all of the obligations of
Praegitzer Industries Trust I under the % Cumulative Trust Preferred
Securities.
</TABLE>
The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED September __ , 1998
- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall 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 such State.
- --------------------------------------------------------------------------------
4,000,000 Trust Preferred Securities
Praegitzer Industries Trust I __% Cumulative Trust Preferred Securities
(Liquidation Amount $10 Per Trust Preferred Security) Fully and Unconditionally
Guaranteed by
[PRAEGITZER LOGO]
-------------------
The __% Cumulative Trust Preferred Securities (the "Trust Preferred
Securities") offered hereby represent undivided beneficial preferred interests
in the assets of Praegitzer Industries Trust I, a statutory business trust
created under the laws of the state of Delaware (the "Trust"). Praegitzer
Industries, Inc. (the "Company"), will be the owner of all of the . . .
(continued on page 3)
-------------------
See "Risk Factors" commencing on page 15 for certain information that
should be considered by prospective purchasers of the securities offered hereby.
-------------------
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.
<TABLE>
<CAPTION>
====================================================================================================================
Underwriting
Discounts and Proceeds to The
Price to Public Commissions(1) Trust(2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Trust Preferred Security............................ $ 10.00 (2) $ 10.00
- --------------------------------------------------------------------------------------------------------------------
Total (3)............................................... $ 40,000,000 (2) $ 40,000,000
====================================================================================================================
(1) See "Underwriting" for information concerning indemnification of the
Underwriters by the Trust and the Company and other matters.
(2) Because all of the proceeds from the sale of the Trust Preferred Securities
will be used to purchase the Junior Subordinated Debentures, the Company
has agreed to pay the Underwriters as compensation for arranging the
investment therein of such proceeds, a placement fee of $0.40 per Trust
Preferred Security, or $1,600,000 in the aggregate, in addition to paying
certain other fees and expenses. See "Underwriting." The Company has also
agreed to pay the expenses of the offering estimated to be $475,000.
(3) The Trust has granted to the Underwriters a 30-day option to purchase up to
an additional $6,000,000 aggregate liquidation amount of Trust Preferred
Securities on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public and Proceeds to the Trust will each be $46,000,000 and
the total amount to be paid by the Company to the Underwriters in respect
of the placement fee will be $1,840,000. See "Underwriting."
</TABLE>
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The Trust Preferred Securities are being offered hereby by the Underwriters
named herein, subject to prior sale, when, as and if issued by the Trust and
delivered to and accepted by the Underwriters and subject to certain prior
conditions, including the right of the Underwriters to reject any order in whole
or in part. It is expected that delivery of the Trust Preferred Securities will
be made in New York, New York in book-entry form only through the facilities of
The Depository Trust Company on or about _______________, 1998.
-------------------
EVEREN Securities, Inc.
Advest, Inc.
Black & Company, Inc.
The date of this Prospectus is , 1998
<PAGE>
SCHEMATIC CAPTURE
[Illustration of an electronic schematic diagram]
CIRCUIT DESIGN
[Illustration of a computer-generated circuit design]
Schematic capture involves the input of an electronic schematic diagram
into a high-performance computer workstation that generates a list of the
electronic components and interconnects required to design a printed circuit
board. Circuit design is accomplished using specialized computer aided design
software programs.
ENTEK(R) PROCESS LINE
[Photograph of two printed circuit board production lines]
ELECTROLESS NICKEL GOLD LINE
HIGH PERFORMANCE CIRCUITS
[Photograph of two printed circuit boards]
Praegitzer Industries, Inc. has the expertise and specialized engineering
processes to manufacture high-performance circuit boards with a broad range of
materials, processes and requirements including GETEK(R) (a fiberglass material
resistant to high temperatures), laser microvias, and buried capacitance. The
Company provides a wide assortment of alternative surface finishes, including
Entek(R), an organic surface protection, and electroless nickel immersion gold.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE TRUST
PREFERRED SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN
CONNECTION WITH THE OFFERING AND MAY BID FOR AND PURCHASE TRUST PREFERRED
SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>
(Continued from Cover Page)
beneficial interests represented by common securities of the Trust (the "Trust
Common Securities" and, collectively with the Trust Preferred Securities, the
"Trust Securities"). The Trust exists for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in an equivalent amount of __%
Junior Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") to be issued by the Company. The Junior Subordinated Debentures
will mature on _______________, 2028, which date may be shortened (such date, as
it may be shortened, the "Stated Maturity") to a date not earlier than
__________, 2003. The Trust Preferred Securities will have a preference in
certain circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Trust Common Securities. See
"Description of the Trust Preferred Securities--Subordination of Trust Common
Securities of the Trust Held by the Company."
Holders of the Trust Preferred Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on January 15, April 15, July 15 and
October 15 each calendar year (subject to possible deferral as described below),
commencing January 15, 1999, at the annual rate of __% of the Liquidation Amount
(as defined herein) of $10 per Trust Preferred Security ("Distributions"). The
amount of each Distribution due with respect to the Trust Preferred Securities
will include amounts accumulated through the date the Distribution payment is
due. The Company will have the right, so long as no Debenture Event of Default
(as defined herein) has occurred and is continuing, and so long as the Company's
Consolidated Interest Coverage Ratio (as defined herein) for the combined four
fiscal quarters immediately preceding what would (but for the Extension Period)
otherwise be an Interest Payment Date shall be less than 1.50 to 1, to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each deferral period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extension Period and
the payment of all amounts then due, the Company may elect to begin a new
Extension Period subject to the requirements set forth herein. If interest
payments on the Junior Subordinated Debentures are so deferred, Distributions on
the Trust Preferred Securities will also be deferred and the Company will not be
permitted, subject to certain exceptions described herein, to declare or pay any
cash distributions with respect to the Company's capital stock or to make any
payment with respect to its debt securities that rank pari passu with or junior
to the Junior Subordinated Debentures. During an Extension Period, interest on
the Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Preferred Securities are entitled
will accumulate) at the rate of __% per annum, compounded quarterly, and holders
of the Trust Preferred Securities will be required to accrue income and will be
required to pay United States federal income tax on that income. See
"Description of Junior Subordinated Debentures--Option to Defer Interest Payment
Period" and "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
The Company has, through the Guarantee, the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement (each as defined herein), taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's obligations under the Trust
Preferred Securities. See "Relationship Among the Trust Preferred Securities,
the Junior Subordinated Debentures and the Guarantee--Full and Unconditional
Guarantee." Under the Guarantee, the Company guarantees the payment of
Distributions by the Trust and payments on liquidation of or redemption of the
Trust Preferred Securities (subordinate to the right of payment of Senior Debt
and Subordinated Debt of the Company, each as defined herein) to the extent of
funds held by the Trust. See "Description of Guarantee." If the Company does not
make required payments on the Junior Subordinated Debentures held by the Trust,
the Trust will have insufficient funds to pay Distributions on the Trust
Preferred Securities. The Guarantee does not cover payment of Distributions when
the Trust does not have sufficient funds to pay such Distributions. In such
event, a holder of the Trust Preferred Securities may institute a legal
proceeding directly against the Company pursuant to the terms of the Indenture
(as defined herein) to enforce payment of such Distributions to such holder. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Trust Preferred Securities." The obligations of the Company under the
Guarantee and the Junior Subordinated Debentures are subordinate and junior in
right of payment to all Senior Debt and Subordinated Debt of the Company. See
"Description of Junior Subordinated Debentures--Subordination."
The Trust Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Junior Subordinated Debentures at the
Stated Maturity or their earlier redemption, in each case at a redemption price
equal to the aggregate Liquidation Amount of the Trust Preferred Securities plus
any accumulated and unpaid Distributions thereon to the date
3
<PAGE>
of redemption. The Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after _______________, 2003, in
whole at any time or in part from time to time, or (ii) at any time, in whole
(but not in part), within 90 days following the occurrence of a Tax Event or an
Investment Company Event (each as defined herein), in each case at a redemption
price equal to 100% of the principal amount on the Junior Subordinated
Debentures plus the accrued and unpaid interest thereon to the date fixed for
redemption. See "Description of the Trust Preferred Securities--Redemption."
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause a Like Amount (as defined herein) of the Junior
Subordinated Debentures to be distributed to the holders of the Trust Securities
in liquidation of the Trust. See "Description of the Trust Preferred
Securities-- Liquidation Distribution Upon Dissolution."
If the Trust is dissolved, after satisfaction of liabilities to creditors
of the Trust as required by applicable law, the holders of Trust Preferred
Securities will be entitled to receive a liquidation amount of $10 per Trust
Preferred Security ("Liquidation Amount"), plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Distribution of such Like Amount of Junior Subordinated Debentures, subject to
certain exceptions. See "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution."
The Junior Subordinated Debentures and the Guarantee are unsecured and
subordinated to all Senior Debt and Subordinated Debt. The Indenture relating to
the Junior Subordinated Debentures will place certain limitations on the amount
of Indebtedness (as defined) and Disqualified Capital Stock (as defined) that
the Company and its subsidiaries can incur, based upon the Company's compliance
with certain financial ratio tests, subject to certain exceptions described
therein (including an exception for up to $65,000,000 of Indebtedness under the
Company's bank credit agreements). See "Description of Junior Subordinated
Debentures--Covenants of the Company." The terms of the Indenture and the
Guarantee place no limitation on the amount of Senior Debt and Subordinated Debt
the Company has outstanding as of the time of the offering. The Company has a
revolving credit agreement with Key Bank National Association (the "Key
Agreement"), a term loan with Finova Capital Corporation (the "Finova
Agreement") and several secured term loans with Heller Financial, Inc. (the
"Heller Agreements"). The Company will apply approximately $25.2 million of the
net proceeds of this offering to pay down the outstanding balance under the Key
Agreement, approximately $8.7 million to pay off the outstanding balance under
one of the Heller Agreements, and approximately $3.2 million to pay off the
outstanding balance under the Finova Agreement. All obligations of the Company
with respect to the securities described herein will be effectively subordinated
to all existing and future obligations of the Company and its subsidiaries. As
of June 30, 1998, on a pro forma basis after giving effect to the offering and
the application of the estimated net proceeds therefrom, the Company would have
had approximately $82.7 million of indebtedness outstanding, all of which
(except for the indebtedness relating to the Securities themselves) effectively
would have been senior to the Securities described herein. Subject to the
Indenture restrictions described above, the Company will also have an additional
$27.7 million available for borrowing under its credit agreements upon
completion of this offering. The Company may cause additional trust preferred
securities to be issued in the future by trusts similar to the Trust and,
subject to the Indenture restrictions described above and certain restrictions
in the Company's bank credit agreements, there is no limit on the amount of such
securities that may be issued. In that event, the Company's obligations under
the junior subordinated debentures to be issued to such other trusts and the
Company's guarantees of the payments by such trusts will rank pari passu with
the Company's obligations under the Junior Subordinated Debentures and the
Guarantee, respectively.
The Trust has applied for approval to list the Trust Preferred Securities
on the American Stock Exchange. To meet the listing requirements of the American
Stock Exchange, the representatives of the Underwriters have undertaken to
distribute the Trust Preferred Securities to a minimum of 400 public holders.
There is no assurance that a market will develop for the Trust Preferred
Securities. See "Risk Factors--Absence of Existing Public Market; Market Prices"
and "Underwriting."
Each of the Trust Preferred Securities and, if the Junior Subordinated
Debentures are distributed to holders of Trust Preferred Securities, the Junior
Subordinated Debentures will be represented by one or more global certificates
registered in the name of The Depository Trust Company (the "Depositary") or its
nominee. Beneficial interests in the Trust Preferred Securities and, in such
event, the Junior Subordinated Debentures will be shown on, and transfers
thereof will be effected only through, records maintained by participants in the
Depositary. The Depositary and the Paying Agent (as defined herein) will be
responsible for interest and dividend payments to holders of the Trust Preferred
Securities and the Junior Subordinated
4
<PAGE>
Debentures. Except as described herein, the Trust Preferred Securities in
certificated form will not be issued in exchange for global certificates. See
"Book-Entry Issuance."
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, as amended and supplemented from time to time, between the Company
and Wilmington Trust Company, as Trustee (the "Indenture Trustee"), under which
the Junior Subordinated Debentures will be issued, (ii) the "Trust Agreement"
means the Amended and Restated Trust Agreement relating to the Trust among the
Company, as depositor, Wilmington Trust Company, as Property Trustee (the
"Property Trustee"), Wilmington Trust Company, as Delaware Trustee (the
"Delaware Trustee"), the Administrative Trustees named therein, each of whom
will be an officer of the Company (collectively, with the Property Trustee and
Delaware Trustee, the "Issuer Trustees"), and the holders, from time to time, of
the trust securities, (iii) the "Guarantee Agreement" means the Guarantee
Agreement relating to the guarantee between the Company and Wilmington Trust
Company, as Guarantee Trustee (the "Guarantee Trustee"), and (iv) the "Expense
Agreement" means the Agreement as to Expenses and Liabilities between the
Company and the Trust.
AVAILABLE INFORMATION
The Company and the Trust have jointly filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement"), under the Securities Act of 1933 (the "Securities Act"), with
respect to the offering of the securities offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company, the
Trust and the securities offered hereby, reference is made to the Registration
Statement and the exhibits and the financial statements, notes and schedules
filed as a part thereof or incorporated by reference therein, which may be
inspected at the public reference facilities of the Commission, at the addresses
set forth below. Statements made in this Prospectus concerning the contents of
any documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such document
filed as an exhibit to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. Reports,
proxy statements and other information filed by the Company can be inspected and
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048. The Commission also
maintains a Web site (http://www.sec.gov) at which reports, proxy and
information statements and other information regarding the Company may be
accessed.
No separate financial statements of the Trust have been included herein.
The Company and the Trust do not consider that such financial statements would
be material to holders of the Trust Preferred Securities because the Trust is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures of the
Company and issuing the Trust Securities. The Company will fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the Trust
Preferred Securities. See "Prospectus Summary--The Company" and "--Praegitzer
Industries Trust I," "Description of the Trust Preferred Securities,"
"Description of Junior Subordinated Debentures" and "Description of Guarantee."
The Company will provide to the holders of the Trust Preferred Securities
annual reports containing financial statements audited by the Company's
independent auditors and such other reports as the Company determines or are
required by law. The Company will also furnish annual reports on Form 10-K and
quarterly reports on Form 10-Q (except for exhibits thereto) free of charge to
holders of the Trust Preferred Securities who so request in writing to the
Company.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its entirety. Except as
otherwise noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment options.
The Company
The Company is a leader in providing electronics original equipment
manufacturers ("OEMs") and contract manufacturers with a full range of printed
circuit board ("PCB") and interconnect solutions, including schematic capture
and design, quick-turnaround, prototyping and pre-production, and large volume
production. The Company provides its solutions to four key electronics industry
segments (with corresponding percentages of Company revenue for the fiscal year
ended June 30, 1998): (i) data and telecommunications (31%), (ii) computers and
peripherals (36%), (iii) industrial and instrumentation (25%) and (iv) business
and consumer (8%). The Company's growth has been driven by sales to industry
leaders whose products require increasing complexity and technological
advancement within the electronic interconnect industry. The Company's principal
customers include Compaq, Hewlett Packard, Intel, Dell, EMC, IEC Electronics,
SCI, Solectron, Motorola, Xylan and Xerox. The Company has obtained ISO 9002
certifications for five of its manufacturing facilities and has received awards
from a number of its customers in recognition of its superior performance in
meeting their PCB needs. In fiscal 1998 the Company served more than 650
customers worldwide.
The 1997 worldwide PCB market was estimated at $29.7 billion by the
Institute for Interconnecting Packaging Electronic Circuits ("IPC"), of which
the U.S. portion was $7.8 billion and was forecast to grow 6.5% annually through
2001. The market dynamic for electronics OEMs includes greater emphasis on
faster product time-to-market, greater PCB complexity in tight space tolerances,
and increasing pressure to shorten the design-to-manufacture cycles.
Additionally, as OEMs have increasingly focused on core competencies,
outsourcing of PCBs and electronic interconnects has grown from 66% of total OEM
requirements in 1991 to 93% in 1997.
Addressing these trends, Praegitzer in 1997 implemented its One-Stop
Shopping(TM) strategy to provide its customers with advanced technology and
integrated manufacturing capabilities for the entire cycle of PCB creation. In
the last three years, the Company acquired production facilities in Redmond,
Washington; Fremont, California; and Huntsville, Alabama, and acquired a 51%
interest in a production facility in Melaka, Malaysia. During this same period,
Praegitzer acquired or opened 12 design centers in the U.S. (11) and in Israel
(1). With its facilities and recent technological expansion, the Company
believes that it is one of the world's leading PCB design and manufacturing
companies. The Company has experienced 46.5% compound revenue growth during
fiscal years 1995 through 1998, compared with a compound revenue growth rate for
the U.S. PCB industry of 8.5%, and during this period the Company produced
increasingly complex PCBs with higher density and layer counts.
The Company's goal is to be the leading provider of electronic interconnect
one-stop design and manufacturing services, while continuing to increase its
technological and services advantages.
Praegitzer Industries Trust I
The Trust is a statutory business trust created under Delaware law pursuant
to (i) the trust agreement of the Trust among the Company, as depositor, the
Delaware Trustee and an Administrative
6
<PAGE>
Trustee and (ii) the filing of a Certificate of Trust with the Delaware
Secretary of State on August 7, 1998. Upon closing of this offering, the Trust's
business and affairs will be conducted by the Issuer Trustees. The Trust exists
for the exclusive purposes of (i) issuing and selling the Trust Securities, (ii)
using the proceeds from the sale of the Trust Preferred Securities to acquire
the Junior Subordinated Debentures issued by the Company and (iii) engaging in
only those other activities necessary, advisable or incidental thereto. The
Junior Subordinated Debentures will be the sole assets of the Trust and payments
by the Company under the Junior Subordinated Debentures and the Expense
Agreement will be the sole revenues of the Trust. All of the Trust Common
Securities will be owned by the Company. The Trust Common Securities will rank
pari passu, and payments will be made thereon pro rata, with the Trust Preferred
Securities, except that, upon the occurrence and during the continuance of an
event of default under the Trust Agreement resulting from an event of default
under the Indenture, the rights of the Company as holder of the Trust Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption or otherwise will be subordinated to the rights of the holders of the
Trust Preferred Securities. See "Description of the Trust Preferred
Securities--Subordination of Trust Common Securities of the Trust Held by the
Company." The Company will acquire Trust Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of the Trust. The Trust has
a term of 31 years but may dissolve earlier as provided in the Trust Agreement.
The Trust's and the Company's principal offices are located at 1270 SE
Monmouth Cut Off Road, Dallas, Oregon 97338 and their telephone number is (503)
623-1000.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Prospectus contains statements that are forward-looking, such as statements
relating to plans for future activities. Such forward-looking information
involves important known and unknown risks, uncertainties and other factors that
could significantly affect actual results, performance or achievements of the
Company in the future and, accordingly, such actual results, performance or
achievements may materially differ from those expressed or implied in any
forward-looking statements made by or on behalf of the Company. These risks,
uncertainties and factors include, but are not limited to, those relating to
business conditions and growth in the electronics industry and general
economies, both domestic and international, lower than expected customer orders,
competitive factors (including increased competition, new product offerings by
competitors and price pressures), the availability of third party parts and
supplies at reasonable prices, technological difficulties and resource
constraints encountered in developing new products, and outstanding
indebtedness. The words "believe," "expect," "anticipate," "intend" and "plan"
and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date the statement was made. See "Risk Factors."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective purchasers of the Trust Preferred Securities.
7
<PAGE>
SUMMARY FINANCIAL DATA AND OTHER INFORMATION
(in thousands, except growth rate, ratio and per share data)
The summary financial data set forth below with respect to the Company's
statement of income data and actual balance sheet data have been derived from
the Company's consolidated financial statements included elsewhere in this
Prospectus, which have been audited by Deloitte & Touch LLP, independent
auditors, as indicated in their report included elsewhere in this Prospectus.
This information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company, including the notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------
1996 1997 1998
----------- ------------ ----------
<S> <C> <C> <C>
Statement of Income Data:
Revenue....................................................... $ 95,101 $ 147,947 $ 182,773
Cost of goods sold............................................ 72,941 122,013 148,487
----------- ------------ ----------
Gross profit.................................................. 22,160 25,934 34,286
Selling, general and administrative expenses.................. 8,896 19,188 23,456
Impairment and in-process technology
expense................................................... -- 11,650 --
----------- ------------ ----------
Income (loss) from operations................................. 13,264 (4,904) 10,830
Interest expense.............................................. 1,799 2,295 3,757
Income (loss) from continuing operations
before income taxes....................................... 11,767 (6,631) 7,297
Provision for income taxes.................................... 4,472(1) 1,670 2,215
----------- ------------ ----------
Income (loss) from continuing operations...................... $ 7,295(1) $ (8,301) $ 5,082
=========== ============ ==========
Net income (loss)............................................. $ 6,916(1) $ (8,301) $ 5,082
=========== ============ ==========
Net income (loss) per share - basic and diluted............... $ 0.76 $ (0.68) $ 0.40
Weighted average number of shares outstanding - diluted 9,110 12,234 12,846
=========== ============ ==========
Other Data:
EBITDA (2).................................................... $ 18,175 $ 2,473 $ 19,733
Adjusted EBITDA (2)(3)........................................ 18,175 14,123 19,733
Depreciation and amortization................................. 4,911 7,377 8,903
Capital expenditures.......................................... 7,526 24,761 39,334
Net cash provided by operating activities..................... 8,943 1,719 10,353
Net cash (used in) investing activities....................... (11,905) (18,927) (54,844)
Net cash provided by financing activities..................... 2,977 17,612 45,219
Growth Rates:
Revenue....................................................... 63.7% 55.6% 23.5%
Adjusted EBITDA (2)(3)........................................ 157.7% (22.3%) 39.7%
Adjusted income from operations (3)........................... 296.3% (49.1%) 60.5%
Margins (4):
Adjusted EBITDA (2)(3)........................................ 19.1% 9.5% 10.8%
Adjusted Income (loss) from operations (3).................... 13.9% 4.6% 5.9%
Net income (loss)............................................. 7.3% (5.6)% 2.8%
Ratios:
Adjusted EBITDA to interest expense (2)(3).................... 10.1x 6.2x 5.3x
Earnings to fixed charges (5)................................. 7.4x -- 2.8x
Adjusted Earnings to fixed charges (3)(5)..................... 7.4x 2.9x 2.8x
8
<PAGE>
June 30, 1998
---------------------------
Balance Sheet Data: Actual As Adjusted (6)
------------ ------------
<S> <C> <C>
Working capital............................................... $ 19,296 $ 20,189
Inventories................................................... 16,491 16,491
Total assets.................................................. 151,494 153,334
Short-term debt............................................... 6,394 4,169
Long-term debt................................................ 73,413 38,544
Company obligated mandatorily redeemable preferred
securities of a subsidiary trust holding solely junior
subordinated debentures................................... -- 40,000
Shareholders' equity.......................................... 43,980 43,774
(1) The Company was an S corporation prior to April 1996 and accordingly was
not subject to federal and state income taxes prior to April 1996. For this
portion of 1996 income tax expense, net income and net income per share are
shown pro forma. Pro forma amounts reflect federal and state income taxes
as if the Company had been a C corporation based on the effective tax rates
that would have been in effect during these periods. See Note 11 to the
Company's Financial Statements.
(2) EBITDA represents income from operations before depreciation and
amortization. EBITDA is not a measurement determined under generally
accepted accounting principles ("GAAP") and does not represent cash
generated from operating activities in accordance with GAAP. EBITDA should
not be considered by the reader as an alternative to net income as an
indicator of financial performance or as an alternative to cash flows as a
measure of liquidity. In addition, the Company's definition of EBITDA may
not be identical to similarly entitled measures used by other companies.
The derivation of EBITDA and EBITDA, as adjusted, is set forth in the
following table.
1996 1997 1998
----------- ------------ ----------
<S> <C> <C> <C>
Income (loss) from operations................................. $ 13,264 $ (4,904) $ 10,830
Depreciation and amortization................................. 4,911 7,377 8,903
----------- ------------ ----------
EBITDA........................................................ 18,175 2,473 19,733
Impairment and in-process technology expense.................. -- 11,650 --
----------- ------------ ----------
EBITDA, as adjusted........................................... $ 18,175 $ 14,123 $ 19,733
=========== ============ ==========
(3) Adjusted earnings, adjusted EBITDA and adjusted income from operations
reflect the Company's earnings, EBITDA and income from operations,
respectively, adjusted to exclude a non-cash charge of $11.65 million in
fiscal 1997. Adjusted earnings, adjusted EBITDA and adjusted income from
operations are not measurements determined under GAAP. Adjusted earnings,
adjusted EBITDA and adjusted income from operations should not be
considered by the reader as alternatives to net income, EBITDA and income
from operations as an indicator of financial performance. In addition, the
Company's definitions of adjusted earnings, adjusted EBITDA and adjusted
income from operations may not be identical to similarly entitled measures
used by other companies.
(4) Margins represent the indicated items expressed as a percentage of revenue.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before income taxes, plus fixed charges. "Fixed
charges" consist of interest on all indebtedness, amortization of deferred
debt financing costs and one-third of rental expense (the portion deemed
representative of the interest factor). Earnings were insufficient to cover
fixed charges for the year ended June 30, 1997 by $4.9 million. For each
period presented, the ratio of earnings to fixed charges plus preferred
dividends is identical to the corresponding ratio of earnings to fixed
charges.
(6) As adjusted to give effect to the issuance by the Trust of the 4,000,000
Trust Preferred Securities offered hereby and the receipt by the Company of
the proceeds, net of estimated underwriting compensation and other
estimated offering expenses, from the corresponding sale of the Junior
Subordinated Debentures to the Trust, and the application of the net
proceeds therefrom as described under "Use of Proceeds." Estimated
underwriting compensation and other estimated offering expenses have been
reflected as a deferred financing cost to be amortized over the life of the
Junior Subordinated Debentures.
</TABLE>
9
<PAGE>
THE OFFERING
Trust Preferred
Securities issuer.............. Praegitzer Industries Trust I ("the Trust")
Securities offered................ 4,000,000 Trust Preferred Securities having
a Liquidation Amount of $10 per Trust
Preferred Security. The Trust Preferred
Securities represent preferred undivided
beneficial interests in the Trust's assets,
which will consist solely of the Junior
Subordinated Debentures and payments
thereunder.
Distributions..................... The Distributions payable on each Trust
Preferred Security will be fixed at a rate
per annum of __% of the Liquidation Amount
of $10 per Trust Preferred Security, will
be cumulative, will accrue from the date of
issuance of the Trust Preferred Securities,
and will be payable quarterly in arrears on
January 15, April 15, July 15 and October
15 each calendar year, commencing on
January 15, 1999 (subject to possible
deferral as described below). The amount of
each Distribution due with respect to the
Trust Preferred Securities will include
amounts accumulated through the date the
Distribution payment is due. See
"Description of the Trust Preferred
Securities."
Extension periods................. So long as no Debenture Event of Default
(as defined herein) has occurred and is
continuing, and so long as the Company's
Consolidated Interest Coverage Ratio (as
defined herein) for the combined four
fiscal quarters immediately preceding what
would (but for the Extension Period)
otherwise be an Interest Payment Date is
less than 1.50 to 1, the Company will have
the right, at any time, to defer payments
of interest on the Junior Subordinated
Debentures by extending the interest
payment period thereon for a period not
exceeding 20 consecutive quarterly periods
with respect to each deferral period (each
an "Extension Period"), provided that no
Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated
Debentures and, provided further, that any
such Extension Period may continue only so
long as (x) no Debenture Event of Default
has occurred and is continuing, and (y) the
Consolidated Interest Coverage Ratio of the
Company for the combined four fiscal
quarters immediately preceding what would
(but for such Extension Period) otherwise
be an Interest Payment Date is less than
1.50 to 1. If interest payments are so
deferred, Distributions on the Trust
Preferred Securities will also be deferred
and the Company will not be permitted,
subject to certain exceptions described
herein, to declare or pay any cash
distributions with respect to the Company's
capital stock or debt securities that rank
pari passu with or junior to the Junior
Subordinated Debentures. During an
Extension Period, Distributions will
continue to accumulate at the rate of __%
compounded quarterly. Because interest will
continue to accrue and compound on the
Junior Subordinated Debentures to the
extent permitted by applicable law, holders
of the
10
<PAGE>
Extension periods (cont.)......... Trust Preferred Securities, regardless of
their method of accounting, will be
required to accrue income for United States
federal income tax purposes. See
"Description of Junior Subordinated
Debentures--Option to Defer Interest
Payment Period" and "Certain Federal Income
Tax Consequences--Interest Income and
Original Issue Discount."
Maturity.......................... The Junior Subordinated Debentures will
mature on __________, 2028 which date may
be shortened (such date, as it may be
shortened, the "Stated Maturity") to a date
not earlier than _______________, 2003. The
Company might exercise its right to shorten
the maturity of the Junior Subordinated
Debentures in the circumstances where a Tax
Event, Investment Company Event or other
undesirable event could be avoided by
shortening the maturity of the Junior
Subordinated Debentures. See "Description
of Junior Subordinated Debentures--
General."
Redemption........................ The Trust Securities are subject to
mandatory redemption upon repayment of the
Junior Subordinated Debentures at their
Stated Maturity or their earlier redemption
at a redemption price equal to the
aggregate Liquidation Amount of the Trust
Securities plus accumulated and unpaid
Distributions thereon to the date of
redemption. The Junior Subordinated
Debentures are redeemable prior to maturity
at the option of the Company (i) on or
after September ___, 2003 in whole at any
time or in part from time to time or (ii)
at any time, in whole (but not in part),
within 90 days following the occurrence of
a Tax Event or an Investment Company Event,
in each case at a redemption price equal to
100% of the principal amount of the Junior
Subordinated Debentures so redeemed,
together with any accrued but unpaid
interest thereon to the date fixed for
redemption. See "Description of the Trust
Preferred Securities--Redemption" and
"Description of Junior Subordinated
Debentures--Redemption." Distribution of
Junior Subordinated
Debentures........................ The Company has the right at any time to
dissolve the Trust and, after satisfaction
of creditors of the Trust as required by
applicable law, to cause the Junior
Subordinated Debentures to be distributed
to holders of Trust Preferred Securities in
liquidation of the Trust. See "Description
of the Trust Preferred
Securities--Distribution of Junior
Subordinated Debentures."
11
<PAGE>
Certain Junior Subordinated
Debenture Covenants........... The Indenture relating to the Junior
Subordinated Debentures will contain
certain limited covenants by the Company,
including a covenant that, subject to
certain exceptions described herein, the
Company shall not, and shall not permit any
Subsidiary to, directly or indirectly,
incur any Indebtedness (as defined,
including certain obligations in connection
with Capitalized Lease Obligations or
operating leases) or any Disqualified
Capital Stock (as defined), unless: (1) no
Debenture Event of Default shall have
occurred and be continuing at the time of,
or would occur after giving effect, on a
pro forma basis, to, such incurrence; and
(2) on the date of the incurrence, on a pro
forma basis giving effect to such
incurrence (A) the Consolidated Interest
Coverage Ratio (as defined) of the Company
for the combined four fiscal quarters
immediately preceding the incurrence date
shall be greater than 2.15 to 1, and (B)
the Consolidated Leverage Ratio (as
defined) of the Company as of the
incurrence date shall be less than 3.25 to
1. The foregoing debt incurrence covenant
will, however, terminate in certain
circumstances if the Company has met the
foregoing Consolidated Interest Coverage
and Consolidated Leverage Ratios at the end
of each quarter in a 12 consecutive fiscal
quarter period. See "Description of Junior
Subordinated Debentures--Covenants of the
Company."
Guarantee......................... Taken together, the Company's obligations
under the various documents described
herein, including the Guarantee Agreement,
provide a full and unconditional guarantee
(the "Guarantee") of payments by the Trust
of Distributions and other amounts due on
the Trust Preferred Securities. Under the
Guarantee Agreement, the Company guarantees
the payment of Distributions by the Trust
and payments on liquidation or redemption
of the Trust Preferred Securities
(subordinate to the right to payment of
Senior Debt and Subordinated Debt of the
Company) to the extent of funds held by the
Trust. If the Trust has insufficient funds
to pay Distributions on the Trust Preferred
Securities (including as the result of the
failure of the Company to make required
payments under the Junior Subordinated
Debentures), a holder of the Trust
Preferred Securities would have the right
to institute a legal proceeding directly
against the Company to enforce payment of
such Distributions to such holder. See
"Description of Junior Subordinated
Debentures-- Enforcement of Certain Rights
by Holders of Trust Preferred Securities,"
and "--Debenture Events of Default" and
"Description of Guarantee."
12
<PAGE>
Ranking........................... The Trust Preferred Securities will rank
pari passu, and payments thereon will be
made pro rata, with the Trust Common
Securities of the Trust held by the
Company, except as described under
"Description of the Trust Preferred
Securities--Subordination of Trust Common
Securities of the Trust Held by the
Company." The obligations of the Company
under the Guarantee, the Junior
Subordinated Debentures and other documents
described herein are unsecured and rank
subordinate and junior in right of payment
to all current and future Senior Debt and
Subordinated Debt of the Company, the
amount of which is limited only by certain
covenants in the Indenture (described
above) and certain restrictions in the
Company's bank credit agreements. The
Company may cause additional trust
preferred securities to be issued in the
future by trusts similar to the Trust and,
subject to the Indenture restrictions and
certain restrictions in the Company's bank
credit agreements, there is no limit on the
amount of such securities that may be
issued. In that event, the Company's
obligations under the junior subordinated
debentures to be issued to such other
trusts and the Company's guarantees of the
payments by such trusts will rank pari
passu with the Company's obligations under
the Junior Subordinated Debentures and the
Guarantee, respectively.
Voting rights..................... The holders of the Trust Preferred
Securities will have no voting rights
except in limited circumstances. Except as
provided below, the affirmative consent of
the holders of at least a majority of the
outstanding Trust Preferred Securities will
be required by the Trust for amendments to
the Trust Agreement that would affect
adversely the rights or privileges of the
holders of the Trust Preferred Securities.
The Property Trustee, the Administrative
Trustees and the Company may amend the
Trust Agreement without the consent of
holders of the Trust Preferred Securities
to ensure that the Trust will be classified
for United States federal income tax
purposes as a grantor trust or to ensure
that the Trust will not be required to
register as an "investment company" under
the Investment Company Act, even if such
action adversely affects the interests of
such holders. See "Description of the Trust
Preferred Securities--Voting Rights;
Amendment of the Trust Agreement."
ERISA considerations.............. Prospective purchasers should carefully
consider the information set forth under
the caption "ERISA Considerations."
Proposed American Stock
Exchange Symbol............... PGZ.Pr.A
13
<PAGE>
Use of proceeds................... The proceeds to the Trust from the sale of
the Trust Preferred Securities offered
hereby will be used by the Trust to
purchase the Junior Subordinated Debentures
of the Company. The Company will apply
approximately $25.2 million of the net
proceeds of this offering to pay down the
outstanding balance under the Key
Agreement, approximately $8.7 million to
pay off the entire balance of one of the
Heller Agreements and approximately $3.2
million to pay off the entire balance under
the Finova Agreement. All obligations of
the securities described herein will be
effectively subordinated to all outstanding
existing and future obligations of the
Company and its subsidiaries. As of June
30, 1998, on a pro forma basis after giving
effect to the offering and the application
of the estimated net proceeds therefrom,
the Company would have had approximately
$82.7 million of indebtedness outstanding,
all of which (except for the indebtedness
relating to the Securities themselves)
effectively would have been senior to the
Securities described herein. The Company
will also have an additional $27.7 million
available for borrowing under its credit
agreement upon completion of this offering,
subject to certain restrictions in the
Company's bank credit agreements and in the
Indenture (see earlier). The balance of the
proceeds will be used for working capital
and other general corporate purposes. See
"Use of Proceeds."
14
<PAGE>
RISK FACTORS
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information before
purchasing the Trust Preferred Securities offered hereby.
Risk Factors Related to the Offering
Subordination of Junior Subordinated Debentures and the Guarantee
All obligations of the Company under the Guarantee, the Junior Subordinated
Debentures and other documents described herein are unsecured and rank
subordinate and junior in right of payment to all current and future Senior Debt
and Subordinated Debt of the Company, the amount of which is unlimited.
The Company will use approximately $25.2 million of the proceeds from this
offering to pay down the outstanding balance under the Key Agreement,
approximately $8.7 million to pay off the entire balance under one of the Heller
Agreements and approximately $3.2 million and to pay off the entire balance
under the Finova Agreement. All obligations of the securities described herein
will be effectively subordinated to all outstanding existing and future
obligations of the Company and its subsidiaries. As of June 30, 1998, on a pro
forma basis after giving effect to the offering and the application of the
estimated net proceeds therefrom, the Company would have had approximately $82.7
million of indebtedness outstanding, all of which (except for the indebtedness
relating to the securities themselves) effectively would have been senior to the
securities described herein. Subject to the restrictions under the Indenture,
the Company will also have an additional $27.7 million available for borrowing
under its credit agreements upon completion of this offering, subject to certain
restrictions contained in the credit agreements. All of the Company's existing
credit agreements provide for the acceleration of outstanding amounts under any
such agreement in the event of default. Such an acceleration might cause the
Company to exercise its right under the Junior Subordinated Debentures to defer
the payment of interest on the Junior Subordinated Debentures or otherwise
restrict the ability of the Company to pay interest on the Junior Subordinated
Debentures and, consequently, the Trust's ability to pay Distributions on the
Trust Preferred Securities.
The Indenture relating to the Junior Subordinated Debentures will place
certain limitations on the amount of Indebtedness (as defined) and Disqualified
Capital Stock (as defined) that the Company and its subsidiaries can incur,
based upon the Company's compliance with certain financial ratio tests, subject
to certain exceptions described therein (including an exception for up to
$65,000,000 of Indebtedness under the Company's bank credit agreements). See
"Description of Junior Subordinated Debentures--Covenants of the Company." The
terms of the Indenture and the Guarantee place no limitation on the amount of
Senior Debt and Subordinated Debt of the Company has outstanding and issued as
of the time of the offering. The Company may cause additional trust preferred
securities to be
15
<PAGE>
issued in the future by trusts similar to the Trust and, subject to the
Indenture restrictions described above and certain restrictions in the Company's
bank credit agreements, there is no limit on the amount of such securities that
may be issued. In that event, the Company's obligations under the junior
subordinated debentures to be issued to such other trusts and the Company's
guarantees of the payments by such trusts will rank pari passu with the
Company's obligations under the Junior Subordinated Debentures and the
Guarantee, respectively. See "Description of Junior Subordinated
Debentures--Subordination" and "Description of Guarantee--Status of the
Guarantee."
Option to Defer Interest Payment Period
So long as no Debenture Event of Default has occurred and is continuing,
and so long as the Company's Consolidated Interest Coverage Ratio for the
combined four fiscal quarters immediately preceding what would (but for the
Extension Period) otherwise be an Interest Payment Date is less than 1.50 to 1,
the Company has the right under the Indenture to defer payment of interest on
the Junior Subordinated Debentures at any time or from time to time for a period
not exceeding 20 consecutive quarterly periods with respect to each Extension
Period. As a consequence of any such deferral, quarterly Distributions on the
Trust Preferred Securities by the Trust will be deferred (and the amount of
Distributions to which holders of the Trust Preferred Securities are entitled
will accumulate additional amounts thereon at the rate of __ % per annum,
compounded quarterly, from the relevant payment date for such Distributions)
during any such Extension Period. During any such Extension Period, the Company
will be prohibited from making certain payments or distributions with respect to
the Company's capital stock (including dividends on or redemptions of common or
preferred stock) and from making certain payments with respect to any debt
securities of the Company that rank pari passu with or junior in interest to the
Junior Subordinated Debentures; however, the Company will not be restricted from
(a) paying dividends or distributions in capital stock of the Company, (b)
redeeming rights or taking certain other actions under a shareholders rights
plan, (c) making payments under the Guarantee or (d) making purchases of common
stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers, employees or consultants.
Further, during an Extension Period, the Company would have the ability to
continue to make payments on its Senior Debt and Subordinated Debt, if any.
Prior to the termination of any Extension Period, the Company may further extend
such Extension Period, subject to certain exceptions. Upon the termination of
any Extension Period and the payment of all interest then accrued and unpaid,
the Company may elect to begin a new Extension Period subject to the above
requirements. There is no limitation on the number of times that the Company may
elect to begin an Extension Period. As a consequence of the Company's deferral
of interest payments, holders of the Trust Preferred Securities will not receive
cash distributions during such deferral periods, and the market price of the
Trust Preferred Securities is likely to be adversely affected by such deferral.
A holder that disposes of such Trust Preferred Securities during an Extension
Period, therefore, might not receive the same return on such holder's investment
as a holder that disposes of Trust Preferred Securities during any other period.
In addition, the Trust Preferred Securities may
16
<PAGE>
trade at prices that do not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. A holder
that uses the accrual method of accounting for tax purposes (and a cash method
holder if the Junior Subordinated Debentures are deemed to have been issued with
original issue discount ("OID")) and that disposes of its Trust Preferred
Securities between record dates for payments of Distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to its adjusted tax basis in
the pro rata share of the underlying Junior Subordinated Debentures deemed
disposed of. To the extent that the selling price is less than the holder's
adjusted tax basis (as so determined), 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
"Description of the Trust Preferred Securities--Distributions," "Description of
Junior Subordinated Debentures--Option to Defer Interest Payment Period" and
"Description of Junior Subordinated Debentures-- Debenture Events of Default."
Tax Consequences of Option to Defer Interest Payment Period and of a Deferral of
Interest Payment
Because the Company has no plan to exercise its option to defer payments of
interest and because the Company may only exercise such option if the Company's
Consolidated Interest Coverage Ratio for the combined four fiscal quarters
immediately preceding what would (but for such Extension Period) otherwise be an
Interest Payment Date is less than 1.50 to 1, the Company considers the
likelihood of exercising the option to be a remote contingency as of the issue
date of the Junior Subordinated Debentures. Accordingly, the Company believes
the Junior Subordinated Debentures will be treated as issued without OID for
United States federal income tax purposes. As a result, holders of Trust
Preferred Securities will include interest in taxable income in accordance with
their own methods of accounting (i.e., cash or accrual). If the Internal Revenue
Service successfully challenges the Company's position, or if the Company
exercises its right to defer payments of interest, the holders of Trust
Preferred Securities will be required to include their pro rata share of OID in
gross income as it accrues for United States federal income tax purposes in
advance of the receipt of cash. If the tax authorities successfully asserted
that, as of the issue date of the Junior Subordinated Debentures, exercise of
the deferment option is not a remote or incidental contingency, interest would
be reportable under the OID rules as of the issue date. See "Certain Federal
Income Tax Consequences--Interest Income and Original Issue Discount."
Possible Changes to United States Tax Laws; Possible Tax Event
In a budget proposal released on February 6, 1997, the Clinton
Administration proposed tax law changes that, if enacted, would have treated a
corporate issuer that filed annual financial statements with the SEC as having
characterized an instrument such as the Junior Subordinated Debentures as equity
for purposes of Section 385(c) of the Internal
17
<PAGE>
Revenue Code of 1986, as amended (the "Code"), if the instrument had a maximum
term exceeding 15 years and was not shown as indebtedness on the issuer's
balance sheet or, in the case of indebtedness issued to a related party that
issued a related instrument, the related instrument was not reflected as
indebtedness on the applicable consolidated balance sheet. Under Section 385(c)
of the Code, the characterization by the issuer of an instrument as equity is
binding on the issuer and all holders of the instrument unless a holder
discloses on its tax return that it is treating the instrument in a manner
inconsistent with the issuer's characterization. Accordingly, the proposals
would have not permitted the Company to deduct interest paid on the Junior
Subordinate Debentures for United States federal income tax purposes. These
proposals were not enacted into law, and the Administration has not made any
such proposals in its budget proposal for fiscal year 1999 released on February
2, 1998. See "--Redemption Prior to Stated Maturity," "--Possible Distribution
of Junior Subordinated Debentures to Holders of Trust Preferred Securities; Risk
of Taxation Upon a Distribution," "Description of the Trust Preferred
Securities--Redemption," "--Liquidation Distribution Upon Dissolution,"
"Description of the Junior Subordinated Debentures-- Redemption," and "Certain
Federal Income Tax Consequences--Possible Tax Legislation."
There is no assurance that legislation affecting the Company's ability to
deduct interest paid on the Junior Subordinated Debentures or characterization
of the Junior Subordinated Debentures for United States federal income tax
purposes, including legislation similar to the proposal described above, will
not be enacted in the future or that any such legislation would not be effective
retroactively. If tax law changes are enacted and apply retroactively to the
Junior Subordinated Debentures, those changes could give rise to a Tax Event,
which could, in certain circumstances, require dissolution of the Trust or
permit the Company to redeem the Junior Subordinated Debentures.
Possible Redemption Prior to Stated Maturity
The Company may, at its option, on or after _______________, 2003, redeem
the Junior Subordinated Debentures in whole at any time or in part from time to
time at 100% of the principal amount together with accrued but unpaid interest
to the date fixed for redemption and therefore cause a mandatory redemption of
the Trust Securities.
In addition, upon the occurrence and during the continuation of a Tax Event
or an Investment Company Event (whether occurring before or after
_______________, 2003), the Company has the right, if certain conditions are
met, to redeem the Junior Subordinated Debentures in whole (but not in part) at
100% of the principal amount together with accrued but unpaid interest to the
date fixed for redemption within 90 days following the occurrence of such Tax
Event or Investment Company Event and therefore cause a mandatory redemption of
Trust Securities. See "Description of the Trust Preferred Securities--
Redemption."
A "Tax Event" means the receipt by the Company and the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of any
amendment to, or
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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, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such prospective
change, pronouncement or decision is announced on or after the original issuance
of the Trust Preferred Securities, there is more than an insubstantial risk (i)
the Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by the Company on the
Junior Subordinated Debentures is not, or within 90 days of such opinion, will
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes or (iii) the Trust is, or will be within 90 days of
the date of the opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
An "Investment Company Event" means the receipt by the Company and the
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any 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, the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
becomes effective on or after the original issuance of the Trust Preferred
Securities.
If less than all of the Trust Securities issued by the Trust are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata to the Trust
Preferred Securities and the Trust Common Securities based upon the relative
Liquidation Amounts of such classes. The particular Trust Preferred Securities
to be redeemed shall be selected by the Property Trustee from the outstanding
Trust Preferred Securities not previously called for redemption, by such method
as the Property Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of portions (equal to $10 or an integral
multiple thereof) of the Liquidation Amount of Trust Preferred Securities.
Possible Distribution of Junior Subordinated Debentures to Holders of Trust
Preferred Securities; Risk of Taxation Upon a Distribution
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Preferred Securities in liquidation of the Trust.
Because holders of the Trust Preferred Securities may receive Junior
Subordinated Debentures in liquidation of the Trust and because Distributions
are otherwise limited to payments on the Junior Subordinated Debentures,
prospective purchasers of the Trust Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of the
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Trust Preferred Securities--Liquidation Distribution Upon Dissolution" and
"Description of Junior Subordinated Debentures." If a Tax Event were to occur
which would cause the Trust to be subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, a distribution of the Junior Subordinated Debentures by the Trust
could be a taxable event to the Trust and the holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences--Distribution of Junior
Subordinated Debentures to Holders of Trust Preferred Securities."
Right to Shorten Stated Maturity of Junior Subordinated Debentures
The Company will have the right at any time to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than five years from the
date of issuance and thereby cause the Trust Preferred Securities to be redeemed
on such earlier date. See "Description of Junior Subordinated
Debentures--Redemption."
Limitations on Direct Actions Against the Company and on Rights Under the
Guarantee
The Guarantee guarantees to the holders of the Trust Preferred Securities
the following payments, to the extent not paid by the Trust: (i) any accumulated
and unpaid Distributions required to be paid on the Trust Preferred Securities,
to the extent that the Trust has funds on hand available therefor at such time,
(ii) the redemption price with respect to any Trust Preferred Securities called
for redemption, to the extent that the Trust has funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary dissolution,
winding-up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Trust Preferred Securities), the
lesser of (a) the aggregate of the Liquidation Amount and all accumulated and
unpaid Distributions to the date of payment to the extent that the Trust has
funds on hand available therefor at such time (the "Liquidation Distribution")
and (b) the amount of assets of the Trust remaining available for distribution
to holders of the Trust Preferred Securities after satisfaction of liabilities
to creditors of the Trust as required by applicable law. The holders of not less
than a majority in aggregate liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust power conferred upon the
Guarantee Trustee under the Guarantee Agreement. Any holder of the Trust
Preferred Securities may, pursuant to the terms of the Indenture, institute a
legal proceeding directly against the Company to enforce its rights 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 under the Junior Subordinated
Debentures, the Trust would lack funds for the payment of Distributions or
amounts payable on redemption of the Trust Preferred Securities or otherwise,
and, in such event, holders of the Trust Preferred Securities would not be able
to rely upon the Guarantee for payment of such amounts. Instead, in the event a
Debenture Event of Default shall have occurred and be continuing and such event
is attributable to the failure of the Company to pay interest on or principal of
the Junior Subordinated Debentures on the date on which such
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<PAGE>
payment is due and payable, then a holder of Trust Preferred Securities may,
pursuant to the terms of the Indenture, institute a legal proceeding directly
against the Company for enforcement of payment to such holder of the principal
of and/or interest on such Junior Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Trust Preferred
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, the Company will have a right of set-off under the Indenture to the
extent of any payment made by the Company to such holder of Trust Preferred
Securities in the Direct Action. Except as described herein, holders of Trust
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debentures or assert
directly any other rights in respect of the Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Trust Preferred Securities" and "Description of Guarantee." The Trust
Agreement provides that each holder of Trust Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee Agreement and the Indenture.
Ability to Make Payments on the Trust Preferred Securities and Junior
Subordinated Debentures
The ability of the Trust to pay amounts due on the Trust Preferred
Securities is solely dependent upon the Company making payments on the Junior
Subordinated Debentures as and when required. The Company will have significant
interest expense under the Junior Subordinated Debentures. As of June 30, 1998,
after giving effect to the offering and the application of net proceeds
therefrom, the Company would have approximately $82.7 million in outstanding
indebtedness on a consolidated basis, all of which (except for indebtedness
relating to the Securities themselves) effectively would have been senior to the
Securities described herein. The Company's ability to pay interest on the Junior
Subordinated Debentures to the Trust (and consequently, the Trust's ability to
pay distributions on the Trust Preferred Securities and the Company's ability to
pay its obligations under the Guarantee) depends primarily on the cash and
liquid investments of the Company and on the profitability, financial condition,
and capital expenditure and other cash flow requirements of the Company. In
addition, the Indenture provides only limited restrictions on the ability of the
Company or its Subsidiaries to incur additional indebtedness, including
indebtedness secured by their assets or properties, and does not prohibit the
Company or its Subsidiaries from entering into credit agreements or other
financial arrangements that restrict such Subsidiaries from making payments to
the Company. Although the Company expects that its operating cash flow will be
sufficient to cover its expenses including interest costs, there is no assurance
in this regard. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Limited Covenants; Absence of Sinking Fund
The covenants in the Indenture are limited. Although the Indenture does
require the Company to meet certain interest coverage tests to defer interest
payment on the Junior Subordinated Debentures and also requires the Company to
meet certain interest coverage
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<PAGE>
and leverage ratio tests to incur additional Indebtedness, the Company is not
otherwise required under the Indenture to meet any financial tests that measure
the Company's working capital, interest coverage or net worth in order to comply
with the terms of the Indenture. There are no covenants relating to the Company
in the Trust Agreement. As a result, neither the Indenture nor the Trust
Agreement offers substantial protection to holders of Junior Subordinated
Debentures, or Trust Preferred Securities, respectively, in the event of a
material adverse change in the Company's financial condition or results of
operations. Therefore, the provisions of these governing instruments should not
be considered a significant factor in evaluating whether the Company will be
able to comply with its obligations under the Junior Subordinated Debentures or
the Guarantee. Further, the Junior Subordinated Debentures do not have the
benefit of any sinking fund payments by the Company.
Limited Voting Rights
The holders of the Trust Preferred Securities will have no voting rights
except in limited circumstances relating only to the modification of the Trust
Preferred Securities and the exercise of the rights of the Trust as holder of
the Junior Subordinated Debentures and the Guarantee. Except as provided below,
the affirmative consent of the holders of at least a majority of the outstanding
Trust Preferred Securities will be required by the Trust for amendments to the
Trust Agreement that would affect adversely the rights or privileges of the
holders of the Trust Preferred Securities. Holders of Trust Preferred Securities
will not be entitled to vote to appoint, remove or replace the Property Trustee
or the Delaware Trustee, and such voting rights are vested exclusively in the
holder of the Trust Common Securities except upon the occurrence of certain
events described herein. In no event will the holders of the Trust Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the holder
of the Trust Common Securities. The Property Trustee, the Administrative
Trustees and the Company may amend the Trust Agreement without the consent of
holders of the Trust Preferred Securities to cure any ambiguity or make other
provisions not inconsistent with the Trust Agreement or to ensure that the Trust
will be classified for United States federal income tax purposes as a grantor
trust or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act, even if such action
adversely affects the interests of such holders. See "Description of the Trust
Preferred Securities--Voting Rights; Amendment of the Trust Agreement" and
"--Removal of Trustees."
Absence of Existing Public Market; Volatility of Market Prices
There is no existing market for the Trust Preferred Securities. The Trust
has applied for approval to list the Trust Preferred Securities on the American
Stock Exchange. There is no assurance, however, that an active and liquid
trading market for the Trust Preferred Securities will develop or that continued
quotation of the Trust Preferred Securities will be available on the American
Stock Exchange. Future trading prices of the Trust Preferred
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<PAGE>
Securities will depend on many factors including, among other things, prevailing
interest rates, the operating results and financial condition of the Company,
and the market for similar securities. As a result of the Company's rights to
defer interest payments on or shorten the Stated Maturity of the Junior
Subordinated Debentures, the market price of the Trust Preferred Securities may
be more volatile than the market prices of debt securities that are not subject
to optional deferrals or reduction in maturity. There is no assurance as to the
market prices for the Trust Preferred Securities or the Junior Subordinated
Debentures that may be distributed in exchange for the Trust Preferred
Securities if the Company exercises its right to dissolve and liquidate the
Trust. Accordingly, the Trust Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that a holder of the Trust
Preferred Securities may receive in liquidation of the Trust, may trade at a
discount from the price that the investor paid to purchase the Trust Preferred
Securities offered hereby.
Risk Factors Relating to the Company
Fluctuations in Operating Results
The Company's results of operations have fluctuated and may continue to
fluctuate from period to period, including on a quarterly basis. Variations in
design, quick-turnaround and pre-production and high volume production orders
and in the average number of layers per printed circuit board have significantly
affected both revenue and gross margins. Operating results may also be affected
by other factors, including the receipt and shipment of large orders, plant
utilization, manufacturing process yields, the timing of expenditures in
anticipation of future sales, raw material availability, the length of sales
cycles and economic conditions in the electronics industry. A significant
portion of the Company's operating expenses are fixed. Any inability to adjust
spending quickly enough to compensate for any revenue shortfall could magnify
the shortfall's adverse impact on the Company. Moreover, the Company's business
involves highly complex manufacturing processes that are subject to occasional
failure. Process failures have occurred in the past and have resulted in delays
in product shipments. There is no assurance that process failures will not occur
in the future, and the loss of revenue as the result of such failures could have
a material adverse effect on the Company. Results of operations in any period
should not be considered indicative of the results to be expected for any future
period. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Lack of Long-Term Sales Commitments
Several factors contribute to the volatility of the Company's results of
operations, including backlog and order management, product mix changes, order
cancellations and process failures. The Company's customers generally require
short delivery cycles, and a substantial portion of the Company's backlog is
typically scheduled for delivery within 60 days. The Company has no long-term
sales commitments other than a two-year contract with Intergraph Corporation
("Intergraph"). Quarterly sales and operating results therefore depend in large
part on the volume and timing of orders received during the quarter, which
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<PAGE>
are difficult to forecast. The level and timing of orders placed by the
Company's customers vary due to customer inventory management, changes in
customer manufacturing strategy, variation in demands for customer products and
other factors. In the case of orders for prototype and pre-production runs, the
Company's lead time may be reduced to as little as one day and, due to its
dependence on customer product launches and design changes, the Company's
operating results from its quick-turnaround business are subject to particular
volatility. The short lead times inherent in the Company's backlog also affect
its ability to plan production and inventory levels, which could lead to
fluctuation in operating results. In addition, a variety of conditions, both
those specific to individual customers and those generally affecting their
industry segments (such as a general downturn in the general economic conditions
in the United States and other regions of the world, including Asia), may cause
customers to cancel, reduce or delay orders that were previously made or
anticipated. Generally, customers may cancel, reduce or delay purchase orders
and commitments without penalty, except for payment for work and materials
expended through the cancellation date. Significant or numerous cancellations,
reductions or delays in orders by customers could have a material adverse effect
on the Company. See "Business-- Customers, Sales and Marketing."
Dependence on Electronics Industry
The Company's customers include OEMs and contract manufacturers of data
communications and telecommunications equipment, instrumentation and industrial
equipment, computers and peripherals, and business and consumer electronics.
These industry segments, as well as the electronics industry as a whole, are
subject to rapid technological change and product obsolescence. Because the
Company's products are highly specialized and are specified into an OEM's
product, discontinuation or modification of these products could have a material
adverse effect on the Company. The electronics industry is subject to economic
cycles and has experienced and is likely in the future to experience
recessionary periods. Pricing pressures, a general recession or any other event
leading to excess capacity or a downturn in the electronics industry likely
would result in intensified price competition, reduced gross margins and a
decrease in unit volume, which could have a material adverse effect on the
Company. See "Business--Customers, Sales and Marketing."
Technological Change
Technological change in the PCB industry is rapid and continuous. The
manufacture of complex PCBs requires increasing technological and manufacturing
expertise. To satisfy customers' needs for increasingly complex products, the
Company must continue to develop improved manufacturing processes and invest in
new facilities and systems. New technologies and equipment may be required for
the Company to remain competitive, and the acquisition and implementation of
such technologies and equipment may require significant capital investment. In
addition, the printed circuit board industry may in the future encounter
competition from new technologies, including ceramic and deposited multichip
modules, that may reduce the number of printed circuit boards required in
electronic
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<PAGE>
equipment or may render existing technology less competitive or obsolete. There
is no assurance that the Company will have adequate capital to maintain
technological adequacy, that the Company's future process development efforts
will be successful or that the emergence of new technologies, industry standards
or customer requirements will not render the Company's technology, equipment or
systems inadequate. See "Business-Manufacturing and Engineering Processes."
Uncertain Ability to Manage Growth; Risks Associated with Possible Acquisitions
The Company has recently experienced significant growth and expansion,
particularly in connection with the acquisitions of CTI, Trend, a 51% ownership
interest in Praegitzer Asia Sdn. Bhd. ("Praegitzer Asia"), the Huntsville PCB
facility of Intergraph Corporation and several design centers, which has placed,
and its expected to continue to place, significant demands on the Company's
managerial, technical, financial and other resources. The Company's growth
strategy will require increased personnel throughout the Company, expanded
customer service and support, expanded operational and financial systems and the
implementation of new control procedures. There is no assurance that the Company
will be able to attract qualified personnel, successfully manage expanded
operations or accomplish other measures necessary for its successful growth. As
the Company expands, it may from time to time experience constraints that will
adversely affect its ability to satisfy customer demands in a timely fashion.
Failure to manage growth effectively, including costs of integrating acquired
facilities, could have an adverse effect on the Company.
The Company intends to continue pursuing acquisitions. Although the Company
has no understandings, commitments or agreements with respect to any
acquisition, the Company anticipates that one or more potential acquisition
opportunities may become available in the future. Acquisitions would require
investment of operational and financial resources and could require integration
of dissimilar operations, assimilation of new employees, diversion of management
resources, increases in administrative costs and additional costs associated
with debt or equity financing. If attractive acquisition opportunities become
available, the Company intends to pursue them actively. There is no assurance
that the Company will complete any acquisition, that any future acquisition will
be successful or that a future acquisition will not materially and adversely
affect the Company. See "Use of Proceeds" and "Business--Business Strategy."
Dependence on Key Personnel
The Company's future success will depend in part on the continued service
of certain key management, engineering and other personnel, including Robert
Praegitzer and Matthew Bergeron, and the Company's ability to attract and retain
qualified managerial, engineering, technical, sales and marketing personnel.
Competition for these employees is intense. There is no assurance that the
Company can retain its existing key personnel or that it can attract and retain
sufficient numbers of qualified employees in the future. The loss of key
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<PAGE>
employees or the inability to hire or retain qualified personnel in the future
could have a material adverse effect on the Company. See "Management."
Customer Concentration
For fiscal 1998, sales to Hewlett-Packard and Victron/Xylan accounted for
approximately 8% and 6.1% of the Company's revenue, respectively, and the
Company's ten largest customers accounted for approximately 45% of the Company's
revenue. The Company expects a significant portion of its revenue will continue
to be concentrated in a small number of customers. The loss of, or significant
curtailment of purchases by, one or more of these customers could have a
material adverse effect on the Company. In addition, future consolidation in the
electronics industry could reduce the number of the Company's customers and
increase the possibility that the loss of, or significant curtailment of
purchases by, one or more of these customers could have a material adverse
effect on the Company. See "Business-Customers, Sales and Marketing."
Competition
The PCB industry is highly fragmented and characterized by intense
competition, which the Company believes will increase. The Company competes
principally in the market for complex, rigid multilayer PCBs. The Company's
competitors are primarily large domestic manufacturers, offshore manufacturers
located primarily in Asia, small or regional domestic manufacturers and captive
PCB operations of large OEMs such as IBM. The principal competitors of the
Company include Nanya, Compeq, Hadco and Viasystems. Some of the Company's
competitors are substantially larger and have substantially greater
manufacturing, financial and marketing resources than the Company. During
periods of recession in the electronics industry, increasingly price sensitive
customers may place less value on the Company's competitive strengths, such as
quick-turnaround manufacturing and responsive customer service. In addition,
OEMs with captive PCB manufacturing operations may seek open market orders to
fill excess capacity, which increases price competition. The Company may be at a
disadvantage in the lower technology segments of the PCB market when competing
with manufacturers with lower cost structures, particularly those with offshore
facilities where labor and other costs may be lower. Although capital
requirements are a significant barrier to entry for manufacturing
technologically complex PCBs, the basic interconnect technology is generally not
protected by patents or copyrights. There is no assurance that the Company will
be able to compete successfully against present or future competitors or that
competitive pressures faced by the Company will not have a material adverse
effect on the Company. See "Business--Competition."
Availability and Cost of Materials
The Company has no fixed price contracts or arrangements for some of the
raw materials and supplies it purchases. Shortages of, and price increases for,
certain raw materials used by the Company have occurred in the past and may
occur in the future. As
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the use of proprietary materials increases, the potential for shortages in
supply also increases. Future shortages or price fluctuations in raw materials
could have a material adverse effect on the Company. There is no assurance that
the Company will be successful in mitigating these risks through contracts with
its suppliers. Delays or interruptions in obtaining raw materials would have a
particularly pronounced effect on the Company's quick-turnaround business
because of the short lead times associated with that business. See "Business-
Manufacturing and Engineering Processes" and "--Materials and Supplies."
Environmental Matters
The Company uses certain materials in its manufacturing processes that are
classified as hazardous substances. Proper waste disposal and environmental
regulation are major considerations for PCB manufacturers because metals and
chemicals are used in the manufacturing process. If violations of environmental
laws occur, the Company could be liable for damages and for the costs of
remedial actions and could also be subject to revocation of permits necessary to
conduct its business. Any such revocation could require the Company to cease or
limit production at one or more of its facilities, which could have a material
adverse effect on the Company. The Company is also subject to laws relating to
the storage, use and disposal of chemicals, solid waste and hazardous materials,
as well as air quality regulations. As a generator of hazardous materials, the
Company is subject to financial exposure even if it fully complies with these
laws. Because of the nature and quantity of hazardous substances used in PCB
manufacturing, the Company could be required under environmental laws to conduct
investigation and remediation of past releases of hazardous substances.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with a violation.
See "Business--Environmental Matters."
International Operations
The Company recently acquired a 51% interest in Praegitzer Asia, a PCB
manufacturer located in Malaysia. As a result, the Company's business is subject
to the risks generally associated with doing business abroad, such as foreign
governmental regulations, foreign consumer preferences, tariffs and other trade
barriers, political unrest, disruptions or delays in shipments and changes in
economic conditions in countries in which the Company manufactures or sells its
products. For example, the recent turmoil in Asian markets may adversely affect
the Company's ability to sell products produced by Praegitzer Asia. Some of the
Company's international sales are denominated in Malaysian Ringgit.
Consequently, a decrease in the value of the Malaysian currency in relation to
the U.S. dollar would have an adverse impact on the Company's results of
operations. Moreover, the Malaysian government has recently imposed certain
currency controls relating to the Ringgit, which may adversely impact the
Company's ability to transfer funds into and out of its Malaysian subsidiary.
These factors, among others, could influence the Company's ability to sell its
products in international markets, as well as its ability to manufacture its
products or procure certain materials. If any such factors were to render the
conduct of business in Malaysia undesirable or impractical, there could be a
material adverse effect on the Company. The Company's management has limited
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<PAGE>
experience in operating foreign manufacturing facilities, and there is no
assurance that the Company will be able to operate the new facility profitably.
Intellectual Property
The Company's success depends in part on its proprietary techniques and
manufacturing expertise, particularly in the area of complex multilayer PCBs.
The Company has no patents and relies principally on trade secret protection of
its intellectual property. There is no assurance that the Company will be able
to protect its trade secrets or that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets. In addition, litigation may be
necessary to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of patent
infringement. With one exception, the Company is not aware of any pending or
threatened claims that affect any of the Company's intellectual property rights.
The exception is a claim asserted by a former iron powder supplier to the
Company, which has claimed that the Company's use of iron powder purchased from
another source in the certain copper recovery processes infringes on a patent
held by such former supplier. The Company believes that it has valid defenses to
this claim, and intends to defend the against the claim vigorously. If any other
infringement claim is asserted against the Company, the Company may seek to
obtain a license of the other party's intellectual property rights. There is no
assurance that third parties will not assert infringement claims against the
Company in the future or that, in such circumstances, a license would be
available on reasonable terms or at all. Litigation with respect to patents or
other intellectual property matters could result in substantial costs and
diversion of management and other resources and could have a material adverse
effect on the Company.
Control by Principal Shareholder
Robert L. Praegitzer, Chairman of the Board and Chief Executive Officer of
the Company, beneficially owns approximately 64.2% of the outstanding Common
Stock. As a result, he will be able to control all matters requiring approval by
the shareholders of the Company, including the election of directors and the
amendment of the Company's articles of incorporation, without the cooperation of
any other shareholder. As a shareholder, Mr. Praegitzer is not prohibited from
acting in his own interest in respect of, among other things, the voting or
disposing of his shares of Common Stock.
USE OF PROCEEDS
All of the proceeds to the Trust from the sale of the Trust Preferred
Securities offered hereby will be used by the Trust to purchase the Junior
Subordinated Debentures of the Company. The net proceeds to the Company from the
sale of the Junior Subordinated Debentures are estimated to be approximately
$37.3 million (approximately $43.0 million if the Underwriters' over-allotment
option is exercised in full) after deducting the estimated underwriting
compensation and offering expenses payable by the Company.
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The Company intends to use approximately $25.2 million of the net proceeds
to pay down the outstanding balance under the Key Agreement, approximately $8.7
million to pay off the entire balance under one of the Heller Agreements and
approximately $3.2 million to pay off the entire balance under the Finova
Agreement. Interest accrues on outstanding balances under the Key Agreement at
the bank's prime rate (8.5% per annum at July 31, 1998), under the Heller
Agreement to be paid off at LIBOR plus 2.75% (8.4% per annum at July 31, 1998)
and under the Finova Agreement at 9.9% per annum. The outstanding balance under
the Key Agreement is payable in full by March 31, 2000. The outstanding balance
under the Heller Agreement that will be paid off is payable in full by February
1, 2005. The outstanding balance under the Finova Agreement is payable in full
by September 1, 1999. From July 1, 1997 to July 31, 1998, the Company borrowed
approximately $23.5 million under the Key Agreement to finance existing
operating leases, finance the expansion of the White City facility, meet the
Company's increased working capital needs and to partially finance the
acquisition of the Huntsville facility. Any remaining proceeds will be used for
working capital and other general corporate purposes, including the possible
acquisition of businesses or products which the Company believes will enhance
its business. Although the Company actively seeks and evaluates possible
acquisition opportunities, the Company has no agreements, commitments,
understandings or arrangements with respect to any acquisition.
Proceeds not immediately required for the purposes set forth above will be
invested principally in U.S. government securities, short-term certificates of
deposit, money market funds or other investment grade interest-bearing
investments.
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 Trust Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company under the caption "Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated
Debentures," and appropriate disclosures about the Trust Preferred Securities,
the Guarantee and the Junior Subordinated Debentures will be included in the
notes to consolidated financial statements. Estimated underwriting compensation
and other estimated offering expenses will be capitalized as a deferred
financing cost and amortized over the life of the Junior Subordinated
Debentures. For financial reporting purposes, the Company will record
Distributions payable on the Trust Preferred Securities and amortization of
deferred financing costs as interest expense in the consolidated statements of
operations.
Future reports of the Company filed under the Exchange Act will include a
footnote to the financial statements to the effect that (i) the Trust is wholly
owned, (ii) the sole assets of the Trust are the Junior Subordinated Debentures
(specifying the principal amount, interest rate and maturity date of such Junior
Subordinated Debentures), and (iii) the back up
29
<PAGE>
obligations, in the aggregate, constitute a full and unconditional guarantee by
the Company of the obligations of the Trust under the Trust Preferred
Securities. The Trust will not provide separate reports under the Exchange Act.
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of June 30, 1998 and as adjusted to give effect to (i) the
issuance by the Trust of the 4,000,000 Trust Preferred Securities offered
hereby, (ii) the receipt by the Company of the net proceeds from the
corresponding sale of the Junior Subordinated Debentures to the Trust and (iii)
the application by the Company of the net proceeds therefrom as described under
"Use of Proceeds."
<TABLE>
<CAPTION>
June 30, 1998
------------------------------------------
Actual As Adjusted
------------------- ------------------
(Dollars in thousands)
<S> <C> <C>
Short-term debt........................................................ $ 6,394 $ 4,169
=================== ==================
Long-term obligations, net of current portion.......................... $ 73,413 $ 38,544
Mandatorily redeemable preferred
securities of subsidiary trust (1)................................ -- 40,000
Shareholders' equity:
Preferred stock, 500,000 shares authorized, no
shares issued and outstanding................................. -- --
Common Stock, 50,000,000 shares authorized,
12,750,214 shares issued and outstanding...................... 42,325 42,325
Retained earnings................................................. 1,655 1,449(2)
------------------- ------------------
Total shareholders' equity.................................... 43,980 43,774
------------------- ------------------
Total capitalization..................................... $ 117,393 $ 122,318
=================== ==================
- ---------------
(1) The subsidiary trust is the Trust, which will hold the Junior Subordinated
Debentures as its sole assets. The Trust Preferred Securities are issued by
the Trust. The Junior Subordinated Debentures will bear interest at the
rate of ___% per annum and will mature on ________, 2028, which date may be
shortened to a date not earlier than ___________, 2003 if certain
conditions are met. The Junior Subordinated Debentures are redeemable prior
to maturity at the option of the Company (i) on or after _______, 2003, in
whole at any time or in part from time to time, or (ii) at any time, in
whole (but not in part), within 90 days following the occurrence and
continuation of a Tax Event or an Investment Company Event. See
"Description of Junior Subordinated Debentures-- Redemption." The Company
owns all of the Trust Common Securities.
(2) Reflects payment of prepayment penalties.
</TABLE>
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
The following selected financial data at and for the years ended June 30,
1994, 1995, 1996, 1997 and 1998 with respect to the Company's statement of
income data and actual balance sheet data have been derived from the Company's
consolidated financial statements included elsewhere in this Prospectus, which
have been audited by Deloitte & Touche LLP, independent auditors, as indicated
in their report included elsewhere in this Prospectus. Such information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ---------- ----------- ------------- -----------
(in thousands, except percentages, ratios and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue........................................ $ 51,757 $ 58,096 $ 95,101 $ 147,947 $ 182,773
Cost of goods sold............................. 46,244 48,343 72,941 122,013 148,487
----------- ---------- ----------- ------------- -----------
Gross Profit................................... 5,513 9,753 22,160 25,934 34,286
Selling, general and administrative expenses... 6,082 6,406 8,896 19,188 23,456
Impairment and in-process technology
expense............................... -- -- -- 11,650 --
----------- ---------- ----------- ------------- -----------
Income (loss) from operations.................. (569) 3,347 13,264 (4,904) 10,830
Interest expense............................... 1,217 1,563 1,799 2,295 3,757
Income (loss) from continuing operations
before income taxes................... (2,139) 1,876 11,767 (6,631) 7,297
Provision (benefit) for income taxes........... (919)(1) 691(1) 4,472(1) 1,670 2,215
----------- ---------- ----------- ------------- -----------
Income (loss) from continuing operations....... (1,220)(1) 1,185(1) 7,295(1) (8,301) 5,082
Net income (loss).............................. $ (3,119)(1)$ 1,185(1)$ 6,916(1)$ (8,301) $ 5,082
=========== ========== =========== ============= ===========
Net income (loss) per share - basic
and diluted........................... $ 0.13(1)$ 0.76(1)$ (0.68) $ 0.40
========== =========== ============= ===========
Weighted average number of shares outstanding -
diluted............................... 8,824 9,110 12,234 12,846
========== =========== ============= ===========
Other Data:
EBITDA (2)..................................... $ 3,145 $ 7,052 $ 18,175 $ 2,473 $ 19,733
Adjusted EBITDA (2)............................ 3,145 7,144 18,175 14,123 19,733
Depreciation and amortization.................. 3,714 3,705 4,911 7,377 8,903
Capital Expenditures........................... 3,951 3,663 7,526 24,761 39,334
Net cash provided by operating activities...... 2,057 5,004 8,943 1,719 10,353
Net cash provided by (used in) investing
activities............................ 3,421 (3,816) (11,905) (18,927) (54,844)
Net cash provided by (used in) financing
activities............................ (5,477) (1,189) 2,977 17,612 45,219
Growth Rates:
Revenue ....................................... 2.6% 12.2% 63.7% 55.6% 23.5%
Adjusted EBITDA (2)(3)......................... (65.9)% 124.2% 157.7% (22.3)% 39.7%
Adjusted income from operations (3) ........... (111.4)% NA 296.3% (49.1)% 60.5%
31
<PAGE>
Margins (4):
Adjusted EBITDA (2)(3)......................... 6.1% 12.1% 19.1% 9.5% 10.8%
Adjusted income (loss) from operations (3)..... (1.1%) 5.8% 13.9% 4.6% 5.9%
Net income (loss).............................. (6.0%) 2.0% 7.3% (5.6)% 2.8%
Ratios:
Adjusted EBITDA to interest
expense (2)(3)(5)..................... 2.6x 4.5x 10.1x.. 6.2x 5.3x
Earnings, to fixed charges (6)................. 0.6x 2.7x 7.4x -- 2.8x
Adjusted earnings to fixed charges (3)(6)...... 0.6x 2.7x 7.4x 2.9x 2.8x
June 30,
----------------------------------------------------------------------
Balance Sheet Data: 1994 1995 1996 1997 1998
----------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Working capital................................ $ (5,999) $ (1,897) $ 10,743 $ 17,031 $ 19,297
Inventories.................................... 3,449 4,002 6,212 8,534 16,491
Total assets................................... 29,051 30,352 52,836 87,286 151,494
Short-term debt................................ 2,068 1,302 871 3,565 6,394
Long-term debt................................. 7,496 10,188 7,695 29,785 73,413
Mandatorily redeemable preferred
securities of a subsidiary trust...... -- -- -- -- --
Shareholders' equity........................... 4,118 5,699 34,641 37,641 43,980
(1) The Company was an S corporation prior to April 1996 and accordingly was
not subject to federal and state income taxes prior to April 1996. For this
portion of 1996 income tax expense, net income and net income per share are
shown pro forma. Pro forma amounts reflect federal and state income taxes
as if the Company had been a C corporation based on the effective tax rates
that would have been in effect during these periods. See Note 11 to the
Company's Financial Statements.
(2) EBITDA represents income from operations before depreciation and
amortization. EBITDA is not a measurement determined under GAAP and does
not represent cash generated from operating activities in accordance with
GAAP. EBITDA should not be considered by the reader as an alternative to
net income as an indicator of financial performance or as an alternative to
cash flows as a measure of liquidity. In addition, the Company's definition
of EBITDA may not be identical to similarly entitled measures used by other
companies. The derivation of EBITDA and EBITDA, as adjusted, is set forth
in the following table.
1994 1995 1996 1997 1998
----------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Income (loss) from operations......... $ (569) $ 3,347 $ 13,264 $ (4,904) $ 10,830
Depreciation and amortization ........ 3,714 3,705 4,911 7,377 8,903
----------- ---------- ----------- ------------- -----------
EBITDA................................ 3,145 7,052 18,175 2,473 19,733
Impairment and in-process
technology expense................. -- -- -- 11,650 --
----------- ---------- ----------- ------------- -----------
EBITDA, as adjusted................... $ 3,145 $ 7,052 $ 18,175 $ 14,123 $ 19,733
=========== ========== =========== ============= ===========
(3) Adjusted earnings, adjusted EBITDA and adjusted income from operations
reflect the Company's earnings, EBITDA and income from operations,
respectively, adjusted to exclude a non-cash charge of $11.65 million in
fiscal 1997. Adjusted earnings, adjusted EBITDA and adjusted income from
operations are not measurements determined under GAAP. Adjusted earnings,
adjusted EBITDA and adjusted income from operations should not be
considered by the reader as alternatives to net income, EBITDA and income
from operations as an indicator of financial performance. In addition, the
Company's definitions of adjusted earnings, adjusted EBITDA and adjusted
income from operations may not be identical to similarly entitled measures
used by other companies.
32
<PAGE>
(4) Margins represent the indicated items expressed as a percentage of revenue.
(5) EBITDA was insufficient to cover interest expense for the year ended June
30, 1994.
(6) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before taxes, plus fixed charges. "Fixed
charges" consist of interest on all indebtedness, amortization of deferred
debt financing costs and one-third of rental expense (the portion deemed
representative of the interest factor). Earnings were insufficient to cover
fixed charges for the years ended June 30, 1994 and June 30, 1997 by
$569,000 and $4.9 million, respectively. For each period presented, the
ratio of earnings to fixed charges plus preferred dividends is identical to
the corresponding ratio of earnings to fixed charges.
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company is a leading provider of a full range of PCB and interconnect
solutions, including schematic capture and design, quick-turnaround, prototyping
and pre-production, and large volume production to electronics OEMs and contract
manufacturers. The Company provides its solutions to four key electronics
industry segments (with corresponding percentages of Company revenue for fiscal
1998): (i) data and telecommunications (31%), (ii) computers and peripherals
(36%), (iii) industrial and instrumentation (25%) and (iv) business and consumer
(8%).
In 1997 the Company implemented its One-Stop Shopping(TM) strategy to
provide its customers with advanced technology and integrated manufacturing
capabilities for the entire cycle of PCB creation. As part of that
implementation the Company has made a number of strategic acquisitions. In
November 1995 the Company acquired Circuit Technology, Inc. ("CTI") (now its
Redmond facility) to increase its prototype production capability. In August
1996 the Company acquired Trend Circuits ("Trend") (now its Fremont facility) to
increase its quick-turnaround capability. In March 1998 the Company acquired its
Huntsville facility to increase its pre-production capability. In the last three
years, Praegitzer also acquired or opened 12 design centers in the United States
(11) and in Israel (1). The Company believes that, with its facilities and
recent technological expansion, it is one of the world's leading PCB design and
manufacturing companies.
The Company has experienced 46.5% compound revenue growth in fiscal years
1995 through 1998, compared with a U.S. PCB industry compound revenue growth
rate of 8.5% over the same period. The Company attributes this growth, in part,
to its One-Stop Shopping(TM) strategy, which is intended to provide the full
spectrum of PCB services, from initial design, schematic capture and layout to
prototype fabrication and full-volume production. By providing extensive design
services, the Company has been able to attract additional quick-turnaround and
high volume production business.
The Company derives pricing for its products and services from a series of
matrices. In volume and quick-turnaround production, bare board pricing
generally depends on order size, board complexity (e.g., density and layer
count), technology and special processes involved (e.g., microvias, buried vias
and blind vias), and required turnaround time. The design division generally
charges based on an hourly rate. The Company invoices its customers at the time
the product is shipped. Pursuant to the Company's standard payment terms,
invoices are due within 30 days after receipt. The Company typically offers a
discount of up to 1.0% on payments made within 10 days of invoicing.
34
<PAGE>
Results of Operations
The following table sets forth certain financial data for the Company
for the periods indicated as a percentage of revenue.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
1996 1997 1998
------------ ----------- -------------
<S> <C> <C> <C>
Revenue 100.0% 100.0% 100.0%
Cost of goods sold 76.7 82.5 81.2
------------ ----------- -------------
Gross profit 23.3 17.5 18.8
Selling, general and administrative expense 9.4 13.0 12.8
Impairment and in-process technology expense -- 7.9 --
------------ ----------- -------------
Income (loss) from operations 13.9 (3.3) 5.9
Interest expense 1.9 1.6 2.1
Other income 0.3 0.4 0.1
------------ ----------- -------------
Income (loss) from continuing operations 12.4 (4.5) 4.0
Provision for income taxes 4.7(1) 1.1 1.2
------------ ----------- -------------
Net income (loss) from continuing operations 7.7%(1) (5.6)% 2.8%
============ =========== =============
- ---------------
(1) Provision for income taxes and net income from continuing operations are
pro forma for the year ended June 30, 1996. The Company was an S
corporation and accordingly was not subject to federal and state income
taxes for the year ended June 30, 1996. See Note 11 to the Company's
Financial Statements.
</TABLE>
Year Ended June 30, 1998 ("fiscal 1998") Compared to Year Ended June 30, 1997
("fiscal 1997")
Revenue. Revenue in fiscal 1998 increased 23.5% to $182.8 million from
$147.9 million in fiscal 1997. The Company's three primary products and
services, (i) volume production, (ii) quick-turnaround, prototype and
pre-production, and (iii) design, accounted for 72.0%, 21.1%, and 6.9% of
revenues, respectively, in fiscal 1998 compared to 79.5%, 14.8%, and 5.7%,
respectively, in fiscal 1997. The Company's increased revenue from design
through pre-production is the result of the Company's increasing emphasis on its
One-Stop Shopping(TM) strategy.
Revenue growth in fiscal 1998 was the result of several factors, including
gains in market share due to industry consolidation, increased capacity,
improved technological capabilities and strategic advantages offered by the
Company's One-Stop Shopping(TM) strategy. The balance of the increase in revenue
was the result of several acquisitions in fiscal 1998, including the acquisition
of the Huntsville facility in March 1998, and the acquisitions of two design
centers, which added $3.2 million and $3.6 million to revenue during fiscal
1998, respectively.
35
<PAGE>
Volume production revenue increased 17.4% to $103.6 million in fiscal 1998
from $88.1 million in fiscal 1997. The increase in volume production business
can be attributed to additional capacity, new customers, increased sales to
existing customers, and new technology offerings. Significant new volume
customers in fiscal 1998 included SMTC/Dell, EMC, Celestica, RadiSys, and
Teradyne, among others. Existing customers with increased sales in 1998 included
Xerox, Motorola, SCI and PSC.
Quick-turnaround, prototype and pre-production revenue increased 26.0% to
$65.3 million in fiscal 1998 from $51.9 million in fiscal 1997. These increases
in revenue can be attributed to increased prototype production generated by the
Company's design division, the addition of the Huntsville facility and enhanced
technological capabilities.
Design revenue increased 76.3% to $13.9 million in fiscal 1998 compared to
$7.9 million in fiscal 1997. The revenue increase can be primarily attributed to
two design acquisitions that added $3.6 million of revenue in fiscal 1998. The
balance of revenue growth can be attributed to higher average bill rates, more
designers and other factors, including increased business from existing and new
customers such as Intel, NEC, Bay Networks and 3Com.
Cost of Goods Sold. Cost of goods sold includes direct labor, materials and
manufacturing overhead costs. The cost of goods sold in fiscal 1998 was $148.5
million, or 81.2% of revenue, compared to $122.0 million, or 82.5% of revenue,
in fiscal 1997. This decrease was primarily due to lower materials costs and
labor costs as a percentage of revenues, achieved through supplier price
concessions, lower scrap rates, improved yields, higher employee productivity
and improved process efficiencies.
Gross Profit. Gross profit in fiscal 1998 increased 32.2% to $34.3 million
from $25.9 million in fiscal 1997. Gross margin increased to 18.8% in fiscal
1998 compared to 17.5% in fiscal 1997. These increases were due to both
increased revenue and a decrease in the cost of goods sold as a percentage of
revenue, as discussed above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in fiscal 1998 increased $4.3 million, or 22.2%, to
$23.5 million from $19.2 million in fiscal 1997. The increase in expenses was
due to increased personnel and fixed costs associated with the expansion of the
design division and corporate sales force. As a percentage of revenue, selling,
general and administrative expenses decreased to 12.8% in fiscal 1998 from 13.0%
in fiscal 1997.
Net Income (Loss) from Operations. Operating income in fiscal 1998
increased $15.7 million to $10.8 million, or 5.9% of total revenues, compared to
an operating loss of $4.9 million in fiscal 1997. The gains in operating income
were driven by improvements in gross margin and the benefit from the elimination
of the $11.7 million nonrecurring expense related to impairment and in-process
technology in fiscal 1997. Excluding this write-off, income from operations was
$6.7 million, or 4.6% of revenue, for fiscal 1997. The increase
36
<PAGE>
in income from operations in fiscal 1998, excluding the one-time write-off from
fiscal 1997, was primarily the result of increased efficiency in the Company's
expanded manufacturing facilities.
Interest Expense. Interest expense in fiscal 1998 increased $1.5 million,
or 63.7%, to $3.8 million from $2.3 million in the prior year. The increase was
primarily the result of increased borrowings required to finance the Intergraph
acquisition and equipment purchases.
Income Taxes. Income taxes in fiscal 1998 were $2.2 million compared to an
income tax provision of $1.7 million in fiscal 1997. The effective tax rate in
fiscal 1998 was 30.4%. During fiscal 1997, the Company had a tax expense on a
pre-tax book loss primarily due to the add-backs of a goodwill and an in-process
technology write-off, neither of which were tax deductible. Federal and state
research and experimental tax credits, however, partially offset the effect of
these add-backs. Absent the add-back of the goodwill and in-process technology
write-offs, the Company's effective tax rate for fiscal 1997 would have been
29.4%.
Net Income. As a result of the factors described above, including the
write-off of $11.7 million non-recovery expenses related to impairment and
in-process technology expense, the net income in fiscal 1998 of $5.1 million
represents an increase of $13.4 million compared to the net loss of $8.3 million
in fiscal 1997.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996 ("fiscal 1996")
Revenue. Revenue in fiscal year 1997 was $147.9 million, an increase of
$52.8 million, or 55.6%, from fiscal 1996. The increase resulted primarily from
the Company's acquisitions in fiscal 1997, including the acquisition of Trend,
now the Company's Fremont division, which increased revenue by $26.8 million.
Revenue contribution from the design division increased $5.5 million for fiscal
1997, due in part to the acquisition of six strategically located design centers
in fiscal 1997, which increased revenue by $1.9 million. The increase was also
due to improved sales resulting from the efforts of the Company's expanded sales
force, as well as increased capacity in the Company's White City and Dallas,
Oregon facilities.
Cost of Goods Sold. Cost of goods sold was $122.0 million in fiscal 1997,
or 82.5% of revenue, as compared to $72.9 million in fiscal 1996, or 76.7% of
revenue. This increase was primarily due to capacity constraints in inner layer
production at the Dallas facility caused by a transition to new technologies.
The transition period, which extended into the third quarter, resulted in
increased scrap rates, decreased throughput and forced outsourcing of some
processes for the division. In addition, the Company had expansions at its
Redmond and White City facilities to increase capacity.
37
<PAGE>
Gross Profit. Gross profit in fiscal 1997 was $25.9 million, or 17.5% of
revenue, compared to $22.2 million, or 23.3% of revenue, in fiscal 1996. This
decrease was due primarily to an increase in cost of goods sold as a percentage
of revenue, as discussed above.
Selling, General and Administrative Expense. Selling, general and
administrative expense in fiscal 1997 was $19.2 million, or 13.0% of revenue,
compared to $8.9 million, or 9.3% of revenue, in fiscal 1996. The increase was
primarily a result of increased personnel and fixed costs required to support
higher levels of sales and the overall growth of the Company. The Company also
experienced higher than expected integration costs related to the acquisitions
of Trend, CTI and several design centers. In addition, goodwill amortization
increased by $1.1 million during fiscal 1997 as a result of the Trend
acquisition.
Impairment and In-Process Technology Expense. In the first quarter of
fiscal 1997, the Company took a one-time write-off of $11.7 million of certain
goodwill associated with the CTI acquisition and purchased research and
development costs related to the acquisition of Trend. This write-off is defined
as impairment and in-process technology.
Net Income (Loss) from Operations. Net loss from operations in 1997 was
$4.9 million compared to operating income of $13.3 million in fiscal 1996. The
decrease, primarily the result of a one-time write-off of goodwill and purchased
research and development costs, was adversely affected by capacity constraints
and higher scrap rates arising from transitions to new technologies, and
decreased utilization of capacity at expanded facilities. Excluding this
write-off, income from operations was $6.7 million, or 4.6% of revenue, in
fiscal 1997.
Interest Expense. Interest expense in fiscal 1997 was $2.3 million, an
increase of $496,000, or 27.6%, from fiscal 1996. The increase was the result of
increased borrowings required to finance the acquisition of Trend, increased
working capital needs and capital expenditures.
Income Taxes. Although the Company had a pre-tax book loss, the Company had
a tax expense of $1.7 million in fiscal 1997, due to the add-back of goodwill
and the write-off of in-process technology which are not tax deductible. Federal
and state research and experimental tax credits, however, partially offset the
effect of these add-backs. Absent these nonrecurring items, the Company's
effective tax rate would have been 29.4% in fiscal 1997 compared to a pro forma
effective tax rate of 36.0% in fiscal 1996.
Net Income (Loss). Net loss in fiscal 1997 was $8.3 million, compared to
pro forma net income of $6.9 million in fiscal 1996. This loss resulted
primarily from a one-time write-off of goodwill and purchased research and
development costs associated with the Trend and CTI acquisitions, as well as
higher sales costs.
38
<PAGE>
Liquidity and Capital Resources
Since its inception, the Company has financed its operations and capital
expenditures with cash from operations and debt financing, as well as an initial
public offering in April 1996. Net cash provided by operating activities was
$10.4 million, $1.7 million and $8.9 million for fiscal 1998, 1997 and 1996,
respectively. As of June 30, 1998, the Company had $1.2 million in cash and cash
equivalents and working capital of approximately $19.3 million.
Capital expenditures were $39.3 million, $24.8 million and $7.5 million for
fiscal 1998, 1997 and 1996, respectively. These capital expenditures were
primarily for manufacturing equipment and plant expansions and modernization.
Although the Company has no commitments in material amounts, it expects capital
expenditures for fiscal 1999 to be between 8% to 12% of revenue for facility
expansions and equipment.
The Company increased its bank line of credit to $40.0 million at June 30,
1998 from $15.0 million at June 30, 1997. At June 30, 1998 borrowings of $37.5
million were outstanding and $652,000 was available for borrowings based on
eligible accounts receivable and inventory. Amounts outstanding under the line
of credit bear interest at the bank's prime rate (8.5% per annum at June 30,
1998). Under the line of credit, the Company must maintain certain financial
ratios and other covenants. The line of credit also requires that the Company
issue at least $25 million in junior subordinated debt or equity prior to
January 1, 1999, which will be satisfied by the issuance of the Junior
Subordinated Debentures to the Trust, grant Key Bank a deed of trust on the
Company's Dallas facility, and reduce its outstanding balance under the line of
credit (after the application of proceeds from the Offering) by $9 million prior
to January 1, 1999. The Company anticipates that it will enter into a new
financing arrangement with another lender to facilitate this balance reduction.
In fiscal 1998, the Company borrowed $15.2 million from Heller Financial, Inc.,
secured by real property and miscellaneous equipment at the Company's Huntsville
facilities.
The Company is in compliance with all the terms of each of the Key
Agreement, the Heller Agreements and the Finova Agreement, and no events of
default exist under any of these agreements. The Company has received waivers
and going-forward covenant modifications with respect to each of the Key
Agreement, the Heller Agreements and the Finova Agreement relating to certain
technical defaults and events of default that arose as a result of noncompliance
with certain financial covenants in the Heller Agreements and the Finova
Agreement. The Company has made all payments on all indebtedness related to
these agreements.
The Company believes existing cash and cash equivalents, funds generated
from operations, its credit facility with the bank and equipment financings as
well as proceeds from this offering will be sufficient to fund its operations
for the next twelve months. See "Use of Proceeds."
39
<PAGE>
The Company intends to use approximately $25.2 million of the net proceeds
from the sale of the Junior Subordinated Debentures to repay indebtedness
outstanding under the Key Agreement, approximately $8.7 million to pay off the
outstanding balance under one of the Heller Agreements and approximately $3.2
million and to pay off the outstanding balance under the Finova Agreement.
Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Earnings." SFAS No. 130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Company's first quarter of
the fiscal year ending June 30, 1999. Reclassification of prior year financial
statements for comparative purposes is required. Management has not completed an
evaluation of the effects this standard will have on the Company's financial
position or results of operations.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The new standards becomes effective for the Company's fiscal year
ending June 30, 1999. Adoption of this statement may result in additional
disclosures but will have no material impact on the Company's results of
operations or financial position.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new statement will require recognition
of all derivatives as either assets or liabilities on the balance sheet at fair
value. The new statement becomes effective for the first quarter of fiscal year
ending June 30, 2000. Management has not completed an evaluation of the effects
this standard will have on the Company's financial position or results of
operations.
Year 2000 Compliance
Certain computer hardware and software use two-digit data fields to store
and recognize years, assuming the first two digits of the year are "19" (e.g.,
the number "98" is recognized as "1998"). This and certain similar protocols
give rise to possible problems related to the recognition of dates in years
after 1999--so-called "Year 2000" issues. The Company continues to assess and
address the business risks associated with Year 2000 issues. Some of the
Company's systems include hardware and packaged software recently purchased from
vendors who have represented that these systems are Year 2000 compliant.
Other hardware and software used by the Company has been identified by the
Company as not being Year 2000 compliant. The Company expects that Year 2000
upgrades
40
<PAGE>
to the software used in its manufacturing systems and replacement components for
certain older hardware used in these systems will soon be available from
vendors. The cost of these upgrades and replacements is not expected to be
material.
The Company relies on a number of vendors and suppliers, including banks,
telecommunication providers, and other providers of goods and services. The
inability of these third parties to conduct their business for a significant
period of time due to the Year 2000 issue could have a material adverse impact
on the Company's operations. The Company has not determined whether all of its
vendors and suppliers are Year 2000 compliant. The Company's reliance on single
vendor source suppliers, however, is minimal, and the Company seeks to limit
sole source supply relationships. The Company is continuing to assess potential
Year 2000 issues and is developing contingency plans. At this time, the Company
believes costs incurred in responding to other parties' Year 2000 computer
system deficiencies, together with the cost of any required modifications to the
Company's systems, will not have a material impact on the Company's results of
operations or financial condition. This analysis may be modified as the
Company's assessment of potential Year 2000 issues progresses.
41
<PAGE>
BUSINESS
The Company is a leader in providing electronics OEMs and contract
manufacturers with a full range of PCB and interconnect solutions, including
schematic capture and design, quick-turnaround, prototyping and pre-production,
and large volume production. The Company provides its solutions to four key
electronics industry segments (with corresponding percentages of Company revenue
for the fiscal year ended June 30, 1998): (i) data and telecommunications (31%),
(ii) computers and peripherals (36%), (iii) industrial and instrumentation (25%)
and (iv) business and consumer (8%). The Company's growth has been driven by
sales to industry leaders whose products require increasing complexity and
technological advancement within the electronic interconnect industry. The
Company's principal customers include Compaq, Hewlett Packard, Intel, Dell, EMC,
IEC Electronics, SCI, Solectron, Motorola, Xylan and Xerox. The Company has
obtained ISO 9002 certifications for five of its manufacturing facilities and
has received awards from a number of its customers in recognition of its
superior performance in meeting their PCB needs. In fiscal 1998 the Company
served more than 650 customers worldwide.
The 1997 worldwide PCB market was estimated at $29.7 billion by IPC, of
which the U.S. portion was $7.8 billion and was forecast to grow 6.5% annually
through 2001. The market dynamic for electronics OEMs includes greater emphasis
on faster product time-to- market, greater PCB complexity in tight space
tolerances, and increasing pressure to shorten the design-to-manufacture cycles.
Additionally, as OEMs have increasingly focused on core competencies,
outsourcing of PCBs and electronic interconnects has grown from 66% of total OEM
requirements in 1991 to 93% in 1997.
Addressing these trends, Praegitzer in 1997 implemented its One-Stop
Shopping(TM) strategy to provide its customers with advanced technology and
integrated manufacturing capabilities for the entire cycle of PCB creation. In
the last three years, the Company acquired production facilities in Redmond,
Washington; Fremont, California; and Huntsville, Alabama, and acquired a 51%
interest in a production facility in Melaka, Malaysia. During this same period,
Praegitzer acquired or opened 12 design centers in the U.S. (11) and in Israel
(1). With its facilities and recent technological expansion, the Company
believes that it is one of the world's leading PCB design and manufacturing
companies. The Company has experienced 46.5% compound revenue growth during
fiscal years 1995 through 1998, compared with a compound revenue growth rate for
the U.S. PCB industry of 8.5%, and during this period the Company produced
increasingly complex PCBs with higher density and layer counts.
The Company's goal is to be the leading provider of electronic interconnect
one-stop design and manufacturing services, while continuing to increase its
technological and services advantages.
42
<PAGE>
Industry Overview
PCBs, consisting of interconnected layers of etched copper patterns of
electrical circuitry that have been laminated to insulating material, are the
basic platforms used to interconnect the integrated circuits and other essential
components of electronic products. The Company primarily focuses on the
multilayer PCB market, which accounted for approximately 76.1% and 73.3% of U.S.
PCB sales in 1997 and 1996, respectively.
The overall market for electronic products has grown steadily over the past
20 years as end users increasingly seek products with attractive
price/performance characteristics and as technological advances have created new
markets. To compete in the broader electronics market, OEMs require product
components with increased functionality at lower cost per function. The
interconnect densities, signal speeds and layer counts of PCBs have increased to
meet these requirements. Many of these increasingly complex PCBs are
manufactured using a variety of complex processes and equipment, further
complicating the production process. Furthermore, competitive pressures and
rapid technological change have shortened product life cycles. As a result,
time-to-market and time-to-volume have become increasingly important competitive
factors.
To compete in the market for increasingly complex and technologically
advanced PCBs and to meet shorter time-to-market and time-to-volume
requirements, PCB manufacturers must make substantial capital investments and
develop greater manufacturing specialization and expertise. These factors have
resulted in two trends in the PCB industry. First, as capital requirements have
increased, the industry has consolidated. According to IPC, the number of United
States PCB manufacturers has decreased from over 2,500 in 1976 to fewer than 700
in 1996. Second, OEMs have increased the outsourcing of PCB production to focus
resources on their core strengths and have relied on outside suppliers to
overcome increasingly complex manufacturing challenges. According to IPC, the
independent manufacturers' portion of the total PCB market increased to 93% in
1997 from 66% in 1991. IPC estimates that in 1997 the nine largest independent
manufacturers accounted for about 32% of total PCB sales in the United States by
independent manufacturers.
PCB Design and Production Process
The creation of PCBs progresses in stages: (1) initial design and
simulation, (2) schematic capture and circuit design, (3) quick-turnaround,
prototype and pre-production, and (4) volume production.
43
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OEM Design OEM or OEM or Quick- Quick- Volume
Schematic Circuit Design turnaround turnaround Vendor
Vendor Vendor Vendor Vendor or
Volume
Vendor
</TABLE>
[Graphic showing PCB creation process.]
1. INITIAL DESIGN. Initial design is performed by the OEMs and encompasses the
process of idea formation, conceptual analysis, engineering design (including
specifications and features), functional simulation and simulation of the
processed layout of a PCB.
2. SIMULATION. Simulation of proposed locations of holes and conductors (the
"layout") provides information regarding potential layout problems to the
initial design engineer and creates revised design guidelines for the schematic
capture and circuit design technicians. Due to the increasing number of
high-speed devices being used on PCBs, physical layout guidelines must be
tailored to each particular design to resolve problems regarding circuit timing,
signal-integrity and electromagnetic interference ("EMI"). These problems, if
not resolved in up-front board layout design, can result in low manufacturing
yields and inconsistent product performance that can increase time and cost to
market for OEMs. Up-front simulation by knowledgeable professionals using
computer aided design ("CAD") simulation tools is required to model and resolve
problematic issues prior to manufacturing.
3. SCHEMATIC CAPTURE AND CIRCUIT DESIGN. Schematic capture involves the input of
an electronic schematic diagram into a high-performance computer workstation
that generates a list of the electronic components and interconnects required to
design a PCB. Circuit design is accomplished using specialized CAD software
programs. Computer- generated data describe the layout which, along with
manufacturing information, may be transmitted electronically from the designer
to the manufacturer. When transmitting data to its internal manufacturing
organizations, the Company typically uses specialized computer aided
manufacturing ("CAM") software prior to sending the data to ensure design for
manufacturability ("DFM") and to help speed the quick-turnaround process.
Historically, circuit design was the step in the PCB production process least
likely to be outsourced by OEMs. As PCB related design-for-manufacture
challenges become more complex, however, more OEMs are relying on outside
resources for these services.
4. QUICK-TURNAROUND, PROTOTYPE AND PRE-PRODUCTION. Quick-turnaround is
characterized by shorter than standard lead time requirements, typically one to
10 days, and involves producing a small quantity, usually fewer than 50 PCBs.
Prototype evaluation
44
<PAGE>
is critical to product development and frequently requires several iterations to
finalize the design. Because time is critical, most prototypes are manufactured
on a quick-turnaround basis. Consequently, high quality and timely delivery
generally are the most important competitive factors for the quick-turnaround
market. Pre-production runs involve the manufacture of limited quantities of
PCBs during the transition from prototype to volume production. Pre-production
may require quick-turnaround delivery because of overall time- to-market
pressures and shorter product life cycles or as a temporary solution in the
event of volume production delay. Accordingly, high quality and timely delivery
continue to be the factors most important to the OEM or contract manufacturer,
although price is also a significant factor. Many OEMs take advantage of a PCB
manufacturer's quick-turnaround capability, even when circuit design or volume
production is done in-house or by other PCB manufacturers. PCB manufacturers use
quick-turnaround capabilities to build relationships with OEMs, thereby
developing additional OEM design and volume production business.
5. VOLUME PRODUCTION. Volume production is characterized by longer lead times
and increased emphasis on lower cost as the product moves to full-scale
commercial production. At this stage of production, price, quality, on-time
delivery and process capability are the factors most important to the OEM or
contract manufacturer. As product life cycles grow shorter, the ability to meet
shorter lead time requirements becomes an increasingly significant competitive
factor.
Each stage of the PCB creation process requires substantially different
capabilities and as a result most companies specialize in only one stage.
Consequently, OEMs and contract manufacturers typically use different suppliers
at each stage, which requires costly and time-consuming duplicative tooling and
pre-production engineering. Accordingly, many OEMs and contract manufacturers
are establishing strategic relationships with fewer suppliers such as the
Company that provide a full range of services.
The Praegitzer Approach
The Company provides a full range of PCB and electronic interconnect
solutions that meet the growing technological demands of electronics OEMs and
contract manufacturers. The Company provides design services, quick-turnaround,
prototyping, pre-production and volume production of PCBs to its customers using
integrated processes that allow shorter time-to-market and time-to-manufacture
at a lower cost of manufacturing. The Company seeks to expand its supplier
relationships with electronics OEMs because these customers have the greatest
incentive to fully exploit the advantages provided by the Company's integrated
design and fabrication of complex PCBs. By working with high-end customers, the
Company can influence the design of customers' PCBs, optimize performance,
minimize production costs and shorten development and production time.
45
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OEM Design Design Design Fremont All White City
Division Division Division Redmond Production Dallas
Huntsville Facilities Malaysia
(except
Design)
</TABLE>
[Graphic showing process of PCB creation through the Company's various
facilities.]
For fiscal 1998 and 1997, respectively, the Company derived 7% and 6% of its
revenue from design, 21% and 15% of its revenue from quick-turnaround, prototype
and pre-production, and 72% and 79% of its revenue from volume production of
PCBs.
Strategy
Leverage One-Stop Shopping(TM) Capabilities. In response to customer
requirements, in 1997 the Company implemented its One-Stop Shopping(TM)
strategy, which provides customers with integrated design to manufacturing
services. By offering this complete range of services, the Company can provide
integrated design and manufacturing solutions while reducing time-to- market,
time-to-volume and product development costs. The Company believes its strong
relationships with pre-production and volume production customers will assist
its continued expansion into the design and quick-turnaround markets.
Enhance and Maintain Technological Leadership Position. The Company's
significant capital investments in technology, facilities and equipment over the
past two years have positioned the Company among the leading designers and
manufacturers of PCBs in the U.S. As a result of these initiatives, the Company
is able to design and produce complex, high layer, high density PCBs rapidly and
efficiently. The Company intends to maintain its technological advantage in the
future.
Increase Long-Term Relationships with Leading Electronics Manufacturers. The
Company pursues long-term relationships with rapidly growing OEMs, as well as
their contract manufacturers, that are technology leaders in their industry
segments and whose product requirements generally drive the advancement of
electronic interconnect manufacturing technology. These relationships enable the
Company to work closely with its customers to continually improve its products
and develop new technologies and allow it to remain a leader in the PCB
industry.
Expand Geographically. The Company has design and manufacturing locations
throughout the United States as well as selected locations abroad. The Company's
strategic location of U.S. production facilities near OEMs allows the Company to
be close to its customer base,
46
<PAGE>
thereby facilitating communications and reducing delivery times. Physical
proximity to customers is particularly important for design and quick-turnaround
facilities. Accordingly, the Company seeks to locate its production facilities
in the U.S. strategically near OEMs.
Markets
The Company concentrates on the broad electronics market, which is
characterized by high growth, rapid technological advances, short product
development cycles and accelerated time-to-market and time-to-volume
requirements. In response to this market's broadening requirements, the Company
implemented its One-Stop Shopping(TM) strategy and expanded its design,
quick-turnaround and production volume capabilities.
The Company's principal customers are electronics OEMs and contract
manufacturers in four vertical markets--(i) computers and peripherals, (ii) data
communications and telecommunications, (iii) instrumentation and industrial, and
(iv) business and consumer.
Computers and Peripherals. The computer and peripheral market accounted for
approximately $65.8 million, or 36%, of the Company's 1998 revenue. The most
significant component of growth in this market is unit sales of computers. The
annual compound growth projections over the next five years for the portable
computer and desktop computer markets are approximately 28% and 11%,
respectively. Since fiscal 1996, Company sales to this sector have increased at
a compound annual rate of 77%. Future drivers of growth in this area include (i)
growth in the personal computer (PC) market, (ii) emerging global markets and
(iii) rapid advancement of technology.
Data Communications and Telecommunications. The data communications and
telecommunications market accounted for approximately $56.7 million, or 31%, of
the Company's fiscal 1998 revenue. Products incorporating the Company's PCBs
include portable communication devices such as cellular telephones, microwave
relays, telecommunications and telephone switching equipment, and mobile radios.
The portable communications device market is expected to grow by 15% to 20%
compounded annually. Since fiscal 1996, Company sales to this sector have
increased at a compound annual rate of 34%. Future drivers of growth in this
area include (i) heavy demand expected for portable communication devices, (ii)
infrastructure build-out in the telecommunications industry, and (iii) rapid
pace of new product introductions.
Instrumentation and Industrial. The instrumentation and industrial market
accounted for approximately $45.7 million, or 25%, of the Company's 1998
revenue. Products incorporating the Company's circuit boards include machine and
process controls, sensors, test and measurement equipment and medical
instruments. Demand is expected to increase as the use of electronic measuring
equipment and medical technologies such as magnetic resonance imaging (MRIs) and
laser surgery continues to increase. Since fiscal 1996, Company sales to this
sector have increased at a compound annual rate of 17%. Future drivers of growth
in this area include (i) increasing capital expenditures by OEMs,
47
<PAGE>
(ii) improvements in technology, (iii) increasing research and development
budgets, and (iv) emerging global healthcare markets.
Business and Consumer. The business and consumer market accounted for
approximately $14.6 million, or 8%, of the Company's 1998 revenue. Products
incorporating the Company's circuit boards include copy machines, inventory
tracking systems and cash registers. Demand has been driven by a number of
factors, the most significant of which is the expanding consumer market for
electronics. Since fiscal 1996, Company sales to this sector have increased at a
compound annual rate of 24%. Future drivers of growth in this area include (i)
increasing demand for complex consumer electronics and (ii) continued investment
by companies in modern business systems.
Manufacturing and Engineering Processes and Quality Assurance
The Company believes its substantial capital investment and manufacturing
expertise in a number of specialized areas have contributed to its position as a
leader in the production of complex, rigid multilayer PCBs. The Company's
One-Stop Shopping(TM) strategy, incorporating design, quick-turnaround and
prototyping, and volume production requires periodic upgrades of the Company's
capabilities and resources.
The Company believes that its design capabilities are facilitated by tools
focused on DFM and CAM systems. These systems take full advantage of the
Company's materials technologies, including the ability to use materials as thin
as .0015 inches, alternative surface finishes, electroless nickel/immersion
gold, selective gold plate and Entek(R) (an organic surface protection). The
Company also uses specialty materials such as GETEK(R), OHMEGA-PLY(R), cyanate
ester and polyimide for high temperature, fast signal speed and other
high-performance requirements.
The Company's substantial investment in six modern prototyping and volume
production facilities and state-of-the-art equipment permits high-yield
fabrication of complex PCBs. The Company can produce PCBs with more than 20
layers incorporating blind vias, buried vias, laser microvias and buried
resistors and capacitance. Most vias (holes drilled in the PCBs to facilitate
electronic interconnects) are made with computer-controlled drills, with
tolerances as small as .004 inches. The Company uses similar drills for routing
and plating processes.
The performance of a PCB is highly sensitive to quality standards. In
recognition of the need for quality, the Company has obtained ISO 9002
certifications for five of its manufacturing facilities and is obtaining ISO
9002 certification for its Huntsville facility and ISO 9001 certification for
all of its design centers. Certain of the Company's manufacturing facilities
also are Bellcore compliant. The Company's fine-line circuitry is produced
within the Company's Class 10,000 clean room environment, and completed PCBs are
subject to rigorous automated optical inspection, dual-side simultaneous
testing, flying probe technology
48
<PAGE>
and a variety of customized test fixtures that have been designed and produced
by the Company.
Customers
The following table sets forth in alphabetical order a selection of the
Company's customers who purchased at least $1 million of products sold by the
Company in fiscal 1998.*
- --------------------------------------------------------------------------------
Data Communications and Telecommunications
- --------------------------------------------------------------------------------
ADTRAN NEC
DSC Communications Verilink
Motorola Xylan
- --------------------------------------------------------------------------------
Instrumentation and Industrial
- --------------------------------------------------------------------------------
Hewlett-Packard PSC/Spectra-Physics
RadiSys Teradyne
- --------------------------------------------------------------------------------
Computers and Peripherals
- --------------------------------------------------------------------------------
Compaq Intel
Dell Silicon Graphics
EMC IBM
- --------------------------------------------------------------------------------
Business Systems and Consumer Electronics
- --------------------------------------------------------------------------------
In Focus Systems Xerox
- --------------------------------------------------------------------------------
Contract Manufacturers
- --------------------------------------------------------------------------------
Benchmark Electronics SMT Centre
IEC Electronics Solectron
SCI Systems Victron
- --------------------------------------------------------------------------------
* The Company serves OEM customers directly as well as through contract
manufacturers and electronics distributors. Some sales indicated in the
Contract Manufacturers segment are also included under sales in the other
listed segments.
- --------------------------------------------------------------------------------
For fiscal 1998, the Company's ten largest customers accounted for
approximately 45% of the Company's revenue. During fiscal 1998 the Company
served more than 650 customers worldwide.
49
<PAGE>
Sales and Marketing
The Company's sales organization emphasizes the Company's One-Stop
Shopping(TM) solution. The Company has sales personnel located in Washington,
Oregon, California, Texas, Minnesota, Alabama, Florida, New Hampshire,
Massachusetts, Illinois, Pennsylvania, North Carolina, Canada, Japan, Malaysia,
Singapore and Israel, locations that are in close proximity to many of the
Company's existing and potential customers. The Company's sales organization
consists of a senior vice president of sales and marketing, a vice president of
customer service, four regional managers and 30 account executives. Each
division of the Company also has an experienced inside sales and customer
service organization to support its outside sales personnel and to promote
customer relationships.
The Company engages in a number of marketing activities to enhance
awareness of its broad range of products and services. In addition to paid
advertisements and promotional items, the marketing efforts include business and
technical editorials for industry publications, participation in trade shows and
industry conferences, customer newsletters and satisfaction surveys as well as
scheduled press releases.
Materials and Supplies
The Company orders certain materials and supplies based on purchase orders
received and seeks to minimize its inventory of other materials that are not
identified for use in filling specific orders. Although the Company uses a
select group of suppliers, the materials necessary to manufacture PCBs are
generally available from multiple suppliers.
To enhance its relationships with suppliers, in 1991 the Company
implemented a "STAR Supplier" program to improve key supplier performance by
measuring product quality, on-time delivery, technological support, sales
support and other criteria. The Company believes it has realized significant
benefits from the program, including lower costs of materials.
The Company has established strategic relationships and stocking programs
with certain key vendors and negotiated price discounts based on the volume of
the Company's purchases. For example, certain laminate suppliers operate
warehouses near the Company and are beginning to work directly from the
Company's materials requirement projections to better meet the Company's needs.
The Company also uses suppliers' technical support and engineering capabilities.
For example, several proprietary chemistry and equipment vendors have provided
personnel to work full-time within the Company's facilities.
Management Information Systems
The Company uses its management information systems to shorten turnaround
times for customer orders, increase output, improve inventory management, and
reduce costs by allowing the Company to more efficiently manage and control the
PCB production process.
50
<PAGE>
The Company has developed information systems that integrate key management data
to facilitate operations under its One-Stop Shopping strategy. The Company uses
both internally developed and third party software, with applications for
manufacturing and shop floor control, DFM analysis, quality assurance, CAD/CAM,
human resources, and finance and accounting.
In fiscal 1999, the Company anticipates completing Phase I of a rapid
multiphase rollout of the SAP R/3 enterprise resource planning software solution
("Phase I"). Costs associated with Phase I are estimated to be approximately
$3.5 million in fiscal 1999. Phase I will integrate the Company's financial and
accounting systems as well as provide manufacturing, sales order entry and
materials management for the Fremont facility and all the design centers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
The Company anticipates utilizing the SAP R/3 system to shorten turnaround
times for customer orders, increase output, improve inventory management and
reduce costs by eliminating duplication of work and reducing errors in ordering
of parts. The fully installed system will consist of a material resources
planning module, a shop floor control module, an inventory control and parts
tracing module and a general accounting module.
Competition
The PCB industry is highly fragmented and characterized by intense
competition, which the Company believes will increase. The Company's competitors
include large domestic manufacturers, offshore manufacturers located primarily
in Asia, small or regional domestic manufacturers and captive PCB operations of
larger OEMs. The principal competitors of the Company include Nanya (Taiwan),
Compeq (Taiwan and North America), Hadco (North America and Malaysia) and
Viasystems (North America and Europe).
The Company believes the primary competitive factors in the market for
complex, rigid multilayer printed circuit boards are product quality,
responsiveness to customers, on-time delivery, lead time, volume production
capabilities, advanced manufacturing technology, engineering skills and price.
The Company believes its primary competitive strengths stem from its One-Stop
Shopping(TM) strategy, including its ability to provide technologically advanced
manufacturing services, respond to customers reliably and effectively and
deliver finished products on a quick-turnaround through high volume basis while
maintaining superior product quality. See "Risk Factors--Competition."
Backlog
The Company's backlog at July 31, 1998 was approximately $25.3 million,
compared to a backlog of approximately $25.9 million at July 31, 1997. The
Company includes in its backlog all purchase orders scheduled for delivery
within the next 12 months, although the majority of the backlog typically is
scheduled for delivery within 60 days. There are no
51
<PAGE>
orders in the Company's backlog that it does not reasonably expect to have
filled by June 30, 1999. For a variety of reasons, including timing of orders
and shipments, delivery intervals, customer and product mix and the possibility
of customer changes in delivery schedules, backlog as of any particular date may
not be a reliable measure of sales for any succeeding period. Cancellation
charges generally vary depending upon the time of cancellation and, therefore,
the Company's backlog may be subject to cancellation without significant penalty
to the customer.
Environmental Matters
The Company is subject to environmental laws relating to the storage, use
and disposal of chemicals, solid waste and other hazardous materials, as well as
air quality regulations. Water used in the manufacturing process must be treated
to remove metal particles and other contaminates before it can be discharged
into the municipal sanitary sewer system. The Company operates and maintains
effluent water treatment systems and uses approved laboratory testing procedures
at its manufacturing facilities. The Company operates these systems under
effluent discharge permits issued by a number of governmental authorities. These
permits must be renewed periodically and are subject to revocation in the event
of violations of environmental laws. See "Risk Factors--Environmental Matters."
The Company believes its activities and facilities are in compliance with
applicable environmental laws in all material respects. The Company eliminated
all ozone depleting compounds from its manufacturing processes in December 1993.
In 1993 the Company was also recognized by the United Nations as an
environmentally conscious manufacturer. In 1994 the Environmental Protection
Agency recognized the Company for its participation in the 33/50 Program, a
voluntary initiative aimed at reducing emissions and disposals of toxic
substances.
Insurance
The Company maintains insurance against property damage (including business
interruption) and against product liability claims in amounts that the Company
believes to be adequate. There is no assurance that such coverages will continue
to be available in the amounts desired or on terms acceptable to the Company, or
that these coverages will be adequate for losses or liabilities actually
incurred. Any uninsured or underinsured loss suffered by, or claim brought
against, the Company, or any claim or product recall that results in significant
cost to or adverse publicity against the Company, could have a material adverse
effect on the Company.
Employees
At June 30, 1998, the Company had approximately 2,000 employees. None of
the Company's employees is represented by a labor union, and the Company has
never
52
<PAGE>
experienced a work stoppage, slowdown or strike. The Company believes it
maintains good employee relations.
Properties
The Company's principal properties are as follows:
<TABLE>
<CAPTION>
Ownership Square
Location Purpose Status Feet
-------- ------- --------- ------
<S> <C> <C> <C>
Dallas, Oregon Volume production Owned 130,000
White City, Oregon(1) Volume production Owned 105,000
Redmond, Washington Pre-production and Leased 48,000
prototype
Fremont, California Quick-turnaround Leased 30,000
Huntsville, Alabama Pre-production and Owned (2) 98,000
prototype
Melaka, Malaysia Volume production Leased 120,000
(1) Includes 40,000 square foot buildout which is not expected to be
operational until fall, 1998.
(2) The property is currently under a long-term lease pursuant to which the
Company pays nominal rent and has the right to acquire fee-simple ownership
by payment of nominal consideration.
</TABLE>
The Dallas and White City manufacturing facilities specialize in medium to
high volume production of complex, rigid multilayer PCBs. The Fremont facility
specializes in quick-turnaround prototype production, and the Redmond and
Huntsville facilities specialize in prototype pre-production of complex, rigid
multilayer PCBs. The Malaysian facility specializes in medium to high volume
production of lower technology rigid PCBs. The Company also has 12 design
centers worldwide, 11 in the U.S. and one in Israel.
The Redmond facility is subject to two leases with total current monthly
lease costs of approximately $44,000. One lease expires in 2000 and the other
lease expires in 2002. Both leases contain an option to renew for an additional
five-year period. The Fremont facility is subject to a monthly lease cost of
approximately $30,000 which expires in 2002. The Melaka, Malaysia facility is
subject to a lease with a current monthly lease cost of approximately $24,000
(based on the Malaysian Ringgit exchange rate on August 3, 1998). This lease
expires in 2002, with an option to renew for an additional three-year period.
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<PAGE>
The Trust
The Trust is a statutory business trust created under Delaware law pursuant
to (i) the trust agreement of the Trust among the Company, as depositor, the
Delaware Trustee and an Administrative Trustee, and (ii) the filing of a
Certificate of Trust with the Delaware Secretary of State on August 7, 1998. The
Trust's business and affairs are conducted by the Issuer Trustees. The Trust
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures issued by the Company, and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto. The Junior Subordinated Debentures will be the sole assets of the
Trust, and payment by the Company under the Junior Subordinated Debentures and
the Expense Agreement will be the sole revenues of the Trust. All of the Trust
Common Securities will be owned by the Company. The Trust Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the Trust
Preferred Securities, except that upon the occurrence and during the continuance
of an event of default under the Trust Agreement resulting from an event of
default under the Indenture, the rights of the Company as holder of the Trust
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Trust Preferred Securities. See "Description of the Trust
Preferred Securities--Subordination of Trust Common Securities of the Trust Held
by the Company." The Company will acquire Common Trust Securities in an
aggregate liquidation amount equal to 3% of the total capital of the Trust. The
Trust has a term of 31 years, but may dissolve earlier as provided in the Trust
Agreement.
MANAGEMENT
Directors, Executive Officers and Certain Key Employees
The following table sets forth, as of July 31, 1998, the directors,
executive officers and certain key employees of the Company.
54
<PAGE>
Name Age Position
- ---- --- --------
Robert L. Praegitzer 66 Chief Executive Officer and Chairman of the
Board
Matthew J. Bergeron 35 President, Chief Operating Officer and
Director
William J. Thale 38 Corporate Vice President and Chief Financial
Officer
Robert J. Versiackas 49 Senior Vice President of Operations
James M. Buchanan 51 Senior Vice President of Sales and Marketing
Gregory L. Lucas 53 Senior Vice President of Technology
Daniel J. Barnett 47 Director
Theodore L. Stebbins 57 Director
Merrill A. McPeak 62 Director
Gordon B. Kuenster 65 Director
ROBERT L. PRAEGITZER founded the Company in 1981 and has been its Chief
Executive Officer and Chairman of the Board since that time and was the
President since that time until January 1998. He was also the founder and
President of Praegitzer Design, Inc. which merged into the Company in 1995, and
Praegitzer Property Group, the assets of which were acquired by the Company in
1996.
MATTHEW J. BERGERON joined the Company in 1990 as Chief Financial Officer.
He became Senior Vice President in 1993, a director in November 1995, the
Executive Vice President and Chief Operating Officer in April 1997 and President
and Chief Operating Officer in January 1998. Prior to joining the Company, Mr.
Bergeron was an accountant at Johnson & Shute P.S., a public accounting firm.
WILLIAM J. THALE joined the Company in 1990 and served as controller in
both the Assembled Products Division, an operation discontinued in 1994, and
Praegitzer Design, a division of the Company. Mr. Thale became Vice President
and Chief Financial Officer in April 1997. Mr. Thale is a certified public
accountant.
ROBERT J. VERSIACKAS joined Trend in 1990 as Vice President of Operations
and upon the merger of Trend into the Company in August 1996 was appointed Vice
President of Operations - Fremont Division. In February 1997 Mr. Versiackas
became Senior Vice President of Operations.
JAMES M. BUCHANAN joined the Company as Senior Vice President of Sales and
Marketing in April 1998. Prior to joining the Company, Mr. Buchanan served as
Vice President of Sales for Zycon Corporation from 1984 until January 1997, Vice
President of Sales for Hadco Corporation from January 1997 until August 1997 and
Senior Vice President of Sales for Continental Circuits from August 1997 until
April 1998.
55
<PAGE>
GREGORY L. LUCAS joined the Company in June 1997 as Senior Vice President
of Technology. Prior to joining the Company, Mr. Lucas had been Vice President
of Technology for Zycon Corporation since 1991. Mr. Lucas holds several patents
primarily in the field of buried passive components.
DANIEL J. BARNETT joined the Company as a director in August 1996 in
connection with the merger of Trend into the Company. He served as Vice
President of Sales of the Company from August 1996 to May 1998. Prior to the
merger, Mr. Barnett had been the president of Trend since 1992.
THEODORE L. STEBBINS is the Managing Director of Adams, Harkness & Hill, an
investment banking firm, and was appointed to the Board of Directors of the
Company in May 1996.
MERRILL A. McPEAK joined the Company as a director in April 1997. He is a
retired general in the United States Air Force. General McPeak served as Chief
of Staff of the U.S. Air Force from October 1990 until October 1994. In addition
to the Company, General McPeak serves on the boards of four publicly held
companies; ECC International, Tektronix Inc., Thrustmaster Incorporated and
Trans World Airlines. General McPeak is a distinguished advisor for Russia
Special Purpose Corporation and is President of McPeak and Associates.
GORDON B. KUENSTER is founder and Chief Executive Officer of Seattle Sight
Systems, Incorporated, a manufacturer of application-specific high resolution
computer displays. He founded Seattle Sight Systems, Incorporated in 1996 and
serves as its Chief Executive Officer. Mr. Kuenster was founder and Chief
Executive Officer of Virtual Vision, Incorporated from 1991 to 1994 and Virtual
Image Displays, Incorporated from 1994 to 1996. He was General Manager of Eldec
Power Supply Division, Vice President of Engineering for Pacific Electrodynamics
and Engineering Manager of Boeing Aerospace.
Committees of the Board of Directors
The Company has an Audit Committee comprised of Messrs. McPeak, Stebbins
and Kuenster. The Audit Committee will, among other things, make recommendations
to the Board of Directors with respect to the engagement of the Company's
independent certified public accountants and the review of the scope and effect
of the audit engagement. The Company has a Compensation Committee of its Board
of Directors, comprised of Messrs. Kuenster, McPeak and Stebbins. The
Compensation Committee will, among other things, make recommendations to the
Board of Directors with respect to the compensation of the executive officers of
the Company.
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<PAGE>
Executive Compensation
The following table discloses the compensation awarded by the Company, for
the three fiscal years ended June 30, 1996, 1997 and 1998, to the Chief
Executive Officer and the four other most highly compensated executive officers
whose annual compensation exceeded $100,000 (together, the "Named Executives").
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
--------------------------------------------------------------------------
All Other
Long Term Compensation
Name and Principal Position Year Salary Bonus Compensation (1)
- -------------------------------- ---------- ------------ ----------- -------------------- --------------------
Securities
Underlying
Options(#)
--------------------
<S> <C> <C> <C> <C> <C>
Robert L. Praegitzer, 1998 $ 300,000 0 0 $ 9,640
Chairman and Chief 1997 274,999 0 125,000 9,640
Executive Officer 1996 195,972 0 0 29,684
Matthew J. Bergeron, 1998 199,423 0 25,000 4,983
President and 1997 149,999 0 25,000 4,983
Chief Operating Officer 1996 134,084 $ 15,000 50,000 0
Robert J. Versiackas, 1998 199,892 0 58,957 0
Senior Vice President of 1997 141,731 0 16,043 0
Operations 1996 -- -- -- --
Daniel J. Barnett (2), 1998 189,904 0 0 0
Senior Vice President of 1997 162,500 0 50,000 0
Sales 1996 -- -- -- --
Gregory L. Lucas 1998 181,442 0 25,000 0
Senior Vice president of 1997 7,115(3) 0 50,000 0
Technology 1996 -- -- -- --
(1) Consists of automobile allowances.
(2) Mr. Barnett terminated his employment with the Company on May 29, 1998. Mr.
Barnett continues to serve as a director of the Company.
(3) Mr. Lucas commenced employment with the Company on June 16, 1997.
</TABLE>
57
<PAGE>
The following table discloses information concerning options granted in
fiscal 1998 to the Named Executives.
<TABLE>
<CAPTION>
Option Grants in Fiscal Year Ended June 30, 1998
Individual Grants
Potential Realizable
Value at Assumed
Number of Percent of Annual Rate of Stock
Securities Total Options Price
Underlying Granted to Exercise Appreciation for
Options Granted Employees in Price Expiration Option
Name (#) Fiscal Year (%) ($/Sh) Date Term ($)(1)
- --------------------- ------------------- ------------------ ----------- ---------------- ------------------------------
5% 10%
----- -----
<S> <C> <C> <C> <C> <C> <C>
Robert L. Praegitzer 0 -- -- -- -- --
Matthew J. Bergeron 25,000(2) 6.5 13.00 7/18/07 204,388 517,964
Robert J. Versiackas 33,957(2) 8.9 13.00 7/18/07 277,618 703,541
25,000(3) 6.5 9.38 4/01/08 147,396 373,532
Daniel J. Barnett(4) 0 -- -- -- -- --
Gregory L. Lucas 25,000(3) 6.5 9.38 4/01/08 147,396 373,532
- --------------
(1) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the
compounded rates specified over the term of the options. These numbers do
not take into account provisions of options providing for termination of
the option following termination of employment or nontransferability of the
options and do not make any provision for taxes associated with exercise.
Because actual gains will depend upon, among other things, future
performance of the Common Stock, there can be no assurance that the amounts
reflected in this table will be achieved.
(2) These options became exercisable on July 18, 1998.
(3) These options become exercisable on April 1, 1999.
(4) Mr. Barnett terminated his employment with the Company on May 29, 1998. Mr.
Barnett continues to serve as a director of the Company.
</TABLE>
58
<PAGE>
The following table sets forth information concerning the number of options
owned by the Named Executives and the value of any in-the-money unexercised
options as of June 30, 1998. No options were exercised by the Named Executives
during fiscal 1998 and no options are currently in-the-money:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options at In-the-Money Options at
June 30, 1998 June 30, 1998(1)
----------------------------------------- ------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ---------------- -------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Robert L. Praegitzer 31,250 93,750 $0 $0
Matthew J. Bergeron 31,249 68,751 $0 $0
Robert J. Versiackas 4,010 70,990 $0 $0
Daniel J. Barnett 0 0 -- --
Gregory L. Lucas 12,500 62,500 $0 $0
- --------------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end
market value of the Common Stock. An option is "in-the-money" if the fiscal
year-end fair market value of the Common Stock exceeds the option exercise
price. The last sale price (the fair market value) of the Common Stock on
June 30, 1998 was $5.75 per share.
</TABLE>
Employment Arrangements
In November 1995 the Company entered into an employment agreement with
Robert L. Praegitzer, providing an annual base salary of $250,000 with increases
over time, and eligibility for bonuses and other company benefits. Mr.
Praegitzer's employment agreement is of an indefinite duration.
In August 1996 the Company entered into an employment agreement with Robert
J. Versiackas providing for an annual base salary of $130,000 with eligibility
for bonuses and other Company benefits. If at the end of each quarter during the
first two years of this Agreement the total salary and bonus paid to Mr.
Versiackas is less than an annualized rate of $165,000, the Company is required
to pay Mr. Versiackas an amount equal to the difference. The agreement may be
terminated at any time by the Company for cause, or by Mr. Versiackas upon a
material breach by the Company. Upon termination, Mr. Versiackas is entitled to
all payments customary under Company policies. Upon termination by the Company
without cause, or termination by Mr. Versiackas for cause, Mr. Versiackas, is
also entitled to his base compensation for the lesser of (i) one year, and (ii)
the time remaining until the expiration of two years after the date of the
agreement. After an initial term ending August 26, 1998, the agreement with Mr.
Versiackas may be terminated by either party with or without cause upon 30 days
written notice (or, in the case of termination by the Company, with payment of
60 days of base compensation in lieu of 30 days notice).
59
<PAGE>
Mr. Versiackas has also entered into an agreement with the Company
restricting his ability to compete with the Company until two years after
termination of his employment and prohibiting disclosure of confidential
information and solicitation of the Company's customers or employees.
In March 1998, the Company entered into a letter agreement with James M.
Buchanan providing for an annual base salary of $185,000 with eligibility for
bonuses and other Company benefits. The agreement provides that Mr. Buchanan's
stock options will become fully exercisable upon a change of control of the
Company. In addition, if Mr. Buchanan's employment is terminated other than for
cause within 18 months of such a change of control, he will be entitled to
receive his full base salary, insurance coverage and car allowance for 18 months
following termination. If Mr. Buchanan is terminated other than for causes
related to criminal activity or ethical misconduct during his first 12 months of
employment, he will be entitled to receive his base salary for two years
following termination.
Compensation of Directors
Directors who are not officers of the Company are reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings. In addition, each
individual who becomes a nonemployee director of the Company receives a
non-statutory option to purchase 10,000 shares of Common Stock when the
individual becomes a director, and each nonemployee director of the Company is
automatically granted an annual non-discretionary, non-statutory option to
purchase 5,000 shares of Common Stock upon re-election.
PRINCIPAL SHAREHOLDERS
The following table sets forth information at June 30, 1998, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Ownership Ownership (1) of Class
- --------------------------------------------------------------- ---------------------- ----------------
<S> <C> <C>
Robert L. Praegitzer 8,181,875(2) 64.2%
1270 S.E. Monmouth Cut Off Road
Dallas, Oregon 97338
Matthew J. Bergeron 51,049(3) *
Daniel J. Barnett 142,370 1.1%
Robert J. Versiackas 176,941(4) 1.4%
Gregory L. Lucas 12,500(5) *
Theodore L. Stebbins 13,333(6) *
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<PAGE>
Merrill A. McPeak 8,666(7) *
Gordon B. Kuenster 0 -
All directors and executive 8,622,833(8) 67.6%
officers as a group (11 persons)
- --------------
* Less than 1%
(1) Shares that the person has the right to acquire within 60 days after August
31, 1998 are deemed to be outstanding in calculating the percentage
ownership of the person or group but are not deemed to be outstanding as to
any other person or group.
(2) Includes options to purchase 62,500 shares of Common Stock that are
exercisable within 60 days after August 31, 1998 and excludes options to
purchase 62,500 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(3) Includes options to purchase 43,749 shares of Common Stock that are
exercisable within 60 days after August 31, 1998 and excludes options to
purchase 56,251 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(4) Includes options to purchase 16,509 shares of Common Stock that are
exercisable within 60 days after August 31, 1998 and excludes options to
purchase 58,490 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(5) Includes options to purchase 12,500 shares of Common Stock that are
exercisable within 60 days after August 31, 1998, and excludes options to
purchase 62,500 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(6) Includes options to purchase 13,333 shares of Common Stock that are
exercisable within 60 days after August 31, 1998, and excludes options to
purchase 6,667 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(7) Includes options to purchase 6,666 shares of Common Stock that are
exercisable within 60 days after August 31, 1998, and excludes options to
purchase 13,334 shares of Common Stock not exercisable within 60 days after
August 31, 1998.
(8) Includes options to purchase 175,507 shares of Common Stock that are
exercisable within 60 days after August 31, 1998. Excludes options to
purchase 419,492 shares of Common Stock not exercisable within 60 days
after August 31, 1998.
</TABLE>
CERTAIN TRANSACTIONS
The Company leases its Dallas warehouse facility from Robert L. Praegitzer,
a director, officer, and principal shareholder in the Company on a
month-to-month basis at a an average monthly rate of $7,930, with the lease
payments totaling $95,150 for the year ended June 30, 1998. The lease rates for
the warehouse facility were determined by Mr. Praegitzer, who was the sole
shareholder of the Company at the time of determination. The Board of Directors
of the Company unanimously concluded that these rates were comparable to rates
that could have been obtained from an independent party. The Company believes
that these payments reflect the fair market rental value of the warehouse.
61
<PAGE>
In April 1996, the Company and Robert Praegitzer entered into a Tax
Indemnification Agreement with respect to the status of Company's, CTI's and
Praegitzer Design, Inc.'s ("PDI") as S corporations. Pursuant to that agreement,
the Company is obligated to indemnify Mr. Praegitzer for certain federal or
state income tax liability (including penalties and interest) he may incur or
any increased taxable income resulting from a final determination of any
adjustment with respect to the Company's, CTI's or PDI's income or deductions
for certain periods prior to the termination of the Company's S corporation
status (the "Termination Date"). In addition, the Company is obligated to
indemnify Mr. Praegitzer for any federal and state income taxes he must pay as a
result of receiving the indemnification payment. If there is a final
determination that the Company, CTI or PDI was not an S corporation for certain
periods prior to the S corporation Termination Date, Mr. Praegitzer is obligated
to pay the Company any federal and state income tax refund actually received by
him as a result of that determination. The agreement requires the shareholders,
including Mr. Praegitzer, to file a refund claim if requested to do so by the
Company. In addition, in connection with the CTI transaction, Mr. Praegitzer
received certain rights with respect to the registration of his shares of the
Company's common stock under the Securities Act.
In August 1996 the Company acquired Trend by means of a merger of Trend
with and into the Company (the "Merger"). In the Merger, each outstanding share
of Trend was converted into (i) 277.085 shares of Company's common stock and
(ii) the right to receive a cash payment of $1,385.43. On completion of the
Merger, the shareholders of Trend held a total of 1,000,000 shares of
Praegitzer, or approximately 8.5% of the outstanding Praegitzer Common Stock,
and received a total of $5,000,000 cash. Daniel J. Barnett, a director of the
Company and the former president of Trend and a former senior vice president of
the Company, and his spouse received 185,370 shares of the Company's common
stock and a cash payment of $926,853. Robert Versiackas, now a senior vice
president of the Company, and his spouse received 160,432 shares of the
Company's common stock and a cash payment of $802,163.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Trust Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. Initially, Wilmington Trust Company will serve as the
Delaware Trustee and the Property Trustee. The Property Trustee is the
independent trustee whose sole responsibility is to fulfill the trustee
obligations specified in the Trust Indenture Act. The terms of the Trust
Preferred Securities will include those stated in the Trust Agreement and those
made part of the Trust Agreement by the Trust Indenture Act. This summary of
certain terms and provisions of the Trust Preferred Securities and the Trust
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. Wherever particular
defined terms of the Trust Agreement (as amended or supplemented from time to
time) are referred to herein, such defined terms are incorporated herein. The
62
<PAGE>
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
General
Pursuant to the terms of the Trust Agreement, the Administrative Trustees
on behalf of the Trust will issue the Trust Securities. The Trust Securities
represent undivided beneficial interests in the assets of the Trust. The holders
of the Trust Preferred Securities will be entitled to a preference over the
Trust Common Securities (which will be held by the Company) in certain
circumstances with respect to Distributions and amounts payable on redemption or
liquidation, as well as other benefits as described in the Trust Agreement.
The Trust Preferred Securities will rank pari passu, and payments will be
made thereon pro rata, with the Common Securities of the Trust, except as
described under "--Subordination of Common Securities of the Trust Held by the
Company" below. Legal title to the Junior Subordinated Debentures will be held
by the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The Guarantee executed by the Company for the benefit of the holders
of the Trust Preferred Securities (the "Guarantee") will be a guarantee on a
subordinated basis with respect to the Trust Preferred Securities but will not
guarantee payment of Distributions or amounts payable on redemption or on
liquidation of the Trust Preferred Securities if the Trust does not have funds
on hand available to make such payments. See "Description of Guarantee."
Distributions
Payment of Distributions. Distributions on the Trust Preferred Securities
will be paid at the annual rate of ___% of the stated Liquidation Amount of $10,
payable quarterly in arrears on January 15, April 15, July 15 and October 15 of
each calendar year to the holders of the Trust Preferred Securities on the
relevant record dates (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date"). The amount of each
Distribution due with respect to the Trust Preferred Securities will include
amounts accumulated through the Distribution Date. Distributions on the Trust
Preferred Securities will be payable to the holders thereof as they appear on
the register of the Trust on the relevant record date which will be, so long as
such Securities remain in book-entry form, one Business Day (as defined below)
prior to the relevant Distribution Date or, in the event that the Trust
Preferred Securities are not then in book-entry form, the relevant record date
will be the date 15 days prior to the relevant Distribution Date. Distributions
will accumulate from the date of original issuance and will accumulate whether
or nor funds are available for payment. The first Distribution Date for the
Trust Preferred Securities will be January 15, 1999.
The amount of Distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which Distributions are payable on the Trust Preferred Securities is not a
Business Day, payment of the
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<PAGE>
Distribution payable on such date will be made on the next Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on the date such payment was originally
payable. As used in this Prospectus, a "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in the State
of Oregon are authorized or required by law or executive order to remain closed
or a day on which the corporate trust office of the Property Trustee or the
Indenture Trustee is closed for business.
The funds of the Trust available for distribution to holders of its Trust
Preferred Securities will be limited to payments by the Company under the Junior
Subordinated Debentures in which the Trust will invest the proceeds from the
sale of its Trust Preferred Securities. See "Description of Junior Subordinated
Debentures." If the Company does not make interest payments on the Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Trust Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Company. See "Description of Guarantee."
Extension Period. So long as no Debenture Event of Default has occurred and
is continuing, and so long as the Company's Consolidated Interest Coverage Ratio
(as defined below under "Description of Junior Subordinated
Debentures--Covenants of the Company") for the combined four fiscal quarters
immediately preceding what would (but for the Extension Period) otherwise be an
Interest Payment Date shall be below 1.50 to 1, the Company has the right under
the Indenture to defer the payment of interest on the Junior Subordinated
Debentures at any time or from time to time for a period not exceeding 20
consecutive quarterly periods with respect to each such period (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debentures. As a consequence of any
such election, quarterly Distributions on the Trust Preferred Securities will be
deferred by the Trust during any such Extension Period. Distributions to which
holders of Trust Preferred Securities are entitled will accumulate additional
amounts thereon at the rate per annum of ____% thereof, compounded monthly from
the relevant Distribution Date, to the extent permitted under applicable law.
The term "Distribution," as used herein, shall include any such additional
accumulated amounts. During any such Extension Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than (a) dividends or distributions in
the Company's capital stock (which includes common and preferred stock), (b) any
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock
64
<PAGE>
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee and (d) purchases of
common stock related to the issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers, employees or consultants)
or (iii) redeem, purchase or acquire less than all of the Junior Subordinated
Debentures or any of the Trust Preferred Securities. Prior to the termination of
any such Extension Period, the Company may further extend such Extension Period,
provided that such extension does not cause such Extension Period to exceed 20
consecutive quarterly periods or extend beyond the Stated Maturity and, provided
further, that any such Extension Period may continue only so long as (x) no
Debenture Event of Default has occurred and is continuing, and (y) the
Consolidated Interest Coverage Ratio of the Company for the combined four fiscal
quarters immediately preceding what would (but for such Extension Period)
otherwise be an Interest Payment Date is less than 1.50 to 1. Upon the
termination of any such Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. Subject to the foregoing, there is no limitation on the
number of times that the Company may elect to begin an Extension Period. The
Company has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures.
Redemption
Mandatory Redemption of Trust Preferred Securities. Upon the repayment or
redemption at any time, in whole or in part, of any Junior Subordinated
Debentures, the proceeds from such repayment or redemption shall be applied by
the Property Trustee to redeem a Like Amount (as defined below) of the Trust
Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the Redemption Price (as defined below).
See "Description of Junior Subordinated Debentures-- Redemption." If less than
all of the Junior Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption of the Trust Securities on a pro rata basis. The
amount of premium, if any, paid by the Company upon the redemption of all or any
part of the Junior Subordinated Debentures to be repaid or redeemed on a
Redemption Date shall be allocated to the redemption pro rata of the Trust
Securities.
Optional Redemption of Junior Subordinated Debentures. The Company will
have the right to redeem the Junior Subordinated Debentures (i) on or after
____________, 2003, in whole at any time or in part from time to time at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof, or (ii) at any time, in whole (but not in
part), upon the occurrence of a Tax Event or an Investment Company Event at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof. See "Description of Junior Subordinated
Debentures--Redemption."
65
<PAGE>
Tax Event Redemption, Investment Company Event Redemption or Distribution
of Junior Subordinated Debentures. If a Tax Event or an Investment Company Event
shall occur and be continuing, the Company has the right to redeem the Junior
Subordinated Debentures in whole (but not in part) and thereby cause a mandatory
redemption of the Trust Securities in whole (but not in part) at the Redemption
Price (as defined below) within 90 days following the occurrence of such Tax
Event or Investment Company Event. If a Tax Event or an Investment Company Event
has occurred and is continuing and the Company does not elect to redeem the
Junior Subordinated Debentures and thereby cause a mandatory redemption of the
Trust Securities or to dissolve the Trust and cause the Junior Subordinated
Debentures to be distributed to holders of the Trust Securities in liquidation
of the Trust as described below, such Trust Securities will remain outstanding
and Additional Sums (as defined below) may be payable on the Junior Subordinated
Debentures.
Definitions
"Additional Sums" means the additional amounts as may be necessary to be
paid by the Company with respect to the Junior Subordinated Debentures in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Trust Securities of the Trust shall not be reduced as a result of
any additional taxes, duties and other governmental charges to which the Trust
has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Trust Common Securities and to the Trust Preferred Securities based upon the
relative Liquidation Amounts of such classes and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities, and (ii) with respect
to a distribution of Junior Subordinated Debentures to holders of Trust
Securities in connection with a dissolution and liquidation of the Trust, Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts), among
the Trust Securities.
Distribution of Junior Subordinated Debentures
Subject to the Company and the Trust having received an opinion of counsel
to the effect that such distribution will not be a taxable event to the holders
of the Trust Preferred
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<PAGE>
Securities, the Company will have the right at any time to dissolve the Trust
and, after satisfaction of the liabilities of creditors of the Trust as provided
by applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of Trust Securities in liquidation of the Trust. After the
liquidation date fixed for any distribution of Junior Subordinated Debentures
for Trust Preferred Securities (i) such Trust Preferred Securities will no
longer be deemed to be outstanding, and (ii) certificates representing Trust
Preferred Securities that are not then held by the Depositary or its nominee
will be deemed to represent Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Trust Preferred Securities, and
bearing accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on the Trust Preferred Securities until such certificates are
presented to the Administrative Trustees or their agent for transfer or
exchange.
There is no assurance as to the market prices for the Trust Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Trust Preferred Securities if a dissolution and liquidation of
the Trust were to occur. Accordingly, the Trust Preferred Securities that an
investor may purchase, or the Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of the Trust, may trade at a discount
to the price that the investor paid to purchase the Trust Preferred Securities
offered hereby.
Redemption Procedures
Trust Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the Trust has funds on
hand available for the payment of such Redemption Price. See "--Subordination of
Trust Common Securities of the Trust Held by the Company" herein and
"Description of Guarantee."
If the Property Trustee gives a notice of redemption in respect of the
Trust Preferred Securities, then, by 12:00 noon, Eastern time on the Redemption
Date, to the extent funds are available and to the extent the Trust Preferred
Securities are no longer in book-entry form, the Property Trustee will deposit
with the Paying Agent for such Trust Preferred Securities funds sufficient to
pay the aggregate Redemption Price and will give such Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the holders thereof
upon surrender of their certificates evidencing such Trust Preferred Securities.
If such Trust Preferred Securities are only in book-entry form, the Property
Trustee, to the extent funds are available, will deposit with the Depositary
funds sufficient to pay the aggregate Redemption Price and will give the
Depositary irrevocable instructions and authority to pay the Redemption Price to
the holders of such Trust Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date shall be payable to the
holders of such Trust Preferred Securities on the relevant record dates
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for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of the Trust Preferred Securities will cease, except the
right of the holders of the Trust Preferred Securities to receive the applicable
Redemption Price, but without interest on such Redemption Price, and such Trust
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of such Trust Preferred Securities is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding Business Day (and without any interest or other payment in
respect of any such delay), with the same force and effect as if made on the
date such payment was originally payable. In the event that payment of the
Redemption Price in respect of Trust Preferred Securities called for redemption
is improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee, Distributions on such Trust Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law), and further provided that the Company is not then
exercising its right to defer interest payments on the Junior Subordinated
Debentures, the Company may at any time and from time to time purchase
outstanding Trust Preferred Securities by tender, in the open market or by
private agreement.
Payment of the Redemption Price on the Trust Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Trust Preferred
Securities shall be made to the applicable recordholders thereof as they appear
on the register for such Trust Preferred Securities on the relevant record date,
which date shall be, so long as such securities remain in book-entry form, one
Business Day prior to the Redemption Date or Liquidation Date, as applicable. In
the event that the Trust Preferred Securities are not in book-entry form, the
relevant record date for such Trust Preferred Securities shall be the date 15
days prior to the relevant Redemption Date.
If less than all of the Trust Securities issued by the Trust are to be
redeemed on a Redemption Date, then the aggregate Redemption Price for such
Trust Securities to be redeemed shall be allocated pro rata (based on
Liquidation Amounts) to the Trust Preferred Securities and Trust Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Trust Preferred Securities to be redeemed shall be selected by the
Property Trustee from the outstanding Trust Preferred Securities not previously
called for redemption, by such method as the Property Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions (equal to $10 or an integral multiple thereof) of the Liquidation
Amount of Trust Preferred Securities. The Property Trustee shall promptly notify
the Securities Registrar (as defined below) in writing of the Trust Preferred
Securities selected for redemption and, in the case of any Trust Preferred
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Securities selected for partial redemption, the Liquidation Amount thereof to be
redeemed. For all purposes of the Trust Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Trust Preferred
Securities shall relate to the portion of the aggregate Liquidation Amount of
Trust Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at such
holder's registered address. Unless the Trust defaults in payment of the
applicable Redemption Price, on and after the Redemption Date, Distributions
will cease to accrue on such Trust Preferred Securities called for redemption.
Subordination of Trust Common Securities Held by the Company
Payment of Distributions on, and the Redemption Price of, the Trust
Preferred Securities and Trust Common Securities, as applicable, shall be made
pro rata based on the Liquidation Amounts of the Trust Preferred Securities and
Trust Common Securities; provided, however, that if on any Distribution Date or
Redemption Date a Debenture Event of Default shall have occurred and be
continuing, no payment of any Distribution on, or applicable Redemption Price
of, any of the Trust Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Trust Common Securities,
shall be made unless payment in full in cash of all accumulated and unpaid
Distributions on all of the outstanding Trust Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the applicable Redemption Price, the full amount of such Redemption Price on
all of the outstanding Trust Preferred Securities then called for redemption,
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 Redemption Price of, the Trust Preferred Securities
then due and payable.
In the case of any Event of Default under the Trust Agreement resulting
from a Debenture Event of Default, the Company as holder of the Trust Common
Securities, will be deemed to have waived any right to act with respect to any
such Event of Default until the effect of all such Events of Default have been
cured, waived or otherwise eliminated. Until any such Events of Default have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Trust Preferred Securities and not on
behalf of the Company as holder of the Trust Common Securities, and only the
holders of the Trust Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
Liquidation Distribution Upon Dissolution
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the
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Junior Subordinated Debentures to be distributed to the holders of the Trust
Preferred Securities. See "--Distribution of Junior Subordinated Debentures"
above. The Company might exercise its right to dissolve the Trust under
circumstances where a "Tax Event," "Investment Company Event" or other
undesirable event could be avoided simply by dissolving the Trust and causing
the Junior Subordinated Debentures to be distributed to holders of the Trust
Preferred Securities.
In addition, pursuant to the Trust Agreement, the Trust shall automatically
dissolve upon expiration of its term and shall earlier dissolve on the first to
occur of: (i) certain events of bankruptcy, dissolution or liquidation of the
Company; (ii) the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of its Trust Securities, if the Company, as Depositor,
has delivered written direction to the Property Trustee to dissolve the Trust
(which direction is optional and, except as described above, wholly within the
discretion of the Company, as Depositor); (iii) redemption of all of the Trust
Preferred Securities as described under "--Redemption"; and (iv) the entry of an
order for the dissolution of the Trust by a court of competent jurisdiction.
If an early dissolution occurs as described in clause (i), (ii), or (iv)
above, the Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out of
the assets of the Trust available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to, in the case of holders of Trust Preferred Securities,
the aggregate of the Liquidation Amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such 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
Trust Preferred Securities shall be paid on a pro rata basis. The holder(s) of
the Trust Common Securities will be entitled to receive distributions upon any
such liquidation on a pro rata basis with the holders of the Trust Preferred
Securities, except that if a Debenture Event of Default has occurred and is
continuing, the Trust Preferred Securities shall have a priority over the Trust
Common Securities.
Under current United States federal income tax law and interpretations, and
assuming that the Trust is treated as a grantor trust, a distribution of the
Junior Subordinated Debentures should not be a taxable event to holders of the
Trust Preferred Securities. Should there be a change in law, a change in
distribution, a Tax Event or other circumstances, however, the distribution
could be a taxable event to the Trust and to holders of the Trust Preferred
Securities. See "Certain Federal Income Tax Consequences." If the Company elects
neither to redeem the Junior Subordinated Debentures prior to maturity nor to
liquidate the Trust and distribute the Junior Subordinated Debentures to holders
of the
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Trust Preferred Securities, the Trust Preferred Securities will remain
outstanding until the repayment of the Junior Subordinated Debentures.
If the Company elects to dissolve the Trust and thereby causes the Junior
Subordinated Debentures to be distributed to holders of the Trust Preferred
Securities in liquidation of the Trust, the Company shall continue to have the
right to shorten the Stated Maturity of such Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--General."
Events of Default; Notice
Any one of the following events that has occurred and is continuing
constitutes an "Event of Default" under the Trust Agreement (an "Event of
Default") with respect to the Trust Preferred Securities (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):
(i) the occurrence of a Debenture Event of Default (see "Description of
Junior Subordinated Debentures--Debenture Events of Default"); or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Property Trustee in the Trust Agreement (other than
a default or breach in the performance of a covenant or warranty which is
addressed in clause (ii) or (iii) above), and continuation of such default or
breach, for a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Property Trustee by the holders of at least
25% in aggregate Liquidation Amount of the outstanding Trust Preferred
Securities, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under the
Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit notice of such Event of Default to the holders of the
Trust Preferred Securities, the Administrative Trustees and the Company, as
Depositor, unless such Event of Default shall
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have been cured or waived. The Company, as Depositor, and the Administrative
Trustees are required to file annually with the Property Trustee a certificate
as to whether or not they are in compliance with all the conditions and
covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Trust
Preferred Securities shall have a preference over the Trust Common Securities
upon dissolution of the Trust as described above. See "--Liquidation
Distribution upon Dissolution" herein. Upon a Debenture Event of Default (other
than with respect to certain events in bankruptcy, insolvency or
reorganization), unless the principal of all the Junior Subordinated Debentures
has already become due and payable, either the Property Trustee or the holders
of not less than 25% in aggregate principal amount of the Junior Subordinated
Debentures then outstanding may declare all of the Junior Subordinated
Debentures to be due and payable immediately by giving notice in writing to the
Company (and to the Property Trustee, if notice is given by holders of the
Junior Subordinated Debentures). If the Property Trustee or the holders of the
Junior Subordinated Debentures fail to declare the principal of all of the
Junior Subordinated Debentures due and payable upon a Debenture Event of
Default, the holders of at least 25% in Liquidation Amount of the Trust
Preferred Securities then outstanding shall have the right to declare the Junior
Subordinated Debentures immediately due and payable. In either event, payment of
principal and interest on the Junior Subordinated Debentures shall remain
subordinated to the extent provided in the Indenture. In addition, holders of
the Trust Preferred Securities have the right in certain circumstances to bring
a Direct Action (as hereinafter defined). See "Description of Junior
Subordinated Debentures--Enforcement of Certain Rights by Holders of Trust
Preferred Securities."
If a Debenture Event of Default with respect to certain events in
bankruptcy, insolvency or reorganization occurs, the Junior Subordinated
Debentures shall automatically, and without any declaration or other action on
the part of the Property Trustee or the holders of the Junior Subordinated
Debentures, become immediately due and payable. In such event, payment of
principal and interest on the Junior Subordinated Debentures will also remain
subordinated to the extent provided in the Indenture.
Removal of Trustees
Unless a Debenture Event of Default has occurred and is continuing, any of
the Property Trustee, the Delaware Trustee or the Administrative Trustees may be
removed at any time by the holder of the Trust Common Securities. For example,
the holder of the Trust Common Securities may seek to remove such trustees upon
substandard performance or non-performance of their duties or upon a significant
increase in a trustee's fee. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee also may be removed at
such time by the holders of a majority in Liquidation Amount of the outstanding
Trust Preferred Securities. In no event will the holders of the Trust Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as
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the holder of the Trust Common Securities. No resignation or removal of an
Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust property may
at the time be located, the Company, as the holder of the Trust Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Trust Agreement. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Merger or Consolidation of Trustees
Any Person (as defined in the Trust Agreement) into which the Property
Trustee and the Delaware 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 such relevant Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Trustee under the Trust
Agreement, provided such corporation shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below or as described in "--Liquidation Distribution Upon
Dissolution." The Trust may, at the request of the Company, with the consent of
the Administrative Trustees and without the consent of the holders of the Trust
Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to a trust organized as such under the laws of any State;
provided, that (i) such successor entity either (a) expressly assumes all of the
obligations of the Trust with respect to the Trust Preferred Securities or (b)
substitutes for the Trust Preferred Securities other securities having
substantially the same terms as the Trust Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the Trust
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity, possessing
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the same powers and duties as the Property Trustee, as the holder of the Junior
Subordinated Debentures, (iii) the Successor Securities are listed or traded, or
any Successor Securities will be listed upon notification of issuance, on any
national securities exchange, national stock market or other organization on
which the Trust Preferred Securities are then listed or traded, if any, (iv)
such merger, consolidation, amalgamation, conveyance, transfer or lease does not
cause the Trust Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization which
gives ratings to the Trust Preferred Securities, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an Opinion
of Counsel to the effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Trust Preferred Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor such successor entity will be required to register
as an investment company under the Investment Company Act and (viii) the Company
or any permitted successor or designee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or loan its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or loan would cause the Trust or the successor entity to be
classified as other than a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of the Trust Agreement
Except as provided below and under "Description of Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Trust Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Trust will be classified for United States federal
income tax
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purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any such
amendments of the Trust Agreement shall become effective when notice thereof is
given to the holders of the Trust Securities. The Trust Agreement may be amended
by the Administrative Trustees and the Property Trustee with (i) the consent of
holders representing not less than a majority of the aggregate Liquidation
Amount of the outstanding Trust Securities, and (ii) receipt by such Trustees of
an Opinion of Counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from registration as an "investment
company" under the Investment Company Act, provided that without the unanimous
consent of the holders of the Trust Securities to be affected thereby, the Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
executing any trust or power conferred on the Indenture Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in aggregate Liquidation Amount of all outstanding Trust Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Trust Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Trust Preferred Securities except by subsequent vote of
the holders of the Trust Preferred Securities. The Property Trustee shall notify
each holder of the Trust Preferred Securities of any notice of default with
respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Trust Preferred Securities, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an Opinion
of Counsel experienced in such matters to the effect that such action will not
cause the Trust to fail to be classified as a grantor trust for United States
federal income tax purposes.
Any required approval of holders of the Trust Preferred Securities may be
given at a meeting of holders of Trust Preferred Securities convened for such
purpose or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of
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the Trust 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 given to each
holder of record of the Trust Preferred Securities in the manner set forth in
the Trust Agreement.
No vote or consent of the holders of the Trust Preferred Securities will be
required for the Trust to redeem and cancel the Trust Preferred Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Trust Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Trust Preferred Securities that are owned by the Company, the Issuer Trustees or
any affiliate of the Company or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
Global Trust Preferred Securities
The Trust Preferred Securities will be represented by one or more global
certificates registered in the name of the Depositary or its nominee ("Global
Trust Preferred Security"). Beneficial interests in the Global Trust Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in the Depositary. Except as
described below, Trust Preferred Securities in certificated form will not be
issued in exchange for the Global Trust Preferred Securities. See "Book-Entry
Issuance."
A Global Trust Preferred Security will be exchanged for Trust Preferred
Securities in certificated form registered in the names of persons other than
the Depositary or its nominee only if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as a depositary for such Global Trust
Preferred Security and no successor depositary shall have been appointed, or if
at any time the Depositary ceases to be a clearing agency registered under the
Exchange Act, at a time when the Depositary is required to be so registered to
act as such depositary, and no successor depositary shall have been appointed,
(ii) the Company in its sole discretion determines that such Global Trust
Preferred Security shall be so exchangeable, or (iii) there shall have occurred
and be continuing a Debenture Event of Default and the owners of beneficial
interests in such Global Trust Preferred Security aggregating at least a
majority in Liquidation Amount of the Trust Preferred Securities inform the
Property Trustee that the continuation of a book-entry registration system is no
longer in the best interests of the holders of Trust Preferred Securities. Any
Global Trust Preferred Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for definitive certificates registered in such
names as the Depositary shall direct. It is expected that such instructions will
be based upon directions received by the Depositary with respect to ownership of
beneficial interests in such Global Trust Preferred Security. In the event that
Trust Preferred Securities are issued in definitive form, such Trust Preferred
Securities will be in denominations of $10 and integral multiples thereof and
may be transferred or exchanged at the corporate trust office of the Property
Trustee, or the officers of a paying or transfer agent appointed by the
Administrative Trustees.
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Unless and until it is exchanged in whole or in part for the individual
Trust Preferred Securities represented thereby, a Global Trust Preferred
Security may not be transferred except as a whole by the Depositary to a nominee
of such Depositary or by a nominee of the Depositary to such Depositary or
another nominee of such Depositary or by the Depositary or any nominee to a
successor Depositary or any nominee of such successor.
Payments on Global Trust Preferred Securities will be made to the
Depositary, as the record holder of the Trust Preferred Securities. In the event
the Trust Preferred Securities are issued in definitive form, Distributions will
be payable, the transfer of the Trust Preferred Securities will be registrable,
and Trust Preferred Securities will be exchangeable for Trust Preferred
Securities of other denominations of a like aggregate Liquidation Amount, at the
corporate trust office of the Property Trustee, or at the offices of any paying
agent or transfer agent appointed by the Administrative Trustees, provided that
payment of any Distribution may be made at the option of the Administrative
Trustees by check mailed to the address of the persons entitled thereto or by
wire transfer, provided that payments will be made by wire transfer if so
requested by a holder of more than $1 million aggregate Liquidation Amount. In
addition, if the Trust Preferred Securities are issued in definitive,
certificated form, the record dates for payment of Distributions will be the
first day of the month in which the relevant Distribution Date occurs. For a
description of the terms of the depositary arrangements relating to payments,
transfer, voting rights, redemptions and other notices and other matters, see
"Book-Entry Issuance."
Upon the issuance of a Global Trust Preferred Security, and the deposit of
such Global Trust Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Trust Preferred Security or its nominee will credit,
on its book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Trust Preferred Securities represented by
such Global Trust Preferred Securities to the accounts of Participants (as
defined below). Such accounts shall be designated by the dealers, underwriters
or agents with respect to such Trust Preferred Securities. Ownership of
beneficial interests in a Global Trust Preferred Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Trust Preferred Security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Trust Preferred Security.
So long as the Depositary for a Global Trust Preferred Security, or its
nominee, is the registered owner of such Global Trust Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Trust Preferred Securities represented by such Global
Trust Preferred Security for all purposes under the Trust Agreement governing
such Trust Preferred Securities. Except as provided below,
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owners of beneficial interests in a Global Trust Preferred Security will not be
entitled to have any of the individual Trust Preferred Securities represented by
such Global Trust Preferred Security registered in their names, will not receive
or be entitled to receive physical delivery of any such Trust Preferred
Securities in definitive form and will not be considered the owners or holders
thereof under the Trust Agreement.
None of the Company, the Property Trustee, any Paying Agent, or the
Securities Registrar for such Trust Preferred Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Trust
Preferred Security representing such Trust Preferred Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for Trust Preferred Securities or
its nominee, upon receipt of any payment of the Liquidation Amount or
Distributions in respect of a permanent Global Trust Preferred Security
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Trust Preferred Security as shown on the
records of such Depositary or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in such Global Trust
Preferred Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
Payment and Paying Agent
Payments in respect of the Trust Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any of the Trust Preferred Securities are
not held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Securities Register. The paying agent (the "Paying Agent") shall initially be
the Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Company. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees, the Property Trustee and the Company. In the event that
the Property Trustee shall no longer be the Paying Agent, the Administrative
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Administrative Trustees and the Company) to act as Paying
Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the Trust
Preferred Securities. Registration of transfers of the Trust Preferred
Securities will be effected without charge by or on behalf of the Trust, but
upon payment by the holder of any tax or other
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governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of the Trust Preferred Securities after such Trust Preferred
Securities have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If the Property
Trustee is required to decide between alternative courses of action or to
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of the Trust Preferred Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by the Company and, if not so directed, shall take such action as it
deems advisable and in the best interests of the holders of the Trust Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
Miscellaneous
The Administrative 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
Investment Company Act or fail to be classified as a grantor trust for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Trust Agreement,
that the Company and the Administrative Trustees determine in their discretion
to be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Trust Preferred
Securities. Holders of the Trust Preferred Securities have no preemptive or
similar rights.
The Trust may not borrow money, issue debt or mortgage or pledge any of its
assets.
The Trust Agreement is governed by Delaware law.
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Trust Preferred Securities, the Trust
will invest the proceeds thereof, together with the consideration paid by the
Company for the Trust Common Securities, in Junior Subordinated Debentures
issued by the Company. The Junior Subordinated Debentures will be issued as
unsecured debt under the Junior Subordinated Indenture, dated as of
____________, 1998 (the "Indenture"), between the Company and the Indenture
Trustee. The following summary of the terms and provisions of the Junior
Subordinated Debentures and the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture,
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to the Trust Indenture Act. The Indenture is
qualified under the Trust Indenture Act. Whenever particular defined terms of
the Indenture are referred to herein, such defined terms are incorporated herein
by reference.
General
The Junior Subordinated Debentures will bear interest at the annual rate of
___% of the principal amount thereof, payable quarterly in arrears on January
15, April 15, July 15 and October 15 of each calendar year (each, an "Interest
Payment Date"), commencing January 15, 1998, to the person in whose name each
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the first day of the month in which such payment is
made. Notwithstanding the above, in the event that either the (i) Junior
Subordinated Debentures are held by the Property Trustee and the Trust Preferred
Securities are registered in book-entry only form or (ii) the Junior
Subordinated Debentures are represented by a Global Subordinated Debenture (as
defined herein), the record date for such payment shall be the Business Day next
preceding such Interest Payment Date. The amount of each interest payment due
with respect to the Junior Subordinated Debentures will include amounts accrued
through the date the interest payment is due. It is anticipated that, until the
liquidation, if any, of the Trust, each Junior Subordinated Debenture will be
held in the name of the Property Trustee, in trust for the benefit of the
holders of the Trust Preferred Securities. The amount of interest payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next Business Day (and without any
interest or other payment in respect of any such delay), in each case with the
same force and effect as if made on the date such payment was originally
payable. Accrued interest that is not paid on the applicable Interest Payment
Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of ____% thereof. The term "interest" as
used herein shall include quarterly interest payments, interest on quarterly
interest payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined below), as applicable.
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The Junior Subordinated Debentures will mature on ___________, 2028 (such
date, as it may be shortened as hereinafter described, the "Stated Maturity").
Such date may be shortened at any time by the Company to any date not earlier
than _______________, 2003. The Company might exercise its right to shorten the
maturity of the Junior Subordinated Debentures under circumstances where a "Tax
Event," "Investment Company Event" or other undesirable event could be avoided
simply by shortening the maturity of the Junior Subordinated Debentures. In the
event that the Company elects to shorten the Stated Maturity of the Junior
Subordinated Debentures, it shall give notice to the Indenture Trustee, and the
Indenture Trustee shall give notice of such shortening to the holders of the
Junior Subordinated Debentures no less than 60 days prior to the effectiveness
thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt and Subordinated Debt
of the Company. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Debt and Subordinated
Debt, whether under the Indenture or any existing or other indenture that the
Company may enter into in the future or otherwise. See "--Subordination" below.
Option to Defer Interest Payment Period
So long as no Debenture Event of Default has occurred and is continuing,
and so long as the Company's Consolidated Interest Coverage Ratio (as defined
below under "--Covenants of the Company") for the combined four fiscal quarters
immediately preceding what would (but for the Extension Period) otherwise be an
Interest Payment Date shall be less than 1.50 to 1, the Company has the right
under the Indenture at any time during the term of the Junior Subordinated
Debentures to defer the payment of interest at any time or from time to time for
a period not exceeding 20 consecutive quarterly periods (each such period an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity. At the end of such Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon at the annual
rate of ____%, compounded quarterly, to the extent permitted by applicable law).
During an Extension Period, interest will continue to accrue and holders of
Junior Subordinated Debentures will be required to accrue interest income for
United States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount." Neither the default
by the Company on any Senior Debt and Subordinated Debt, nor a default with
respect to Senior Debt and Subordinated Debt resulting in acceleration of the
maturity thereof, constitutes a Debenture Event of Default. See "--Debenture
Events of Default" below.
During any such Extension Period, the Company may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including other Junior Subordinated Debentures) that
rank pari passu with or junior in interest to the Junior
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Subordinated Debentures, or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any subsidiary of the Company
if such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debentures (other than (a) dividends or distributions in capital
stock of the Company (which includes common and preferred stock), (b) any
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, and (d) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans for
its directors, officers or employees), or (iii) redeem, purchase or acquire less
than all of the Junior Subordinated Debentures or any of the Trust Preferred
Securities. Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or extend
beyond the Stated Maturity and, provided further, that any such Extension Period
may continue only so long as (x) no Debenture Event of Default has occurred and
is continuing, and (y) the Consolidated Interest Coverage Ratio of the Company
for the combined four fiscal quarters immediately preceding what would (but for
such Extension Period) otherwise be an Interest Payment Date is less than 1.50
to 1. Upon the termination of any such Extension Period and the payment of all
amounts then due on any Interest Payment Date, the Company may elect to begin a
new Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The Company
must give notice to the Property Trustee, the Administrative Trustees and the
Indenture Trustee of its election of any Extension Period at least one Business
Day prior to the earlier of (i) the date the distributions on the Trust
Preferred Securities would have been payable but for the election to begin or
extend such Extension Period, (ii) the date the Administrative Trustees are
required to give notice to the American Stock Exchange, the New York Stock
Exchange, The Nasdaq Stock Market or any applicable stock exchange or automated
quotation system on which the Trust Preferred Securities are then listed or
quoted or to the holders of the Trust Preferred Securities on the record date or
(iii) the date such distributions are payable, but in any event not less than
one Business Day prior to such record date. The Indenture Trustee shall give
notice of the Company's election to begin or extend a new Extension Period to
the holders of the Trust Preferred Securities. There is no limitation on the
number of times that the Company may elect to begin an Extension Period.
Distributions on the Trust Preferred Securities will be deferred by the
Trust during any such Extension Period. See "Description of the Trust Preferred
Securities-- Distributions." For a description of certain federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures, see "Certain Federal Income Tax Consequences."
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Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures such amounts
("Additional Sums") as shall be required so that the Distributions payable by
the Trust shall not be reduced as a result of any such additional taxes, duties
or other governmental charges.
Redemption
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) on or after _______________, 2003, in whole at any
time or in part from time to time, or (ii) at any time in whole (but not in
part), within 90 days following the occurrence of a Tax Event or an Investment
Company Event, in each case at a redemption price equal to the accrued and
unpaid interest on the Junior Subordinated Debentures so redeemed to the date
fixed for redemption, plus 100% of the principal amount thereof.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless the
Company defaults in payment of the redemption price, on and after the redemption
date interest ceases to accrue on such Junior Subordinated Debentures or
portions thereof called for redemption.
If the Trust is required to pay additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums (as
defined herein).
The Junior Subordinated Debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described under "Description of the Trust Preferred
Securities--Liquidation Distribution Upon Dissolution," under certain
circumstances involving the dissolution of the Trust, the Junior Subordinated
Debentures may be distributed to the holders of the Trust Preferred Securities
in liquidation of the Trust after satisfaction of liabilities to creditors of
the Trust as provided by applicable law. If the Junior Subordinated Debentures
are distributed to the holders of Trust Preferred Securities upon the
liquidation of the Trust, the Company will use its best efforts to list the
Junior Subordinated Debentures on the American Stock Exchange or the Nasdaq
National Market or such other stock exchanges or automated quotation system, if
any, on which the Trust Preferred Securities are then listed or quoted. There is
no assurance as to the market price of any Junior Subordinated Debentures that
may be distributed to the holders of Trust Preferred Securities.
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Restrictions on Certain Payments
If at any time (i) there shall have occurred a Debenture Event of Default,
(ii) the Company shall have given notice of its election of an Extension Period
as provided in the Indenture with respect to the Junior Subordinated Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing, or (iii) while the Junior Subordinated
Debentures are held by the Trust, the Company shall be in default with respect
to its payment of any obligation under the Guarantee, then the Company will not
(1) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, (2) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company (including
other Junior Subordinated Debt) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than (a) dividends or distributions in
capital stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee and (d) purchases of
common stock related to issuance of common stock or rights under any of the
Company's benefit plans for its directors, officers, employees or consultants)
or (3) redeem, purchase or acquire less than all of the Junior Subordinated
Debentures or any of the Trust Preferred Securities.
Subordination
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Debt and Subordinated
Debt whether now existing or hereafter incurred. Senior Debt and Subordinated
Debt may include indebtedness of the Company which is subordinated to other
indebtedness of the Company but nevertheless senior to the Junior Subordinated
Debentures. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Junior Subordinated Debentures may be made
if any payment default or acceleration with respect to any Senior Debt and
Subordinated Debt shall have occurred and be continuing and the Company and the
Trustee shall have received notice of such default or acceleration from any
person permitted to give such notice. Upon any payment by the Company or
distribution of assets of the Company to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due on all Senior Debt and Subordinated Debt must be paid in full before
the holders of the Junior Subordinated Debentures are entitled to receive or
retain any payment. Upon payment in full of all amounts due on the Senior Debt
and Subordinated Debt then outstanding, the rights of the holders of the Junior
Subordinated Debentures will be subrogated to the rights of the holders of
Senior Debt and Subordinated Debt to receive
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payments or distributions applicable to such Senior Debt and Subordinated Debt
until all amounts owing on the Junior Subordinated Debentures are paid in full.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, by reason of a Debenture Event of Default, the holders of all Senior
Debt and Subordinated Debt outstanding at the time of such acceleration will
first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the Junior Subordinated Debentures.
The Indenture places no limitation on the amount of additional Senior Debt
and Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt and
Subordinated Debt.
Covenants of the Company
The Company will covenant in the Indenture, as to the Junior Subordinated
Debentures, that if and so long as (i) the Property Trustee on behalf of the
Trust is the holder of all such Junior Subordinated Debentures, (ii) a Tax Event
in respect of the Trust has occurred and is continuing and (iii) the Company has
elected, and has not revoked such election, to pay Additional Sums (as defined
under "Description of the Trust Preferred Securities--Redemption") in respect of
the Trust Preferred Securities, the Company will pay to the Trust such
Additional Sums. The Company will also covenant, as to the Junior Subordinated
Debentures, (i) to maintain directly or indirectly 100% ownership of the Trust
Common Securities of the Trust to which Junior Subordinated Debentures have been
issued, provided that certain successors which are permitted to do so pursuant
to the Indenture may succeed to the Company's ownership of the Trust Common
Securities, (ii) not to voluntarily dissolve, wind up or liquidate the Trust,
except (a) in connection with a distribution of Junior Subordinated Debentures
to the holders of the Trust Preferred Securities in liquidation of the Trust or
(b) in connection with certain mergers, consolidations, or amalgamations
permitted by the Trust Agreement and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to remain classified as a grantor trust and not an association taxable as
a corporation for United States federal income tax purposes.
The Company will also covenant in the Indenture (the covenant described
herein referred to as the "Debt Incurrence Covenant"), as to the Junior
Subordinated Debentures, that, except as set forth in the next paragraph, the
Company shall not, and shall not permit any Subsidiary to, directly or
indirectly, incur any Indebtedness (including without limitation Indebtedness in
connection with Capitalized Lease Obligations or operating leases, whether
incurred as part of a sale/leaseback transaction or otherwise) or any
Disqualified Capital Stock, unless: (i) no default or Debenture Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect, on a pro forma basis, to, such incurrence of such Indebtedness or
Disqualified Capital Stock; and (ii) on the date of the incurrence of such
Indebtedness or Disqualified Capital Stock, on a pro forma basis giving
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effect to such incurrence (A) the Consolidated Interest Coverage Ratio of the
Company for the combined four fiscal quarters immediately preceding the
incurrence date shall be greater than 2.15 to 1, and (B) the Consolidated
Leverage Ratio of the Company as of the incurrence date shall be less than 3.25
to 1. For the purposes of the Indenture, Indebtedness and Disqualified Stock
incurred by any person that is not the Company or a Subsidiary, which
Indebtedness or Disqualified Stock is outstanding at the time such Person
becomes a Subsidiary, or is merged or consolidated with the Company or a
Subsidiary, shall (subject to the provisions set forth in the definitions of
Consolidated Interest Coverage Ratio, Consolidated Leverage Ratio and the
related definitions) be deemed to have been incurred or issued, as the case may
be, at the time such Person becomes a Subsidiary, or is merged or consolidated
with the Company or a Subsidiary.
Notwithstanding the foregoing: (i) the Company may incur Indebtedness
evidenced by the Securities and other obligations under the Indenture, the
Guarantee and the Expense Agreement; (ii) the Company may incur Indebtedness
pursuant to the terms of the Key Agreement or the Heller Agreements
(collectively, the "Credit Agreements") (including any guarantees thereof and
letters of credit issued thereunder) or any amendment of or replacement
therefor, provided that the aggregate principal amount incurred and outstanding
(including any Indebtedness in connection with any such refinancing of or
replacement for the Credit Agreements) does not at any time exceed $65,000,000;
(iii) the Company or any Subsidiary may incur Indebtedness to the Company or to
a Subsidiary at least 80% of the outstanding voting stock of which is owned,
directly or indirectly, by the Company (other than a Praegitzer Industries
Trust); provided, that no Subsidiary shall become liable to any Person other
than the Company or another Subsidiary at least 80% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company in respect of
such Indebtedness permitted by this subclause; (iv) the Company or any
Subsidiary may incur Indebtedness consisting of Capitalized Lease Obligations,
operating leases or other indebtedness the proceeds of which are applied toward
the purchase of assets in the ordinary course of the Company's or such
Subsidiary's business and with respect to which there is created a security
interest in such assets in favor of the seller thereof, provided, that the
aggregate principal amount of such Indebtedness does not exceed $100,000
individually (for any one or series of related incurrences) or $1,000,000 for
all such incurrences in any 12-month period; (v) the Company or any Subsidiary
may incur Indebtedness so long as such Indebtedness is issued in the ordinary
course of business under interest rate swap obligations or is (consistent with
past practices and in the ordinary course of business) in the form of
performance bonds or letters of credit or reimbursement obligations in respect
thereof, letter of credit obligations related to insurance with respect to
claims by employees for work- related injuries, or bank overdrafts that are
repaid within three Business Days; (vi) the Company or any Subsidiary may incur
certain adequately reserved judgement Liens, tax and governmental assessment
Liens, workmen's compensation and similar Liens, mechanics' and similar Liens,
zoning and similar restrictions, unperfected sellers' Liens and pre-existing
Liens, in each case, to the extent such Liens would constitute Indebtedness
solely under clause (v) of the definition of Indebtedness (below), and (vii) the
Company or any Subsidiary may incur Indebtedness as a result of or in connection
with an Acquisition, provided that
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(A) the amount of such Acquisition-related Indebtedness shall not exceed 100% of
the total purchase price paid by the Company and its Subsidiaries in connection
with such Acquisition, (B) the Consolidated Interest Coverage Ratio of the
Company for the combined four fiscal quarters immediately preceding the
incurrence date shall be greater than 1.75 to 1, (C) the Consolidated Leverage
Ratio of the Company as of the incurrence date shall be less than 3.75 to 1, and
(D) in the event the Consolidated Interest Coverage Ratio of the Company for the
combined four fiscal quarters immediately preceding the six month anniversary of
such incurrence date is less than 2.15 to 1, or the Consolidated Leverage Ratio
of the Company as of such six-month anniversary is greater than 3.25 to 1, such
Indebtedness, together with all interest, premium (if any) and other charges in
connection with such Indebtedness, shall be paid in full without the incurrence
of additional, refinancing or replacement Indebtedness.
If no Indenture Event of Default has occurred and is continuing, the Debt
Incurrence Covenant will terminate and be of no further force and effect upon
appropriate notice by the Company to the Trustee within 90 days after the end of
any 12 consecutive fiscal quarter period of the Company during which (x) there
has been no Extension Period and all payments on the Debentures have been made
timely and in full when due, (y) the Consolidated Interest Coverage Ratio of the
Company for the combined four fiscal quarters immediately preceding each fiscal
quarter end in such 12-quarter period was greater than 2.15 to 1, and (z) the
Consolidated Leverage Coverage Ratio of the Company as of the end of each fiscal
quarter in such 12-quarter period was less than 3.25 to 1.
Definitions
"Acquisition" means the acquisition (including by way of merger or
consolidation) of any asset or property of another person during the relevant
measurement period by purchase in cash, exchange of property or securities, or
by any other method.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, or other equity interest, including, without limitation, each class of
common stock and preferred stock of such person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Consolidated Indebtedness" of any person means the sum of, in each case as
of the date of determination, (a) all liabilities of such person and its
consolidated subsidiaries for Indebtedness determined in accordance with GAAP
(but whether or not such Indebtedness would be classified as indebtedness in
accordance with GAAP), (b) all obligations attributable to any Disqualified
Capital Stock (whether or not such Disqualified Capital Stock would be
classified as indebtedness in accordance with GAAP) including, in the case of
the
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Company, the Securities, and (c) the aggregate discounted net present value of
all operating leases of such person and its subsidiaries, as lessee, determined
by discounting the payment stream under each such lease for its entire term
(assuming the use or exercise of all possible rights or options of the lessor
thereunder (but not any such right or option solely in the discretion of the
lessee) to extend the term thereof) using a discount rate equal to the Prime
Rate, all as of the date of determination.
"Consolidated Interest Coverage Ratio" of any person means, for any period,
the ratio, on a pro forma basis, of (i) Modified EBITDA of such person for such
period, to (ii) Consolidated Interest Expense of such person for such period;
provided, that in making such computation (and in calculating Modified EBITDA
and Consolidated Interest Expense), (a) Acquisitions which occurred during the
relevant measurement period or subsequent to the relevant measurement period and
on or prior to the date of the transaction giving rise to the need to calculate
the Consolidated Interest Coverage Ratio (the "Transaction Date") shall be
assumed to have occurred on the first day of the relevant measurement period,
(b) the incurrence of any Indebtedness or Disqualified Capital Stock during the
relevant measurement period or subsequent to such period and on or prior to the
Transaction Date and the application of the proceeds therefrom shall be assumed
to have occurred on the first day of such measurement period, (c) the
Consolidated Interest Expense of such person attributable to interest (or
dividends) on any Indebtedness or Disqualified Capital Stock computed on a pro
forma basis and bearing a floating interest (or dividend) rate shall be computed
as if the rate in effect on the Transaction Date had been the applicable rate
for the entire period, and (d) in the case of the restrictions on the incurrence
of Indebtedness, the incurrence of Indebtedness or Disqualified Capital Stock
giving rise to the need to calculate the Consolidated Interest Coverage Ratio
shall be assumed to have occurred on the first day of the relevant measurement
period.
"Consolidated Interest Expense" of any person means, for any period, the
aggregate amount (without duplication) of (a) interest of such person and its
consolidated subsidiaries, whether expensed or capitalized (including, in
accordance with the following sentence, interest attributable to Capitalized
Lease Obligations) paid, accrued, or scheduled to be paid or accrued during such
period, in respect of all Indebtedness of such person and its consolidated
subsidiaries (including, without duplication (i) the interest on the Securities,
whether or not the Securities are classified as indebtedness on such person's
balance sheet under GAAP, (ii) the interest portion of all deferred payment
obligations, calculated in accordance with the effective interest method, (iii)
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financings and costs (net of income,
if any) associated with currency and interest rate swap arrangements, in each
case to the extent attributable to such period), and (b) dividend requirements
of such person and its consolidated subsidiaries with respect to Disqualified
Capital Stock (whether in cash or otherwise (except dividends payable solely in
shares of stock that is not Disqualified Capital Stock)) paid, accrued or
scheduled to be paid or accrued during such period; in each case to the extent
attributable to such period and excluding items eliminated in consolidation. For
purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be
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deemed to accrue at the interest rate reasonably determined by such person's
independent public accountants to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP, and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or a
subsidiary of such person of an obligation of a person other than such person
shall be deemed to be the interest expense attributable to the items guarantied.
"Consolidated Leverage Ratio" of any person means, as of the date of
determination, the ratio, on a pro forma basis, of (i) such person's
Consolidated Indebtedness to (ii) such person's Consolidated Net Worth; provided
that in making such computation (and in calculating Consolidated Indebtedness
and Consolidated Net Worth for such purposes), (a) the transaction giving rise
to the need to calculate such ratios shall be assumed to have occurred as of the
time of determination, and (b) the incurrence of any Indebtedness or
Disqualified Capital Stock as part of or in connection with the transaction
giving rise to the need to calculate the Consolidated Leverage Ratio, and the
application of the proceeds therefrom (including, without limitation, to retire
Indebtedness), shall be assumed to have occurred as of the time of
determination.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its consolidated subsidiaries
(determined in accordance with GAAP) for such period, adjusted to exclude (only
to the extent included in computing such net income (or loss) and without
duplication): (a) all extraordinary, unusual and nonrecurring gains or losses or
other gains or losses from the sale of assets (other than the sale of inventory
in the ordinary course of business and occasional sales of used equipment no
longer needed in such person's business), (b) the net income, if positive, of
any other person (other than a consolidated subsidiary the common voting equity
interests of which are owned, directly or indirectly, at least 80% by such
person or its wholly-owned subsidiaries), except to the extent of the amount of
any dividends or distributions actually paid in cash to such person or a
wholly-owned subsidiary of such person during such period, but in any event not
in excess of such person's pro rata share of such person's net income during
such period, (c) the net income of any person acquired in a pooling of interests
transaction for any period prior to the dale of such acquisition, (d) the net
income, if positive, of any of such person's subsidiaries to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such subsidiary, and (e) the net effects of any changes in accounting
principles.
"Consolidated Net Worth" of any person means the consolidated stockholders'
equity of such person and its consolidated subsidiaries, as of the date of
determination, determined in accordance with GAAP (calculating the assets of
such person on a first-in, first-out basis), adjusted to exclude (to the extent
included in calculating such equity), (a) the amount of equity attributable to
any Disqualified Capital Stock, and (b) all revaluations and other write- ups in
the book value of any asset of such person or a consolidated subsidiary of such
person subsequent to the Original Issue Date (other than write-ups in the book
value of assets in
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connection with the acquisition thereof (whether by asset purchase, stock
purchase, merger or otherwise) during the twelve-month period immediately
following such acquisition.
"Disqualified Capital Stock" means, with respect to any person, Capital
Stock of such person that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased (other
than at the option of the holder) by such person or any of its subsidiaries, in
whole or in part, on or prior to the Maturity of the Securities (and including,
in the case of the Company, the Securities).
"GAAP" means generally accepted accounting principles as in effect in the
United States of America on the date of this Indenture, consistently applied.
"Incur" means, individually and collectively, to issue, incur, assume,
guarantee, become directly or indirectly liable, with respect to (including as a
result of or in connection with an Acquisition), extend the maturity of, or
otherwise become responsible for, contingently or otherwise.
"Indebtedness" means, without duplication, with respect to any person: (i)
all liabilities, contingent or otherwise, of such person (a) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (b) evidenced by bonds,
notes, debentures or similar instruments or letters of credit, (c) representing
the balance deferred and unpaid of the purchase price of any property or
services, including obligations incurred in connection with a business
acquisition (other than accounts payable or other obligations to trade creditors
arising in the ordinary course of business), (d) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (e) for the
payment of money relating to a Capitalized Lease Obligation, or (f) all
indebtedness, whenever incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps in similar arrangements; (ii) reimbursement obligations of
such person with respect to letters of credit; (iii) all liabilities, contingent
or otherwise, of such person for the payment of money relating to an operating
lease (with the principal amount of each such operating lease deemed to be the
discounted net present value of the payment stream under such lease for its
entire term (assuming the use or exercise of all possible rights or options of
the lessor thereunder (but not any such right or option solely in the discretion
of the lessee) to extend the term thereof) using a discount rate equal to the
Prime Rate as of the date of determination), (iv) all liabilities of others of
the kind described in the preceding clauses (i), (ii) or (iii) that such person
has guaranteed or that is otherwise its legal liability; (v) all obligations
secured by a Lien to which the property or assets (including, without
limitation, leasehold interests and any other tangible or intangible property
rights) of such person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such person's legal
liability; and (vi) any and all deferrals, renewals, extensions, refinancings
and refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
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clauses (i), (ii), (iii), (iv) or (v), or this clause (vi), whether or not
between or among the same parties.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, interest or
adverse claim affecting title or resulting in an encumbrance against real or
personal property, or a security interest of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, any
option or other agreement to sell and any filing of or agreement to give any
financing statement in respect of any of the foregoing under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Modified EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to exclude (in
each case without duplication and only to the extent included in computing such
Consolidated Net Income), (i) consolidated expense for taxes based upon income
or profits, (ii) depreciation and amortization expense (but only to the extent
not included in Consolidated Interest Expense), (iii) Consolidated Interest
Expense, and (iv) any other non-cash items (including, for example, (x) any
non-cash compensation expense attributable to stock option or other equity
compensation arrangements, or (y) any write-off or add-back of goodwill,
in-process technology or other items related to asset valuation) which increased
or decreased Consolidated Net Income, in each case determined for such period on
a consolidated basis for such person and its consolidated subsidiaries in
accordance with GAAP, except as specifically otherwise provided herein.
"Prime Rate" shall mean the "Prime Rate" in use by the Bank of America, San
Francisco, California, from time to time.
"Senior Debt and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Indebtedness of the Company whether incurred on or prior to the date of the
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Junior
Subordinated Debentures or to other Indebtedness which is pari passu with, or
subordinated to, the Junior Subordinated Debentures; provided, however, that
Senior Debt and Subordinated Debt shall not be deemed to include (i) any
Indebtedness of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (ii) any Indebtedness of the
Company to any of its subsidiaries, (iii) Indebtedness to any employee of the
Company, and (iv) any other debt securities issued pursuant to the Indenture.
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Registration, Denomination and Transfer
The Junior Subordinated Debentures will initially be registered in the name
of the Property Trustee. If the Junior Subordinated Debentures are distributed
to holders of Preferred Securities, it is anticipated that the depository
arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Trust Preferred Securities. See
"Description of the Trust Preferred Securities--Global Trust Preferred
Securities" and "Book-Entry Issuance."
Although the Depositary has agreed to the procedures described above, it is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the Company within 90 days of receipt of notice from the Depositary
to such effect, the Company will cause the Junior Subordinated Debentures to be
issued in definitive form.
Payments on Junior Subordinated Debentures represented by a global
certificate will be made to Cede & Co., the nominee for the Depositary as the
registered holder of the Junior Subordinated Debentures, as described under
"Description of the Trust Preferred Securities--Global Trust Preferred
Securities." If Junior Subordinated Debentures are issued in certificate form,
principal and interest will be payable, the transfer of the Junior Subordinated
Debentures will be registrable, and Junior Subordinated Debentures will be
exchangeable for Junior Subordinated Debentures of other authorized
denominations of a like aggregate principal amount, at the corporate trust
office of the Indenture Trustee in Wilmington, Delaware or at the offices of any
paying agent or transfer agent appointed by the Company, provided that payment
of interest may be made at the option of the Company by check mailed to the
address of the persons entitled thereto. However, a holder of $1 million or more
in aggregate principal amount of Junior Subordinated Debentures may receive
payments of interest (other than interest payable at the Stated Maturity) by
wire transfer of immediately available funds upon written request to the
Indenture Trustee not later than 15 calendar days prior to the date on which the
interest is payable.
Junior Subordinated Debentures will be exchangeable for other Junior
Subordinated Debentures of like tenor, of any authorized denominations and of a
like aggregate principal amount.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the securities registrar (the "Securities
Registrar") appointed under the Indenture or at the office of any transfer agent
designated by the Company for such purpose without service charge and upon
payment of any taxes and other governmental charges as described in the
Indenture. The
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Company will appoint the Indenture Trustee as Securities Registrar under the
Indenture. The Company may at any time designate additional transfer agents with
respect to the Junior Subordinated Debentures.
In the event of any redemption, neither the Company nor the Indenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures during a period beginning at the opening of
business 15 days before the day of selection for redemption of the Junior
Subordinated Debentures to be redeemed and ending at the close of business on
the date of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
Payment and Paying Agents
Payment of principal of (and premium, if any) and any interest on the
Junior Subordinated Debentures will be made at the office of the Indenture
Trustee, except that at the option of the Company payment of any interest may be
made (i) except in the case of Global Junior Subordinated Debentures, by check
mailed to the address of the person entitled thereto as such address shall
appear in the securities register, (ii) by transfer to an account maintained by
the person entitled thereto as specified in the securities register, provided
that proper transfer instructions have been received by the regular record date,
or (iii) if the Junior Subordinated Debentures are held by the Property Trustee,
by agreement between the Company and the Property Trustee. Payment of any
interest on Junior Subordinated Debentures will be made to the person in whose
name such Junior Subordinated Debenture is registered at the close of business
on the regular record date for such interest. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Company will at all times be required to maintain a Paying
Agent in each place of payment for the Junior Subordinated Debentures. Any
moneys deposited with the Indenture Trustee or any Paying Agent, or then held by
the Company in trust, for the payment of the principal of (and premium, if any)
or interest on the Junior Subordinated Debentures and remaining unclaimed for
two years after such principal (and premium, if any) or interest has become due
and payable shall, at the request of the Company, be repaid to the Company and
the holder of such Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to the Company for payment thereof.
Modification of Indenture
From time to time the Company and the Indenture Trustee may, without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interests of the holders of the Junior
Subordinated Debentures or the Trust Preferred Securities so long as they remain
outstanding) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions
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permitting the Company and the Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of the Junior Subordinated Debentures; provided, that
no such modification may, without the consent of the holder of each outstanding
Junior Subordinated Debenture, (i) change the Stated Maturity of the Junior
Subordinated Debentures, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or (ii) reduce the
percentage of principal amount of Junior Subordinated Debentures, the holders of
which are required to consent to any such modification of the Indenture;
provided that so long as any of the Trust Preferred Securities remain
outstanding, no such modification may be made that adversely affects the holders
of such Trust Preferred Securities in any material respect, and no termination
of the Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority of the aggregate Liquidation
Amount of the Trust Preferred Securities unless and until the principal of the
Junior Subordinated Debentures and all accrued and unpaid interest thereon have
been paid in full and certain other conditions have been satisfied. Where a
consent under the Indenture would require the consent of each holder of Junior
Subordinated Debentures, no such consent shall be given by the Property Trustee
without the prior consent of each holder of Trust Preferred Securities. In
addition, the Company and the Indenture Trustee may execute, without the consent
of any holder of Junior Subordinated Debentures, any supplemental Indenture for
the purpose of creating any new series of Junior Subordinated Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes a "Debenture Event of Default," with respect to the
Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case of an
Extension Period), or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption, by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Indenture Trustee or to the Company and the Indenture Trustee
by the holders of at least 25% in aggregate outstanding principal amount of the
Junior Subordinated Debentures; or
(iv) any default in the performance of, or any breach of, the covenant set
forth above under "Covenants of the Company"; or
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(v) any default in the payment of principal of (or premium, if any) or
interest on any Senior Debt and/or Subordinated Debt, the aggregate principal
amount of which (together with premium, if any, and accrued and unpaid interest
thereon) exceeds $1,000,000, shall have continued uncured or unwaived for a
period of 30 days or more; or
(vi) any event of default with respect to any Senior Debt and/or
Subordinated Debt, the aggregate principal amount of which (together with
premium, if any, and accrued and unpaid interest thereon) exceeds $1,000,000,
shall have resulted in such debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
unless such event of default shall have been cured or waived and such
acceleration shall have been rescinded or annulled; or
(vii) certain events in bankruptcy, insolvency or reorganization of the
Company or certain of its Subsidiaries.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee. The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. If
the Indenture Trustee or such holders of such Junior Subordinated Debentures
fail to make such declaration, the holders of at least 25% in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Trust Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
In case a Debenture Event of Default shall occur and be continuing as to
the Junior Subordinated Debentures, the Property Trustee, as holder of the
Junior Subordinated Debentures, will have the right to declare the principal of
and the interest on such Junior
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Subordinated Debentures, and any other amounts payable under the Indenture, to
be forthwith due and payable and to enforce its other rights as a creditor with
respect to such Junior Subordinated Debentures.
The Company is required to file annually with the Indenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
Enforcement of Certain Rights by Holders of Trust Preferred Securities
If a Debenture 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 Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of Trust Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the Trust
Preferred Securities of such holder (a "Direct Action"). The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Trust Preferred
Securities outstanding. The Company shall have the right under the Indenture to
set off any payment made to such holder of Trust Preferred Securities by the
Company in connection with a Direct Action.
The holders of the Trust Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of the Trust Preferred Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless (i) in case the Company
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes the
Company's obligations on the Junior Subordinated Debentures issued under the
Indenture; (ii) immediately after giving effect thereto, no Debenture Event of
Default, and no event which, after notice or lapse of time or both, would become
a Debenture Event of Default, shall have occurred and be continuing; and (iii)
certain other conditions an prescribed in the Indenture are met.
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The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
similar transaction involving the Company that may adversely affect holders of
the Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Indenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Company deposits or causes to
be deposited with the Indenture Trustee funds, in trust, for the purpose and in
an amount in the currency or currencies in which the Junior Subordinated
Debentures are payable sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Indenture
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the Stated Maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to the Company's obligations to pay all
other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture.
Governing Law
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York, except that
the immunities and standard of care of the Indenture Trustee will be governed by
Delaware law.
Information Concerning the Indenture Trustee
The Indenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, 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 Junior Subordinated 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.
BOOK-ENTRY ISSUANCE
The Depositary will act as securities depositary for all of the Trust
Preferred Securities and, if the Junior Subordinated Debentures are distributed
to holders of Trust Preferred Securities, the Junior Subordinated Debentures.
The Trust Preferred Securities and, in such event, the Junior Subordinated
Debentures will be issued only as fully-registered
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securities registered in the name of Cede & Co. (the Depositary's nominee). One
or more fully-registered global certificates will be issued for the Trust
Preferred Securities and the Junior Subordinated Debentures and will be
deposited with the Depositary.
The Depositary 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. The Depositary holds securities that its Participants deposit with the
Depositary. The Depositary 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.
"Direct Participants" include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The Depositary
is owned by a number of its Direct 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 Depositary system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain custodial relationships with Direct Participants,
either directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Commission.
Purchases of Trust Preferred Securities or Junior Subordinated Debentures
within the Depositary system must be made by or through Direct Participants,
which will receive a credit for the Trust Preferred Securities or Junior
Subordinated Debentures on the Depositary's records. The ownership interest of
each actual purchaser of each Trust Preferred Security and each Junior
Subordinated Debenture ("Beneficial Owner") will be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary 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 Direct or Indirect
Participants through which the Beneficial Owners purchased Trust Preferred
Securities or Junior Subordinated Debentures. Transfers of ownership interests
in the Trust Preferred Securities or Junior Subordinated Debentures are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Trust Preferred Securities or Junior Subordinated
Debentures, except in the event that use of the book-entry system for the Junior
Subordinated Debentures is discontinued.
The Depositary has no knowledge of the actual Beneficial Owners of the
Trust Preferred Securities or Junior Subordinated Debentures; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Preferred Securities or Junior Subordinated Debentures are credited,
which may or may not be the Beneficial
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Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and 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 will be sent to Cede & Co. as the registered holder of
the Trust Preferred Securities or Junior Subordinated Debentures. If less than
all of the Trust Preferred Securities or the Junior Subordinated Debentures are
being redeemed, the Depositary will determine by lot or pro rata the amount of
the Trust Preferred Securities of each Direct Participant to be redeemed.
Although voting with respect to the Trust Preferred Securities or the
Junior Subordinated Debentures is limited to the holders of record of the Trust
Preferred Securities or Junior Subordinated Debentures, as applicable, in those
instances in which a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities or Junior
Subordinated Debentures. Under its usual procedures, the Depositary would mail
an omnibus proxy (the "Omnibus Proxy") to the relevant Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Trust Preferred Securities or Junior Subordinated Debentures are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of the
Depositary, the relevant Trustee, 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 the Depositary is the responsibility of the relevant
Trustee, disbursement of such payments to Direct Participants is the
responsibility of the Depositary, and disbursements of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
Under certain circumstances set forth in the Trust Agreement, the Global
Trust Preferred Security will be exchangeable for definitive certificated Trust
Preferred Securities. See "Description of the Trust Preferred Securities."
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The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Trust and
the Company believe to be accurate, but the Trust and the Company assume no
responsibility for the accuracy thereof. Neither the Trust nor the Company has
any responsibility for the performance by the Depositary or its Participants of
their respective obligations as described herein or under the rules and
procedures governing their respective operations.
DESCRIPTION OF GUARANTEE
The Guarantee Agreement will be executed and delivered by the Company
concurrently with the issuance of the Trust Preferred Securities for the benefit
of the holders of the Trust Preferred Securities. Wilmington Trust Company will
act as Guarantee Trustee under the Guarantee Agreement for the purposes of
compliance with the Trust Indenture Act, and the Guarantee Agreement will be
qualified as an indenture under the Trust Indenture Act. The following summary
of certain provisions of the Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the provisions
of the Guarantee Agreement, including the definition therein of certain terms,
and the Trust Indenture Act. The form of the Guarantee Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Trust Preferred Securities.
General
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Trust Preferred Securities, but will apply
only to the extent that the Trust has funds sufficient to make such payments,
and is not a guarantee of collection.
The Company will irrevocably and unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the Trust Preferred Securities, as and when
due, regardless of any defense, right of set-off or counterclaim that the Trust
may have or assert other than the defense of payment. The following payments
with respect to the Trust Preferred Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payment"), will be subject to the Guarantee:
(i) any accumulated and unpaid Distributions required to be paid on the Trust
Preferred Securities, to the extent that the Trust has funds on hand available
therefor at such time, (ii) the redemption price with respect to any Trust
Preferred Securities called for redemption, to the extent that the Trust has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of the Trust (unless the
Junior Subordinated Debentures are distributed to holders of the Trust Preferred
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of the Trust remaining available for distribution to holders of Trust
Preferred Securities after satisfaction of liabilities to creditors of the Trust
as required by law. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required
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amounts by the Company to the
holders of the Trust Preferred Securities or by causing the Trust to pay such
amounts to such holders.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by the Trust, the Trust will not be able to pay Distributions on
the Trust Preferred Securities and will not have funds legally available
therefor. The Guarantee will rank subordinate and junior in right of payment to
all Senior Debt and Subordinated Debt of the Company. See "--Status of the
Guarantee" below. Except as otherwise described herein, the Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Company, including Senior Debt and Subordinated Debt, whether under the
Indenture, any other indenture that the Company may enter into in the future, or
otherwise. The Company has, through the Guarantee Agreement, the Trust
Agreement, the Junior Subordinated Debentures, the Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed all
of the Trust's obligations under the Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Preferred
Securities. See "Relationship Among the Trust Preferred Securities, the Junior
Subordinated Debentures and the Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt in the same manner as the Junior Subordinated Debentures.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The Guarantee
will be held for the benefit of the holders of the Trust Preferred Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payment
in full to the extent not paid by the Trust or upon distribution of the Junior
Subordinated Debentures to the holders of the Trust Preferred Securities. The
Guarantee does not place a limitation on the amount of additional Senior Debt
and Subordinated Debt that may be incurred by the Company. The Company expects
from time to time to incur additional indebtedness constituting Senior Debt and
Subordinated Debt.
Amendments and Assignment
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Trust Preferred Securities (in which case no vote
will be required), the Guarantee Agreement may not be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Trust Preferred
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Securities. See "Description of the Trust Preferred Securities--Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee Agreement shall bind the successors, assigns, receivers, trustees
and representatives of the Company and shall inure to the benefit of the holders
of the Trust Preferred Securities then outstanding.
Events of Default
An Event of Default under the Guarantee Agreement will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder and, except for a default in payment of a Guaranty Payment, the
Guarantor shall have received notice of default and shall not have cured such
default within 90 days after receipt of such notice. The holders of not less
than a majority in aggregate Liquidation Amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee Agreement. Any holder of the Trust
Preferred Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person or
entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee Agreement.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
an Event of Default, and after curing all Events of Default that shall have
occurred under the Guarantee Agreement, has undertaken to perform only such
duties as are specifically set forth in the Guarantee Agreement and, after the
occurrence of an Event of Default under the Guarantee Agreement, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee Agreement at the request of any holder of the Trust Preferred
Securities unless it is offered adequate security and indemnity as would satisfy
a reasonable person in the position of the Guarantee Trustee against the costs,
expenses and liabilities that might be incurred thereby.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Trust Preferred Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of Junior Subordinated Debentures to the holders of the Trust
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Trust Preferred
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Securities must restore payment of any sums paid under the Trust Preferred
Securities or the Guarantee.
Governing Law
The Guarantee Agreement will be governed by and construed in accordance
with the laws of the State of New York.
EXPENSE AGREEMENT
Pursuant to the Expense Agreement to be entered into between the Company
and the Trust under the Trust Agreement, the Company will irrevocably and
unconditionally guarantee, to each person or entity to whom the Trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Trust (including, without limitation, expenses relating to the offering of
the Trust Preferred Securities and any expenses the Property Trustee may incur
relating to the enforcement of the rights of the holders of the
Trust Preferred Securities or the Junior Subordinated Debentures pursuant to the
Trust Agreement and the Indenture, respectively), other than obligations of the
Trust to pay to the holders of the Trust Preferred Securities or other similar
interests in the Trust the amounts due such holders pursuant to the terms of the
Trust Preferred Securities or such other similar interests, as the case may be.
The Expense Agreement may be enforced against the Company by any person or
entity to whom the Trust is or becomes indebted or liable.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Trust Preferred
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of Guarantee." Taken together, the Company's
obligations under the Junior Subordinated Debentures, the Indenture, the Trust
Agreement, the Expense Agreement and the Guarantee Agreement provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Preferred
Securities. If and to the extent that the Company does not make payments on the
Junior Subordinated Debentures, the Trust will not pay Distributions or other
amounts due on the Trust Preferred Securities. The Guarantee does not cover
payment of Distributions when the Trust does not have sufficient funds to pay
such Distributions. In such event, the remedy of a holder of the Trust Preferred
Securities is to institute a legal proceeding directly against the Company for
enforcement of payment on the
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Junior Subordinated Debentures. The obligations of the Company under the
Guarantee are subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt of the Company.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Preferred Securities,
primarily because: (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Preferred Securities and Trust Common Securities; (ii) the interest rate
and interest and other payment dates on the Junior Subordinated Debentures will
match the Distribution rate and Distribution and other payment dates for the
Trust Preferred Securities; (iii) the Company shall pay for all and any costs,
expenses and liabilities of the Trust, except the Trust's obligations to holders
of Trust Preferred Securities; and (iv) the Trust Agreement further provides
that the Trust will not engage in any activity that is not consistent with its
limited purposes.
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set off any payment it is otherwise required to make thereunder to
the extent the Company has theretofore made, or is concurrently on the date of
such payment making, a payment under the Guarantee.
Enforcement Rights of Holders of the Trust Preferred Securities Under the
Guarantee
A holder of any of the Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Debt and Subordinated Debt
would not constitute a default or Event of Default under the Guarantee. However,
in the event of a default under Senior Debt and Subordinated Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures from and after the time that
the Company and the Indenture Trustee receive notice of such default and while
such default is continuing. Failure to make required payments on Junior
Subordinated Debentures would constitute an Event of Default.
Limited Purpose of the Trust
The Trust Preferred Securities evidence a beneficial interest in the Trust,
and the Trust exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in Junior Subordinated Debentures. A principal
difference between the rights of a holder of the Trust Preferred Securities and
a holder of a Junior Subordinated Debenture is that a holder of a Junior
Subordinated Debenture is entitled to receive from the Company the
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principal amount of and interest accrued on Junior Subordinated Debentures held,
while a holder of the Trust Preferred Securities is entitled to receive
Distributions from the Trust (or from the Company under the Guarantee) if and to
the extent the Trust has funds available for the payment of such Distributions.
Rights upon Dissolution
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust involving the liquidation of the Junior Subordinated Debentures, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, the holders of Trust Preferred Securities will be entitled to receive, out
of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of the Trust Preferred Securities-- Liquidation Distribution Upon
Dissolution." Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Junior Subordinated Debentures,
would be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Debt and Subordinated Debt as set forth in the Indenture,
but entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
is the guarantor under the Guarantee and has agreed to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to the
holders of its Trust Preferred Securities), the positions of a holder of the
Trust Preferred Securities and a holder of Junior Subordinated Debentures
relative to other creditors and to stockholders of the Company in the event of
liquidation or bankruptcy of the Company are substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In connection with issuance of the Trust Preferred Securities, Stoel Rives
LLP, counsel to the Company ("Counsel"), will render its opinion that, under
current law and assuming full compliance with the terms of the Trust Agreement
and certain other documents, and based on certain facts and assumptions
contained in such opinion, the following summary of certain of the principal
federal income tax consequences to holders of the Trust Preferred Securities
arising from the purchase, ownership and disposition thereof is accurate in all
material respects and, subject to the limitations stated herein, represents the
material federal income tax consequences to holders of Trust Preferred
Securities arising from purchase, ownership and disposition thereof. This
summary assumes the accuracy of the facts set forth in the prospectus. Unless
otherwise stated, this summary deals only with Trust Preferred Securities held
as capital assets by United States Persons (defined below) who purchase the
Trust Preferred Securities upon original issuance at their original offering
price. As used herein, a "United States Person" means a person that is (i) a
citizen or resident of the United States as determined for United States federal
income tax purposes, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to United States federal
income taxation regardless of its source, or (iv) a trust if a U.S. court is
able to exercise primary supervision over the administration of such trust and
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one or more United States persons have the authority to control all substantial
decisions of such trust. The tax treatment of holders may vary depending on
their particular situation. The summary does not address all tax consequences
that may be relevant to a particular holder or to holders that may be subject to
special tax treatment, such as banks, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, foreign investors, investors that hold the Trust Preferred
Securities as part of a hedging, straddle, constructive sale, or conversion or
other risk reduction transaction or whose functional currency is not the U.S.
dollar. In addition, it does not describe any alternative minimum tax
consequences or the tax laws of any state, local or foreign government that may
be applicable to a holder of Trust Preferred Securities. This summary is based
on the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
This summary does not address tax consequences that might be relevant to
persons that are not United States Persons ("non-United States Persons").
Non-United States Persons should consult their own tax advisors as to the
specific United States federal income and other tax consequences of the
purchase, ownership and disposition of Trust Preferred Securities.
The authorities on which this summary is based are subject to various
interpretations. Neither this summary, nor any opinion of Counsel is binding on
the Internal Revenue Service ("Service") or the courts, either of which could
take a contrary position. Moreover, no rulings have been or will be sought from
the Service with respect to the transactions described herein. Accordingly,
there can be no assurance that the Service will not challenge the conclusions
expressed herein or that a court would not sustain such a challenge.
Holders should consult their own tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the Trust
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. For a discussion of the possible redemption of the
Trust Preferred Securities upon the occurrence of certain tax events, see
"Description of the Trust Preferred Securities--Redemption."
Classification of the Trust
In connection with the issuance of the Trust Preferred Securities, Counsel
will render its opinion that, under current law and assuming full compliance
with the terms of the Trust Agreement and certain other related documents, and
based on certain facts and assumptions contained in such opinion, the Trust will
be classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result, each
beneficial owner of the Trust Preferred Securities (a "Securityholder") will be
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treated as owning an undivided beneficial interest in the Junior Subordinated
Debentures. Accordingly, each Securityholder will be required to include in its
gross income its pro rata share of the interest income or original issue
discount ("OID") that is paid or accrued on the Junior Subordinated Debentures.
See "--Interest Income and Original Issue Discount" herein.
Classification of the Junior Subordinated Debentures
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Trust
Preferred Security, each holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Trust Preferred Securities as evidence of an
indirect beneficial ownership interest in the Junior Subordinated Debentures.
Counsel has not delivered any opinion relating to classification of the Junior
Subordinated Debentures as indebtedness and no assurance can be given that such
position of the Company will not be challenged by the Service or, if challenged,
that such a challenge will not be successful. The remainder of this "Certain
Federal Income Tax Consequences" section assumes that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company. No amount included in income with respect to the
Junior Subordinated Debentures and Trust Preferred Securities will be eligible
for the dividends received deduction.
Interest Income and Original Issue Discount
Unless the Junior Subordinated Debentures are issued with OID, stated
interest on the Junior Subordinated Debentures generally will be included in
income by a Securityholder at the time such interest income is paid or accrued
in accordance with such Securityholder's regular method of tax accounting. Under
the applicable Treasury regulations, the Junior Subordinated Debentures will not
be considered to have been issued with OID within the meaning of Section 1273(a)
of the Code, so long as the Junior Subordinated Debentures have terms and
conditions that cause the likelihood of the Company's exercising its right to
defer payments of interest on the Junior Subordinated Debentures to be a
"remote" contingency at the time the Junior Subordinated Debentures are issued.
The Company believes that the terms and conditions of the Junior Subordinated
Debentures (including the Consolidated Interest Coverage Ratio requirement and
the restrictions on dividends, distributions, redemptions and other payments
during the Extension Period) are such that the likelihood of its exercising such
right is remote, and intends to take the position that the Junior Subordinated
Debentures are not issued with OID.
Because this issue is inherently factual, Counsel is unable to express any
opinion regarding whether the Junior Subordinated Debentures are issued with
OID. If, however, the Company exercised its right to defer payments of interest
on the Junior Subordinated Debentures, the Junior Subordinated Debentures would
become OID instruments at such time and all Securityholders would be required to
include the stated interest on the Junior
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Subordinated Debentures in their gross income for tax purposes as it accrues and
compounds on a daily basis during the Extension Period, even though the Company
would not pay such interest until the end of the Extension Period, and even
though some Securityholder otherwise might use the cash method of tax
accounting. Moreover, if the Company exercised such right, the Junior
Subordinated Debentures thereafter would be taxed as OID instruments for as long
as they remained outstanding. Thus, even after the end of the Extension Period,
all Securityholders would be required to continue to include the stated interest
on the Junior Subordinated Debentures in income on a daily economic accrual
basis, regardless of their method of tax accounting and in advance of receipt of
the cash attributable to such interest income. Under the economic accrual rules,
a Securityholder would be required to accrue an amount of interest income each
year that approximated the stated interest payments called for under the Junior
Subordinated Debentures, and actual cash payments of interest on the Junior
Subordinated Debentures would not be reported separately as taxable income. A
Securityholder's basis in Trust Preferred Securities would be increased by any
OID includible in income.
The Company's determination that there is a remote likelihood of exercising
its right to defer the payment of interest on the Trust Preferred Securities is
binding on each Securityholder unless the holder explicitly discloses in the
manner required by applicable Treasury regulations that its determination is
different from the Company's. The Company's determination is not, however,
binding on the Service.
The Treasury regulations described above, including the definition of
"remote" for this purpose, have not yet been addressed in any definitive
interpretations by the Service, and it is possible that the Service could take a
contrary position. If the Service were to assert successfully that the stated
interest on the Junior Subordinated Debentures was OID regardless of whether the
Company exercised its right to defer payments of interest on such debentures,
all Securityholders would be required to include such stated interest in income
on a daily economic accrual basis as described above.
Distribution of Junior Subordinated Debentures to Holders of Trust Preferred
Securities
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the captions "Description of the Trust Preferred
Securities--Distribution of Junior Subordinated Debentures" and "Liquidation
Distribution Upon Dissolution" would be non-taxable and would result in each
Securityholder receiving directly its pro rata share of the Junior Subordinated
Debentures previously held indirectly through the Trust, with a holding period
and aggregate tax basis equal to the holding period and aggregate tax basis such
Securityholder had in its Trust Preferred Securities before the distribution. A
Securityholder would continue to recognize interest income in respect of Junior
Subordinated Debentures received from the Trust in the manner described above
under "--Interest Income and Original Issue Discount". If, however, the
liquidation of the Trust were to occur because the Trust was subject or became
subject to United States federal income tax with respect to income accrued or
received on the Junior Subordinated Debentures as a result of a
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Tax Event or otherwise, the distribution of Junior Subordinated Debentures to
Securityholders by the Trust could be a taxable event to the Trust and each
Securityholder, and a Securityholder could be required to recognize gain or loss
as if the Securityholder had exchanged its Trust Preferred Securities for the
Junior Subordinated Debentures it received upon the liquidation of the Trust. In
that event, the Securityholder's holding period for the Junior Subordinated
Debentures received would not include the holding period for the Trust Preferred
Securities surrendered in the liquidation.
Sales or Redemption of Trust Preferred Securities
Gain or loss will be recognized by a Securityholder on a sale of Trust
Preferred Securities (including a redemption for cash) in an amount equal to the
difference between the amount realized (which for this purpose, will exclude
amounts attributable to accrued interest or OID not previously included in
income) and the Securityholder's adjusted tax basis in the Trust Preferred
Securities sold or so redeemed. Gain or loss recognized by a Securityholder on
Trust Preferred Securities held for more than one year generally will be taxable
as long-term capital gain or loss. Amounts attributable to accrued interest or
OID with respect to a Securityholder's pro rata share of the Junior Subordinated
Debentures not previously included in income will be taxable as ordinary income.
Backup Withholding Tax and Information Reporting
The amount of interest and OID accrued on the Trust Preferred Securities
held of record by United States Persons (other than certain exempt
Securityholders), if any, will be reported to the Service. "Backup" withholding
at a rate of 31% will apply to payments on, and proceeds from the sale of, the
Trust Preferred Securities, unless the Securityholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
Regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions. Any
amounts withheld from a Securityholder pursuant to the backup withholding rules
will be allowed as a refund or a credit against such Securityholder's United
States federal income tax liability, provided the required information is timely
furnished to the Service.
Possible Tax Legislation
In a previous budget proposal released on February 6, 1997, the Clinton
Administration proposed certain tax law changes that, if enacted, would have
treated a corporate issuer that filed annual financial statements with the SEC
as having characterized an instrument such as the Junior Subordinated Debentures
as equity for purposes of Section 385(c) of the Code, if the instrument had a
maximum term exceeding 15 years and was not shown as indebtedness on the
issuer's balance sheet or, in the case of indebtedness issued to a related party
that issued a related instrument, the related instrument was not reflected as
indebtedness on the applicable consolidated balance sheet. Under Section 385(c),
the characterization by the issuer of an instrument as equity is binding on the
issuer and all
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holders of the instrument unless a holder discloses on its tax return that it is
treating such instrument in a manner inconsistent with the issuer's
characterization. These proposals were not enacted into law, and the
Administration has not made any such proposals in its budget proposal for fiscal
year 1999, released on February 2, 1998.
There is no assurance that legislation affecting the Company's ability to
deduct interest paid on the Junior Subordinated Debentures or characterization
of the Junior Subordinated Debentures for United States federal income tax
purposes, including legislation similar to the proposal described above, will
not be enacted in the future or that any such legislation would not be effective
retroactively. If tax law changes are enacted and apply retroactively to the
Junior Subordinated Debentures, such changes could give rise to a Tax Event,
which would, in certain circumstances, require dissolution of the Trust or
permit the Company to redeem the Junior Subordinated Debentures. See "Risk
Factors--Possible Changes to United States Tax Laws; Possible Tax Event."
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") should consider the fiduciary standards of ERISA in the context of the
plan's particular circumstances before authorizing an investment in the Trust
Preferred Securities. Among other factors, the fiduciary should consider whether
such an investment is in accordance with the documents governing the plan and
whether an investment is appropriate for the plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Other provisions of ERISA and the Code prohibit an employee benefit plan subject
to either ERISA or Section 4975 of the Code (which generally includes individual
retirement accounts and so-called "Keogh" plans as well as other
employer-sponsored plans) from engaging in certain transactions involving "plan
assets" with parties which are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. Therefore, a
fiduciary of an employee benefit plan should also consider whether an investment
in the Trust Preferred Securities might constitute or give rise to a prohibited
transaction under ERISA and the Code.
If the assets of the Trust were deemed to be plan assets of employee
benefit plans that are holders of the Trust Preferred Securities (including
holders, who are not employee benefit plans themselves but are investing "plan
assets" of an employee benefit plan), the plan's investment in the Trust
Preferred Securities might be deemed to constitute a delegation under ERISA of
the duty to manage plan assets by an ERISA plan fiduciary investing in Trust
Preferred Securities, and certain transactions involving the operation of the
Trust might be deemed to constitute prohibited transactions under ERISA and the
Code.
The U.S. Department of Labor (the "DOL") has issued a regulation with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity investments would be deemed to be plan assets. The
regulation provides that the underlying
110
<PAGE>
assets of an entity will not be considered to be plan assets if the interests of
the entity acquired by the employee benefit plan are "publicly-offered
securities"--that is, they are (1) widely held (i.e., owned by more than 100
investors independent of the entity and of each other), (2) freely transferable,
and (3) sold as part of an offering pursuant to an effective registration
statement under the Securities Act and timely registered under Section 12(b) or
12(g) of the Exchange Act. It is expected that the Trust Preferred Securities
will meet the criteria of "publicly offered securities" above. The Underwriters
expect that the Trust Preferred Securities will be held by at least 100
independent investors at the conclusion of the offering. There are no
restrictions imposed on the transfer of the Trust Preferred Securities and the
Trust Preferred Securities will be sold as part of an offering pursuant to an
effective registration statement under the Securities Act, and will be timely
registered under the Exchange Act.
Even if the assets of the Trust were deemed to be "plan assets" of employee
benefit plans that are holders of the Trust Preferred Securities, there are five
class exemptions issued by the DOL which could apply to except certain
transactions involving assets of the Trust from the prohibited transaction
provisions of ERISA and the Code--Prohibited Transaction Exemption 84-14, for
certain transactions determined by qualified professional asset managers;
Prohibited Transaction Exemption 90-1, for certain transactions involving
insurance company pooled separate accounts; Prohibited Transaction Exemption
91-38, for certain transactions involving bank collective investment funds;
Prohibited Transaction Exemption 95-60, for certain transactions involving
insurance company general accounts; and Prohibited Transaction Exemption 96-23,
for certain transactions determined by in-house asset managers.
Even if the assets of the Trust are not deemed "plan assets" of employee
benefit plans that hold Trust Preferred Securities, the Company might be
considered a party in interest or a disqualified person with respect to certain
such employee benefit plans by reason of pre-existing relationships, such as
plans for which the Company, or an affiliate serves as trustee. Therefore,
before such employee benefit plans purchase Trust Preferred Securities, they
should determine that either (a) neither the Company nor any affiliate is a
party in interest or disqualified person with respect to such plan or (b) one of
the class exemptions referred to in the preceding paragraph or any other
exemption from the prohibited transacted rules under ERISA and the Code is
applicable to their purchase and holding of the Trust Preferred Securities.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that an employee benefit
plan fiduciary considering the purchase of Trust Preferred Securities consult
with legal counsel regarding the consequences under ERISA of the acquisition and
ownership of Trust Preferred Securities. Employee benefit plans which are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) generally are not subject to ERISA
requirements or the prohibited transaction provisions of the Code.
111
<PAGE>
UNDERWRITING
Subject to the terms and certain conditions of the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom EVEREN Securities, Inc., Advest, Inc. and Black &
Company, Inc. are acting as representative (the "Representative"), agreed to
purchase an aggregate of 4,000,000 Trust Preferred Securities from the Trust.
The number of Trust Preferred Securities that each Underwriter has agreed to
purchase is set forth opposite its name below:
Underwriters Number of Trust Preferred Securities
- ------------ ------------------------------------
EVEREN Securities, Inc...............
Advest, Inc..........................
Black & Company, Inc.................
Total....................... 4,000,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters who are parties thereunder are subject to certain conditions. If
any of the Trust Preferred Securities are purchased by the Underwriters pursuant
to the Underwriting Agreement, all of such Trust Preferred Securities (other
than the Trust Preferred Securities covered by the over-allotment option
described below) must be so purchased.
The Trust and the Company have been advised by the Representatives that the
Underwriters propose to offer the Trust Preferred Securities to the public
initially at the price to the public set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not to exceed
$ per Trust Preferred Security. The Underwriters may allow, and such dealers may
reallow, discounts not to exceed $ per Trust Preferred Security to certain other
dealers. After the initial public offering of the Trust Preferred Securities,
the public offering price and the other selling terms may be changed by the
Representatives. In view of the fact that the proceeds of the sale of the Trust
Preferred Securities will be used to purchase the Junior Subordinated Debentures
of the Company, the Underwriting Agreement provides that the Company will pay as
compensation to the Underwriters arranging the investment therein of such
proceeds, an amount in immediately available funds of $0.40 per Trust Preferred
Security (or $1,600,000 ($1,840,000 if the over-allotment option is exercised in
full) in the aggregate) for the accounts of the Underwriters. The Company has
also agreed to pay to EVEREN Securities, Inc., in immediately available funds,
as compensation for its special services in connection with the preparation of
this offering (i) a structuring fee in an amount of $0.10 per Trust Preferred
Security (or $400,000 ($460,000 if the over-allotment option is exercised in
full) in the aggregate), and (ii) a non-accountable expense allowance to cover
unreimbursed legal fees and other expenses in an amount equal to $0.05 per Trust
Preferred Security (or $200,000 ($230,000 if the over-allotment option is
exercised in full) in the aggregate).
112
<PAGE>
The Trust has granted to the Underwriters an option to purchase up to an
additional $6,000,000 aggregate liquidation amount of Trust Preferred Securities
at the price to the public set forth on the cover page of this Prospectus,
solely to cover over-allotments, if any. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of option Trust Preferred Securities
proportionate to such Underwriter's initial commitment as indicated in the
preceding table. Among other things, to the extent the Underwriters exercise
their over-allotment option, the Trust will sell to the Company and the Company
will purchase from the Trust, additional Trust Common Securities as is required
for the Company to continue to hold at least 3% of the total equity capital of
the Trust.
The Trust and the Company have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Trust Preferred Securities are a new issue of securities with no
established trading market. The Trust has applied for approval to list the Trust
Preferred Securities on the American Stock Exchange. In order to meet the
listing requirements of the American Stock Exchange, the Representatives have
undertaken to distribute the Trust Preferred Securities to a minimum of 400
public holders. The offering price and distribution rate have been determined by
negotiations among representatives of the Company and the Representatives, and
the offering price of the Trust Preferred Securities may not be indicative of
the market price following the offering.
The Trust and the Company have agreed with the Underwriters not to (other
than in connection with this offering), directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise issue any Trust Preferred Securities or Junior Subordinated
Debentures, any securities convertible into or exercisable or exchangeable for
Trust Preferred Securities, or any securities substantially similar to the Trust
Preferred Securities or Junior Subordinated Debentures, enter into any swap or
other agreement to do any of the foregoing, or file any registration statement
relating to any of the foregoing on behalf of itself or any other person, for a
period of 180 days after the date of this Prospectus, without the written
consent of EVEREN Securities, Inc.
In connection with the offering, certain Underwriters and selling group and
their respective affiliates may engage in transactions that stabilize, maintain
or otherwise affect the market price of the Trust Preferred Securities. Such
transactions may include stabilization transactions effected in accordance with
the Securities Exchange Act of 1934 pursuant to which such persons may bid for
or purchase Trust Preferred Securities for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of the
Underwriters by selling more Trust Preferred Securities in connection with this
offering than they are committed to purchase from the Trust, and in such case
may purchase Trust Preferred Securities in the open market following completion
of the offering
113
<PAGE>
to cover all or a portion of such Trust Preferred Securities or may exercise the
Underwriters' over-allotment option referred to above. In addition, the
Representatives, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby they may reclaim from an
Underwriter (or dealer participating in the offering), for the account of the
other Underwriters, the selling concession with respect to Trust Preferred
Securities that are distributed in this offering but subsequently purchased for
the account of the Underwriters in the open market.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Preferred Securities, the enforceability of the Trust Agreement and the creation
of the Trust will be passed upon by Richards, Layton & Finger, P.A., special
Delaware counsel to the Company and the Trust. The validity of the Guarantee and
the Junior Subordinated Debentures will be passed upon for the Company by Stoel
Rives LLP, counsel to the Company. Certain legal matters relating to the
offering will be passed upon for the Underwriters by Irell & Manella LLP. Stoel
Rives LLP and Irell & Manella LLP will rely on the opinions of Richards, Layton
& Finger, P.A. as to certain matters of Delaware law. Certain matters relating
to United States federal income tax considerations will be passed upon for the
Company by Stoel Rives LLP.
EXPERTS
The financial statements of Praegitzer Industries, Inc. included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon such
report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of Likom PCB Sdn Bhd included in this Prospectus
have been audited by Ong Boon Bah & Co., independent auditors, as stated in
their report appearing herein, and are included in reliance upon such report of
such firm given upon their authority as experts in accounting and auditing.
114
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report of Deloitte & Touche LLP...................... F-1
Consolidated Balance Sheets at June 30, 1998 and 1997...................... F-2
Consolidated Statements of Operations for the years ended
June 30, 1998, 1997 and 1996............................................ F-3
Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997 and 1996............................................ F-4
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1998, 1997 and 1996...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
Independent Auditors' Report of Ong Boon Bah & Co......................... F-21
Balance Sheets at June 30, 1997 and 1998................................... F-22
Statements of Income and Retained Earnings for the years ended
June 30, 1997 and 1997.................................................. F-23
Statements of Cash Flows for the years ended June 30, 1997 and 1998........ F-24
Notes to Financial Statements for the year ended June 30, 1997............. F-25
Pro Forma Statement of Operations for the year ended
June 30, 1998 (Unaudited)............................................... F-29
Notes to Pro Forma Combined Statements of Operations (Unaudited)........... F-30
115
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Praegitzer Industries, Inc.
We have audited the accompanying consolidated balance sheets of Praegitzer
Industries, Inc. and subsidiary as of June 30, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Praegitzer Industries, Inc. and
subsidiary as of June 30, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1998,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
September 4, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
- ------------------------------------------------------------------------------------
ASSETS 1997 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 441,950 $ 1,169,912
Receivables, net of allowance
for doubtful accounts of $400,000
at June 30, 1997 and 1996 24,452,506 28,562,209
Inventories (Note 4) 8,534,428 16,491,325
Prepaid expenses 454,304 2,438,844
Current deferred tax asset (Note 11) 628,532 474,175
------------ -------------
Total current assets 34,511,720 49,136,465
PROPERTY, PLANT, AND EQUIPMENT, Net (Note 5) 40,036,399 88,825,496
RESTRICTED CASH 162,903 -
OTHER ASSETS (Note 6) 12,574,899 13,532,050
------------ -------------
TOTAL $ 87,285,921 $ 151,494,011
============ =============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 2,041,554 $ 3,709,446
Accounts payable 8,504,485 13,929,852
Accrued payroll and related benefits 2,878,913 3,955,300
Other current liabilities 491,610 1,851,425
Current portion of long-term
obligations (Notes 8 and 9) 3,564,591 6,393,664
------------ -------------
Total current liabilities 17,481,153 29,839,687
LONG-TERM OBLIGATIONS,
Net of current portion (Notes 8 and 9) 29,784,885 73,413,472
DEFERRED TAX LIABILITY (Note 11) 2,306,426 4,197,481
DEFERRED GAIN 72,578 63,550
COMMITMENTS AND CONTINGENCIES (Note 9) - -
SHAREHOLDERS' EQUITY:
Preferred stock; 500,000 shares authorized,
no shares issued and outstanding - -
Common stock, 50,000,000 shares authorized and
12,750,214 shares issued and outstanding at
June 30, 1998 and 12,434,518 at June 30, 1997 41,232,502 42,324,553
Retained earnings (deficit) (3,591,623) 1,655,268
------------ -------------
Total shareholders' equity 37,640,879 43,979,821
------------ -------------
TOTAL $ 87,285,921 $ 151,494,011
============ =============
See notes to consolidated financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------------------------------
1996 1997 1998
<S> <C> <C> <C>
REVENUE $ 95,101,170 $ 147,947,303 $ 182,773,158
COST OF GOODS SOLD 72,941,213 122,012,818 148,487,031
------------- ------------- -------------
Gross profit 22,159,957 25,934,485 34,286,127
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE 8,895,548 19,188,455 23,456,329
IMPAIRMENT AND IN-PROCESS
TECHNOLOGY EXPENSE (Notes 3 and 7) - 11,650,000 -
------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS 13,264,409 (4,903,970) 10,829,798
Interest expense 1,798,914 2,295,140 3,757,236
Other income, net 301,642 568,412 224,125
------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 11,767,137 (6,630,698) 7,296,687
PROVISION FOR INCOME TAXES (Note 11) 1,445,000 1,669,809 2,214,938
------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 10,322,137 (8,300,507) 5,081,749
DISCONTINUED OPERATIONS (Note 10) (612,000) - -
------------- ------------- -------------
NET INCOME (LOSS) $ 9,710,137 $ (8,300,507) $ 5,081,749
============= ============= =============
PRO FORMA NET INCOME DATA
(Note 11) (Unaudited):
Income from continuing operations
before income taxes, as reported $ 11,767,137
Pro forma provision for income taxes (4,472,000)
Discontinued operations, as reported (612,000)
Pro forma tax benefit
of discontinued operations 233,000
-------------
Pro forma net income $ 6,916,137
=============
NET INCOME (LOSS) PER SHARE,
BASIC AND DILUTED (Note 2)
(1996 Pro Forma unaudited) from:
Continuing operations $ 0.80 $ (0.68) $ 0.40
Discontinued operations (0.04) - -
------------- ------------- -------------
NET INCOME (LOSS) PER SHARE,
BASIC AND DILUTED $ 0.76 $ (0.68) $ 0.40
============= ============= =============
See notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- -----------------------------------------------------------------------------------------------------
1996 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9,710,137 $ (8,300,507) $ 5,081,749
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,911,279 7,376,595 8,902,708
Loss (Gain) on sale of fixed assets (111,730) (564,858) (53,445)
Deferred taxes 502,000 474,325 2,045,412
Provision for doubtful accounts 292,354 135,000 -
Impairment and in-process
technology expense - 11,650,000 -
Loss on discontinued operations 612,000 - -
Changes in operating
assets and liabilities
Receivables (3,361,233) (8,474,182) (3,186,023)
Inventory (688,624) (1,366,761) (6,475,384)
Accounts payable (2,684,743) 1,301,094 4,479,382
Income taxes payable 943,000 (980,835) (1,892,929)
Accrued payroll and related benefits 288,645 345,317 1,074,422
Other current liabilities (1,336,809) 214,561 453,904
Other (132,935) (90,912) (77,253)
----------- ------------ ------------
Net cash provided by operating activities 8,943,341 1,718,837 10,352,543
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment (7,525,631) (24,760,670) (39,334,464)
Additions to other assets - (121,502) (746,927)
Proceeds from sale of property,
plant, and equipment 217,955 11,187,029 4,244,785
Acquisitions, net of cash acquired (2,000,000) (5,375,122) (19,170,255)
Net reductions in amounts due from
related parties and shareholders (2,594,714) - -
Change in restricted cash (2,331) 143,053 162,903
----------- ------------ ------------
Net cash used in investing activities (11,904,721) (18,927,212) (54,843,958)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net additions to (reductions in)
short-term borrowings (5,199,771) 11,463,066 25,063,359
Borrowing of long-term debt 3,880,409 21,814,498 21,300,000
Payments on long-term debt (7,713,451) (16,386,981) (3,261,600)
Proceeds from initial public
offering, net of expenses 19,340,185 - -
Issuances of common stock
under employee stock plans - 307,964 1,091,051
Dividends paid (6,783,635) - -
Payments on capital leases (108,460) (636,884) (641,325)
Increase (decrease) in bank overdrafts (438,270) 1,049,975 1,667,892
----------- ------------ ------------
Net cash provided by financing activities 2,977,007 17,611,638 45,219,377
----------- ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS $ 15,627 $ 403,263 $ 727,962
(Continued)
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- -----------------------------------------------------------------------------------------------------
1996 1997 1998
<S> <C> <C> <C>
INCREASE IN CASH AND CASH EQUIVALENTS $ 15,627 $ 403,263 $ 727,962
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 23,060 38,687 441,950
----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 38,687 $ 441,950 $ 1,169,912
=========== ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION -
Cash paid during the year for interest $ 1,789,375 $ 1,915,515 $ 3,734,173
Cash paid during the year
for income taxes, net - 2,165,392 2,062,324
NONCASH INVESTING AND FINANCING ACTIVITIES:
During the year ended June 30, 1996, the Company used $526,720 of operating
lease deposits toward the purchase of equipment.
During the year ended June 30, 1996, the Company distributed dividends of
$468,087 to a shareholder by reducing amount due from shareholder.
See notes to consolidated financial statements.
(Concluded)
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
- ----------------------------------------------------------------------------------------------------------------
Common Stock
--------------------------- Retained
Number Earnings
of Shares Amount (Deficit) Total
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCES, JUNE 30, 1995 8,086,875 $ 4,308,916 $ 1,389,703 $ 5,698,619
Stock issued in connection with acquisitions 700,000 7,143,714 - 7,143,714
Initial public offering, net of expenses 2,275,000 19,340,185 - 19,340,185
Dividends - (468,087) (6,783,635) (7,251,722)
Net earnings June 30, 1996 - (392,679) 10,102,816 9,710,137
---------- ----------- ----------- -----------
BALANCES, JUNE 30, 1996 11,061,875 29,932,049 4,708,884 34,640,933
Stock issued in connection with acquisitions 1,330,000 10,992,489 - 10,992,489
Proceeds from exercise of Incentive Stock Options 12,000 114,000 - 114,000
Proceeds from issuance under the ESPP 30,643 193,964 - 193,964
Net loss June 30, 1997 - - (8,300,507) (8,300,507)
---------- ----------- ----------- -----------
BALANCES, JUNE 30, 1997 12,434,518 41,232,502 (3,591,623) 37,640,879
Stock issued in connection with acquisitions 200,000 1,000 165,142 166,142
Proceeds from exercise of Incentive Stock Options 54,048 499,738 - 499,738
Proceeds from issuance under the ESPP 61,648 591,313 - 591,313
Net earnings June 30, 1998 - - 5,081,749 5,081,749
---------- ----------- ----------- -----------
BALANCES, JUNE 30,1998 12,750,214 $ 42,324,553 $ 1,655,268 $ 43,979,821
========== ============ =========== ============
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
PRAEGITZER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Praegitzer Industries, Inc. (the "Company" or
"Praegitzer") is incorporated under the laws of the State of Oregon, and
its principal business is the design, manufacture and sale of electronic
circuit boards.
Principles of Consolidation - The accompanying financial statements include
the accounts of the Company and its majority owned subsidiary, since its
acquisition on April 13, 1998. All significant intercompany transactions
and 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. Actual results could differ from those
estimates.
Revenue Recognition - Revenue is recognized when goods are shipped to the
customer.
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.
Cash and Cash Equivalents includes all cash and short-term debt
instruments, purchased with an original maturity of three months or less.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
trade accounts receivable. The risk is limited due to the fact that the
Company's trade accounts receivable are derived from sales in various
geographic areas to numerous companies varying in size within the
electronics industry. Additionally, the Company performs ongoing credit
evaluations of its customers' financial condition and generally does not
require collateral, such as letters of credit or security agreements.
Credit losses have consistently been within management's expectations.
Property, Plant, and Equipment - Depreciation of property and equipment is
provided on the straight-line method based on the estimated useful lives of
the individual assets, primarily 3 to 10 years for equipment and 31 years
for buildings. The Company records the assets and the related obligations
of capital leases at amounts based upon the cash purchase price of the
assets involved at the beginning of the lease term. Depreciation and
amortization expense also includes amortization of equipment recorded under
capital leases provided on the basis of the estimated useful lives of the
individual assets, primarily 5 years, on the straight-line method.
Loan Fees - Other assets include loan fees incurred by the Company. These
fees are being amortized over the terms of the loans.
Goodwill - The Company amortizes costs in excess of fair value of net
assets of businesses acquired using the straight-line method over a period
of fifteen years. Management reviews,
F-7
<PAGE>
on an ongoing basis, the continuing appropriateness of the remaining
amortizable life and the net realizable value of the unamortized balance.
Asset Impairments - Long-lived assets to be held and used by the Company
are reviewed for impairment when events and circumstances indicate costs
may not be recoverable. Losses are recognized when the book values exceed
expected undiscounted future cash flows. If impairment exists, the asset's
book value is written down to its estimated fair value. Assets to be
disposed are written down to their fair value, less sales costs. See note 7
for a discussion of a charge in 1997 related to impairment of goodwill.
Derivative Financial Instruments - The Company has only limited involvement
with derivative financial instruments. See note 8 for a discussion of the
Company's derivative instruments as of June 30, 1998.
Income Taxes - The Company elected to be taxed under the S corporation
provisions of the Internal Revenue Code through the effective date of the
initial public offering by Praegitzer of common stock (the "Offering").
Under those provisions, the Company did not pay federal or state corporate
income taxes on its taxable income. Instead, the shareholders were liable
for federal and state income taxes on the Company's taxable income.
Actual and pro forma income taxes have been provided for under Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are
recognized based on differences between financial statement and tax basis
of assets and liabilities using presently enacted tax rates.
S Corporation Dividends - Historically, the Company has paid dividends to
its shareholders in amounts which approximate the federal and state income
taxes that are due as a result of the Company electing to be taxed as an S
corporation as discussed above. In connection with the Offering, the
Company distributed to its former shareholders substantially all of the
undistributed cumulative income that had been taxed or was taxable to its
former shareholders. This dividend was paid from the proceeds of the
Offering.
Future Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, Reporting Comprehensive
Earning. SFAS No. 130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Company's first quarter
of the fiscal year ending June 30, 1999. Reclassification of prior year
financial statements for comparative purposes is required. Management has
not completed an evaluation of the effects this standard will have on the
Company's financial position or results of operations.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards
for disclosure about operating segments in annual financial statements and
selected information in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. The new standard becomes effective for the
Company's fiscal year ending June 30, 1999. Adoption of this statement may
result in additional disclosures but will have no material impact on the
Company's results of operations or financial position.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The new statement will require
recognition of all derivatives as either
F-8
<PAGE>
assets or liabilities on the balance sheet at fair value. The new statement
becomes effective for the first quarter of fiscal year ending June 30,
2000. Management has not completed an evaluation of the effects this
standard will have on the Company's financial position or results of
operations.
Reclassifications - Certain amounts from the prior year's financial
statements have been reclassified to be consistent with the current year
presentation.
2. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, Earnings per Share, which
specifies new standards for computing and disclosing earnings per share and
is effective for periods ending after December 15, 1997. The Company has
adopted this standard and has restated its earnings per share ("EPS") for
prior periods presented. The basic EPS has been computed by dividing net
income by the weighted average number of shares outstanding during each
period. Diluted EPS has been computed by dividing net income by the
weighted average common and common equivalent shares outstanding during
each period using the treasury stock method, if the common equivalent
shares were not anti-dilutive. The difference between the basic and diluted
weighted average shares is due to common stock equivalent shares resulting
from outstanding stock options and warrants. Net income for the calculation
of both basic and diluted EPS is the same for all periods presented. The
calculation of the weighted average outstanding shares is as follows:
<TABLE>
<CAPTION>
Proforma
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Weighted average shares outstanding-basic 9,070,209 12,233,769 12,694,039
Common stock options and warrants 40,024 - 151,757
------------ ------------ -------------
Weighted average shares outstanding-diluted 9,110,233 12,233,769 12,845,796
============ ============ =============
</TABLE>
3. ACQUISITIONS
Effective April 13, 1998, the Company acquired 51% of the outstanding
capital stock of Likom PCB Sdn Bhd ("Likom"), a printed circuit board
manufacturer located in Malaysia. The purchase price was up to 5.2 million
Ringgit, $1,432,000 based on the currency exchange rate on April 27, 1998,
which consisted of the transfer and contribution to Likom of third-party
software license rights, machinery and equipment currently owned or
purchased by the Company and cash.
The acquisition of Likom has been accounted for using the purchase method
of accounting. The operating results from the date of purchase have been
consolidated in the Company's financial statements. No goodwill was
recognized related to this acquisition.
On March 31, 1998, the Company acquired a printed circuit board fabrication
facility located in Huntsville, Alabama from Intergraph Corporation
("Intergraph"). The acquisition consisted of land, building, equipment and
inventory. The purchase price for the assets was $15.95 million, which was
paid in cash.
F-9
<PAGE>
The acquisition was accounted for under the purchase method of accounting
and, accordingly, the operating results of Intergraph from the date of
purchase are included in the Company's financial statements. The estimated
fair market value of assets approximate the fair market value of the
liabilities and, accordingly, no goodwill was recognized.
On August 28, 1996, the Company acquired Trend Circuits, Inc. ("Trend"), a
circuit board manufacturing company. The acquisition was accomplished by a
merger of Trend with and into Praegitzer. The purchase price included
$5,000,000 of cash and 1,000,000 shares of Praegitzer's common stock valued
at $10.65 per share.
The acquisition was accounted for under the purchase method of accounting
and, accordingly, the operating results of Trend from the date of purchase
are included in the Company's financial statements. The estimated fair
market value of assets and liabilities acquired was approximately
$9,600,000 and $11,900,000, respectively. The Company incurred a one-time
charge of $8,000,000 related to a portion of the purchase price allocated
to in-process technology which was expensed at the closing of the
transaction. The remaining excess of the aggregate purchase price over the
fair market value of the net assets acquired of $9,900,000 was recognized
as goodwill and is being amortized over fifteen years.
On November 15, 1995, Praegitzer acquired Circuit Technology, Inc. ("CTI"),
a circuit board manufacturing company. The acquisition was accomplished by
a merger of CTI with and into Praegitzer. The purchase price included
$2,000,000 of cash and 700,000 shares of Praegitzer's common stock which
was valued at $10.21 per share.
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the operating results of CTI have been
included in the Company's combined financial statements since the date of
acquisition. The estimated fair market value of assets and liabilities
acquired was approximately $8,000,000 and $7,300,000, respectively. The
excess of the aggregate purchase price over the fair market value of net
assets acquired of $8,400,000 was recognized as goodwill and is being
amortized over fifteen years. During the year ended June 30, 1997 the
Company recorded an impairment of goodwill related to CTI of $3,650,000
(See Note 7). The remaining goodwill is being amortized over the remaining
life of 15 years.
The following unaudited pro forma results of operations assume the
acquisitions occurred on July 1, 1996:
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------
1997 1998
<S> <C> <C>
Revenue $172,511,303 $197,332,158
Net income (loss) (2,761,507) 2,630,749
Net income (loss) per share (0.23) 0.21
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Likom, Intergraph, CTI
and Trend acquisitions been consummated as of July 1, 1996 nor is it
necessarily indicative of future operating results.
F-10
<PAGE>
In April 1996, Praegitzer acquired all the assets and the related
liabilities of Praegitzer Property Group ("PPG") for net consideration of
$12,120,000. Praegitzer issued 1,369,875 shares of its common stock to the
sole proprietor of PPG. As the entities are commonly controlled, the
transaction was accounted for in a manner similar to a pooling of interests
which resulted in a restatement of prior years financial statements.
In addition, the Company acquired several other companies during the last
three years, which were not significant to its financial position, results
of operations or cash flows. During the year ended June 30, 1998, one
acquisition was accounted for as a pooling of interest; however, prior
period financial statements were not restated because the retroactive
effect was not material. During the year ended June 30, 1997, two
acquisitions were accounted for as pooling of interests; however, prior
period financial statements were not restated because the retroactive
effect was not material. All other acquisitions were accounted for using
the purchase method. Under the purchase method, the results of operations
of acquired companies are included prospectively from the date of
acquisition, and the acquisition cost is allocated to the acquirees' assets
and liabilities based upon their fair market values at the date of the
acquisition. To accomplish the mergers a total of 200,000 and 330,000
shares were issued during the years ended June 30, 1998 and 1997,
respectively. At June 30, 1998 and 1997, the net book value of goodwill
associated with acquisitions was $11,486,072 and $12,414,228, respectively,
and is being amortized on a straight-line basis over 15 years.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Raw materials and supplies $ 3,117,427 $ 6,430,638
Work-in-process 5,417,001 10,060,687
----------- -----------
Total inventories $ 8,534,428 $16,491,325
=========== ===========
</TABLE>
F-11
<PAGE>
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Useful
Life
(Years) 1997 1998
<S> <C> <C> <C>
Land - $ 3,302,576 $ 1,468,212
Buildings and leasehold improvements 10 to 31 14,453,908 21,899,123
Equipment 3 to 10 42,770,430 83,949,892
Office furniture and fixtures 5 to 7 660,388 1,086,121
Projects in process - 1,669,207 10,670,668
Deposits on equipment - 2,962,150 5,726,843
------------ ------------
65,818,659 124,800,859
Accumulated depreciation and amortization (25,782,260) (35,975,363)
------------ ------------
Property, plant and equipment $ 40,036,399 $ 88,825,496
============ ============
</TABLE>
At June 30, 1998 and 1997, the Company had equipment of $2,535,381 and
$3,678,970, respectively, financed with capital leases. The total
accumulated amortization at June 30, 1998 and 1997 was $946,712 and
$617,499, respectively.
6. OTHER ASSETS
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Goodwill $ 12,414,228 $ 11,486,072
Other 160,671 2,045,978
------------ ------------
Total other assets $ 12,574,899 $ 13,532,050
============ ============
</TABLE>
Other assets are presented net of related accumulated amortization of
$3,302,606 and $2,296,946 at June 30, 1998 and 1997, respectively.
7. IMPAIRMENT OF GOODWILL
During the year ended June 30, 1997 the Company recorded an impairment of
$3,650,000 of certain goodwill associated with the CTI acquisition. The
impairment was due to the inability of the CTI operation (now Redmond
Division), which was purchased to serve as the Company's quick-turn
operation, to move its product mix from 75% production 25%
quick-turnaround. Further, it was anticipated that turning Redmond's
operation into a quick-turnaround operation would be very costly in both
time and cash flow. Recognizing the problem, the Company acquired Trend
(now Fremont Division), an operation that is
F-12
<PAGE>
80% to 90% quick-turnaround. The Company plans to utilize the Fremont
Division for the majority of its quick-turnaround requirements. This
resulted in an impairment of goodwill related to the CTI acquisition.
In determining the amount of the impairment charge, the Company developed
estimates of operating cash flows over the remaining business life cycle.
Future cash flows, excluding interest charges, were discounted using an
estimated 8% incremental borrowing rate.
8. LONG-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Line of credit of $40,000,000 payable to Key Bank, 8.5% at June 30, 1998,
collateralized by inventory and accounts receivable, expires March 31, 2000 $ 12,447,658 $ 37,511,017
Note payable to Heller Financial, Inc., 9.9375% at June 30, 1998 payable in
monthly installments of $180,952 beginning February 1,1999 plus accrued
interest at LIBOR plus 4.25% collaterialized by real property and equipment
at the Huntsville, Alabama facility, $6.1 million due April 1, 2003 - 15,200,000
Note payable to Heller Financial, Inc., 8.4375% at June 30, 1998 payable in
monthly installments of $111,111 plus accrued interest at LIBOR plus
2.75%, collaterialized by real property and equipment at the Dallas, Oregon
facility due November 1, 2004 10,000,000 8,666,667
Notes payable to Heller Financial, Inc., 7.8% to 7.9%, due in monthly
installments of $94,697 including interest, collateralized by machinery and
equipment due January 1, 2005 and April 1, 2005 - 5,864,824
Note payable to Heller Financial, Inc., 8.2375% at June 30, 1998 payable in
monthly installments of $55,555 plus accrued interest at LIBOR plus 2.55%,
collateralized by real property and equipment at the White City, Oregon
facility, due February 1, 2004 4,500,000 3,833,333
Note payable to Finova Capital Corporation, 9.93%, payable in 35 monthly
installments plus accrued interest, through August 1, 1999, $2.2 million
due September 1, 1999 3,995,278 3,251,862
Shareholder loan payable to Rubitasi Holding Company, 0%, at June 30, 1998
payable in 36 monthly installments plus accrued interest at the Maybank
rate, interest begins to accrue on November 12, 1998 at which time the first
payment is due. - 1,763,224
Other notes payable, 0% to 10% at June 30, 1998 305,779 977,004
------------ ------------
Subtotal 31,248,715 77,067,931
Current portion (2,917,466) (4,874,852)
------------ ------------
Total long-term notes payable $ 28,331,249 $ 72,193,079
============ ============
</TABLE>
To reduce the risk of fluctuations in interest rates the Company entered
into an interest rate swap agreement with Key Bank during the year ended
June 30, 1997. The swap has a notional amount of $5 million and effectively
changes the Company's interest rate exposure on the Key Bank lease line
from a variable rate to a 6.10% fixed rate. This agreement matures in 2003.
F-13
<PAGE>
The Company's loan agreements with Heller Financial, Inc. and Finova Credit
Corporation contain certain financial covenants. At June 30, 1998 the
Company was not compliant with certain of these financial covenants, which
caused the Company to be in technical default under its credit agreement
with Key Bank and its loan agreements with Heller Financial, Inc. and
Finova Credit Corporation. The Company has received waivers from its
lenders for all of these defaults. The Company was in compliance with all
other covenants at June 30, 1998.
Maturities on the notes payable as of June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
--------------------------------------------------
<S> <C>
1999 $ 4,874,852
2000 45,454,708
2001 5,589,016
2002 5,254,857
2003 10,738,420
Thereafter 5,156,078
------------
Total $ 77,067,931
============
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Capital Leases
The Company has acquired certain equipment under capital lease obligations
bearing interest rates ranging from 9.25% to 31.03% and monthly
installments totaling $143,591 including interest at June 30, 1998 and
interest rates ranging from 9.25% to 13.69% and monthly installments
totaling $68,136 including interest at June 30, 1997.
Operating Leases
Praegitzer leases buildings and equipment under operating lease agreements
that expire at various times through 2004.
The following table is a schedule of future minimum principal payments
under capital leases and future minimum rentals under operating lease
agreements at June 30, 1998:
F-14
<PAGE>
<TABLE>
<CAPTION>
Capital Operating
Year Ending June 30, Leases Leases
----------------------------------------------------------
<S> <C> <C>
1999 $ 1,518,812 $ 4,656,795
2000 1,051,225 3,248,599
2001 148,807 2,505,892
2002 15,282 2,405,742
2003 5,079 1,304,314
Thereafter - 450,765
----------- ------------
Total $ 2,739,205 $ 14,572,107
=========== ============
</TABLE>
Several of Praegitzer's operating leases contain renewal options. Rent
expense relating to the building and equipment leases totaled $5,781,332,
$3,834,948, and $796,642 for the years ended June 30, 1998, 1997, and 1996
respectively.
The Company is involved as a defendant in litigation in the ordinary course
of business, the outcome of which can not be predicted with certainty.
Management believes that any ultimate liability with respect to such
litigation will not materially affect the financial position, results of
operations or cash flows of the Company.
10. DISCONTINUED OPERATIONS
On July 1, 1993, the Company adopted a formal plan to sell its assembly
contract manufacturing division. On April 25, 1994, the sale of
substantially all of the assets of the assembly division was completed.
During 1996, the Company paid $612,000 in settlement of a prior contingency
related to the assembly division. This amount was recorded as a loss from
discontinued operations during the year ended June 30, 1996.
11. INCOME TAXES
The following information reflects income taxes on the Company's earnings
from April 4, 1996 the date of the closing of the Company's initial
offering of common stock to the public, to June 30, 1996 and for the years
ended June 30, 1998 and 1997. The Company terminated its S corporation
election on April 4, 1996 and is now taxed as a C corporation. The
following information also includes unaudited pro forma information as if
the Company's earnings from continuing operations had been subject to
federal and state income taxes as a C corporation for all periods
presented.
F-15
<PAGE>
<TABLE>
<CAPTION>
Period April 4, 1996- Pro Forma Year Ended Year ended June 30,
June 30, 1996 June 30, 1996 1997 1998
------------------ -------------------- ------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 891,000 $ 4,278,000 $ 1,126,752 $ 475,382
State 52,000 742,000 68,732 (305,865)
----------- ----------- ----------- -----------
943,000 5,020,000 1,195,484 169,517
Deferred:
Federal 466,000 (595,000) 425,676 1,976,712
State 36,000 47,000 48,649 68,709
----------- ----------- ----------- -----------
502,000 (548,000) 474,325 2,045,421
----------- ----------- ----------- -----------
$ 1,445,000 $ 4,472,000 $ 1,669,809 $ 2,214,938
=========== =========== =========== ===========
</TABLE>
The income tax provision on earnings from continuing operations subsequent
to the date of the Offering which are subject to income taxes and the pro
forma tax provision on earnings from continuing operations subject to
income taxes differs from the statutory federal income tax rate due to the
following:
<TABLE>
<CAPTION>
Period Proforma
April 4, 1996- Year Ended Year Ended June 30,
June 30, 1996 June 30, 1996 1997 1998
------------- ------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Federal income taxes at the
staturtory rate $ 1,402,000 $ 4,118,000 $ (2,320,744) $ 2,480,870
State income tax, net of 67,000 323,000 (265,228) 364,834
federal benefit
Tax credits utilized (23,000) (171,000) (626,778) (1,097,843)
Goodwill - - 4,856,150 360,296
Other (1,000) 202,000 26,409 106,781
----------- ----------- ----------- -----------
$ 1,445,000 $ 4,472,000 $ 1,669,809 $ 2,214,938
=========== =========== =========== ===========
</TABLE>
Pro forma income taxes related to discontinued operations differs from the
statutory rate primarily due to state income taxes, net of federal benefit.
The significant items comprising the Company's net deferred tax liability
are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1998
------------ ------------
<S> <C> <C>
Reserves and other liabilities $ 415,777 $ 217,527
Other 268,986 321,733
Property, plant, and equipment (2,362,657) (4,262,566)
------------ ------------
$ (1,677,894) $ (3,723,306)
============ ============
</TABLE>
F-16
<PAGE>
Net deferred tax assets and liabilities are included in the following
balance sheet accounts at June 30, 1998 and 1997:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Current deferred asset $ 628,532 $ 474,175
Deferred tax liability (2,306,426) (4,197,481)
------------ ------------
Net deferred tax liability $ (1,677,894) $ (3,723,306)
============ ============
</TABLE>
12. MAJOR CUSTOMERS
For the year ended June 30, 1998 the Company had no customers that
represented more than 10% of total revenue. For the year ended June 30,
1997 the Company recognized 12% of total revenue from one customer. For the
year ended June 30, 1996 the Company recognized 23% of total revenue from
two customers.
13. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan which covers all employees and permits
discretionary contributions by the participants. The Company has
contributed $318,938, $132,588, and $251,188 to the plan for the years
ended June 30, 1998, 1997 and 1996.
14. STOCK INCENTIVE PLAN AND STOCK WARRANTS
Under the Company's Stock Incentive Plan, the Board of Directors may grant
incentive and non-qualified options, stock bonuses, restricted stock, stock
appreciation rights, and cash bonus rights to employees and directors to
purchase up to 1,500,000 shares of common stock. The Stock Incentive Plan
shall continue in effect until all shares available for issuance have been
issued. However, the Board of Directors can suspend or terminate the Stock
Incentive Plan at any time except with respect to options and shares
subject to restrictions then outstanding under the Stock Incentive Plan.
Under the Stock Incentive Plan, the option price is equal to fair market
value at the grant date. Options currently expire no later than ten years
from the grant date and generally vest after four years.
The following table summarizes the stock option activity under the
Company's option plan:
F-17
<PAGE>
<TABLE>
<CAPTION>
Weighted
average
Number exercise
of shares price
- ----------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1995 -
Granted 667,000 $ 9.56
----------
Options outstanding at June 30, 1996 667,000 9.56
Granted 499,563 9.84
Canceled (68,800) 9.51
Exercised (12,000) 9.50
----------
Options outstanding at June 30, 1997 1,085,763 9.80
Granted 383,457 10.46
Canceled (222,318) 9.95
Exercised (17,382) 9.57
----------
Options outstanding at June 30, 1998 1,229,520 $10.03
==========
Options exercisable at:
June 30, 1996 - -
June 30, 1997 130,357 $ 9.69
June 30, 1998 310,744 $ 9.65
</TABLE>
The range of exercise prices for options outstanding at June 30, 1998 and
1997 was $8.375-$13.50. Options available for grant at June 30, 1998
totaled 241,098.
The Company has elected to account for its stock based compensation under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees;" however, as required by SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has computed for pro forma
disclosure purposes the value of options granted during the years ended
June 30, 1998, 1997 and 1996 using the Black-Scholes option pricing model.
The weighted average assumptions used for stock option grants in 1998, 1997
and 1996 were a risk free interest rate of 5.48%, 6.44% and 6.19%,
respectively, no expected dividend yield, an expected life of 4.8 years, 6
years and 6.5 years, respectively, and an expected volatility of 55%, 44%
and 52%, respectively. The weighted average estimated fair value of
employee stock options granted during the years ended June 30, 1998, 1997
and 1996 was $5.49, $5.13 and $5.67 per share, respectively.
If the Company had accounted for the plan in accordance with SFAS No. 123,
the Company's net income and pro forma net income per share would have been
reported as follows:
<TABLE>
<CAPTION>
Year ended June 30,
------------------------------------------
1996 1997 1998
<S> <C> <C> <C>
Net income (loss) as reported, 1996 pro forma $6,916,137 $(8,300,507) $5,081,749
Pro forma net income (loss) 6,512,685 (8,992,908) 4,386,882
Pro forma diluted net income (loss) per share 0.71 (0.74) 0.34
</TABLE>
F-18
<PAGE>
The effects of applying SFAS No. 123 for providing pro forma disclosures
for the years ended June 30, 1998, 1997 and 1996 are not likely to be
representative of the effects on reported net income and earnings per share
for future years since options vest over several years and additional
awards are made each year.
The Company has an Employee Stock Purchase Plan ("ESPP"). Under the ESPP
employees may purchase shares of the Company's common stock at 85% of fair
market value at specific, predetermined dates. There are 200,000 authorized
to be issued under the ESPP.
In connection of the acquisition of CTI (see Note 3), Praegitzer issued
stock warrants to purchase 46,333 shares of common stock to the former
shareholders of CTI. The warrants can be exercised at $12 per share and
expire in 2006. At June 30, 1998, no shares had been purchased under the
stock warrants.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of long-term debt has been estimated by discounting
projected future cash flows, using current rate at which similar loans
would be made to borrowers with similar credit ratings and for the same
maturities. Current maturities of long-term debt were included and capital
lease obligations were excluded. The fair value of the Company's long-term
debt is estimated to be $77,182,424, or 100.1% of the carrying value of
$77,067,931 at June 30, 1998 and $31,944,045, or 102.2% of the carrying
value of $31,248,714 at June 30, 1997. The fair value of the Key Bank
interest rate swap is estimated to be $4,704,547 or 109.9% of the carrying
value of $4,282,171 at June 30, 1998 and $5,189,703 or 109.2% of the
carrying value of $4,753,683 at June 30, 1997.
16. QUARTERLY FINANCIAL DATA (Unaudited)
In the opinion of management, this unaudited quarter financial summary
includes all adjustments, which are of a normal and recurring nature,
necessary to present fairly the financial position, the results of
operations, and the cash flows of the Company for the periods represented,
with the exception of the one-time charges reported in the quarter ended
September 30, 1996, see further discussion in Notes 3 and 7 (in thousands,
except per share amounts):
F-19
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31, March 31, June 30,
1997 1997 1998 1998
<S> <C> <C> <C> <C>
Net sales $ 42,595 $ 46,032 $ 44,713 $ 49,433
Gross profit 8,032 10,034 8,773 7,447
Income from operations 2,229 4,019 3,379 1,203
Income (loss) before taxes 1,601 3,379 2,545 (228)
Net income 1,107 2,269 1,732 (26)
Net income per share, basic and diluted 0.09 0.18 0.14 0.00
September 30, December 31, March 31, June 30,
1996 1996 1997 1997
Net sales $ 29,449 $ 34,791 $ 38,303 $ 45,404
Gross profit 5,086 6,965 5,208 8,675
Income (loss) from operations (9,846) 2,172 (50) 2,820
Income (loss) before taxes (10,088) 1,900 (801) 2,358
Net income (loss) (10,673) 1,185 (546) 1,733
Net income (loss) per share, basic and diluted (0.93) 0.10 (0.04) 0.14
</TABLE>
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Likom PCB Sdn Bhd
Kuala Lumpur, Malaysia
We have audited the accompanying balance sheets of Likom PCB Sdn Bhd as of June
30, 1997, and the related statements of income and retained earnings and cash
flows for the year ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Malaysia and the United States of America. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Likom PCB Sdn Bhd as of June 30, 1997, and
the results of its operations and its cash flows for the year ended June 30,
1997 in conformity with generally accepted accounting principles in the United
States of America.
ONG BOON BAH & CO.
Kuala Lumpur, Malaysia
August 6, 1998
F-21
<PAGE>
<TABLE>
<CAPTION>
LIKOM PCB SDN BHD
(Incorporated in Malaysia)
BALANCE SHEETS
JUNE 30, 1997 AND 1998
- -----------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 94,152 % 31,353
Accounts receivable, net of allowance for trade doubtful account
of $58,345 (Note 4) 700,745 718,919
Inventories (Note 5) 382,477 731,513
Prepaid expenses 26,345 23,386
------------ ------------
Total current assets 1,203,719 1,505,171
PLANT, EQUIPMENT, AND MOTOR VEHICLES, Net (Note 6) 4,657,713 4,871,835
LONG-TERM INVESTMENTS 16,214 10,290
------------ ------------
TOTAL $ 5,877,646 $ 6,387,296
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 282,036 $ 934,298
Others 877,727 442,758
Accrued and other liabilities 140,848 905,911
Current portion of long-term obligation 1,111,666 1,181,341
------------ ------------
Total current liabilities 2,412,277 3,464,308
------------ ------------
LONG-TERM OBLIGATIONS, Net of current portion (Note 7) 1,480,779 2,769,731
SHAREHOLDERS' EQUITY:
Common stock - 50,000,000 shares authorized and 42,740,000
shares issued 16,963,684 18,395,684
Retained earnings (accumulated loss) (14,979,094) (17,867,073)
Cumulative foreign currency translation adjustment - (375,354)
------------ ------------
Total shareholders' equity 1,984,590 153,257
------------ ------------
TOTAL $ 5,877,646 $ 6,387,296
============ ============
See notes to financial statements.
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
LIKOM PCB SDN BHD
(Incorporated in Malaysia)
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED JUNE 30, 1997 AND 1998
- -----------------------------------------------------------------------------------------------------------------------
1997 1998
(Unaudited)
<S> <C> <C>
TURNOVER (Note 3) $ 3,615,256 $ 3,258,613
COST OF GOODS SOLD 8,927,138 4,640,754
------------- -------------
Gross loss (5,311,882) (1,382,141)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE (865,627) (1,269,129)
------------- -------------
OPERATING LOSS (6,177,509) (2,651,270)
------------- -------------
OTHER INCOME (EXPENSE):
Interest expenses (349,081) (236,709)
Other incomes (Note 8) 2,070,675 -
------------- -------------
Total other income (expense) 1,721,594 (236,709)
------------- -------------
NET LOSS (4,455,915) (2,887,979)
ACCUMULATED LOSS AT BEGINNING OF YEAR (10,523,179) (14,979,094)
------------- -------------
ACCUMULATED LOSS AT END OF YEAR $(14,979,094) $ (17,867,073)
============= =============
See notes to financial statements.
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
(Incorporated in Malaysia)
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1998
- -----------------------------------------------------------------------------------------------------------------------
1997 1998
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,455,916) $ (2,887,979)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Waiver of amount due to holding company (2,033,789) -
Depreciation 3,390,522 566,391
Loss on disposal of fixed assets 4,332 -
Changes in operating assets and liabilities:
Receivables 1,515,320 (18,174)
Inventory 295,649 (349,036)
Accounts payable 2,072,579 217,293
Accrued and other liabilities (559,380) 768,022
------------ ------------
Net cash provided by (used in) operating activities 229,317 (1,703,483)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) of fixed assets (97,902) (410,513)
(Purchase) sale of investment (15,877) 5,924
Proceeds from disposal of fixed assets 68,348 -
------------ ------------
Net cash used in investing activities (45,431) (404,589)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Equity contribution - 1,062,000
Reduction in borrowing (90,201) (1,111,666)
Borrowing under long-term obligation - 2,470,293
------------ ------------
Net cash used in financing activities (90,201) 2,420,627
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES - (375,354)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 93,685 (62,799)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 467 94,152
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 94,152 $ 31,353
============ ============
See notes to financial statements.
</TABLE>
F-24
<PAGE>
LIKOM PCB SDN BHD
(Incorporated in Malaysia)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997 and 1998 (unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Assets and liabilities are translated into U.S. dollar at the exchange rate
ruling at year-end. Transactions in the income statement are translated
into U.S. dollar at the exchange rate ruling at that date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Likom PCB Sdn Bhd is incorporated in Malaysia, and its
principal business is the manufacturing of printed circuit boards.
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. Actual results could differ from those
estimates.
Revenue Recognition - Revenue is recognized when goods are sold.
Inventories are stated at the lower of cost and net realizable value. Cost
is determined on a standard cost basis.
Cash and Cash Equivalents includes all cash and short-term debt
instruments, including nonrestricted certificates of deposit, purchased
with an original maturity of three months or less.
Plant, Equipment, and Motor Vehicles - Depreciation of plant, equipment,
and motor vehicles is provided on the straight-line method based on the
estimated useful lives of the individual assets, primarily 3 to 10 years.
During fiscal year 1997, the annual depreciation rate of certain plant and
machinery has increased from 10% to 40% to reflect the reduced economical
life of the assets concerned. The effect of change has increased the
depreciation charge by $2,401,133 in fiscal year 1997.
Investments are stated at cost and provision is made for permanent
diminution in value where considered appropriate. Investments with
maturities greater than one year are classified as long-term investments.
Income Taxes - The Company accounts for taxes on income using the asset and
liability method under which deferred tax assets and liabilities are
recognized for the future tax consequences of temporary differences between
the carrying amounts and tax bases of assets and liabilities using enacted
rates. Future tax benefits are recognized to the extent that realization of
such benefits can be reasonably anticipated.
F-25
<PAGE>
3. TURNOVER
Turnover represents the invoiced value of goods sold net of returns and
allowances.
4. ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 1997 consist of the following:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Trade $ 663,545 $ 676,951
Others 37,200 41,968
--------- ---------
Total accounts receivable $ 700,745 $ 718,919
========= =========
</TABLE>
5. INVENTORIES
Inventories consist of the following at June 30, 1997:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Raw materials $ 210,543 $ 426,393
Work-in-process 31,526 260,588
Finished goods 140,408 44,532
--------- ---------
Total inventories $ 382,477 $ 731,513
========= =========
</TABLE>
6. PLANT, EQUIPMENT, AND MOTOR VEHICLES
Plant, equipment, and motor vehicles consist of the following at June 30,
1997:
<TABLE>
<CAPTION>
Useful
Life
(Years) 1997 1998
<S> <C> <C> <C>
Plant and machinery 2-1/2 to 10 $ 8,895,790 $ 6,939,076
Furniture, fitting, and equipment 3 to 10 391,384 356,177
Motor vehicles 5 43,881 104,127
Construction in progress - 932,581
----------- -----------
9,331,055 8,331,961
Less: Accumulated depreciation (4,673,342) (3,460,126)
----------- -----------
Plant, equipment, and motor vehicles $ 4,657,713 $ 4,871,835
=========== ===========
Depreciation charged for the year $ 3,390,522 $ 566,391
=========== ===========
</TABLE>
F-26
<PAGE>
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at June 30, 1997:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Hire purchase installments payable to Mayban Finance Berhad in monthly
installment of $69,276 plus interest at an average rate of 5.86% per
annum, collateralized by plant and equipment $ 2,117,937 $1,061,758
Hire purchase installments payable to D&C Finance Bhd in monthly
installment of $13,114 plus interest at an average rate of 5.78% per
annum, collateralized by plant and equipment 236,215 69,952
Hire purchase installments payable to Sogelease (Malaysia) Sdn Bhd in
monthly installments of $11,569 plus interest at an average rate of 5.50%
per annum, collateralized by plant and equipment 235,622 81,960
Hire purchase installments payable to Lion Leasing Sdn Bhd in monthly
installments of $1,092 plus interest at an average rate of 6.63% per
annum, collateralized by plant and equipment 2,671 38,630
Hire purchase installments payable to Eon Finance Bhd in monthly
installments of $264 plus interest at an average rate of 8% per annum,
collateralized by plant and equipment - 27,469
Loan from a shareholder - 2,671,303
----------- -----------
2,592,445 3,951,072
Less current portion 1,111,666 1,181,341
----------- -----------
Total long-term obligations $ 1,480,779 $ 2,769,731
=========== ===========
</TABLE>
The long-term obligations are repayable over the following period:
Year Ending
June 30,
1999 $1,181,341
2000 1,026,265
2001 619,112
2002 211,196
2003 5,079
2004 908,079
----------
$3,951,072
==========
F-27
<PAGE>
8. OTHER INCOMES
Other incomes consist of the following at June 30, 1997:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Waiver of amount due to holding company $ 2,033,789 $ -
Others 36,886 -
----------- --------
Total other incomes $ 2,070,675 $ -
=========== ========
</TABLE>
9. TAXATION
Taxation has not been provided in 1997 in view of the operating losses
incurred by the Company.
As at June 30, 1997, deferred tax debits calculated at current tax rate,
which are not recognized in the accounts as the directors could not
reasonably anticipate their recovery in the near future are as follows:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Carried forward tax losses $ 3,109,000 $ 3,686,000
Unabsorbed capital allowances carried forward 889,000 889,000
----------- -----------
Total $ 3,998,000 $ 4,575,000
=========== ===========
</TABLE>
10. CHANGE OF OWNERSHIP
Effective April 13, 1998, the Company's owners sold 21,797,400 shares of
the Company's common stock (51%) to Praegitzer Industries, Inc. In exchange
for the shares, Praegitzer agreed to contribute to the Company third-party
software license rights, machinery and equipment, and cash with a value of
up to 5.2 million Ringgit ($1,432,000) based on the currency exchange rate
on April 27, 1998.
In addition, the selling shareholders agreed to provide additional funding
in the form of a line of credit of up to 5 million Ringget of which
2,262,800 Ringget ($569,975) had been borrowed at June 30, 1998.
* * * * * *
F-28
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
Praegitzer Pro forma
Industries, Likom PCB Pro forma June 30,
Inc. Sdn Bhd Adjustments 1998
<S> <C> <C> <C> <C>
Revenue $ 182,773 $ 3,259 $ (859) $ 185,173
Cost of goods sold 148,487 4,641 (536) 152,592
--------- -------- -------- ---------
Gross profit (loss) 34,286 (1,382) (323) 32,581
Selling, general and administrative expense 23,456 1,269 (278) 24,447
--------- -------- -------- ---------
EARNINGS (LOSS) FROM OPERATIONS 10,830 (2,651) (45) 8,134
Interest expense 3,757 237 (53) 3,941
Other income (expense) 224 - 29 253
Minority interest loss - - (10)
- - 1,455 1,445
--------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 7,297 (2,888) 1,482 5,891
PRO FORMA PROVISION (BENEFIT) FOR
INCOME TAXES 2,215 - - 2,215
--------- -------- -------- ---------
PRO FORMA INCOME (LOSS) $ 5,082 $ (2,888) $ 1,482 $ 3,676
========= ======== ======== =========
Pro forma loss per share - basic and diluted $ 0.40 $ 0.29
========= =========
Pro forma weighted average shares outstanding 12,846 12,846
========= =========
</TABLE>
F-29
<PAGE>
PRAEGITZER INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
Effective April 13, 1998, Praegitzer Industries, Inc. ("Praegitzer") acquired
51% of the outstanding capital stock of Likom PCB Sdn Bhd ("Likom"), a printed
circuit board manufacturer located in Malaysia. The acquisition of Likom has
been accounted for using the purchase method of accounting. The purchase price
is up to $5.2 million Malaysian Ringgit ($1,432,000) based on the currency
exchange rate on April 27, 1998, which will consist of the transfer and
contribution to Likom over an eighteen-month period ending in October 1999 of
third-party software license rights, machinery and equipment currently owned by
Praegitzer. At its option Praegitzer may contribute cash in lieu of this
property. The unaudited pro forma combined financial statements reflect an
adjustment for the recognition of the minority interest. No purchase price
adjustments have been recognized as the historical cost of the assets and
liabilities approximates the fair value; accordingly, no goodwill has been
recognized. The pro forma balance sheet has not been included as the amounts are
included within the consolidated balance sheet included elsewhere. The pro forma
statement of operations was prepared as if the transaction had occurred on July
1, 1997.
In the opinion of management of Praegitzer, all adjustments necessary to present
fairly such pro forma financial statements have been made. These unaudited pro
forma financial statements are not necessarily indicative of what actual results
would have been had the transaction occurred at the beginning of the respective
period nor do they purport to indicate the results of future operations of
Praegitzer.
- --------------------------------------------------
(1) The recognition of the minority interest in the loss from operations during
the respective period.
(2) Elimination of the account balances which have been included in
Praegitzer's consolidated statement of operations.
F-30
<PAGE>
PRAEGITZER INDUSTRIES, INC. WORLDWIDE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[Photograph of DALLAS DIVISION [Photograph of REDMOND DIVISION
manufacturing facility] Dallas, Oregon manufacturing facility] Redmond, Washington
130,000 sq. ft. 48,000 sq. ft.
700+ employees 260+ employees
VOLUME PROTOTYPE AND
PRE-PRODUCTION
WHITE CITY DIVISION [Photograph of FREMONT DIVISION [Photograph of production
White City, Oregon production facility] Fremont, California facility]
105,000 sq. ft. 30,000 sq. ft.
350+ employees 290+ employees
VOLUME QUICK-
TURNAROUND
[Photograph of production MALAYSIA DIVISION [Photograph of HUNTSVILLE DIVISION
facility] Melaka, Malaysia production facility] Huntsville, Alabama
120,000 sq. ft. 98,000 sq. ft.
160+ employees 130+ employees
VOLUME PROTOTYPE AND
PRE-PRODUCTION
DESIGN DIVISIONS [Praegitzer Industries, Inc. Logo]
PORTLAND, OREGON o SAN JOSE, LOS
ANGELES AND SAN DIEGO, CALIFORNIAo Praegitzer Industries, Inc.
DENVER, COLORADOo ORLANDO, FLORIDAo
NASHUA, NEW HAMPSHIREo PHILADELPHIA, The Fine Line in Printed Circuits
PENNSYLVANIAo DALLAS AND AUSTIN,
TEXASo SEATTLE, WASHINGTONo TEL AVIV,
ISRAEL
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make representations other than those contained in this
Prospectus and, if given, or made, such information or representations must not
be relied upon as having been authorized by the Company, the Trust or any of the
underwriters. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy, any security other than the securities offered
by this Prospectus, or an offer to sell or a solicitation of an offer to buy to
any person in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information on this Prospectus is correct as of any time subsequent to the date
hereof.
-----------------
TABLE OF CONTENTS
Page
Available Information.............................
Prospectus Summary................................
Risk Factors......................................
Use of Proceeds...................................
Accounting Treatment..............................
Capitalization....................................
Selected Consolidated Financial Data
and Other Information........................
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................
Business..........................................
Management........................................
Certain Transactions..............................
Description of the Trust Preferred
Securities...................................
Description of Junior Subordinated
Debentures...................................
Book-Entry Issuance...............................
Description of Guarantee..........................
Expense Agreement.................................
Relationship Among the Trust Preferred
Securities, the Junior Subordinated
Debentures and the Guarantee.................
Certain Federal Income Tax
Consequences.................................
ERISA Considerations..............................
Underwriting......................................
Legal Matters.....................................
Experts...........................................
Index to Financial Statements.....................
- --------------------------------------------------------------------------------
4,000,000 Trust Preferred Securities
Praegitzer Industries
Trust I
% Cumulative Trust
Preferred Securities
(Liquidation Amount $10 Per
Trust Preferred Security)
Fully and Unconditionally Guaranteed
By
[Praegitzer Industries, Inc.
LOGO]
PROSPECTUS
EVEREN Securities, Inc.
Advest, Inc.
Black & Company, Inc.
____________, 1998
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and other
expenses (other than underwriting commissions) payable by the Trust and the
Company in connection with the issuance and distribution of the Trust Preferred
Securities pursuant to the Prospectus contained in this Registration Statement.
The Company will pay all of these expenses.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.................................................. $ 13,570
NASD fee.............................................................. 5,100
American Stock Exchange fees.......................................... 25,000
Trustees' fees and expenses........................................... 15,000
Legal fees and expenses............................................... 250,000
Accounting fees and expenses.......................................... 100,000
Printing and engraving expenses....................................... 30,000
Miscellaneous expenses................................................ 36,330
============
Total........................................................ $ 475,000
============
</TABLE>
- --------------
Item 14. Indemnification of Directors and Officers.
Article IV of the Company's Second Amended and Restated Articles of
Incorporation, as amended (the "Articles"), requires indemnification of current
or former directors of the Company to the fullest extent not prohibited by the
Oregon Business Corporation Act (the "Act"). The Act permits or requires
indemnification of directors and officers in certain circumstances. The effects
of the Articles and the Act (the "Indemnification Provisions") are summarized as
follows:
(a) The Indemnification Provisions grant a right of indemnification in
respect of any proceeding (other than an action by or in the right of the
Company), if the person concerned acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
Company, was not adjudged liable on the basis of receipt of an improper personal
benefit and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The termination of a
proceeding
II-1
<PAGE>
by judgment, order, settlement, conviction or plea of nolo contendere, or its
equivalent, is not, of itself, determinative that the person did not meet the
required standards of conduct.
(b) The Indemnification Provisions grant a right of indemnification in
respect of any proceeding by or in the right of the Company against the expenses
(including attorney fees) actually and reasonably incurred if the person
concerned acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the Company, except that no right
of indemnification will be granted if the person is adjudged to be liable to the
Company.
(c) Every person who has been wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person was a party
because of the person's status as a director or officer of a controversy
described in (a) or (b) above is entitled to indemnification as a matter of
right.
(d) Because the limits of permissible indemnification under Oregon law are
not clearly defined, the Indemnification Provisions may provide indemnification
broader than that described in (a) and (b).
(e) The Company may advance to a director or officer the expenses incurred
in defending any proceeding in advance of its final disposition if the director
or officer affirms in writing in good faith that he or she has met the standard
of conduct to be entitled to indemnification as described in (a) or (b) above
and undertakes to repay any amount advanced if it is determined that the person
did not meet the required standard of conduct.
The Company may obtain insurance for the protection of its directors and
officers against any liability asserted against them in their official
capacities. The rights of indemnification described above are not exclusive of
any other rights of indemnification to which the persons indemnified may be
entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise.
Under the Trust Agreement, the Company will agree to indemnify each of the
Trustees of the Trust or any predecessor Trustee for the Trust, and to hold each
Trustee harmless against any loss, damage, claims, liability or incurred without
negligence or bad faith on its part, arising out of or connection with the
acceptance or administration of the Trust Agreement, the costs and expenses of
defending itself against any claim or in connection with the exercise or
performance of any of its powers or duties under the Trust Agreement.
The Company and the Trust have agreed to indemnify the Underwriters and the
Underwriters have agreed to indemnify the Trust and the Company for certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Reference is made to the Underwriting Agreement filed as Exhibit 1.1 herewith.
II-2
<PAGE>
Item 16. Exhibits.
Exhibit
Number Description
------- -----------
*1.1 Form of Underwriting Agreement
3(i) Second Amended and Restated Articles of Incorporation (incorporated
by reference to Exhibit 3(i) of the Company's Annual Report on Form
10-K for the year ended June 30, 1998 (the "1998 Form 10-K"))
3(ii) Bylaws (incorporated by reference to Exhibit 3(ii) of the Company's
Registration Statement on Form S-1, Registration No. 333-01228 (the
"Form S-1"))
4.1 See Article II of Exhibit 3(i) and Articles II and V of Exhibit
3(ii)
4.2 Form of Subordinated Indenture to be entered into between
Praegitzer Industries, Inc. and Wilmington Trust Company, as the
Indenture Trustee
4.3 Form of Officers' Certificate and Company Order
4.4 Certificate of Trust of the Trust dated August 7, 1998
4.5 Trust Agreement of the Trust dated as of August 7, 1998
4.6 Form of Amended and Restated Trust Agreement of the Trust
4.7 Form of Trust Preferred Securities Certificate of the Trust
4.8 Form of Common Securities Certificate of the Trust
4.9 Form of Guarantee Agreement
4.10 Form of Agreement as to Expenses and Liabilities
4.11 Form of Junior Subordinated Deferrable Interest Debenture of the
Company
*5.1 Opinion of Stoel Rives LLP regarding the legality of the securities
being registered
*5.2 Opinion of Richards, Layton & Finger, P.A. regarding the validity
under Delaware law of the securities being registered
*8.1 Opinion of Stoel Rives LLP, as counsel to Praegitzer Industries,
Inc. regarding certain tax matters
10.1 1995 Stock Incentive Plan (incorporated by reference to Exhibit
10.1 of the Form S-1)
10.2 Form of Incentive Stock Option Agreement (incorporated by reference
to Exhibit 10.2 of the Form S-1)
10.3 Form of Nonstatutory Stock Option Agreement (incorporated by
reference to Exhibit 10.3 of the Form S-1)
10.4 1996 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K for the
year ending June 30, 1997 (the "1997 Form 10-K"))
10.5 Borrowing Agreement between the Company and Heller Financial dated
August 22, 1996 (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ending
September 30, 1996 (the "September 30, 1996 Form 10-Q"))
II-3
<PAGE>
Exhibit
Number Description
------- -----------
10.6 Borrowing Agreement between the Company and Finova Capital dated
July 19, 1996 (incorporated by reference to Exhibit 10.3 of the
September 30, 1996 Form 10-Q)
10.7 First Amendment to Loan and Security Agreement between the Company
and Finova Capital dated as of September 4, 1998 (incorporated by
reference to Exhibit 10.7 of the 1998 Form 10-K)
10.8 Swap Agreement between the Company and Key Bank dated December 10,
1996 (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ending December 31,
1996)
10.9 Borrowing Agreement between the Company and Heller Financial dated
May 30, 1997 (incorporated by reference to Exhibit 10.8 of the 1997
Form 10-K)
10.10 Borrowing Agreement between the Company and Heller Financial dated
December 29, 1997 (incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ending
December 31, 1997 (the "December 31, 1997 Form 10-Q"))
10.11 Borrowing Agreement between the Company and Heller Financial dated
December 29, 1997 (incorporated by reference to Exhibit 10.2 of the
December 31, 1997 Form 10-Q)
10.12 Borrowing Agreement between the Company and Heller Financial dated
March 27, 1998 (incorporated by reference to Exhibit 10.1 of the
March 31, 1998 Form 10-Q (the "March 31, 1998 Form 10-Q"))
10.13 Borrowing Agreement between the Company and Heller Financial dated
March 31, 1998 (incorporated by reference to Exhibit 10.12 of the
1998 Form 10-K)
10.14 Credit Agreement between the Company and Key Bank National
Association dated March 31, 1998 (incorporated by reference to
Exhibit 10.2 of the March 31, 1998 Form 10-Q)
10.15 First Amendment to Credit Agreement between the Company and Key
Bank National Association dated as of August 6, 1998 (incorporated
by reference to Exhibit 10.14 of the 1998 Form 10-K)
10.16 Lease Agreement between CTI and Seapointe Development, Inc. dated
April 1989 and amendments thereto (incorporated by reference to
Exhibit 10.13 of the Form S-1)
10.17 Lease between CTI and Redmond Quadrant Associates LP dated June 15,
1995 (incorporated by reference to Exhibit 10.14 of the Form S-1)
10.18 Employment Agreement between the Company and Robert L. Praegitzer
dated November 17, 1995 (incorporated by reference to Exhibit 10.20
of the Form S-1)
II-4
<PAGE>
Exhibit
Number Description
------- -----------
10.19 Employment Agreement between the Company and Robert J. Versiackas
dated August 26, 1996 (incorporated by reference to Exhibit 10.18
of the 1998 Form 10-K)
10.20 Offer Letter between the Company and James M. Buchanan dated March
24, 1998 (incorporated by reference to Exhibit 10.19 of the 1998
Form 10-K)
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit
21.1 of the 1998 Form 10-K)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ong Boon Bah & Co.
*23.3 Consent of Stoel Rives LLP (included in Exhibits 5.1 and 8.1)
*23.4 Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5.2)
24.1 Power of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the % Junior Subordinated Deferrable Interest
Debentures of Praegitzer Industries, Inc.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the % Cumulative Trust Preferred Securities of
Praegitzer Industries Trust I
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the Guarantee by Praegitzer Industries, Inc.
with respect to Trust Preferred Securities of Praegitzer Industries
Trust I
27.1 Financial Data Schedule
- ----------------
* To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
II-5
<PAGE>
(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) For the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed the initial bona fide offering thereof.
(3) To remove by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any arrangement, 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 Securities
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 such 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 to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
497(h) under the Securities Act is part of this Registration Statement as
of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement for the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
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, in the City of Dallas, State of Oregon, on the 4th day of
September, 1998.
PRAEGITZER INDUSTRIES, INC.
By: MATTHEW J. BERGERON
-------------------------------------
Matthew J. Bergeron
President and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each such person whose signature
appears below hereby constitutes and appoints Matthew J. Bergeron, Robert L.
Praegitzer and William J. Thale, or any of them, his or her true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any amendments (whether pre-effective or
post-effective) to this Registration Statement and any registration statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same with
all exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto each of said attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
ROBERT L. PRAEGITZER Chairman and Chief September 4, 1998
- -------------------------- Executive Officer
Robert L. Praegitzer
II-7
<PAGE>
MATTHEW J. BERGERON President, Chief Operating September 4, 1998
- -------------------------- Officer and Director
Matthew J. Bergeron
DANIEL J. BARNETT Director September 4, 1998
- --------------------------
Daniel J. Barnett
THEODORE L. STEBBINS Director September 4, 1998
- --------------------------
Theodore L. Stebbins
MERRILL A. MCPEAK Director September 4, 1998
- --------------------------
Merrill A. McPeak
GORDON B. KUENSTER Director September 4, 1998
- --------------------------
Gordon B. Kuenster
WILLIAM J. THALE Chief Financial Officer September 4, 1998
- --------------------------
William J. Thale
II-8
<PAGE>
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, in the City of Dallas, State of Oregon, on the 4th day of
September, 1998.
PRAEGITZER INDUSTRIES TRUST I
PRAEGITZER INDUSTRIES, INC. as
Depositor
By: MATTHEW J. BERGERON
--------------------------------------
Matthew J. Bergeron
President and Chief Operating Officer
II-9
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
*1.1 Form of Underwriting Agreement
3(i) Second Amended and Restated Articles of Incorporation (incorporated
by reference to Exhibit 3(i) of the Company's Annual Report on Form
10-K for the year ended June 30, 1998 (the "1998 Form 10-K"))
3(ii) Bylaws (incorporated by reference to Exhibit 3(ii) of the Company's
Registration Statement on Form S-1, Registration No. 333-01228 (the
"Form S-1"))
4.1 See Article II of Exhibit 3(i) and Articles II and V of Exhibit
3(ii)
4.2 Form of Subordinated Indenture to be entered into between
Praegitzer Industries, Inc. and Wilmington Trust Company, as the
Indenture Trustee
4.3 Form of Officers' Certificate and Company Order
4.4 Certificate of Trust of the Trust dated August 7, 1998
4.5 Trust Agreement of the Trust dated as of August 7, 1998
4.6 Form of Amended and Restated Trust Agreement of the Trust
4.7 Form of Trust Preferred Securities Certificate of the Trust
4.8 Form of Common Securities Certificate of the Trust
4.9 Form of Guarantee Agreement
4.10 Form of Agreement as to Expenses and Liabilities
4.11 Form of Junior Subordinated Deferrable Interest Debenture of the
Company
*5.1 Opinion of Stoel Rives LLP regarding the legality of the securities
being registered
*5.2 Opinion of Richards, Layton & Finger, P.A. regarding the validity
under Delaware law of the securities being registered
*8.1 Opinion of Stoel Rives LLP, as counsel to Praegitzer Industries,
Inc. regarding certain tax matters
10.1 1995 Stock Incentive Plan (incorporated by reference to Exhibit
10.1 of the Form S-1)
10.2 Form of Incentive Stock Option Agreement (incorporated by reference
to Exhibit 10.2 of the Form S-1)
10.3 Form of Nonstatutory Stock Option Agreement (incorporated by
reference to Exhibit 10.3 of the Form S-1)
10.4 1996 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.17 of the Company's Annual Report on Form 10-K for the
year ending June 30, 1997 (the "1997 Form 10-K"))
10.5 Borrowing Agreement between the Company and Heller Financial dated
August 22, 1996 (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ending
September 30, 1996 (the "September 30, 1996 Form 10-Q"))
<PAGE>
Exhibit
Number Description
------- -----------
10.6 Borrowing Agreement between the Company and Finova Capital dated
July 19, 1996 (incorporated by reference to Exhibit 10.3 of the
September 30, 1996 Form 10-Q)
10.7 First Amendment to Loan and Security Agreement between the Company
and Finova Capital dated as of September 4, 1998 (incorporated by
reference to Exhibit 10.7 of the 1998 Form 10-K)
10.8 Swap Agreement between the Company and Key Bank dated December 10,
1996 (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ending December 31,
1996)
10.9 Borrowing Agreement between the Company and Heller Financial dated
May 30, 1997 (incorporated by reference to Exhibit 10.8 of the 1997
Form 10-K)
10.10 Borrowing Agreement between the Company and Heller Financial dated
December 29, 1997 (incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ending
December 31, 1997 (the "December 31, 1997 Form 10-Q"))
10.11 Borrowing Agreement between the Company and Heller Financial dated
December 29, 1997 (incorporated by reference to Exhibit 10.2 of the
December 31, 1997 Form 10-Q)
10.12 Borrowing Agreement between the Company and Heller Financial dated
March 27, 1998 (incorporated by reference to Exhibit 10.1 of the
March 31, 1998 Form 10-Q (the "March 31, 1998 Form 10-Q"))
10.13 Borrowing Agreement between the Company and Heller Financial dated
March 31, 1998 (incorporated by reference to Exhibit 10.12 of the
1998 Form 10-K)
10.14 Credit Agreement between the Company and Key Bank National
Association dated March 31, 1998 (incorporated by reference to
Exhibit 10.2 of the March 31, 1998 Form 10-Q)
10.15 First Amendment to Credit Agreement between the Company and Key
Bank National Association dated as of August 6, 1998 (incorporated
by reference to Exhibit 10.14 of the 1998 Form 10-K)
10.16 Lease Agreement between CTI and Seapointe Development, Inc. dated
April 1989 and amendments thereto (incorporated by reference to
Exhibit 10.13 of the Form S-1)
10.17 Lease between CTI and Redmond Quadrant Associates LP dated June 15,
1995 (incorporated by reference to Exhibit 10.14 of the Form S-1)
10.18 Employment Agreement between the Company and Robert L. Praegitzer
dated November 17, 1995 (incorporated by reference to Exhibit 10.20
of the Form S-1)
<PAGE>
Exhibit
Number Description
------- -----------
10.19 Employment Agreement between the Company and Robert J. Versiackas
dated August 26, 1996 (incorporated by reference to Exhibit 10.18
of the 1998 Form 10-K)
10.20 Offer Letter between the Company and James M. Buchanan dated March
24, 1998 (incorporated by reference to Exhibit 10.19 of the 1998
Form 10-K)
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit
21.1 of the 1998 Form 10-K)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ong Boon Bah & Co.
*23.3 Consent of Stoel Rives LLP (included in Exhibits 5.1 and 8.1)
*23.4 Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5.2)
24.1 Power of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the % Junior Subordinated Deferrable Interest
Debentures of Praegitzer Industries, Inc.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the % Cumulative Trust Preferred Securities of
Praegitzer Industries Trust I
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company to
act as trustee for the Guarantee by Praegitzer Industries, Inc.
with respect to Trust Preferred Securities of Praegitzer Industries
Trust I
27.1 Financial Data Schedule
- ----------------
* To be filed by amendment.
- --------------------------------------------------------------------------------
4,000,000 Shares
Praegitzer Industries Trust I
(a Delaware Business Trust)
___% Cumulative Trust Preferred Securities
(Liquidation Amount of $10 per Trust Preferred Security)
UNDERWRITING AGREEMENT
________ __, 1998
EVEREN Securities, Inc.
Advest, Inc.
&
Black & Company
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. The Shares. ........................................................1
2. Registration Statement and Prospectus................................2
3. Agreements to Sell and Purchase......................................2
4. Agreements of the Offerors as to Delivery and Payment................3
5. Further Agreements of the Offerors...................................4
6. Representations and Warranties.......................................8
7. Indemnification.....................................................19
8. Conditions of the Obligations of the Underwriters...................22
9. Effective Date of Agreement, Termination and Defaults...............26
10. Effectiveness of Registration Statement.............................27
11. Miscellaneous.......................................................27
-i-
<PAGE>
4,000,000 Shares
Praegitzer Industries Trust I
(a Delaware Business Trust)
____% Cumulative Trust Preferred Securities
(Liquidation Amount of $10 per Trust Preferred Security)
UNDERWRITING AGREEMENT
---------- --, 1998
EVEREN Securities, Inc.
Advest, Inc.
Black & Company
As Representatives of the Several Underwriters
c/o EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Ladies and Gentlemen:
Praegitzer Industries, Inc., an Oregon corporation (the "Company"), and its
financing subsidiary, Praegitzer Industries Trust I, a Delaware business trust
(the "Trust," and together with the Company, the "Offerors"), confirm their
agreements with the several underwriters listed in Schedule I hereto (the
"Underwriters"), for whom EVEREN Securities, Inc. and Advest, Inc.
(collectively, the "Representatives") have been duly authorized to act as
representatives, as follows:
1. The Shares. Subject to the terms and conditions set forth in this
agreement (the "Agreement"), the Trust proposes to issue and sell to the
Underwriters 4,000,000 shares of __% Cumulative Trust Preferred Securities
having a Liquidation Amount of $10 per share (the "Trust Preferred Securities"),
to be issued under the Trust Agreement (as defined below), the terms of which
are more fully described in the Prospectus (as defined below). Such 4,000,000
shares of Trust Preferred Securities proposed to be sold by the Trust are
hereinafter referred to as the "Firm Shares." The Trust also proposes to grant
to the Underwriters an option to purchase up to 600,000 additional shares of
Trust Preferred Securities (the "Additional Shares") solely for the purpose of
covering over-allotments, if any, if requested by the Underwriters as provided
in Section 3 hereof. The Firm Shares and the Additional Shares are herein
collectively called the "Shares."
<PAGE>
The Offerors hereby confirm their agreements with the Underwriters as
follows:
2. Registration Statement and Prospectus. The Offerors have prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (File No. 333------) including a
prospectus, relating to the Shares, the --% Junior Subordinated Deferrable
Interest Debentures due 2028 of the Company (the "Debentures"), and the
Guarantee pursuant to the Guarantee Agreement (as defined below) for the benefit
of the Trust Preferred Securities (the "Guarantee"). To the extent the
registration statement has been amended, each such amendment has been prepared
and filed with the Commission. Such registration statement, as amended, at the
time when it became effective, and any registration statement filed with the
Commission pursuant to Rule 462(b) under the Act, at the time when it becomes
effective, including all financial schedules and exhibits thereto and all of the
information (if any) deemed to be part of the registration statements at the
time of effectiveness pursuant to Rule 430A under the Act ("Rule 430A"), is
hereinafter referred to as the "Registration Statement;" the prospectus in the
form first provided to the Underwriters by the Offerors for use in connection
with the offering and sale of the Shares (whether or not required to be filed
pursuant to Rule 424(b) under the Act ("Rule 424(b)")), and including all
documents incorporated or deemed incorporated by reference therein, is
hereinafter referred to as the "Prospectus," except that if any revised
prospectus shall be provided to the Underwriters by the Offerors for use in
connection with the offering of the Shares that differs from the Prospectus
(whether or not any such revised prospectus is required to be filed by the
Offerors pursuant to Rule 424(b)), the term "Prospectus" shall refer to the
revised prospectus from and after the time it is first provided to the
Underwriters for such use. Each preliminary prospectus included in the
Registration Statement prior to the time it became effective is herein referred
to as a "Preliminary Prospectus."
3. Agreements to Sell and Purchase.
(a) On the basis of the representations and warranties contained in this
Agreement, and subject to the terms and conditions hereof: (i) the Offerors,
jointly and severally, agree that the Trust will issue and sell to the
Underwriters, at a price of $10 per Share (the "Purchase Price"), 4,000,000
newly issued Firm Shares; and (ii) each Underwriter agrees, severally and not
jointly, to purchase from the Trust, at the Purchase Price, the aggregate number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto.
(b) On the basis of the representations and warranties contained in this
Agreement, and subject to the terms and conditions hereof: (i) the Offerors,
jointly and severally, agree that the Trust will issue and sell to the
Underwriters, at the Purchase Price, up to 600,000 newly issued Additional
Shares; and (ii) the Underwriters shall have the right, from time to time
(subject to the last sentence of Section 4(b)) to purchase from the Trust,
severally and not jointly, up to the aggregate number of Additional Shares at
the Purchase Price. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase the
number of Additional Shares (subject to such adjustments to
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<PAGE>
eliminate fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I bears to the total number of Firm Shares.
(c) The Offerors are advised by the Representatives that the Underwriters
propose to make a public offering of their prospective portions of the Shares as
soon after the Registration Statement and this Agreement become effective as in
the Representatives' judgment is advisable. In view of the fact that the
proceeds of the sale of the Shares (together with the entire proceeds from the
sale by the Trust to the Company of the Common Securities (as defined below))
will be used to purchase the Debentures, the Company hereby agrees to pay by
wire transfer of same day funds on the Closing Date and on each Option Closing
Date: (i) directly to the Underwriters, as compensation to the Underwriters for
their commitments hereunder, a commission of $0.40 per Share purchased by the
Underwriters and delivered by the Trust pursuant to this Agreement on such date
(the "Underwriting Commission"); (ii) directly to EVEREN Securities, Inc., as
compensation for its advisory services in connection with the structuring the
transactions contemplated hereby, a structuring fee of $0.10 per Share purchased
by the Underwriters and delivered by the Trust pursuant to this Agreement on
such date (the "Structuring Fee"); and (iii) directly to EVEREN Securities,
Inc., as compensation for its various unreimbursed costs and expenses in
connection with the transactions contemplated hereby, a non-accountable expense
allowance of $0.05 per Share purchased by the Underwriters and delivered by the
Trust pursuant to this Agreement on such date (the "Expense Allowance").
(d) Each of the Offerors covenants and agrees that it will not (other than
in connection with the transactions expressly contemplated by this Agreement),
directly or indirectly, for a period of 180 days after the date this Agreement
becomes effective, without the prior written consent of EVEREN Securities, Inc.
on behalf of the Underwriters, (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise issue any shares of
Trust Preferred Securities or Debentures, or any securities convertible into or
exercisable or exchangeable for Trust Preferred Securities or Debentures, or any
equity securities substantially similar to the Trust Preferred Securities or any
debt securities substantially similar to the Debentures, or any securities
convertible into or exercisable or exchangeable for Trust Preferred Securities,
Debentures or such similar securities, or (2) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of any of the foregoing securities, or (3) file any registration
statement relating to any of the foregoing securities on behalf of itself or any
other person.
4. Agreements of the Offerors as to Delivery and Payment. The Offerors,
jointly and severally, agree with each Underwriter that:
(a) Delivery to the Underwriters of and payment for the Firm Shares
shall be made at 10:00 A.M., New York City time, on the third full business day
(such time and date being referred to as the "Closing Date") following the date
of the initial public offering of the Firm Shares pursuant to this Agreement as
advised to the Representatives by the Offerors, at such place as the
Representatives shall designate.
-3-
<PAGE>
(b) Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as the
Representatives shall designate, at 10:00 A.M., New York City time, on such date
or dates (individually, an "Option Closing Date" and collectively, the "Option
Closing Dates"), which may be the same as the Closing Date but shall in no event
be earlier than the Closing Date, as shall be specified in a written notice from
the Representatives to the Offerors of the Underwriters' determination to
purchase a number, specified in said notice, of Additional Shares. Any such
notice may be given at any time prior to the thirty-first (31st) day after the
date of this Agreement.
(c) Unless otherwise agreed, the Shares to be purchased by each
Underwriter in book-entry form and in authorized denominations and registered in
the name of the nominee of The Depository Trust Company ("DTC") shall be
delivered by or on behalf of the Offerors through the facilities of DTC for the
account of such Underwriter, against payment of the Purchase Price therefor by
wire transfer of same day funds to the Trust, or upon its order, to an account
designated by the Trust, with any transfer taxes payable upon initial issuance
or the transfer thereof duly paid by the Offerors for the respective accounts of
the Underwriters.
(d) Any or all of the Underwriters and/or EVEREN Securities, Inc., as
the case may be, may elected to receive the Underwriting Commission, Structuring
Fee and Expense Allowance payable to it by the Company by setoff against the
Purchase Price payable by it to the Trust, notice of which setoff shall be given
to the Offerors by EVEREN Securities, Inc.
5. Further Agreements of the Offerors. Each of the Offerors, jointly and
severally, also agrees with each Underwriter that:
(a) each Offeror will, if the Registration Statement has not
heretofore become effective under the Act, file an amendment to the Registration
Statement or, if necessary pursuant to Rule 430A under the Act, a post-effective
amendment to the Registration Statement, as soon as practicable after the
execution and delivery of this Agreement, and will use its best efforts to cause
the Registration Statement or such post-effective amendment to become effective
at the earliest possible time; and each of the Offerors will comply fully and in
a timely manner with the applicable provisions of Rule 424(b), Rule 430A and the
other rules under the Act;
(b) each Offeror will advise the Underwriters promptly and, if
requested by the Representatives, shall confirm such advice in writing (and
provide copies of any relevant correspondence and other documents) to the
Representatives (i) when the Registration Statement has become effective, if and
when the Prospectus is sent for filing pursuant to Rule 424 under the Act and
when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the receipt of any comments or correspondence from the
Commission that relate to the Registration Statement or requests by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or, to
-4-
<PAGE>
the best knowledge of the Offerors, of the threat or initiation of any
proceedings for such purpose by the Commission or any state securities
commission or other regulatory authority, and (iv) of the happening of any event
or information becoming known during the period referred to in paragraph
(e) below that makes any statement of a material fact made in the Registration
Statement untrue or that requires the making of any additions to or changes in
the Registration Statement (as amended or supplemented from time to time) in
order to make the statements therein not misleading or that makes any statement
of a material fact made in the Prospectus (as amended or supplemented from time
to time) untrue or that requires the making of any additions to or changes in
the Prospectus (as amended or supplemented from time to time) in order to make
the statements therein, not misleading; if at any time the Commission shall
issue or institute proceedings (or threaten to institute any such proceedings)
to issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue or institute proceedings (or threaten to institute proceedings) to
issue an order suspending the qualification or exemption of the Shares under any
state securities or Blue Sky laws, each of the Offerors shall use their best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;
(c) each Offeror will furnish to each of the Representatives without
charge one signed copy of the Registration Statement as first filed with the
Commission and of each amendment to it, including all exhibits filed therewith,
and will furnish to the Representatives such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as the Representatives may reasonably request;
(d) each Offeror will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus of which the
Representatives shall not previously have been advised and provided a copy a
reasonable period of time prior to the filing thereof and to which the
Representatives or their counsel shall reasonably object; and each Offeror will
prepare and file with the Commission, promptly upon the Representatives'
reasonable request, any amendment to the Registration Statement or supplement to
the Prospectus that may be necessary or advisable in connection with the
distribution of the Shares by the Representatives in their or their counsel's
reasonable opinion, and will use its best efforts to cause the same to become
effective as promptly as possible;
(e) promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as a prospectus is required by the
Act to be delivered in connection with the sales by an underwriter or a dealer
(in the reasonable written opinion of the Representatives' counsel, it being
understood that no opinion of the Representatives' counsel shall be necessary
for distribution of the Prospectus prior to or on the Closing Date), each
Offeror will furnish to each Representative, Underwriter and dealer without
charge as many copies of the Prospectus (and any amendment or supplement of the
Prospectus) as the Representatives or such Underwriters or dealers may
reasonably request for the purposes contemplated by the Act; each of the
Offerors consent to the use of the Prospectus and any amendment or supplement
thereto by any Underwriter or any dealer, both in connection with the offering
or sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection therewith;
-5-
<PAGE>
(f) if during the period specified in paragraph (e) any event shall
occur or information become known as a result of which in the reasonable opinion
of the Representatives' counsel it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing as of the date the Prospectus is delivered to a
purchaser, not misleading, or it is necessary to amend or supplement the
Prospectus to comply with any law, each Offeror will forthwith prepare and,
subject to paragraph 5(d) above, file with the Commission at the sole expense of
the Offerors an appropriate amendment or supplement to the Prospectus so that
the statements of any material facts in the Prospectus, as so amended and
supplemented, will not in light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law and each Offeror will
furnish to the Representatives and to such Underwriters and dealers as the
Representatives shall specify, at the sole expense of the Offerors, such number
of copies thereof as the Representatives or such Underwriters or dealers may
reasonably request;
(g) without limiting the generality of the foregoing clause (f), the
Offerors acknowledge and agree that if, prior to the exercise in full or
termination or expiration of the option to purchase the Additional Shares,
either Offeror incurs any liability or obligation, direct or contingent, or
enters into any material transaction, or otherwise takes any action or
experiences any change in situation or circumstances which may render the
Prospectus (as it then exits) misleading, the Offerors shall (i) promptly notify
EVEREN Securities, Inc. in writing of such event, such notice to explain the
nature and scope of such event in reasonable detail insofar as possible, and
(ii) forthwith prepare and, subject to paragraph 5(d) above, file with the
Commission at the sole expense of the Offerors an appropriate amendment to the
Registration Statement or supplement to the Prospectus, and (iii) at the sole
expense of the Offerors, reproduce and distribute such amendment or supplement
to such persons or institutions as EVEREN Securities, Inc. shall request;
(h) prior to any public offering of the Shares, each Offeror will
cooperate with the Representatives and counsel for the Representatives in
connection with the registration or qualification of the Shares for offer and
sale by the several Underwriters and by dealers under the state securities or
Blue Sky laws of such jurisdictions as the Representatives may request
(provided, that the Offerors shall not be obligated to qualify as a foreign
corporation or business trust in any jurisdiction in which it is not otherwise
required to be so qualified or to take any action which would subject it to
general consent to service of process in any jurisdiction in which it is not now
otherwise required to be so subject); the Offerors will continue such
qualification in effect so long as required by law for the distribution of the
Shares and will file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification
(provided, that the Offerors shall not be obligated to take any action that
would subject it to general consent to service of process in any jurisdiction in
which it is not now otherwise required to be so subject);
(i) each Offeror will not acquire any Trust Preferred Securities or
any capital stock of the Company prior to the exercise in full or termination or
expiration of the option to purchase the Additional Shares, nor will the Company
declare or pay any dividend or make any other distribution upon its common stock
(the "Common Stock") payable to
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stockholders of record on a date prior to the exercise in full or termination or
expiration of the option to purchase the Additional Shares;
(j) the Offerors will mail and make generally available to holders of
beneficial interests in the Trust and furnish to the Representatives as soon as
reasonably practicable a consolidated earnings statement covering a period of at
least 12 months beginning after the "effective date" (as defined in Rule 158
under the Act) of the Registration Statement (but in no event commencing later
than 90 days after such date) that will satisfy the provisions of Section 11(a)
of the Act and Rule 158 thereunder, if applicable to holders of beneficial
interests in the Trust;
(k) During the period of five (5) years after the date of this
Agreement, each Offeror will furnish to each of the Representatives a copy
(i) as soon as practicable after the filing thereof, of each report filed by it
with the Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"); (ii) as soon as practicable after the release
thereof, of each press release relating to either or both of the Offerors;
(iii) as soon as available, of each report of the Company mailed to the
Company's stockholders and each report of the Trust mailed to holders of
beneficial interests in the Trust; and (iv) as soon as available, such other
publicly available information concerning the Offerors as the Representatives
may reasonably request;
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(l) whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective as to all of its provisions or
is terminated, to pay (in addition to any Expense Allowance payable by the
Company pursuant to this Agreement) all costs, fees, expenses and taxes incident
to the performance by the Offerors of their obligations hereunder, including
(i) the preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), each
Preliminary Prospectus, the Prospectus and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e) above of this
Section 5, (ii) the word processing, reproduction and distribution of the Blue
Sky Survey and any related memoranda, correspondence and other documents
prepared and delivered by the Underwriters or their counsel (including in each
case the fees and disbursements of counsel for the Underwriters relating to such
preparation and delivery), (iii) the filing of notices of the offer and sale of
the Shares by the several Underwriters and by dealers under the securities or
Blue Sky laws of the several states (including in each case the fees and
disbursements of counsel for the Underwriters relating to such filings),
(iv) the filings and clearance with the NASD in connection with the offering and
sale of the Shares (including the fees and disbursements of counsel for the
Underwriters relating to such filings and clearance), (v) the approval for
quotation of the Shares on the American Stock Exchange, Inc., (vi) furnishing
such copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus and all amendments and supplements thereto as may be requested by the
Representatives for use in connection with the offering or sale of the Shares by
the Underwriters or by dealers to whom the Shares may be sold, (vii) obtaining
the opinions to be provided pursuant to Section 8(f)-(h) of this Agreement,
(viii) the fees and expenses of the Property Trustee, the Delaware Trustee, the
Guarantee Trustee and the Indenture Trustee (each as defined below), including
the fees and disbursements of counsel for such trustees, (ix) the cost of
qualifying the Shares with DTC, and (x) the performance by the Offerors of all
of their other obligations under this Agreement; if the sale of the Shares
provided for
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herein is not consummated because the Underwriters exercise their right to
terminate this Agreement pursuant to Section 9 hereof and any of the following
have occurred during the term of this Agreement: (a) there has been any material
adverse change in the condition (financial or otherwise), earnings, affairs,
business or prospects of the Company; or (b) the Offerors shall refuse or be
unable to comply with any provision hereof (except as the result of a breach of
this Agreement by the Underwriters), the Offerors will promptly reimburse the
Underwriters upon demand for all reasonable out-of-pocket expenses (including
the fees and disbursements of counsel for the Underwriters) that shall have been
incurred by the Underwriters in connection with the proposed purchase and sale
of the Shares;
(m) each of the Offerors intends to use the net proceeds received by
it from the sale of the Shares being sold by the Trust in the manner specified
in the Prospectus;
(n) if, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule 430A,
then immediately following the execution and delivery of this Agreement, each of
the Offerors will prepare, and file or transmit for filing with the Commission
in accordance with such Rule 430A and Rule 424(b), copies of an amended
prospectus, or, if required by such Rule 430A, a post-effective amendment to the
Registration Statement (including an amended prospectus), containing all
information so omitted;
(o) each of the Offerors will cause the Shares to be approved for
quotation, subject to notice of issuance or sale, on the American Stock
Exchange, Inc.; each of the Offerors will comply with all registration, filing
and reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and American Stock Exchange, Inc. in connection with the
sale of the Shares; and
(p) each of the Offerors will use its best efforts to do and perform
all things required to be done and performed under this Agreement by it prior to
or after the Closing Date or any Option Closing Date, as the case may be, and to
satisfy all conditions precedent required to be satisfied under this Agreement
prior to the delivery of the Shares.
6. Representations and Warranties.
(a) The Offerors, jointly and severally, represent and warrant to each
Underwriter as of the date hereof, the Closing Date and each Option Closing Date
that:
(i) The Commission has not issued any order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor, to the best of the Offerors' knowledge, instituted or threatened any
proceedings for that purpose. The Registration Statement, on the date it became
effective, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission (or if not filed, on the date
provided by the Offerors to the Underwriters in connection with the offering and
sale of the Shares) and at the Closing Date and each Option Closing Date
conformed or will conform with the requirements of the Act and the rules and
regulations promulgated thereunder (the "Rules and Regulations") and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and
regulations promulgated thereunder (the "Trust Indenture Regulations"). The
Registration Statement, on
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the date it became effective, did not contain an untrue statement of material
fact or omit to state 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. The Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission (or if not filed, on
the date provided by the Offerors to the Underwriters in connection with the
offering and sale of the Shares) and at the Closing Date and each Option Closing
Date did not and will not include an untrue statement of material fact or omit
to state 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. The foregoing shall not apply to statements in or omissions from
the Registration Statement and the Prospectus made or omitted in reliance upon,
and in conformity with information relating to the Underwriters furnished in
writing to the Offerors by or on behalf of the Underwriters expressly for use
therein. The Offerors hereby acknowledge for all purposes under this Agreement
that the information furnished to the Offerors by or on behalf of the
Underwriters for use in the preparation of the Registration Statement or the
Prospectus or any amendment or supplement thereto (the "Underwriters'
Information") consists only of (A) the last paragraph of text set forth on the
outside front cover page of the Prospectus, (B) the stabilization and passive
market-making legends set forth on the [inside of the front cover page] of the
Prospectus, and (C) the statements set forth under the caption "Underwriting" in
the Prospectus.
(ii) The only subsidiaries of the Company (other than the Trust)
are as set forth on Exhibit A to this Agreement (singularly, a "Subsidiary" and
collectively, the "Subsidiaries"). The Company has been duly incorporated and is
a validly existing corporation in good standing under the laws of Oregon, with
full corporate power and authority to own or lease its properties and assets and
to conduct its business as described in the Registration Statement and the
Prospectus and is duly qualified to do business in each jurisdiction in which it
owns or leases real property or in which the conduct of its business or the
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not (i) have a material adverse effect on the
condition (financial or otherwise), business, assets, prospects, net worth or
results of operations of the Company and its Subsidiaries, taken as a whole, or
(ii) give rise (whether with notice or a lapse of time, or both, or otherwise)
to a default or event of default with respect to the Debentures (a "Material
Adverse Effect," and, when used with respect to the Trust, "Material Adverse
Effect" means any material adverse effect on the condition (financial or
otherwise), business, assets, prospects, net worth or results of operations of
the Trust, including without limitation any facts, events or circumstances which
would give rise (whether with notice or lapse of time, or both, or otherwise) to
a default or event of default with respect to the Debentures). Each Subsidiary
has been duly incorporated and is a validly existing corporation in good
standing under the laws of the jurisdiction set forth opposite its name on
Exhibit A, with full corporate power and authority to own or lease its
properties and assets and to conduct its business as described in the
Registration Statement and the Prospectus and is duly qualified to do business
in each jurisdiction in which it owns or leases real property or in which the
conduct of its business or the ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
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(iii) The trust has been duly created and is a validly existing
business trust in good standing under the laws of Delaware, with full power and
authority to own or lease its properties and assets and to conduct its business
as described in the Registration Statement and the Prospectus, including,
without limitation, to enter into this Agreement and the other agreements or
instruments contemplated hereby, to issue and sell the Shares, to issue and sell
the Common Securities and to otherwise consummate the transactions contemplated
hereby, and is duly qualified to do business in each jurisdiction in which it
owns or leases real property or in which the conduct of its business or the
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a Material Adverse Effect. The Trust
is a consolidated subsidiary of the Company pursuant to generally accepted
accounting principles, and has no subsidiaries of its own. The Trust is not a
party to or bound by any agreement or instrument other than the Trust Agreement,
this Agreement and the agreements and instruments contemplated by the Trust
Agreement and this Agreement and described in the Registration Statement and the
Prospectus. The Trust has no liabilities or obligations other than those arising
out of the transactions contemplated by the Trust Agreement and this Agreement
and described in the Registration Statement and the Prospectus. The Trust is, to
the knowledge of the Offerors, classified as a grantor trust and not as a
partnership or association taxable as a corporation for United States federal
income tax purposes.
(iv) The capitalization of the Company is, and upon consummation
of the transactions contemplated hereby and by the Prospectus will be, as set
forth in the Registration Statement and the Prospectus under the caption
"Capitalization." All of the outstanding shares of capital stock of the Company
have been duly authorized and are validly issued, are fully paid and
non-assessable and conform to the description thereof in the Company's Annual
Report on Form 10-K for its fiscal year ended June 30, 1998 (the "1998 Form
10-K") and were not issued in violation of any preemptive rights or other rights
to subscribe for or purchase securities. Except as set forth in the 1998 Form
10-K with respect to the Company's stock option plans and options, warrants or
other rights to acquire shares of Common Stock granted outside of the Company's
stock option plans, no options, warrants or other rights to purchase from the
Company, agreements or other obligations of the Company to issue or other rights
to convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company are outstanding.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as described
therein, (A) neither the Trust, the Company nor any Subsidiary has incurred any
material liabilities or obligations, direct or contingent, or entered into any
material transactions, (B) neither the Trust, the Company nor any Subsidiary has
purchased any of its outstanding capital stock or declared, paid or otherwise
made any dividend or distribution of any kind on its capital stock or otherwise,
and (C) there has not been any material adverse change in the condition
(financial or otherwise), business, affairs, prospects or results of operations
of the Company and its Subsidiaries, taken as a whole, or of the Trust, or any
material change in the Trust's, the Company's or any Subsidiary's capital stock,
short-term debt or long-term debt.
(vi) The Shares to be sold by the Trust pursuant to this
Agreement have been duly and validly authorized and, when issued, delivered and
paid for
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pursuant to this Agreement, will be validly issued, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust and will be entitled
to the benefits of the Trust Agreement. The shares of --% Cumulative Trust
Common Securities having a Liquidation Amount of $10 per share (the "Common
Securities") will be sold by the Trust to the Company and, when so sold, will
have been duly and validly authorized and, when issued, delivered and paid for,
will be validly issued, fully paid and nonassessable undivided beneficial assets
of the Trust and will be entitled to the benefits of the Trust Agreement. The
Shares and the Common Securities conform to the descriptions thereof contained
in the Registration Statement and the Prospectus.
(vii) Subject to the terms of the Trust Agreement, holders of the
Shares will be entitled to the same limitation of personal liability under
Delaware law as extended to stockholders of private corporations for profit.
(viii) This Agreement has been duly authorized, executed and
delivered by the Trust and the Company and is a legal, valid and binding
agreement of the Trust and the Company enforceable in accordance with its terms,
except (i) as enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equity principles, and (ii) as rights to indemnity or
contribution hereunder may be limited by Federal or state securities laws or the
public policy underlying such laws.
(ix) Each of the Administrative Trustees (as defined below) of
the Trust is an employee of the Company and has been authorized by the Company
to execute and deliver the Amended and Restated Trust Agreement (the "Trust
Agreement") by and among the Company, as Depositor, Wilmington Trust Company
("WTC") as Delaware Trustee (the "Delaware Trustee"), WTC as Property Trustee
(the "Property Trustee") and [Matthew J. Bergeron], [William J. Thale] and
[Scott D. Gilbert] as Administrative Trustees (the "Administrative Trustees").
The Trust Agreement has been duly authorized by the Company, will be duly
executed and delivered by the Company, as Depositor, and the Administrative
Trustees on the Closing Date, and will be legal, valid and binding agreements of
the Company and the Administrative Trustees enforceable in accordance with its
terms, except (i) as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general equity principles and (ii) as rights
to indemnity or contribution hereunder may be limited by Federal or state
securities laws or the public policy underlying such laws. The Trust Agreement
conforms in all material respects with the description thereof and all
statements relating thereto in the Registration Statement and the Prospectus and
has been qualified under the Trust Indenture Act.
(x) The Indenture ("Indenture") by and between the Company and
WTC, as Indenture Trustee (the "Indenture Trustee"), has been duly authorized by
the Company, will be duly executed and delivered by the Company on the Closing
Date, and will be a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except (i) as enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general equity
principles, and (ii) as rights to indemnity or contribution hereunder may be
limited by Federal or state securities laws or the public policy underlying such
laws. The
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Indenture conforms in all material respects with the description thereof and all
statements relating thereto in the Registration Statement and the Prospectus and
has been qualified under the Trust Indenture Act.
(xi) The Debentures have been duly authorized by the Company,
will be duly executed and delivered by the Company on the Closing Date and on
each Option Closing Date, and, when authenticated in the manner provided for in
the Indenture and delivered against payment therefor as described in the
Registration Statement and the Prospectus, will be legal, valid and binding
obligations of the Company enforceable in accordance with its terms, except
(i) as enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equity principles, and (ii) as rights to indemnity or
contribution hereunder may be limited by Federal or state securities laws or the
public policy underlying such laws, and will be entitled to the benefits of the
Indenture. The Debentures conform in all material respects with the description
thereof and all statements relating thereto in the Registration Statement and
the Prospectus.
(xii) The Guarantee Agreement (the "Guarantee Agreement") by and
between the Company and WTC, as Guarantee Trustee (the "Guarantee Trustee"), has
been duly authorized by the Company, will be duly executed and delivered by the
Company on the Closing Date, and will be a legal, valid and binding agreement of
the Company enforceable in accordance with its terms, except (i) as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
general equity principles, and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws or the public
policy underlying such laws. The Guarantee pursuant to the Guarantee Agreement
and related documents conforms in all material respects with the description
thereof and all statements relating thereto in the Registration Statement and
the Prospectus and the Trust, pursuant to the Guarantee, has been qualified
under the Trust Indenture Act.
(xiii) The Expense Agreement (the "Expense Agreement") by and
between the Trust and the Company has been duly authorized by the Trust and the
Company, will be duly executed and delivered by the Trust and the Company on the
Closing Date, and will be a legal, valid and binding agreements of the Trust and
the Company enforceable in accordance with its terms, except (i) as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
general equity principles, and (ii) as rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws or the public
policy underlying such laws. The Expense Agreement conforms in all material
respects with the description thereof and all statements relating thereto in the
Registration Statement and the Prospectus.
(xiv) None of the Trust, the Company or any Subsidiary is in
violation of its Certificate of Trust and Trust Agreement, or its Certificate or
Articles of Incorporation or by-laws, as the case may be. None of the Trust, the
Company or any Subsidiary is in violation of or in breach of or in default in
(nor has any event occurred that with notice or lapse of time, or both, would be
a breach of or a default in) the performance of any obligation, agreement or
condition contained in any agreement, lease, contract,
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permit, license, franchise agreement, mortgage, loan agreement, debenture, note,
deed of trust, bond, indenture or other evidence of indebtedness or any other
instrument or obligation (collectively, "Obligations and Instruments") to which
it is a party or by which it or any of its properties or assets are bound or
affected, except for such violation, breach, default as, either individually or
in the aggregate, would not have a Material Adverse Effect. Without limiting the
generality of the foregoing sentence, there is no default or event of default
(nor has any event occurred that with notice or lapse of time, or both, would
result in a default or event of default) under or in connection with any of the
Key Agreement, the Heller Agreements, the Finova Agreement or any other Senior
and/or Subordinated Debt (all as defined in the Prospectus). None of the Trust,
the Company or any Subsidiary is in violation of any statute, judgment, decree,
order, Rule or regulation (collectively, "Laws") applicable to it or any of its
properties or assets that, alone or together with other violations of Laws,
would result in a Material Adverse Effect.
(xv) The execution, delivery and performance of this Agreement
and delivery of the Shares by the Trust and compliance by the Trust and the
Company with all the provisions hereof and the consummation of the transactions
contemplated hereby and as described in the Registration Statement and the
Prospectus will not, alone or upon notice or the passage of time or both
(A) require any consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body or third party
(except such as may be required under the Act and the securities or Blue Sky
laws of the various states or by the NASD), (B) result in the creation or
imposition of any material lien, charge or encumbrance upon any of the
properties or assets of the Trust, the Company or any Subsidiary pursuant to the
terms and provisions of any Obligation or Instrument, (C) conflict with or
constitute a breach or default under any Obligation or Instrument to which the
Trust, the Company or any Subsidiary is a party or by which it or any of its
properties or assets are bound (including without imitation the Key Agreement,
the Finova Agreement, the Heller Agreements or any other Senior and/or
Subordinated Debt Obligations and Instruments), or (D) assuming compliance with
the Act and all applicable state securities or Blue Sky laws violate or conflict
with any Laws applicable to the Trust, the Company or any Subsidiary or any of
its properties or assets, except, with respect to clauses (B), (C) and (D)
hereof, for such liens, charges, encumbrances, conflicts, breaches, defaults or
violations as would not, either individually or in the aggregate, have a
Material Adverse Effect.
(xvi) Except as set forth in the Registration Statement and the
Prospectus, there is no action, suit, proceeding, inquiry or investigation,
governmental or otherwise before any court, arbitrator or governmental agency or
body (collectively, "Proceedings") pending to which the Trust, the Company or
any Subsidiary is a party or to which any of their properties or assets are
subject, that, individually or in the aggregate, if determined adversely to the
Trust, the Company or such Subsidiary, could reasonably be expected to result in
a Material Adverse Effect, or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of any of the Shares
to be sold hereunder or the consummation of the transactions described in the
Registration Statement and the Prospectus and, to the best knowledge of the
Offerors, no such Proceedings are threatened or contemplated. There is no
contract, document, agreement or transaction to which the Trust, the Company or
any Subsidiary is a party, or that involved or involves the Trust, the Company
or any Subsidiary or any of its properties or assets that is required to be
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described in or filed as an exhibit to the Registration Statement by the Act or
the Rules and Regulations that has not been so described or filed. To the best
knowledge of the Offerors, no action has been taken by any governmental agency
that suspends the effectiveness of the Registration Statement, prevents or
suspends the use of any Preliminary Prospectus or the Prospectus or suspends the
sale of the Shares in any jurisdiction referred to in Section 5(h) hereof. No
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction has been issued with respect to the Trust, the Company
or any Subsidiary that might prevent the issuance of the Shares, suspend the
effectiveness of the Registration Statement, prevent or suspend the use of any
Preliminary Prospectus or the Prospectus or suspend the sale of the Shares in
any jurisdiction referred to in Section 5(h) hereof. Every request of the
Commission, or any securities authority or agency of any jurisdiction, for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) has been complied with in all material respects.
(xvii) Neither the Company nor any Subsidiary has violated any
Federal or state law, statute, ordinance, rule, regulation or common law, as the
same may be interpreted or administered by any Federal, state, regional, county
or local agencies, relating to (A) the protection, investigation, remediation,
or restoration of the environment or natural resources, (B) the handling, use,
storage, treatment, disposal, release or threatened release of any Hazardous
Material (as defined below), or (C) pollution or contamination ("Environmental
Laws"), except for such violations as would not, either individually or in the
aggregate, have a Material Adverse Effect, nor, to the knowledge of the
Offerors, are there any circumstances, either past, present or that are
reasonably foreseeable, that may lead to such violation in the future that, in
each case or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. No property owned or leased by the Company or any
Subsidiary is included or, to the best of the knowledge of the Company, proposed
for inclusion on the National Priorities List promulgated under the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
U.S.C. section 9601 et seq. Except for any asbestos containing materials or
lead-based paint that may be, or may have been contained, on property, to the
knowledge of the Offerors no property currently, or in the past, owned or leased
by the Company or any Subsidiary contains, or contained, as the case may by, any
Hazardous Material that requires or required, as the case may be, investigation
or remediation under any Environmental Law, except for such investigation or
remediation as would not, either individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any Subsidiary has caused or
allowed the release of any Hazardous Material on, in, under or from any property
currently or in the past owned or leased by the Company or any Subsidiary,
except for such releases as would not, either individually or in the aggregate,
have a Material Adverse Effect, nor may the Company or any Subsidiary be deemed
an "owner or operator" of a "facility" or "vessel" that owns, possesses,
transports, generates, discharges or disposes of a "hazardous substance" as
those terms are defined in Section 9601 of the Comprehensive Response
Compensation and Liability Act of 1980, U.S.C. Section 9601 et seq. Neither the
Company nor any Subsidiary has received any notice of a claim under or pursuant
to any Environmental Law relating to any Hazardous Material on or originating
from any property currently or in the past owned or leased by the Company or any
Subsidiary, except for such claims as would not, either individually or in the
aggregate, have a Material Adverse Effect. "Hazardous Material" means any
substance, material, or waste that is (A) listed, classified or regulated as a
hazardous substance or waste in any concentration pursuant to any Environmental
Law, or
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(B) any other substance, material, or waste which may be the subject of
regulatory action by any governmental entity pursuant to any Environmental Law.
(xviii) The Trust, the Company and each Subsidiary has such
permits, licenses, registrations, franchises and authorizations of governmental
or regulatory authorities or third parties ("Permits"), including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease and operate its properties and assets and to conduct its businesses or
operations, except where the failure to have any such Permit would not have a
Material Adverse Effect. The Trust, the Company and each Subsidiary are in
compliance with such Permits, except where such failure to comply with such
Permits would not, either individually or in the aggregate, have a Material
Adverse Effect. No event has occurred that allows, or after notice or lapse of
time, or both would allow, revocation or termination thereof or result in any
other material impairment of the rights of the holder of any such Permits.
(xix) Neither the Company nor any Subsidiary is in violation of
any foreign, Federal, state or local law relating to discrimination in the
hiring, promotion or pay of employees for any applicable foreign, Federal or
state wages and hours laws, nor any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations promulgated
thereunder ("ERISA") or similar foreign laws, the violation of which in each
case or in the aggregate would result in a Material Adverse Effect. No
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) which in each case or in the aggregate
would result in a Material Adverse Effect. The Company has not incurred any
material liability under (i) Title IV of ERISA with respect to the termination
of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended.
(xx) None of the Trust, the Company or any Subsidiary is, or
intends to conduct its business in a manner in which it would become, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xxi) Except as otherwise set forth in the Registration Statement
and the Prospectus, the Company and each Subsidiary has good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions
(except liens for taxes not yet due and payable) to all property and assets
described in the Registration Statement as being owned by it, except for such
liens, claims, encumbrances and restrictions as would not have a Material
Adverse Effect. All leases to which the Company or any Subsidiary is a party are
subsisting, valid and binding obligation of the Company or such Subsidiary and
no default of the Company or the Subsidiary or, to the best knowledge of the
Offerors, any other person has occurred or is continuing thereunder that might
result in a Material Adverse Effect. The Company and each Subsidiary enjoys
peaceful and undisturbed possession under all such leases to which the Company
or the Subsidiary is a party as lessee with such exceptions as do not materially
interfere with the use made thereof by the Company or the Subsidiary.
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(xxii) The Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as is reasonable and prudent for the business in which it is engaged.
(xxiii) No labor dispute with the employees of the Company or any
Subsidiary exists, or to the best knowledge of the Offerors, is imminent, that
could result in a Material Adverse Effect. The Company does not know of any
existing or imminent labor disturbance by the employees of any of its or its
Subsidiaries' principle suppliers, customers, manufacturers or contractors that
could reasonably be expected to result in a Material Adverse Effect.
(xxiv) Deloitte & Touche, LLP, the accounting firm that has
audited the required annual financial statements and supporting schedules filed
or to be filed with the Commission as part of the Registration Statement and the
Prospectus, is an independent public accounting firm with respect to the Trust
and the Company as required by the Act.
(xxv) The consolidated financial statements of the Company,
together with related notes and schedules of the Company included in the
Registration Statement and the Prospectus, are accurate and present fairly the
financial position, results of operations and cash flows of the Company as
consolidated with its Subsidiaries at the indicated dates and for the indicated
periods. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made; any unaudited financial
statements have been prepared on a basis substantially consistent with that of
the audited operating financial statements included in the Registration
Statement and the Prospectus. The summary and selected financial and operating
data included in the Registration Statement and the Prospectus presents fairly
the information shown therein and have been prepared on a basis consistent with
the audited and any unaudited financial statements, as the case may be, included
therein. The pro forma information included in the Registration Statement and
the Prospectus present fairly the information shown therein, has been prepared
in accordance with GAAP and the Commission's rules and guidelines with respect
to pro forma financial statements and other pro forma information, has been
properly prepared on the pro forma basis described therein and the assumptions
used in the preparation thereof are reasonable and the adjustments used therein
are appropriate under the circumstances.
(xxvi) No holder of any security of the Company has any right to
require inclusion of any such security in the Registration Statement or, to the
extent such rights exist, (a) such rights have been waived or (b) the securities
as to which such rights exist are currently subject to an effective registration
statement under the Act. There are no preemptive rights with respect to the
offering being made by the Prospectus or the offer or sale of the Common
Securities to the Company.
(xxvii) The Trust, the Company and each Subsidiary has filed or
caused to be filed, or has properly filed extensions for, all foreign, federal,
state and local income, value added and franchise tax returns and has paid all
taxes and assessments shown thereon as due, except for such taxes and
assessments as are disclosed or adequately
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reserved against and that are being contested in good faith by appropriate
proceedings, promptly instituted and diligently conducted. All material tax
liabilities are adequately provided for on the books of the Company and each
Subsidiary, and there is no material tax deficiency that has been or might be
asserted against the Trust, the Company or any Subsidiary that is not so
provided for. During the time the Company had elected to be treated as an "S"
Corporation under the Internal Revenue Code of 1986, as amended (the "Code"),
and any applicable state law, the Company's election of such status was validly
made, and at all times until April --, 1996 the Company qualified continuously
for treatment as an "S" Corporation under the Code.
(xxviii) The Company and each Subsidiary owns or possesses, or
can acquire on reasonable terms, the patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively, "Patents
and Proprietary Rights") currently employed by it in connection with the
business it now operates except where the failure to so own, possess or acquire
such Patents and Proprietary Rights would not have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received any notice and the Offerors
are not otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Patent or Proprietary Rights that, if the subject
of any unfavorable decision, ruling or finding, singly or in the aggregate,
could result in a Material Adverse Effect.
(xxix) Each of the Trust, the Company and each Subsidiary has
conducted, is conducting and intends to conduct its business so as to comply in
all material respects with applicable federal, state, local and foreign
government Laws, except where the failure to comply would not have a Material
Adverse Effect. Neither the Trust, the Company nor any Subsidiary is charged
with or, to the Offerors' knowledge, under investigation with respect to, any
material violation of any such Laws.
(xxx) None of the Trust, the Company or any Subsidiary has taken
or will take, directly or indirectly, any action designed to or which has
constituted or that might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of the price of any
security of the Trust or the Company to facilitate the sale or resale of the
Shares.
(xxxi) None of the Trust, the Company, any Subsidiary or, to the
best knowledge of the Offerors, any employee or agent of the Trust, the Company
or any Subsidiary has made any payment of funds of the Trust, the Company or the
Subsidiary or received or retained any funds in violation of any law, Rule or
regulation (including, without limitation, the Foreign Corrupt Practices Act) or
of a character required to be disclosed in the Prospectus. Neither the Trust,
the Company nor any Subsidiary has, at any time during the past five years,
(1) made any unlawful contributions to any candidate for any political office,
or failed fully to disclose any contribution in violation of law, or (2) made
any unlawful payment to state, federal or foreign government officer or
officers, or other person charged with similar public or quasi-public duty.
(xxxii) No transaction has occurred between or among the Trust,
the Company or any Subsidiary and any of the Trust's, the Company's or such
Subsidiary's
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officers, directors or trustees or any affiliate or affiliates of any such
officer, director or trustee that is required to be described in and is not
described in the Registration Statement and the Prospectus. There is no material
contract, document, agreement, transaction or relationship of a character
required by the Act to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that is
not described or filed as required.
(xxxiii) Other than as provided to the Underwriters under this
Agreement, none of the Trust, the Company or any Subsidiary has incurred any
liability for finder's or broker's fees or agent's commissions in connection
with the execution and delivery of this Agreement, the offer and sale of the
Shares or the transactions hereby contemplated.
(xxxiv) The Trust, the Company and each Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for inventory is compared with the existing inventory at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxxv) The Company has been subject to the requirements of
Section 12 or 15(d) of the Exchange Act and has filed in a timely manner all
reports and other material required to be filed pursuant to Sections 13, 14 or
15(d) of the Exchange Act since April --, 1996 and, if the Company has used Rule
12b-25(b) under the Exchange Act with respect to a report or a portion of any
such report, that report or portion thereof has actually been filed within the
time period prescribed by that rule. All such reports and other materials filed
pursuant to the Exchange Act were, at the time of their filing, complete and
accurate in all material respects.
(xxxvi) The Company has not, since the end of its fiscal year
ended June 30, 1998 (for which audited financial statements of the Company were
included in the 1998 Form 10-K, a report filed pursuant to Section 13(a) or
15(d) of the Exchange Act) defaulted on any (a) installment or installments of
indebtedness for borrowed money or (b) rental on one or more long term leases,
which defaults in the aggregate are material to the financial position of the
Company.
(xxxvii) The Offerors confirm as of the date hereof that the
Trust, the Company and each Subsidiary is in compliance with all provisions of
Section 1 of Florida Statutes, Section 517.075, An Act Relating to Disclosure of
Doing Business with Cuba. The Offerors further agree that if they or any
Subsidiary commences engaging in business with the government of Cuba or with
any person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever date is
later, the Trust and the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
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(xxxviii) No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on any such Subsidiary's capital stock, from repaying to the
Company any loans or advances to such Subsidiary from the Company or from
transferring any of such Subsidiary's property or assets to the Company or any
other Subsidiary.
(b) Any certificate signed by any trustee of the Trust or officer of
the Company and delivered to the Underwriters or to counsel for the Underwriters
shall be deemed a representation and warranty made by the Trust or Company, as
the case may be, to each Underwriter as to the matters covered thereby and shall
be deemed incorporated herein in its entirety and shall be effective as if such
representation and warranty were made herein.
7. Indemnification.
(a) The Offerors agree, jointly and severally, to indemnify and hold
harmless each of the Underwriters and each person, if any, who controls each of
the Underwriters within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (collectively the Underwriters and each such person are
sometimes referred to in this Section 7 as the "indemnified parties") from and
against any and all losses, claims, damages, liabilities and judgments caused
by, arising out of, related to or based upon: (i) any inaccuracy of any
representation or warranty by the Offerors contained in Section 6 hereof;
(ii) any failure of the Offerors to perform their respective obligations
hereunder or under law; or (iii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (as amended
or supplemented if the Offerors shall have furnished any amendments or
supplements thereto), including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, or the Prospectus or any Preliminary Prospectus or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the indemnification contained in this paragraph with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter or any
employee of such Underwriter) on account of any such loss, liability, claim,
damage or expense arising from the sale of the Shares by such Underwriter to any
person if a copy of the Prospectus shall not have been sent to such person
within the time required by the Act and the Regulations, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended or supplemented, provided that the Offerors had delivered
the Prospectus, as amended or supplemented, to the several Underwriters on a
timely basis to permit such delivery or sending; and provided further, that the
Offerors shall not be liable in any such case to the extent that such losses,
claims, damages, liabilities or judgments are caused by an untrue statement or
omission made or omitted in reliance upon, and in conformity with, Underwriters'
Information.
(b) In case any action shall be brought against any of the indemnified
parties, based upon any Preliminary Prospectus, the Registration Statement or
the Prospectus or any amendment or supplement thereto, or otherwise, and with
respect to which indemnity may be sought against the Offerors, such indemnified
parties shall promptly notify the Offerors in writing (but the failure so to
notify shall not relieve the Offerors of any liability
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that it may otherwise have to such indemnified parties under this Section 7,
although the Offerors' liability to an indemnified party may be reduced on a
monetary basis to the extent, but only to the extent, it has been prejudiced by
such failure on the part of such indemnified party), and the Offerors shall
promptly assume the defense thereof, including the employment of counsel
satisfactory to such indemnified party and payment of all fees and expenses. The
indemnified parties shall each have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified parties unless (i) the
employment of such counsel shall have been specifically authorized by the
Offerors, (ii) the Offerors shall have failed to assume promptly the defense, or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified parties and the Offerors, and an indemnified party
shall have been advised by counsel that there may be a conflict of interest
between the indemnified parties, on the one hand, and the Offerors, on the other
hand, (in which case the Offerors shall not have the right to assume the defense
of such action on behalf of such indemnified party, it being understood,
however, that the Offerors shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for the indemnified parties, which firm shall be designated
in writing by EVEREN Securities, Inc., and that all such fees and expenses shall
be reimbursed promptly as they are incurred). The Offerors shall not be liable
for any settlement of any such action effected without their written consent,
which consent shall not be unreasonably withheld, but if settled with the
written consent of the Offerors, the Offerors agree to indemnify and hold
harmless the indemnified parties from and against any and all loss or liability
by reason of such settlement. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested the Offerors to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
sentence of this paragraph, the Offerors agree that they shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 10 business days after delivery by
registered or certified mail to the proper address for notice to the Offerors of
the aforesaid request (whether or not such delivery is accepted) and (ii) the
Offerors shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. The Offerors shall not, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional and complete
release in writing of such indemnified party from any and all liability on
claims that are the subject matter of such proceeding, which settlement shall be
in form and substance reasonably satisfactory to the indemnified party. The
indemnification provided in this Section 7 will be in addition to any liability
which the Offerors may otherwise have.
(c) The Underwriters agree, severally and not jointly, to indemnify
and hold harmless each of the Offerors, its directors, officers or trustees who
sign the Registration Statement and any person controlling the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the indemnity provided in Section 7(a)(iii) above from the
Offerors to the Underwriters, but only with reference to information stated in
or omitted from the Registration Statement, the Prospectus
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or any Preliminary Prospectus in reliance upon, and in conformity with, the
Underwriters' Information. In case any action shall be brought against the
Offerors, any of the Offerors' directors, any such officers or any person
controlling the Offerors based on the Registration Statement, the Prospectus or
any Preliminary Prospectus and in respect of which indemnity may be sought
against the Underwriters, the Underwriters shall have the rights and duties
given to the Offerors by Section 7(b) hereof (except that if the Offerors shall
have assumed the defense thereof, such Underwriter shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of
such Underwriter), and the Offerors, their directors, any such officers and any
person controlling the Officers shall have the rights and duties given to the
"indemnified parties" by Section 7(b) hereof.
(d) The Company agrees to indemnify and hold harmless the Trust, its
directors, officers or trustees who sign the Registration Statement and any
person controlling the Trust within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, to the same extent as the indemnity provided in
Section 7(a) above from the Offerors to the Underwriters.
(e) If the indemnification provided for in this Section 7 is for any
reason unavailable to an indemnified party or insufficient to hold such
indemnified party harmless in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Offerors on the one hand and the
Underwriters on the other from the offering of the Shares or (ii) if the
allocation provided in clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Offerors on
the one hand and the Underwriters on the other in connection with the statements
or omissions or alleged statements or omissions that resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Offerors on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering and sale of the Shares
(before deducting expenses) received by the Offerors on the one hand, and the
total underwriting discounts and commissions received by the Underwriters on the
other, bears to the total price to the public of the Shares, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Offerors and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or the alleged omission to state a material fact relates to
information supplied by the Offerors or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Offerors and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a
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result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
of Underwriting Commission received by such Underwriter in connection with the
Shares underwritten by it and distributed to the public. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligation in this
Section 7(e) to contribute are several in proportion to the respective amount of
Shares purchased hereunder by each Underwriter and not joint.
8. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Shares on the Closing
Date and the Additional Shares on any Option Closing Date are subject to the
fulfillment of each of the following conditions on or prior to the Closing Date
and each Option Closing Date:
(a) All the representations and warranties of the Offerors contained
in this Agreement and in any certificate delivered hereunder shall be true and
correct on the Closing Date and each Option Closing Date with the same force and
effect as if made on and as of the Closing Date or Option Closing Date, as
applicable. The Offerors shall not have failed at or prior to the Closing Date
or Option Closing Date, as applicable, to perform or comply in all material
respects with any of the agreements herein contained and required to be
performed or complied with by the Offerors at or prior to the Closing Date or
the Option Closing Date, as applicable.
(b) If the Registration Statement is not effective at the time of the
execution and delivery of this Agreement, the Registration Statement shall have
become effective (or, if a post-effective amendment is required to be filed
pursuant to Rule 430A under the Act, such post-effective amendment shall have
become effective) not later than 9:30 A.M., New York City time, on the date of
this Agreement or such later time as the Representatives may approve in writing
or, if the Registration Statement has been declared effective prior to the
execution and delivery hereof in reliance on Rule 430A, the Prospectus shall
have been filed as required by the Act, if necessary; and at the Closing Date
and each applicable Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or, to the best knowledge of the Underwriters or the Offerors, threatened
by the Commission; every request for additional information on the part of the
Commission shall have been complied with to the Underwriters' satisfaction; no
stop order suspending the sale of the Shares in any jurisdiction referred to in
Section 5(h) shall have been issued and no proceeding for that purpose shall
have been commenced or shall be pending or, to the best knowledge of the
Underwriters or the Offerors, threatened.
(c) The Shares shall have been qualified for sale (or an exemption
from such qualification shall have been secured) under the Blue Sky laws of such
states as shall have been specified by the Representatives.
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(d) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form of the
certificates representing the Shares, the execution and delivery of this
Agreement and all corporate proceedings and other legal matters incident
thereto, and the form of the Registration Statement and the Prospectus (except
financial statements) shall have been approved by counsel for the Underwriters
exercising reasonable judgment, and no Underwriter shall have advised the
Offerors that the Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of material fact, or omits to
state a fact that in the Representatives' opinion is material and is required to
be stated therein or is necessary to make the statements therein not misleading.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any material change, or any development involving a
prospective material change, in or affecting particularly the business or
properties of the Trust, the Company or any Subsidiary, whether or not arising
in the ordinary course of business, that, in the reasonable judgment of the
Representatives, makes it impractical or inadvisable to proceed with the public
offering or purchase of the Shares as contemplated hereby, or (ii) any event
described in clauses (ii)-(vii) of the second paragraph of Section 9 hereof.
(f) The Underwriters shall have received an opinion (satisfactory to
them and their counsel) dated the Closing Date or the Option Closing Date, as
the case may be, of Richards, Layton & Finger, P.A., special counsel for the
Offerers, in form and substance satisfactory to the Representatives and attached
hereto as Exhibit B-1; the Underwriters shall have received an opinion
(satisfactory to them and their counsel) dated the Closing Date or the Option
Closing Date, as the case may be, of Richards, Layton & Finger, P.A., special
counsel for the Property Trustee, the Indenture Trustee and the Guarantee
Trustee, in form and substance satisfactory to the Representatives and attached
hereto as Exhibit B-2.
(g) The Underwriters shall have received an opinion (satisfactory to
them and their counsel) dated the Closing Date or the Option Closing Date, as
the case may be, of Stoel Rives LLP, counsel for the Company, in form and
substance satisfactory to the Representatives and attached hereto as Exhibit
B-3.
(h) The Underwriters shall have received an opinion (satisfactory to
the Underwriters and their counsel) dated the Closing Date or the Option Closing
Date, as the case may be, of Greene & Markley, counsel for the Company, in form
and substance satisfactory to the Representatives and attached hereto as Exhibit
B-4.
(i) The Underwriters shall have received an opinion of Irell & Manella
LLP, counsel for the Underwriters, dated the Closing Date or the Option Closing
Date, as the case may be, in form and substance satisfactory to the
Representatives and attached hereto as Exhibit B-5.
(j) The Underwriters shall have received, in connection with the
execution of this Agreement and on the Closing Date and each Option Closing
Date, a "cold comfort" letter from Deloitte & Touche, LLP, dated as of each such
date in form and substance satisfactory to the Representatives with respect to
the financial statements and
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certain financial information and data contained in the Registration Statement
and the Prospectus [SEPARATE COMFORT FROM MALAYSIAN ACCOUNTANTS].
(k) The Underwriters shall have received from the Company a certificate, signed
by Matthew J. Bergeron and William J. Thale in their capacities as the President
and Chief Operating Officer of the Company and Vice President and CFO of the
Company, respectively, addressed to the Underwriters and dated the Closing Date
or Option Closing Date, as applicable, to the effect that:
(i) such officer does not know of any Proceedings instituted,
threatened or contemplated against the Company or any Subsidiary of a
character required to be disclosed in the Prospectus that are not so
disclosed; such officer does not know of any material contract
required to be filed as an exhibit to the Registration Statement which
is not so filed;
(ii) such officer has carefully examined the Registration
Statement and the Prospectus and all amendments or supplements thereto
and, in such officer's opinion, such Registration Statement or such
amendment as of its effective date and as of the Closing Date, and the
Prospectus or such supplement as of its date and as of the Closing
Date, did not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in such
officer's opinion, since the effective date of the Registration
Statement, no event has occurred or information become known that
should have been set forth in an amendment to the Registration
Statement or a supplement to the Prospectus which has not been so set
forth in such amendment or supplement;
(iii) the representations and warranties of the Company set forth
in Section 6 of this Agreement are true and correct as of the date of
this Agreement and as of the Closing Date or the Option Closing Date,
as the case may be, and the Company has complied in all material
respects with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such Closing Date
or the Option Closing Date, as the case may be; and
(iv) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and, to the best knowledge of
the respective officers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Act.
The delivery of the certificate provided for in this subparagraph shall be and
constitute a representation and warranty of the Company as to the facts set
forth in said certificate.
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(l) The Underwriters shall have received from the Trust a certificate,
signed by each of the Administrative Trustees, addressed to the Underwriters and
dated the Closing Date or Option Closing Date, as applicable, to the effect
that:
(i) such trustee does not know of any Proceedings instituted,
threatened or contemplated against the Trust of a character required
to be disclosed in the Prospectus that are not so disclosed; such
trustee does not know of any material contract required to be filed as
an exhibit to the Registration Statement which is not so filed;
(ii) such trustee has carefully examined the Registration
Statement and the Prospectus and all amendments or supplements thereto
and, in such trustee's opinion, such Registration Statement or such
amendment as of its effective date and as of the Closing Date, and the
Prospectus or such supplement as of its date and as of the Closing
Date, did not contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in such
trustee's opinion, since the effective date of the Registration
Statement, no event has occurred or information become known that
should have been set forth in an amendment to the Registration
Statement or a supplement to the Prospectus which has not been so set
forth in such amendment or supplement;
(iii) the representations and warranties of the Trust set forth
in Section 6 of this Agreement are true and correct as of the date of
this Agreement and as of the Closing Date or the Option Closing Date,
as the case may be, and the Trust has complied in all material
respects with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to such Closing Date
or the Option Closing Date, as the case may be; and
(iv) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and, to the best knowledge of
the respective trustees, no proceedings for that purpose have been
instituted or are pending or contemplated under the Act.
The delivery of the certificate provided for in this subparagraph shall be and
constitute a representation and warranty of the Offerors as to the facts set
forth in said certificate.
(l) The Underwriters and Irell & Manella LLP, counsel for the
Underwriters, shall have received on or before the Closing Date or the Option
Closing Date, as the case may be, such further documents, opinions, certificates
and schedules or instruments relating to the business, corporate, legal and
financial affairs of the Offerors as the Underwriters and they shall have
reasonably requested from the Offerors.
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9. Effective Date of Agreement, Termination and Defaults. This Agreement
shall become effective upon, and shall not be deemed delivered until, the later
of (i) execution of this Agreement by or on behalf of all parties hereto, and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date and
any exercise of the option to purchase Additional Shares may be canceled at any
time prior to any Option Closing Date by the Underwriters by written notice to
the Offerors if any of the following has occurred: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change or development involving a prospective
material adverse change in the condition, financial or otherwise, of the Trust
or the Company or the earnings, assets, liabilities, affairs, prospects,
management or business of the Trust or the Company, whether or not arising in
the ordinary course of business, that would, in the Representatives' sole
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States that, in
the Representatives' judgment, is material and adverse and would, in the
Representatives' judgment, make it impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., the Nasdaq SmallCap Market or the
Nasdaq Stock Market or limitation on prices for securities on either such
exchange, the Nasdaq SmallCap Market or the Nasdaq Stock Market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, Rule or order of any court or other governmental authority
that in the Representatives' opinion materially and adversely affects, or will
materially and adversely affect, the business or operations of the Trust or the
Company, (v) the declaration of a banking moratorium by either federal or
Oregon, California, Illinois or New York state authorities, (vi) the taking of
any action by any Federal, state or local government or agency in respect of its
monetary or fiscal affairs that in the Representatives' opinion has a material
adverse effect on the financial markets in the United States, (vii) there shall
be any change in financial markets or in political, economic or financial
conditions which, in the opinion of the Representatives, either renders it
impracticable or inadvisable to proceed with the offering and sale of the Shares
on the terms set forth in the Prospectus or materially adversely affects the
market for the Shares, (viii) a "Tax Event" or "Investment Company Event" (as
defined in the Prospectus), or (ix) any conditions to the Underwriters'
obligations under this Agreement shall not have been fulfilled when and as
required by this Agreement.
If on the Closing Date or on any Option Closing Date, as the case may be,
any of the Underwriters shall fail or refuse to purchase the Firm Shares or
Additional Shares, as the case may be, which it has agreed to purchase hereunder
on such date, and the aggregate number of Firm Shares or Additional Shares, as
the case may be, that such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed, in the aggregate, 10% of the
total number of Shares that all Underwriters are obligated to purchase on such
date, each non-defaulting Underwriter shall be obligated, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I hereto
bears to the total number of Firm Shares or Additional Shares, as the case may
be, that all the non-defaulting
-26-
<PAGE>
Underwriters have agreed to purchase, or in such other proportion as the
non-defaulting Underwriters may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
Closing Date or on the Option Closing Date, as the case may be, any of the
Underwriters shall fail or refuse to purchase the Firm Shares or Additional
Shares, as the case may be, in an amount that exceeds, in the aggregate, 10% of
the total number of the Shares, and arrangements satisfactory to the
non-defaulting Underwriters and the Offerors for the purchase of such Shares are
not made within 48 hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Underwriters and the
Offerors, except as otherwise provided in this Section 9. In any such case that
does not result in termination of this Agreement, either the Representatives or
the Company may postpone the Closing Date or the Option Closing Date, as the
case may be, for not longer than seven (7) days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve a defaulting Underwriter from liability in respect of any
default of any such Underwriter under this Agreement.
The indemnity and contribution provisions and other agreements,
representations and warranties of the Offerors and the Offerors' officers,
directors and trustees set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any of the Underwriters or by or on
behalf of the Offerors or the officers or directors of the Offerors or any
controlling person of the Offerors, (ii) acceptance of the Shares and payment
therefor hereunder or (iii) termination of this Agreement. Notwithstanding any
termination of this Agreement, the Offerors shall be liable for and shall pay
all expenses they have agreed to pay pursuant to Section 5(l).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of, and shall be binding upon, the Offerors, the Underwriters,
any indemnified person referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
terms "successors and assigns" shall not include a purchaser of any of the
Shares from any of the several Underwriters merely because of such purchase.
10. Effectiveness of Registration Statement. The Underwriters and the
Offerors will use their best efforts to cause the Registration Statement to
become effective, if it has not yet become effective, and to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement and, if such stop order be issued, to obtain as soon as possible the
lifting thereof.
11. Miscellaneous. All communications hereunder will be in writing and, if
sent to the Underwriters will be mailed, delivered or telegraphed and confirmed
to the Representatives c/o EVEREN Securities, Inc., 77 West Wacker Drive,
Chicago, Illinois 60601-1994, Attention: Syndicate Department, with a copy to
Irell & Manella LLP, 333 South Hope Street, Suite 3300, Los Angeles, California
90071-1560, Attention: Eric A. Webber, Esq.; and if sent to the Offerors will be
mailed, delivered or telegraphed and
-27-
<PAGE>
confirmed to the Offerors at the Company's corporate headquarters with a copy to
Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204-1260,
Attention: Robert J. Moorman, Esq. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among
the Offerors and the several Underwriters, including the Representatives.
Very truly yours,
PRAEGITZER INDUSTRIES, INC.
By: MATTHEW J. BERGERON
------------------------------------
Matthew J. Bergeron
President and Chief Operating Officer
And
PRAEGITZER INDUSTRIES TRUST I
By: MATTHEW J. BERGERON
-------------------------------------
Matthew J. Bergeron
Administrative Trustee
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<PAGE>
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
EVEREN SECURITIES, INC.
ADVEST, INC.
BLACK & COMPANY
Acting as Representatives of the several Underwriters named in Schedule I.
By: EVEREN Securities, Inc.
By:------------------------------
David Enzer
Senior Managing Director
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<PAGE>
Exhibit A
---------
Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<PAGE>
Exhibit B-1
-----------
Opinion of Richards, Layton & Finger, P.A.,
as counsel to the Company and the Trust
<PAGE>
Exhibit B-2
-----------
Opinion of Richards, Layton & Finger, P.A.,
as counsel to the Property Trustee, the Indenture Trustee
and the Guarantee Trustee
<PAGE>
Exhibit B-3
-----------
Opinion of Stoel Rives LLP,
as counsel to the Company
<PAGE>
Exhibit B-4
-----------
Opinion of Greene & Markley,
as counsel to the Company
<PAGE>
Exhibit B-5
-----------
Opinion of Irell & Manella LLP,
as Underwriters' Counsel
<PAGE>
Schedule I
----------
Number of Firm
Underwriter Shares to be Purchased
- ----------- ----------------------
EVEREN Securities, Inc........................... [ ]
Advest, Inc...................................... [ ]
Black & Company.................................. [ ]
TOTAL............................................ 4,000,000
=========
PRAEGITZER INDUSTRIES, INC.
to
WILMINGTON TRUST COMPANY
Trustee
JUNIOR SUBORDINATED INDENTURE
Dated as of ____________ ___, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........1
Section 1.1 Definitions................................................1
Section 1.2 Compliance Certificate and Opinions.......................13
Section 1.3 Forms of Documents Delivered to Trustee...................13
Section 1.4 Acts of Holders...........................................14
Section 1.5 Notices, Etc. to Trustee and Company......................16
Section 1.6 Notice to Holders; Waiver.................................16
Section 1.7 Conflict with Trust Indenture Act.........................17
Section 1.8 Effect of Headings and Table of Contents..................17
Section 1.9 Successors and Assigns....................................17
Section 1.10 Separability Clause.......................................17
Section 1.11 Benefits of Indenture.....................................17
Section 1.12 Governing Law.............................................17
Section 1.13 Non-Business Days.........................................17
ARTICLE II SECURITY FORMS................................................18
Section 2.1 Forms Generally...........................................18
Section 2.2 Form of Face of Security..................................18
Section 2.3 Form of Reverse of Security...............................22
Section 2.4 Additional Provisions Required in Global Security.........24
Section 2.5 Form of Trustee's Certificate of Authentication...........25
ARTICLE III THE SECURITIES................................................25
Section 3.1 Title and Terms...........................................25
Section 3.2 Denominations.............................................28
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----
Section 3.3 Execution, Authentication, Delivery and Dating............28
Section 3.4 Temporary Securities......................................29
Section 3.5 Registration, Transfer and Exchange.......................30
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities..........31
Section 3.7 Payment of Interest; Interest Rights Preserved............32
Section 3.8 Persons Deemed Owners.....................................34
Section 3.9 Cancellation..............................................34
Section 3.10 Computation of Interest...................................34
Section 3.11 Deferrals of Interest Payment Dates.......................34
Section 3.12 Right of Set-Off..........................................36
Section 3.13 Agreed Tax Treatment......................................36
Section 3.14 Shortening of Stated Maturity.............................36
Section 3.15 CUSIP Numbers.............................................36
ARTICLE IV SATISFACTION AND DISCHARGE....................................36
Section 4.1 Satisfaction and Discharge of Indenture...................36
Section 4.2 Application of Trust Money................................38
ARTICLE V REMEDIES......................................................38
Section 5.1 Events of Default.........................................38
Section 5.2 Acceleration of Maturity; Rescission and Annulment........39
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee................................................40
Section 5.4 Trustee May File Proofs of Claim..........................41
Section 5.5 Trustee May Enforce Claim Without Possession
of Securities.............................................42
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Page
----
Section 5.6 Application of Money Collected............................42
Section 5.7 Limitation on Suits.......................................43
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders of
Preferred Securities......................................43
Section 5.9 Restoration of Rights and Remedies........................44
Section 5.10 Rights and Remedies Cumulative............................44
Section 5.11 Delay or Omission Not Waiver..............................44
Section 5.12 Control by Holders........................................44
Section 5.13 Waiver of Past Defaults...................................45
Section 5.14 Undertaking for Costs.....................................45
Section 5.15 Waiver of Usury, Stay or Extension Laws...................46
ARTICLE VI THE TRUSTEE...................................................46
Section 6.1 Certain Duties and Responsibilities.......................46
Section 6.2 Notice of Defaults........................................47
Section 6.3 Certain Rights of Trustee.................................47
Section 6.4 Not Responsible for Recitals or Issuance of Securities....48
Section 6.5 May Hold Securities.......................................48
Section 6.6 Money Held in Trust.......................................49
Section 6.7 Compensation and Reimbursement............................49
Section 6.8 Disqualification; Conflicting Interests...................49
Section 6.9 Corporate Trustee Required; Eligibility...................50
Section 6.10 Resignation and Removal; Appointment of Successor.........50
Section 6.11 Acceptance of Appointment by Successor....................52
-iii-
<PAGE>
Section 6.12 Merger, Conversion, Consolidation or Succession
to Business...............................................53
Section 6.13 Preferential Collection of Claims Against Company.........53
Section 6.14 Appointment of Authenticating Agent.......................53
ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.............55
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders..................................55
Section 7.2 Preservation of Information,
Communications to Holders.................................55
Section 7.3 Reports by Trustee........................................55
Section 7.4 Reports by Company........................................56
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..........56
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms.....................................56
Section 8.2 Successor Corporation Substituted.........................57
ARTICLE IX SUPPLEMENTAL INDENTURES.......................................57
Section 9.1 Supplemental Indentures without Consent of Holders........57
Section 9.2 Supplemental Indentures with Consent of Holders...........58
Section 9.3 Execution of Supplemental Indentures......................60
Section 9.4 Effect of Supplemental Indentures ........................60
Section 9.5 Conformity with Trust Indenture Act.......................60
Section 9.6 Reference in Securities to Supplemental Indentures........60
ARTICLE X COVENANTS.....................................................61
Section 10.1 Payment of Principal, Premium and Interest................61
Section 10.2 Maintenance of Office or Agency...........................61
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Page
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Section 10.3 Money for Security Payments to be Held in Trust...........61
Section 10.4 Statement as to Compliance................................63
Section 10.5 Waiver of Certain Covenants...............................63
Section 10.6 Additional Sums...........................................63
Section 10.7 Additional Covenants......................................64
ARTICLE XI REDEMPTION OF SECURITIES......................................68
Section 11.1 Applicability of This Article.............................68
Section 11.2 Election to Redeem; Notice to Trustee.....................68
Section 11.3 Selection of Securities to be Redeemed....................68
Section 11.4 Notice of Redemption......................................69
Section 11.5 Deposit of Redemption Price...............................70
Section 11.6 Payment of Securities Called for Redemption...............70
Section 11.7 Right of Redemption of Securities Initially Issued
to a Praegitzer Industries Trust..........................70
ARTICLE XII SINKING FUNDS.................................................71
Section 12.1 Applicability of Article..................................71
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.....71
Section 12.3 Redemption of Securities for Sinking Fund.................71
ARTICLE XIII SUBORDINATION OF SECURITIES...................................73
Section 13.1 Securities Subordinate to Senior Debt
and Subordinated Debt.....................................73
Section 13.2 Payment Over of Proceeds Upon Dissolution, Etc............73
Section 13.3 Prior Payment to Senior Debt and Subordinated Debt
Upon Acceleration of Securities...........................74
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<PAGE>
Page
----
Section 13.4 No Payment When Senior Debt and Subordinated
Debt in Default...........................................75
Section 13.5 Payment Permitted If No Default...........................76
Section 13.6 Subrogation to Rights of holders of Senior Debt
and Subordinated Debt.....................................76
Section 13.7 Provisions Solely to Define Relative Rights...............76
Section 13.8 Trustee to Effectuate Subordination.......................77
Section 13.9 No Waiver of Subordination Provisions.....................77
Section 13.10 Notice to Trustee.........................................77
Section 13.11 Reliance on Judicial Order or Certificate
of Liquidating Agent......................................78
Section 13.12 Trustee Not Fiduciary for holders of Senior Debt
and Subordinated Debt.....................................78
Section 13.13 Rights of Trustee as Holder of Senior Debt and
Subordinated Debt; Preservation of Trustee's Rights.......79
Section 13.14 Article Applicable to Paying Agents.......................79
Section 13.15 Certain Conversions or Exchanges Deemed Payment...........79
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<PAGE>
PRAEGITZER INDUSTRIES, INC.
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the
Trust Reform Act of 1990, are a part of and govern the Indenture whether or not
physically contained therein) and the Junior Subordinated Indenture, dated as of
________________, 1998.
Trust Indenture Indenture
Act Section Section
--------------- ---------
ss. 310 (a)(1) and (2) 6.9
(a)(3) Not Applicable
(a)(4) Not Applicable
(a)(5) 6.9
(b) 6.8
(c) Not Applicable
ss. 311 (a) 6.13
(b) 6.13
(c) Not Applicable
ss. 312 (a) 7.1
7.2(a)
(b) 7.2(b)
(c) 7.2(c)
ss. 313 (a) 7.3(a), 7.3(b)
(b) 7.3(a)
(c) 1.6
(d) 7.3(c)
ss. 314 (a)(1),(2)&(3) 7.4
(a)(4) 10.4
(b) Not Applicable
(c)(1) 1.2
(c)(2) 1.2
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.2
(f) 1.7
ss. 315 (a) 6.1(a)
(b) 6.2
(c) 6.1(b)
(d) 6.1(c)
(d)(1) 6.1(c)(i)
(d)(2) 6.1(c)(ii)
(d)(3) 6.1(c)(iii)
(e) 5.14
ss. 316 (a)(1)(A) 5.12
(a)(1)(B) 5.13
(a)(2) Not Applicable
(b) 5.8
(c) 1.4(f)
ss. 317 (a)(1) 5.3
(a)(2) 5.4
(b) 10.3
ss. 318 (a) 1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Junior Subordinated Indenture.
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of _________ __, 1998, between
PRAEGITZER INDUSTRIES, INC., an Oregon corporation (hereinafter called the
"Company") having its principal office at 1270 SE Monmouth Cut Off Road, Dallas,
Oregon 97338, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as
Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "Praegitzer
Industries Trust" or "Trust," and, collectively, the "Praegitzer Industries
Trusts" or the "Trusts") of preferred trust interests in such Trusts (the
"Preferred Securities") and common interests in such Trusts (the "Common
Securities" and, collectively with the Preferred Securities, the "Trust
Securities"), and to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered.
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 covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the contest otherwise requires:
(a) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
(b) All other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at
-1-
<PAGE>
the date or time of such computation; provided, that when two or more principles
are so generally accepted, it shall mean that set of principles consistent with
those in use by the Company; and
(d) 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.
"Acquisition" means the acquisition (including by way of merger or
consolidation) of any asset or property of another Person during the Reference
Period by purchase in cash, exchange of property or securities, or by any other
method.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and which shall accrue at the rate per
annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means the sum of any additional taxes, duties and other
governmental charges to which a Praegitzer Industries Trust has become subject
from time to time as a result of a Tax Event.
"Administrative Trustee" means, in respect of any Praegitzer Industries
Trust, each Person identified as an "Administrative Trustee" or an
"Administrative Agent" in the related Amended and Restated Trust Agreement,
solely in such Person's capacity as Administrative Trustee or an Administrative
Agent, as the case may be, of such Praegitzer Industries Trust under such
Amended and Restated Trust Agreement and not in such Person's individual
capacity, or any successor administrative trustee or successor administrative
agent, as the case may be, appointed as therein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, no Praegitzer Industries
Trust to which Securities have been issued shall be deemed to be an Affiliate of
the Company. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series.
-2-
<PAGE>
"Bank Credit Agreements" means, collectively (i) the Credit Agreement
between the Company and Keybank National Association, dated March 31, 1998, as
amended by that First Amendment to Credit Agreement dated as of August __, 1998,
(ii) the promissory notes issued by the Company to Heller Financial, Inc. dated
August 22, 1996 (in the original amount of $5,000,000), May 30, 1997 (in the
original amount of $10,000,000), December 29, 1997 (in the original amount of
$2,570,091.06), December 29, 1997 (in the original amount of $2,010,803.20),
March 27, 1998 (in the original amount of $15,200,000), and March 31, 1998 (in
the original amount of $1,519,105.74), and (iii) any amendments, modifications,
or supplements thereto from time to time, or any agreement, as amended, modified
or supplemented from time to time, pursuant to which refinancing indebtedness is
incurred with respect thereto.
"Board of Directors" means either the board of directors of the Company or
any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the State of Oregon are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to a Praegitzer Industries Trust, the principal office
of the Property Trustee under the related Trust Agreement, is closed for
business.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, or other equity interest, including, without limitation, each class of
common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Consolidated Indebtedness" of any Person means the sum of, in each case as
of the date of determination, (a) all liabilities of such Person and its
consolidated subsidiaries for Indebtedness determined in accordance with GAAP
(but whether or not such Indebtedness would be classified as indebtedness in
accordance with GAAP), (b) all obligations attributable to any Disqualified
Capital Stock (whether or not such Disqualified Capital Stock would be
classified as indebtedness in accordance with GAAP), and (c) the aggregate
discounted net present value of all operating leases of such person and its
subsidiaries, as lessee, determined by discounting the payment stream under each
such operating lease for its entire term (assuming the use or exercise of all
possible rights or options of the lessor
-3-
<PAGE>
thereunder (but not any such right or option solely in the discretion of the
lessee) to extend the term thereof) using a discount rate equal to the Prime
Rate, all as of the date of determination.
"Consolidated Interest Coverage Ratio" of any Person means, for any period,
the ratio, on a pro forma basis, of (i) Modified EBITDA of such Person for such
period, to (ii) Consolidated Interest Expense of such Person for such period;
provided, that in making such computation (and in calculating Modified EBITDA
and Consolidated Interest Expense), (a) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
date of the transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio (the "Transaction Date") shall be assumed to have
occurred on the first day of the Reference Period, (b) the incurrence of any
Indebtedness or Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date and
the application of the proceeds therefrom shall be assumed to have occurred on
the first day of such Reference Period, (c) the Consolidated Interest Expense of
such Person attributable to interest (or dividends) on any Indebtedness or
Disqualified Capital Stock computed on a pro forma basis and bearing a floating
interest (or dividend) rate shall be computed as if the rate in effect on
Transaction Date had been the applicable rate for the entire period, and (d) in
the case of Section 10.7(c), the incurrence of Indebtedness or Disqualified
Capital Stock giving rise to the need to calculate the Consolidated Interest
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period.
"Consolidated Interest Expense" of any Person means for any period, the
aggregate amount (without duplication) of (a) interest of such Person and its
consolidated subsidiaries, whether expensed or capitalized (including, in
accordance with the following sentence, interest attributable to Capitalized
Lease Obligations) paid, accrued, or scheduled to be paid or accrued during such
period, in respect of all Indebtedness of such Person and its consolidated
subsidiaries (including, without duplication (i) the interest on the Securities,
whether or not the Securities are classified as indebtedness on such Person's
balance sheet under GAAP, (ii) the interest portion of all deferred payment
obligations, calculated in accordance with the effective interest method, (iii)
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financings and costs (net of income,
if any) associated with currency and interest rate swap arrangements, in each
case to the extent attributable to such period); and (b) dividend requirements
of such Person and its consolidated subsidiaries with respect to Disqualified
Capital Stock (whether in cash or otherwise (except dividends payable solely in
shares of stock that is not Disqualified Capital Stock)) paid, accrued or
scheduled to be paid or accrued during such period; in each case to the extent
attributable to such period and excluding items eliminated in consolidation. For
purposes of this definition, (x) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by such
Person's independent public accountants to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with GAAP, and (y) interest
expense attributable to any Indebtedness represented by the guaranty by such
Person or a subsidiary of such Person of an obligation of a Person other than
such Person shall be deemed to be the interest expense attributable to the items
guarantied.
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"Consolidated Leverage Ratio" of any Person means, as of the date of
determination, the ratio, on a pro forma basis, of (i) such Person's
Consolidated Indebtedness to (ii) such Person's Consolidated Net Worth; provided
that in making such computation (and in calculating Consolidated Indebtedness
and Consolidated Net Worth for such purposes), (a) the transaction giving rise
to the need to calculate such ratios (the "Transaction Date") shall be assumed
to have occurred as of the time of determination, and (b) the incurrence of any
Indebtedness or Disqualified Capital Stock as part of or in connection with the
transaction giving rise to the need to calculate the Consolidated Leverage
Ratio, and the application of the proceeds therefrom (including, without
limitation, to retire Indebtedness), shall be assumed to have occurred as of the
time of determination.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its consolidated subsidiaries
(determined in accordance with GAAP) for such period, adjusted to exclude (only
to the extent included in computing such net income (or loss) and without
duplication): (a) all extraordinary, unusual and nonrecurring gains or losses or
other gains or losses from the sale of assets (other than the sale of inventory
in the ordinary course of business and occasional sales of used equipment no
longer needed in such Person's business), (b) the net income, if positive, of
any other Person (other than a consolidated subsidiary the common voting equity
interests of which are owned, directly or indirectly, at least 80% by such
Person or its wholly-owned subsidiaries), except to the extent of the amount of
any dividends or distributions actually paid in cash to such Person or a
wholly-owned subsidiary of such Person during such period, but in any event not
in excess of such Person's pro rata share of such Person's net income during
such period, (c) the net income of any Person acquired in a pooling of interests
transaction for any period prior to the dale of such acquisition, (d) the net
income, if positive, of any of such Person's subsidiaries to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such subsidiary, and (e) the net effects of any changes in accounting
principles..
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person and its consolidated subsidiaries, as of the date of
determination, determined in accordance with GAAP (calculating the assets of
such Person on a first-in, first-out basis), adjusted to exclude (to the extent
included in calculating such equity), (a) the amount of equity attributable to
any Disqualified Capital Stock, and (b) all revaluations and other write-ups in
the book value of any asset of such Person or a consolidated subsidiary of such
Person subsequent to the Original Issue Date (other than write-ups in the book
value of assets in connection with the acquisition thereof (whether by asset
purchase, stock purchase, merger or otherwise) during the twelve-month period
immediately following such acquisition.
"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 on such date.
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"Common Securities" has the meaning specified in the first recital of this
Indenture.
"Common Stock" means the common stock of the Company.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by two individual Company
officers, one being its Chief Executive Officer, President or a Vice President,
and the other being its Vice President, Controller, its Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Default" has the meaning specified in Section 6.2.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Company pursuant to Section 3.1 with
respect to such series (or any successor thereto).
"Discount Security" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased (other
than at the option of the holder) by such Person or any of its subsidiaries, in
whole or in part, on or prior to the Maturity of the Securities (and including,
in the case of the Company, the Securities).
"Distributions" with respect to the Trust Securities issued by a Praegitzer
Industries Trust, means amounts payable in respect of such Trust Securities as
provided in the related Trust Agreement and referred to therein as
"Distributions."
"Dollar" or "U.S. $" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.
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"Event of Default" has the meaning specified in Article V unless otherwise
specified in the supplemental indenture or the Officers' Certificate delivered
pursuant to Section 3.1 hereof creating a series of Securities.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4(f).
"Extension Period" has the meaning specified in Section 3.11.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America on the date of this Indenture, consistently applied.
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" means the Guarantee Agreement substantially in the
form attached hereto as Annex C, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"incur" shall have the meaning provided in Section 10.7(c).
"Incurrence Date" shall have the meaning given in Section 10.7(c).
"Indebtedness" means, without duplication, with respect to any Person: (i)
all liabilities, contingent or otherwise, of such Person (a) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (b) evidenced by bonds,
notes, debentures or similar instruments or letters of credit, (c) representing
the balance deferred and unpaid of the purchase price of any property or
services, including obligations incurred in connection with a business
acquisition (other than accounts payable or other obligations to trade creditors
arising in the ordinary course of business), (d) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (e) for the
payment of money relating to a Capitalized Lease Obligation, or (f) all
indebtedness, whenever incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps in similar arrangements; (ii) reimbursement obligations of
such Person with respect to letters of credit; (iii) all liabilities, contingent
or otherwise, of such Person for the payment of money relating to an operating
lease (with the principal amount of each such operating lease deemed to be the
discounted net present value of the payment stream under such lease for its
entire term (assuming the use or exercise of all possible rights or options of
the lessor thereunder (but not any such right or option solely in the discretion
of the lessee) to extend the term thereof) using a discount rate equal to the
Prime Rate as of the date of
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determination), (iv) all liabilities of others of the kind described in the
preceding clauses (i) (ii) or (iii) that such Person has guaranteed or that is
otherwise its legal liability; (v) all obligations secured by a Lien to which
the property or assets (including, without limitation, leasehold interests and
any other tangible or intangible property rights) of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (vi) any and all
deferrals, renewals, extensions, refinancings and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (i), (ii), (iii), (iv) or
(v), or this clause (vi), whether or not between or among the same parties.
"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 or one or more
Officers' Certificates delivered pursuant to Section 3.1 and shall include the
terms of each particular series of Securities established as contemplated by
Section 3.1.
"Interest Payment Date" means as to each series of Securities, the Stated
Maturity of an installment of interest on such Securities.
"Investment Company Event" means, in respect of a Praegitzer Industries
Trust, the receipt by the Company and a Praegitzer Industries Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of 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, such Praegitzer Industries Trust is or will be considered
an "investment company" that is required to be registered under the 1940 Act,
which change becomes effective on or after the date of original issuance of the
Preferred Securities of such Praegitzer Industries Trust.
"Junior Subordinated Payment" has the meaning specified in Section 13.2.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, interest or
adverse claim affecting title or resulting in an encumbrance against real or
personal property, or a security interest of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, any
option or other agreement to sell and any filing of or agreement to give any
financing statement in respect of any of the foregoing under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"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.
"Modified EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person for such period adjusted to exclude (in
each case without duplication and only to the extent included in computing such
Consolidated Net Income), (i) consolidated expense for taxes based upon income
or profits, (ii) depreciation and amortization expense (but only to the extent
not included in Consolidated Interest
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Expense), (iii) Consolidated Interest Expense, and (iv) any other non-cash items
(including, for example, (x) any non-cash compensation expense attributable to
stock option or other equity compensation arrangements, or (y) any write-off or
add-back of goodwill, in-process technology or other items related to asset
valuation) which increased or decreased Consolidated Net Income, in each case
determined for such period on a consolidated basis for such Person and its
consolidated subsidiaries in accordance with GAAP, except as specifically
otherwise provided herein.
"Notice of Default" means a written notice of the kind specified in Section
5.2.
"Officers' Certificate" means a certificate signed by two individual
Company officers, one being its Chief Executive Officer, the President or a Vice
President, and the other being its Vice President, Controller, the Secretary or
an Assistant Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means the date of issuance specified as such in each
Security.
"Outstanding" means, when used in reference to any Securities, 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 money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust
for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.6, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands such
Securities are valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which
the Trustee knows to be so owned shall be so disregarded. 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 or such other obligor. Upon the written request of the Trustee,
the
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Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Securities, if any, known by the Company to be
owned or held by or for the account of the Company, or any other obligor on
the Securities or any Affiliate of the Company or such obligor, and,
subject to the provisions of Section 6.1, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts
therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means, with respect to the Securities of any series, the
place or places where the principal of (and premium, if any) and interest on the
Securities of such series are payable pursuant to Sections 3.1 and 3.11.
"Praegitzer Guarantee" means the guarantee by the Company of distributions
on the Preferred Securities of a Praegitzer Industries Trust to the extent
provided in the related Guarantee Agreement.
"Praegitzer Industries Trust" has the meaning specified in the first
recital of this Indenture.
"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 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Preferred Securities" has the meaning specified in the first recital of
this Indenture.
"Prime Rate" shall mean the "Prime Rate" in use by the Bank of America, San
Francisco, California, from time to time.
"Proceeding" has the meaning specified in Section 5.4.
"Property Trustee" means, in respect of any Praegitzer Industries Trust,
the commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of such
Praegitzer Industries Trust under such Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as therein provided.
"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.
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"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.
"Reference Period" means the combined four most recently-completed
consecutive fiscal quarters of the Person prior to the date of measurement.
"Regular Record Date" for the interest payable on any Interest Payment Date
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of a series: (i) in the case
of (A) Securities of a series represented by one or more Global Securities, or
(B) Securities (in any form) held by the Property Trustee of a Praegitzer
Industries Trust the Preferred Securities of which are registered in book-entry
only form, the Business Day next preceding such Interest Payment Date and (ii)
in the case of Securities of a series not represented by one or more Global
Securities or not otherwise described in the foregoing clause (i), the date
which is fifteen days next preceding such Interest Payment Date (whether or not
a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Securities" or "Security" means any debt securities or debt security, as
the case may be, authenticated and delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt and Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not such claim for post-petition interest is allowed in such proceeding), on
Indebtedness of the Company, whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities or
to other Indebtedness which is pari passu with, or subordinated to, the
Securities; provided, however, that Senior Debt and Subordinated Debt shall not
be deemed to include (a) any Indebtedness of the Company which, when incurred
and without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the Company, (b)
any Indebtedness of the Company to any of its Subsidiaries, (c) Indebtedness to
any employee of the Company, and (d) any Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Security or any installment
of principal thereof or interest thereon means the date specified pursuant to
the terms of such Security as the date on which the principal of such Security
or such installment of interest is due and payable, in the case of such
principal, as such date may be shortened or extended as provided pursuant to the
terms of such Security and this Indenture.
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"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.
"Tax Event" means the receipt by the Company and the Praegitzer Industries
Trust of an Opinion of Counsel (as defined in the relevant Praegitzer Industries
Trust Agreement) experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or Judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such prospective change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities of such Praegitzer Industries
Trust, there is more than an insubstantial risk that (i) such Praegitzer
Industries Trust is, or will be within 90 days of the date of such Opinion of
Counsel, subject to United States Federal income tax with respect to income
received or accrued on the corresponding series of Securities, (ii) interest
payable by the Company on such corresponding series of Securities is not, or
within 90 days of the date of such Opinion of Counsel, will not be, deductible
by the Company, in whole or in part, for United States Federal income tax
purposes or (iii) such Praegitzer Industries Trust is, or will be within 90 days
of the date of such Opinion of Counsel, subject to more than a de minimis amount
of other taxes, duties or other governmental charges.
"Trust" has the meaning specified in the first recital of this Indenture.
"Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex A, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex B, or substantially
in such form as may be specified as contemplated by Section 3.1 with respect to
the Securities of any series, in each case as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of this
Indenture.
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"Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a word or words added
before or after the title "vice president" of the Company.
Section 1.2 Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitute a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.5) shall include:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section 1.3 Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or
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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 1.4 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the Acts of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a Person acting in other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority.
(c) The fact and date of the execution by any Person of any such instrument
or writing, or the authority of the Person executing the same, may also be
proved in any other manner which the Trustee deems sufficient and in accordance
with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Company in reliance thereon,
whether or not notation of such action is made upon such Security.
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(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(b), or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time
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may change the Expiration Date to any earlier or later day, provided that no
such change shall be effective unless notice of the proposed new Expiration Date
is given to the other party hereto in writing, and to each Holder of Securities
of the relevant series in the manner set forth in Section 1.6, on or prior to
the existing Expiration Date. If an Expiration Date is not designated with
respect to any record date set pursuant to this Section, the party hereto which
set such record date shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect thereto, subject to
its right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder 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 part of such principal amount.
Section 1.5 Notices, Etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, any holder of Preferred Securities or the
Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or
(b) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose (except as otherwise provided
in Section 5.1) hereunder if in writing and mailed, first class, postage
prepaid, to the Company, addressed to it at the address of its principal office
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
Section 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
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Section 1.7 Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture
Act through operation of Section 318(c) thereof, such imposed duties shall
control.
Section 1.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.10 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 1.11 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 and
assigns, the Holders of Senior Debt and Subordinated Debt, the Holders of the
Securities and, to the extent expressly provided in this Indenture, the holders
of Preferred Securities, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 1.12 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 conflicts of
laws principles thereof, except that the immunities and standard of care of the
Trustee shall be governed by Delaware law.
Section 1.13 Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Securities) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day (and no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day, with the same force
and effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity).
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ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally.
The Securities of each series shall be in substantially the forms set forth
in this Article, or in such other form or forms as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently herewith,
be determined by the officers executing such securities, as evidenced by their
execution of the Securities. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Vice President,
Controller, the Secretary or an Assistant Secretary of the Company and delivered
to the Trustee at or prior to the delivery of the Company Order contemplated by
Section 3.3 with respect to the authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be substantially in the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
Section 2.2 Form of Face of Security.
PRAEGITZER INDUSTRIES, INC.
___% JUNIOR SUBORDINATED [If applicable - DEFERRABLE INTEREST]
DEBENTURE DUE _______
Registered No.: _______ Principal Amount: $_________
CUSIP No.: _______________
Praegitzer Industries, Inc., a corporation organized and existing under the
laws of Oregon (hereinafter called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _____________________, or registered
assigns, the principal sum of $___________ ( _________ Dollars) on
______________________; provided that the Company may shorten the Stated
Maturity of the principal of this Security to a date not earlier than
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___________. The Company further promises to pay interest, compounded quarterly,
on said principal sum from ____________ or from the most recent interest payment
date (each such date, an "Interest Payment Date") on which interest has been
paid or duly provided for, quarterly (subject to deferral as set forth herein)
in arrears on January 15, April 15, July 15 and October 15 of each calendar year
commencing with ________ 15, ____ at the rate of ___% per annum, until the
principal hereof shall have become due and payable, plus Additional Interest, if
any, until the principal hereof is paid or duly provided for or made available
for payment and on any overdue principal and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the rate of ___% per annum. The amount of
interest payable for any period shall be computed on the basis of twelve 30-day
months and a 360-day year. The amount of interest payable for any partial period
shall be computed on the basis of the number of days elapsed in a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable
on this Security is not a Business Day, then a payment of the interest payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), with
the same force and effect as if made on the date the payment was originally
payable. A "Business Day" shall mean any day other than a Saturday or Sunday a
day on which banking institutions in the State of Oregon are authorized or
required by law or executive order to remain closed or on a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee under the Amended and Restated Trust Agreement (hereinafter referred to)
for [name of Trust] is closed for business. The interest installment so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this 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 [insert
Record Date] next preceding such Interest Payment Date. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this 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 whereof shall be
given to holders of Securities of this series not less than ______ 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 of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
[If applicable, insert--So long as no Event of Default has occurred and is
continuing, and so long as the Consolidated Interest Coverage Ratio of the
Company for the Reference Period immediately preceding what would (but for the
Extension Period, defined below) otherwise be an Interest Payment Date shall be
less than 1.50 to 1, the Company shall have the right at any time during the
term of this Security to defer payment of interest on this Security, at any time
or from time to time, for up to 20 consecutive quarterly interest payment
periods with respect to each deferral period (each an "Extension Period"),
(during which Extension Periods the Company shall have the right to make partial
payments of interest on any Interest Payment Date, and at the end of which the
Company shall pay all interest then accrued and unpaid (together with Additional
Interest thereon to the extent permitted by applicable law)); provided, however,
that no Extension Period shall extend
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beyond the Stated Maturity of the principal of this Security; provided, further,
that during any such Extension Period, the Company shall not, and shall not
permit any Subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt security of the
Company (including Securities issued by the Company pursuant to the Indenture
other than the Securities represented by this certificate) that ranks pari passu
with or junior in interest to this Security, (iii) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
Subsidiaries of the Company (if such guarantee ranks pari passu in all respects
with or junior in interest to this Security (other than (a) dividends or
distributions in the Company's capital stock (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Praegitzer Guarantee related to the
Preferred Securities issued by [name of Trust], and (d) purchases of Common
Stock related to the issuance of Common Stock or rights under any of the
Company's benefit plans for its directors, officers or employees, or (iv)
redeem, purchase or acquire less than all of the Securities of this series or
any of the Preferred Securities. Prior to the termination of any such Extension
Period, the Company may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 60 consecutive interest
payment periods or to extend beyond the Stated Maturity and, provided further,
that any such Extension Period may continue only so long as (x) no Event of
Default has occurred and is continuing, and (y) the Consolidated Interest
Coverage Ratio of the Company for the Reference Period immediately preceding
what would (but for such Extension Period) otherwise be an Interest Payment Date
is less than 1.50 to 1. Upon the termination of any such Extension Period and
upon the payment of all amounts then due on any Interest Payment Date, and
subject to the foregoing conditions and limitations, the Company may elect to
begin a new Extension Period. No interest shall be due and payable during an
Extension Period except at the end thereof. The Company shall give the Trustee,
the Property Trustee and the Administrative Trustees of [name of Trust] notice
of its election to begin any Extension Period at least [one] Business Day prior
to the earlier of (i) the date on which Distributions on the Preferred
Securities would be payable except for the election to begin such Extension
Period, or (ii) the date the Administrative Trustees are required to give notice
to the American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock
Market or other applicable stock exchange or automated quotation system on which
the Preferred Securities are then listed or quoted or to holders of such
Preferred Securities on the record date or (iii) the date such Distributions are
payable, but in any event not less than [one] Business Day prior to such record
date. The Trustee shall give notice of the Company's election to begin a new
Extension Period to the holders of the Preferred Securities. There is no
limitation on the number of times that the Company may elect to begin an
Extension Period.]
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office of
such paying agent or paying agents as the Company may designate from time to
time, maintained for that purpose in the United States, in such coin or currency
of the United States of America as at the time of
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payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Securities Register or (ii) by transfer to an account
maintained by the person entitled thereto, in immediately available funds, at
such place and to such account as may be designated by the Person entitled
thereto as specified in the Securities Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior Debt and
Subordinated Debt, and this Security is issued subject to the provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt and Subordinated Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
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.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Praegitzer Industries, Inc.
By:
--------------------------------
[Chief Executive Officer,
President or Vice President]
Attest:
- ----------------------------------
[Secretary or Assistant Secretary]
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Section 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Indenture, dated as of ____________, 1998
(herein called the "Indenture"), between the Company and ______________ 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 of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to $
______________.
All terms used in this Security that are defined in the Indenture and in
the Amended and Restated Trust Agreement, dated as of ____________, 1998, as
amended (the "Amended and Restated Trust Agreement"), for [insert name of trust]
among Praegitzer Industries, Inc., as depositor, and the Trustees named therein,
shall have the meanings assigned to them in the Indenture or the Amended and
Restated Trust Agreement, as the case may be.
[If applicable, insert--The Company may at any time, at its option, on or
after _______________, and subject to the terms and conditions of Article XI of
the Indenture, redeem this Security [in whole at any time] [or in part from time
to time], without premium or penalty, at a redemption price equal to [insert
redemption price] to the Redemption Date.]
[If applicable, insert--Upon the occurrence and during the continuation of
a Tax Event or Investment Company Event in respect of a Praegitzer Industries
Trust, the Company may, at its option, at any time within 90 days of the
occurrence of such Tax Event or Investment Company Event redeem this Security,
[if applicable, insert--in whole but not in part], subject to the provisions of
Section 11.7 and the other provisions of Article XI of the Indenture, at a
redemption price equal to [insert redemption price] to the Redemption Date.]
[If applicable, insert--In the event of redemption of this Security in part
only, a new Security or Securities of this series for the portion hereof not
redeemed will be issued in the name of the Holder hereof upon the cancellation
hereof.]
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in
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principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, 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.
[If the Security is not a Discount Security, insert--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities of this series may
declare the principal amount of all the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a Praegitzer Industries Trust, if upon an Event of Default, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series fails to declare the principal of all the
Securities of this series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee; and upon any such declaration the principal amount of and the accrued
interest (including any Additional Interest) on all the Securities of this
series shall become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.]
[If the Security is a Discount Security, insert--As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Securities of this
series issued to a Praegitzer Industries Trust, if upon an Event of Default, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series fails to declare the principal of all the
Securities of this series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee. Such amount shall be equal to [insert formula for determining the
amount]. Upon any such declaration, such amount of the principal of and the
accrued interest (including any Additional Interest) on all the Securities of
this series shall become immediately due and payable, provided that the payment
of principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any overdue principal and overdue interest (in
each case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's
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obligations in respect of the payment of the principal of and interest, if any,
on this Security shall terminate.]
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 premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company maintained under Section 10.2 of the Indenture duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this 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.
The Securities of this series are issuable only in registered form without
coupons in minimum denominations of $10 and any integral multiples of $10 in
excess thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
Section 2.4 Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the provisions
contained in Sections 2.2 and 2.3, bear a legend in substantially the following
form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
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OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY."
Section 2.5 Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
as Trustee
By:
--------------------------------
Authorized Officer
ARTICLE III
THE SECURITIES
Section 3.1 Title and Terms.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate (such Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:
(i) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(ii) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and
except for any Securities which, pursuant to Section 3.3, are deemed never
to have been authenticated and delivered hereunder); provided, however,
that the authorized aggregate principal amount of such series may be
increased above such amount by a Board Resolution to such effect;
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(iii) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination
thereof;
(iv) the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any Securities
of such series, the Interest Payment Dates on which such interest shall be
payable, the right, pursuant to Section 3.11 or as otherwise set forth
therein, of the Company to defer or extend an Interest Payment Date, and
the Regular Record Date for the interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined;
(v) the place or places where the principal of (and premium, if any)
and interest on the Securities of such series shall be payable, the place
or places where the Securities of such series may be presented for
registration of transfer or exchange, and the place or places where notices
and demands to or upon the Company in respect of the Securities of such
series may be made;
(vi) the period or periods within or the date or dates on which, if
any, the price or prices at which and the terms and conditions upon which
the Securities of such series may be redeemed, in whole or in part, at the
option of the Company;
(vii) the obligation or the right, if any, of the Company to prepay,
repay or purchase the Securities of such series pursuant to any sinking
fund, amortization or analogous provisions, or at the option of a holder
thereof, and the period or periods within which, the price or prices at
which, the currency or currencies (including currency unit or units) in
which and the other terms and conditions upon which Securities of the
series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(viii) the denominations in which any Securities of such series shall
be issuable, if other than denominations of $10 and any integral multiples
of $10 in excess thereof;
(ix) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable, or in
which the Securities of the series shall be denominated;
(x) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Securities of such series;
(xi) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(xii) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or
facilitate the issuance of
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the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;
(xiii) any index or indices used to determine the amount of payments
of principal of and premium, if any, on the Securities of such series or
the manner in which such amounts will be determined;
(xiv) whether the Securities of the series, or any portion thereof,
shall initially be issuable in the form of a temporary Global Security
representing all or such portion of the Securities of such series and
provisions for the exchange of such temporary Global Security for
definitive Securities of such series;
(xv) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities
and, in such case, the respective Depositaries for such Global Securities,
the form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Section 2.4 and any
circumstances in addition to or in lieu of those set forth in Section 3.5
in which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in whole or
in part may be registered, in the name or names of Persons other than the
Depositary for such Global Security or a nominee thereof;
(xvi) the appointment of any Paying Agent or Agents for the Securities
of such series;
(xvii) the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Company, and the
additions or changes, if any, to this Indenture with respect to the
Securities of such series to permit or facilitate such conversion or
exchange;
(xviii) the form or forms of the Trust Agreement, Amended and Restated
Trust Agreement and Guarantee Agreement, if different from the forms
attached hereto as Annexes A, B and C, respectively;
(xix) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities
in right of payment, whether such other series of Securities are
Outstanding or not; and
(xx) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture). All
Securities of any one series shall be substantially identical except as to
denomination and except as may otherwise be provided herein or in or
pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary
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or an Assistant Secretary of the Company and delivered to the Trustee at or
prior to the delivery of the Officers' Certificate setting forth the terms of
the series.
The Securities shall be subordinated in right of payment to Senior Debt and
Subordinated Debt as provided in Article XIII.
Section 3.2 Denominations.
The Securities of each series shall be in registered form without coupons
and shall be issuable in minimum denominations of $10 and integral multiples of
$10 in excess thereof, unless otherwise specified as contemplated by Section
3.1.
Section 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its President
or one of its Vice Presidents under its corporate seal reproduced or impressed
thereon and attested by its Vice President, Controller, Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
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 of any series executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 2.1, that such form has been
established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such terms
have been established in conformity with the provisions of this Indenture;
and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of
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general applicability relating to or affecting creditors' rights and to
general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
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 the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 3.9, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities of such series 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 of any series are issued, the Company will cause
definitive Securities of such series 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 the office or agency of the Company designated for that purpose
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 deliver in exchange therefor one or more definitive Securities
of the same
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series of authorized denominations having the same Original Issue Date and
Stated Maturity and having the same terms as such temporary Securities. Until so
exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
Section 3.5 Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a 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. Such register is herein sometimes referred to as the
"Securities Register." The Trustee is hereby appointed "Securities Registrar"
for the purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Company designated for that 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 the same series of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, 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 deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any 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
transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Securities Registrar) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange of
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
transfer or exchange of Securities.
The provisions of Clauses (a), (b), (c) and (d) below shall apply only to
Global Securities:
(a) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian
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therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency registered
under the Exchange Act at a time when the Depositary is required to be so
registered to act as depositary, in each case unless the Company has
approved a successor Depositary within 90 days, (B) there shall have
occurred and be continuing an Event of Default with respect to such Global
Security, (C) the Company in its sole discretion determines that such
Global Security will be so exchangeable or transferable or (D) there shall
exist such circumstances, if any, in addition to or in lieu of the
foregoing as have been specified for this purpose as contemplated by
Section 3.1.
(c) Subject to Clause (6) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or
11.6 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same issue
and series of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity, and bearing a number not contemporaneously
outstanding.
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If there shall be delivered to the Company and to 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
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 upon its request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security of the same issue and
series of like tenor and principal amount, having the same Original Issue Date
and Stated Maturity as such destroyed, lost or stolen Security, 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 3.6 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series 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 for such interest
in respect of Securities of such series, except that, unless otherwise provided
in the Securities of such series, interest payable on the Stated Maturity of the
principal of a Security shall be paid to the Person to whom principal is paid.
The initial payment of interest on any Security of any series which is issued
between a Regular Record Date and the related Interest Payment Date shall be
payable as provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the related series of Securities.
Any interest on any Security which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such holder, and such Defaulted
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Interest may be paid by the Company, at its election in each case, as provided
in Clauses (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series in respect of
which interest is in default (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 of a Security of such series at the address of such
Holder as it appears in the Securities Register not less than 10 days prior
to such Special Record Date. The Trustee may, in its discretion, in the
name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the
English language on each Business Day and of general circulation in the
State of Oregon, but such publication shall not be a condition precedent to
the establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered on such Special Record
Date and shall no longer be payable pursuant to the following Clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of the series in respect of
which interest is in default may be listed and, upon such notice as may be
required by such exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.7, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
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Section 3.8 Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 3.7) any interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
Section 3.9 Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose 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 shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.
Section 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series for any period shall be
computed on the basis of a 360-day year of twelve 30-day months and interest on
the Securities of each series for any partial period shall be computed on the
basis of the number of days elapsed in a 360-day year of twelve 30-day months.
Section 3.11 Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, and so long as the Consolidated Interest Coverage
Ratio of the Company for the Reference Period immediately preceding what would
(but for the Extension Period, defined below) otherwise be an Interest Payment
Date shall be less than 1.50 to 1, the Company shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period") during which Extension
Periods the Company shall have the right to make partial payments of interest on
any Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law); provided, however, that
no Extension Period shall extend beyond the Stated Maturity of the principal of
the Securities of such series; provided, further, that during any such Extension
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Period, the Company shall not, and shall not permit any Subsidiary to, (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company (including securities other than the
Securities of such series) that ranks pari passu in all respects with or in
interest to the Securities of such series, or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company if such guarantee rank pari passu in all respects with or Junior
in interest to the securities of such series (other than (a) dividends or
distributions in capital stock (which includes common and preferred stock), (b)
any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Praegitzer Guarantee related to the
Preferred Securities issued by the Praegitzer Industries Trust holding
Securities of such series, and (d) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees) or (iii) redeem, purchase or acquire less
than all of the Securities of such series or any of the Preferred Securities.
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided that such extension does not cause such
Extension Period to extend beyond the Stated Maturity of the principal of such
Securities and, provided further, that any such Extension Period may continue
only so long as (x) no Event of Default has occurred and is continuing, and (y)
the Consolidated Interest Coverage Ratio of the Company for the Reference Period
immediately preceding what would (but for such Extension Period) otherwise be an
Interest Payment Date is less than 1.50 to 1. Upon termination of any Extension
Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Company may elect
to begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Trustee, the Property Trustee and the Administrative
Trustees of the Praegitzer Industries Trust holding securities of such series
notice of its election of any Extension Period (or an extension thereof) at
least one business Day prior to the earlier of (i) the next occurring date on
which Distributions on the Preferred Securities of such Praegitzer Industries
Trust would be payable except for the election to begin or extend such Extension
Period or (ii) the date the Administrative Trustees are required to give notice
to the American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock
Market or other applicable stock exchange or automated quotation system on which
the Preferred Securities are then listed or quoted or to holders of such
Preferred Securities as of the record date or (iii) the date such Distributions
are payable, but in any event not less than one Business Day prior to such
record date. The Trustee shall give notice of the Company's election to begin a
new Extension Period to the holders of the Securities. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
The Trustee shall promptly give notice of the Company's election to begin
any such Extension Period to the holders of the outstanding Securities of such
series.
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Section 3.12 Right of Set-Off.
With respect to the Securities of a series issued to a Praegitzer
Industries Trust, notwithstanding anything to the contrary in the Indenture, the
Company shall have the right to set off any payment it is otherwise required to
make thereunder in respect of any such Security to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement relating to such Security or under Section
5.8 of the Indenture.
Section 3.13 Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Company and, by its
acceptance of a Security or a beneficial interest therein, the Holder of, and
any Person that acquires a beneficial interest in, such Security agree that for
United States Federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.14 Shortening of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, the Company shall have the right to
shorten the Stated Maturity of the principal of the Securities of such series at
any time to any date not earlier than the first date on which the Company has
the right to redeem the Securities of such series. In the event that the Company
elects to shorten the Stated Maturity of the Junior Subordinated Debentures, it
shall give notice to the Indenture Trustee, and the Indenture Trustee shall give
notice of such shortening to the Holders of the Junior Subordinated Debentures
no less than 60 days prior to the effectiveness thereof.
Section 3.15 CUSIP Numbers.
The 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.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
securities herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
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Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, if
(a) either
(i) all Securities theretofore authenticated and delivered (other than
(x) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (y) 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 10.3), have been
delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee for
cancellation
(1) have become due and payable, or
(2) will become due and payable at their Stated Maturity within
one year of the date of deposit, or
(3) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of Clause (ii) (1), (2) or (3) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which the
Securities of such series are payable sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and interest
(including any Additional Interest) to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with. Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.
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Section 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, 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 premium, if
any) and interest for the payment of which such money or obligations have been
deposited with or received by the Trustee.
ARTICLE V
REMEDIES
Section 5.1 Events of Default.
"Event of Default," wherever used herein with respect to the Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or
(b) default in the payment of the principal of (or premium, if any, on) any
Security of that series at its Maturity, upon redemption by declaration or
otherwise; or
(c) default in the performance, or breach, in any material respect, of any
covenant of the Company in this Indenture (other than a covenant, a default in
the performance of which is elsewhere in this Section 5.1 specifically dealt
with), and continuance of such default or breach for a period of 90 days after
there has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied; or
(d) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 90 consecutive days; or
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(e) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit for creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of corporate action
by the Company in furtherance of any such action; or
(f) any default in the performance of, or any breach of, any covenant set
forth in Section 10.7 hereof; or
(g) any default in the payment of principal of (or premium, if any) or
interest on any Senior Debt and/or Subordinated Debt, the aggregate principal
amount of which (together with premium, if any, and accrued and unpaid interest
thereon) exceeds $1,000,000, shall have continued uncured or unwaived for a
period of 30 days or more; or
(h) any event of default with respect to any Senior Debt and/or
Subordinated Debt, the aggregate principal amount of which (together with
premium, if any, and accrued and unpaid interest thereon) exceeds $1,000,000,
shall have resulted in such debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
unless such event of default shall have been cured or waived and such
acceleration shall have been rescinded or annulled; or
(i) any other Event of Default provided with respect to Securities of that
series.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
5.1(d), 5.1(e) or 5.1(h)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the holders of not less than 25% in principal amount of the outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case of
the Securities of a series issued to a Praegitzer Industries Trust, if, upon an
Event of Default, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of that series fail to declare the
principal of all the Securities of that series to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
corresponding series of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration such principal amount (or specified portion thereof) of and the
accrued interest (including any Additional Interest) on all the Securities of
such series shall become immediately due and payable. Payment of principal and
interest (including any Additional Interest) on such Securities shall remain
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subordinated to the extent provided in Article XIII notwithstanding that such
amount shall become immediately due and payable as herein provided. If an Event
of Default specified in Section 5.1(d), 5.1(e) or 5.1(h) with respect to
Securities of any series at the time Outstanding occurs, the principal amount of
all the Securities of that series (or, if the Securities of that series are
Discount Securities, such portion of the principal amount of such Securities as
may be specified by the terms of that series) shall automatically, and without
any declaration or other action on the part of the Trustee or any holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(i) all overdue installments of interest (including any Additional
Interest) on all Securities of that series,
(ii) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities, and
(iii) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(b) all Events of Default with respect to Securities of that series, other
than the non-payment of the principal of Securities of that series which has
become due solely by such acceleration, have been cured or waived as provided in
Section 5.13.
In the case of Securities of a series issued to a Praegitzer Industries
Trust, the holders of a majority in aggregate Liquidation Amount (as defined in
the Trust Agreement under which such Praegitzer Industries Trust is formed) of
the related series of Preferred Securities issued by such Praegitzer Industries
Trust shall also have the right to rescind and annul such declaration and its
consequences by written notice to the Company and the Trustee subject to the
satisfaction of the conditions set forth in Clauses (a) and (b) above of this
Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
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(a) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable and such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (and premium, if
any, on) any Security at the Maturity thereof, the Company will, upon demand of
the Trustee, pay to the Trustee, for the benefit of the holders of such
Securities, the whole amount then due and payable on such Securities for
principal, including any sinking fund payment or analogous obligations (and
premium, if any) and interest (including any Additional Interest); and, in
addition thereto, all amounts owing the Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding (each such event, if any, herein sometimes referred to as a
"Proceeding") relative to the Company or any other obligor upon the Securities
or the property of the Company or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the Securities of
any series shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal (and premium, if any) or
interest (including any Additional Interest)) shall be entitled and empowered,
by intervention in such Proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest (including any Additional Interest) owing and
unpaid in respect to the Securities and to file such other papers or
documents as may be necessary or advisable and to take any and all actions
as are authorized under the Trust Indenture Act in order to have the claims
of the Holders and any predecessor to the Trustee under Section 6.7 allowed
in any such Proceeding; and
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(ii) in particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such
claims and to distribute the same in accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator, sequestrator
(or other similar official) in any such Proceeding is hereby authorized by each
Holder to make such payments to the Trustee for distribution in accordance with
Section 5.6, and in the event that the Trustee shall consent to the making of
such payments directly to the holders, to pay to the Trustee any amount due to
it and any predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any holder thereof, or to authorize the Trustee to vote in
respect of the claim of any holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
Section 5.5 Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
Section 5.6 Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the 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 and any predecessor
Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the amounts then due and
unpaid upon such series of Securities for principal (and premium, if any) and
interest (including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such series of
Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
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Section 5.7 Limitation on Suits.
No Holder of any Securities of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(b) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest; Direct Action by Holders of Preferred Securities.
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 premium, if any) and (subject to Section 3.7)
interest (including any Additional Interest) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a Praegitzer Industries
Trust, any holder of the corresponding series of Preferred Securities issued by
such Praegitzer Industries Trust shall have the right, upon the occurrence of an
Event of Default described in Section 5.1(a) or 5.1(b), to institute a suit
directly against the Company for enforcement of payment to such holder of
principal of (and premium, if any) and (subject to Section 3.7) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount (as defined in the Trust Agreement
under which such
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Praegitzer Industries Trust is formed) of such Preferred Securities of the
corresponding series held by such holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities 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, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, the
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee, any holder of any Security or any
holder of any Preferred 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 and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the holders or the holders of Preferred
Securities, as the case may be.
Section 5.12 Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that:
(a) such direction shall not be in conflict with any rule of law or with
this Indenture,
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(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(c) subject to the provisions of Section 6.1, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or Officers
of the Trustee shall, in good faith, determine that the proceeding so directed
would be unjustly prejudicial to the Holders not joining in any such direction
or would involve the Trustee in personal liability.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series and, in the case of any Securities of a
series issued to a Praegitzer Industries Trust, the holders of Preferred
Securities issued by such Praegitzer Industries Trust may waive any past default
hereunder and its consequences with respect to such series except a default:
(a) in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Article IX
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series or, in the case of a waiver by holders of Preferred
Securities issued by such Praegitzer Industries Trust, by all holders of
Preferred Securities issued by such Praegitzer Industries Trust.
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 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest (including any
Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
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Section 5.15 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
Section 6.1 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of Holders pursuant to Section 5.12 relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.1.
Section 6.2 Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided, further,
that, in the case of any default of the character specified in Section 5.1(c),
no such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section, the
term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
Section 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(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, Security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
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(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;
(d) the Trustee may consult with counsel and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney; and
(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.
Section 6.4 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 neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.
Section 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
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
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Securities
Registrar or such other agent.
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Section 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 6.7 Compensation and Reimbursement.
The Company agrees
(a) to pay to the Trustee from time to time compensation for all services
rendered by it hereunder in such amounts as the Company and the Trustee shall
agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability, claim, action, suit, cost or expense (including the reasonable
compensation and the expenses and disbursements of its agents and counsel) of
any kind and nature whatsoever incurred without negligence or bad faith, arising
out of or in connection with the acceptance or administration of this trust or
the performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. This indemnification
shall survive the termination of this Agreement.
To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(d) or (e) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
Section 6.8 Disqualification; Conflicting Interests.
The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 3.10(b).
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Section 6.9 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.9, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued hereunder.
Section 6.10 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
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(i) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(iii) 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, (x) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (y)
subject to Section 5.14, 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 with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee with respect to the Securities of
that or those series. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee with respect to the Securities of such series and supersede
the successor Trustee appointed by the Company. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, subject to Section 5.14, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
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Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in paragraph
(a) or (b) of this Section 6.11, as the case may be.
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(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VI, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In 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, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
Section 6.13 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the 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).
Section 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section 6.14 the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so
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published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.14, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section 6.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant to
this Section 6.14, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated:
[INSERT NAME OF TRUSTEE]
As Trustee
By:--------------------------------------
As Authenticating Agent
By:--------------------------------------
Authorized Officer
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) quarterly, not more than 7 days after 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 such date, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
Section 7.2 Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided in 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 the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
Section 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than July 15 in each calendar year,
commencing with the first July 15 after the first issuance of Securities under
this Indenture.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed and
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also with the Commission. The Company will notify the Trustee when any
Securities are listed on any stock exchange.
Section 7.4 Reports by Company.
The Company shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The Company
also shall comply with the other provisions of Trust Indenture Act Section
314(a).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1 Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(a) in case the Company shall consolidate with or merge into another Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of (and premium,
if any) and interest (including any Additional Interest) on all the Securities
and the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(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 such consolidation, merger, conveyance,
transfer or lease and any such supplemental indenture comply with this Article
and that all conditions
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precedent herein provided for relating to such transaction have been complied
with; and the Trustee, subject to Section 6.1, may rely upon such Officers'
Certificate and Opinion of Counsel as conclusive evidence that such transaction
complies with this Section 8.1.
Section 8.2 Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; and in the event of any such
conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in its
own name or in the name of the Company, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication pursuant to such provisions and
any Securities which such successor Person thereafter shall cause to be signed
and delivered to the Trustee on its behalf for the purpose pursuant to such
provisions. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 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,
provided, however, that the form and terms of Securities of any series may be
established by a Board Resolution, as set forth in the Officers' Certificate
delivered to the Trustee pursuant to Section 3.1, without entering into a
supplemental indenture for all purposes hereunder, for any of the following
purposes:
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(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 contained; or
(b) to convey, transfer, assign, mortgage or pledge any property to or with
the Trustee or to surrender any right or power herein conferred upon the
Company; or
(c) to establish the form or terms of Securities of any series as permitted
by Sections 2.1 or 3.1; or
(d) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(e) to add any additional Events of Default for the benefit of the holders
of all or any series of Securities (and if such additional Events of Default are
to be for the benefit of less than all series of Securities, stating that such
additional Events of Default are expressly being included solely for the benefit
of such series); or
(f) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental indenture which is entitled to the benefit of such provision;
or
(g) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (g) shall not
adversely affect the interest of the Holders of Securities of any series in any
material respect or, in the case of the Securities of a series issued to a
Praegitzer Industries Trust and for so long as any of the corresponding series
of Preferred Securities issued by such Praegitzer Industries Trust shall remain
outstanding, the holders of such Preferred Securities; or
(h) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.11(b); or
(i) to comply with the requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act.
Section 9.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of
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said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities of such
series under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(a) except to the extent permitted by Sections 3.11 or 3.14 or as otherwise
specified as contemplated by Section 2.1 or Section 3.1 with respect to the
deferral of the payment of interest on the Securities of any series or the
shortening of the Stated Maturity of the Securities of any series, change the
Stated Maturity of the principal of, or any installment of interest (including
any Additional Interest) on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or reduce any premium payable upon the
redemption thereof, or reduce the amount of principal of a Discount Security
that would be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2, 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
(b) reduce the percentage in principal amount of the Outstanding Securities
of any series, 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, Section 5.13 or Section
10.5, 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 Security affected thereby; or
(d) modify the provisions in Article XIII of this Indenture with respect to
the subordination of Outstanding Securities of any series in a manner adverse to
the Holders thereof; provided, further, that, in the case of the Securities of a
series issued to a Praegitzer Industries Trust, so long as any of the
corresponding series of Preferred Securities issued by such Praegitzer
Industries Trust remains outstanding, (i) no such amendment shall be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver of any
Event of Default or compliance with any covenant under this Indenture shall be
effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of such Preferred Securities then
outstanding unless and until the principal (and premium, if any) of the
Securities of such series and all accrued and, subject to Section 3.7, unpaid
interest (including any Additional Interest) thereon have been paid in full and
(ii) no amendment shall be made to Section 5.8 of this Indenture that would
impair the rights of the holders of Preferred Securities provided therein
without the prior consent of the holders of each Preferred Security then
outstanding unless and until the principal (and premium, if any) of
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the Securities of such series and all accrued and (subject to Section 3.7)
unpaid interest (including any Additional Interest) thereon have been paid in
full.
A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities or Preferred Securities,
or which modifies the rights of the Holders of Securities or holders of
Preferred Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities or holders of Preferred Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing or accepting the additional series of Securities created by
any supplemental indenture permitted by this Article or the modifications
thereby of any series of Securities previously created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture, and that all conditions precedent have been
complied with. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX or
delivery to the Trustee of the Officers' Certificate pursuant to Section 3.1
hereof (which Officers' Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), 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 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX and every
Officers' Certificate delivered to the trustee pursuant to Section 3.1 hereof
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX or delivery to the Trustee of
the Officers' Certificate pursuant to Section 3.1 hereof (which Officers'
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for
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in such supplemental indenture or such Officers' Certificate. If the Company
shall so determine, new Securities of any series so modified as to conform, in
the opinion of the Company, to any such supplemental indenture or such Officers'
Certificate may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of such Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities, an office or agency where Securities of that series may be presented
or surrendered for payment and an office or agency where Securities of that
series may be surrendered for transfer or exchange and where notices and demands
to or upon the Company in respect of the Securities of that series and this
Indenture may be served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes. The Company
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company shall fail to maintain
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities of any series for such purposes. The Company will give
prompt written notice to the Trustee of any such designation and any change in
the location of any such office or agency.
Section 10.3 Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.
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Whenever the Company shall have one or more Paying Agents, it will, prior
to 12:00 noon Eastern time on each due date of the principal of or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal and premium
(if any) or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its failure so to act.
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 10.3, that such
Paying Agent will:
(a) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) comply with the provisions of the Trust Indenture Act applicable to it
as a Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by 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 (and premium, if any)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English
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language, customarily published on each Business Day and of general circulation
in the state of Oregon, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
Section 10.4 Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end of
each calendar year of the Company ending after the date hereof, an Officers'
Certificate covering the preceding calendar year, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance, observance or fulfillment of or compliance with any of the terms,
provisions, covenants and conditions of this Indenture, and if the Company shall
be in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge. For the purpose of this Section 10.4, compliance
shall be determined without regard to any grace period or requirement of notice
provided pursuant to the terms of this Indenture.
Section 10.5 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4) with respect
to the Securities of any series, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company in respect of any such covenant
or condition shall remain in full force and effect.
Section 10.6 Additional Sums.
In the case of the Securities of a series issued to a Praegitzer Industries
Trust, so long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, in the
event that (i) such Praegitzer Industries Trust is the Holder of all of the
Outstanding Securities of such series, (ii) a Tax Event in respect of such
Praegitzer Industries Trust shall have occurred and be continuing and (iii) the
Company shall not have (A) redeemed the Securities of such series pursuant to
Section 11.7 or (B) terminated such Praegitzer Industries Trust pursuant to
Section 9.2(b) of the related Trust Agreement, the Company shall pay to such
Praegitzer Industries Trust (and its permitted successors or assigns under the
related Trust Agreement) for so long as such Praegitzer Industries Trust (or its
permitted successor or assignee) is the registered holder of any Securities of
such series, such additional amounts as may be necessary in order that the
amount of Distributions (including any Additional Amounts (as defined in such
Trust Agreement)) then due and payable by such Praegitzer Industries Trust on
the related Preferred Securities and Common Securities that at any time remain
outstanding in accordance with the terms thereof shall not be reduced as a
result of any Additional Taxes (the "Additional Sums"). Whenever in this
Indenture or the Securities there is a reference in
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any context to the payment of principal of or interest on the Securities, such
mention shall be deemed to include mention of the payments of the Additional
Sums provided for in this paragraph to the extent that, in such context,
Additional Sums are, were or would be payable in respect thereof pursuant to the
provisions of this paragraph and express mention of the payment of Additional
Sums (if applicable) in any provisions hereof shall not be construed as
excluding Additional Sums in those provisions hereof where such express mention
is not made; provided, however, that the deferral of the payment of interest
pursuant to Section 3.11 or the Securities shall not defer the payment of any
Additional Sums that may be due and payable.
Section 10.7 Additional Covenants.
(a) If at any time (i) there shall have occurred an Event of Default, (ii)
the Company shall have given notice of its election of an Extension Period as
provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing, or (iii) while Securities
are held by a Praegitzer Industries Trust, the Company shall be in default with
respect to its payment of any obligation under the Guarantee, then the Company
covenants and agrees with each Holder of Securities of any series that it shall
not, and it shall not permit any Subsidiary of the Company to, (a) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any shares of the Company's capital stock
(which includes common and preferred stock), (b) make any payment of principal
of or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including Securities other than the Securities of
such series) that rank pari passu in all respects with or junior in interest to
the Securities of such series or make any guarantee payments with respect to any
guarantee by the Company of debt securities of any subsidiary of the Company if
such guarantee ranks pari passu in all respects with or junior in interest to
the Securities (other than (i) dividends or distributions in capital stock
(which includes common and preferred stock), (ii) any declaration of a dividend
in connection with the implementation of a shareholders' rights plan, or the
issuance of stock under any such plan or the redemption or repurchase of any
such rights pursuant thereto, (iii) payments under the Praegitzer Guarantee
related to the Preferred Securities issued by the Praegitzer Industries Trust
holding Securities of such series, and (iv) purchases of Common Stock related to
the issuance of Common Stock or rights under any of the Company's benefit plans
for its directors, officers, consultants or employees), or (c) redeem, purchase
or acquire less than all of the Securities of such series or any of the
Preferred Securities if at such time (i) there shall have occurred an Event of
Default with respect to the Securities of such series, (ii) if the Securities of
such series are held by a Praegitzer Industries Trust, the Company shall be in
default with respect to its payment of any obligations under the Praegitzer
Guarantee relating to the Preferred Securities issued by such Praegitzer
Industries Trust, or (iii) the Company shall have given notice of its election
to begin an Extension Period with respect to the Securities of such series as
provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
(b) The Company also covenants with each Holder of Securities of a series
issued to a Praegitzer Industries Trust (i) to maintain directly or indirectly
100% ownership of the Common Securities of such Praegitzer Industries Trust;
provided, however, that any
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permitted successor of the Company hereunder may succeed to the Company's
ownership of such Common Securities, (ii) not to voluntarily terminate, wind-up
or liquidate such Praegitzer Industries Trust, except (a) in connection with a
distribution of the Securities of such series to the holders of Trust Securities
in liquidation of such Praegitzer Industries Trust or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the related Trust
Agreement and (iii) to use its reasonable efforts, consistent with the terms and
provisions of such Trust Agreement, to cause such Praegitzer Industries Trust to
remain classified as a grantor trust and not an association taxable as a
corporation for United States federal income tax purposes.
(c) Except as set forth in this clause (c) of Section 10.7, the Company
shall not, and shall not permit any Subsidiary to, directly or indirectly,
issue, incur, assume, guarantee, become directly or indirectly liable, with
respect to (including as a result of or in connection with an Acquisition),
extend the maturity of, or otherwise become responsible for, contingently or
otherwise (individually and collectively, "incur"), any Indebtedness (including
without limitation Indebtedness in connection with Capitalized Lease Obligations
or operating leases, whether incurred as part of a sale/leaseback transaction or
otherwise) or any Disqualified Capital Stock from and after the Original Issue
Date, unless: (1) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro forma
basis, to, such incurrence of such Indebtedness or Disqualified Capital Stock;
and (2) on the date of the incurrence of such Indebtedness or Disqualified
Capital Stock (the "Incurrence Date"), on a pro forma basis giving effect to
such incurrence (A) the Consolidated Interest Coverage Ratio of the Company for
the Reference Period immediately preceding the Incurrence Date shall be greater
than 2.15 to 1, and (B) the Consolidated Leverage Ratio of the Company as of the
Incurrence Date shall be less than 3.25 to 1. For purposes of this Indenture,
Indebtedness and Disqualified Stock incurred by any Person that is not the
Company or a Subsidiary, which Indebtedness or Disqualified Stock is outstanding
at the time such Person becomes a Subsidiary, or is merged or consolidated with
the Company or a Subsidiary, shall (subject to the provisions set forth in the
definitions of Consolidated Interest Coverage Ratio, Consolidated Leverage Ratio
and the related definitions) be deemed to have been incurred or issued, as the
case may be, at the time such Person becomes a Subsidiary, or is merged or
consolidated with the Company or a Subsidiary.
Notwithstanding the foregoing provisions of this clause (c) of Section
10.7:
(i) The Company may incur Indebtedness evidenced by the Securities and
other obligations under this Indenture, the Guarantee and the Expense
Agreement;
(ii) The Company may incur Indebtedness pursuant to the terms of the
Bank Credit Agreements (including any guarantees thereof and letters of
credit issued thereunder) or any amendment of or replacement for such Bank
Credit Agreements; provided that the aggregate principal amount incurred
and outstanding pursuant to this subclause (ii), including any Indebtedness
in connection with any such refinancing of or replacement for such Bank
Credit Agreements, shall not at any time exceed $65,000,000;
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(iii) The Company or any Subsidiary may incur Indebtedness to the
Company or to a Subsidiary at least 80% of the outstanding voting stock of
which is owned, directly or indirectly, by the Company (other than a
Praegitzer Industries Trust); provided, that no Subsidiary shall become
liable to any Person other than the Company or another Subsidiary at least
80% of the outstanding voting stock of which is owned, directly or
indirectly, by the Company, in respect of Indebtedness permitted by this
subclause (iii);
(iv) The Company or any Subsidiary may incur Indebtedness consisting
of Capitalized Lease Obligations, operating leases or other indebtedness
the proceeds of which are applied toward the purchase of assets in the
ordinary course of the Company's or such Subsidiary's business and with
respect to which there is created a security interest in such assets in
favor of the seller thereof; provided, that the aggregate principal amount
incurred pursuant to this subclause (iv) shall not exceed $100,000
individually (for any one or series of related incurrences) or $1,000,000
for all such incurrences in any twelve-month period;
(v) The Company or any Subsidiary may incur Indebtedness so long as
such Indebtedness is issued in the ordinary course of business under
interest rate swap obligations or is (consistent with past practices and in
the ordinary course of business) in the form of performance bonds or
letters of credit or reimbursement obligations in respect thereof, letter
of credit obligations related to insurance with respect to claims by
employees for work-related injuries, or bank overdrafts that are repaid
within three Business Days;
(vi) To the extent that the following shall constitute Indebtedness
solely under clause (v) of the definition of Indebtedness, the Company or
any Subsidiary may incur
(A) Liens arising out of judgments or awards (other than any
judgment that could constitute an Event of Default under this
Indenture) in respect of which the Company or a Subsidiary shall in
good faith be prosecuting an appeal or proceedings for review and in
respect of which it shall have secured a subsisting stay of execution
pending such appeal or proceedings for review, provided it shall have
set aside on its books adequate reserves, in accordance with GAAP,
with respect to such judgment or award,
(B) Liens for taxes, assessments or governmental charges or
levies that are not past due or are being contested in good faith by
the Company or a Subsidiary through appropriate proceedings and for
which disputed amounts adequate reserves have been established in
accordance with GAAP,
(C) Liens to secure payments of workmen's compensation and other
payments, public liability, unemployment and other insurance, old-age
pensions or other social security obligations, or the performance of
bids, tenders, leases, contracts (other than contracts for the payment
of money),
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public or statutory obligations, surety, stay or appeal bonds, or
other similar obligations arising in the ordinary course of business,
(D) mechanics', workmen's, materialman's, repairmen's,
warehousemen's, vendors' or carriers' Liens, or other similar Liens
arising in the ordinary course of business and securing sums which are
not past due or are being contested in good faith by the Company or a
Subsidiary through appropriate proceedings and for which disputed
amounts adequate reserves have been established in accordance with
GAAP,
(E) zoning restrictions, easements, (including, without
limitation, the easements granted under reciprocal easement agreements
and utility agreements), rights of way, covenants, consents,
reservations, encroachments, variations, licenses, restrictions on the
use of real property or minor irregularities in title thereto, which
do not materially impair the use of such property in the normal
operation of the business of the Company or any Subsidiary or the
value of such property for the purpose of such business,
(F) unperfected Liens arising by operation of law under Article 2
of the UCC in favor of unpaid sellers or prepaying buyers of goods
relating to amounts that are not past due in accordance with their
respective terms of sale, and
(G) rights arising as a matter of law or existing as of the
Original Issue Date, in each case, of the lessor of any premises
leased by the Company or any Subsidiary with respect to tangible
property on the leased premises;
and
(vii) The Company or any Subsidiary may incur Indebtedness as a result
of or in connection with an Acquisition, provided that (A) the amount of
such Acquisition-related Indebtedness shall not exceed 100% of the total
purchase price paid by the Company and its Subsidiaries in connection with
such Acquisition, (B) the Consolidated Interest Coverage Ratio of the
Company for the Reference Period immediately preceding the Incurrence Date
shall be greater than 1.75 to 1, (C) the Consolidated Leverage Ratio of the
Company as of the incurrence date shall be less than 3.75 to 1, and (D) in
the event the Consolidated Interest Coverage Ratio of the Company for the
Reference Period immediately preceding the six month anniversary of such
Incurrence Date is less than 2.15 to 1 and/or the Consolidated Leverage
Ratio of the Company as of such six month anniversary is greater than 3.25
to 1, such Indebtedness, together with all interest, premium (if any) and
other charges in connection with such Indebtedness, shall be paid in full
without the incurrence of additional refinancing or replacement
Indebtedness.
If no Event of Default has occurred and is continuing, the provisions of
this Section 10.7(c) shall terminated and be of no further force and effect upon
written notice by the Company to the Trustee in compliance with the last
sentence of this paragraph (a "Fall
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Away Notice") given within 90 days after the end of any 12 consecutive fiscal
quarter period of the Company during which (x) there has been no Extension
Period and all payments on the Securities have been made timely and in full when
due, (y) the Consolidated Interest Coverage Ratio of the Company for the
combined four fiscal quarters immediately preceding each fiscal quarter end in
such 12-quarter period was greater than 2.15 to 1, and (z) the Consolidated
Leverage Ratio of the Company as of the end of each fiscal quarter in such
12-quarter period was less than 3.25 to 1. Any Fall Away Notice shall include
copies of (1) resolutions of the Company's Board of Directors, certified by the
Company's Secretary as having been duly adopted and being of full force and
effect, finding, based upon the advice of the Company's independent auditors and
such other advice and information as may be reasonably necessary for such a
conclusion, that the conditions to the termination of this Section 10.7(c) set
forth in the foregoing sentence have been satisfied, and (2) an Officer's
Certificate and an Opinion of Counsel evidencing compliance with such
conditions.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Applicability of This Article.
Redemption of Securities of any series (whether by operation of a sinking
fund or otherwise) as permitted or required by any form of Security issued
pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of such series shall be
subject to partial redemption only in the amount of $10 or, in the case of the
Securities of a series issued to a Praegitzer Industries Trust, $10, or integral
multiples of $10 in excess thereof.
Section 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the election of
the Company of less than all of the Securities of any particular series and
having the same terms, the Company shall, not less than 30 nor more than 60 days
prior to the Redemption Date (unless a shorter notice shall be satisfactory to
the Trustee), notify the Trustee of such date and of the principal amount of
Securities of that series to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate and an Opinion of Counsel evidencing compliance
with such restriction.
Section 11.3 Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be
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selected not more than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series 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 a portion of the principal amount of
any Security of such series, provided that the portion of the principal amount
of any Security not redeemed shall be in an authorized denomination (which shall
not be less than the minimum authorized denomination) for such Security. If less
than all the Securities of such series and of a specified tenor 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 of such series
and specified tenor not previously called for redemption in accordance with the
preceding sentence.
The Trustee shall promptly notify the Company in writing of the Securities
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed. If the
Company shall so direct, Securities registered in the name of the Company, any
Affiliate or any Subsidiary thereof shall not be included in the Securities
selected for redemption.
Section 11.4 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
the address of such Holder as it appears in the Securities Register.
With respect to Securities of each series to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of such particular series and
having the same terms are to be redeemed, the identification (and, in the case
of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Security or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(f) that the redemption is for a sinking fund, if such is the case.
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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 and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Section 11.5 Deposit of Redemption Price.
Prior to 12:00 noon, Eastern time on the Redemption Date specified in the
notice of redemption given as provided in Section 11.4, the Company will deposit
with the Trustee or with one or more Paying Agents (or if the Company is acting
as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including Additional Interest) on, all the
Securities which are to be redeemed on that date.
Section 11.6 Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4, the
Securities or portion of Securities with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the applicable Redemption Price. On presentation and surrender
of such Securities at a Place of Payment in said notice specified, the said
securities or the specified portions thereof shall be paid and redeemed by the
Company at the applicable Redemption Price, together with accrued interest
(including any Additional Interest) to the Redemption Date; provided, however,
that, unless otherwise specified as contemplated by Section 3.1, installments of
interest whose Stated Maturity is on or prior to the Redemption Date will 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 their terms and the provisions of Section 3.7.
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of the same series, of
authorized denominations, in aggregate principal amount equal to the portion of
the Security not redeemed so presented and having the same Original Issue Date,
Stated Maturity and terms. If a Global Security is so surrendered, such new
Security will also be a new Global Security.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, on such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 11.7 Right of Redemption of Securities Initially Issued to a Praegitzer
Industries Trust.
In the case of the Securities of a series initially issued to a Praegitzer
Industries Trust, except as otherwise specified as contemplated by Section 3.1,
the Company, at its
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option, may redeem such Securities (i) on or after the date five years after the
Original Issue Date of such Securities, in whole at any time or in part from
time to time, or (ii) upon the occurrence and during the continuation of a Tax
Event or Investment Company Event, at any time within 90 days following the
occurrence of such Tax Event or Investment Company Event in respect of such
Praegitzer Industries Trust, in whole (but not in part), in each case at a
Redemption Price equal to 100% of the principal amount thereof.
ARTICLE XII
SINKING FUNDS
Section 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount which is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment." If provided for by the terms
of any Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.2. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of such Securities.
Section 12.2 Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 30 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company Order instructing the Trustee to credit such
obligations and stating that the Securities of such series were originally
issued by the Company by way of bona fide sale or other negotiation for value;
provided that the Securities to be so credited have not been previously so
credited. The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the redemption price for such Securities, as
specified in the Securities so to be redeemed, for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
Section 12.3 Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms
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of such Securities, the portion thereof, if any, which is to be satisfied by
payment of cash in the currency in which the Securities of such series are
payable (except as provided pursuant to Section 3.1) and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 12.2 and will also deliver to the Trustee any Securities to be so
delivered. Such Officers' Certificate shall be irrevocable and upon its delivery
the Company shall be obligated to make the cash payment or payments therein
referred to, if any, on or before the succeeding sinking fund payment date. In
the case of the failure of the Company to deliver such Officers' Certificate
(or, as required by this Indenture, the Securities and coupons, if any,
specified in such Officers' Certificate), the sinking fund payment due on the
succeeding sinking fund payment date for such series shall be paid entirely in
cash and shall be sufficient to redeem the principal amount of the Securities of
such series subject to a mandatory sinking fund payment without the right to
deliver or credit securities as provided in Section 12.2 and without the right
to make the optional sinking fund payment with respect to such series at such
time.
Any sinking fund payment or payments (mandatory or optional) made in cash
plus any unused balance of any preceding sinking fund payments made with respect
to the Securities of any particular series shall be applied by the Trustee (or
by the Company if the Company is acting as its own Paying Agent) on the sinking
fund payment date on which such payment is made (or, if such payment is made
before a sinking fund payment date, on the sinking fund payment date immediately
following the date of such payment) to the redemption of Securities of such
series at the Redemption Price specified in such Securities with respect to the
sinking fund. Any sinking fund moneys not so applied or allocated by the Trustee
(or, if the Company is acting as its own Paying Agent, segregated and held in
trust by the Company as provided in Section 10.3) for such series and together
with such payment (or such amount so segregated) shall be applied in accordance
with the provisions of this Section 12.3. Any and all sinking fund moneys with
respect to the Securities of any particular series held by the Trustee (or if
the Company is acting as its own Paying Agent, segregated and held in trust as
provided in Section 10.3) on the last sinking fund payment date with respect to
Securities of such series and not held for the payment or redemption of
particular Securities of such series shall be applied by the Trustee (or by the
Company if the Company is acting as its own Paying Agent), together with other
moneys, if necessary, to be deposited (or segregated) sufficient for the
purpose, to the payment of the principal of the Securities of such series at
Maturity. The Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 11.3 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 11.4. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Section 11.6. On or before each sinking fund payment
date, the Company shall pay to the Trustee (or, if the Company is acting as its
own Paying Agent, the Company shall segregate and hold in trust as provided in
Section 10.3) in cash a sum in the currency in which Securities of such series
are payable (except as provided pursuant to Section 3.1) equal to the principal
and any interest accrued to the Redemption Date for Securities or portions
thereof to be redeemed on such sinking fund payment date pursuant to this
Section 12.3.
Neither the Trustee nor the Company shall redeem any Securities of a series
with sinking fund moneys or mail any notice of redemption of Securities of such
series by
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operation of the sinking fund for such series during the continuance of a
default in payment of interest, if any, on any Securities of such series or of
any Event of Default (other than an Event of Default occurring as a consequence
of this paragraph) with respect to the Securities of such series, except that if
the notice of redemption shall have been provided in accordance with the
provisions hereof, the Trustee (or the Company, if the Company is then acting as
its own Paying Agent) shall redeem such Securities if cash sufficient for that
purpose shall be deposited with the Trustee (or segregated by the Company) for
that purpose in accordance with the terms of this Article XII. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such default or Event of Default shall occur and any moneys thereafter paid into
such sinking fund shall, during the continuance of such default or Event of
Default, be held as security for the payment of the Securities and coupons, if
any, of such series; provided, however, that in case such default or Event of
Default shall have been cured or waived herein, such moneys shall thereafter be
applied on the next sinking fund payment date for the Securities of such series
on which such moneys may be applied pursuant to the provisions of this Section
12.3.
ARTICLE XIII
SUBORDINATION OF SECURITIES
Section 13.1 Securities Subordinate to Senior Debt and Subordinated Debt.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XIII, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior Debt and Subordinated
Debt.
Section 13.2 Payment Over of Proceeds Upon Dissolution, Etc.
In case of the pendency of any Proceeding relative to the Company, then the
holders of Senior Debt and Subordinated Debt shall be entitled to receive
payment in full of such Senior Debt and Subordinated Debt, or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt and Subordinated Debt, before the
Holders of the Securities are entitled to receive or retain any payment or
distribution of any kind or character, whether in cash, property or securities
(including any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of the Company subordinated to
the payment of the Securities, such payment or distribution being hereinafter
referred to as a "Junior Subordinated Payment"), on account of principal of (or
premium, if any) or interest (including any Additional Interest) on the
Securities or on account of the purchase or other acquisition of Securities by
the Company or any Subsidiary and to that end the holders of Senior Debt and
Subordinated Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, including any Junior Subordinated Payment, which may be
payable or deliverable in respect of the Securities in any such Proceeding.
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In the event that, notwithstanding the foregoing provisions of this Section
13.2, the Trustee or the Holder of any Security shall have received any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, including any Junior Subordinated Payment, before
all Senior Debt and Subordinated Debt are paid in full or payment thereof is
provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt and Subordinated Debt, and if such fact shall, at
or prior to the time of such payment or distribution, have been made known to
the Trustee or, as the case may be, such Holder, then and in such event such
payment or distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Debt and Subordinated Debt remaining
unpaid, to the extent necessary to pay all Senior Debt and Subordinated Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt and Subordinated Debt.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Debt and Subordinated Debt to
substantially the same extent as the Securities are so subordinated as provided
in this Article XIII. The consolidation of the Company with, or the merger of
the Company into, another Person or the liquidation or dissolution of the
Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section 13.2 if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by sale such properties and
assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions set forth in Article
VIII.
Section 13.3 Prior Payment to Senior Debt and Subordinated Debt Upon
Acceleration of Securities.
In the event that any Securities are declared due and payable before their
Stated Maturity, then and in such event the holders of the Senior Debt and
Subordinated Debt outstanding at the time such Securities become due and payable
shall be entitled to receive payment in full of all amounts due on or in respect
of such Senior Debt and Subordinated Debt (including any amounts due upon
acceleration), or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt
and Subordinated Debt, before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character, whether in cash,
property or securities (including any Junior Subordinated Payment) by the
Company on account of the principal of (or premium, if any) or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section 13.3 shall prevent the
satisfaction of any sinking fund payment in accordance with this Indenture or as
otherwise specified as contemplated by Section 3.1 for the Securities of any
series by delivering and
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crediting pursuant to Section 12.2 or as otherwise specified as contemplated by
Section 3.1 for the Securities of any series Securities which have been acquired
(upon redemption or otherwise) prior to such declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.3, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.3 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.4 No Payment When Senior Debt and Subordinated Debt in Default.
In the event and during the continuation of any default in the payment of
principal of (or premium, if any) or interest on any Senior Debt and
Subordinated Debt, or in the event that any event of default with respect to any
Senior Debt and Subordinated Debt shall have occurred and be continuing and
shall have resulted in such Senior Debt and Subordinated Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and such acceleration shall have
been rescinded or annulled, if the Trustee shall have received notice of such
payment default or acceleration from any person permitted to give such notice,
then no payment or distribution of any kind or character, whether in cash,
properties or securities (including any Junior Subordinated Payment) shall be
made by the Company on account of principal of (or premium, if any) or interest
(including any Additional Interest), if any, on the Securities or on account of
the purchase or other acquisition of Securities by the Company or any
Subsidiary, in each case unless and until all such Senior Debt and Subordinated
Debt are paid in full; provided, however, that nothing in this Section 13.4
shall prevent the satisfaction of any sinking fund payment in accordance with
this Indenture or as otherwise specified as contemplated by Section 3.1 for the
Securities of any series by delivering and crediting pursuant to Section 12.2 or
as otherwise specified as contemplated by Section 3.1 for the Securities of any
series Securities which have been acquired (upon redemption or otherwise) prior
to such default in payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.4, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 13.4 shall not apply to any payment with
respect to which Section 13.2 would be applicable.
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Section 13.5 Payment Permitted If No Default.
Nothing contained in this Article XIII or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 13.2 or under the
conditions described in Sections 13.3 and 13.4, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article XIII.
Section 13.6 Subrogation to Rights of holders of Senior Debt and Subordinated
Debt.
Subject to the payment in full of all amounts due or to become due on all
Senior Debt and Subordinated Debt, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
Debt and Subordinated Debt, the Holders of the Securities shall be subrogated to
the extent of the payments or distributions made to the holders of such Senior
Debt and Subordinated Debt pursuant to the provisions of this Article XIII
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinated to Senior Debt and Subordinated Debt of the
Company to substantially the same extent as the Securities are subordinated to
the Senior Debt and Subordinated Debt and is entitled to like rights of
subrogation by reason of any payments or distributions made to holders of such
Senior Debt and Subordinated Debt) to the rights of the holders of such Senior
Debt and Subordinated Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt and Subordinated Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt and Subordinated Debt of any
cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article XIII to the holders of
Senior Debt and Subordinated Debt by Holders of the Securities or the Trustee,
shall, as among the Company, its creditors other than holders of Senior Debt and
Subordinated Debt, and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Debt and
Subordinated Debt.
Section 13.7 Provisions Solely to Define Relative Rights.
The provisions of this Article XIII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt and Subordinated Debt on the other hand.
Nothing contained in this Article XIII or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as between the Company and the
Holders of the Securities, the obligations of the Company, which are absolute
and unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as
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and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than their rights in relation to
the holders of Senior Debt and Subordinated Debt; or (c) prevent the Trustee or
the Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture including, without limitation,
filing and voting claims in any Proceeding, subject to the rights, if any, under
this Article XIII of the holders of Senior Debt and Subordinated Debt to receive
cash, property and securities otherwise payable or deliverable to the Trustee or
such Holder.
Section 13.8 Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article XIII and appoints the Trustee his or her attorney-in-fact for any and
all such purposes.
Section 13.9 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt and
Subordinated Debt to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof that any such holder may
have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Debt and Subordinated Debt may, at any time and
from to time, without the consent of or notice to the Trustee or the Holders of
the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of the Securities to the
holders of Senior Debt and Subordinated Debt, 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, Senior Debt and Subordinated Debt, or
otherwise amend or supplement in any manner Senior Debt and Subordinated Debt or
any instrument evidencing the same or any agreement under which Senior Debt and
Subordinated Debt is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt and
Subordinated Debt; (iii) release any Person liable in any manner for the
collection of Senior Debt and Subordinated Debt; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
Section 13.10 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article XIII or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence
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of any facts which would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt and
Subordinated Debt or from any trustee, agent or representative therefor;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section 13.10 at least two Business Days prior to the date
upon which by the terms hereof any monies may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest (including any Additional Interest) on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received and shall not be affected by any notice
to the contrary which may be received by it within two Business Days prior to
such date.
Subject to the provisions of Section 6.1, the Trustee 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 Debt and Subordinated Debt (or a trustee therefor) to
establish that such notice has been given by a holder of Senior Debt and
Subordinated Debt (or a trustee therefor). 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 Debt and Subordinated Debt to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Debt and Subordinated Debt 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 rights of such
Person under this Article, 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 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
Subordinated Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XIII.
Section 13.12 Trustee Not Fiduciary for holders of Senior Debt and Subordinated
Debt.
The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt and Subordinated
Debt and shall not be liable to any such holders if it shall in good faith
mistakenly pay over or distribute to
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Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt and Subordinated Debt shall be
entitled by virtue of this Article or otherwise.
Section 13.13 Rights of Trustee as Holder of Senior Debt and Subordinated Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XIII with respect to any Senior Debt and Subordinated
Debt which may at any time be held by it, to the same extent as any other holder
of Senior Debt and Subordinated Debt, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Section 13.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIII in addition to or in place of the Trustee.
Section 13.15 Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article XIII only, (a) the issuance and delivery
of junior securities upon conversion or exchange of Securities shall not be
deemed to constitute a payment or distribution on account of the principal of
(or premium, if any) or interest (including any Additional Interest) on
Securities or on account of the purchase or other acquisition of Securities, and
(b) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion or exchange of a Security shall be
deemed to constitute payment on account of the principal of such security. For
the purposes of this Section 13.15, the term "junior securities" means (i)
shares of any stock of any class of the Company and (ii) securities of the
Company which are subordinated in right of payment to all Senior Debt and
Subordinated Debt which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article XIII.
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.
PRAEGITZER INDUSTRIES, INC.
By:--------------------------------------
Its:-------------------------------------
Attest:
By:--------------------------------
Its:-------------------------------
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Trustee
By:--------------------------------------
Its:-------------------------------------
Attest:
By:--------------------------------
Its:-------------------------------
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<PAGE>
STATE OF OREGON )
) SS.
COUNTY OF )
On the ----- day of ----------, 1998 before me personally came
- -------------------- to me known, who, being by me duly sworn, did depose and
say that he is -------------------- of PRAEGITZER INDUSTRIES, INC. one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; and that he signed his name thereto by authority of the
Board of Directors of said corporation.
[SEAL] -----------------------------------------
Notary Public
STATE OF DELAWARE )
) SS.
COUNTY OF NEW CASTLE )
On the ----- day of ----------, 1998 before me personally came
- -------------------- to me known, who, being by me duly sworn, did depose and
say that he is -------------------- of WILMINGTON TRUST COMPANY one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; and that he signed his name thereto by authority of the
Board of Directors of said corporation.
[SEAL] -----------------------------------------
Notary Public
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PRAEGITZER INDUSTRIES, INC.
_______ % JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES DUE ________, 2028
OFFICERS' CERTIFICATE AND COMPANY ORDER
Pursuant to the Indenture dated as of ________, 1998 (the "Indenture"),
between Praegitzer Industries, Inc., an Oregon corporation (the "Company"), and
Wilmington Trust Company, as Trustee (the "Trustee"), and resolutions adopted by
the Pricing Committee of the Company's Board of Directors on ________, 1998;
this Officers' Certificate is being delivered to the Trustee to establish the
terms of one series of securities (the "Securities") in accordance with Section
3.1 of the Indenture, to establish the form of the Securities of such series in
accordance with Section 2.1 of the Indenture, to request the authentication and
delivery of the Securities of such series pursuant to Section 3.3 of the
Indenture and to comply with the provisions of Section 1.2 of the Indenture.
This Officers' Certificate shall be treated for all purposes under the Indenture
as a supplemental indenture thereto.
All conditions precedent provided for in the Indenture relating to the
establishment of (i) a series of Securities and (ii) the form of Securities of
such series have been complied with.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Indenture.
I. Establishment of Series of Securities pursuant to Section 3.1 of the
Indenture.
There are hereby established pursuant to Section 3.1 of the Indenture a
series of Securities which shall have the following terms:
A. The Securities of such series shall bear the title ____% Junior
Subordinated Deferrable Interest Debentures Due ________, 2028.
B. The aggregate principal amount of such series of Securities to be
issued pursuant to this Officers' Certificate and Company Order shall be limited
to the sum of (i) $ ____________ (except for Securities authenticated and
delivered upon registration of, transfer of, or in exchange for, or in lieu of,
other Securities of such series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7
of the Indenture and except for any Securities which, pursuant to Section 3.3 of
the Indenture, are deemed never to have been authenticated and delivered
thereunder).
C. The date on which the principal of the Securities is due and
payable shall be ____________, 2028.
D. The Securities shall bear interest at the rate of ___% per annum
(based upon a 360-day year of twelve 30-day months), compounded monthly, from
and including the date of original issuance or from and including the most
recent Interest Payment Date to which interest has been paid or duly provided
for, as the case may be, payable quarterly in arrears on January 15, April 15,
July 15 and October 15 of each
<PAGE>
calendar year (each, an "Interest Payment Date"), commencing January 15, 1999,
until the principal thereof is paid or made available for payment. The Business
Day next preceding an Interest Payment Date shall be the "Regular Record Date"
for the interest payable on such Interest Payment Date. Accrued interest that is
not paid on such applicable Interest Payment Date will bear additional interest
on the amount thereof (to the extent permitted by law) at a rate per annum of
___% thereof compounded quarterly.
In addition, so long as no Event of Default with respect to the Securities
has occurred or is continuing, and so long as the Consolidated Interest Coverage
Ratio of the Company for the Reference Period immediately preceding what would
(but for the Extension Period, defined below) otherwise be an Interest Payment
Date shall be at no greater than 1.50 to 1, the Company has the right under the
Indenture at any time during the term of such Securities to defer the payment of
interest at any time or from time to time for a period not exceeding 20
consecutive quarterly periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity. At the end of
such Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of ___%, compounded
quarterly, to the extent permitted by applicable law).
E. Principal of (and premium, if any) and interest on the Securities
will be payable, and, except as provided in Section 3.5 of the Indenture with
respect to a Global Security (as defined below), the transfer of the Securities
will be registrable and Securities (except as provided in paragraph (Q) hereof)
will be exchangeable for Securities bearing identical terms and provisions at
the corporate trust office of Wilmington Trust Company in the City of
Wilmington, State of Delaware.
F. The Securities will be redeemable in whole at any time and in part
from time to time, at the option of the Company at any time on or after
_____________, 2003, at a redemption price equal to the accrued and unpaid
interest on the Securities so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof.
In addition, upon the occurrence of a Tax Event or an Investment
Company Event (as each such term is defined below) the Company may, at its
option, prepay the Securities in whole (but not in part) at any time within 90
days of the occurrence of such Tax Event or Investment Company Event, at a
redemption price equal to the accrued and unpaid interest on the Securities so
redeemed to the date fixed for redemption, plus 100% of the principal amount
thereof.
"Tax Event" means the receipt by the Praegitzer Industries Trust I, a
Delaware statutory business trust (the "Trust"), of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities of the Trust, there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date of such opinion, subject
to United States Federal income tax with respect to income received or
-2-
<PAGE>
accrued on the Securities, (ii) interest payable by the Company on the
Securities is not, or within 90 days of the date of such opinion, will not be,
deductible by the Company, in whole or in part, for United States Federal income
tax purposes, or (iii) the Trust is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means, in respect of the Trust, the receipt
by the Trust of an Opinion of Counsel, rendered by a law firm experienced in
such matters, to the extent that, as a result 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, the Trust
is or will be considered an "investment company" that is required to be
registered under the 1940 Act, which change becomes effective on or after the
date of original issuance of the Preferred Securities of the Trust.
G. The Company shall not be obligated to redeem or purchase any
Securities pursuant to any sinking fund or analogous provisions or at the option
of the Holder.
H. The Securities will be issued only in fully registered form and the
authorized minimum denomination of the Securities shall be $10.00 and any
integral multiple of $10.00 in excess thereof.
I. The Securities shall be denominated, and payments of principal of
(and premium, if any) and interest on the Securities of such series will be
made, in United States dollars.
J. The Securities shall be subject to the Events of Default specified
in Section 5.1, paragraphs (a) through (e), of the Indenture.
K. The portion of the principal amount of the Securities which shall
be payable upon declaration of acceleration of maturity thereof shall not be
other than the principal amount thereof, provided, that, if such acceleration is
declared by the Holders of at least 25% in aggregate liquidation amount of the
Preferred Securities then outstanding, then, upon such declaration of
acceleration, the Securities which shall be payable shall be the principal
amount thereof plus accrued interest (including any Additional Interest).
L. The Securities will be issued in fully registered form, without
coupons. The Securities will not be issued in bearer form.
M. The amount of payments of principal of and any premium or interest
on the Securities will not be determined with reference to an index.
N. The Securities shall not be issued in the form of a temporary
Global Security (as defined below).
O. The Securities will initially be in certificated form registered in
the name of Wilmington Trust Company as Property Trustee for the Trust (the
"Certificated Securities"). The Securities may, in the sole discretion of the
Company, be deposited with, and on behalf of, The Depository Trust Company, New
York, New York, as Depositary, and
-3-
<PAGE>
will be represented by a global security (a "Global Security") registered in the
name of a nominee of the Depositary. If and so long as the Depositary or its
nominee is the registered holder of any Global Security, the Depositary or its
nominee, as the case may be, will be considered the sole Holder of the
Securities of such series represented by such Global Security for all purposes
under the Indenture and the Securities. The Certificated Securities or the
Global Securities, as the case may be, shall bear no legends.
P. The Trustee shall be Paying Agent.
Q. The Securities will not be convertible into any other securities or
property of the Company. The Securities of any series may not be exchanged for
Securities of any other series.
R. The Trust Agreement, the Amended and Restated Trust Agreement and
the Guarantee Agreement are in the forms attached hereto as Exhibits A, B and C
respectively.
S. The Securities are subordinate and subject in right of payment to
the prior payment in full of all amounts then due and payable in respect of all
Senior Debt and Subordinated Debt, as provided in the Indenture.
T. The Securities shall have additional terms, which terms shall not
be inconsistent with the provisions of the Indenture.
II. Establishment of Forms of Securities Pursuant to Section 2.1 of
Indenture.
It is hereby established pursuant to Section 2.1 of the Indenture that the
Securities shall be substantially in the form attached as Exhibit D hereto.
III. Order for the Authentication and Delivery of Securities Pursuant to
Section 3.3 of the Indenture.
It is hereby ordered pursuant to Section 3.3 of the Indenture that the
Trustee authenticate, in the manner provided by the Indenture, Securities in the
aggregate principal amount of $_____________ registered in the name of
Wilmington Trust Company, as Property Trustee for the Trust, which Securities
have been heretofore duly executed by the proper officers of the Company and
delivered to you as provided in the Indenture, and to deliver said authenticated
Securities to Wilmington Trust Company or its custodian on or before 12:00 noon,
Eastern time, on _____________, 1998.
IV. Other Matters.
Attached as Exhibit E hereto are true and correct copies of resolutions
adopted by the Pricing Committee of the Board of Directors of the Company at a
meeting on _____________, 1998. Attached as Exhibit F hereto are true and
correct copies of resolutions adopted by the Board of Directors of the Company
at a meeting on _____________, 1998, authorizing the issuance of the Securities.
Such resolutions have not been further amended, modified or rescinded and remain
in full force and effect; and such resolutions (together with this Officers'
Certificate) are the only resolutions or other action
-4-
<PAGE>
adopted by the Company's Board of Directors or any committee thereof or by any
Authorized Officers relating to the offering and sale of the Securities.
The undersigned have read the pertinent sections of the Indenture including
the related definitions contained therein. The undersigned have examined the
resolutions adopted by the Board of Directors and the Pricing Committee of the
Board of Directors of the Company. In the opinion of the undersigned, the
undersigned have made such examination or investigation as is necessary to
enable the undersigned to express an informed opinion as to whether or not the
conditions precedent to the establishment of (i) a series of Securities, (ii)
the forms of such Securities and (iii) authentication of such series of
Securities, contained in the Indenture have been complied with. In the opinion
of the undersigned, such conditions have been complied with.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
_____ day of _____________, 1998.
PRAEGITZER INDUSTRIES, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
-5-
<PAGE>
EXHIBIT A
Trust Agreement
-6-
<PAGE>
EXHIBIT B
Amended and Restated Trust Agreement
-7-
<PAGE>
EXHIBIT C
Guarantee Agreement
-8-
<PAGE>
EXHIBIT D
Form of Securities
-9-
<PAGE>
EXHIBIT E
Resolutions of Pricing Committee
-10-
<PAGE>
EXHIBIT F
Resolutions of Board of Directors
-11-
EXHIBIT 4.4
CERTIFICATE OF TRUST
OF
PRAEGITZER INDUSTRIES TRUST I
THIS Certificate of Trust of Praegitzer Industries Trust I (the "Trust"),
dated as of August 7, 1998, is being duly executed and filed by the undersigned,
as trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. ss. 3801, et seq.).
1. Name. The name of the business trust formed hereby is "Praegitzer
Industries Trust I."
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are 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 trustees of the Trust, have
executed this Certificate of Trust as of the date first-above written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as trustee of the Trust
By: EMMETT R. HARMON
------------------------------------
Name: Emmett R. Harmon
Title: Vice President
WILLIAM J. THALE,
not in his individual capacity but
solely as trustee of the Trust
WILLIAM J. THALE
----------------------------------------
EXHIBIT 4.5
TRUST AGREEMENT
OF
PRAEGITZER INDUSTRIES TRUST I
THIS TRUST AGREEMENT is made as of August 7, 1998 (this "Trust
Agreement"), by and among Praegitzer Industries, Inc., as depositor (the
"Depositor"), and Wilmington Trust Company, as trustee (the "Delaware Trustee"),
and Matthew J. Bergeron, as trustee (the "Administrative Trustee" and jointly
with the Delaware Trustee, the "Trustees"). The Depositor and the Trustees
hereby agree as follows:
1. The trust created hereby shall be known as "Praegitzer Industries Trust
I" (the "Trust"), in which name the Trustees or the Depositor, to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. Such amount shall constitute the initial trust estate. It
is the intention of the parties hereto that the Trust created hereby constitute
a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss.ss. 3801, et seq. (the "Business Trust Act"), and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in such form as the Trustees may approve.
3. An amended and restated Trust Agreement satisfactory to each party to it
and substantially in the form to be included as an exhibit to the 1933 Act
Registration Statement (as herein defined), or in such other form as the parties
thereto may approve, will be entered into to provide for the contemplated
operation of the Trust created hereby and the issuance of the Preferred or
Capital Securities and Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Trust Agreement, the
Trustees shall not have any duty or obligation hereunder or with respect of the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Trustees may take all actions deemed proper as are necessary to
effect the transactions contemplated herein.
4. The Depositor, as the depositor of the Trust, is hereby authorized (i)
to file with the Securities and Exchange Commission (the "Commission") and to
execute, in the case of the 1933 Act Registration Statement and 1934 Act
Registration Statement (as herein defined), on behalf of the Trust, (a) a
Registration Statement (the "1933 Act Registration Statement"), including all
pre-effective and post-effective amendments thereto, relating to the
registration under the Securities Act of 1933, as amended (the "1933 Act"), of
the Preferred or Capital Securities of the Trust, (b) any preliminary prospectus
or prospectus or supplement thereto relating to the Capital or Preferred
Securities of the Trust required to be filed pursuant to the 1933 Act, and (c) a
Registration Statement on Form 8-A or other appropriate form (the "1934 Act
Registration Statement"), including all pre-effective and post-effective
amendments thereto, relating to the registration of the Preferred or Capital
Securities of the Trust under the Securities Exchange Act of 1934, as amended;
(ii) to file with the American Stock Exchange or other exchange, or the National
Association of
<PAGE>
Securities Dealers ("NASD"), and execute on behalf of the Trust a listing
application and all other applications, statements, certificates, agreements and
other instruments as shall be necessary or desirable to cause the Preferred or
Capital Securities of the Trust to be listed on the American Stock Exchange or
such other exchange, or the NASD's Nasdaq National Market; (iii) to file and
execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as shall be necessary or desirable to register the
Preferred or Capital Securities under the securities or blue sky laws of such
jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or
desirable; and (iv) to execute, deliver and perform on behalf of the Trust an
underwriting agreement with one or more underwriters relating to the offering of
the Preferred or Capital Securities of the Trust. In the event that any filing
referred to in clauses (i), (ii) or (iii) above is required by the rules and
regulations of the Commission, the American Stock Exchange or other exchange,
NASD, or state securities or blue sky laws to be executed on behalf of the Trust
by the Trustees, the Trustees, in their capacities as trustees of the Trust, are
hereby authorized and directed to join in any such filing and to execute on
behalf of the Trust any and all of the foregoing, it being understood that the
Trustees, in their capacities as trustees of the Trust, shall not be required to
join in any such filing or execute on behalf of the Trust any such document
unless required by the rules and regulations of the Commission, the American
Stock Exchange or other exchange, NASD, or state securities or blue sky laws. In
connection with all of the foregoing, the Trustees, solely in their capacities
as trustees of the Trust, and the Depositor hereby constitute and appoint
Richard Raleigh as his, her or its, as the case may be, true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution
for the Trustees and the Depositor or in the Trustees' or the Depositor's name,
place and stead, in any and all capacities, to sign any and all amendments
(including all pre-effective and post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and to file the
same, with all exhibits thereto, and any other documents in connection
therewith, with the Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as the Trustees or the Depositor might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his respective substitute or substitutes, shall do or cause to be done by
virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be two and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Depositor which
may increase or decrease the number of trustees of the Trust; provided, however,
that to the extent required by the Business Trust Act, one trustee of the Trust
shall either be a natural person who is a resident of the State of Delaware or,
if not a natural person, an entity which has its principal place of business in
the State of Delaware. Subject to the foregoing, the Depositor is entitled to
appoint or remove without cause any trustee of the Trust at any time. Any
trustee of the Trust may resign upon thirty days' prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws
principles).
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the day and year first above written.
PRAEGITZER INDUSTRIES, INC.,
as Depositor
By: WILLIAM J. THALE
-------------------------------------
Name: William Joseph Thale
Title: Chief Financial Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Delaware Trustee
By: EMMETT R. HARMON
-------------------------------------
Name: Emmett R. Harmon
Title: Vice President
WILLIAM J. THALE,
not in his individual capacity, but
solely as Administrative Trustee
WILLIAM J. THALE
-----------------------------------------
-3-
AMENDED AND RESTATED TRUST AGREEMENT
among
Praegitzer Industries, Inc., as Depositor,
Wilmington Trust Company,
as Property Trustee,
Wilmington Trust Company,
as Delaware Trustee,
and
The Administrative Trustees Named Herein
Dated as of ________, 1998
PRAEGITZER INDUSTRIES TRUST I
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINED TERMS....................................................1
SECTION 1.1 Definitions...............................................1
ARTICLE II ESTABLISHMENT OF THE TRUST......................................10
SECTION 2.1 Name.....................................................10
SECTION 2.2 Office of the Delaware Trustee; Principal Place
of Business..............................................10
SECTION 2.3 Initial Contribution of Trust Property; Organizational
Expenses.................................................10
SECTION 2.4 Issuance of the Preferred Securities.....................10
SECTION 2.5 Issuance of the Common Securities; Subscription and
Purchase of Debentures...................................11
SECTION 2.6 Declaration of Trust.....................................11
SECTION 2.7 Authorization to Enter into Certain Transactions.........12
SECTION 2.8 Assets of Trust..........................................15
SECTION 2.9 Title to Trust Property..................................15
ARTICLE III PAYMENT ACCOUNT.................................................15
SECTION 3.1 Payment Account..........................................15
ARTICLE IV DISTRIBUTIONS; REDEMPTION.......................................16
SECTION 4.1 Distributions............................................16
SECTION 4.2 Redemption...............................................17
SECTION 4.3 Subordination of Common Securities.......................18
SECTION 4.4 Payment Procedures.......................................19
SECTION 4.5 Tax Returns and Reports..................................19
SECTION 4.6 Payment of Taxes, Duties, Etc. of the Trust..............20
SECTION 4.7 Payments under Indenture or Pursuant to Direct
Actions..................................................20
-i-
<PAGE>
Page
----
ARTICLE V TRUST SECURITIES CERTIFICATES...................................20
SECTION 5.1 Initial Ownership........................................20
SECTION 5.2 The Trust Securities Certificates........................20
SECTION 5.3 Execution and Delivery of Trust Securities Certificates..20
SECTION 5.4 Registration of Transfer and Exchange of Preferred
Securities Certificates..................................21
SECTION 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.............................................22
SECTION 5.6 Persons Deemed Securityholders...........................22
SECTION 5.7 Access to List of Securityholders' Names and Addresses...22
SECTION 5.8 Maintenance of Office or Agency..........................23
SECTION 5.9 Appointment of Paying Agent..............................23
SECTION 5.10 Ownership of Common Securities by Depositor..............24
SECTION 5.11 Book-Entry Preferred Securities Certificates; Common
Securities Certificate...................................24
SECTION 5.12 Notices to Clearing Agency...............................25
SECTION 5.13 Definitive Preferred Securities Certificates.............25
SECTION 5.14 Rights of Securityholders................................26
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.......................28
SECTION 6.1 Limitations on Voting Rights.............................28
SECTION 6.2 Notice of Meetings.......................................29
SECTION 6.3 Meetings of Preferred Securityholders....................29
SECTION 6.4 Voting Rights............................................29
SECTION 6.5 Proxies, etc.............................................29
SECTION 6.6 Securityholder Action by Written Consent.................30
-ii-
<PAGE>
Page
----
SECTION 6.7 Record Date for Voting and Other Purposes................30
SECTION 6.8 Acts of Securityholders..................................30
SECTION 6.9 Inspection of Records....................................31
ARTICLE VII REPRESENTATIONS AND WARRANTIES..................................31
SECTION 7.1 Representations and Warranties of the Bank...............31
SECTION 7.2 Representations and Warranties of Depositor..............32
ARTICLE VIII THE TRUSTEES....................................................33
SECTION 8.1 Certain Duties and Responsibilities......................33
SECTION 8.2 Certain Notices..........................................34
SECTION 8.3 Certain Rights of Property Trustee.......................34
SECTION 8.4 Not Responsible for Recitals or Issuance of Securities...36
SECTION 8.5 May Hold Securities......................................36
SECTION 8.6 Compensation; Indemnity; Fees............................37
SECTION 8.7 Corporate Property Trustee Required; Eligibility
of Trustees..............................................38
SECTION 8.8 Conflicting Interests....................................38
SECTION 8.9 Co-Trustees and Separate Trustee.........................38
SECTION 8.10 Resignation and Removal; Appointment of Successor........40
SECTION 8.11 Acceptance of Appointment by Successor...................41
SECTION 8.12 Merger, Conversion, Consolidation or Succession
to Business..............................................42
SECTION 8.13 Preferential Collection of Claims Against Depositor
or Trust.................................................42
SECTION 8.14 Reports by Property Trustee..............................43
SECTION 8.15 Reports to the Property Trustee..........................43
SECTION 8.16 Evidence of Compliance with Conditions Precedent.........44
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<PAGE>
Page
----
SECTION 8.17 Number of Trustees.......................................44
SECTION 8.18 Delegation of Power......................................44
SECTION 8.19 Voting...................................................45
ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER.............................45
SECTION 9.1 Dissolution Upon Expiration Date.........................45
SECTION 9.2 Early Dissolution........................................45
SECTION 9.3 Termination..............................................45
SECTION 9.4 Liquidation..............................................46
SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements
of the Trust.............................................47
ARTICLE X MISCELLANEOUS PROVISIONS........................................48
SECTION 10.1 Limitation of Rights of Securityholders..................48
SECTION 10.2 Amendment................................................48
SECTION 10.3 Counterparts.............................................49
SECTION 10.4 Separability.............................................50
SECTION 10.5 Governing Law............................................50
SECTION 10.6 Payments Due on Non-Business Day.........................50
SECTION 10.7 Successors...............................................50
SECTION 10.8 Headings.................................................50
SECTION 10.9 Reports, Notices and Demands.............................50
SECTION 10.10 Agreement Not to Petition................................51
SECTION 10.11 Trust Indenture Act; Conflict with Trust
Indenture Act............................................51
SECTION 10.12 Acceptance of Terms of Trust Agreement, Guarantee
and Indenture............................................52
-iv-
<PAGE>
INDEX OF EXHIBITS
-----------------
EXHIBIT A ..............................................Certificate of Trust
EXHIBIT B .....................................DTC Letter of Representations
EXHIBIT C ..................Form of Certificate Evidencing Common Securities
EXHIBIT D ..........................Agreement as to Expenses and Liabilities
EXHIBIT E .......Form of Certificate Evidencing Trust Preferred Certificates
<PAGE>
PRAEGITZER INDUSTRIES TRUST I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
--------------------- ---------------
(Section) 310(a)(1) 8.7
(a)(2) 8.7
(a)(3) 8.9
(a)(4) 2.7(a)(ii)
(a)(5) Not Applicable
(b) 8.8
(c) Not Applicable
(Section) 311(a) 8.13
(b) 8.13
(c) Not Applicable
(Section) 312(a) 5.7
(b) 5.7
(c) 5.7
(Section) 313(a) 8.14(a)
(a)(4) 8.14(b)
(b) 8.14(b)
(c) 10.9
(d) 8.14(c)
(Section) 314(a) 8.15
(b) Not Applicable
(c)(1) 8.16
(c)(2) 8.16
(c)(3) Not Applicable
(d) Not Applicable
(e) 1.1, 8.16
(Section) 315(a) 8.1(a), 8.3(a)
(b) 8.2, 10.9
(c) 10.11
(d) 8.1, 8.3
(e) 10.11
(Section) 316(a)(1)(A) 5.14
(a)(1)(B) 5.14
(a)(2) Not Applicable
(b) 5.14
(c) 6.7
(Section) 317(a)(1) 10.11
(a)(2) 10.11
(b) 5.9
(Section) 318(a) 10.11
- ---------------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed
to be a part of the Trust Agreement
<PAGE>
THIS AMENDED AND RESTATED TRUST AGREEMENT (this "Trust Agreement"), dated
as of ----------, 1998, among (i) Praegitzer Industries, Inc., an Oregon
corporation (including any successors or assigns, the "Depositor"), (ii)
Wilmington Trust Company, a Delaware banking corporation duly organized and
existing under the laws of the State of Delaware, as property trustee (in such
capacity, the "Property Trustee" and, in its separate corporate capacity and not
in its capacity as Property Trustee, the "Bank"), (iii) the Bank, as Delaware
trustee (in such capacity, the "Delaware Trustee"), (iv) -----------, an
individual, ----------, an individual, and ----------, an individual, each of
whose address is c/o Praegitzer Industries, Inc., 1270 SE Monmouth Cut Off Road,
Dallas, Oregon 97338 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees are referred to collectively herein as the "Trustees")
and (v) the several Holders, as hereinafter defined.
WITNESSETH
WHEREAS, the Depositor, the Delaware Trustee and ----------, as an
Administrative Trustee (the "Initial Administrative Trustee"), have declared and
established a business trust pursuant to the Delaware Business Trust Act by
entering into a Trust Agreement dated as of August 7, 1998 (the "Original Trust
Agreement"), and by the execution and filing by the Delaware Trustee and the
Initial Administrative Trustee with the Secretary of State of the State of
Delaware (the "Secretary of State") of the Certificate of Trust, filed on August
7, 1998; and
WHEREAS, the Depositor, the Delaware Trustee and ----------, ----------
and ----------, each as an Administrative Trustee, desire to, and by this Trust
Agreement do, amend and restate the Original Trust Agreement in its entirety as
set forth herein.
NOW THEREFORE, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, each party, for the benefit of the other parties and for
the benefit of the Securityholders, hereby agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1 Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) unless the context otherwise requires, any reference to an "Article" or
a "Section" refers to an Article or a Section, as the case may be, of this Trust
Agreement; and
<PAGE>
(d) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Trust Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(e) the following terms shall have the meanings indicated hereinbelow:
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Administrative Trustee" means each of the Persons identified as an
"Administrative Trustee" in the preamble to this Trust Agreement solely in such
Person's capacity as Administrative Trustee of the Trust created and continued
hereunder and not in such Person's individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. 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.
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication
or composition of or in respect of such Person under any applicable
Bankruptcy Law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of such Person or of any
substantial part of its property or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 90 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Bankruptcy Law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of such Person or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as
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they become due and its willingness to be adjudicated a bankrupt, or the
taking of corporate action by such Person in furtherance of any such
action.
"Bankruptcy Law" means any Federal or state bankruptcy, insolvency,
reorganization or similar law.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the appropriate Trustees.
"Book-Entry Preferred Securities Certificates" means a beneficial interest
in the Preferred Securities Certificates, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 5.11.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the State of Oregon are authorized or required
by law or executive order to remain closed, or (c) a day on which the Property
Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture
Trustee is closed for business.
"Certificate Depository Agreement" means the agreement among the Trust, the
Depositor and The Depository Trust Company, as the initial Clearing Agency,
dated as of the Closing Date, relating to the Preferred Securities Certificates,
substantially in the form attached as Exhibit B, as the same may be amended and
supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State with respect to the Trust, as amended or restated from time
to time. The form of Certificate of Trust as of the date hereof is attached as
Exhibit A.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act. The Depository Trust Company will
act as the initial Clearing Agency hereunder.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, as amended, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
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"Common Security" means an undivided beneficial interest in the assets of
the Trust, having a Liquidation Amount of $10 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware, 19890-0001, Attention:
Corporate Trust Administration, and (ii) when used with respect to the Debenture
Trustee, the principal office of the Debenture Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware, 19890-0001, Attention:
Corporate Trust Administration.
"Debenture Event of Default" means an "Event of Default" as defined in the
Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation organized under the laws of the State of Delaware and any successor
thereto, as trustee under the Indenture.
"Debentures" means the aggregate principal amount of the Depositor's ---%
Junior Subordinated Deferrable Interest Debentures, issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or both (as the
context requires) of (a) Preferred Securities Certificates issued as Book-Entry
Preferred Securities Certificate as provided in Section 5.11(a) and (b)
Preferred Securities Certificates issued in certificated, fully registered form
as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. ss.ss. 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement solely in its capacity as Delaware Trustee
of the Trust created and continued hereunder and not in its individual capacity,
or its successor in interest in such capacity, or any successor trustee
appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Preferred
Securities as provided in Section 4.1.
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"Early Dissolution Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of
30 days; or
(c) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Property Trustee in this Trust Agreement
(other than a covenant or warranty a default in the performance or breach
of which is dealt with in clause (b) or (c) above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the defaulting Property Trustee by the
Holders of at least 25% in aggregate liquidation preference of the
Outstanding Preferred Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property
Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the holders
of the Preferred Securities, as amended from time to time.
"Holder" means a Securityholder.
"Indenture" means the Junior Subordinated Indenture, dated as of ----------
- --, 1998, between the Depositor and the Debenture Trustee, as trustee, as
amended or supplemented from time to time.
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"Investment Company Event" means the receipt by the Depositor and the Trust
of an Opinion of Counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in Investment
Company Act Law"), the Trust is or will be considered an "investment company"
that is required to be registered under the Investment Company Act, which Change
in Investment Company Act Law becomes effective on or after the date or original
issuance of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, adverse claim, hypothecation, assignment,
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture,
allocated to the Common Securities and the Trust Preferred Securities based upon
the relative Liquidation Amounts of such classes and the proceeds of which will
be used to pay the Redemption Price of such Trust Securities, and (b) with
respect to a distribution of Debentures to Holders of Trust Securities in
connection with a dissolution or liquidation of the Trust, Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed
to Holders of Trust Securities in connection with a dissolution and liquidation
of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by two individual
officers of the Depositor, one of whom is its Chairman of the Board, Chief
Executive Officer, President or a Vice President, and the other of whom is its
Chief Financial Officer, Treasurer, Secretary or an Assistant Secretary, and
delivered to the appropriate Trustee. One of the officers signing an Officers'
Certificate given pursuant to Section 8.16 shall be the principal executive,
financial or accounting officer of the Depositor. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' 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 Officers'
Certificate;
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<PAGE>
(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.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee, the Delaware Trustee or the Depositor, but
not an employee of any thereof, and who shall be reasonably acceptable to the
Property Trustee.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding," when used with respect to Trust Securities, means, as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee
or any Paying Agent for the Holders of such Trust Securities; provided
that, if such Trust Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange for or in
lieu of which other Trust Securities have been executed and delivered
pursuant to Sections 5.4, 5.5, 5.11 and 5.13; provided, however, that in
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Preferred Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Trustee or any Affiliate of the
Depositor or any Trustee shall be disregarded and deemed not to be
Outstanding, except that (a) in determining whether any Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Preferred Securities that such
Trustee knows to be so owned shall be so disregarded and (b) the foregoing
shall not apply at any time when all of the outstanding Preferred
Securities are owned by the Depositor, one or more of the Trustees and/or
any such Affiliate. Preferred Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Administrative Trustees the pledgee's right so to
act with respect to such Preferred Securities and that the pledgee is not
the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Preferred Securities Certificate as reflected in the records of the Clearing
Agency or, if a Clearing Agency Participant is not the Owner, then as reflected
in the records of a Person maintaining
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an account with such Clearing Agency (directly or indirectly, in accordance with
the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.9 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its trust department
for the benefit of the Securityholders in which all amounts paid in respect of
the Debentures will be held and from which the Property Trustee, through the
Paying Agent, shall make payments to the Securityholders in accordance with
Sections 4.1 and 4.2.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the assets
of the Trust designated as "___% Cumulative Trust Preferred Securities," having
a Liquidation Amount of $10 per security and having the rights provided therefor
in this Trust Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Preferred Securities Certificate" means a certificate evidencing ownership
of Preferred Securities, substantially in the form attached as Exhibit E.
"Property Trustee" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement solely in its capacity as Property Trustee
of the Trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the stated maturity of the
Debentures shall be a Redemption Date for a Like Amount of Trust Preferred
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among
the Trust Preferred Securities.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Responsible Officer" of the Property Trustee shall mean any officer of the
Property Trustee assigned by the Property Trustee from time to time to
administer corporate trust matters.
"Secretary of State" has the meaning specified in the recitals to this
Agreement.
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<PAGE>
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.4.
"Securityholder" means a Person in whose name a Trust Security is
registered in the Securities Register; any such Person shall be deemed to be a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under this Trust Agreement, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days after the
date of such Opinion of Counsel, subject to United States Federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Depositor on the Debentures is not, or within 90 days after the
date of such Opinion of Counsel, will not be, deductible by the Depositor, in
whole or in part, for United States Federal income tax purposes or (iii) the
Trust is, or will be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges.
"Trust" means the Delaware business trust created and continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Trust Agreement, as the same may be modified,
amended or supplemented in accordance with the applicable provisions hereof,
including (i) all exhibits hereto and (ii) for all purposes of this Trust
Agreement and any such modification, amendment or supplement, the provisions of
the Trust Indenture Act that are deemed to be a part of and govern this Trust
Agreement and any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in, or
owing to, the Payment Account and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
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"Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
"Underwriters" means each of the Underwriters named in the Underwriting
Agreement.
"Underwriting Agreement" means that certain Underwriting Agreement, dated
as of ---------- --, 1998, among the Trust, the Depositor, EVEREN Securities,
Inc., Advest, Inc. and Black & Company, as the representatives of the
Underwriters.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 2.1 Name.
The Trust continued hereby shall be known as "PRAEGITZER INDUSTRIES TRUST
I," as such name may be modified from time to time by the Administrative
Trustees following written notice to the Holders of Trust Securities and the
other Trustees, in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments on behalf
of the Trust and sue and be sued.
SECTION 2.2 Office of the Delaware Trustee; Principal Place of Business.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001, Attention: Corporate Trust Administration, or
such other address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Securityholders and the Depositor. The
principal executive office of the Trust is c/o Praegitzer Industries, Inc., 1270
SE Monmouth Cut Off Road, Dallas, Oregon 97338.
SECTION 2.3 Initial Contribution of Trust Property; Organizational
Expenses.
The Trustees acknowledges receipt in trust from the Depositor in connection
with the Original Trust Agreement of the sum of $10, which constituted the
initial Trust Property. The Depositor shall pay organizational expenses of the
Trust as they arise or shall, upon request of any Trustee, promptly reimburse
such Trustee for any such expenses paid by such Trustee. The Depositor shall
make no claim upon the Trust Property for the payment of such expenses.
SECTION 2.4 Issuance of the Preferred Securities.
The Depositor and an Administrative Trustee, on behalf of the Trust and
pursuant to the Original Trust Agreement, have executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement (and contemporaneously with and to the extent of the
exercise of the Underwriters' over-allotment option pursuant to the Underwriting
Agreement), an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 5.2 and deliver to the
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Underwriters named in the Underwriting Agreement, Preferred Securities
Certificates, registered in the name of the nominee of the initial Clearing
Agency, as instructed by EVEREN Securities, Inc., on behalf of the
representatives of the Underwriters, in an aggregate amount of [4,000,000]
Preferred Securities (up to [600,000] Preferred Securities in the case of an
over-allotment option exercise) having an aggregate Liquidation Amount of
$[40,000,000] (up to [$6,000,000] in the case of an over-allotment option
exercise), against receipt of such aggregate purchase price of such Preferred
Securities of $[40,000,000] (up to [$6,000,000] in the case of an over-allotment
option exercise), which amount the Administrative Trustee shall promptly deliver
to the Property Trustee.
SECTION 2.5 Issuance of the Common Securities; Subscription and Purchase of
Debentures.
Contemporaneously with the execution and delivery of this Trust Agreement
(and contemporaneously with and to the extent of the exercise of the
Underwriters' over-allotment option pursuant to the Underwriting Agreement), an
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 5.2 and deliver to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of [120,000]
Common Securities (up to [18,000] Common Securities in the case of an
over-allotment option exercise) having an aggregate Liquidation Amount of
$[1,200,000] (up to $[180,000] in the case of an over-allotment option
exercise), against payment by the Depositor of such amount, which amount such
Administrative Trustee shall promptly deliver to the Property Trustee.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor Debentures, registered in the
name of the Trust and having an aggregate principal amount equal to
$[41,200,000] (up to $[6,180,000] in the case of an over-allotment option
exercise) and, in satisfaction of the purchase price for such Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum
of $[41,200,000] (up to $[6,180,000] in the case of an over-allotment option
exercise), such amount being the sum of the amounts delivered to the Property
Trustee pursuant to (i) the second sentence of Section 2.4 and (ii) the first
sentence of this Section 2.5.
SECTION 2.6 Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities and use the proceeds from such sale to acquire the Debentures,
and (b) to engage in those activities necessary, advisable or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the benefit of the Trust and the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
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SECTION 2.7 Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance with
the terms of this Trust Agreement. Subject to the limitations set forth in
paragraph (b) of this Section and Section 2.6, and in accordance with the
following provisions (i) and (ii), the Trustees shall have the authority to
enter into all transactions and agreements determined by the Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Trustees under this Trust Agreement, and to perform all acts in
furtherance thereof, including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall have the
power and authority to act on behalf of the Trust with respect to the
following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute, deliver and
perform on behalf of the Trust, the Expense Agreement and the
Certificate Depository Agreement and such other agreements as may be
necessary or desirable in connection with the purposes and function of
the Trust;
(C) assisting in the registration (including the execution of a
registration statement on the appropriate form) of the Preferred
Securities under the Securities Act of 1933, as amended, and under
state securities or blue sky laws, and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities upon
such securities exchange or exchanges as shall be determined by the
Depositor and the registration of the Preferred Securities under the
Exchange Act, and the preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default) and
other information regarding the Trust Securities and the Debentures to
the Securityholders in accordance with this Trust Agreement;
(F) the appointment of a Paying Agent, authenticating agent and
Securities Registrar in accordance with this Trust Agreement;
(G) registering transfer of the Trust Securities in accordance
with this Trust Agreement;
(H) unless otherwise determined by the Depositor, the Property
Trustee or the Administrative Trustees, or as otherwise required by
the Delaware Business Trust Act or the Trust Indenture Act, to execute
on behalf of the Trust (either acting alone or together with any or
all of the Administrative Trustees) any documents that the
Administrative Trustees have the power to execute pursuant to this
Trust Agreement; and
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(I) the taking of any action incidental to the foregoing as the
Trustees may from time to time determine is necessary or advisable to
give effect to the terms of this Trust Agreement for the benefit of
the Securityholders (without consideration of the effect of any such
action on any particular Securityholder). (ii) among the Trustees, the
Property Trustee shall have the power, duty and authority to act on
behalf of the Trust with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments made
in respect of the Debentures in the Payment Account;
(D) the distribution through the Paying Agent of amounts owed to the
Securityholders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges of a
holder of the Debentures;
(F) the sending of notices of default and other information regarding
the Trust Securities and the Debentures to the Securityholders in
accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance with the
terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the winding up of
the affairs of and liquidation of the Trust and the preparation, execution
and filing of the certificate of cancellation with the Secretary of State;
(I) after an Event of Default (other than under paragraph (b), (c),
(d) or (e) of the definition of such term if such Event of Default is by or
with respect to the Property Trustee) the taking of any action incidental
to the foregoing as the Property Trustee may from time to time determine is
necessary or advisable to give effect to the terms of this Trust Agreement
and protect and conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any such action on
any particular Securityholder);
(J) so long as the Property Trustee is the Securities Registrar,
registering transfers of the Trust Securities in accordance with this Trust
Agreement; and
(K) except as otherwise provided in this Section 2.7(a)(ii), the
Property Trustee shall have none of the duties, liabilities, powers or the
authority of the Administrative Trustees set forth in Section 2.7(a)(i).
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(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein, (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes, (iv) incur any indebtedness for borrowed money or issue any
other debt or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities, the
Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the Commission and
the execution by the Trust of a registration statement on the appropriate
form in relation to the Preferred Securities, including any amendments
thereto;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and the determination of any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and the advice to
the Trustees of actions they must take on behalf of the Trust, and the
preparation for execution and filing of any documents to be executed and
filed by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of any
such States;
(iii) the preparation for filing by the Trust and execution on behalf
of the Trust of an application to the American Stock Exchange or any other
national stock exchange or the NASDAQ Stock Market for listing upon notice
of issuance of any Preferred Securities;
(iv) the preparation for filing by the Trust with the Commission and
the execution on behalf of the Trust of a registration statement on Form
8-A relating to the registration of the Preferred Securities under Section
12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery
of, the Underwriting Agreement providing for the sale of the Preferred
Securities; and
(vi) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
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(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust will not be deemed to be an "investment
company" required to be registered under the 1940 Act, or fail to be classified
as a grantor trust for United States federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, the Depositor and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement, that each of
the Depositor and any Administrative Trustee determines in its discretion to be
necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the holders of the
Preferred Securities.
SECTION 2.8 Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
SECTION 2.9 Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1 Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
shall have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits in and withdrawals from the
Payment Account in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Property Trustee in the Payment Account for the exclusive benefit of
the Securityholders and for distribution as herein provided, including (and
subject to) any priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1 Distributions.
(a) The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including of Additional Amounts) will be made
on the Trust Securities at the rate and on the dates that payments of interest
(including of Additional Interest, as defined in the Indenture) are made on the
Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for
the payment of Distributions. Distributions shall accrue from the date of
original issuance of the Trust Securities, and, except in the event (and to
the extent) that the Depositor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
quarterly in arrears on January 15, April 15, July 15, October 15 of each
year, commencing on January 15, 1999. If any date on which a Distribution
is otherwise payable on the Trust Securities is not a Business Day, then
the payment of such Distribution shall be made on the next succeeding day
that is a Business Day (and without any interest or other payment in
respect of any such delay) with the same force and effect as if made on
such date (each date on which distributions are payable in accordance with
this Section 4.1(a), a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made when due
(and before giving effect to Additional Amounts, if applicable),
Distributions on the Trust Securities shall be payable at a rate of ___%
per annum of the Liquidation Amount of the Trust Securities. The amount of
Distributions payable for any full period shall be computed on the basis of
a 360-day year of twelve 30-day months. The amount of Distributions for any
partial period shall be computed on the basis of the number of days elapsed
in a 360-day year of twelve 30-day months. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(iii) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
one Business Day prior to such Distribution Date; provided, however, that in the
event that the Preferred Securities do not remain in book-entry-only form, the
relevant record date shall be the date 15 days prior to the relevant
Distribution Date (or, if such date is not a Business Day, the next Business Day
following such date).
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SECTION 4.2 Redemption.
(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Trust will be required to redeem, subject to Section 4.3, a Like
Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become due
and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption of
Debentures. Redemptions of the Trust Securities shall be made and the Redemption
Price shall be payable on each Redemption Date only to the extent that the Trust
has funds then on hand and available in the Payment Account for the payment of
such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, Eastern time, on the Redemption Date,
subject to Section 4.2(c), with respect to Preferred Securities held in
certificated form, the Property Trustee, subject to Section 4.2(c), will
irrevocably deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and will give the Paying Agent irrevocable instructions and
authority to pay the Redemption Price to the Holders thereof upon surrender of
their Preferred Securities Certificates. With respect to Preferred Securities
held in book-entry form, the Property Trustee, subject to Section 4.2(c), will
irrevocably deposit with the Clearing Agency for the Preferred Securities funds
sufficient to pay the applicable Redemption Price and will give such Clearing
Agency irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but
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without interest, and such Securities will cease to be outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
any Trust Securities called for redemption is improperly withheld or refused and
not paid either by the Trust or by the Depositor pursuant to the Guarantee,
Distributions on such Trust Securities will continue to accrue, at the then
applicable rate, from the Redemption Date originally established by the Trust
for such Trust Securities to the date such Redemption Price is actually paid, in
which case the actual payment date will be the date fixed for redemption for
purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made
to the recordholders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be one Business Day
prior to the relevant Redemption Date; provided, however, that in the event that
the Preferred Securities do not remain in book-entry-only form, the relevant
record date shall be the date 15 days prior to the relevant Redemption Date (or,
if such date is not a Business Day, the next Business Day following such date).
(f) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Redemption Price of Trust Securities to be redeemed shall be allocated on a pro
rata basis (based on Liquidation Amounts) among the Common Securities and the
Preferred Securities. The particular Preferred Securities to be redeemed shall
be selected on a pro rata basis (based upon Liquidation Amounts) not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method (including, without limitation, by lot) as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $10 or an integral multiple of $10 in excess thereof) of
the Liquidation Amount of Preferred Securities of a denomination larger than
$10. The Property Trustee shall promptly notify the Security Registrar in
writing of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities that has been or is to be redeemed.
SECTION 4.3 Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if applicable)
on, and the Redemption Price of, the Trust Securities, as applicable, shall be
made, subject to Section 4.2(f), pro rata among the Common Securities and the
Preferred Securities based on the Liquidation Amount of the Trust Securities;
provided, however, that if on any Distribution Date or Redemption Date any Event
of Default resulting from a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution
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(including Additional Amounts, if applicable) on, or Redemption Price of, any
Common Security, and no other payment on account of the redemption, liquidation
or other acquisition of Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) on all Outstanding Preferred Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities, shall have been made or provided for, and all
funds immediately available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions (including Additional Amounts,
if applicable) on, or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holder of Common Securities will be deemed
to have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated.
Until any such Event of Default under this Trust Agreement with respect to the
Preferred Securities has 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.
SECTION 4.4 Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register, provided that payments will be made by wire transfer if requested by a
holder of at least $1,000,000 aggregate Liquidation Amount of the Preferred
Securities, or, if the Preferred Securities are held by a Clearing Agency, such
Distributions shall be made to the Clearing Agency in immediately available
funds, which shall credit the relevant Persons' accounts at such Clearing Agency
on the applicable Distribution Dates. Payments in respect of the Common
Securities shall be made in such manner as shall be mutually agreed between the
Property Trustee and the Common Securityholder.
SECTION 4.5 Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service form required to be
provided on such form. The Administrative Trustees shall provide the Depositor
and the Property Trustee with a copy of all such returns and reports promptly
after such filing or furnishing. The Trustees shall comply with United States
federal withholding and backup
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withholding tax laws and information reporting requirements with respect to any
payments to Securityholders under the Trust Securities.
SECTION 4.6 Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the Property Trustee
shall promptly pay any taxes, duties or governmental charges of whatsoever
nature (other than withholding taxes) imposed on the Trust by the United States
or any other taxing authority.
SECTION 4.7 Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities shall be
reduced by the amount of any corresponding payment that such Holder (and any
Owner with respect thereto) has directly received pursuant to Section 5.8 of the
Indenture or Section 5.14 of this Trust Agreement.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1 Initial Ownership.
Upon the formation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 5.2 The Trust Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of $10 Liquidation Amount and integral multiples of $10 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $10 Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by signature of at least
one Administrative Trustee. Trust Securities Certificates bearing the signatures
of individuals who were, at the time when such signatures shall have been
affixed, authorized to sign on behalf of the Trust, shall be validly issued and
entitled to the benefits of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
delivery of such Trust Securities Certificates or did not hold such offices at
the date of delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and shall be
entitled to the rights and subject to the obligations of a Securityholder
hereunder, upon due registration of such Trust Securities Certificate in such
transferee's name pursuant to Sections 5.4, 5.11 and 5.13.
SECTION 5.3 Execution and Delivery of Trust Securities Certificates.
On or prior to the Closing Date, and on the date, if any, on which the
Underwriters exercise their over-allotment option pursuant to the terms of the
Underwriting Agreement, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate
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Liquidation Amount as provided in Section 2.4, to be executed on behalf of the
Trust and delivered to or upon the written order of the Depositor, signed by two
individual officers of the Depositor, one of whom is its Chairman of the Board,
Chief Executive Officer, President or any Vice President, and the other of whom
is its Chief Financial Officer, Treasurer, Secretary or any Assistant Secretary,
without further corporate action by the Depositor, in authorized denominations.
SECTION 5.4 Registration of Transfer and Exchange of Preferred Securities
Certificates.
The Depositor shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 5.8, a register or registers for the purpose of
registering Trust Securities Certificates and transfers and exchanges of
Preferred Securities Certificates (the "Securities Register") in which, the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 5.10 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.8, the
Administrative Trustees or any one of them shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Preferred
Securities Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date of execution by such Administrative Trustee or
Trustees.
The Securities Registrar shall not be required to register the transfer of
any Preferred Securities that have been called for redemption. At the option of
a Holder, Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 5.8.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to an Administrative Trustee and the
Securities Registrar duly executed by the Holder or his attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by an
Administrative Trustee in accordance with such Person's customary practice. The
Trust shall not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any
Preferred Securities called for redemption and ending at the close business on
the day of such mailing or (ii) register the transfer of or exchange any
Preferred Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
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No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Securities Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Preferred
Securities Certificates.
SECTION 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate and (b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Securities Certificate shall have been acquired by a bona fide purchaser, the
Administrative Trustees, or any one of them, on behalf of the Trust shall
execute and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination. In connection with
the issuance of any new Trust Securities Certificate under this Section, the
Administrative Trustees or the Securities Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Trust Securities Certificate issued
pursuant to this Section shall constitute conclusive evidence of an undivided
beneficial interest in the assets of the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Securities Certificate shall be found
at any time.
SECTION 5.6 Persons Deemed Securityholders.
The Trustees or the Securities Registrar shall treat the Person in whose
name any Trust Securities Certificate shall be registered in the Securities
Register as the owner of such Trust Securities Certificate for the purpose of
receiving Distributions and for all other purposes whatsoever, and neither the
Trustees nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 5.7 Access to List of Securityholders' Names and Addresses.
At any time when the Property Trustee is not also acting as the Securities
Registrar, the Administrative Trustees or the Depositor shall furnish or cause
to be furnished to the Property Trustee (a) semi-annually on or before January 1
and July 1 in each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Securityholders as of the
most recent record date and (b) promptly after receipt by any Administrative
Trustee or the Depositor of a request therefor from the Property Trustee, such
other information as the Property Trustee may reasonably require in order to
enable the Property Trustee to discharge its obligations under this Trust
Agreement, in each case to the extent such information is in the possession or
control of the Administrative Trustees or the Depositor and is not identical to
a previously supplied list or has not otherwise been received by the Property
Trustee in its capacity as Securities Registrar. The rights of Securityholders
to communicate with other Securityholders with respect to their rights under
this Trust Agreement or under the Trust Securities, and the corresponding rights
of the Trustee shall be
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as provided in the Trust Indenture Act. Each Securityholder, by receiving and
holding a Trust Securities Certificate, and each Owner shall be deemed to have
agreed not to hold the Depositor, the Property Trustee or the Administrative
Trustees accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 5.8 Maintenance of Office or Agency.
The Administrative Trustees shall maintain an office or offices or agency
or agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the principal corporate trust office
of the Property Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, as
the principal corporate trust office for such purposes. The Administrative
Trustees shall give prompt written notice to the Depositor and to the
Securityholders of any change in the location of the Securities Register or any
such office or agency.
SECTION 5.9 Appointment of Paying Agent.
The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee, and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Property Trustee shall
no longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall
apply to the Property Trustee also in its role as Paying Agent, for so long as
the Property Trustee shall act as Paying Agent and, to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Trust
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
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SECTION 5.10 Ownership of Common Securities by Depositor.
At the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, other than a transfer in connection with a consolidation or merger of the
Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH SECTION
5.10 OF THE TRUST AGREEMENT."
SECTION 5.11 Book-Entry Preferred Securities Certificates; Common
Securities Certificate.
(a) The Preferred Securities Certificates, upon original issuance, will be
issued in the form of a typewritten Preferred Securities Certificate or
Certificates representing Book-Entry Preferred Securities Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Preferred Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of CEDE &
CO., the nominee of the initial Clearing Agency, and no Owner will receive a
Definitive Preferred Securities Certificate, representing such Owners' interest
in such Preferred Securities, except as provided in Section 5.13. Unless and
until Definitive Preferred Securities Certificates have been issued to Owners
pursuant to Section 5.13:
(i) the provisions of this Section 5.11(a) shall be in full force and
effect;
(ii) the Securities Registrar, the Paying Agent and the Trustees shall
be entitled to deal with the Clearing Agency for all purposes of this Trust
Agreement relating to the Book-Entry Preferred Securities Certificates
(including the payment of the Liquidation Amount of and Distributions on
the Preferred Securities evidenced by Book-Entry Preferred Securities
Certificates) the Book-Entry Preferred Securities Certificates and shall
have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section 5.11 conflict
with any other provisions of this Trust Agreement, the provisions of this
Section 5.11 shall control; and
(iv) the rights of the Owners of the Book-Entry Preferred Securities
Certificates shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Certificate Depository Agreement, unless and until Definitive
Preferred Securities Certificates are issued pursuant to Section 5.13, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments on the Preferred
Securities to such Clearing Agency Participants. Any Clearing Agency
designated pursuant here to will not be deemed an agent of the Trustee for
any purpose.
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(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 5.12 Notices to Clearing Agency.
To the extent that a notice or other communication to the Owners is
required under this Trust Agreement, unless and until Definitive Preferred
Securities Certificates shall have been issued to Owners pursuant to Section
5.13, the Trustees shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION 5.13 Definitive Preferred Securities Certificates.
If (a) the Clearing Agency notifies the Depositor that it is no longer
willing or able to continue as depositary for the Preferred Securities
Certificates and no successor Clearing Agency shall have been appointed, or if
at any time the Clearing Agency ceases to be a clearing agency registered under
the Exchange Act at a time when the Clearing Agency is required to be so
registered to act as depositary, and no successor depositary shall have been
appointed, or (b) the Depositor, in its sole discretion, determines that such
Preferred Securities Certificates shall be so exchangeable, or (c) after there
shall have occurred and be continuing a Debenture Event of Default and Owners of
Book-Entry Preferred Securities Certificates representing beneficial interests
aggregating at least a majority of the Liquidation Amount advise the Property
Trustee in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interest of the Owners of Preferred
Securities Certificates, then, in each case ((a), (b) or (c)), the Property
Trustee shall notify the Clearing Agency and the Clearing Agency shall notify
all Owners of Preferred Securities Certificates and the other Trustees of the
occurrence of any such event and that the Definitive Preferred Securities
Certificates will be distributed to such Owners in exchange for their beneficial
interests in such Preferred Securities Certificate(s). Upon surrender to the
Property Trustee of the typewritten Preferred Securities Certificate or
Certificates representing the Book-Entry Preferred Securities Certificates by
the Clearing Agency, accompanied by registration instructions, the
Administrative Trustees, or any one of them, shall execute the Definitive
Preferred Securities Certificates in accordance with the instructions of the
Clearing Agency and deliver same to or upon the order of the Clearing Agency or
authorized representative thereof. Neither the Securities Registrar nor the
Trustees shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Preferred Securities Certificates, the Trustees
shall recognize the Holders of the Definitive Preferred Securities Certificates
as Securityholders. The Definitive Preferred Securities Certificates shall be
engraved and executed in accordance with the applicable rules of the American
Stock Exchange or such other national exchange or over-the-counter market on
which the Preferred Securities are then listed for trading. Thereafter, payments
of Distributions (including Additional Amounts, if applicable) in respect of the
Definitive Preferred Securities shall be made by check mailed to the address of
the Person entitled thereto as such address shall appear on the Securities
Register, provided that payments will be made by wire transfer if requested by a
holder of at least $1,000,000 aggregate Liquidation Amount of the Preferred
Securities.
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SECTION 5.14 Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights and when issued and delivered to
Securityholders against payment of the purchase price therefor will be fully
paid and nonassessable by the Trust. The Holders of the Trust Securities, in
their capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if, upon a
Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Debenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable, provided that the payment of principal and interest on such
Debentures shall remain subordinated to the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as in the Indenture
provided, the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the Depositor and the
Debenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Depositor has paid or deposited with the Debenture Trustee a
sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of the
Debentures,
(B) the principal of (and premium, if any, on) any Debentures
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures,
and
(C) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Property Trustee, their
agents and counsel; and
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(ii) all Events of Default with respect to the Debentures, other than
the non-payment of the principal of the Debentures which has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.13 of the Indenture.
The Holders of a majority in aggregate Liquidation Amount of the Preferred
Securities may, on behalf of the Holders of all the Preferred Securities, waive
any past default under the Indenture, except a default in the payment of
principal or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Preferred
Securities all or part of which is represented by Book-Entry Preferred
Securities Certificates, a record date shall be established for determining
Holders of Outstanding Preferred Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Property
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.14(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holder (a "Direct
Action"). Except as set forth in Section 5.14(b) and this Section 5.14(c), the
Holders of Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of, the Debentures.
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ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1 Limitations on Voting Rights.
(a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2 and
in the Indenture and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 5.13 of
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, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities, provided, however, that where a consent under
the Indenture would require the consent of each Holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of Preferred Securities, except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that such action shall not
cause the Trust to fail to be classified as a grantor trust for United States
federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a majority in Liquidation
Amount of the Outstanding Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States federal income tax purposes.
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SECTION 6.2 Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the time,
place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 10.9 to each Preferred Securityholder of record, at his
registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 6.3 Meetings of Preferred Securityholders.
No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Preferred
Securityholders to vote on any matter upon the written request of Holders of
record of 25% of the Outstanding Preferred Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Preferred Securityholders to
vote on any matters as to which Preferred Securityholders are entitled to vote.
Holders of record of 50% of the Outstanding Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the Preferred
Securityholders of record present, in person or by proxy, holding more than a
majority of the Preferred Securities (based upon their Liquidation Amount) held
by the Preferred Securityholders of record present, either in person or by
proxy, at such meeting shall constitute the action of the Preferred
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 6.4 Voting Rights.
Securityholders shall be entitled to one vote for each $10 of Liquidation
Amount represented by their Trust Securities in respect of any matter as to
which such Securityholders are entitled to vote.
SECTION 6.5 Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the Property
Trustee. Only Securityholders of record shall be entitled to vote. When Trust
Securities are held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Trust Securities, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust Securities. A
proxy purporting to be executed by or on behalf of a Securityholder shall be
deemed valid
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unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. No proxy shall be valid more than three
years after its date of execution.
SECTION 6.6 Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be taken
without a meeting if Securityholders holding a majority of all Outstanding Trust
Securities (based upon their aggregate Liquidation Amount) entitled to vote in
respect of such action (or such larger proportion thereof as shall be required
by any express provision of this Trust Agreement) shall consent to the action in
writing (based upon their aggregate Liquidation Amount).
SECTION 6.7 Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix a date, not
more than 90 days prior to the date of any meeting of Securityholders or the
payment of a Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.8 Acts of Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Trust Agreement to be given, made or
taken by Securityholders or Owners may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Securityholders
or Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the Securities
Register.
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Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such liquidation amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Securityholder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust or any Person.
SECTION 6.9 Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Securityholders
during normal business hours for any purpose reasonably related to such
Securityholder's interest as a Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1 Representations and Warranties of the Bank.
The Bank hereby represents and warrants for the benefit of the Depositor
and the Securityholders that:
(a) the Bank is a Delaware banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) the Bank has full corporate power, authority and legal right to
execute, deliver and perform its obligations under this Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and delivered
by the Bank and constitutes the valid and legally binding agreement of the Bank
enforceable
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against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles;
(d) the execution, delivery and performance of this Trust Agreement has
been duly authorized by all necessary corporate or other action on the part of
the Bank and does not require any approval of stockholders of the Bank and such
execution, delivery and performance will not (i) violate the charter or bylaws
of the Bank, (ii) violate any provision of, or constitute, with or without
notice or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust Property
pursuant to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Bank is a party or by
which it is bound, or (iii) violate any law, governmental rule or regulation of
the United States or the State of Delaware, as the case may be, governing the
banking, trust or general powers of the Bank or any order, judgment or decree
applicable to the Bank;
(e) neither the authorization, execution or delivery by the Bank of this
Trust Agreement nor the consummation of any of the transactions by the Property
Trustee or the Delaware Trustee (as appropriate in context) contemplated herein
or therein requires the consent or approval of, the giving of notice to, the
registration with or the taking of any other action with respect to any
governmental authority or agency under any existing federal law governing the
banking, trust or general powers of the Bank, as the case may be, under the laws
of the United States or the State of Delaware;
(f) there are no proceedings pending or, to the best the Bank's knowledge,
threatened against or affecting the Property Trustee or the Delaware Trustee in
any court or before any governmental authority, agency or arbitration board or
tribunal which, individually or in the aggregate, would materially and adversely
affect the Trust or would question the right, power and authority of the Bank to
enter into or perform its obligations as one of the Trustees under this Trust
Agreement.
SECTION 7.2 Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued at the Closing Date on behalf
of the Trust have been duly authorized and will have been, duly and validly
executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust Agreement
and the Securityholders will be, as of each such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable by the
Trust (or the Trustees on behalf of the Trust) under the laws of the State of
Delaware or any political subdivision thereof in connection with the execution,
delivery and performance by the Bank, the Property Trustee or the Delaware
Trustee, as the case may be, of Bank, this Trust Agreement.
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ARTICLE VIII
THE TRUSTEES
SECTION 8.1 Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as provided by
this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Section.
No Administrative Trustee or the Delaware Trustee shall be subject to any
liability under this Trust Agreement except for its own grossly negligent
action, its own grossly negligent failure to act, or its own willful misconduct.
To the extent that, at law or in equity, a Trustee has duties (including
fiduciary duties) and liabilities relating thereto to the Trust or to the
Securityholders, such Trustee shall not be liable to the Trust or to any
Securityholder for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of the Trustees otherwise existing at law or
in equity, are agreed by the Depositor and the Securityholders to replace such
other duties and liabilities of the Trustees as permitted by Section 3806(c) of
the Delaware Business Trust Act.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each Securityholder,
by its acceptance of a Trust Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This Section 8.1(b)
does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of judgment
made in good faith by an authorized officer of the Property Trustee, unless
it shall be proved that the Property Trustee was negligent in ascertaining
the pertinent facts;
(ii) 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
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the Holders of the Trust Securities given in accordance with this Trust
Agreement relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising
any trust or power conferred upon the Property Trustee under this Trust
Agreement;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Payment
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 Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on any
money received by it except as it may otherwise agree with the Depositor;
and money held by the Property Trustee need not be segregated from other
funds held by it except in relation to the Payment Account maintained by
the Property Trustee pursuant to Section 3.1 and except to the extent
otherwise required by law; and
(v) the Property Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 8.2 Certain Notices.
(a) Within 5 Business Days after the occurrence of any Event of Default
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in Section
10.9, notice of such Event of Default to the Securityholders, the Administrative
Trustees and the Depositor, unless the Event of Default shall have been cured or
waived. For purposes of this Section the term "Event of Default" means any event
that is, or after notice or lapse of time or both would become, and Event of
Default.
(b) The Administrative Trustees shall transmit, to the Securityholders in
the manner and to the extent provided in Section 10.9, notice of the Depositor's
election to begin or further extend an Extension Period (as defined in the
Indenture) on the Debentures (unless such election shall have been revoked)
within the time specified for transmitting such notice to the holders of the
Debentures pursuant to the Indenture as originally executed.
SECTION 8.3 Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
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(b) if (i) in performing its duties under this Trust Agreement the Property
Trustee is required to decide between alternative courses of action or (ii) in
construing any of the provisions of this Trust Agreement the Property Trustee
finds the same ambiguous or inconsistent with any other provisions contained
herein or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative Trustees
contemplated by this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the Property
Trustee shall deem it desirable that a matter be established before undertaking,
suffering or omitting any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Depositor or the Administrative
Trustees;
(e) 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;
(f) the Property Trustee may consult with counsel (which counsel may be
counsel to the Depositor or any of its Affiliates, and may include any of its
employees) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice, such counsel may be counsel to the Depositor 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 Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Trust Agreement at the request or
direction of any of the Securityholders pursuant to this Trust Agreement, unless
such Securityholders shall have offered to the Property Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
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(h) 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, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Securityholders, but the
Property Trustee may make such further inquiry or investigation into such facts
or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through its agents or
attorneys, provided that the Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or attorney
appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the Property
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust Agreement, the
Property Trustee shall not be under any obligation to take any action that is
discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 8.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
SECTION 8.5 May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, except as provided in the definition of the term "Outstanding"
in Article I and subject to Sections 8.8 and 8.13, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
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SECTION 8.6 Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable compensation for
all services rendered by them hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust) as specified in a separate agreement between any of the Trustees and the
Depositor;
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this Trust
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its gross negligence (or ordinary
negligence in the case of the Property Trustee), bad faith or willfulness; and
(c) to the fullest extent permitted by applicable law, to indemnify and
hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee, (iii) any
officer, director, shareholder, employee, representative or agent of any
Trustee, and (iv) any employee or agent of the Trust or its Affiliates,
(referred to herein as an "Indemnified Person") from and against any loss,
damage, liability, action, suit, tax, penalty, expense or claim of any kind or
nature whatsoever incurred by such Indemnified Person by reason of the creation,
operation or dissolution of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or ordinary negligence in the case of the Property Trustee), bad
faith or willful misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement.
No Trustee may claim any lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 8.6.
The Depositor and any Trustee may (subject to Section 8.8) 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 Trust Securities shall have no rights by
virtue of this Trust Agreement 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. Neither the Depositor, nor any 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 the Depositor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity.
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Any Trustee may engage or be interested in any financial or other transaction
with the Depositor or any Affiliate of the Depositor, or may act as depository
for, trustee or agent for, or act on any committee or body of holders of,
securities or other obligations of the Depositor or its Affiliates.
SECTION 8.7 Corporate Property Trustee Required; Eligibility of Trustees.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
SECTION 8.8 Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 8.9 Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Depositor and the Administrative Trustees, by agreed
action of the majority of such Trustees, shall have power to appoint, and upon
the written request of the Administrative Trustees, the Depositor shall for such
purpose join with the Administrative Trustees in the execution, delivery, and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in
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the capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall either be (i) a natural person who is at least 21 years of age and
a resident of the United States or (ii) a legal entity with its principal place
of business in the United States that shall act through one or more persons
authorized to bind such entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:
(a) The Trust Securities shall be executed and delivered and all rights,
powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be exercised
solely by such Trustees and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred or imposed
upon the Property Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Property
Trustee or by the Property Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall be
incompetent or unqualified to perform such act, in which event such rights,
powers, duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing executed
by it, with the written concurrence of the Depositor, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section,
and, in case a Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have power to accept the resignation of, or remove, any
such co-trustee or separate trustee without the concurrence of the Depositor.
Upon the written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally liable
by reason of any act or omission of the Property Trustee or any other trustee
hereunder.
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(e) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 8.10 Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Common
Securityholder. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after the giving of such notice of resignation, the Relevant
Trustee may petition, at the expense of the Trust, any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by Act of the Common Securityholder. If a
Debenture Event of Default shall have occurred and be continuing, the Property
Trustee or the Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of the Preferred
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). In no event will the Holders of the Preferred Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees. An Administrative Trustee may be removed by the Common Securityholder
at any time.
If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees, and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Preferred Securityholders, by
Act of the Securityholders of a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section
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8.11. If an Administrative Trustee shall resign, be removed or become incapable
of acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder by Act of the
Common Securityholder delivered to the Administrative Trustee shall promptly
appoint a successor Administrative Trustee or Administrative Trustees and such
successor Administrative Trustee or Trustees shall comply with the applicable
requirements of Section 8.11. If no successor Relevant Trustee shall have been
so appointed by the Common Securityholder or the Preferred Securityholders and
accepted appointment in the manner required by Section 8.11, any Securityholder
who has been a Securityholder of Trust Securities 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 Relevant Trustee.
The Depositor shall give notice of each resignation and each removal of a
Trustee and each appointment of a successor Trustee to all Securityholders in
the manner provided in Section 10.9. Each notice shall include the name of the
successor Relevant Trustee and the address of its Corporate Trust Office if it
is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes, in the opinion of the Depositor, incompetent
or incapacitated, the vacancy created by such death, incompetence or incapacity
may be filled by (a) the unanimous act of the remaining Administrative Trustees
if there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.7).
SECTION 8.11 Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Relevant Trustee; but,
on request of the Trust or any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and deliver to such successor Relevant
Trustee all Trust Property, all proceeds thereof and money held by such retiring
Relevant Trustee hereunder with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph.
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Any successor Delaware Trustee appointed hereunder shall promptly file an
amendment to the Certificate of Trust with the Secretary of State identifying
the name and principal place of business, or if such successor is an individual,
his/her residence in the State of Delaware for purposes of complying with the
Delaware Business Trust Act.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware 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 such Relevant
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of such Relevant Trustee, shall be the
successor of such Relevant Trustee hereunder, provided such 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;
provided, however, that any successor to the Delaware Trustee pursuant to this
Section 8.12 shall file an amendment to the Certificate of Trust with the
Secretary of State as required under Section 8.11.
SECTION 8.13 Preferential Collection of Claims Against Depositor or Trust.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Trust Securities and to file such other
papers or documents as may be necessary or advisable in order to have the claims
of the Property Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Property Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) 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 Property Trustee and, in the event the Property Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Property Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel, and
any other amounts due the Property Trustee.
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Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement adjustment or compensation affecting the Trust
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 8.14 Reports by Property Trustee.
(a) Not later than July 31 of each year commencing with the year commencing
January 1, 1999, the Property Trustee shall transmit to all Securityholders in
accordance with Section 10.9, and to the Depositor, a brief report dated as of
the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to the
best of its knowledge it has continued to be eligible under said Section, a
written statement to such effect;
(ii) a statement that the Property Trustee has complied with all of
its obligations under this Trust Agreement during the twelve-month period
(or, in the case of the initial report, the period since the Closing Date)
ending with such December 31 or, if the Property Trustee has not complied
in any material respect with such obligations, a description of such
noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken by
the Property Trustee in the performance of its duties hereunder which it
has not previously reported and which in its opinion materially affects the
Trust Securities.
(b) In addition the Property Trustee shall transmit to Securityholders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national stock exchange
(including the American Stock Exchange), the NASDAQ Stock Market or such other
interdealer quotation system or self-regulatory organization upon which the
Trust Securities are listed or traded, with the Commission and with the
Depositor.
SECTION 8.15 Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
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SECTION 8.16 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.17 Number of Trustees.
(a) The number of Trustees shall be five (5) provided that the Holder of
all of the Common Securities by written instrument may increase or decrease the
number of Administrative Trustees. The Property Trustee and the Delaware Trustee
may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Trust Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 8.18 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a), including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
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SECTION 8.19 Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1 Dissolution Upon Expiration Date.
Unless dissolved earlier, the Trust shall automatically dissolve on
- ----------, 2029 (the "Expiration Date"), following the distribution of the
Trust Property in accordance with Section 9.4.
SECTION 9.2 Early Dissolution.
The first to occur of any of the following events is an "Early Dissolution
Event," upon the occurrence of which the Trust shall dissolve:
(a) the occurrence of a Bankruptcy Event in respect of, or the dissolution
or liquidation of, the Depositor;
(b) the written direction to the Property Trustee from the Depositor at any
time to dissolve the Trust and distribute Debentures to Securityholders in
exchange for a Like Amount of the Preferred Securities (which direction is
optional and wholly within the discretion of the Depositor);
(c) the redemption of all of the Preferred Securities in connection with
the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
SECTION 9.3 Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; and (c) the
discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders, and (d) the filing of a Certificate of Cancellation by the
Administrative Trustee under the Delaware Business Trust Act. As soon as
practicable after an event referred to in Section 9.1 or 9.2, and upon the
completion of the winding up and liquidation
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of the Trust, the Property Trustee shall file a certificate of cancellation with
the Delaware Secretary of State terminating the Trust.
SECTION 9.4 Liquidation.
(a) If an Early Dissolution Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to each Securityholder a Like Amount of Debentures,
subject to Section 9.4(d). Notice of liquidation shall be given by the Property
Trustee by first-class mail, postage prepaid mailed not later than 30 nor more
than 60 days prior to the Liquidation Date to each Holder of Trust Securities at
such Holder's address appearing in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities Certificates for certificates
representing the Like Amount of the Debentures, or if Section 9.4(d)
applies receive a Liquidation Distribution, as the Administrative Trustees
or the Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Securityholders,
the Administrative Trustees shall establish a record date for such distribution
(which shall be not more than 45 days prior to the Liquidation Date) and, either
itself acting as exchange agent or through the appointment of a separate
exchange agent, shall establish such procedures as it shall deem appropriate to
effect the distribution of Debentures in exchange for the Outstanding Trust
Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures will be issued to holders
of Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) the Depositor shall
use its best efforts to have the Debentures listed on the American Stock
Exchange or on such other exchange, interdealer quotation system or
self-regulatory organization as the Preferred Securities are then listed, (iv)
any Trust Securities Certificates not so surrendered for exchange will be deemed
to represent a Like Amount of Debentures, accruing interest at the rate provided
for in the Debentures from the last Distribution Date on which a Distribution
was made on such Trust Securities Certificates until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to Holders of Debentures represented by such
certificates) and (v) all rights of Securityholders holding Trust Securities
will cease, except the right of such
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Securityholders to receive a Like Amount of Debentures upon surrender of Trust
Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this Section
9.4, whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be wound-up or terminated, by
the Property Trustee in such manner as the Property Trustee determines. In such
event, on the date of the dissolution of the Trust, Securityholders will be
entitled to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If, upon any such
winding up or termination, the Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding sentence, the
amounts payable by the Trust on the Trust Securities shall be paid on a pro rata
basis (based upon Liquidation Amounts). The Holder of the Common Securities will
be entitled to receive Liquidation Distributions upon any such winding-up or
termination pro rata (determined as aforesaid) with Holders of Preferred
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, Holders of the Preferred Securities shall have a priority over the
Holders of Common Securities.
SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements of the
Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except pursuant
to this Section 9.5 or Section 9.4. At the request of the Depositor, with the
consent of the Administrative Trustees and without the consent of the Holders of
the Preferred Securities, the Property Trustee or the Delaware Trustee, the
Trust may merge with or into, consolidate, amalgamate, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to a trust organized as such under the laws of any State; provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to distributions and payments upon liquidation, redemption and
otherwise, (ii) the Depositor expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed or traded,
or any Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred
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<PAGE>
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose substantially identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of Counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor owns all of the
Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the
Preferred Securities, 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 other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Limitation of Rights of Securityholders.
The death or incapacity of any person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such person or any
Securityholder for such person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
SECTION 10.2 Amendment.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Depositor, without the consent of
any Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions
of this Trust Agreement to such extent as shall be necessary to ensure that the
Trust will be classified for United States federal income tax purposes as a
grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an investment company
under the 1940 Act; provided, however, that in the case of clause (i), such
action shall not adversely affect in any material respect the interests of any
Securityholder, and any such amendments of this Trust Agreement shall become
effective when notice thereof is given to the Securityholders.
-48-
<PAGE>
(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Administrative Trustees and the Property
Trustee with (i) the consent of Trust Securityholders representing not less than
a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the Trustees
in accordance with such amendment will not affect the Trust's status as a
grantor trust for United States federal income tax purposes or the Trust's
exemption from registration as an investment company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the unanimous consent of the Securityholders to be affected
thereby (such consent being obtained in accordance with Section 6.3 or 6.6
hereof), this Trust Agreement may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely affect
the amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a Securityholder
to institute suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.3 or
6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Administrative Trustee shall enter into or consent to any amendment to this
Trust Agreement which would (i) cause the Trust to fail or cease to qualify for
the exemption from registration as an investment company under the 1940 Act,
(ii) cause the Trust to fail or cease to be classified as a grantor trust for
United States federal income tax purposes, or (iii) cause the Preferred
Securities to be delisted by the American Stock Exchange.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Delaware Trustee or the Depositor, as the case may
be, this Trust Agreement may not be amended in a manner which imposes any
additional obligation on the Depositor or the Delaware Trustee.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be required
to enter into any amendment to this Trust Agreement which affects its own
rights, duties or immunities under this Trust Agreement. The Property Trustee
shall be entitled to receive an Opinion of Counsel and an Officers' Certificate
stating that any amendment to this Trust Agreement is in compliance with this
Trust Agreement.
SECTION 10.3 Counterparts.
This Trust Agreement may be executed in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the same
instrument.
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<PAGE>
SECTION 10.4 Separability.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 10.5 Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
SECTION 10.6 Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Business Day, then such payment need not be made on such date but may
be made on the next succeeding day that is a Business Day (except as otherwise
provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as
though made on the date fixed for such payment, and no interest shall accrue
thereon for the period after such date.
SECTION 10.7 Successors.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust or the Relevant Trustee, including
any successor by operation of law. Except in connection with a consolidation,
merger or sale involving the Depositor that is permitted under Article Eight of
the Indenture and pursuant to which the assignee agrees in writing to perform
the Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
SECTION 10.8 Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 10.9 Reports, Notices and Demands.
Any report, notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
any Securityholder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a
Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to Praegitzer
Industries, Inc., 1270 SE Monmouth Cut Off Road, Dallas, Oregon 97338,
Attention: Matthew J. Bergeron, Chief Executive Officer. Such notice, demand or
other
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<PAGE>
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Trust, the Property Trustee, the Delaware Trustee or the Administrative Trustees
shall be given in writing addressed (until another address is published by the
Trust) as follows: (a) with respect to the Property Trustee to Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Department; (b) with respect to the
Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention Administrative
Trustees of PRAEGITZER INDUSTRIES TRUST I." Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
SECTION 10.10 Agreement Not to Petition.
Each of the Trustees and the Depositor agree for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any Bankruptcy Laws or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor takes action in violation of this
Section 10.10, the Property Trustee agrees, for the benefit of Securityholders,
that at the expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such petition by
the Depositor against the Trust or the commencement of such action and raise the
defense that the Depositor has agreed in writing not to take such action and
should be stopped and precluded therefrom and such other defenses, if any, as
counsel for the Trustee or the Trust may assert. The provisions of this Section
10.10 shall survive the termination of this Trust Agreement.
SECTION 10.11 Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Trust Agreement by any
of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Trust Agreement as so modified
or excluded, as the case may be.
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<PAGE>
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 10.12 Acceptance of Terms of Trust Agreement, Guarantee and
Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE
OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement this
- ----- day of ----------, 1998.
PRAEGITZER INDUSTRIES, INC. PRAEGITZER INDUSTRIES TRUST I
By: ------------------------------- By: ------------------------------------
Name: ------------------------- Name: -----------------------------,
not in his individual capacity
Title: but solely as Administrative
Trustee
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Delaware Trustee By: ------------------------------------
Name: -----------------------------,
not in his individual capacity
By: ------------------------------- but solely as Administrative
Name: Trustee
Title:
By: ------------------------------- By: ------------------------------------
Name: Name: ------------------------------
not in his individual capacity
Title: but solely as Administrative
Trustee
-52-
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Property Trustee
By: -------------------------------
Name:
Title:
By: -------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
Certificate of Trust
<PAGE>
EXHIBIT B
DTC Letter of Representations
<PAGE>
EXHIBIT C
Form of Certificate Evidencing Common Securities
<PAGE>
EXHIBIT D
Agreement as to Expenses and Liabilities
<PAGE>
EXHIBIT E
Form of Certificate Evidencing Trust Preferred Certificates
THIS TRUST PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY TRUST COMPANY (THE "DEPOSITORY") OR A NOMINEE OF THE DEPOSITORY. THIS
TRUST PREFERRED SECURITY IS EXCHANGEABLE FOR TRUST PREFERRED SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT AND NO TRANSFER OF
THIS TRUST PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS TRUST PREFERRED
SECURITY AS A WHOLE 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) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS TRUST PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK) TO
PRAEGITZER INDUSTRIES TRUST I OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY TRUST PREFERRED SECURITY ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO
CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE>
CERTIFICATE NUMBER P-1 NUMBER OF TRUST
PREFERRED SECURITIES: ____
CUSIP NO.
--------------
CERTIFICATE EVIDENCING TRUST PREFERRED SECURITIES
of
PRAEGITZER INDUSTRIES TRUST I
_____% CUMULATIVE TRUST PREFERRED SECURITIES,
(LIQUIDATION AMOUNT $10 PER TRUST PREFERRED SECURITY)
PRAEGITZER INDUSTRIES TRUST I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that CEDE & CO. (the
"Holder") is the registered owner of _______________________ (______) Trust
Preferred Securities of the Trust representing an undivided beneficial interest
in the assets of the Trust and designated the PRAEGITZER INDUSTRIES TRUST I
Cumulative Trust Preferred Securities, (liquidation amount $10 per Trust
Preferred Security) (the "Trust Preferred Securities"). The Trust Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer as provided in Section 5.4 of the Trust
Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Trust Preferred
Securities are set forth in, and this certificate and the Trust Preferred
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of ___________, 1998, as the same may be amended from time to
time (the "Trust Agreement") including the designation of the terms of Trust
Preferred Securities as set forth therein. The Holder is entitled to the
benefits of the Guarantee Agreement entered into by Praegitzer Industries, Inc.,
an Oregon corporation, and Wilmington Trust Company, a Delaware banking
corporation, as guarantee trustee, dated as of ___________, 1998, (the
"Guarantee"), to the extent provided therein. The Trust will furnish a copy of
the Trust Agreement and the Guarantee to the Holder without charge upon written
request to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust Agreement and
is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ______ day of ____________, 1998.
PRAEGITZER INDUSTRIES TRUST I
By: __________________________________
Name: __________________________________
not in his individual capacity but
solely as Administrative Trustee
<PAGE>
ASSIGNMENT
For Value Received, the undersigned assigns and transfers this Trust
Preferred Security to:_______________________________________________________
(Insert assignee's social security or tax identification number)
-----------------------------------
-----------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints______________________________________________________
__________________________________________________________________________as
agent to transfer this Trust Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:____________________
Signature:_________________________________________________________________
(Sign exactly as your name appears on the other side of this Trust
Preferred Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
Rule 17Ad-15 of the regulations promulgated under Securities Exchange Act of
1934, as amended.
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT IN ACCORDANCE WITH SECTION 5.10 OF THE TRUST AGREEMENT
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES: ____
CERTIFICATE EVIDENCING COMMON SECURITIES
of
PRAEGITZER INDUSTRIES TRUST I
______% COMMON SECURITIES
(LIQUIDATION AMOUNT $10 PER COMMON SECURITY)
PRAEGITZER INDUSTRIES TRUST I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that
Praegitzer Industries, Inc. (the "Holder") is the registered owner of
___________________ (______________) common securities of the Trust representing
an undivided beneficial interest in the assets of the Trust and designated the
Common Securities (liquidation amount $10 per Common Security) (the "Common
Securities"). Except in accordance with Section 5.10 of the Trust Agreement (as
defined below), the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of _____________, 1998, as the same may be amended from time to time (the
"Trust Agreement") including the designation of the terms of the Common
Securities as set forth therein. The Trust will furnish a copy of the Trust
Agreement to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed
this certificate this _____ day of _____________, 1998.
PRAEGITZER INDUSTRIES TRUST I
By: _______________________________________
Name: _____________________________________
not in his individual capacity but solely as
Administrative Trustee
GUARANTEE AGREEMENT
between
PRAEGITZER INDUSTRIES, INC.
(AS GUARANTOR)
and
WILMINGTON TRUST COMPANY
(AS TRUSTEE)
dated as of
___________, 1998
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Section of
Indenture Act of 1939, as amended Guarantee Agreement
--------------------------------- -------------------
310(a)(1) & (2) 4.1(a)
310(a)(3), (4) & (5) Inapplicable
310(b) 4.1(c), 2.8
310(c) Inapplicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Inapplicable
312(a) 2.2(a)
312(b) 2.2(b)
312(c) 2.1
313 2.3
314(a)(1), (2) & (3) 2.4
314(a)(4) 2.5
314(b) Inapplicable
314(c) (1) & (2) 2.5
314(c)(3) Inapplicable
314(d) Inapplicable
314(e) 1.1
314(f) 2.1
315(a) 3.1(d),3.2(a)
315(b) 2.7
315(c) 3.1
315(d) 3.1
315(e) 2.1
316(a)(1)(A) 1.1, 5.4
316(a)(1)(B) 1.1, 2.6
316(a)(2) Inapplicable
316(b) 5.3
316(c) 9.2
317(a) Inapplicable
317(b) Inapplicable
318(a) 2.1(b)
318(b) 2.1
318(c) 2.1(a)
- ---------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms
or provisions.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.....................................................1
SECTION 1.1 Definitions.......................................1
ARTICLE II TRUST INDENTURE ACT.............................................4
SECTION 2.1 Trust Indenture Act; Application...................4
SECTION 2.2 List of Holders....................................4
SECTION 2.3 Reports by the Guarantee Trustee.........................4
SECTION 2.4 Periodic Reports to the Guarantee Trustee................4
SECTION 2.5 Evidence of Compliance with Conditions Precedent.........5
SECTION 2.6 Events of Default; Waiver................................5
SECTION 2.7 Event of Default; Notice.................................5
SECTION 2.8 Conflicting Interest.....................................5
ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE..............5
SECTION 3.1 Powers and Duties of the Guarantee Trustee...............5
SECTION 3.2 Certain Rights of Guarantee Trustee......................7
SECTION 3.3 Indemnity................................................8
ARTICLE IV GUARANTEE TRUSTEE...............................................9
SECTION 4.1 Guarantee Trustee; Eligibility...........................9
SECTION 4.2 Appointment, Removal and Resignation of the
Guarantee Trustee........................................9
ARTICLE V GUARANTEE......................................................10
SECTION 5.1 Guarantee...............................................10
SECTION 5.2 Waiver of Notice and Demand.............................10
SECTION 5.3 Obligations Not Affected................................10
SECTION 5.4 Rights of Holders.......................................11
i
<PAGE>
SECTION 5.5 Guarantee of Payment....................................11
SECTION 5.6 Subrogation.............................................11
SECTION 5.7 Independent Obligations.................................12
ARTICLE VI CVENANTS AND SUBORDINATION.....................................12
SECTION 6.1 Subordination...........................................12
SECTION 6.2 Pari Passu Guarantees...................................12
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...........12
SECTION 7.1 Guarantor May Consolidate, Etc., Only on Certain Terms..12
SECTION 7.2 Successor Guarantor Substituted.........................13
ARTICLE VIII TERMINATION....................................................13
SECTION 8.1 Termination.............................................13
ARTICLE IX MISCELLANEOUS..................................................13
SECTION 9.1 Successors and Assigns..................................13
SECTION 9.2 Amendments..............................................14
SECTION 9.3 Notices.................................................14
SECTION 9.4 Benefit.................................................15
SECTION 9.5 Interpretation..........................................15
SECTION 9.6 Governing Law...........................................16
ii
<PAGE>
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT, dated as of ________________, 1998, is
executed and delivered by PRAEGITZER, INDUSTRIES, INC., an Oregon corporation
(the "Guarantor") having its principal office at 1270 SE Monmouth Cut Off Road,
Dallas, Oregon 97338 and WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders from time to time of the Preferred Securities (as defined herein) of
Praegitzer IndustriesTrust I, a Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of ________, 1998 (the "Trust Agreement"), among the Guarantor, as Depositor,
Wilmington Trust Company as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, the Administrative Trustees named therein and the Holders from
time to time of undivided beneficial interests in the assets of the Trust, the
Trust issued [$40,000,000] aggregate Liquidation Amount (as defined in the Trust
Agreement), and may (pursuant to an over-allotment option granted to the
underwriters in connection with the initial public offering of the Preferred
Securities) issue up to an additional [$600,000] aggregate liquidation amount,
of its ___% Cumulative Trust Preferred Securities, Liquidation Amount $10 per
Trust Preferred Security (all such securities, the "Preferred Securities");
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof, together with the proceeds from the issuance of the Trust's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which was deposited with
Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets;
WHEREAS, as an incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement and
pursuant to Section 5.1 hereof extends the Guarantee for the benefit of the
Holders from time to time of the Preferred Securities.
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions.
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement and the Indenture (as
defined herein), each as in effect on the date hereof.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to be an Affiliate of the Trust. For 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.
"Board of Directors" means either the board of directors of the
Guarantor or any committee of that board duly authorized to act hereunder.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 90 days after receipt of such notice.
"Guarantee" has the meaning set forth in Section 5.1.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Trust: (i) any accrued and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Trust shall have funds on hand available
therefor at such time, (ii) the applicable Redemption Price (as defined in the
Trust Agreement), to the extent the Trust shall have funds on hand available
therefor at such time, and (iii) upon a voluntary or involuntary termination,
winding up or liquidation of the Trust, unless Debentures are distributed to the
Holders, the lesser of (a) the aggregate of the Liquidation Distribution (as
defined in the Trust Agreement) and (b) the amount of assets of the Trust
remaining available for distribution to Holders of Preferred Securities after
satisfaction of liabilities to creditors of the Trust as required by applicable
law.
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement, and thereafter means each such
Successor Guarantee Trustee.
"Holder" means 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, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
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"Indenture" means the Junior Subordinated Indenture dated as of
____________, 1998, as supplemented and amended, between the Guarantor and
Wilmington Trust Company, as trustee.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the Liquidation Amount of all then
outstanding Preferred Securities issued by the Trust.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman or a Vice Chairman of the Board of Directors
of such Person or the President or a Vice President of such Person, and by the
Chief Financial Officer, the Secretary or an Assistant Secretary of such Person,
and delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' 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 such 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.
"Other Guarantees" means any guarantees similar to the Guarantee
issued, from time to time, by the Guarantor on behalf of holders of one or more
series of Preferred Securities issued by any Praegitzer IndustriesTrust (as
defined in the Indenture) other than the Trust.
"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.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any officer of the Corporate Trust Department of the Guarantee Trustee 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.
"Securities Act" means the Securities Act of 1933, as amended.
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"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) quarterly, not more than 7 days after January 1, April 1,
July 1 and October 1 of each year, a list, in such form as the Guarantee Trustee
may reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such date, and (b) at such other times as the Guarantee Trustee
may request in writing, within 30 days after the receipt by the Guarantor of any
such request, a List of Holders as of a date not more than 15 days prior to the
time such list is furnished, in each case to the extent such information is in
the possession or control of the Guarantor and is not identical to a previously
supplied list of Holders or has not otherwise been received by the Guarantee
Trustee in its capacity as such The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Guarantee Trustee.
Not later than July 31 of each year, commencing in the year beginning
January 1, 1999, the Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
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SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee, on an annual
basis, such evidence of compliance with such conditions precedent, if any,
provided for in this Guarantee Agreement that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
SECTION 2.7 Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default known to the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided, that,
except in the case of a default in the payment of a Guarantee Payment, the
Guarantee Trustee shall be protected in withholding such notice if and so long
as the Board of Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of
Default.
SECTION 2.8 Conflicting Interest.
The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purpose of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee to any Person except to a Holder exercising his or her rights pursuant
to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
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Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenant shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(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 Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or opinions that
by any provision hereof or of the Trust Indenture Act are specifically
required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee Agreement;
(ii) The Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation
Amount of the
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Preferred Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under
this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if the Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3 Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee 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 reasonably 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
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of such
request from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the
written advice or opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its employees. The Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this
Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holder, unless such Holder shall have provided
to the Guarantee Trustee such adequate security and indemnity as would
satisfy a reasonable person in
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the position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee Trustee; provided
that, nothing contained in this Section 3.2(a)(v) shall be taken to relieve
the Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Guarantee
Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, and the Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement the
Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3 Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee Agreement,
including the 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.
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ARTICLE IV GUARANTEE TRUSTEE
SECTION 4.1 Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of Section
310(a) of the Trust Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority, then, for the purposes of this Section
4.1(a)(ii) and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of the Guarantee Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at
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the expense of the Guarantor, any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
ARTICLE V GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full on
a subordinated basis to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert other than the defense of payment (the "Guarantee"). The
Guarantee is a continuing guarantee, and the Guarantor fully, knowingly and
unconditionally waives any right the Guarantor may have, under any law or
otherwise, to revoke the Guarantee as to any future transactions. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of the 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 Guarantee Trustee,
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 5.3 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the 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 (other than an extension of time for payment of
Distributions that results from the extension of any interest payment period on
the Debentures as provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
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(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 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances. There shall be no
obligation of the Holders to give notice to, or obtain the consent of, the
Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4 Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee on behalf of
the Holders; (iii) 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 in
respect of this Guarantee Agreement or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder
may institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Guarantee Trustee, the Trust or any other Person.
SECTION 5.5 Guarantee of Payment.
This Guarantee creates a guarantee of payment and not of collection.
This Guarantee will not be discharged except by payment of the Guarantee
Payments in full (without duplication of amounts theretofore paid by the Trust)
or upon distribution of Debentures to Holders as provided in the Trust
Agreement.
SECTION 5.6 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Trust in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Trust pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
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Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.7 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 Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI COVENANTS AND SUBORDINATION
SECTION 6.1 Subordination.
The obligations of the Guarantor under this Guarantee will constitute
unsecured obligations of the Guarantor and will rank subordinate and junior in
right of payment to all Senior Debt and Subordinated Debt (as defined in the
Indenture) in the same manner as Debentures (as defined in the Trust Agreement).
SECTION 6.2 Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee shall rank pari
passu with the obligations of the Guarantor under all Other Guarantees.
ARTICLE VI CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Guarantor May Consolidate, Etc., Only on Certain Terms.
The Guarantor shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Guarantor or convey, transfer or lease its properties and assets
substantially as an entirety to the Guarantor, unless:
(1) in case the Guarantor shall consolidate with or merge
into another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Guarantor is merged or the Person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Guarantor substantially as an entirety shall be a corporation, partnership or
trust organized and existing under the laws of the United States of America or
any State or the District of Columbia, and shall expressly assume the
Guarantor's obligations under this Guarantee;
(2) immediately after giving effect thereto, 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;
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(3) such consolidation, merger, conveyance, transfer or
lease is permitted under the Trust Agreement and the Indenture and does not give
rise to any breach or violation of the Trust Agreement or the Indenture; and
(4) the Guarantor has delivered to the Guarantee Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and assumption of the
Guarantor's obligations under this Guarantee Agreement comply with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Guarantee Trustee, subject to
Section 3.1 hereof, may rely upon such Officers' Certificate and Opinion of
Counsel as conclusive evidence that such transaction complies with this Section
7.1.
SECTION 7.2 Successor Guarantor Substituted.
Upon any consolidation or merger by the Guarantor with or into any
other Person, or any conveyance, transfer or lease by the Guarantor of its
properties and assets substantially as an entirety to any Person in accordance
with Section 7.1, the successor Person formed by such consolidation or into
which the Guarantor 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 Guarantor under this Guarantee Agreement with the same effect as
if such successor Person had been named as the Guarantor herein; and in the
event of any such conveyance, transfer or lease the Guarantor shall be
discharged from all obligations and covenants under this Guarantee Agreement.
ARTICLE VIII TERMINATION
SECTION 8.1 Termination.
This Guarantee Agreement shall terminate and be of no further force
and effect upon the earliest of (i) full payment of the applicable Redemption
Price of all Preferred Securities, (ii) the distribution of Debentures to the
Holders in exchange for all of the Preferred Securities or (iii) full payment of
the amounts payable in accordance with the Trust Agreement upon liquidation of
the Trust. Notwithstanding the foregoing clauses (i) through (iii), this
Guarantee Agreement will continue to be effective or will be reinstated if it
has been terminated pursuant to one of such clauses (i) through (iii), as the
case may be, if at any time any Holder must restore payment of any sums paid
with respect to Preferred Securities or this Guarantee Agreement.
ARTICLE IX MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VII hereof and
Article VIII of the Indenture, the Guarantor shall not assign its obligations
hereunder.
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SECTION 9.2 Amendments.
Except with respect to any changes which do not adversely affect the
rights of the Holders in any material respect (in which case no vote will be
required), this Guarantee Agreement may not be amended without the prior
approval of the Holders of not less than a Majority in Liquidation Amount of the
Preferred Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.
SECTION 9.3 Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address, facsimile number or to the attention of such other Person as the
Guarantor may give notice to the Holders:
Praegitzer Industries, Inc.
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
Facsimile No.: (503) 623-3403
Attention: Matthew J. Bergeron
(b) if given to the Trust, in care of the Guarantee Trustee, at the
Trust's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Trust may give notice to the
Holders:
Praegitzer Industries, Inc.
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
Facsimile No.: (503) 623-3403
Attention: Matthew J. Bergeron
-14-
<PAGE>
with a copy to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Guarantee is solely for the benefit of the Holders and is not
separately transferable from the Preferred Securities.
SECTION 9.5 Interpretation.
In this Guarantee Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined
in the preamble hereto have the respective meanings assigned to them in Section
1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the contest otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
-15-
<PAGE>
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 9.6 Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
PRAEGITZER INDUSTRIES, INC.
By:______________________________
Name:
Title:
WILMINGTON TRUST COMPANY
not in its individual capacity but solely as
Guarantee Trustee
By:_______________________________
Name:
Title:
-16-
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement"), dated as
of ____________, 1998, between PRAEGITZER INDUSTRIES, INC., an Oregon
corporation (the "Company"), and PRAEGITZER INDUSTRIES TRUST I, a Delaware
business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Junior Subordinated Deferrable Interest Debentures
(the "Debentures") from the Company and to issue and sell __% Cumulative Trust
Preferred Securities (the "Trust Preferred Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of __________, 1998, as the
same may be amended from time to time (the "Trust Agreement");
WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Trust Preferred Securities, which purchase the Company hereby agrees shall
benefit the Company and which purchase the Company acknowledges will be made in
reliance upon the execution and delivery of this Agreement, the Company and the
Trust hereby agree as follows:
ARTICLE I
Section 1.1 Guarantee by the Company.
Subject to the terms and conditions hereof, the Company hereby
irrevocably and unconditionally guarantees to each person or entity to whom the
Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the
full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust, other than obligations of the Trust to pay
to holders of any Trust Preferred Securities or other similar interests in the
Trust the amounts due such holders pursuant to the terms of the Trust Preferred
Securities or such other similar interests, as the case may be. This Agreement
is intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.2 Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Trust Preferred Securities (whether
upon redemption, liquidation, exchange or otherwise) and (b) the date on which
there are no Beneficiaries remaining; provided, however, that this Agreement
shall continue to be effective or shall be reinstated, as the case may be, if at
any time any holder of Trust Preferred Securities or any Beneficiary must
restore payment of any sums paid under the Trust Preferred Securities, under any
<PAGE>
Obligation, under the Guarantee Agreement dated the date hereof by the Company
and Wilmington Trust Company, a Delaware banking corporation, as guarantee
trustee, or under this Agreement, for any reason whatsoever. This Agreement is
continuing, irrevocable, unconditional and absolute and the Company fully,
knowingly and unconditionally waives any right to revoke the guarantee contained
in this Agreement under applicable law or otherwise.
Section 1.3 Waiver of Notice.
The Company hereby waives notice of acceptance of this Agreement and
of any Obligation to which it applies or may apply, and the Company hereby
waives presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4 No Impairment.
The obligations, covenants, agreements and duties of the Company under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) 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. There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, the Company with respect to the happening of any of the
foregoing.
Section 1.5 Enforcement.
A Beneficiary may enforce this Agreement directly against the Company
and the Company waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against the
Company.
Section 1.6 Subrogation.
The Company shall be subrogated to all (if any) rights of the Trust in
respect of any amounts paid to the Beneficiaries by the Company under this
Agreement; provided, however, that the Company shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any
rights which it may acquire by way of
-2-
<PAGE>
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Agreement, if, at the time of any such payment,
any amounts are due and unpaid under this Agreement.
ARTICLE II
Section 2.1 Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Beneficiaries.
Section 2.2 Amendment.
So long as there remains any Beneficiary or any Trust Preferred
Securities are outstanding, this Agreement shall not be modified or amended in
any manner adverse to such Beneficiary or to the holders of the Trust Preferred
Securities.
Section 2.3 Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor, by facsimile transmission (confirmed by mail), or by registered or
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed):
PRAEGITZER INDUSTRIES TRUST I
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
Facsimile No.: (503) 623-3403
Attention: Matthew J. Bergeron
PRAEGITZER INDUSTRIES, INC.
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
Facsimile No.: (503) 623-3403
Attention: Matthew J. Bergeron
Section 2.4 Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES).
-3-
<PAGE>
This Agreement is executed as of the day and year first above written.
PRAEGITZER INDUSTRIES, INC.
By: ________________________________
Name:
Title:
PRAEGITZER INDUSTRIES TRUST I
By: ________________________________
Name:
not in his individual capacity but
solely as Administrative Trustee
-4-
Face of Security
PRAEGITZER INDUSTRIES, INC.
___% JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURE DUE ______________, 2028
Registered No. _____________ Principal Amount: $___________
CUSIP No.: _________________
PRAEGITZER INDUSTRIES, INC., a corporation organized and existing
under the laws of Oregon (hereinafter called the "Company", which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Wilmington Trust Company, as Property
Trustee, for PRAEGITZER INDUSTRIES TRUST I, or registered assigns, the principal
sum of $__________ (_________ dollars) on __________, 2028; provided that the
Company may shorten the Stated Maturity of the principal of this Security to a
date not earlier than __________, 2003. The Company further promises to pay
interest, compounded quarterly, on said principal sum from the date of original
issuance or from the most recent interest payment date (each such date, an
"Interest Payment Date") on which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on January 15,
April 15, July 15 and October 15 of each calendar year commencing January 15,
1999 at the rate of ___% per annum, until the principal hereof shall have become
due and payable, plus Additional Interest, if any, until the principal hereof is
paid or duly provided for or made available for payment and on any overdue
principal and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the rate of ___% per annum. The amount of interest payable for any
period shall be computed on the basis of twelve 30-day months and a 360-day
year. The amount of interest payable for any partial period shall be computed on
the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this Security
is not a Business Day, then a payment of the interest payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), with the same force and
effect as if made on the date the payment was originally payable. A "Business
Day" shall mean any day other than a Saturday or Sunday or a day on which
banking institutions in the State of Oregon are authorized or required by law or
executive order to remain closed or on a day on which the Corporate Trust Office
of the Trustee, or the principal office of the Property Trustee under the Trust
Agreement (hereinafter referred to) for PRAEGITZER INDUSTRIES TRUST I is closed
for business. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this 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 next Business Day preceding
such Interest Payment Date. Any such interest installment not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at
<PAGE>
the close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to holders of
Securities of this series 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 of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, and so
long as the Consolidated Interest Coverage Ratio of the Company for the
Reference Period immediately preceding what would (but for the Extension Period,
defined below) otherwise be an Interest Payment Date shall be less than 1.50 to
1, the Company shall have the right at any time during the term of this Security
to defer payment of interest on this Security, at any time or from time to time,
for up to 20 consecutive quarterly interest payment periods with respect to each
deferral period (each an "Extension Period"), (during which Extension Periods
the Company shall have the right to make partial payments of interest on any
Interest Payment Date, and at the end of which the Company shall pay all
interest then accrued and unpaid (together with Additional Interest thereon to
the extent permitted by applicable law)); provided, however, that no Extension
Period shall extend beyond the Stated Maturity of the principal of this
Security; provided, further, that during any such Extension Period, the Company
shall not, and shall not permit any Subsidiary of the Company to, (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock), (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt security
of the Company (including Securities issued by the Company pursuant to the
Indenture other than the Securities represented by this certificate) that ranks
pari passu with or junior in interest to this Security, (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any Subsidiaries of the Company if such guarantee ranks pari passu in all
respects with or junior in interest to this Security (other than (a) dividends
or distributions in capital stock of the Company (which includes common and
preferred stock), (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Praegitzer Industries, Inc. Guarantee
related to the Trust Preferred Securities issued by PRAEGITZER INDUSTRIES TRUST
I, and (d) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Company's benefit plans for its directors, officers,
employees or consultants or (iv) redeem, purchase or acquire less than all of
the Securities represented by this certificate or any of the Preferred
Securities. Prior to the termination of any such Extension Period, the Company
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 60 consecutive interest payment periods or
to extend beyond the Stated Maturity and, provided further, that any such
Extension Period may continue only so long as (x) no Event of Default has
occurred and is continuing, and (y) the Consolidated Interest Coverage Ratio of
the Company for the Reference Period immediately preceding what would (but for
such Extension Period) otherwise be an Interest Payment Date is less than 1.50
to 1. Upon the termination of any such Extension Period and upon the payment of
all amounts then due on any Interest Payment Date, and subject to the foregoing
conditions and limitations, the
-2-
<PAGE>
Company may elect to begin a new Extension Period. No interest shall be due and
payable during an Extension Period except at the end thereof. The Company shall
give the Trustee, the Property Trustee and the Administrative Trustees of
PRAEGITZER INDUSTRIES TRUST I notice of its election to begin any Extension
Period at least one Business Day prior to the earlier of (i) the date on which
Distributions on the Trust Preferred Securities would be payable except for the
election to begin or extend such Extension Period, or (ii) the date the
Administrative Trustees are required to give notice to the American Stock
Exchange, the New York Stock Exchange, the Nasdaq Stock Market, Inc. or other
applicable stock exchange or automated quotation system on which the Preferred
Securities are then listed or quoted or to holders of such Preferred Securities
on the record date, or (iii) the date such Distributions are payable, but in any
event not less than one Business Day prior to such record date. The Trustee
shall give notice of the Company's election to begin a new Extension Period to
the holders of the Preferred Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee or at the office of
such paying agent or paying agents as the Company may designate from time to
time, maintained for that purpose in the United States, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the person entitled
thereto, in immediately available funds, at such place and to such account as
may be designated by the Person entitled thereto as specified in the Securities
Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior Debt and
Subordinated Debt, and this Security is issued subject to the provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided, and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt and Subordinated Debt, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
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.
-3-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
PRAEGITZER INDUSTRIES, INC.
an Oregon corporation
By:
------------------------------------
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
-4-
<PAGE>
Reverse of Security
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Indenture, dated as of ____________, 1998
(herein called 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 of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $_______.
All terms used in this Security that are defined in the Indenture and
in the Amended and Restated Trust Agreement, dated as of __________, 1998, as
amended (the "Trust Agreement"), for PRAEGITZER INDUSTRIES TRUST I among
Praegitzer Industries, Inc., as Depositor, and the Trustees named therein, shall
have the meanings assigned to them in the Indenture or the Trust Agreement, as
the case may be.
The Company may at any time, at its option, on or after _________ ,
2003, and subject to the terms and conditions of Article XI of the Indenture,
redeem this Security in whole at any time or in part from time to time, without
premium or penalty, at a redemption price equal to the accrued and unpaid
interest on the Security so redeemed to the Redemption Date, plus 100% of the
principal amount thereof.
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event in respect of PRAEGITZER INDUSTRIES TRUST I, the
Company may, at its option, at any time within 90 days of the occurrence of such
Tax Event or Investment Company Event, redeem this Security, in whole but not in
part, subject to the provisions of Section 11.7 and the other provisions of
Article XI of the Indenture, at a redemption price equal to the accrued and
unpaid interest on the Security so redeemed to the Redemption Date, plus 100% of
the principal amount thereof.
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the portion hereof not redeemed will
be issued in the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for satisfaction and discharge of
the entire indebtedness of this Security upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time
-5-
<PAGE>
Outstanding, on behalf of the Holders of all Securities of such series, 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 therefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities of this series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of this series may declare the principal amount of all the Securities
of this series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided that, in the case of
the Securities of this series issued to PRAEGITZER INDUSTRIES TRUST I, if upon
an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series fails to declare
the principal of all the Securities of this series to be immediately due and
payable, the holders of at least 25% in aggregate Liquidation Amount of the
Trust Preferred Securities then outstanding shall have such right by a notice in
writing to the Company and the Trustee; and upon any such declaration the
principal amount of and the accrued interest (including any Additional Interest)
on all the Securities of this series shall become immediately due and payable,
provided that the payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided in
Article XIII of the Indenture.
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 premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing and
thereupon one or more new Securities of this series, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
-6-
<PAGE>
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.
The Securities of this series are issuable only in registered form
without coupons in minimum denominations of $10 and any integral multiples of
$10 in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: _____________, 1998
WILMINGTON TRUST COMPANY,
Not in its individual capacity but solely as
Trustee
By:_____________________________
Authorized Officer
[Later]
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Praegitzer Industries,
Inc. on Form S-1 of our report dated September 2, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the headings "Summary Financial Data and Other
Information", "Selected Consolidated Financial Data and Other Information", and
"Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Portland, Oregon
September 2, 1998
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Praegitzer Industries,
Inc. on Form S-1 of our report dated August 6, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such prospectus.
ONG BOON BAH & CO.
ONG BOON BAH & CO.
Kuala Lumpur, Malaysia
August 26, 1998
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) ___
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)
PRAEGITZER INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Oregon 93-0790158
(State of incorporation) (I.R.S. employer identification no.)
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
(Address of principal executive offices) (Zip Code)
% Junior Subordinated Deferrable Interest Debentures of
Praegitzer Industries, Inc.
(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, 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 28th day of August, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ PATRICIA A. EVANS By: /s/ MARY ANN RICH
-------------------------- --------------------------
Assistant Secretary Name: Mary Ann Rich
Title: Vice President
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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.
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(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.
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<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.
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<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 ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
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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.
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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.
12
<PAGE>
(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 $1,000,000 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."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<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. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors 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 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
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 such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The 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.
3
<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 such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(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 Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office 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 4. 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 5. 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 6. 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 7. 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 8. 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.
6
<PAGE>
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 9. The officer designated by the Board of Directors to be in
charge of the 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 10. 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 11. 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
7
<PAGE>
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 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 though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
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 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
9
<PAGE>
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.
(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: August 28, 1998 By: /s/ MARY ANN RICH
----------------------------------------
Name: Mary Ann Rich
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, 1998.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income................. 3,978,706
LESS: Allowance for loan and lease losses............... 63,164
LESS: Allocated transfer risk reserve................... 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices.......................................................................................4,568,934
Noninterest-bearing...................................... 838,655
Interest-bearing......................................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
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) _____
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)
PRAEGITZER INDUSTRIES, INC.
PRAEGITZER INDUSTRIES TRUST I
(Exact name of obligor as specified in its charter)
Oregon 93-0790158
Delaware
(State of incorporation) (I.R.S. employer identification no.)
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
(Address of principal executive offices) (Zip Code)
% Cumulative Trust Preferred Securities of Praegitzer Industries Trust I
(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, 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 28th day of August, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ PATRICIA A. EVANS By: /s/ MARY ANN RICH
-------------------------- --------------------------
Assistant Secretary Name: Mary Ann Rich
Title: Vice President
<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.
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(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
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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.
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<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
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<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
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<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.
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(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 ByLaws 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.
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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 $1,000,000 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."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<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. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors 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 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
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 such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The 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.
3
<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 such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(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 Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office 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 4. 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 5. 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 6. 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 7. 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 8. 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.
6
<PAGE>
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 9. The officer designated by the Board of Directors to be in
charge of the 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 10. 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 11. 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
7
<PAGE>
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 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 though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
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 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
9
<PAGE>
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.
(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: August 28, 1998 By: /s/ MARY ANN RICH
-------------------------------------
Name: Mary Ann Rich
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, 1998.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income................ 3,978,706
LESS: Allowance for loan and lease losses.............. 63,164
LESS: Allocated transfer risk reserve.................. 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices.......................................................................................4,568,934
Noninterest-bearing.................................... 838,655
Interest-bearing....................................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
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) _____
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)
PRAEGITZER INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Oregon 93-0790158
(State of incorporation) (I.R.S. employer identification no.)
1270 SE Monmouth Cut Off Road
Dallas, Oregon 97338
(Address of principal executive offices) (Zip Code)
Guarantee by Praegitzer Industries, Inc. with respect to
Trust Preferred Securities of Praegitzer Industries Trust I
(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, 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 28th day of August, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ PATRICIA A. EVANS By: /s/ MARY ANN RICH
-------------------------- ---------------------------
Assistant Secretary Name: Mary Ann Rich
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.
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(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
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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.
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(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.
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(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 ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
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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.
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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 $1,000,000 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."
13
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<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. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors 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 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
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 such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The 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.
3
<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 such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(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 Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office 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 4. 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 5. 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 6. 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 7. 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 8. 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.
6
<PAGE>
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 9. The officer designated by the Board of Directors to be in
charge of the 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 10. 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 11. 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
7
<PAGE>
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 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 though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
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 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
9
<PAGE>
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.
(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: August 28, 1998 By: /s/ MARY ANN RICH
-------------------------------------
Name: Mary Ann Rich
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, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.............................................232,976
Interest-bearing balances........................................................................... 0
Held-to-maturity securities................................................................................ 195,579
Available-for-sale securities.............................................................................1,416,957
Federal funds sold and securities purchased under agreements to resell......................................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income............... 3,978,706
LESS: Allowance for loan and lease losses............. 63,164
LESS: Allocated transfer risk reserve................. 0
Loans and leases, net of unearned income, allowance, and reserve..............................3,915,542
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................135,596
Other real estate owned...................................................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies...........................................1,066
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................55,759
Other assets................................................................................................103,586
Total assets..............................................................................................6,208,857
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices.......................................................................................4,568,934
Noninterest-bearing.................................... 838,655
Interest-bearing....................................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase................................. 418,382
Demand notes issued to the U.S. Treasury.....................................................................99,350
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less......................................................524,000
With original maturity of more than one year.....................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 91,728
Total liabilities.........................................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities........................................6,520
Total equity capital........................................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital.......................................6,208,857
</TABLE>
2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,170
<SECURITIES> 0
<RECEIVABLES> 28,562
<ALLOWANCES> 0
<INVENTORY> 16,491
<CURRENT-ASSETS> 49,136
<PP&E> 124,801
<DEPRECIATION> 35,974
<TOTAL-ASSETS> 151,494
<CURRENT-LIABILITIES> 29,840
<BONDS> 73,413
0
0
<COMMON> 42,325
<OTHER-SE> 1,655
<TOTAL-LIABILITY-AND-EQUITY> 151,494
<SALES> 182,773
<TOTAL-REVENUES> 182,773
<CGS> 148,487
<TOTAL-COSTS> 148,487
<OTHER-EXPENSES> 23,456
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,757
<INCOME-PRETAX> 7,297
<INCOME-TAX> 2,215
<INCOME-CONTINUING> 5,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,082
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
