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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ORTHALLIANCE, INC.
(exact name of registrant as specified in its charter)
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DELAWARE 95-4632134
(state or jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
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8741
(Primary Standard Industrial Classification Code Number)
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
(310) 792-1300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Sam Westover
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
(310) 792-1300
(Name, address, including zip code, and telephone
number, including area code, of agent for
service of process)
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Copies to:
Robert B. Knauss
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, California 90071
Telephone: (213) 683-9100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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(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 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 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, please check
the following box. [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(2) FEE
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Debt Securities (3)
Preferred Stock, par value
$.001 per share (4)
Class A Common Stock, par value
$.001 per share (5)
Warrants (6)
- ---------------------------------------------------------------------------------------------------------------------
Total........................... $ 65,000,000(7) (1) $ 65,000,000(7) $ 5,333.40(8)
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Footnotes to table on next
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Footnotes to table from cover page
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(1) The proposed maximum offering price per unit offered by the Registrant will
be determined from time to time by the Registrant in connection with the
issuance by the Registrant of the securities registered hereunder.
(2) The proposed maximum aggregate offering price for the securities to be
offered by the Registrant has been estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(o) under the
Securities Act of 1933.
(3) Subject to note (7) below, there is being registered hereunder an
indeterminate principal amount of Debt Securities as may be issued, from
time to time, by the Registrant. The Registrant may issue Debt Securities at
an original issue discount at an aggregate initial offering price not to
exceed $65,000,000 less the dollar amount of any securities previously
issued hereunder.
(4) Subject to note (7) below, there is being registered hereunder an
indeterminate number of shares of Preferred Stock as may be issued, from
time to time, by the Registrant.
(5) Subject to note (7) below, there is being registered hereunder an
indeterminate number of shares of Common Stock as may be issued, from time
to time, by the Registrant. There are also being registered hereunder an
indeterminate number of shares of Common Stock as shall be issuable upon
conversion or redemption of Preferred Stock or Debt Securities registered
hereunder.
(6) Subject to note (7) below, there is being registered hereunder an
indeterminate amount and number of Warrants, representing rights to purchase
Debt Securities, Preferred Stock, or Common Stock registered hereunder.
(7) In no event will the aggregate initial offering price of all securities
issued from time to time by the registrants pursuant to this Registration
Statement exceed $65,000,000. The aggregate amount of Common Stock to be
sold by the Registrant and registered hereunder is further limited to that
which is permissible under Rule 415(a)(4) under the Securities Act of 1933.
The securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(8) Determined pursuant to Rule 457(o) under the Securities Act to be $18,070
less an additional filing fee of $12,736.60 which was previously paid for
$43,174,895.75 of unsold common stock of the Registrant registered under
Registration Statement on Form S-4 No. 333-53415.
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included
herein contains a combined Prospectus that also relates to a total of
$43,174,895.75 of common stock of the Registrant previously registered under
Registration Statement on Form S-4 No. 333-53415 (which was declared effective
on May 29, 1998) and not issued. This Registration Statement constitutes
Post-Effective Amendment No. 1 to Registration Statement on Form S-4 No.
333-53415 pursuant to which the total amount of unsold common stock previously
registered under Registration Statement on Form S-4 No. 33-50732 may be offered
and sold as Debt Securities, Preferred Stock, Common Stock or Warrants, without
limitation as to class of securities, together with the securities registered
hereunder, through the use of the combined Prospectus included herein relating
to Debt Securities, Preferred Stock, Common Stock and Warrants. In the event any
of such previously registered Common Stock are offered and sold prior to the
effective date of this Registration Statement, the amount of such Common Stock
will not be included in any Prospectus hereunder.
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EXPLANATORY NOTE
This registration statement contains three base prospectuses. The first
will be used for offerings of common stock. The second will be used for
offerings of convertible debt securities. The third will be used for offerings
of non-convertible debt securities, preferred stock or warrants.
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Information in this prospectus is not complete and may be changed. We may not
issue these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 30, 1999
ORTHALLIANCE, INC.
Up to $65,000,000
COMMON STOCK
We plan to offer and issue from time to time in the future shares of our common
stock having an aggregate offering price of up to $65,000,000 to owners of
orthodontic and pediatric dental practices with which we affiliate. The specific
terms upon which we will issue these securities will be determined by
negotiation with the owners of the practices with which we affiliate, but we
expect that common stock we issue in affiliation transactions will be at a price
reasonably related to the prevailing market price of our common stock at or near
the time we enter into the affiliation agreement or consummate the affiliation
transaction.
We will pay all expenses of this offering. We will not pay underwriting
discounts or commissions in connection with issuing the securities in
affiliation transactions, although we typically compensate our development
representatives (both employees and independent contractors) for new
affiliations in their territories. These persons may be deemed underwriters
within the meaning of the Securities Act of 1933.
Our common stock is traded on The Nasdaq Stock Market's National Market System
under the symbol "ORAL." On July 27, 1999, the last reported sale price of our
common stock on The Nasdaq National Market System was $7.3125 per share.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU
OTHERWISE.
The date of this prospectus is ____________, 1999
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TABLE OF CONTENTS
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PAGE
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About This Prospectus................................................................
Where You Can Find More Information..................................................
OrthAlliance.........................................................................
Transaction Terms....................................................................
Description of Our Capital Stock.....................................................
Plan of Distribution.................................................................
Validity of Common Stock ............................................................
Experts .............................................................................
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") using a "shelf" registration
process. Under this shelf process, we may from time to time offer and issue any
combination of the securities described in this prospectus and the other
prospectuses included as part of our registration statement in one or more
offerings up to a total dollar amount of $65,000,000. This prospectus provides
you with a general description of the securities we may offer and issue. From
time to time we may add, update or change information contained in this
prospectus by filing periodic reports with the SEC or by filing a prospectus
supplement with the SEC. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
You should rely only on the information contained in this prospectus, any
prospectus supplement or any document that we have referred you to. We have not
authorized anyone to provide you with different information. We are only
offering these securities in states where the offer is permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of those documents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our
filings with the SEC are also available at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W. Washington, DC
20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
- Annual Report on Form 10-K for the year ended December 31, 1998, filed
March 31, 1999; and
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed May 17, 1999.
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You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning us at the following address:
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
Attention: Paul H. Hayase, (310) 792-1300
ORTHALLIANCE
We provide practice management or consulting services to orthodontic and
pediatric dental practices throughout the United States. As of June 30, 1999, we
had affiliated with 101 orthodontic practices and 17 pediatric dental practices
(the "Allied Practitioners") operating 291 offices in 30 states pursuant to
long-term management service or consulting agreements. We intend to continue to
expand our network of affiliated practices and to target orthodontic and
pediatric dental practices that we believe are leading practices in their
markets based upon a variety of factors, including size, profitability,
historical growth and reputation for high quality care, among local consumers of
orthodontic and pediatric dental services and within the orthodontic and
pediatric dental services industry.
We provide fee-based management or consulting services to our Allied
Practitioners thereby allowing them to concentrate on providing cost effective,
quality patient care. We do not practice orthodontics or dentistry, but
generally acquire certain operating assets of an orthodontic and pediatric
dental practice, employ the employees (except orthodontists and dentists, and
where applicable law requires, hygienists, dental assistants and dental
technicians), and enter into service or consulting agreements with the practices
whereby we provide management or consulting services to the practices, including
billing and collections, cash management, purchasing, inventory management,
payroll processing, advertising and marketing, financial reporting and analysis,
productivity reporting and analysis, training and capital for satellite office
development and acquisitions. Where state law allows, and upon request by an
Allied Practitioner, we lease equipment or office space to the Allied
Practitioners.
Our common stock is traded on The Nasdaq National Market System under the symbol
"ORAL." Our executive offices and operating headquarters are located at 21535
Hawthorne Boulevard, Suite 200, Torrance, California 90503, and our telephone
number at those offices is (310) 792-1300.
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TRANSACTION TERMS
This prospectus, and the other prospectuses filed with this registration
statement, together cover up to $65,000,000 of our securities that we may issue
from time to time in the future to owners of orthodontic and pediatric dental
practices with which we affiliate. We expect that the terms of any affiliation
transaction we engage in will be determined through negotiations with the owners
of the orthodontic and pediatric dental practices, and that the share price of
any common stock issued will be valued at prices reasonably related to market
prices either when the affiliation agreement is entered into or when we deliver
the securities.
If an affiliation transaction has a material financial effect on us, we will
file information about the transaction with the SEC on a current report on Form
8-K, a quarterly report on Form 10-Q or an annual report on Form 10-K.
DESCRIPTION OF OUR CAPITAL STOCK
At June 30, 1999, our authorized capital stock consisted of:
- 70,000,000 shares of Class A common stock, par value $.001 per share, of
which 13,197,961 shares were outstanding. Throughout this Prospectus, we
refer to the Class A common stock simply as "common stock."
- 250,000 shares of Class B common stock, par value $.001 per share, of
which 249,292 shares were outstanding.
- 20,000,000 shares of preferred stock, par value $.001 per share, of
which no shares were outstanding; and
COMMON STOCK
Holders of our common stock and Class B common stock have identical rights,
powers and limitations, except as described below.
Voting Rights. Holders of common stock and Class B Common Stock may attend all
special and annual meetings of our stockholders and, share-for-share and without
regard to class, together with the holders of all other classes of stock
entitled to attend such meetings, may cast one vote for each outstanding share
of common stock or Class B common stock so held upon any matter properly
considered and acted upon by the stockholders, voting together as a single
class, except as otherwise required by law.
Liquidation Rights. If we dissolve, liquidate or wind up, holders of our common
stock and holders of any class or series of our stock entitled to participate in
the distribution of our assets (including the Class B common stock), shall be
entitled to participate in the distribution of our assets, if any, remaining
after we have paid our debts and liabilities and after we have paid to the
holders of any class of stock having preference over the common stock and the
Class B common stock the full preferential amounts, if any, to which they are
entitled.
Dividends. We may pay dividends on the common stock and the Class B common stock
and on any other class or series of stock entitled to participate as to
dividends, but only when and as declared by the Board of Directors. Holders of
common stock and Class B common stock will participate as one class with respect
to any dividends declared and paid on the common stock.
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Other Rights. Holders of our common stock do not have any preemptive or other
subscription or conversion rights. Shares of our Class B common stock are
subject to the conversion provisions described below, and are not transferable,
except to a holder's spouse, parents, siblings, lineal descendants, a trust for
the benefit of any such persons or as determined by will or the laws of descent.
Conversion Rights of Class B Common Stock. Each share of Class B common stock
shall automatically convert into common stock (i) at the ratio of eight shares
of common stock for each share of Class B common stock upon the attainment of
the Conversion Prices set forth below or (ii) if not converted pursuant to
subparagraph (i), on a one-for-one basis on August 21, 2003.
The shares of Class B common stock convertible pursuant to subparagraph (i)
above will convert in five increments of up to 50,000 shares of Class B common
stock (20% of the total number of shares of Class B common stock issued) upon
the attainment of each of the following five specified Conversion Prices:
$18.00, $21.60, $25.92, $31.10 and $37.32. Upon each such conversion, each
holder of Class B common stock will be deemed to have converted a pro rata share
of such Class B common stock then outstanding. In the event that there are any
shares of Class B common stock outstanding on August 21, 2003, all such shares
shall automatically convert into an equal number of shares of common stock. The
holders of the Class B common stock may convert each share of Class B common
stock into one share of common stock at any time prior to August 21, 2003.
PREFERRED STOCK
Our board of directors can, without approval of stockholders, issue one or more
series of serial preferred stock. Our board can also determine the number of
shares of each series and the rights, preferences and limitations of each series
including the dividend rights, voting rights, conversion rights, redemption
rights and any liquidation preferences of any series of preferred stock, the
number of shares constituting each series and the terms and conditions of issue.
CERTAIN OTHER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
Certain provisions of our Certificate of Incorporation and our Bylaws and
Delaware law could discourage, delay or prevent a third party from acquiring us.
These provisions are intended to enhance the continuity and stability of our
Board of Directors and the policies formulated by our Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change in control of the Company. These provisions are also designed
to reduce our vulnerability to an unsolicited acquisition proposal and to
discourage certain tactics that may be used in proxy fights. However, these
provisions may discourage third parties from making tender offers for our
shares. As a result, the market price of our common stock may not benefit from
any premium that might occur in anticipation of a potential or actual change in
control. These provisions also may prevent changes in our management.
Section 203 of Delaware Law. As a corporation organized under the laws of the
State of Delaware, we are subject to Section 203 of the General Corporation Law
of the State of Delaware. Section 203 restricts certain business combinations
between us and an "interested stockholder" (in general, a stockholder owning 15%
or more of our outstanding voting stock) or that stockholder's affiliates or
associates for a period of three years following the date on which the
stockholder becomes an "interested stockholder." The restrictions do not apply
if:
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- prior to an interested stockholder becoming such, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to certain exceptions; or
- on or after the date an interested stockholder becomes such, the
business combination is both approved by our board of directors and
authorized at an annual or special meeting of our stockholders (and not
by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
Classification of Board of Directors. Our Board of Directors is divided into
three classes, designated Class I, Class II and Class III. The terms of Class I,
Class II and Class III directors will expire on the respective dates of the
2002, 2000 and 2001 annual meetings of stockholders and in all cases directors
elected will serve until their respective successors are elected and qualified.
At each annual meeting of stockholders, directors will be elected to succeed
those in the class whose terms then expire, with each director so elected to
serve for a term expiring at the third succeeding annual meeting of stockholders
after such director's election, and until the director's successor is elected
and qualified. Thus, directors elected stand for election only once in three
years.
Additional Directorships, Vacancies and Removal of Directors. Our Bylaws provide
that our Board of Directors shall consist of up to nine members; our Board of
Directors currently consists of eight members. Our Board of Directors may create
additional directorships and abolish any vacant directorships. Newly-created
directorships and vacancies may be filled by the affirmative vote of a majority
of directors then in office and any director so elected shall hold office only
until the next annual meeting of stockholders, and until their successors shall
be elected and qualified. Our directors may be removed only for cause by vote of
the holders of a majority of the shares entitled to vote at an election of
directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations.
Our Bylaws require an advance notice procedure for the nomination, other than by
or at the direction of the Board of Directors or the Nominating Committee
thereof, of candidates for election as directors (the "Nomination Procedure"),
as well as for other stockholder proposals to be considered at annual
stockholders' meetings. A stockholder who proposes to nominate a person at a
meeting for election as a director generally must notify us not less than 120
nor more than 150 days prior to the anniversary of the date notice of the annual
meeting of stockholders was given in the preceding year. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the Nomination Procedure. Similar advance notice must be
given of any other proposed business which a stockholder proposes to bring
before an annual meeting of stockholders. We require advance notice in order to
give our Board of Directors an opportunity to consider the qualifications of the
proposed nominees or the merits of other stockholder proposals and, to the
extent deemed necessary or desirable by our Board of Directors, to inform
stockholders about those matters. Although the advance notice provisions do not
give our Board of Directors any power to approve or disapprove of stockholder
nominations or proposals for action by the Company, these provisions may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the procedures established by the
Bylaws are not followed and discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its
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own proposals, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
TRANSFER AGENT AND REGISTRATION
The transfer agent and registrar for our common stock is Norwest Shareowner
Services.
PLAN OF DISTRIBUTION
With this prospectus and the other prospectuses included in our registration
statement, we may issue from time to time up to a total of $65,000,000 worth of
our (i) debt securities; (ii) common stock; (iii) preferred stock; and (iv)
warrants to purchase debt securities, common stock or preferred stock. We may
issue these securities from time to time in the future to owners of orthodontic
and pediatric dental practices with which we affiliate. We expect that the price
per share of the common stock we issue in these affiliation transactions will be
reasonably related to prevailing market price of our common stock at or near the
time we enter into an affiliation agreement or consummate the affiliation
transaction.
We will pay all expenses of this offering, and we do not expect to pay any
underwriting discounts or commissions. We typically, however, compensate our
development representatives (both employees and independent contractors) for new
affiliations in their territories. Any person receiving this compensation may be
deemed to be an underwriter within the meaning of federal and state securities
laws.
The shares of common stock offered by this prospectus will have been approved
for quotation on The Nasdaq National Market System.
VALIDITY OF COMMON STOCK
The validity of the common stock offered by this prospectus will be passed upon
for us by Munger, Tolles & Olson LLP, Los Angeles, California, or another
counsel named in the prospectus supplement.
EXPERTS
The financial statements included in this Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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The information in this prospectus is not complete and may be changed. We may
not issue these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell nor does it seek an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 30, 1999
ORTHALLIANCE, INC.
Up to $65,000,000
Convertible Subordinated Notes
We plan to offer and issue from time to time convertible notes having an
aggregate offering price of up to $65,000,000 to owners of orthodontic and
pediatric dental practices with which we affiliate. The specific terms upon
which we will issue these convertible notes will be determined by negotiation
with the owners of the practices with which we affiliate, and will be included
in a prospectus supplement to this prospectus.
The convertible notes may be converted by you into the number of shares of our
common stock specified in the applicable prospectus supplement. The convertible
notes will also pay interest at the annual rate specified in the applicable
prospectus supplement. The applicable prospectus supplement will also specify
the circumstances, if any, under which we can redeem the convertible notes and
under which you can require us to repurchase the convertible notes. The
convertible notes will be subordinated in right of payment to all of our
existing and future senior debt.
See "Risk Factors" beginning on page __ to read about certain factors you should
consider before agreeing to accept the convertible notes as consideration for an
affiliation transaction.
We will pay all expenses of this offering. We will not pay underwriting
discounts or commissions in connection with issuing the securities in
affiliation transactions, although we typically compensate our development
representatives (both employees and independent contractors) for new
affiliations in their territories. These persons may be deemed underwriters
within the meaning of the Securities Act of 1933.
Our common stock is traded on The Nasdaq Stock Market's National Market System
under the symbol "ORAL." On July 27, 1999, the last reported sale price of our
common stock on The Nasdaq National Market System was $7.3125 per share.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU
OTHERWISE.
The date of this prospectus is ____________, 1999
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TABLE OF CONTENTS
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PAGE
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About This Prospectus.....................................................................
Where You Can Find More Information.......................................................
OrthAlliance..............................................................................
Ratios of Earnings to Fixed Charges.......................................................
Risk Factors Relating to the Convertible Notes............................................
Transaction Terms.........................................................................
Description of Convertible Notes..........................................................
Certain Federal Income Tax Considerations.................................................
Description of Our Capital Stock..........................................................
Plan of Distribution......................................................................
Validity of Convertible Notes.............................................................
Experts...................................................................................
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") using a "shelf" registration
process. Under this shelf process, we may from time to time offer and issue any
combination of the securities described in this prospectus and the other
prospectuses included as part of our registration statement in one or more
offerings up to a total dollar amount of $65,000,000. This prospectus provides
you with a general description of the securities we may offer and issue. From
time to time we may add, update or change information contained in this
prospectus by filing periodic reports with the SEC or by filing a prospectus
supplement with the SEC. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
You should rely only on the information contained in this prospectus, any
prospectus supplement or any document that we have referred you to. We have not
authorized anyone to provide you with different information. We are only
offering these securities in states where the offer is permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of those documents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our
filings with the SEC are also available at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W. Washington, DC
20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
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- Annual Report on Form 10-K for the year ended December 31, 1998, filed
March 31, 1999; and
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed May 17, 1999.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning us at the following address:
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
Attention: Paul H. Hayase, (310) 792-1300
ORTHALLIANCE
We provide practice management or consulting services to orthodontic and
pediatric dental practices throughout the United States. As of June 30, 1999, we
had affiliated with 101 orthodontic practices and 17 pediatric dental practices
(the "Allied Practitioners") operating 291 offices in 30 states pursuant to
long-term management service or consulting agreements. We intend to continue to
expand our network of affiliated practices and to target orthodontic and
pediatric dental practices that we believe are leading practices in their
markets based upon a variety of factors, including size, profitability,
historical growth and reputation for high quality care, among local consumers of
orthodontic and pediatric dental services and within the orthodontic and
pediatric dental services industry.
We provide fee-based management or consulting services to our Allied
Practitioners thereby allowing them to concentrate on providing cost effective,
quality patient care. We do not practice orthodontics or dentistry, but
generally acquire certain operating assets of an orthodontic and pediatric
dental practice, employ the employees (except orthodontists and dentists, and
where applicable law requires, hygienists, dental assistants and dental
technicians), and enter into service or consulting agreements with the practices
whereby we provide management or consulting services to the practices, including
billing and collections, cash management, purchasing, inventory management,
payroll processing, advertising and marketing, financial reporting and analysis,
productivity reporting and analysis, training and capital for satellite office
development and acquisitions. Where state law allows, and upon request by an
Allied Practitioner, we lease equipment or office space to the Allied
Practitioners.
Our common stock is traded on The Nasdaq National Market System under the symbol
"ORAL." Our executive offices and operating headquarters are located at 21535
Hawthorne Boulevard, Suite 200, Torrance, California 90503, and our telephone
number at those offices is (310) 792-1300.
RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges and earnings to fixed
charges for each of the periods indicated are as follows:
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<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
------------------- --------------------
1998 1999 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................414.1x 10.7x 0 0 31.5x
</TABLE>
- --------------------
These ratios are based on continuing operations. "Earnings" is determined by
adding:
- income before income taxes, and
- fixed charges, net of interest capitalized.
"Fixed charges" consist of interest (whether expensed or capitalized) and that
portion of rentals considered to be representative of the interest factor.
RISK FACTORS RELATING TO THE CONVERTIBLE NOTES
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, in particular, the statements about our plans,
strategies, and prospects. Although we believe that our plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ
materially from the forward-looking statements we make in this Prospectus are
set forth below and elsewhere in this Prospectus. All forward-looking statements
attributable to us or to persons acting on our behalf are expressly qualified in
their entirety by the following cautionary statements. In addition to the risk
factors incorporated by reference in our other public filings, the following are
specific risk factors to consider in connection with this offering of
convertible notes.
THE CONVERSION PRICE OF THE CONVERTIBLE NOTES WILL BE SUBSTANTIALLY HIGHER THAN
OUR MARKET PRICE
We currently intend to issue convertible notes with a conversion price that
substantially exceeds the market price of our common stock. This means that our
common stock would have to increase significantly in order for you to be able to
convert your convertible notes at a price greater than the principal amount of
the convertible note.
THE CONVERTIBLE NOTES WILL BE ILLIQUID AND DIFFICULT TO TRADE
In order to preserve certain tax attributes of the convertible notes, we
generally will not permit you to transfer or trade your convertible notes. In
addition, we do not intend to apply to have the convertible notes listed on any
exchange or quoted on The Nasdaq Stock Market, and we will not take any other
steps to establish a trading market for the convertible notes. You therefore
should not invest in the convertible notes unless you are able and willing to
hold the convertible notes for a substantial period of time. Any shares of our
common stock issued on conversion of the convertible notes will generally be
free of any transfer restrictions.
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YOU MAY ACCRUE TAXABLE INCOME ON THE CONVERTIBLE NOTES AT A HIGHER RATE THAN THE
INTEREST ACTUALLY PAID TO YOU
We expect that the convertible notes will bear interest at a low rate, probably
as low as 2 to 3%. As more fully discussed in "Certain Federal Income Tax
Considerations," you may be deemed to have "imputed" interest income each year
at a higher rate, meaning that you will be required to include a higher amount
in your taxable income than we pay you in cash as interest.
WE MAY INCUR MORE DEBT IN THE FUTURE
We may have to incur substantial additional debt in the future to continue
funding future practice affiliation transactions. The indenture governing the
convertible notes will not restrict our ability to incur additional debt. At
June 30, 1999, we had approximately $31.5 million in outstanding debt incurred
to fund practice affiliations. As we borrow more, we will have less available
under our existing credit agreement to satisfy our obligations under the
convertible notes. While we may in the future be able to reduce our borrowings
with the proceeds of a secondary offering of our common stock, our ability to
successfully consummate such an offering depends on market factors which we
cannot control. We may also be able to increase our borrowing limits under our
credit facilities in the future as our revenues and earnings grow, but we cannot
be sure that this will happen.
THE CONVERTIBLE NOTES WILL BE SUBORDINATED TO OUR SENIOR DEBT
The convertible notes rank behind all of our existing senior debt and all of our
future senior borrowings, except trade payables and any future debt that
expressly provides that it ranks equal with, or subordinated in right of payment
to, the convertible notes. As a result, upon any distribution to our creditors
in a bankruptcy, liquidation or reorganization or similar proceeding, the
holders of our senior debt will be entitled to be paid in full in cash before
any payment may be made with respect to the convertible notes.
As of June 30, 1999, the convertible notes would have been subordinated to
approximately $31.5 million of senior debt and approximately $23.5 million would
have been available for borrowing as additional senior debt under our credit
facilities. The indenture governing the convertible notes does not limit our
ability to incur additional debt, including senior debt.
TRANSACTION TERMS
This prospectus, and the other prospectuses filed with this registration
statement, together cover up to $65,000,000 of our securities that we may issue
from time to time in the future to owners of orthodontic and pediatric dental
practices with which we affiliate. We expect that the terms of any affiliation
transaction we engage in will be determined through negotiations with the owners
of the orthodontic and pediatric dental practices, and that we will prepare and
deliver to the owners a prospectus supplement for each issuance of convertible
notes that describes those specific terms.
If an affiliation transaction has a material financial effect on us, we will
file information about the transaction with the SEC on a current report on Form
8-K, a quarterly report on Form 10-Q or an annual report on Form 10-K.
DESCRIPTION OF CONVERTIBLE NOTES
The convertible notes will be issued under an indenture between us and First
Union National Bank. The
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following description highlights the general terms and provisions of the
convertible notes. The summary is not complete. When convertible notes are
offered in the future, the applicable prospectus supplement will explain the
particular terms of those convertible notes and the extent to which these
general provisions may not apply.
The form of the indenture has been filed as an exhibit to the registration
statement and you should read the indenture for provisions that may be important
to you. Capitalized terms used in this description have the meanings specified
in the indenture.
GENERAL
A prospectus supplement and the convertible note certificate issued to you will
include specific terms relating to the transaction. These terms may include some
or all of the following:
- the principal amount of the convertible notes being offered;
- the dates on which the principal and premium, if any, of the convertible
notes will be payable;
- the interest rate (or method of determining the rate) which the
convertible notes will bear and the interest payment dates for the
convertible notes;
- the place where we will pay (or the method of payment of) principal,
premium and interest on the convertible notes;
- any optional or mandatory redemption periods and prices;
- any rights of the holders of the convertible notes to convert or
exchange the convertible notes into or for other securities or property
and the terms and conditions of the conversion or exchange;
- the denominations in which we will issue the convertible notes, if other
than $1,000 and any integral multiple thereof;
- any trustees, authenticating or paying agents, transfer agents or
registrars with respect to the convertible notes;
- any change or addition to the covenants, definitions or to the
provisions relating to our consolidation, merger, sale or conveyance of
assets; and
- any other terms of the convertible notes.
The indenture does not limit the amount of convertible notes that may be issued.
The indenture allows convertible notes to be issued up to the principal amount
that may be authorized by us from time to time.
We may issue convertible notes at a discount below their stated principal
amount. Even if we do not issue the convertible notes below their stated
principal amount, for United States federal income tax purposes the convertible
notes may be deemed to have been issued with a discount because of certain
interest payment characteristics. We describe under "Certain Federal Income Tax
Considerations" and,
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to the extent not described in this prospectus, will describe in a prospectus
supplement, the United States federal income tax considerations applicable to
convertible notes issued at a discount or deemed to be issued at a discount.
FORM AND DENOMINATION
Convertible notes will be issued only in fully registered form in the name of
the holder, without interest coupons, in minimum denominations of $1,000 and
integral multiples in excess thereof.
PAYMENT AND CONVERSION
The principal of the convertible notes will be payable in U.S. dollars, against
surrender thereof at the office or agency of the trustee specified in the
applicable prospectus supplement, in U.S. currency by dollar check or by
transfer to a dollar account (such a transfer to be made only to a holder of an
aggregate principal amount of convertible notes of at least $100,000 and only if
such holder shall have furnished wire instructions to the trustee in writing no
later than 15 days prior to the relevant payment date) maintained by the holder
with a bank in the United States. Payment of interest on a convertible note may
be made by dollar check mailed to the address of the person entitled thereto as
such address shall appear in the security register, or, upon written application
by the holder to the security registrar setting forth instructions not later
than the relevant record date, by transfer to a dollar account (such a transfer
to be made only to a holder of an aggregate principal amount of convertible
notes of at least $100,000 and only if such holder shall have furnished wire
instructions in writing to the trustee no later than 15 days prior to the
relevant payment date) maintained by the holder with a bank in the United
States.
Any payment on a convertible note due on any day that is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in such place of
payment, place of conversion or other place, as the case may be, are authorized
or obligated by law or executive order to close.
Convertible notes may be surrendered for conversion at the corporate trust
office of the trustee specified in the applicable prospectus supplement, or at
any other office or agency we maintain for such purpose.
CONVERSION RIGHTS
The holder of any convertible note will have the right, at the holder's option,
to convert any portion of the principal amount of a convertible note that is an
integral multiple of $1,000 into shares of our common stock, unless previously
redeemed or repurchased, at a conversion rate equal to the number of shares per
$1,000 principal amount of convertible notes specified in the applicable
prospectus supplement (the "Conversion Rate"), subject to adjustment as
described below. The right to convert a convertible note called for redemption
or delivered for repurchase will terminate at the close of business on the
redemption date or repurchase date for such convertible note, unless we default
in making the payment due upon redemption or repurchase, as the case may be.
The right of conversion attaching to any convertible note may be exercised by
the holder by delivering the convertible note at our office or agency specified
in the applicable prospectus supplement or at any other office or agency we
maintain for such purpose and at the office or agency of any additional
conversion agent appointed by us, accompanied by a duly signed and completed
notice of conversion.
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The trustee or any conversion agent will provide you with a copy of the notice
of conversion. The conversion date will be the date on which the convertible
note and the duly signed and completed notice of conversion are so delivered. As
promptly as practicable on or after the conversion date, we will issue and
deliver to the trustee a certificate or certificates for the number of full
shares of common stock issuable upon conversion, together with payment in lieu
of any fraction of a share or, at our option, rounded up to the next whole
number of shares. The trustee will send such certificate to the Conversion Agent
for delivery to the holder. Such shares of common stock issuable upon conversion
of the convertible notes, in accordance with the provisions of the indenture,
will be fully paid and nonassessable and will also rank pari passu with the
other shares of common stock outstanding from time to time.
Holders that surrender convertible notes for conversion on a date that is not an
interest payment date are not entitled to receive any interest for the period
from the next preceding interest payment date to the date of conversion, except
as described below. However, holders of convertible notes on a regular record
date, including convertible notes surrendered for conversion after the regular
record date, will receive the interest payable on such convertible notes on the
next succeeding interest payment date. Accordingly, any convertible note
surrendered for conversion during the period from the close of business on a
regular record date to the opening of business on the next succeeding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date on the principal amount of convertible
notes being surrendered for conversion; provided, however, that no such payment
will be required upon the conversion of any convertible note (or portion
thereof) that has been called for redemption or that is eligible to be delivered
for repurchase if, as a result, the right to convert such convertible note would
terminate during the period between such regular record date and the close of
business on the next succeeding interest payment date.
No other payment or adjustment for interest, or for any dividends in respect of
common stock, will be made upon conversion. Holders of common stock issued upon
conversion will not be entitled to receive any dividends payable to holders of
common stock as of any record date before the close of business on the
conversion date. No fractional shares will be issued upon conversion but, in
lieu thereof, we will calculate an appropriate amount to be paid in cash on the
basis set forth in the indenture or, at our option, round up to the next whole
number of shares.
A holder delivering a convertible note for conversion will not be required to
pay any securities transfer taxes or duties in respect of the issue or delivery
of our common stock on conversion. However, we will not pay any securities
transfer tax or duty that may be payable as a result of the issuance of our
common stock in a name other than that of the holder of the convertible note.
Certificates representing shares of common stock will not be issued or delivered
unless the person requesting such issue has paid to us the amount of any such
securities transfer tax or duty or has established to our satisfaction that such
securities transfer tax or duty has been paid.
The Conversion Rate is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in our common
stock on shares of our capital stock;
(b) the issuance to all holders of our common stock of certain
rights, options or warrants entitling them to subscribe for or purchase common
stock at less than the then current market price (determined as provided in the
indenture) of common stock as of the record date for holders entitled to receive
such rights, options or warrants;
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(c) subdivisions, combinations and reclassifications of our common
stock; and
(d) distributions to all holders of our common stock of evidences
of our debt, shares of capital stock or other property (including securities,
but excluding those dividends, rights, options, warrants and distributions
referred to in clauses (a) and (b) above, dividends and distributions paid
exclusively in cash and distributions upon mergers or consolidations to which
the next succeeding paragraph applies).
We reserve the right to make such increases in the conversion rate in addition
to those required in the foregoing provisions as we consider to be advisable in
order that any event treated for income tax purposes as a dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock will not be taxable to the recipients. No adjustment of the conversion
rate will be required to be made until the cumulative adjustments amount to 1.0%
or more of the conversion rate. We shall compute any adjustments to the
conversion price and will give notice to the holders of any such adjustments.
In case we consolidate or merge with or into another Person or another Person
merges into us (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of the common stock), or
in the case of any conveyance, sale, transfer or lease of all or substantially
all of our properties and assets, each convertible note then outstanding will,
without the consent of the holder of any convertible note, become convertible
only into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale, conveyance, lease or other transfer by a
holder of the number of shares of common stock into which such convertible note
was convertible immediately prior thereto (assuming such holder of common stock
failed to exercise any rights of election and that such convertible note was
then convertible).
If at any time we make a distribution of property to our shareholders that would
be taxable to such shareholders as a dividend for federal income tax purposes
(e.g., distributions of evidences of our debt or assets, but generally not stock
dividends on common stock or rights to subscribe for common stock) and, pursuant
to the anti-dilution provisions of the indenture, the number of shares into
which convertible notes are convertible is increased, such increase may be
deemed for federal income tax purposes to be the payment of a taxable dividend
to holders of convertible notes. See "Certain Federal Income Tax
Considerations."
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
convertible notes (including amounts payable on any redemption or repurchase)
will be subordinated in right of payment to the extent set forth in the
indenture to the prior full and final payment of all of our Senior Debt.
"Senior Debt" means all our debt, whenever incurred, which is outstanding at any
time, except (a) debt which by its terms is not senior to the convertible notes,
(b) debt held by us or our affiliates, and (c) debt specified in the applicable
prospectus supplement. As used in this definition, "debt" includes:
(a) our debt for money borrowed or evidenced by bonds, convertible
notes or similar instruments;
(b) our liability under any letter of credit or performance bond;
(c) our obligations under capitalized lease obligations;
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(d) liabilities of others of the kinds described in the preceding
clauses (a) through (c) that we have guaranteed or is otherwise our legal
liability;
(e) obligations of the type described in the preceding clauses (a)
through (d) secured by a lien on our assets; and
(f) any and all deferrals, renewals, extensions and refundings of,
or amendments, modifications or supplements to, any debt or obligation described
in the preceding clauses (a) through (e) whether or not there is any notice to
or consent of the holders of convertible notes.
In addition, the Trustee's right to compensation, reimbursement of expenses and
indemnification under the Indenture are not subordinated to the convertible
notes.
We cannot pay any principal or interest on the convertible notes, or redeem or
repurchase any convertible notes, (a) after any Senior Debt becomes due and
payable, unless and until all such Senior Debt is paid in full, or (b) after a
payment default on any Senior Debt, unless and until the payment default has
been cured, waived or otherwise ceases to exist.
If we make any distributions to our creditors upon our dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due on
all Senior Debt must be paid in full before the holders of the convertible notes
are entitled to receive any payment. Therefore, in the event of our insolvency,
our creditors who are holders of Senior Debt may recover more, ratably, than the
holders of the convertible notes, and such subordination may reduce or eliminate
payments to the holders of the convertible notes. As of June 30, 1999, the
Company had approximately $31.5 million of Senior Debt, excluding trade
payables, outstanding.
In addition, the convertible notes will be effectively subordinated to all debt
and other liabilities (including trade payables and lease obligations) of our
subsidiaries. The indenture does not limit our ability or the ability of any of
our subsidiaries to incur debt, including Senior Debt.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The indenture generally permits a consolidation or merger between us and another
corporation or other entity. It also permits the sale or lease by us of all or
substantially all of our property and assets. If this happens, the remaining or
acquiring corporation or other entity shall assume all of our responsibilities
and liabilities under the indenture including the payment of all amounts due on
the convertible notes and performance of the covenants in the indenture.
We are only permitted to consolidate or merge with or into any other entity or
sell all or substantially all of our assets according to the terms and
conditions of the indenture. The remaining or acquiring entity will be
substituted for us in the indenture with the same effect as if it had been an
original party to the indenture. Thereafter, the successor entity may exercise
our rights and powers under the indenture, in our name or in its own name. Any
act or proceeding required or permitted to be done by our board of directors or
any of our officers may be done by the board or officers of the successor
entity. If we consolidate or merge with or into any other entity or sell all or
substantially all of our assets, we shall be released from all our liabilities
and obligations under the indenture and under the convertible notes.
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MODIFICATION OF INDENTURE
We may modify the indenture, without prior notice to or consent of any holders,
for any of the following purposes:
- to evidence the succession of another person to our rights and the
assumption by the successor of our covenants and obligations in the
indenture and the convertible notes;
- to add to the covenants for the benefit of the holders of the
convertible notes or to surrender any right or power conferred upon us
in the indenture;
- to add any additional events of default;
- to facilitate the issuance of convertible notes in certificated or
bearer form;
- to add to, change or eliminate any provision of the indenture, so long
as any such addition, change or elimination will (a) neither apply to
any debt security of any series created prior to the modification which
is entitled to the benefit of the provision nor modify the rights of the
holders of any such debt security with respect to the provision or (b)
become effective only when there are no debt securities outstanding;
- to secure the convertible notes;
- to establish the forms or terms of any series of convertible notes prior
to their issuance;
- to evidence and provide for a successor or other trustee with respect to
the convertible notes of one or more series and to add to or change any
provision of the indenture to provide for or facilitate the
administration of the indenture by more than one trustee;
- to comply with the provisions of the indenture relating to
consolidations, mergers and sales of assets; or
- to cure any ambiguity, defect or inconsistency or to make any change
that does adversely affect the rights of any holders in any material
respect.
We may modify and amend the indenture with the written consent of at least a
majority in principal amount of the outstanding convertible notes of each series
affected by the modifications or amendments; provided, however, that such
modifications may not, without the consent of the holder of each outstanding
debt security of each series affected thereby:
- change the stated maturity, reduce the principal amount or the interest
rate, change the currency in which the principal or interest is payable,
impair a holder's right to initiate suit for the payment of the
convertible note at maturity, or modify the subordination provisions in
a manner adverse to the holders of convertible notes; or
- reduce the minimum percentage of convertible notes required to approve
any modification to the indenture or to waive compliance with provisions
of the indenture or any defaults under the indenture.
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EVENTS OF DEFAULT
"Event of Default", with respect to any series of convertible notes, means any
of the following:
- failure to pay interest on any debt security of that series for 30 days;
- failure to pay the principal or any premium on any debt security of that
series when due;
- failure to perform any covenant with respect to that series in the
indenture that continues for 90 days after being given written notice by
holders of at least 10% of the affected series;
- default under our other debt instruments which results in the
acceleration of the maturity of those other debt instruments;
- certain events in bankruptcy, insolvency or reorganization of
OrthAlliance or a significant subsidiary that has guaranteed the payment
of such series of convertible notes; or
- any other event of default included in the indenture or any supplemental
indenture.
An event of default for a particular series of convertible notes does not
necessarily constitute an event of default for any other series of convertible
notes issued under the indenture.
If an event of default relating to certain events in bankruptcy, insolvency or
reorganization of OrthAlliance occurs and continues, the entire principal of all
the convertible notes of all series will be due and payable immediately. If any
other event of default for any series of convertible notes occurs and continues,
the trustee or the holders of at least 25% in aggregate principal amount of the
convertible notes of the series may declare the entire principal of all the
convertible notes of that series to be due and payable immediately. If this
happens, subject to certain conditions, the holders of a majority of the
aggregate principal amount of the convertible notes of that series can void the
declaration. The trustee may withhold notice to the holders of convertible notes
of any default (except in the payment of principal or interest or in the making
of any sinking fund payment) if it considers such withholding of notice to be in
the interests of the holders.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under the indenture at the request, order
or direction of any holders, unless the holders offer the trustee indemnity. If
they provide this indemnification, the holders of a majority in principal amount
of any series of convertible notes may direct the time, method and place of
conducting any proceeding or any remedy available to the trustee, or exercising
any power conferred upon the trustee, for any series of convertible notes.
No holder of any debt security can institute any action or proceeding with
respect to the indenture unless the holder gives written notice of an event of
default to the trustee, the holders of at least 25% in aggregate principal
amount of the outstanding convertible notes of the applicable series shall have
requested the trustee to institute the action or proceeding and has
appropriately indemnified the trustee, and the trustee has failed to institute
the action or proceeding within a specified time period.
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THE TRUSTEE
We maintain banking and other commercial relationships with the trustee and its
affiliates. In addition, the trustee may own convertible notes and serve as
trustee under our other indentures.
GOVERNING LAW
The indenture and the convertible notes will be governed by and construed in
accordance with the laws of the State of New York.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material U.S. federal income tax
consequences, as of the date hereof, relating to the receipt, ownership and
disposition of the convertible notes and of the common stock into which the
convertible notes may be converted, but does not purport to be a complete
analysis of all the potential tax considerations relating thereto. This summary
is based on current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury Regulations, judicial authority, and current
administrative rulings and pronouncements of the Internal Revenue Service (the
"Service"), all of which are subject to change, possibly with retroactive
effect. We have not sought any ruling from the Service with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the Service will agree with such statements and
conclusions. Significantly, the proposed budget for the U.S. Government for
fiscal year 2000 contains numerous proposals that, if enacted, would
substantially alter the description of certain of the tax considerations
contained herein.
This summary deals only with holders who are United States persons within the
meaning of the Code that will hold the convertible notes and the common stock
into which the convertible notes may be converted as "capital assets" (within
the meaning of Section 1221 of the Code) ("Holders"), and does not address all
tax aspects that may be relevant to particular holders of the convertible notes
and the common stock into which the convertible notes may be converted in light
of their personal investment or tax circumstances, or to certain types of
holders subject to special treatment under the U.S. federal income tax laws
(including, individual retirement accounts and other tax-deferred accounts,
insurance companies, financial institutions, broker-dealers, tax-exempt
organizations, holders holding the convertible notes as part of a hedge,
straddle or conversion transaction, holders whose functional currency is not the
U.S. dollar, or holders who are not Holders). This summary discusses the tax
considerations applicable to an initial Holder of the convertible notes who
receives the convertible notes in an affiliation transaction and does not
discuss the tax considerations applicable to subsequent purchasers of the
convertible notes. Moreover, the effect of any applicable state, local or
foreign tax law is not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. THE TAX TREATMENT MAY
VARY DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. POTENTIAL RECIPIENTS OF
CONVERTIBLE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS
AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
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GAIN OR LOSS UPON AN AFFILIATION TRANSACTION AND THE INSTALLMENT METHOD
Except as otherwise described below for Holders eligible to use the installment
method, and assuming that the affiliation transaction does not qualify as a
tax-free reorganization under the Code (because, for example, no or insufficient
stock is issued as consideration in the affiliation transaction), a Holder
generally will recognize gain or loss in the affiliation transaction in an
amount equal to the difference between (i) the amount of cash, the fair market
value of any property and the imputed principal amount of the convertible note
received in the affiliation transaction, and (ii) the Holder's tax basis in the
property he transfers in the affiliation transaction. The character of the gain
or loss will be determined by reference to the property transferred by the
Holder in the affiliation transaction.
Under certain circumstances, a Holder may be eligible to report some or all of
the gain realized in the affiliation transaction in which he receives the
convertible note under the installment method. Under the installment method, a
Holder will generally report a proportionate amount of the total gain realized
in the affiliation transaction each time the Holder receives a payment of a
portion of the affiliation transaction consideration, including any payment
received in the year the affiliation transaction is consummated, and any
principal payments on the convertible note. The character of the gain recognized
will generally be the same character as that realized at the time of the
affiliation transaction. If eligible, the installment method applies
automatically unless a Holder properly elects not to report gain on the
installment method.
THE ABILITY OF A HOLDER TO USE THE INSTALLMENT METHOD WILL BE DETERMINED BY MANY
FACTORS, SUCH AS THE FORM OF THE AFFILIATION TRANSACTION, THE SPECIFIC FEATURES
OF THE CONVERTIBLE NOTE, THE STATUS OF THE HOLDER AND THE SPECIFIC ASSETS THAT
ARE EXCHANGED FOR THE CONVERTIBLE NOTE. EACH HOLDER SHOULD CONSULT HIS TAX
ADVISOR TO DETERMINE WHETHER HE MAY USE THE INSTALLMENT METHOD.
In the event that a Holder is reporting gain relating to his convertible note on
the installment method, such Holder may be subject to accelerated taxation if he
uses the convertible note as security for debt (the "Anti-Pledging Rules"), and
may have to pay interest charges to the federal government on some or all of the
Holder's deferred gain realized from the affiliation transaction (the "Interest
Charge Rules"). If, in the affiliation transaction, assets are transferred for a
"sales price" of more than $150,000, the Anti-Pledging Rules generally will
apply. Under the Anti-Pledging Rules, if any debt is directly secured under the
terms of the debt or any underlying arrangements by any interest in the
convertible note, the net proceeds of the secured debt are treated as deemed
principal payments on the convertible note and the Holder must recognize gain in
proportion to the deemed principal payment, up to the amount of unrecognized
gain realized in the affiliation transaction. In such an event, subsequent
principal payments on the convertible note will not trigger further gain
recognition until the principal payments exceed the gain recognized under the
Anti-Pledging Rules.
If the affiliation transaction exceeds the $150,000 threshold, the Interest
Charge Rules generally will apply to the extent the Holder holds installment
obligations (the convertible notes and any other obligations with respect to
which the Holder uses the installment method to report gain and that meet the
$150,000 threshold), the face amount of which exceeds $5,000,000. For example, a
Holder who holds a $7,000,000 convertible note and no other installment
obligations will need to pay an interest charge to the federal government at the
federal underpayment interest rate on the deferred taxes attributable to
$2,000,000 (the excess of $7,000,000 over the $5,000,000 threshold) of the
$7,000,000 convertible note. The $5,000,000 threshold is generally applied on a
Holder by Holder basis, but in the case of a Holder that is a pass-through
entity for federal income tax purposes, the $5,000,000 threshold is applied, and
the interest charge calculations are made, separately for each owner of the
pass-through entity.
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PAYMENT OF INTEREST
Interest on a convertible note generally will be includable in the income of a
Holder as ordinary income at the time such interest is received or accrued, in
accordance with such Holder's method of accounting for U.S. federal income tax
purposes.
It is anticipated that the stated interest rate on a convertible note may be
less than the applicable federal rate. The applicable federal rate is based on
the yield to maturity of outstanding U.S. obligations of similar maturity, and
is published monthly by the Service. If the interest rate on a convertible note
is below the applicable federal rate, then two important consequences will
generally follow under federal income tax rules. First, the imputed interest
rules will generally recharacterize a portion of the purported principal amount
of the convertible note as interest in an amount sufficient to result in a
lower, imputed principal amount of debt bearing interest at the applicable
federal rate. Second, an amount equal to the imputed interest will be treated as
original issue discount ("OID"), and such OID, together with any other OID
associated with the convertible note, must be recognized as interest income by a
Holder under a constant yield method over the term of the convertible note,
regardless of the Holder's regular method of accounting, and regardless of the
actual receipt of cash with respect to the period to which such interest income
relates. As a result, Holders subject to these rules will include interest in
gross income in advance of the receipt of cash.
CONSTRUCTIVE DISTRIBUTIONS
The conversion price of the convertible notes may change under certain
circumstances. Section 305 of the Code and applicable Treasury Regulations
provide that under certain circumstances, adjustments in the conversion price of
convertible securities (including the failure to adjust the conversion rate) may
be treated as a constructive distribution of stock taxable as a dividend (to the
extent of OrthAlliance's current or accumulated earnings and profits) if, as a
result of such adjustment, the proportionate interest of the holder of such
convertible security in the assets or earnings and profits of the issuer is
increased. Adjustments in the conversion price (or the failure to make such
adjustments) of the convertible notes may result in constructive distributions
to Holders if, and to the extent that, the adjustment in the conversion price
increases any such Holder's proportionate interest in the assets or earnings and
profits of OrthAlliance. Any such constructive distribution will be taxed as
ordinary income (subject to a possible dividends-received deduction for
corporate holders as described below under "--Distributions on Common Stock
after Conversion) to the extent of our current or accumulated earnings and
profits.
SALE, EXCHANGE OR REDEMPTION OF THE CONVERTIBLE NOTES
In the event that a Holder is reporting gain relating to his convertible note on
the installment method and the convertible note is disposed of, the Holder will
generally be required to recognize gain or loss upon such disposition to the
extent of the difference between the Holder's basis in the convertible note and
either (i) the amount realized (except to the extent such amount is attributable
to accrued interest income not previously included in income, which is taxable
as ordinary income) in the event that the convertible note is satisfied for an
amount other than its face value or is sold, exchanged, or converted into common
stock, or (ii) the fair market value of the convertible note at the time of
disposition in the event that the convertible note is disposed of otherwise than
by way of sale, exchange, or conversion into common stock. For purposes of this
calculation, the Holder's basis in the convertible note is the excess of the
face value of the convertible note over the amount of income the Holder would
recognize if the convertible note were satisfied in full. The character of such
gain or loss generally will be the same character as that realized at the time
of the affiliation transaction.
In the event that a Holder is not reporting gain relating to the convertible
note on the installment method, upon the sale, exchange or redemption of a
convertible note (other than the conversion of a convertible note into common
stock), a Holder generally will recognize capital gain or loss equal to the
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difference between (i) the amount of cash and the fair market value of any other
property received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income not previously included in
income, which is taxable as ordinary income) and (ii) such Holder's adjusted tax
basis in the convertible note. In such a circumstance, a Holder's adjusted tax
basis in a convertible note generally will equal the amount of the "issue price"
of the convertible note (generally, here, the imputed principal amount of the
convertible note) at the time of the affiliation transaction increased by any
accruals of OID and decreased by any payments on the convertible note other than
payments of "qualified" stated interest. Generally, such gain or loss will be
long-term capital gain or loss if the Holder's holding period in the convertible
note is more than one year at the time of sale, exchange or redemption.
DEDUCTIBILITY OF INTEREST BY ORTHALLIANCE
OrthAlliance generally plans to structure the convertible notes so that the
interest paid or accrued on the convertible notes will be deductible by
OrthAlliance for U.S. federal income tax purposes in accordance with its normal
method of accounting or under the OID rules, if applicable. There are Code
provisions that can potentially apply to disallow interest deductions
attributable to the convertible notes. For example, Section 279 of the Code
generally disallows interest deductions on certain convertible "corporate
acquisition indebtedness." Additionally, Section 163(l) of the Code generally
disallows interest deductions on "disqualified debt instruments," which
generally are certain debt instruments that are payable in the equity of the
issuer of the debt instrument. OrthAlliance generally expects that the
convertible notes will be structured so that deductions for interest paid or
accrued on the convertible notes will not be disallowed under either of such
provisions.
CONVERSION OF THE CONVERTIBLE NOTES
Upon conversion of a convertible note into common stock, a Holder who has been
reporting gain relating to the convertible note on the installment method will
recognize gain or loss as described above under "--Sale, Exchange or Redemption
of the Convertible Notes." In such an event, the Holder will have a tax basis in
the common stock received equal to the fair market value of the common stock at
the time of the conversion. The Holder's holding period with respect to such
common stock will begin on the day following the date of conversion.
In the event that a Holder is not reporting gain relating to the convertible
notes on the installment method, such Holder generally will not recognize any
income, gain or loss upon conversion of a convertible note into common stock
except to the extent of cash, if any, received in lieu of a fractional share of
common stock and for shares of common stock that are attributable to accrued
interest not previously included in income. A Holder's tax basis in the common
stock received on conversion of a convertible note will be the same as such
Holder's adjusted tax basis in the convertible note at the time of conversion
(reduced by any basis allocable to a fractional share interest for which cash is
received), and the holding period for the common stock received on conversion
will generally include the holding period of the convertible note converted.
However, a Holder's tax basis in shares of common stock considered attributable
to any accrued interest generally will equal the amount of such accrued interest
included in income, and the holding period for such shares will begin on the day
following the date of conversion. Cash received in lieu of a fractional share of
common stock upon conversion will be treated as a payment in exchange for the
fractional share. Accordingly, cash received in lieu of a fractional share of
common stock generally will result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the holder's
adjusted tax basis in the fractional share).
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DISTRIBUTIONS ON COMMON STOCK AFTER CONVERSION
Once a Holder has converted a convertible note into shares of common stock, the
gross amount of a distribution with respect to such common stock will be treated
as a dividend taxable as ordinary income on the date of receipt, to the extent
of our current or accumulated earnings and profits as determined for U.S.
federal income tax purposes. Distributions in excess of such current or
accumulated earnings and profits will first constitute a non-taxable return of
capital to the extent of a Holder's adjusted tax basis in the common stock and
then will be treated as a capital gain realized on the disposition of the common
stock. The portion of any distribution treated as a non-taxable return of
capital will reduce such Holder's tax basis in such common stock.
Subject to numerous limitations, to the extent distributions made by
OrthAlliance are treated as dividends, a Holder that is taxed as a domestic
corporation and that meets the applicable holding period and taxable income
requirements of the Code may be entitled to a deduction under Section 243 of the
Code in an amount generally equal to 70% of such dividend (the
"Dividends-Received-Deduction"). With respect to common stock considered to be
"portfolio stock," as defined in Section 246A of the Code, the
Dividends-Received-Deduction will be reduced to the extent that the common stock
constitutes "debt financed portfolio stock." In addition, under certain
circumstances, the receipt of a dividend on the common stock determined to be an
"extraordinary dividend" may cause the Holder's tax basis in the common stock to
be reduced by the "untaxed portion" of the dividend and could result in gain
recognition pursuant to Section 1059 of the Code.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock, a Holder generally will recognize
capital gain or loss equal to the difference between (i) the amount of cash and
the fair market value of any other property received upon the sale or exchange
and (ii) such Holder's adjusted tax basis in the common stock. Generally, such
gain or loss will be long-term capital gain or loss if the Holder's holding
period in the common stock is more than one year at the time of the sale or
exchange of the common stock. A Holder's basis and holding period in common
stock received upon conversion of a convertible note are determined as discussed
above under "--Conversion of the Convertible Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments to certain
non-corporate Holders of (i) principal and interest on a convertible note, (ii)
dividends on common stock, (iii) proceeds of the sale of a convertible note and
(iv) proceeds of the sale of common stock. In addition, a 31% backup withholding
tax may apply to such payments if the Holder (i) fails to furnish or certify his
correct taxpayer identification number to the payor in the manner required, or
(ii) does not otherwise establish his entitlement to an exemption. Any amounts
withheld under the backup withholding rules from a payment to a Holder will be
allowed as a credit against such Holder's U.S. federal income tax and may
entitle the Holder to a refund, provided that the required information is
furnished to the Service.
DESCRIPTION OF OUR CAPITAL STOCK
At June 30, 1999, our authorized capital stock consisted of:
- 70,000,000 shares of Class A common stock, par value $.001 per share, of
which 13,197,961 shares were outstanding. Throughout this Prospectus, we
refer to the Class A common stock simply as "common stock."
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- 250,000 shares of Class B common stock, par value $.001 per share, of
which 249,292 shares were outstanding.
- 20,000,000 shares of preferred stock, par value $.001 per share, of
which no shares were outstanding; and
COMMON STOCK
Holders of our common stock and Class B common stock have identical rights,
powers and limitations, except as described below.
Voting Rights. Holders of common stock and Class B Common Stock may attend all
special and annual meetings of our stockholders and, share-for-share and without
regard to class, together with the holders of all other classes of stock
entitled to attend such meetings, may cast one vote for each outstanding share
of common stock or Class B common stock so held upon any matter properly
considered and acted upon by the stockholders, voting together as a single
class, except as otherwise required by law.
Liquidation Rights. If we dissolve, liquidate or wind up, holders of our common
stock and holders of any class or series of our stock entitled to participate in
the distribution of our assets (including the Class B common stock), shall be
entitled to participate in the distribution of our assets, if any, remaining
after we have paid our debts and liabilities and after we have paid to the
holders of any class of stock having preference over the common stock and the
Class B common stock the full preferential amounts, if any, to which they are
entitled.
Dividends. We may pay dividends on the common stock and the Class B common stock
and on any other class or series of stock entitled to participate as to
dividends, but only when and as declared by the Board of Directors. Holders of
common stock and Class B common stock will participate as one class with respect
to any dividends declared and paid on the common stock.
Other Rights. Holders of our common stock do not have any preemptive or other
subscription or conversion rights. Shares of our Class B common stock are
subject to the conversion provisions described below, and are not transferable,
except to a holder's spouse, parents, siblings, lineal descendants, a trust for
the benefit of any such persons or as determined by will or the laws of descent.
Conversion Rights of Class B Common Stock. Each share of Class B common stock
shall automatically convert into common stock (i) at the ratio of eight shares
of common stock for each share of Class B common stock upon the attainment of
the Conversion Prices set forth below or (ii) if not converted pursuant to
subparagraph (i), on a one-for-one basis on August 21, 2003.
The shares of Class B common stock convertible pursuant to subparagraph (i)
above will convert in five increments of up to 50,000 shares of Class B common
stock (20% of the total number of shares of Class B common stock issued) upon
the attainment of each of the following five specified Conversion Prices:
$18.00, $21.60, $25.92, $31.10 and $37.32. Upon each such conversion, each
holder of Class B common stock will be deemed to have converted a pro rata share
of such Class B common stock then outstanding. In the event that there are any
shares of Class B common stock outstanding on August 21, 2003, all such shares
shall automatically convert into an equal number of shares of common stock. The
holders of the Class B common stock may convert each share of Class B common
stock into one share of common stock at any time prior to August 21, 2003.
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PREFERRED STOCK
Our board of directors can, without approval of stockholders, issue one or more
series of serial preferred stock. Our board can also determine the number of
shares of each series and the rights, preferences and limitations of each series
including the dividend rights, voting rights, conversion rights, redemption
rights and any liquidation preferences of any series of preferred stock, the
number of shares constituting each series and the terms and conditions of issue.
CERTAIN OTHER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
Certain provisions of our Certificate of Incorporation and our Bylaws and
Delaware law could discourage, delay or prevent a third party from acquiring us.
These provisions are intended to enhance the continuity and stability of our
Board of Directors and the policies formulated by our Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change in control of the Company. These provisions are also designed
to reduce our vulnerability to an unsolicited acquisition proposal and to
discourage certain tactics that may be used in proxy fights. However, these
provisions may discourage third parties from making tender offers for our
shares. As a result, the market price of our common stock may not benefit from
any premium that might occur in anticipation of a potential or actual change in
control. These provisions also may prevent changes in our management.
Section 203 of Delaware Law. As a corporation organized under the laws of the
State of Delaware, we are subject to Section 203 of the General Corporation Law
of the State of Delaware. Section 203 restricts certain business combinations
between us and an "interested stockholder" (in general, a stockholder owning 15%
or more of our outstanding voting stock) or that stockholder's affiliates or
associates for a period of three years following the date on which the
stockholder becomes an "interested stockholder." The restrictions do not apply
if:
- prior to an interested stockholder becoming such, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to certain exceptions; or
- on or after the date an interested stockholder becomes such, the
business combination is both approved by our board of directors and
authorized at an annual or special meeting of our stockholders (and not
by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
Classification of Board of Directors. Our Board of Directors is divided into
three classes, designated Class I, Class II and Class III. The terms of Class I,
Class II and Class III directors will expire on the respective dates of the
2002, 2000 and 2001 annual meetings of stockholders and in all cases directors
elected will serve until their respective successors are elected and qualified.
At each annual meeting of stockholders, directors will be elected to succeed
those in the class whose terms then expire, with each director so elected to
serve for a term expiring at the third succeeding annual meeting of stockholders
after such director's election, and until the director's successor is elected
and qualified. Thus, directors elected stand for election only once in three
years.
Additional Directorships, Vacancies and Removal of Directors. Our Bylaws provide
that our Board of Directors shall consist of up to nine members; our Board of
Directors currently consists of eight members. Our Board of Directors may create
additional directorships and abolish any vacant
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directorships. Newly-created directorships and vacancies may be filled by the
affirmative vote of a majority of directors then in office and any director so
elected shall hold office only until the next annual meeting of stockholders,
and until their successors shall be elected and qualified. Our directors may be
removed only for cause by vote of the holders of a majority of the shares
entitled to vote at an election of directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations.
Our Bylaws require an advance notice procedure for the nomination, other than by
or at the direction of the Board of Directors or the Nominating Committee
thereof, of candidates for election as directors (the "Nomination Procedure"),
as well as for other stockholder proposals to be considered at annual
stockholders' meetings. A stockholder who proposes to nominate a person at a
meeting for election as a director generally must notify us not less than 120
nor more than 150 days prior to the anniversary of the date notice of the annual
meeting of stockholders was given in the preceding year. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the Nomination Procedure. Similar advance notice must be
given of any other proposed business which a stockholder proposes to bring
before an annual meeting of stockholders. We require advance notice in order to
give our Board of Directors an opportunity to consider the qualifications of the
proposed nominees or the merits of other stockholder proposals and, to the
extent deemed necessary or desirable by our Board of Directors, to inform
stockholders about those matters. Although the advance notice provisions do not
give our Board of Directors any power to approve or disapprove of stockholder
nominations or proposals for action by the Company, these provisions may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the procedures established by the
Bylaws are not followed and discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its own proposals, without regard to whether consideration of such
nominees or proposals might be harmful or beneficial to the Company and its
stockholders.
TRANSFER AGENT AND REGISTRATION
The transfer agent and registrar for our common stock is Norwest Shareowner
Services.
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PLAN OF DISTRIBUTION
With this prospectus and the other prospectuses included in our registration
statement, we may issue from time to time up to a total of $65,000,000 worth of
our (i) debt securities; (ii) common stock; (iii) preferred stock; and (iv)
warrants to purchase debt securities, common stock or preferred stock. We may
issue these securities from time to time in the future to owners of orthodontic
and pediatric dental practices with which we affiliate.
We will pay all expenses of this offering, and we do not expect to pay any
underwriting discounts or commissions. We typically, however, compensate our
development representatives (both employees and independent contractors) for new
affiliations in their territories. Any person receiving this compensation may be
deemed to be an underwriter within the meaning of federal and state securities
laws.
Unless otherwise specified in the applicable prospectus supplement, the
convertible notes offered by this prospectus will not be listed on any exchange
or quoted on the Nasdaq National Market System, and we will not make a market in
the convertible notes or take action to facilitate the secondary trading of the
convertible notes.
VALIDITY OF CONVERTIBLE NOTES
The validity of the convertible notes offered by this prospectus, and the common
stock issuable upon conversion of the convertible notes, will be passed upon for
us by Munger, Tolles & Olson LLP, Los Angeles, California, or another counsel
named in the prospectus supplement.
EXPERTS
The financial statements included in this Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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Information in this prospectus is not complete and may be changed. We may not
issue these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 30, 1999
ORTHALLIANCE, INC.
Up to $65,000,000
DEBT SECURITIES
PREFERRED STOCK
AND
WARRANTS
We plan to offer and issue from time to time our debt securities, preferred
stock and warrants to purchase our debt securities, preferred stock and common
stock, having an aggregate offering price of up to $65,000,000 to owners of
orthodontic and pediatric dental practices with which we affiliate. The specific
terms upon which we will issue these securities will be determined by
negotiation with the owners of the practices with which we affiliate, and will
be included in a prospectus supplement to this prospectus.
We will pay all expenses of this offering. We will not pay underwriting
discounts or commissions in connection with issuing the securities in
affiliation transactions, although we typically compensate our development
representatives (both employees and independent contractors) for new
affiliations in their territories. These persons may be deemed underwriters
within the meaning of the Securities Act of 1933.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU
OTHERWISE.
The date of this prospectus is ____________, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus.......................................................
Where You Can Find More Information.........................................
OrthAlliance................................................................
Ratios of Earnings to Fixed Charges.........................................
Transaction Terms...........................................................
Description of Debt Securities..............................................
Description of Our Capital Stock............................................
Description of Warrants.....................................................
Plan of Distribution........................................................
Validity of Securities......................................................
Experts.....................................................................
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") using a "shelf" registration
process. Under this shelf process, we may from time to time offer and issue any
combination of the securities described in this prospectus and the other
prospectuses included as part of our registration statement in one or more
offerings up to a total dollar amount of $65,000,000. This prospectus provides
you with a general description of the securities we may offer and issue. From
time to time we may add, update or change information contained in this
prospectus by filing periodic reports with the SEC or by filing a prospectus
supplement with the SEC. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
You should rely only on the information contained in this prospectus, any
prospectus supplement or any document that we have referred you to. We have not
authorized anyone to provide you with different information. We are only
offering these securities in states where the offer is permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of those documents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our
filings with the SEC are also available at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W. Washington, DC
20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
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- Annual Report on Form 10-K for the year ended December 31, 1998, filed
March 31, 1999; and
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed May 17, 1999.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning us at the following address:
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, California 90503
Attention: Paul H. Hayase, (310) 792-1300
ORTHALLIANCE
We provide practice management or consulting services to orthodontic and
pediatric dental practices throughout the United States. As of June 30, 1999, we
had affiliated with 101 orthodontic practices and 17 pediatric dental practices
(the "Allied Practitioners") operating 291 offices in 30 states pursuant to
long-term management service or consulting agreements. We intend to continue to
expand our network of affiliated practices and to target orthodontic and
pediatric dental practices that we believe are leading practices in their
markets based upon a variety of factors, including size, profitability,
historical growth and reputation for high quality care, among local consumers of
orthodontic and pediatric dental services and within the orthodontic and
pediatric dental services industry.
We provide fee-based management or consulting services to our Allied
Practitioners thereby allowing them to concentrate on providing cost effective,
quality patient care. We do not practice orthodontics or dentistry, but
generally acquire certain operating assets of an orthodontic and pediatric
dental practice, employ the employees (except orthodontists and dentists, and
where applicable law requires, hygienists, dental assistants and dental
technicians), and enter into service or consulting agreements with the practices
whereby we provide management or consulting services to the practices, including
billing and collections, cash management, purchasing, inventory management,
payroll processing, advertising and marketing, financial reporting and analysis,
productivity reporting and analysis, training and capital for satellite office
development and acquisitions. Where state law allows, and upon request by an
Allied Practitioner, we lease equipment or office space to the Allied
Practitioners.
Our common stock is traded on The Nasdaq National Market System under the symbol
"ORAL." Our executive offices and operating headquarters are located at 21535
Hawthorne Boulevard, Suite 200, Torrance, California 90503, and our telephone
number at those offices is (310) 792-1300.
RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges and earnings to fixed
charges for each of the periods indicated are as follows:
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<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
------------------- --------------------
1998 1999 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................414.1x 10.7x 0 0 31.5x
</TABLE>
- --------------------
These ratios are based on continuing operations. "Earnings" is determined by
adding:
- income before income taxes, and
- fixed charges, net of interest capitalized.
"Fixed charges" consist of interest (whether expensed or capitalized) and that
portion of rentals considered to be representative of the interest factor.
TRANSACTION TERMS
This prospectus, and the other prospectuses filed with this registration
statement, together cover up to $65,000,000 of our securities that we may issue
from time to time in the future to owners of orthodontic and pediatric dental
practices with which we affiliate. We expect that the terms of any affiliation
transaction we engage in will be determined through negotiations with the owners
of the orthodontic and pediatric dental practices, and that we will prepare and
deliver to the owners a prospectus supplement for each issuance of securities
that describes those specific terms.
If an affiliation transaction has a material financial effect on us, we will
file information about the transaction with the SEC on a current report on Form
8-K, a quarterly report on Form 10-Q or an annual report on Form 10-K.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be issued under an indenture between us and a trustee
chosen by us. The trustee for each series of debt securities will be identified
in the applicable prospectus supplement. The following description highlights
the general terms and provisions of the debt securities. The summary is not
complete. When debt securities are offered in the future, the applicable
prospectus supplement will explain the particular terms of those securities and
the extent to which these general provisions may not apply.
The form of the indenture has been filed as an exhibit to the registration
statement and you should read the indenture for provisions that may be important
to you. Capitalized terms used in this description have the meanings specified
in the indenture.
GENERAL
Any debt securities we offer will be our direct, unsecured general obligations.
The debt securities will be either senior debt securities or subordinated debt
securities. The senior debt securities will rank equally with all of our other
senior and unsubordinated debt. The subordinated debt securities will have a
junior position to all of our senior debt.
The indenture does not limit the aggregate principal amount of debt securities
that can be issued. The debt securities may be issued in one or more series as
we may authorize from time to time.
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A prospectus supplement and the convertible note certificate issued to you will
include specific terms relating to the transaction. These terms may include some
or all of the following:
- the title of the debt securities;
- the principal amount of the series of debt securities being offered;
- the dates on which the principal and premium, if any, of the debt
securities will be payable;
- the interest rate (or method of determining the rate) which the debt
securities will bear and the interest payment dates for the debt
securities;
- the place where we will pay (or the method of payment of) principal,
premium and interest on the debt securities;
- any optional redemption periods and prices;
- any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the debt securities;
- any rights of the holders of the debt securities to convert or exchange
the debt securities into or for other securities or property and the
terms and conditions of the conversion or exchange;
- the denominations in which we will issue the debt securities, if other
than $1,000 and any integral multiple thereof;
- the manner in which we will determine the amounts of principal, premium
or interest payments on the debt securities if these amounts may be
determined by reference to an index or based on a formula;
- if prior to maturity the actual principal amount of the debt securities
payable at maturity is not determinable, the manner in which we will
determine the deemed principal amount of the debt securities payable at
maturity;
- any changes or additions to the defeasance or discharge provisions;
- the currency in which we will pay principal, premium and interest on the
debt securities if other than the United States dollar;
- if other than the entire principal amount, the portion of the principal
amount of the debt securities (a) payable if the maturity of the debt
securities is accelerated or (b) provable in bankruptcy;
- any provisions relating to any security provided for the debt
securities;
- any change in or addition to the events of default;
- whether we will issue the debt securities in the form of global
securities and the terms and conditions of the global securities;
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<PAGE> 38
- any trustees, authenticating or paying agents, transfer agents or
registrars with respect to the debt securities;
- any change or addition to the covenants, definitions or to the
provisions relating to our consolidation, merger, sale or conveyance of
assets;
- the terms of any guarantee of the debt securities;
- any subordination provisions relating to the debt securities;
- the dates for certain required reports to the trustee relating to debt
securities which do not bear interest; and
- any other terms of the debt securities.
The indenture does not limit the amount of debt securities that may be issued.
The indenture allows debt securities to be issued up to the principal amount
that may be authorized by us from time to time.
We may issue debt securities at a discount below their stated principal amount.
Even if we do not issue the debt securities below their stated principal amount,
for United States federal income tax purposes the debt securities may be deemed
to have been issued with a discount because of certain interest payment
characteristics. We will describe in a prospectus supplement the United States
federal income tax considerations applicable to debt securities issued at a
discount or deemed to be issued at a discount.
DENOMINATIONS, REGISTRATION, TRANSFER AND PAYMENT
We may issue the debt securities in registered form without coupons, or, if
specified in the applicable prospectus supplement, in the form of one or more
global securities. Unless specified by us otherwise in the prospectus
supplement, registered securities denominated in U.S. dollars will be issued
only in denominations of $1,000 or any integral multiple of $1,000.
You may present registered securities for exchange or transfer at the corporate
trust office of the trustee or at any other office or agency maintained by us
for such purpose, without payment of any service charge except for any tax or
governmental charge.
We will pay principal and any premium and interest on registered securities at
the corporate trust office of the trustee or at any other office or agency
maintained by us for such purpose. We may choose to make any interest payment on
a registered security (a) by check mailed to the address of the holder as such
address shall appear in the register or (b) if provided in the prospectus
supplement, by wire transfer to an account maintained by the holder as specified
in the register. We will make interest payments to the person in whose name the
debt security is registered at the close of business on the day we specify.
SUBORDINATION
If specified in the applicable prospectus supplement, debt securities will be
subordinated to senior debt to the extent set forth below.
"Senior Debt" means all our debt, whenever incurred, which is outstanding at any
time, except (a) debt which by its terms is not senior to the convertible notes,
(b) debt held by us or our affiliates, and (c) debt specified in the applicable
prospectus supplement. As used in this definition, "debt" includes:
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(a) our debt for money borrowed or evidenced by bonds, convertible
notes or similar instruments;
(b) our liability under any letter of credit or performance bond;
(c) our obligations under capitalized lease obligations;
(d) liabilities of others of the kinds described in the preceding
clauses (a) through (c) that we have guaranteed or is otherwise our legal
liability;
(e) obligations of the type described in the preceding clauses (a)
through (d) secured by a lien on our assets; and
(f) any and all deferrals, renewals, extensions and refundings of,
or amendments, modifications or supplements to, any debt or obligation described
in the preceding clauses (a) through (e) whether or not there is any notice to
or consent of the holders of convertible notes.
In addition, the trustee's right to compensation, reimbursement of expenses and
indemnification under the indenture are not subordinated to the debt securities.
We cannot pay any principal or interest on the debt securities, or redeem or
repurchase any debt securities, (a) after any Senior Debt becomes due and
payable, unless and until all such Senior Debt is paid in full, or (b) after a
payment default on any Senior Debt, unless and until the payment default has
been cured, waived or otherwise ceases to exist.
If we make any distributions to our creditors upon our dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due on
all Senior Debt must be paid in full before the holders of the convertible notes
are entitled to receive any payment. Therefore, in the event of our insolvency,
our creditors who are holders of Senior Debt may recover more, ratably, than the
holders of the convertible notes, and such subordination may reduce or eliminate
payments to the holders of the convertible notes. As of June 30, 1999, the
Company had approximately $31.5 million of Senior Debt, excluding trade
payables, outstanding.
In addition, the debt securities will be effectively subordinated to all debt
and other liabilities (including trade payables and lease obligations) of our
subsidiaries. The indenture does not limit our ability or the ability of any of
our subsidiaries to incur debt, including Senior Debt.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The indenture generally permits a consolidation or merger between us and another
corporation or other entity. It also permits the sale or lease by us of all or
substantially all of our property and assets. If this happens, the remaining or
acquiring corporation or other entity shall assume all of our responsibilities
and liabilities under the indenture including the payment of all amounts due on
the debt securities and performance of the covenants in the indenture.
We are only permitted to consolidate or merge with or into any other entity or
sell all or substantially all of our assets according to the terms and
conditions of the indenture. The remaining or acquiring entity will be
substituted for us in the indenture with the same effect as if it had been an
original party to the indenture. Thereafter, the successor entity may exercise
our rights and powers under the indenture, in our name or in its own name. Any
act or proceeding required or permitted to be done by our board of directors or
any of our officers may be done by the board or officers of the successor
entity. If we consolidate or merge with or into any other entity or sell all or
substantially all of our
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<PAGE> 40
assets, we shall be released from all our liabilities and obligations under the
indenture and under the debt securities.
MODIFICATION OF INDENTURE
We may modify the indenture, without prior notice to or consent of any holders,
for any of the following purposes:
- to evidence the succession of another person to our rights and the
assumption by the successor of our covenants and obligations in the
indenture and the debt securities;
- to add to the covenants for the benefit of the holders of the debt
securities or to surrender any right or power conferred upon us in the
indenture;
- to add any additional events of default;
- to facilitate the issuance of debt securities in certificated or bearer
form;
- to add to, change or eliminate any provision of the indenture, so long
as any such addition, change or elimination will (a) neither apply to
any debt security of any series created prior to the modification which
is entitled to the benefit of the provision nor modify the rights of the
holders of any such debt security with respect to the provision or (b)
become effective only when there are no debt securities outstanding;
- to secure the debt securities;
- to establish the forms or terms of any series of debt securities prior
to their issuance;
- to evidence and provide for a successor or other trustee with respect to
the debt securities of one or more series and to add to or change any
provision of the indenture to provide for or facilitate the
administration of the indenture by more than one trustee;
- to comply with the provisions of the indenture relating to
consolidations, mergers and sales of assets; or
- to cure any ambiguity, defect or inconsistency or to make any change
that does adversely affect the rights of any holders in any material
respect.
We may modify and amend the indenture with the written consent of at least a
majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments; provided, however, that such
modifications may not, without the consent of the holder of each outstanding
debt security of each series affected thereby:
- change the stated maturity, reduce the principal amount or the interest
rate, change the currency in which the principal or interest is payable,
impair a holder's right to initiate suit for the payment of the debt
security at maturity, or modify the subordination provisions in a manner
adverse to the holders of debt securities; or
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- reduce the minimum percentage of debt securities required to approve any
modification to the indenture or to waive compliance with provisions of
the indenture or any defaults under the indenture.
EVENTS OF DEFAULT
"Event of Default", with respect to any series of debt securities, means any of
the following:
- failure to pay interest on any debt security of that series for 30 days;
- failure to pay the principal or any premium on any debt security of that
series when due;
- failure to perform any covenant with respect to that series in the
indenture that continues for 90 days after being given written notice by
holders of at least 10% of the affected series;
- default under our other debt instruments which results in the
acceleration of the maturity of those other debt instruments;
- certain events in bankruptcy, insolvency or reorganization of
OrthAlliance or a significant subsidiary that has guaranteed the payment
of such series of debt securities; or
- any other event of default included in the indenture or any supplemental
indenture.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under the indenture.
If an event of default relating to certain events in bankruptcy, insolvency or
reorganization of OrthAlliance occurs and continues, the entire principal of all
the convertible notes of all series will be due and payable immediately. If any
other event of default for any series of convertible notes occurs and continues,
the trustee or the holders of at least 25% in aggregate principal amount of the
debt securities of the series may declare the entire principal of all the debt
securities of that series to be due and payable immediately. If this happens,
subject to certain conditions, the holders of a majority of the aggregate
principal amount of the debt securities of that series can void the declaration.
The trustee may withhold notice to the holders of debt securities of any default
(except in the payment of principal or interest or in the making of any sinking
fund payment) if it considers such withholding of notice to be in the interests
of the holders.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under the indenture at the request, order
or direction of any holders, unless the holders offer the trustee indemnity. If
they provide this indemnification, the holders of a majority in principal amount
of any series of debt securities may direct the time, method and place of
conducting any proceeding or any remedy available to the trustee, or exercising
any power conferred upon the trustee, for any series of debt securities.
No holder of any debt security can institute any action or proceeding with
respect to the indenture unless the holder gives written notice of an event of
default to the trustee, the holders of at least 25% in aggregate principal
amount of the outstanding debt securities of the applicable series shall have
requested the trustee to institute the action or proceeding and has
appropriately indemnified the trustee, and the trustee has failed to institute
the action or proceeding within a specified time period.
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SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
Discharge. With certain exceptions, we will be discharged from our obligations
under the indenture with respect to any series of debt securities by either
paying the principal of, any premium and interest on all of the outstanding debt
securities of such series when due and payable or delivering to the trustee all
outstanding debt securities of such series for cancellation.
Legal Defeasance. We may be discharged from our obligations on the debt
securities of any series at any time if we deposit with the trustee sufficient
cash or government obligations to pay the principal of, any premium and interest
on the debt securities of that series to the stated maturity date or a
redemption date for the debt securities of that series. If that happens, payment
of the debt securities of such series may not be accelerated because of an event
specified as an event of default with respect to such debt securities, and the
holders of the debt securities of such series will not be entitled to the
benefits of the indenture, except for registration of transfer and exchange of
debt securities and replacement of lost, stolen or mutilated debt securities.
We may be discharged only if, among other things, we have delivered to the
trustee an opinion of counsel stating that we have received from the United
States Internal Revenue Service a ruling or, since the date of execution of the
indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that the holders of the debt securities of that series
will not recognize income, gain or loss for federal income tax purposes as a
result of the defeasance.
Covenant Defeasance. We may omit to comply with certain restrictive covenants
contained in the indenture and any omission to comply with those covenants will
not constitute a default or event of default with respect to the debt securities
of any series. We may omit to comply with such covenants only if, among other
things:
- we deposit with the trustee sufficient cash or government obligations to
pay the principal of, any premium and interest on the debt securities of
that series to the stated maturity date or a redemption date for the
debt securities of that series; and
- we deliver to the trustee an opinion of counsel to the effect that the
holders of the debt securities of the series will not recognize income,
gain or loss for federal income tax purposes as a result of the covenant
defeasance.
Effect of Discharge and Defeasance. Under federal income tax law as of the date
of this prospectus, a discharge may be treated as an exchange of the related
debt securities. Each holder might be required to recognize gain or loss equal
to the difference between the holder's cost or other tax basis for the debt
securities and the value of the holder's interest in the trust. Holders might be
required to include as income a different amount than would be includable
without the discharge. Prospective investors are urged to consult their own tax
advisors as to the tax consequences of a discharge, including the applicability
and effect of tax laws other than the federal income tax law.
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THE TRUSTEE
We may appoint a separate trustee for any series of debt securities. We may
maintain banking and other commercial relationships with the trustee and its
affiliates in the ordinary course of business and the trustee may own debt
securities and serve as trustee under our other indentures.
GOVERNING LAW
The indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF OUR CAPITAL STOCK
At June 30, 1999, our authorized capital stock consisted of:
- 70,000,000 shares of Class A common stock, par value $.001 per share, of
which 13,197,961 shares were outstanding. Throughout this Prospectus, we
refer to the Class A common stock simply as "common stock."
- 250,000 shares of Class B common stock, par value $.001 per share, of
which 249,292 shares were outstanding.
- 20,000,000 shares of preferred stock, par value $.001 per share, of
which no shares were outstanding; and
COMMON STOCK
Holders of our common stock and Class B common stock have identical rights,
powers and limitations, except as described below.
Voting Rights. Holders of common stock and Class B Common Stock may attend all
special and annual meetings of our stockholders and, share-for-share and without
regard to class, together with the holders of all other classes of stock
entitled to attend such meetings, may cast one vote for each outstanding share
of common stock or Class B common stock so held upon any matter properly
considered and acted upon by the stockholders, voting together as a single
class, except as otherwise required by law.
Liquidation Rights. If we dissolve, liquidate or wind up, holders of our common
stock and holders of any class or series of our stock entitled to participate in
the distribution of our assets (including the Class B common stock), shall be
entitled to participate in the distribution of our assets, if any, remaining
after we have paid our debts and liabilities and after we have paid to the
holders of any class of stock having preference over the common stock and the
Class B common stock the full preferential amounts, if any, to which they are
entitled.
Dividends. We may pay dividends on the common stock and the Class B common stock
and on any other class or series of stock entitled to participate as to
dividends, but only when and as declared by the Board of Directors. Holders of
common stock and Class B common stock will participate as one class with respect
to any dividends declared and paid on the common stock.
Other Rights. Holders of our common stock do not have any preemptive or other
subscription or conversion rights. Shares of our Class B common stock are
subject to the conversion provisions
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described below, and are not transferable, except to a holder's spouse, parents,
siblings, lineal descendants, a trust for the benefit of any such persons or as
determined by will or the laws of descent.
Conversion Rights of Class B Common Stock. Each share of Class B common stock
shall automatically convert into common stock (i) at the ratio of eight shares
of common stock for each share of Class B common stock upon the attainment of
the Conversion Prices set forth below or (ii) if not converted pursuant to
subparagraph (i), on a one-for-one basis on August 21, 2003.
The shares of Class B common stock convertible pursuant to subparagraph (i)
above will convert in five increments of up to 50,000 shares of Class B common
stock (20% of the total number of shares of Class B common stock issued) upon
the attainment of each of the following five specified Conversion Prices:
$18.00, $21.60, $25.92, $31.10 and $37.32. Upon each such conversion, each
holder of Class B common stock will be deemed to have converted a pro rata share
of such Class B common stock then outstanding. In the event that there are any
shares of Class B common stock outstanding on August 21, 2003, all such shares
shall automatically convert into an equal number of shares of common stock. The
holders of the Class B common stock may convert each share of Class B common
stock into one share of common stock at any time prior to August 21, 2003.
PREFERRED STOCK
Our board of directors can, without approval of stockholders, issue one or more
series of serial preferred stock. Our board can also determine the number of
shares of each series and the rights, preferences and limitations of each series
including the dividend rights, voting rights, conversion rights, redemption
rights and any liquidation preferences of any series of preferred stock, the
number of shares constituting each series and the terms and conditions of issue.
CERTAIN OTHER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
Certain provisions of our Certificate of Incorporation and our Bylaws and
Delaware law could discourage, delay or prevent a third party from acquiring us.
These provisions are intended to enhance the continuity and stability of our
Board of Directors and the policies formulated by our Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change in control of the Company. These provisions are also designed
to reduce our vulnerability to an unsolicited acquisition proposal and to
discourage certain tactics that may be used in proxy fights. However, these
provisions may discourage third parties from making tender offers for our
shares. As a result, the market price of our common stock may not benefit from
any premium that might occur in anticipation of a potential or actual change in
control. These provisions also may prevent changes in our management.
Section 203 of Delaware Law. As a corporation organized under the laws of the
State of Delaware, we are subject to Section 203 of the General Corporation Law
of the State of Delaware. Section 203 restricts certain business combinations
between us and an "interested stockholder" (in general, a stockholder owning 15%
or more of our outstanding voting stock) or that stockholder's affiliates or
associates for a period of three years following the date on which the
stockholder becomes an "interested stockholder." The restrictions do not apply
if:
- prior to an interested stockholder becoming such, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
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- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to certain exceptions; or
- on or after the date an interested stockholder becomes such, the
business combination is both approved by our board of directors and
authorized at an annual or special meeting of our stockholders (and not
by written consent) by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
Classification of Board of Directors. Our Board of Directors is divided into
three classes, designated Class I, Class II and Class III. The terms of Class I,
Class II and Class III directors will expire on the respective dates of the
2002, 2000 and 2001 annual meetings of stockholders and in all cases directors
elected will serve until their respective successors are elected and qualified.
At each annual meeting of stockholders, directors will be elected to succeed
those in the class whose terms then expire, with each director so elected to
serve for a term expiring at the third succeeding annual meeting of stockholders
after such director's election, and until the director's successor is elected
and qualified. Thus, directors elected stand for election only once in three
years.
Additional Directorships, Vacancies and Removal of Directors. Our Bylaws provide
that our Board of Directors shall consist of up to nine members; our Board of
Directors currently consists of eight members. Our Board of Directors may create
additional directorships and abolish any vacant directorships. Newly-created
directorships and vacancies may be filled by the affirmative vote of a majority
of directors then in office and any director so elected shall hold office only
until the next annual meeting of stockholders, and until their successors shall
be elected and qualified. Our directors may be removed only for cause by vote of
the holders of a majority of the shares entitled to vote at an election of
directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations.
Our Bylaws require an advance notice procedure for the nomination, other than by
or at the direction of the Board of Directors or the Nominating Committee
thereof, of candidates for election as directors (the "Nomination Procedure"),
as well as for other stockholder proposals to be considered at annual
stockholders' meetings. A stockholder who proposes to nominate a person at a
meeting for election as a director generally must notify us not less than 120
nor more than 150 days prior to the anniversary of the date notice of the annual
meeting of stockholders was given in the preceding year. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the Nomination Procedure. Similar advance notice must be
given of any other proposed business which a stockholder proposes to bring
before an annual meeting of stockholders. We require advance notice in order to
give our Board of Directors an opportunity to consider the qualifications of the
proposed nominees or the merits of other stockholder proposals and, to the
extent deemed necessary or desirable by our Board of Directors, to inform
stockholders about those matters. Although the advance notice provisions do not
give our Board of Directors any power to approve or disapprove of stockholder
nominations or proposals for action by the Company, these provisions may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the procedures established by the
Bylaws are not followed and discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its own proposals, without regard to whether consideration of such
nominees or proposals might be harmful or beneficial to the Company and its
stockholders.
TRANSFER AGENT AND REGISTRATION
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The transfer agent and registrar for our common stock is Norwest Shareowner
Services.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities ("debt warrants"), preferred
stock ("preferred stock warrants"), or common stock ("common stock warrants,"
and collectively with the preferred stock warrants, the "stock warrants"). We
may issue warrants independently or together with any other securities we offer
pursuant to a prospectus supplement and the warrants may be attached to or
separate from the securities. We will issue each series of warrants under a
separate warrant agreement that we will enter into with a bank or trust company,
as warrant agent. We will describe additional terms of the warrants and the
applicable warrant agreements in the applicable prospectus supplement.
DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of the debt
warrants being offered, the warrant agreement relating to the debt warrants and
the debt warrant certificates representing the debt warrants, which may include
the following:
- the title of the debt warrants;
- the price or prices at which the debt warrants will be issued;
- the aggregate number of the debt warrants;
- the designation and terms of the debt securities purchasable upon
exercise of the debt warrants, and the procedures and conditions
relating to the exercise of the debt warrants;
- the designation and terms of any related debt securities with which the
debt warrants are issued, and the number of the debt warrants issued
with each security;
- the date, if any, on and after which the debt warrants and the related
debt securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of
each debt warrant, and the price at which the principal amount of the
debt securities may be purchased upon exercise;
- the date on which the right to exercise the debt warrants will commence,
and the date on which the right will expire;
- the maximum or minimum number of the debt warrants which may be
exercised at any time;
- whether the debt warrants represented by the debt warrant certificates
or debt securities that may be issued upon exercise of the debt warrants
will be issued in registered or bearer form;
- information with respect to book-entry procedures, if any;
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- the currency or currency units in which the offering price, if any, and
the exercise price are payable;
- a discussion of the material United States federal income tax
considerations applicable to the exercise of the debt warrants;
- the antidilution provisions of the debt warrants, if any;
- the redemption or call provisions, if any, applicable to the debt
warrants; and
- any other terms of the debt warrants, including terms, procedures and
limitations relating to the exercise of the debt warrants.
Holders may exchange debt warrant certificates for new debt warrant certificates
of different denominations, and may exercise debt warrants at the corporate
trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Prior to the exercise of their debt warrants,
holders of debt warrants will not have any of the rights of holders of the
securities purchasable upon the exercise and will not be entitled to payments
principal, premium or interest on the securities purchasable upon the exercise.
STOCK WARRANTS
We will describe in the applicable prospectus supplement the terms of the
preferred stock warrants or common stock warrants being offered, which may
include the following:
- the title of the warrants;
- the price or prices at which the warrants will be issued;
- the aggregate number of the warrants issued;
- the designation and terms of the preferred stock or common stock for
which the warrants are exercisable;
- if applicable, the designation and terms of the preferred stock or
common stock with which the warrants are issued and the number of the
warrants issued with each share of preferred stock or common stock;
- if applicable, the date on and after which the warrants and the related
preferred stock or common stock will be separately transferable;
- the number of shares of preferred stock or common stock purchasable upon
exercise of the warrants and the exercise price of the warrants;
- the date on which the right to exercise the warrants will commence, and
the date on which the right will expire;
- the maximum or minimum number of the warrants which may be exercised at
any time;
47
<PAGE> 48
- the currency or currency units in which the offering price, if any, and
the exercise price are payable;
- if applicable, a discussion of the material United States federal income
tax considerations applicable to the exercise of the warrants;
- any antidilution provisions of the warrants;
- any redemption or call provisions applicable to the warrants; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of the warrant to purchase for cash at the
exercise price set forth in the applicable prospectus supplement the principal
amount of debt securities or shares of preferred stock or common stock being
offered. Holders may exercise warrants at any time up to the close of business
on the expiration date set forth in the applicable prospectus supplement. After
the close of business on the expiration date, unexercised warrants are void.
Holders may exercise warrants as set forth in the prospectus supplement relating
to the warrants being offered. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the debt securities or shares of
preferred stock or common stock purchasable upon the exercise of the warrant. If
less than all of the warrants represented by the warrant certificate are
exercised, we will issue a new warrant certificate for the remaining warrants.
PLAN OF DISTRIBUTION
With this prospectus and the other prospectuses included in our registration
statement, we may issue from time to time up to a total of $65,000,000 worth of
our (i) debt securities; (ii) common stock; (iii) preferred stock; and (iv)
warrants to purchase debt securities, common stock or preferred stock. We may
issue these securities from time to time in the future to owners of orthodontic
and pediatric dental practices with which we affiliate.
We will pay all expenses of this offering, and we do not expect to pay any
underwriting discounts or commissions. We typically, however, compensate our
development representatives (both employees and independent contractors) for new
affiliations in their territories. Any person receiving this compensation may be
deemed to be an underwriter within the meaning of federal and state securities
laws.
Unless otherwise specified in the applicable prospectus supplement, the
securities offered by this prospectus will not be listed on any exchange or
quoted on the Nasdaq National Market System, and we will not make a market in
these securities or take action to facilitate the secondary trading of these
securities.
48
<PAGE> 49
VALIDITY OF SECURITIES
The validity of the securities offered by this prospectus will be passed upon
for us by Munger, Tolles & Olson LLP, Los Angeles, California, or another
counsel named in the prospectus supplement.
EXPERTS
The financial statements included in this Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
49
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify any of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with a threatened,
pending or completed action, suit or proceeding brought against him by reason of
the fact that he is or was a director or officer (i) if any such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation and (ii) in connection with any criminal
action or proceeding if such person had no reasonable cause to believe such
conduct was unlawful. In actions brought by or in the right of the corporation,
however, Section 145 provides that no indemnification may be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of such person's duty
to the corporation unless, and only to the extent that, the Court of Chancery of
the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in review of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
The Certificate provides that no director of the Company shall be liable for
breach of fiduciary duty as a director except for (i) any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) for willful or negligent violations of certain
provisions of the DGCL imposing certain requirements with respect to stock
repurchases, redemptions and dividends; or (iv) any transaction from which the
director derived an improper personal benefit. Pursuant to the Company's
Certificate and Bylaws, the Company is obligated to indemnify each of its
directors and officers to the fullest extent permitted by the DGCL. In addition,
the Bylaws allow the Company to purchase and maintain insurance on behalf of any
director or officer of the Company against any liability asserted against and
incurred by such director or officer, whether or not the Company would have the
power to indemnify such officer or director against such liability under the
provisions of the DGCL.
The Company has obtained insurance which provides general coverage for its
directors and executive officers in amounts determined to be adequate. In
addition, the Company has obtained insurance coverage for its directors and
executive officers with respect to its initial public offering of common stock
in 1997.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1, Registration No.
333-27143, as amended).
3.2 Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1 Registration
II-1
<PAGE> 51
No. 333-27143, as amended).
4.1 Specimen Class A Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-1, Registration No. 333-27143, as
amended).
4.2 Amended and Restated Certificate of Incorporation of the
Company, including, without limitation Section 4 (incorporated
by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1, Registration No. 333-27143, as
amended).
4.3 Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1 Registration No. 333-27143, as amended).
4.4+ Form of Indenture between OrthAlliance and First Union
National Bank.
4.5* Form of Warrant Agreement.
4.6* Form of Warrant Certificate.
4.7* Form of Certificate of Designation of Preferred Stock.
5.1+ Opinion of Munger, Tolles & Olson LLP regarding validity.
10.1 Agreement and Plan of Merger between the Company, USOC and
Premier (incorporated by reference to Exhibit 2.1 of the
Company's Registration Statement on Form S-1, Registration No.
333-27143, as amended).
10.2 Form of Purchase and Sale Agreement between the Company and
Allied Practices (incorporated by reference to Exhibit 2.2 of
the Company's Registration Statement on Form S-1, Registration
No. 333-27143, as amended).
10.3 Form of Stock Purchase and Sale Agreement between the Company
and Stockholders of the initial Allied Practices (incorporated
by reference to Exhibit 2.4 of the Company's Registration
Statement on Form S-1, Registration No. 333-27143, as
amended).
10.4 Form of Stock Purchase and Sale Agreement between the Company
and the Stockholders of the Allied Practices (incorporated by
reference to Exhibit 10.4 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997).
10.5 Form of Agreement and Plan of Reorganization between the
Company, Allied Practices and the Stockholders of the Allied
Practices (incorporated by reference to Exhibit 2.3 of the
Company's Registration Statement on Form S-1, Registration No.
333-27143, as amended).
10.6 Form of Service Agreement between the Company and Allied
Practices (Fixed Percentage Fee) (incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form
S-1, Registration No. 333-27143, as amended).
10.7 Form of Service Agreement between Company and Allied Practices
(Variable Percentage Fee) (incorporated by reference to
Exhibit 10.2 of the Company's Registration Statement on Form
S-1, Registration No. 333-27143, as amended).
10.8 Form of Consulting and Business Services Agreement between the
Company and Allied Practices (Variable Percentage
Fee)(incorporated by reference to Exhibit 10.3 of the
Company's Registration Statement on Form S-1, Registration No.
333-27143, as amended).
10.9 Form of Consulting and Business Services Agreement between the
Company and Allied Practices (Fixed Percentage Fee)
(incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-1, Registration No.
333-27143, as amended).
10.10 Form of Consulting and Business Services Agreement between the
Company and Allied Practices (Fixed Dollar Fee) (incorporated
by reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-1, Registration No. 333-27143,
II-2
<PAGE> 52
as amended).
10.11 1997 Non-Employee Director Stock Plan (incorporated by
reference to Exhibit 10.6 of the Company's Registration
Statement on Form S-1, Registration No. 333-27143).
10.12 Amended and Restated 1997 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form S-1, Registration No.
333-27143).
10.13 1997 Orthodontist Stock Option Plan (incorporated by reference
to Exhibit 10.13 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1997).
10.14 Employment Agreement between the Company and Sam Westover
(incorporated by reference to Exhibit 10.8 of the Company's
Registration Statement on Form S-1, Registration No.
333-27143).
10.15 Credit Agreement dated March 26, 1999 between the Company and
First Union National Bank, U.S. Bank National Association and
Union Bank of California, N.A. (incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999).
10.16 Form of Company Practice Improvement Program Guarantee
(incorporated by reference to Exhibit 10.17 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1997).
10.17 Letter Agreement between the Company and Stephen M. Toon dated
May 22, 1998 (incorporated by reference to Exhibit 10.14 of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.18+ Letter Agreement between the Company and James C. Wilson dated
June 16, 1999.
12.1+ Statement of Computation of Ratio of Earnings to Fixed
Charges.
23.1+ Consent of Arthur Andersen LLP.
23.2+ Consent of Munger, Tolles & Olson LLP (contained in Exhibit
5.1)
24.1+ Powers of Attorney (included on Page II-6).
25.1+ Form T-1 Statement for Eligibility under Trust Indenture Act
of 1939 of First Union National Bank.
- ----------
+ Filed herewith.
* To be incorporated by reference in the event of an offering of the
specified securities.
II-3
<PAGE> 53
ITEM 22. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this 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 this
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of OrthAlliance's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph
(5) immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
II-4
<PAGE> 54
(8) To supply by means of a post-effective amendment all required
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
(9) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrants pursuant to the provisions described in Item 15 above
or otherwise, the registrants have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants 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 the 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 of 1933 and will be governed by the final adjudication of the issue.
(10) The undersigned registrants hereby undertake to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in
accordance with the rules and regulations prescribed by the SEC under Section
305(b)(2) of the Trust Indenture Act of 1939.
II-5
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Registration Statement on Form S-4 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Torrance,
California, on July 28, 1999.
ORTHALLIANCE, INC.
By: /s/ SAM WESTOVER
-------------------------------------
Sam Westover
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below authorizes and
appoints each of Sam Westover and Paul H. Hayase, and each of them severally,
acting alone and without the other, as his attorney-in-fact to execute in the
name of such person and to file any amendments and post effective amendments to
this Registration Statement necessary or advisable to enable the Registrant to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the registration of the securities which are the subject of this
Registration Statement (including any additional registration statement filed
pursuant to Rule 462 of the Securities Act of 1933) which amendments and post
effective amendments may make such changes in the Registration Statement as such
attorney-in-fact may deem appropriate.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ SAM WESTOVER Chief Executive Officer, July 28, 1999
- --------------------------------------- President and Director
Sam Westover (principal executive officer)
/s/ JAMES C. WILSON Chief Financial Officer July 28, 1999
- --------------------------------------- (principal financial and
James C. Wilson accounting officer)
/s/ W. DENNIS SUMMERS Chairman of the Board July 29, 1999
- ---------------------------------------
W. Dennis Summers
Director ________, 1999
- ---------------------------------------
Jonathan E. Wilfong
Director ________, 1999
- ---------------------------------------
Randall K. Bennett
/s/ DOUGLAS D. DURBIN Director July 27, 1999
- ---------------------------------------
Douglas D. Durbin
</TABLE>
II-6
<PAGE> 56
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ CRAIG L. MCKNIGHT Director July 28, 1999
- ---------------------------------------
Craig L. McKnight
/s/ G. HARRY DURITY Director July 26, 1999
- ---------------------------------------
G. Harry Durity
Director ________, 1999
- ---------------------------------------
Raymond G.W. Kubisch
</TABLE>
II-7
<PAGE> 1
EXHIBIT 4.4
================================================================================
ORTHALLIANCE, INC.
TO
FIRST UNION NATIONAL BANK
Trustee
--------------
INDENTURE
Dated as of August __, 1999
--------------
================================================================================
<PAGE> 2
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
Section 310(a)(1) ............................................. 609
(a)(2) ............................................. 609
(a)(3) ............................................. Not Applicable
(a)(4) ............................................. Not Applicable
(b) ............................................. 608
610
Section 311(a) .............................................. 613
(b) ............................................. 613
Section 312(a) .............................................. 701
702
(b) ............................................. 702
(c) ............................................. 702
Section 313(a) ............................................. 703
(b) ............................................. 703
(c) ............................................. 703
(d) ............................................. 703
Section 314(a) .............................................. 704
(a)(4) ............................................. 101
1004
(b) ............................................. Not Applicable
(c)(1) ............................................. 102
(c)(2) ............................................. 102
(c)(3) ............................................. Not Applicable
(d) ............................................. Not Applicable
(e) ............................................. 102
Section 315(a) ............................................. 601
(b) ............................................. 602
(c) ............................................. 601
(d) ............................................. 601
(e) ............................................. 514
Section 316(a) ............................................. 101
(a)(1)(A) ............................................. 502
512
(a)(1)(B) ............................................. 513
(a)(2) ............................................. Not Applicable
(b) ............................................. 508
(c) ............................................. 104
Section 317(a)(1) ............................................. 503
(a)(2) ............................................. 504
(b) ............................................. 1003
Section 318(a) ............................................. 107
</TABLE>
- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS OF THE COMPANY........................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION.................................................1
SECTION 101. Definitions..............................................1
SECTION 102. Compliance Certificates and Opinions.....................8
SECTION 103. Form of Documents Delivered to Trustee...................9
SECTION 104. Acts of Holders; Record Dates............................9
SECTION 105. Notices, Etc., to Trustee and Company...................11
SECTION 106. Notice to Holders; Waiver...............................12
SECTION 107. Conflict with Trust Indenture Act.......................12
SECTION 108. Effect of Headings and Table of Contents................12
SECTION 109. Successors and Assigns..................................13
SECTION 110. Separability Clause.....................................13
SECTION 111. Benefits of Indenture...................................13
SECTION 112. Governing Law...........................................13
SECTION 113. Legal Holidays..........................................13
ARTICLE TWO
SECURITY FORMS........................................................13
SECTION 201. Forms Generally.........................................13
SECTION 202. Form of Face of Security................................14
SECTION 203. Form of Reverse of Security.............................16
SECTION 204. Form of Legend for Global Securities....................20
SECTION 205. Form of Trustee's Certificate of Authentication.........21
ARTICLE THREE
THE SECURITIES........................................................21
SECTION 301. Amount Unlimited; Issuable in Series....................21
SECTION 302. Denominations...........................................24
SECTION 303. Execution, Authentication, Delivery and Dating..........24
SECTION 304. Temporary Securities....................................25
SECTION 305. Registration, Registration of Transfer and Exchange.....26
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities........28
SECTION 307. Payment of Interest; Interest Rights Preserved..........28
SECTION 308. Persons Deemed Owners...................................30
SECTION 309. Cancellation............................................30
SECTION 310. Computation of Interest.................................30
ARTICLE FOUR
SATISFACTION AND DISCHARGE............................................30
SECTION 401. Satisfaction and Discharge of Indenture.................30
SECTION 402. Application of Trust Money..............................32
</TABLE>
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<TABLE>
<S> <C>
ARTICLE FIVE
REMEDIES..............................................................32
SECTION 501. Events of Default.......................................32
SECTION 502. Acceleration of Maturity; Rescission and Annulment......34
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee..................................35
SECTION 504. Trustee May File Proofs of Claim........................36
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities...........................................36
SECTION 506. Application of Money Collected..........................36
SECTION 507. Limitation on Suits.....................................37
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest....................................37
SECTION 509. Restoration of Rights and Remedies......................38
SECTION 510. Rights and Remedies Cumulative..........................38
SECTION 511. Delay or Omission Not Waiver............................38
SECTION 512. Control by Holders......................................38
SECTION 513. Waiver of Past Defaults.................................39
SECTION 514. Undertaking for Costs...................................39
SECTION 515. Waiver of Usury, Stay or Extension Laws.................39
ARTICLE SIX
THE TRUSTEE...........................................................40
SECTION 601. Certain Duties and Responsibilities.....................40
SECTION 602. Notice of Defaults......................................40
SECTION 603. Certain Rights of Trustee...............................40
SECTION 604. Not Responsible for Recitals or Issuance of Securities..41
SECTION 605. May Hold Securities.....................................41
SECTION 606. Money Held in Trust.....................................42
SECTION 607. Compensation and Reimbursement..........................42
SECTION 608. Conflicting Interests...................................42
SECTION 609. Corporate Trustee Required; Eligibility.................42
SECTION 610. Resignation and Removal; Appointment of Successor.......43
SECTION 611. Acceptance of Appointment by Successor..................44
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business..................................45
SECTION 613. Preferential Collection of Claims Against Company.......46
SECTION 614. Appointment of Authenticating Agent.....................46
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.....................48
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders....................................48
SECTION 702. Preservation of Information; Communications to Holders..48
SECTION 703. Reports by Trustee......................................48
SECTION 704. Reports by Company......................................49
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..................49
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms....49
SECTION 802. Successor Substituted...................................50
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE NINE
SUPPLEMENTAL INDENTURES...............................................50
SECTION 901. Supplemental Indentures Without Consent of Holders.....50
SECTION 902. Supplemental Indentures With Consent of Holders........52
SECTION 903. Execution of Supplemental Indentures...................53
SECTION 904. Effect of Supplemental Indentures......................53
SECTION 905. Conformity with Trust Indenture Act....................53
SECTION 906. Reference in Securities to Supplemental Indentures.....53
ARTICLE TEN
COVENANTS.............................................................53
SECTION 1001. Payment of Principal, Premium and Interest.............53
SECTION 1002. Maintenance of Office or Agency........................54
SECTION 1003. Money for Securities Payments to Be Held in Trust......54
SECTION 1004. Statement by Officers as to Default....................55
SECTION 1005. Existence..............................................55
SECTION 1006. Maintenance of Properties..............................56
SECTION 1007. Payment of Taxes and Other Claims......................56
SECTION 1008. Waiver of Certain Covenants............................56
ARTICLE ELEVEN
REDEMPTION OF SECURITIES..............................................57
SECTION 1101. Applicability of Article...............................57
SECTION 1102. Election to Redeem; Notice to Trustee..................57
SECTION 1103. Selection by Trustee of Securities to Be Redeemed......57
SECTION 1104. Notice of Redemption...................................58
SECTION 1105. Deposit of Redemption Price............................59
SECTION 1106. Securities Payable on Redemption Date..................59
SECTION 1107. Securities Redeemed in Part............................59
ARTICLE TWELVE
SINKING FUNDS.........................................................59
SECTION 1201. Applicability of Article...............................59
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities..60
SECTION 1203. Redemption of Securities for Sinking Fund..............60
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE....................................61
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance....................................61
SECTION 1302. Defeasance and Discharge...............................61
SECTION 1303. Covenant Defeasance....................................61
SECTION 1304. Conditions to Defeasance or Covenant Defeasance........62
SECTION 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions................64
SECTION 1306. Reinstatement..........................................65
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES...........................................65
SECTION 1401. Applicability of Article...............................65
SECTION 1402. Securities Subordinated in Any Proceedings.............65
SECTION 1403. No Payment on Securities in Certain Circumstances......65
SECTION 1404. Subrogation............................................66
SECTION 1405. Obligations of the Company Unconditional...............67
SECTION 1406. Trustee and Paying Agents Entitled to Assume
Payments Not Prohibited in Absence of Notice...........67
SECTION 1407. Defeasance.............................................67
SECTION 1408. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt...............68
SECTION 1409. Right to Hold Senior Debt..............................68
SECTION 1410. No Fiduciary Duty of Trustee or Holders to Holders
of Senior Debt.........................................68
SECTION 1411. Distribution to Holders of Senior Debt.................68
SECTION 1412. Trustee's Rights to Compensation, Reimbursement
of Expenses and Indemnification........................68
SECTION 1413. Exception for Certain Distributions....................68
SECTION 1414. Certain Definitions....................................69
ARTICLE FIFTEEN
CONVERSION............................................................69
SECTION 1501. Applicability of Article...............................69
SECTION 1502. Conversion Right and Conversion Price..................69
SECTION 1503. Conversion Procedure...................................70
SECTION 1504. Fractional Shares......................................71
SECTION 1505. Taxes on Conversion....................................71
SECTION 1506. Company to Reserve Common Stock........................71
SECTION 1507. Adjustment for Change in Capital Stock.................72
SECTION 1508. Adjustment for Rights Issue............................73
SECTION 1509. Adjustment for Other Distributions.....................73
SECTION 1510. Current Market Price...................................74
SECTION 1511. When De Minimis Adjustment May Be Deferred.............75
SECTION 1512. When No Adjustment Required............................75
SECTION 1513. Notice of Adjustment...................................75
SECTION 1514. Voluntary Reduction....................................75
SECTION 1515. Notice of Certain Transactions.........................76
SECTION 1516. Reorganization of the Company..........................76
SECTION 1517. Company Determination Final............................76
SECTION 1518. Trustee's Disclaimer...................................77
</TABLE>
-iv-
<PAGE> 7
INDENTURE, dated as of August __, 1999, between OrthAlliance, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 21535 Hawthorne
Boulevard, Suite 200, Torrance, California 90503, and First Union National Bank,
a national banking association duly organized and existing under the laws of the
United States, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of such
computation;
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(4) 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 Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"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.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" has the meaning specified in Section 1502.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
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<PAGE> 9
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Conversion Agent" means any Person authorized by the Company to accept
Securities presented for conversion pursuant to Article 15 and othewise assist
with the performance of the conversion procedures applicable to such Securities.
"Corporate Trust Office" means the principal office of the Trustee in
................................................................ at which at any
particular time its corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Debt" means, with respect to any Person,
(i) any obligation of such Person to pay the principal of,
premium of, if any, interest on (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating
to the Company, whether or not a claim for such post-petition interest
is allowed in such proceeding), penalties, reimbursement or
indemnification amounts, fees, expenses or other amounts relating to any
indebtedness, and any other liability, contingent or otherwise, of such
Person (A) for borrowed money (including instances where the recourse of
the lender is to the whole of the assets of such Person or to a portion
thereof), (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation) including securities, (C) for
any letter of credit or performance bond in favor of such Person, or (D)
for the payment of money relating to a capitalized lease obligation;
(ii) any liability of others of the kind described in the
preceding clause (i), which the Person has guaranteed or which is
otherwise its legal liability;
(iii) any obligation of the type described in clauses (i) and
(ii) secured by a lien to which the property or assets 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; or
(iv) any and all deferrals, renewals, extensions and refunding
of, or amendments, modifications or supplements to, any liability of the
kind described in any of the preceding clauses (i), (ii) or (iii).
"Defaulted Interest" has the meaning specified in Section 307.
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<PAGE> 10
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.
"Distribution" has the meaning specified in Section 1414.
"Event of Default" has the meaning specified in Section 501.
"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 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5).
4
<PAGE> 11
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue 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 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant
to Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid obligations
of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or
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<PAGE> 12
determined as contemplated by Section 301, (C) the principal amount of a
Security denominated in one or more foreign currencies or currency units which
shall be deemed to be Outstanding shall be the U.S. dollar equivalent,
determined as of such date in the manner provided as contemplated by Section
301, of the principal amount of such Security (or, in the case of a Security
described in Clause (A) or (B) above, of the amount determined as provided in
such Clause), and (D) Securities owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, 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 of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Payment Blockage Period" has the meaning specified in Section 1414.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or government or
any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 1414.
"Quoted Price" has the meaning specified in Section 1510.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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<PAGE> 13
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Debt" means Debt of the Company, whenever incurred, outstanding
at any time except (i) Debt that by its terms is not senior in right of payment
to the Securities, (ii) Debt held by the Company or any Affiliate of the
Company, and (iii) Debt excluded pursuant to Section 301.
"Senior Debt Default Notice" has the meaning specified in Section 1414.
"Senior Debt Payment Default" has the meaning specified in Section 1414.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"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 the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
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<PAGE> 14
"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.
"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.
See also Section 1414.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (except for certificates provided for
in Section 1004) shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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<PAGE> 15
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
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 may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
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
9
<PAGE> 16
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.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
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 cancelled 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 106.
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 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, 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
10
<PAGE> 17
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 cancelled
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 106.
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 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 106, 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.
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 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: ................., or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at 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.
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<PAGE> 18
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every pur pose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Debt and the Holders, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form 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 the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. 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 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 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
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SECTION 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder.]
ORTHALLIANCE, INC.
..............................................
No. ......... $ ........
OrthAlliance, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ......................................., or
registered assigns, the principal sum of ......................................
Dollars on ........................................................ [if the
Security is to bear interest prior to Maturity, insert -- , and to pay interest
thereon from ............. or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on ............
and ............ in each year, commencing ........., at the rate of ....% per
annum, until the principal hereof is paid or made available for payment [if
applicable, insert -- , provided that any principal and premium, and any such
installment of interest, which is overdue shall bear interest at the rate of
...% per annum (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or made
available for payment, and such interest shall be payable on demand]. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is regis tered at the
close of business on the Regular Record Date for such interest, which shall be
the ....... or ....... (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will 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 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].
[If the Security is not to bear interest prior to Maturity, insert --
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ....% per annum (to the extent that the payment of
such interest shall be legally enforceable),
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<PAGE> 21
from the dates such amounts are due until they are paid or made available for
payment. Interest on any overdue principal or premium shall be payable on
demand. [Any such interest on overdue principal or premium which is not paid on
demand shall bear interest at the rate of ......% per annum (to the extent that
the payment of such interest on interest shall be legally enforceable), from the
date of such demand until the amount so demanded is paid or made available for
payment. Interest on any overdue interest shall be payable on demand.]]
Payment of the principal of (and premium, if any) and [if applicable,
insert -- any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in ............, 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 [if applicable, insert -- ;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
[If applicable, insert -- The Securities of this series are subject to
conversion by the Holders thereof at any time before the close of business on
____________. If the Security is called for redemption, the holder may convert
it at any time before the close of business on the Business Day prior to the
redemption date. The initial conversion price is $____ per share, subject to
adjustment in certain events. In certain circumstances the right to convert a
Security into Common Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another. To determine the
number of shares issuable upon conversion of a Security, divide the principal
amount to be converted by the conversion price in effect on the conversion date.
On conversion no payment or adjustment for interest will be made. The Company
will deliver a check for cash in lieu of any fractional share. To convert a
Security a Holder must comply with Section 1503 of the Indenture, which requires
the Holder to (1) complete and sign the conversion notice on the back of the
Security, (2) surrender the Security to a Conversion Agent, (3) furnish
appropriate endorsements and transfer documents if required by the Paying Agent
or Conversion Agent, (4) pay any transfer or similar tax if required, and (5)
provide funds, if applicable, required pursuant to Section 1503 of the
Indenture. A holder may convert a portion of a Security if the portion is $1,000
or a whole multiple of $1,000.]
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.
Dated: ORTHALLIANCE, INC.
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<PAGE> 22
By.........................................
Attest:
............................
SECTION 203. 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 an Indenture, dated as of August __, 1999 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and First Union National Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee[, the holders of Senior Debt] 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 [if applicable, insert -- , limited in aggregate principal
amount to $...........].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [if
applicable, insert -- on or after .........., 19..], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if applicable, insert -- on
or before ..............., ...%, and if redeemeD] during the 12-month period
beginning ............. of the years indicated,
Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
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<PAGE> 23
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert -- on or after ............], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ............ of the years indicated,
Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
- ---- ----------------- ----------------------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the Company may
not, prior to ............., redeem any Securities of this series as
contemplated by [if applicable, insert -- Clause (2) of] the preceding paragraph
as a part of, or in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an interest cost to the
Company (calculated in accordance with generally accepted financial practice) of
less than .....% per annum.]
[If applicable, insert -- The sinking fund for this series provides for
the redemption on ............ in each year beginning with the year ....... and
ending with the year ...... of [if applicable, insert -- not less than
$.......... ("mandatory sinking fund") and not more than] $......... aggregate
principal amount of Securities of this series. Securities of this series
acquired or redeemed by the Company otherwise than through [if applicable,
insert -- mandatory] sinking fund payments may be credited against subsequent
[if applicable, insert -- mandatory] sinking fund payments
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<PAGE> 24
otherwise required to be made [if applicable, insert -- , in the inverse order
in which they become due].]
[If the Security is subject to redemption of any kind, insert -- In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Securities are subordinated to Senior Debt
as defined in the Indenture. To the extent provided in the Indenture, Senior
Debt must be paid before the Securities may be paid. The Company agrees, and
each Holder by accepting a Security agrees, to the subordination and authorizes
the Trustee to give it effect.]
[If applicable, insert -- The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]
[If the Security is not an Original Issue Discount Security, insert --
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in 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
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<PAGE> 25
transfer hereof or in exchange herefor 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, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings as Trustee in respect of such
Event of Default and offered the Trustee indemnity. The foregoing provision
shall be ineffective if the Trustee shall not have received from the Holders of
a majority in principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, but failed to institute
any such proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
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 any premium 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 Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple 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 this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
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
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<PAGE> 26
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.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
SECTION 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall 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 OF A DEPOSITARY OR
A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN
PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN
WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN
SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
SECTION 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
By.........................................
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
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, subject to Section 303,
set forth, or
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<PAGE> 27
determined in the manner provided, in an Officers' Certificate, or established
in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the 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 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series
shall be payable, if other than 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;
(4) the date or dates on which the principal of any Securities of
the series is payable;
(5) the rate or rates at which any Securities of the series shall
bear interest, if any, the date or dates from which any such interest
shall accrue, the Interest Payment Dates on which any such interest
shall be payable and the Regular Record Date for any such interest
payable on any Interest Payment Date;
(6) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at
which and the terms and conditions upon which any Securities of the
series may be redeemed, in whole or in part, at the option of the
Company and, if other than by a Board Resolution, the manner in which
any election by the Company to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase
any Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or
periods within which, the price or prices at which and the terms and
conditions upon which any Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
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<PAGE> 28
(10) if the amount of principal of or any premium or interest on
any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
(11) if other than the currency of the United States of America,
the currency, currencies or currency units in which the principal of or
any premium or interest on any Securities of the series shall be payable
and the manner of determining the equivalent thereof in the currency of
the United States of America for any purpose, including for purposes of
the definition of "Outstanding" in Section 101;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to be
payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and the
terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be
determined);
(13) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the series which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502;
(14) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such date
for any purpose thereunder or hereunder, including the principal amount
thereof which shall be due and payable upon any Maturity other than the
Stated Maturity or which shall be deemed to be Outstanding as of any
date prior to the Stated Maturity (or, in any such case, the manner in
which such amount deemed to be the principal amount shall be
determined);
(15) if applicable, that the Securities of the series, in whole
or any specified part, shall be defeasible pursuant to Section 1302 or
Section 1303 or both such Sections and, if other than by a Board
Resolution, the manner in which any election by the Company to defease
such Securities shall be evidenced;
(16) 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 204 and any circumstances in addition to or in lieu of
those set forth in Clause (2) of the last paragraph of Section 305
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<PAGE> 29
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;
(17) any addition to or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 502;
(18) any addition to or change in the covenants set forth in
Article Ten which applies to Securities of the series; and
(19) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 901(5)).
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided in or pursuant to the
Board Resolu tion referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above 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 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.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. 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
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<PAGE> 30
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 estab lished by or
pursuant to one or more Board Resolutions as permitted by Sections 201 and 301,
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 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such form
has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) 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 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 301 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 301 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
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<PAGE> 31
manual signature, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder. 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 309, 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 304. 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 authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. 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 and tenor.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like tenor and
aggregate principal amount.
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At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggre gate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1107 or 1503 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption under Section 1103 and
ending at the close of business on the day of such mailing, or (B) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) 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 therefor, and each such Global Security
shall constitute a single Security for all purposes of this Indenture.
(2) 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
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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, (B) there shall have occurred and be continuing an Event
of Default with respect to such Global Security or (C) 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 301.
(3) Subject to Clause (2) 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.
(4) 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 304, 306,
906 or 1107 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.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not con temporaneously 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 of any series issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obli gation 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
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Indenture equally and proportionately with any and all other Securities of that
series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series (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 of such series and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be given
to each Holder of Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities of
such series (or their respective Predecessor Securi ties) are registered
at the close of
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business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) 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 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled 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 may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All can celled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. 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 the Trustee, at the expense of
the Company, shall execute proper instru ments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306 and (ii) Securi ties for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) 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 (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose money in an amount sufficient to
pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal and any premium and 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;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
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(3) 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 607, the obligations of
the Trustee to any Authen ticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Article
Fourteen or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of
that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of or any premium on
any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture
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solely for the benefit of series of Securities other than that series),
and continuance of such default or breach for a period of 60 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
10% in principal amount of the Outstanding Securities of that series 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
(5) a default under any bond, debenture, note or other evidence
of indebtedness for money borrowed by the Company (including a default
with respect to Securities of any series other than that series) having
an aggregate principal amount outstanding of at least $....., or under
any mortgage, indenture or instrument (including this Indenture) under
which there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by the Company having an aggregate
principal amount outstanding of at least $....., whether such
indebtedness now exists or shall hereafter be created, which default
shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become
due and payable, without such indebtedness having been discharged, or
such acceleration having been rescinded or annulled, within a period of
10 days after there shall have 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 10% in principal amount of the Outstanding
Securities of that series a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or
cause such acceleration to be rescinded or annulled, as the case may be,
and stating that such notice is a "Notice of Default" hereunder;
provided, however, that, subject to the provisions of Sections 601 and
602, the Trustee shall not be deemed to have knowledge of such default
unless either (A) a Responsible Officer of the Trustee shall have actual
knowledge of such default or (B) the Trustee shall have received written
notice thereof from the Company, from any Holder, from the holder of any
such indebtedness or from the trustee under any such mortgage, indenture
or other instrument; or
(6) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorgani zation,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
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(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company in furtherance of any such action; or
(8) any other Event of Default provided with respect to
Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) with respect to Securities of any series at the time
Outstanding occurs and is continu ing, then 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 of all the Securities
of that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(6)
or 501 (7) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) 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,
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by written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) 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 any interest thereon at the
rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs
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and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; 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 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or 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 under Section 607;
and
SECOND: Subject to Article Fourteen, to the payment of the amounts then
due and unpaid for principal of and any premium and interest on the Securities
in respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal and any premium and interest,
respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security 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 or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) 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;
(3) such Holder or Holders have offered to the Trustee indemnity
against the costs, expenses and liabilities to be incurred in compliance
with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
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SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
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 rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any
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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
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest
on any Security of such series,
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected, or
(3) under Article 15.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Inden ture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
SECTION 515. 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
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waives all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
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(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and 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 Securities or the proceeds thereof.
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SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
gross negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any and all losses, liabilities or expenses incurred without
gross negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
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SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each 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
and to the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
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 the
instrument of acceptance by a successor Trustee required by Section 611 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.
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.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
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 or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. 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 in accord
ance with the applicable requirements of Section 611, become the successor
Trustee with respect to the Securities of such series and to that extent
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 appoint ment in the manner
required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
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 to all Holders
of Securities of such series in the manner provided in Section 106. 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.
SECTION 611. Acceptance of Appointment by Successor.
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
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Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.
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 facili tate
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 pro vided
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.
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 such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of
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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 with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. 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, registra tion of transfer or partial redemption thereof
or pursuant to Section 306, 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 and a certificate of authentication executed 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, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conver sion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, 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.
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An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 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
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
If an appointment with respect to one or more series is made pursuant to
this Section, 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 of the series designated therein referred
to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
As Trustee
By........................................,
As Authenticating Agent
By.........................................
Authorized Officer
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than March 31 and September 30 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of Securities of each series
as of the preceding January 1 or July 1, as the case may be, and
(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
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 by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
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.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
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SECTION 704. Reports by Company.
The Company shall file with the Trustee and 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 pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company shall not permit any Person to consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership or trust, shall be organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of and any premium and interest on all the Securities and the
performance or observance of every covenant of this Indenture on the
part of the Company to be performed or observed, except that it need not
assume the obligations of the Company as to conversion of Securities if
pursuant to Section 1516 the Company or another Person enters into a
supplemental indenture obligating it to deliver securities, cash or
other assets upon conversion of Securities;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of 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;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
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become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company
or such successor Person, as the case may be, shall take such steps as
shall be necessary effectively to secure the Securities equally and
ratably with (or prior to) all indebtedness secured thereby; and
(4) 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, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities, except for obligations the
Company may have under a supplemental indenture pursuant to Section 1516.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) 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
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(3) 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
(4) to add to or change any of the provisions of this Indenture
to such extent as shall be necessary to permit or facilitate the
issuance of Securities in bearer form, registrable or not registrable as
to principal, and with or without interest coupons, or to permit or
facilitate the issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that
any such addition, change or elimination (A) shall neither (i) apply to
any Security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision nor
(ii) modify the rights of the Holder of any such Security with respect
to such provision or (B) shall become effective only when there is no
such Security Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) 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 611; or
(9) to comply with Sections 1507 or 1516; or
(10) 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 (10) shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing
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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,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502, or change any Place of Payment
where, or the coin or currency in which, any Security or any premium 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 modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders, or
(2) 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
(3) modify any of the provisions of this Section, Section 513 or
Section 1008, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
Section 1008, or the deletion of this proviso, in accordance with the
requirements of Sections 611 and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of 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 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 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by
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this Indenture, the Trustee shall be entitled to receive, and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. 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 any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. 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 pay ment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securi ties of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any
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change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby 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 of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its 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 or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. Money for Securities 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 or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and 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 action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any series
of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
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,
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upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
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 language, customarily
published on each Business Day and of general circulation in Los Angeles,
California, 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 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously
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conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(18),
901(2) or 901(7) for the benefit of the Holders of such series if before the
time for such compliance the Holders of at least 66 2/3% 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
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities. In case of any redemption at the election of the
Company of less than all the Securities of any series (including any such
redemption affecting only a single
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Security), the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities 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 or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee 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 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 unredeemed portion of the principal amount of any Security 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 redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
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All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the principal amount
of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after said
date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
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 be irrevocable.
SECTION 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent, it
shall segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, 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
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such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. 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 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms
of any Securities is herein referred to as a "mandatory sinking fund payment",
and any payment in excess of such minimum amount provided for by the terms of
such Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; 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,
as
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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 1203. Redemption of Securities for Sinking Fund.
Not less than fifteen (15) days prior to each sinking fund payment date
for any 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 of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than seven (7) days prior to each such sinking fund payment
date, the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 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 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1302
or Section 1303 applied to any Securities or any series of Securities, as the
case may be, designated pursuant to Section 301 as being defeasible pursuant to
such Section 1302 or 1303, in accordance with any applicable requirements
provided pursuant to Section 301 and upon compliance with the conditions set
forth below in this Article. Any such election shall be evidenced by a Board
Resolution or in another manner specified as contemplated by Section 301 for
such Securities.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations, and the
provisions of Article Fourteen shall cease to be effective, with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 1304 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 1304 and as more fully set forth in such
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Section, payments in respect of the principal of and any premium and interest on
such Securities when payments are due, (2) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (3) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (4)
this Article. Subject to compliance with this Article, the Company may exercise
its option (if any) to have this Section applied to any Securities
notwithstanding the prior exercise of its option (if any) to have Section 1303
applied to such Securities.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1006 through 1007, inclusive, and any covenants provided pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the Holders of such
Securities, (2) the occurrence of any event specified in Sections 501(4) (with
respect to any of Section 801(3), Sections 1006 through 1007, inclusive, and any
such covenants provided pursuant to Section 301(18), 901(2) or 901(7)), 501(5)
and 501(8) shall be deemed not to be or result in an Event of Default and (3)
the provisions of Article Fourteen shall cease to be effective, in each case
with respect to such Securities as provided in this Section on and after the
date the conditions set forth in Section 1304 are satisfied (hereinafter called
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that,
with respect to such Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section (to the extent so specified in the case of Section
501(4)) or Article Fourteen, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 1302
or Section 1303 to any Securities or any series of Securities, as the case may
be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of
such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide,
not later than one day before the due date of any payment, money in an
amount, or (C) a combination thereof, in each case sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or any such other qualifying trustee)
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to pay and discharge, the principal of and any premium and interest on
such Securities on the respective Stated Maturities, in accordance with
the terms of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i) a direct
obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii)
an obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i) or
(ii), is not callable or redeemable at the option of the issuer thereof,
and (y) any depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in Clause (x) above and held by
such bank for the account of the holder of such depositary receipt, or
with respect to any specific payment of principal of or interest on any
U.S. Government Obligation which is so specified and held, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
instrument, there has been a change in the applicable Federal income tax
law, in either case (A) or (B) to the effect that, and based thereon
such opinion shall confirm that, the Holders of such Securities will not
recognize gain or loss for Federal income tax purposes as a result of
the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be the case if
such deposit, Defeasance and discharge were not to occur.
(3) In the event of an election to have Section 1303 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and
at the same times as would be the case if such deposit and Covenant
Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities
exchange, will be delisted as a result of such deposit.
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(5) No event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to such Securities or any
other Securities shall have occurred and be continuing at the time of
such deposit or, with regard to any such event specified in Sections
501(6) and (7), at any time on or prior to the 90th day after the date
of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the meaning
of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust shall
be registered under such Act or exempt from registration thereunder.
(9) At the time of such deposit, (A) no default in the payment of
any principal of or premium or interest on any Senior Debt shall have
occurred and be continuing, (B) no event of default with respect to any
Senior Debt shall have resulted in such Senior Debt becoming, and
continuing to be, due and payable prior to the date on which it would
otherwise have become due and payable (unless payment of such Senior
Debt has been made or duly provided for), and (C) no other event of
default with respect to any Senior Debt shall have occurred and be
continuing permitting (after notice or lapse of time or both) the
holders of such Senior Debt (or a trustee on behalf of such holders) to
declare such Senior Debt due and payable prior to the date on which it
would otherwise have become due and payable.
(10) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have
been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 1306, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent
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(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal and any premium and interest, but money so held
in trust need not be segregated from other funds except to the extent required
by law. Money and U.S. Government Obligations so held in trust shall not be
subject to the provisions of Article Fourteen.
The Company shall pay and indemnify the Trustee against any and all
taxes, fees or other charges imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES
SECTION 1401. Applicability of Article.
Securities of any series which are subordinated shall be subordinated in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for such Securities) in accordance with this Article.
SECTION 1402. Securities Subordinated in Any Proceedings.
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Upon any Distribution in any Proceedings,
(1) any Distribution to which the Holders are entitled shall be
paid directly to the holders of Senior Debt to the extent necessary to
make payment in full of all Senior Debt remaining unpaid after giving
effect to all other Distributions to or for the benefit of the holders
of Senior Debt; and
(2) in the event that any Distribution is received by the Trustee
before all Senior Debt is paid in full, such Distribution shall be
applied by the Trustee in accordance with this Article 14.
SECTION 1403. No Payment on Securities in Certain Circumstances.
The Company shall not, directly or indirectly (other than in capital
stock of the Company) pay any Principal of or interest on, redeem, defease or
repurchase any of the Securities (i) after any Senior Debt becomes due and
payable, unless and until all such Senior Debt shall first be paid in full or
(ii) after a Senior Debt Payment Default, unless and until such Senior Debt
Payment Default has been cured, waived, or otherwise has ceased to exist.
During a Payment Blockage Period, no payment of any Principal of or
interest on the Securities may be made, directly or indirectly, by the Company.
Unless the Senior Debt in respect of which the Senior Debt Default Notice has
been given has been declared due and payable in its entirety within the Payment
Blockage Period, at the end of the Payment Blockage Period, the Company shall
pay all sums not paid to the Holders during the Payment Blockage Period and
resume all other payments on the Securities as and when due. Defaulted Interest
shall be paid in accordance with Section 307. Any number of Senior Debt Default
Notices may be given; provided, however, that as to any issue of Senior Debt (i)
not more than one Senior Debt Default Notice shall be given within a period of
any 366 consecutive days, and (ii) no specific act, omission, or condition that
gave rise to a default that existed upon the date of such Senior Debt Default
Notice (whether or not such default applies to the same issue of Senior Debt)
shall be made the basis for the commencement of any other Payment Blockage
Period.
If any Distribution, payment or deposit to redeem, defease or acquire
any of the Securities shall have been received by the Trustee at a time when
such Distribution was prohibited by the provisions of this Section 1403, then,
unless such Distribution is no longer prohibited by this Section 1403, such
Distribution shall be received and applied by the Trustee for the benefit of the
holders of Senior Debt, and shall be paid or delivered by the Trustee to the
holders of Senior Debt for application to the payment of all Senior Debt.
SECTION 1404. Subrogation.
The Holders shall not have any subrogation or other rights of recourse
to any security in respect of any Senior Debt until such time as all Senior Debt
shall have been paid in full. Upon the payment in full of all Senior Debt, the
Holders shall be
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subrogated to the rights of the holders of Senior Debt to receive Distributions
applicable to Senior Debt until all amounts owing in respect of the Securities
shall be so paid. No Distributions to the holders of Senior Debt which otherwise
would have been made to the Holders shall, as between the Company and the
Holders, be deemed to be payment by the Company to or on account of Senior Debt.
If any Distribution to which the Holders would otherwise have been
entitled shall have been applied pursuant to the provisions of this Article to
the payment of Senior Debt, then the Holders shall be entitled to receive from
the holders of such Senior Debt any Distributions received by such holders of
Senior Debt in excess of the amount sufficient to pay all amounts payable on
such Senior Debt to the extent provided herein.
SECTION 1405. Obligations of the Company Unconditional.
This Article defines the relative rights of the Holders and holders of
Senior Debt. Nothing in this Indenture is intended to or shall impair, as
between the Company and the Holders, the obligation of the Company, which is
absolute and unconditional, to pay to the Holders the Principal of and interest
on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company, other than the holders of
Senior Debt, nor shall anything herein or in the Securities prevent the Trustee
or any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article 14, of the holders of Senior Debt in respect of any Distribution
received upon the exercise of any such remedy. If the Company fails because of
this Article to pay principal of or interest on a Security on the due date, the
failure is still a Default. Upon any Distribution, the Trustee and the Holders
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which the Proceeding is pending, or a certificate of
the liquidating trustee or agent or other Person making any Distribution for the
purpose of ascertaining the Persons entitled to participate in such
Distribution, the holders of Senior Debt and other Debt 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 14.
SECTION 1406. Trustee and Paying Agents Entitled to Assume Payments Not
Prohibited in Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, unless and until a Trust Officer shall have received, no later than
three (3) Business Days prior to such payment, written notice thereof from the
Company or from one or more holders of Senior Debt. Prior to the receipt of any
such written notice, the Trustee, shall be entitled in all respects conclusively
to presume that no such fact exists. Unless the Trustee shall have received the
notice provided for in the preceding sentences, the Trustee shall have full
power and authority to receive such payment and to apply the same to the purpose
for which it was received, and shall not be affected by
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any notice to the contrary which may be received by it on or after such date.
The foregoing shall not apply to any Affiliate of the Company acting as Paying
Agent.
SECTION 1407. Defeasance.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article 4 and not prohibited to be deposited under Section 1403
when deposited shall not be subject to this Article 14.
SECTION 1408. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Debt.
No right of any holder of any Senior Debt established in this Article 14
shall at any time or in any way be prejudiced or impaired by any act or failure
to act on the part of the Company or by any act or failure to act, in good
faith, by any such holder, or by any failure by the Company to comply with the
terms of this Indenture.
SECTION 1409. Right to Hold Senior Debt.
The Trustee is entitled to all of the rights set forth in this Article
14 in respect of any Senior Debt at any time held by it to the same extent as
any other holder of Senior Debt.
SECTION 1410. No Fiduciary Duty of Trustee or Holders to Holders of Senior Debt.
Neither the Trustee nor the Holders owes any fiduciary duty to the
holders of Senior Debt. Neither the Trustee nor the Holders shall be liable to
any holder of Senior Debt in the event that the Trustee, acting in good faith,
shall pay over or distribute to the Holders, the Company, or any other Person,
any property to which any holders of Senior Debt are entitled by virtue of this
Article or otherwise. Nothing contained in this Section 1410 shall affect the
obligation of any other such Person to hold such payment for the benefit of, and
to pay such payment over to, the holders of Senior Debt.
SECTION 1411. Distribution to Holders of Senior Debt.
Any Distribution otherwise payable to the holders of the Securities made
to holders of Senior Debt pursuant to this Article shall be made to such holders
of Senior Debt ratably according to the respective amount of Senior Debt held by
each.
SECTION 1412. Trustee's Rights to Compensation, Reimbursement of Expenses and
Indemnification.
The Trustee's rights to compensation, reimbursement of expenses and
indemnification under Section 607 are not subordinated.
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SECTION 1413. Exception for Certain Distributions.
The rights of holders of Senior Debt under this Article do not extend
(a) to any Distribution to the extent applied to the Trustee's rights to
compensation, reimbursement of expenses or indemnification or (b) to (i)
securities which are subordinated to the securities distributed to the holders
of Senior Debt on terms no less favorable to the holders of Senior Debt than the
provisions of this Article, or (ii) Distributions under any plan approved by the
court in any Proceeding.
SECTION 1414. Certain Definitions.
As used in this Article 14,
"Distribution" in any Proceeding means any payment or distribution of
assets or securities of the Company of any kind or character from any source,
whether in cash, securities or other property made by the Company, custodian,
liquidating trustee or agent or any other person whether pursuant to a plan or
otherwise.
"Payment Blockage Period" means the period beginning when a Senior Debt
Default Notice is given to the Company and the Trustee and ending (a) when the
default identified in the Senior Debt Default Notice is cured, waived or
otherwise ceases to exist or (b) after 179 or fewer days, whichever occurs
first.
"Proceeding" means a liquidation, dissolution, bankruptcy, insolvency,
reorganization, receivership or similar proceeding under bankruptcy law, an
assignment for the benefit of creditors, any marshalling of assets or
liabilities, or winding up or dissolution, but shall not include any transaction
permitted by and made in compliance with Article 8.
"Senior Debt Default Notice" means any notice of a default (other than a
Senior Debt Payment Default) that permits the holders of any Senior Debt to
declare such Senior Debt due and payable.
"Senior Debt Payment Default" means a default in the payment of any
principal of or interest on any Senior Debt.
"Trustee" for purposes of this Article 14 includes any Paying Agent.
ARTICLE FIFTEEN
CONVERSION
SECTION 1501. Applicability of Article.
Securities of any series which are convertible shall be convertible in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for such Securities) in accordance with this Article.
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SECTION 1502. Conversion Right and Conversion Price.
A Holder of a Security may convert it into Common Stock at any time
during the period provided in Section 301. The number of shares issuable upon
conversion of a Security is determined as follows: Divide the Principal amount
to be converted by the conversion price in effect on the conversion date. Round
the result to the nearest 1/100th of a share.
The initial conversion price is stated in Section 301. The conversion
price is subject to adjustment in accordance with this Article.
A Holder may convert a portion of a Security if the portion is $1,000 or
a whole multiple of $1,000. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of it.
"Common Stock" means the Class A Common Stock, par value $0.001 per
share, of the Company as such Common Stock exists on the date of this Indenture.
SECTION 1503. Conversion Procedure.
To convert a Security, a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the Security to a
Conversion Agent, (3) furnish appropriate endorsements and transfer documents if
required by the Trustee or Conversion Agent, (4) pay any transfer or similar tax
if required, and (5) provide funds, if applicable, required pursuant to the next
paragraph. The date on which the Holder satisfies all such requirements is the
conversion date. As soon as practicable, the Company shall deliver, or shall
cause the Conversion Agent to deliver, upon the order of the Holder, a
certificate for the number of full shares of Common Stock issuable upon the
conversion and a check for any fractional share. The Person in whose name the
certificate is registered shall be treated as a stockholder of record on and
after the conversion date.
Any Security surrendered for conversion during the period from the close
of business on the record date for any interest payment date to the close of
business on the Business Day next preceding the following interest payment date
shall (unless such Security or portion thereof shall have been called for
redemption on a date fixed for redemption which occurs during the period
beginning at the close of business on such record date and ending at the opening
of business on the first Business Day after the next succeeding interest payment
date, or if such interest payment date is not a Business Day, the second such
Business Day) be accompanied by payment, in New York Clearing House funds or
other funds acceptable to the Company, of an amount equal to the interest
otherwise payable on such interest payment date on the Principal amount being
converted; provided, however, that no such payment need be made if there shall
exist at the conversion date a Default in the payment of interest on the
Securities. Notwithstanding Section 307, if a holder has paid an amount equal to
the interest otherwise payable in accordance with the preceding sentence and the
Company thereafter defaults in the payment of interest on such interest payment
date, such Defaulted Interest, together with interest thereon shall be paid to
the Person who made
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such required payment no later than the payment date set in accordance with
Section 307. Except as provided above in this Section 1503, no payment or other
adjustment shall be made for interest accrued on any Security converted or for
dividends on any securities issued on conversion of the Security.
Except as provided in the immediately preceding paragraph, the Company's
delivery of the fixed number of shares of Common Stock into which a Security is
convertible will be deemed to satisfy the Company's obligation to pay the
Principal amount of the Security and all accrued interest (and original issue
discount) that has not previously been (or is not simultaneously being) paid.
The Common Stock is treated as issued first in payment of accrued interest (and
original issue discount) and then in payment of Principal. Thus, accrued
interest (and original issue discount) are treated as paid rather than
cancelled.
If a Holder converts more than one Security at the same time, the number
of full shares issuable and payment pursuant to Section 1504 upon the conversion
shall be based on the total Principal amount of the Securities converted.
Upon surrender of a Security that is converted in part, the Trustee
shall authenticate for the Holder a new Security equal in Principal amount to
the unconverted Principal amount of the Security surrendered.
If the last day on which a Security may be converted is a Legal Holiday
in a place where the Conversion Agent is located, the Security may be
surrendered to the Company or the Conversion Agent on the next succeeding
Business Day.
SECTION 1504. Fractional Shares.
The Company shall not issue a fractional share of Common Stock upon
conversion of a Security. Instead, the Company shall deliver a check for an
amount equal to the current market value of the fractional share. The current
market value of a fraction of a share shall be determined as follows: Multiply
the current market price of a full share by the fraction.
Round the result to the nearest cent.
The current market price of a share of Common Stock for purposes of this
Section 1504 shall be the Quoted Price of the Common Stock on the last trading
day prior to the conversion date. In the absence of such a quotation, the Board
shall determine the current market price in good faith on the basis of such
information as it considers reasonably appropriate.
SECTION 1505. Taxes on Conversion.
If a Holder of a Security converts it, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion. However, the Holder shall pay any
withholding tax or any such tax that is due because the shares are issued in a
name other than the Holder's name.
SECTION 1506. Company to Reserve Common Stock.
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The Company shall at all times reserve out of its authorized but
unissued Common Stock or its Common Stock held in treasury enough shares of
Common Stock to permit the conversion of the Securities.
All shares of Common Stock issued upon conversion of the Securities
shall be fully paid and non-assessable and free of any preemptive or other
similar rights.
The Company shall endeavor to comply with all securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of Securities
and shall endeavor to list such shares on each national securities exchange on
which the Common Stock is listed.
SECTION 1507. Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of
its capital stock;
then the conversion privilege and the conversion price in effect immediately
prior to such action shall be proportionately adjusted so that the Holder of a
Security thereafter converted may receive the aggregate number and kind of
shares of capital stock of the Company that the Holder would have owned
immediately following such action if the Security had converted immediately
prior to such action.
Each adjustment contemplated by this Section 10.06 shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion of it may
receive shares of two or more classes of capital stock of the Company, the
Board, acting in good faith, shall determine the allocation of the adjusted
conversion price among the classes of capital stock. After such allocation, the
conversion privilege and the conversion price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Article. The term
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"Common Stock" shall thereafter apply to each class of capital stock and the
Company shall enter into such supplemental Indenture, if any, as may be
necessary to reflect such conversion privilege and conversion price.
The adjustment contemplated by this Section 10.06 shall be made
successively whenever any of the events listed above shall occur.
SECTION 1508. Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 60 days
after the record date mentioned below to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per share
on that record date, the conversion price shall be adjusted in accordance with
the following formula:
N x P
-----
C' = C x O + M
-------
O + N
where:
C' = the adjusted conversion price. C = the current conversion price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock subject to such
rights, options or warrants.
P = the offering price per share of the additional shares. M = the
current market price per share of Common Stock on the record date.
The adjustment contemplated by this Section 1508 shall be made
successively whenever any such rights, options or warrants are issued and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the rights, options or warrants. If at the end
of the period during which such rights, options or warrants are exercisable, not
all rights, options or warrants shall have been exercised, the conversion price
shall immediately be readjusted to what it would have been if "N" in the above
formula had been the number of shares actually issued.
SECTION 1509. Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of its
assets (including, but not limited to, cash), debt securities or other
securities or any rights, options or warrants to purchase assets, debt
securities or other securities of the Company, the conversion price shall be
adjusted in accordance with the following formula:
C' = C x M - F
-------
M
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where:
C' = the adjusted conversion price. C = the current conversion price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets, securities,
rights, options or warrants applicable to one share of Common
Stock. Fair market value shall be determined in good faith by the
Board; provided that the Company shall obtain an appraisal or other
valuation opinion in support of the Board's determination from an
investment bank or accounting firm of recognized national standing
if the aggregate fair market value exceeds $25 million.
The adjustment contemplated by this Section 1509 shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive the distribution.
This Section 1509 does not apply to cash dividends or cash distributions
paid in any fiscal year out of consolidated net income of the Company for the
current fiscal year or the prior fiscal year, as shown on the books of the
Company prepared in accordance with generally accepted accounting principles.
Also, this Section does not apply to rights, options or warrants referred to in
Section 1508.
SECTION 1510. Current Market Price.
In Sections 1508 and 1509, the current market price per share of Common
Stock on any date shall be the average of the Quoted Prices of the Common Stock
for the five consecutive trading days selected by the Company commencing not
more than 20 trading days before, and ending not later than, the earlier of (i)
the date of such determination and (ii) the day before the "ex" date with
respect to the issuance or distribution requiring such computation. The "Quoted
Price" of a security shall be the last reported sales price of such security as
reported by the New York Stock Exchange or, if the security is listed on another
securities exchange, the last reported sales price of such security on such
exchange which shall be for consolidated trading if applicable to such exchange,
or as reported by the Nasdaq National Market System, or, if the security is
neither so reported nor listed, the last reported bid price of the security. In
the absence of one or more such quotations, the current market price shall be
determined in good faith by the Board on the basis of such quotations as it
considers reasonably appropriate. For the purposes of this Section 1510, the
term "ex" date, when used with respect to any issuance or distribution, shall
mean the first date on which the security trades on such exchange or in such
market without the right to receive such issuance or distribution.
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SECTION 1511. When De Minimis Adjustment May Be Deferred.
No adjustment in the conversion price need be made unless the adjustment
would require an increase or decrease of at least 1% in the conversion price.
All calculations under this Article shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.
SECTION 1512. When No Adjustment Required.
No adjustment need be made for a transaction referred to in Sections
1507 or 1508 if Holders are permitted to participate in the transaction on a
basis and with notice that the Board determines to be fair and appropriate in
light of the basis and notice on which holders of Common Stock are permitted to
participate in the transaction.
No adjustments need be made for rights to purchase Common Stock pursuant
to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par value
of the Common Stock.
To the extent the Securities become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
SECTION 1513. Notice of Adjustment.
Whenever the conversion price is adjusted, the Company shall promptly
mail to Holders a notice of the adjustment. The Company shall file with the
Trustee a certificate from the Company's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct, absent
mathematical error.
SECTION 1514. Voluntary Reduction.
The Company may from time to time reduce the conversion price by any
amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period; provided, however, that in no event
may the conversion price be less than the par value of a share of Common Stock.
Whenever the conversion price is reduced, the Company shall mail to
Holders a notice of the reduction. The Company shall mail the notice at least 15
days before the date the reduced conversion price takes effect. The notice shall
state the reduced conversion price and the period it will be in effect.
A reduction of the conversion price does not change or adjust the
conversion price otherwise in effect for purposes of Sections 1507 through 1509.
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SECTION 1515. Notice of Certain Transactions.
If:
(1) the Company takes any action that would require an adjustment
in the conversion price pursuant to Sections 1507 or 1508 and if the
Company does not permit Holders to participate pursuant to Section 1512;
(2) the Company takes any action that would require a
supplemental indenture pursuant to Section 1516; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Holders a notice stating the proposed record date for
a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 20 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
SECTION 1516. Reorganization of the Company.
If the Company is a party to a transaction subject to Section 801 or a
merger that reclassifies or changes its outstanding Common Stock, the Person
obligated to deliver securities, cash or other assets upon conversion of
Securities shall enter into a supplemental indenture. If the issuer of
securities deliverable upon conversion of Securities is an Affiliate of the
surviving or transferee corporation, such issuer shall join in the supplemental
indenture.
The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets that
he would have owned immediately after the consolidation, merger or transfer if
he had converted the Security immediately before the effective date of the
transaction. The supplemental indenture shall provide for adjustments that are
as nearly equivalent as practicable to the adjustments provided for in this
Article. The successor Company shall mail to Holders a notice briefly describing
the supplemental indenture.
SECTION 1517. Company Determination Final.
Any determination that the Company or the Board must make pursuant to
Sections 1504, 1507, 1508, 1509, 1510 or 1512 is conclusive, absent mathematical
error. Not later than the date of making any such determination pursuant to
Sections 1507, 1508, 1509, 1510 or 1512, the Company shall deliver to the
Trustee an Officers' Certificate stating the basis upon which such determination
was made and, if pursuant to Sections 1507, 1508 or 1509, the calculations by
which adjustments under such Sections were made.
74
<PAGE> 81
SECTION 1518. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment under this
Article should be made, how it should be made or what it should be. The Trustee
has no duty to determine whether any provisions of a supplemental indenture
under Sections 1507 or 1516 are correct. The Trustee makes no representation as
to the validity or value of any securities or assets issued upon conversion of
Securities. The Trustee shall not be responsible for the Company's failure to
comply with this Article. Each Conversion Agent other than the Company shall
have the same protection under this Section as the Trustee.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ORTHALLIANCE, INC.
By....................................
Attest:
......................................
FIRST UNION NATIONAL BANK
By....................................
Attest:
......................................
75
<PAGE> 82
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On the .... day of August, 1999, before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he is .................... of OrthAlliance, 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; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
......................................
STATE OF ................. )
) ss.:
COUNTY OF ................ )
On the .... day of August, 1999, before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he is .................... of First Union National Bank, 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; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
.......................................
76
<PAGE> 1
EXHIBIT 5.1
July 29, 1999
OrthAlliance, Inc.
21535 Hawthorne Boulevard, Suite 200
Torrance, CA 90503
Re: Registration Statement on Form S-4 (Registration No. 333-______)
Ladies and Gentlemen:
We have acted as counsel for OrthAlliance, Inc., a Delaware corporation
(the "Company"), in connection with the Company's Registration Statement on Form
S-4 (No. 333-_____) (the "Registration Statement"), filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, for the
registration of the sale by the Company from time to time of up to $65,000,000
maximum aggregate initial offering price of (a) its debt securities ("Debt
Securities"), (b) shares of its Preferred Stock, par value $0.001 per share (the
"Preferred Stock"), (c) shares of its Class A Common Stock, par value $0.001 per
share (the "Common Stock") or (d) warrants to purchase Debt Securities,
Preferred Stock or Common Stock (the "Warrants"). The Debt Securities, Preferred
Stock, Common Stock and Warrants are herein collectively referred to as the
"Securities". Debt Securities may be convertible for Securities or other
securities or rights. The Debt Securities will be issued under one or more
indentures, each in the form filed as an exhibit to the Registration Statement
(each an "Indenture"), between the Company and one or more trustees (each a
"Trustee").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary or advisable
for purposes of this opinion.
Based upon foregoing, we are of the opinion that:
1. When the Company and a Trustee execute and deliver an Indenture and
the specific terms of a particular Debt Security have been duly authorized and
established in accordance with such Indenture, and such Debt Security has been
duly authorized, executed, authenticated, issued and delivered in accordance
with such Indenture, against payment therefor or upon exchange in accordance
with the applicable underwriting or other agreement, such Debt Security will
constitute the valid and binding obligation of the Company.
2. When the issuance of Common Stock has been duly authorized, the
certificates for such Common Stock have been duly executed by the Company,
countersigned by the transfer agent therefor and duly delivered to the
purchasers thereof, against payment therefor in accordance with the applicable
underwriting or other agreement, such Common Stock (including any Common Stock
duly issued (a) upon the exchange or conversion of any Debt Security or
Preferred Stock that is exchangeable or convertible into Common Stock or (b)
upon
<PAGE> 2
the exercise of any Warrant exercisable for Common Stock) will be validly
issued, fully paid and nonassessable.
3. When the issuance of Preferred Stock has been duly authorized, the
Certificate of Designations establishing the terms of such Preferred Stock has
been duly approved and executed by the Company and filed with the Secretary of
State of the State of Delaware, the certificates for such Preferred Stock have
been duly executed by the Company, countersigned by the transfer agent therefor
and delivered to the purchasers thereof, against payment therefor in accordance
with the applicable underwriting or other agreement, such Preferred Stock
(including any Preferred Stock duly issued (a) upon the exchange or conversion
of any Debt Security that is exchangeable or convertible into Preferred Stock or
(b) upon the exercise of any Warrant exercisable for Preferred Stock) will be
validly issued, fully paid and nonassessable.
4. When the Company and a Warrant Agent execute and deliver a Warrant
Agreement and the specific terms of a particular Warrant have been duly
authorized and established in accordance with such Warrant Agreement, and such
Warrant has been duly authorized, executed, countersigned, issued and delivered
in accordance with such Warrant Agreement, against payment therefor in
accordance with the applicable underwriting or other agreement, such Warrant
will constitute the valid and binding obligation of the Company.
In connection with the opinions expressed above, we have assumed that,
at or prior to the time of delivery of any such Security, (a) the Board of
Directors shall have duly established the terms of such Security and duly
authorized the issuance and sale of such Security, in each case in accordance
with Delaware law, and such authorization shall not have been modified or
rescinded; (b) the Registration Statement shall have been declared effective and
such effectiveness shall not have been terminated or rescinded; (c) the
applicable Indenture, if any, shall have been duly authorized, executed and
delivered by the Company in accordance with applicable law and the applicable
Trustee and shall have been qualified under the Trust Indenture Act of 1939, as
amended; (d) the applicable Certificate of Designations, if any, shall have been
duly approved and executed by the Company in accordance with applicable law and
filed with the Secretary of State of the State of Delaware in accordance with
Delaware law; (e) the applicable Warrant Agreement, if any, shall have been duly
authorized, executed and delivered by the Company in accordance with applicable
law and the applicable Warrant Agent; and (f) there will not have occurred any
change in law affecting the validity or enforceability of such Security. We have
also assumed that none of the terms of any Security to be established subsequent
to the date hereof, nor the issuance and delivery of such Security, nor the
compliance by the Company with the terms of such Security will violate any
applicable law or will result in a violation of any provision of any instrument
or agreement then binding upon the Company, or any restriction imposed by any
court or governmental body having jurisdiction over the Company.
We are members of the Bar of the State of California and the foregoing
opinion is limited to the laws of the State of California, the General
Corporation Law of the State of Delaware and the federal laws of the United
States of America.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our name in the Registration
Statement and the related Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
MUNGER, TOLLES & OLSON LLP
<PAGE> 1
EXHIBIT 10.18
[ORTHALLIANCE LETTERHEAD]
June 16, 1999
Mr. James C. Wilson
2115 Camino Rey
Fullerton, CA 92833
Dear Jim:
I am pleased to formalize and present the following employment offer for the
position of Senior Vice President and Chief Financial Officer of OrthAlliance,
Inc. ("Company") reporting to me:
COMPENSATION:
o Base Salary of $14,583 per month.
o Bonus of up to 40% of base salary, subject to achievement of objectives
established by the Board of Directors of the Company.
STOCK OPTIONS:
o A stock option grant for 75,000 shares of common stock of Company will
be granted on the first date of your employment. Vesting will be 20% on
such date of grant and 20% on each anniversary of such date.
COMPANY BENEFITS:
o Participation in all benefits made generally available to Company
employees from time to time, subject to eligibility requirements.
o The Company currently provides medical and dental insurance.
o You will be eligible for three (3) weeks of vacation per year.
o If your employment is terminated by the Company for any reason other
than: (i) for cause or (ii) within twelve (12) months following a change
of control, then in exchange for a general release, you will be entitled
to severance pay equal to six (6) months of your base salary.
o In the event that your employment is involuntarily terminated by the
Company without cause within twelve (12) months following a change of
control, the terms set forth in the attached Exhibit A shall apply
instead of the terms contained in the preceding bullet point.
o Exhibit B is attached hereto and incorporated herein.
ESTIMATED START DATE:
o On or before July 19, 1999.
It is the policy of the Company that all employment is for an unspecified
period, and may be discontinued at will by you or the Company, at any time and
for any reason, with or without cause. If these terms are acceptable, please
sign in the space provided below and return one copy of this letter to me.
I am very excited about the opportunity to work with you. Please feel free to
call me with any questions.
Sincerely,
/s/ SAM WESTOVER
Sam Westover
President and CEO
Agreed: /s/ JAMES C. WILSON Date: June 18, 1999
----------------------------- ------------------
<PAGE> 2
EXHIBIT A
CHANGE OF CONTROL TERMINATION PAYMENT.
(a) Termination Payment.
(i) Amount. Notwithstanding anything to the contrary contained in
Section 1 hereof, in the event James C. Wilson's ("Employee") employment with
the Company is involuntarily terminated by the Company without cause within the
twelve month period following a Change Of Control (as defined in subsection (b)
hereof), in exchange for a general release, the Company will pay Employee a lump
sum payment (the "Termination Payment") in cash equal to three (3) times the sum
of the items in the following subsections (I) and (II):
(I) Employee's annual base compensation determined by reference
to his base salary in effect immediately prior to the Change Of Control;
and
(II) the maximum bonus that Employee could receive under any
management incentive bonus plan of the Company for the year in which the
Change Of Control occurs.
The Termination Payment will also include the following:
(III) Employee's base salary accrued but unpaid from the last
payment date to the date of termination;
(IV) expense reimbursement for expenses incurred in the
performance of his duties hereunder prior to the termination of his
employment with the Company;
(V) any other benefit accrued but unpaid as of the date of such
termination; and
(VI) the estimated cost to Employee of obtaining medical
insurance coverage for a period of eighteen months; provided that such
coverage will be substantially similar to the coverage provided to
Employee by Company immediately prior to the Change Of Control; and
provided further that this subsection (a)(i)(VI) will be applied without
regard to, and the amount payable under this subsection (a)(i)(VI) is in
addition to, any continuation (COBRA) rights or conversion rights under
any plan provided by Company, which rights are not affected by any
provision hereof.
(ii) Time for Payment; Interest. The Company will pay the Termination
Payment to Employee concurrent with Employee's termination of employment.
Company's obligation to pay to Employee any amounts under this Exhibit A,
including without limitation the Termination Payment and any Gross Up Payment
due under subsection (c), will bear interest at the maximum rate allowed by law
until paid by Company, and all accrued and unpaid interest will bear interest at
the same rate, all of which interest will be compounded daily.
1
<PAGE> 3
(b) Change Of Control. A Change Of Control will be deemed to have
occurred for purposes hereof (i) when a change of stock ownership of the Company
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any successor Item of a similar nature has occurred;
or (ii) upon the acquisition of beneficial ownership, directly or indirectly, by
any person (as such term is used in Section 14(d)(2) of the Exchange Act) of
securities of the Company representing 33 % or more of the combined voting power
of the Company's then outstanding securities; or (iii) a change during any
period of two consecutive years of a majority of the members of the Board of
Directors of the Company for any reason, unless the election, or the nomination
for election by the Company's shareholders, of each director was approved by a
vote of a majority of the directors then still in office who were directors at
the beginning of the period; provided that a Change Of Control will not be
deemed to have occurred for purposes hereof with respect to any person meeting
the requirements of clauses (i) and (ii) of Rule 13d-l(b)(1) promulgated under
the Securities Exchange Act of 1934, as amended.
(c) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code")
on "excess parachute payments" within the meaning of Section 280G(b)(1) of the
Code, the Company will pay to Employee an amount (the "Gross Up Payment") such
that the net amount retained by Employee, after deduction of any Excise Tax on
the excess parachute payment and any federal, state and local income tax
(together with penalties and interest) and Excise Tax upon the payment provided
for by this subsection (c)(i), will be equal to the amount of the excess
parachute payment.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Employee will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of Employee's
residence on the date of his termination of employment, net of the maximum
reduction in federal income taxes that could be obtained from deduction of such
state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon the
opinion of tax counsel selected by Employee. If such opinion is not finally
accepted by the Internal Revenue Service (or state and local taxing
authorities), then appropriate adjustments to the Excise Tax will be computed
and additional Gross Up Payments will be made in the manner provided by this
subsection (c).
(iv) Time For Payment. The Company will pay the estimated amount of the
Gross Up Payment in cash to Employee concurrent with Employee's termination of
employment. Employee and the Company agree to reasonably cooperate in the
determination of the actual amount of the Gross Up Payment. Further, Employee
and the Company agree to make such adjustments to the estimated amount of the
Gross Up Payment as may be necessary to equal the actual amount of the Gross Up
Payment, which in the case of Employee will refer to refunds of prior
overpayments and in the case of the Company will refer to makeup of prior
underpayments.
2
<PAGE> 4
(d) Arbitration. Any controversy or claim arising out of or relating to
this Exhibit A, or the breach thereof, will be settled exclusively by
arbitration in Los Angeles, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment upon the award rendered by the arbitrator(s) may be entered in, and
enforced by, any court having jurisdiction thereof.
(e) No Right To Continued Employment. This Exhibit A will not give
Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
(f) Exercise of Stock Options. Employee's options to purchase the
Company's Common Stock will vest completely and become immediately exercisable
upon a Change Of Control and will remain exercisable for the greater of 90 days
or the time period specified in the applicable option plan or option agreement.
3
<PAGE> 5
EXHIBIT B
Section 1. CONFIDENTIAL INFORMATION. James C. Wilson ("Employee")
recognizes and acknowledges that certain assets of the Company and its
affiliates, including without limitation information regarding customers,
pricing policies, methods of operation, proprietary computer programs, sales,
products, profits, costs, markets, key personnel, formulae, product
applications, technical processes, and trade secrets (hereinafter called
"Confidential Information") are valuable, special and unique assets of Company
and its affiliates. Employee will not, during or after his term of employment,
disclose any of the Confidential Information to any person, firm, corporation,
association, or any other entity for any reason or purpose whatsoever, directly
or indirectly, except as may be required pursuant to his employment hereunder,
unless and until such Confidential Information becomes publicly available other
than as a consequence of the breach by Employee of his confidentiality
obligations hereunder. In the event of the termination of his employment,
whether voluntary or involuntary and whether by the Company or Employee,
Employee will deliver to the Company all documents and data pertaining to the
Confidential Information and will not take with him any documents or data of any
kind or any reproductions (in whole or in part) of any items relating to the
Confidential Information.
Section 2. NONCOMPETITION. Until two years after termination of
Employee's employment hereunder, Employee will not (i) engage directly or
indirectly, alone or as a shareholder, partner, officer, director, employee or
consultant of any other business organization, in any business activities which
(A) relate to the acquisition, consolidation, management of or consultation with
orthodontic and pediatric practices (the "Designated Industry") and (B) were
either conducted by the Company prior to Employee's termination or proposed to
be conducted by the Company at the time of such termination, (ii) divert to any
competitor of the Company in the Designated Industry any customer of the
Company, or (iii) solicit or encourage any officer, employee, or consultant of
the Company to leave its employ for employment by or with any competitor of the
Company in the Designated Industry. The parties hereto acknowledge that
Employee's noncompetition obligations hereunder will not preclude Employee from
owning less than 2 % of the common stock of any publicly traded corporation
conducting business activities in the Designated Industry. Employee will
continue to be bound by the provisions of this Section 2 until their expiration
and will not be entitled to any compensation from the Company with respect
thereto. If at any time the provisions of this Section 2 are determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 2 will be considered divisible and
will become and be immediately amended to only such area, duration and scope of
activity as will be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Employee agrees that this
Section 2 as so amended will be valid and binding as though any invalid or
unenforceable provision had not been included herein.
4
<PAGE> 1
EXHIBIT 12.1
STATEMENT OF COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------------------- -------------------------------------------
1999 1998 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before income taxes $ 3,821,000 $ 2,892,000 $13,658,000 $ 105,000 $ --
Add: Interest incurred 394,000 7,000 448,000 -- --
- -------------------------------------------------------------------- -------------------------------------------
Earnings $ 4,215,000 $ 2,899,000 $14,106,000 $ 105,000 $ --
- ----------------------------------------============================ ===========================================
Fixed Charges - Interest incurred $ 394,000 $ 7,000 $ 448,000 $ -- $ --
Ratio of earnings to fixed charges 10.7x 414.1x 31.5x -- --
- ----------------------------------------============================ ===========================================
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
February 19, 1999 included in OrthAlliance, Inc.'s Form 10-K for the year ended
December 31, 1998, and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
July 30, 1999
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------
FIRST UNION NATIONAL BANK
(Exact name of trustee as specified in its charter)
United States National Bank 22-1147033
(State of incorporation if (I.R.S. employer
not a national bank) identification no.)
First Union National Bank
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
(Address of principal (Zip Code)
executive offices)
Same as above
(Name, address and telephone number, including
area code, of trustee's agent for service)
ORTHALLIANCE, INC.
(Exact name of obligor as specified in its charter)
State of Delaware
(State or other jurisdiction of incorporation or organization)
95-4632134
(I.R.S. employer identification no.)
Sam Westover
21535 Hawthorne Boulevard, Suite 200
Torrance, CA 90503
(310)792-1300
(Address, including zip code, of principal executive offices)
----------
Convertible Subordinated Notes
(Title of the indenture securities)
----------
<PAGE> 2
1. General information. Furnish the following information as to the trustee:
(a)Name and address of each examining or supervising authority to which
it is subject
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Federal Reserve Bank of Richmond, Richmond, VA
Comptroller of the Currency Washington, D.C.
Securities and Exchange Commission
Division of Market Regulation Washington, D.C.
Federal Deposit Insurance Corporation Washington, D.C.
(b)Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any underwriter
for the obligor is an affiliate of the trustee, describe each such affiliation.
None.
(See Note 1 on Page 4.)
Because the obligor is not in default on any securities issued under indentures
under which the applicant is trustee, Items 3 through 15 are not required
herein.
16. List of Exhibits.
All exhibits identified below are filed as a part of this statement of
eligibility.
1. A copy of the Articles of Association of First Union National Bank as now in
effect, which contain the authority to commence business and a grant of powers
to exercise corporate trust powers.
2. A copy of the certificate of authority of the trustee to commence business,
if not contained in the Articles of Association.
2
<PAGE> 3
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
exhibits (1) or (2) above.
4. A copy of the existing By-laws of First Union National Bank, or instruments
corresponding thereto.
5. Inapplicable.
6. The consent of the trustee required by Section 321(b) of the Trust Indenture
Act of 1939 is included at Page 4 of this Form T-1 Statement.
7. A copy of the latest report of condition of the trustee published pursuant to
law or to the requirements of its supervising or examining authority is attached
hereto.
8. Inapplicable.
9. Inapplicable.
3
<PAGE> 4
NOTE
Note 1:Inasmuch as this Form T-1 is filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information. Item 2 may, however, be
considered correct unless amended by an amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Union National Bank, a national association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Charlotte, and State of North Carolina, on the ___ day of July, 1999.
FIRST UNION NATIONAL BANK
(trustee)
By:____________________________________
Its:________________________________
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939, as amended,
and in connection with the proposed issuance by ORTHALLIANCE, INC., First Union
National Bank as the trustee herein named, hereby consents that reports of
examinations of said Trustee by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon requests therefor.
FIRST UNION NATIONAL BANK
(trustee)
By:____________________________________
Its:________________________________
Title:______________________________
Dated: July __, 1999
4
<PAGE> 5
Legal Title of Bank: First Union National Bank Call Date: 03/31/99 FIEC 031
Address: Two First Union Center Page RC-1
City, State, Zip: Charlotte, NC 28288-0201
FDIC Certificate #: 33869
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1999
All schedules are to be reported in thousands of dollars.
Unless otherwise indicated, report the amount outstanding
as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amount in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS //////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////
a. Noninterest-bearing balances and currency and coin (1)................................. 0081 11,400,000 1.a.
b. Interest-bearing balances (2).......................................................... 0071 454,000 1.b.
2. Securities: //////////////
a. Held-to-maturity securities (from Schedule RC-B, column A)............................. 1754 1,873,000 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................... 1773 38,611,000 2.b.
3. Federal funds sold and securities purchased under agreements to resell...................... 1350 3,359,000 3.
4. Loans and lease financing receivables //////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 131,165,000 ////////////// 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 1,812,000 ////////////// 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 //////////////
d. Loans and leases, net of unearned income, //////////////
allowance, and reserve (item 4.a minus 4.b and 4.c).................................... 2125 129,353,000 4.d.
5. Trading assets (from Schedule RC-D.......................................................... 3545 4,725,000 5.
6. Premises and fixed assets (including capitalized leases).................................... 2145 3,218,000 6.
7. Other real estate owned (from Schedule RC-M)................................................ 2150 126,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M).... 2130 321,000 8.
9. Customers' liability to this bank on acceptances outstanding................................ 2155 769,000 9.
10. Intangible assets (from Schedule RC-M)...................................................... 2143 5,285,000 10.
11. Other assets (from Schedule RC-F)........................................................... 2160 9,176,000 11.
12. Total assets (sum of items 1 through 11).................................................... 2170 208,670,000 12.
</TABLE>
- --------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 6
Legal Title of Bank: First Union National Bank Call Date: 03/31/99 FIEC 031
Address: Two First Union Center Page RC-2
City, State, Zip: Charlotte, NC 28288-0201
FDIC Certificate #: 33869
Schedule RC--Continued
<TABLE>
<CAPTION>
DollarAmount in Thousands Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES ////////////////
13. Deposits: ////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, ////////////////
part I)........................................................... RCON 2200 128,512,000 13.a.
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 131,165,000 //////////////// 4.a.
(1) Noninterest-bearing (1) RCON 6631 21,581,000 ///////////////// 13.a.(1)
(2) Interest-bearing................................... RCON 6636 106,931,000 ///////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, ////////////////
part II)...................................................................... RCFN 2200 9,452,000 13.b.
(1) Noninterest-bearing................................ RCFN 6631 553,000 ///////////////
13.b.(1)
(2) Interest-bearing................................... RCFN 6636 8,899,000 ////////////////
13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase...... RCFD 2800 19,561,000 14.
15. a. Demand notes issued to the U.S. Treasury................................... RCON 2840 500,000 15.a.
b. Trading liabilities (from Schedule RC-D)................................... RCFD 3548 3,585,000 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under /////////////////
capitalized leases):............................................................ /////////////////
a. With a remaining maturity of one year or less.............................. RCFD 2332 12,891,000 16.a.
b. With a remaining maturity of more than one year through three years........ RCFD A547 3,583,000 16.b.
c. With a remaining maturity of more than three years......................... RCFD A548 774,000 16.c.
17. Not applicable.................................................................. /////////////////
18. Bank's liability on acceptances executed and outstanding........................ RCFD 2920 769,000 18.
19. Subordinated notes and debentures (2)........................................... RCFD 3200 4,045,000 19.
20. Other liabilities (from Schedule RC-G).......................................... RCFD 2930 7,306,000 20.
21. Total liabilities (sum of items 13 through 20).................................. RCFD 2948 190,978,000 21.
22. Not applicable.................................................................. /////////////////
EQUITY CAPITAL /////////////////
23. Perpetual preferred stock and related surplus................................... RCFD 3838 161,000 23.
24. Common stock.................................................................... RCFD 3230 455,000 24.
25. Surplus (exclude all surplus related to preferred stock)........................ RCFD 3839 13,291,000 25.
26. a. Undivided profits and capital reserves...................................... RCFD 3632 3,768,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities` RCFD 8434 22,000 26.b.
c. Accumulated net gains (losses) on cash flow hedges.......................... RCFD 4336 0 26 c.
27. Cumulative foreign currency translation adjustments............................. RCFD 3284 (5,000) 27.
28. Total equity capital (sum of items 23 through 27)............................... RCFD 3210 17,692,000 28.
29. Total liabilities and equity capital (sum of items 21 and 28)................... RCFD 3300 208,670,000 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1997............................................ RCFD 6724 2 M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
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(1) Includes total demand deposits and noninterest-bearing time and savings
deposit.
(2) Includes limited-life preferred stock and related surplus.
6
