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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 3, 1999
Commission file number 1-6714
THE WASHINGTON POST COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 53-0182885
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO)
1150 15TH ST., N.W., WASHINGTON, D.C. 20071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 334-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------- -----------------------
Class B Common Stock, par value New York Stock Exchange
$1.00 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the Company's voting stock held by
non-affiliates on February 26, 1999, based on the closing price for the
Company's Class B Common Stock on the New York Stock Exchange on such date:
approximately $2,859,000,000.
Shares of common stock outstanding at February 26, 1999:
Class A Common Stock - 1,739,250 shares
Class B Common Stock - 8,359,977 shares
Documents partially incorporated by reference:
Definitive Proxy Statement for the Company's 1999 Annual Meeting
of Stockholders (incorporated in Part III to the extent provided
in Items 10, 11, 12 and 13 hereof).
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PART I
ITEM 1. BUSINESS.
The principal business activities of The Washington Post Company (the
"Company") consist of newspaper publishing (principally The Washington Post),
television broadcasting (through the ownership and operation of six
network-affiliated stations), the ownership and operation of cable television
systems, and magazine publishing (principally Newsweek magazine). The Company
also produces news and other products for electronic distribution and provides
test preparation and related services.
Information concerning the consolidated operating revenues,
consolidated income from operations and identifiable assets attributable to the
principal segments of the Company's business for the last three fiscal years is
contained in Note M to the Company's Consolidated Financial Statements appearing
elsewhere in this Annual Report on Form 10-K. (Revenues for each segment are
shown in such Note M net of intersegment sales, which did not exceed 0.4% of
consolidated operating revenues.)
During each of the last three years the Company's operations in
geographic areas outside the United States (consisting primarily of the
publication of the international editions of Newsweek) accounted for less than
6% of the Company's consolidated revenues and less than 2% of its consolidated
income from operations, and the identifiable assets attributable to such
operations represented less than 2% of the Company's consolidated assets.
NEWSPAPER PUBLISHING
THE WASHINGTON POST
The Washington Post is a morning and Sunday newspaper primarily
distributed by home delivery in the Washington, D.C. metropolitan area,
including large portions of Virginia and Maryland.
The following table shows the average paid daily (including Saturday)
and Sunday circulation of The Post for the twelve-month periods ended September
30 in each of the last five years, as reported by the Audit Bureau of
Circulations ("ABC") for the years 1994-1997 and as estimated by The Post for
the twelve-month period ended September 30, 1998 (for which period ABC had not
completed its audit as of the date of this report) from the semiannual
publisher's statements submitted to ABC for the six-month periods ended March
31, 1998, and September 30, 1998:
<TABLE>
<CAPTION>
AVERAGE PAID CIRCULATION
------------------------
DAILY SUNDAY
----- ------
<S> <C> <C>
1994................................ 821,956 1,152,441
1995................................ 807,818 1,140,498
1996................................ 800,295 1,129,519
1997................................ 784,199 1,109,344
1998................................ 775,510 1,095,393
</TABLE>
A price increase for home-delivered copies of the daily and Sunday
newspaper went into effect on February 3, 1997, raising the rate per four-week
period from $10.20 to $10.60. On January 8, 1996 that rate had been raised to
$10.20 from $9.80. The rate charged to subscribers for Sunday-only
home-delivered copies of the newspaper for each four-week period has been $6.00
since 1991. On April 6, 1992, the newsstand price for the Sunday newspaper was
increased from $1.25 (which price had been in effect since 1986) to $1.50. The
newsstand price for the daily newspaper has been $0.25 since 1981.
General advertising rates were increased by approximately 4.6% on
January 1, 1998, and approximately another 4.6% on January 1, 1999. Rates for
most categories of classified and retail
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advertising were increased by approximately 4.2% on February 1, 1998, and
approximately an additional 3.5% on February 1, 1999.
The following table sets forth The Post's advertising inches (excluding
preprints) and number of preprints for the past five years:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Inches (in thousands).......................... 3,391 3,212 3,070 3,192 3,199
Full-Run Inches................................. 3,133 2,950 2,814 2,897 2,806
Part-Run Inches................................. 258 262 256 294 393
Preprints (in millions).............................. 1,325 1,416 1,445 1,549 1,650
</TABLE>
The Post also publishes The Washington Post National Weekly Edition, a
tabloid which contains selected articles and features from The Washington Post
edited for a national audience. The National Weekly Edition has a basic
subscription price of $48.00 per year and is delivered by second class mail to
approximately 81,000 subscribers.
The Post has about 600 full-time editors, correspondents, reporters and
photographers on its staff, draws upon the news reporting facilities of the
major wire services and maintains correspondents in 20 news centers abroad and
in New York City, Los Angeles, Chicago, Miami, Richmond, Baltimore, Annapolis
and Austin, Texas.
THE HERALD
The Company owns The Daily Herald Company, publisher of The Herald in
Everett, Washington, about 30 miles north of Seattle. The Herald is published
mornings seven days a week and is primarily distributed by home delivery in
Snohomish County. The Daily Herald Company also provides commercial printing
services and publishes six controlled-circulation weekly community newspapers
(collectively know as The Enterprise Newspapers) that are distributed in south
Snohomish and north King Counties.
The Herald's average paid circulation as reported to ABC for the twelve
months ended September 30, 1998, was 54,213 daily (including Saturday) and
63,903 Sunday. The aggregate average weekly circulation of The Enterprise
Newspapers during the twelve-month period ended December 31, 1998, was
approximately 75,000 copies.
The Herald and The Enterprise Newspapers together employ approximately
70 editors, reporters and photographers.
THE GAZETTE NEWSPAPERS
The Gazette Newspapers, Inc., another subsidiary of the Company,
publishes one paid-circulation and 30 controlled-circulation weekly community
newspapers (collectively known as The Gazette Newspapers) in Montgomery and
Frederick Counties and parts of Prince George's and Carroll Counties, Maryland.
During 1998 The Gazette Newspapers had an aggregate average weekly circulation
of approximately 433,000 copies. This subsidiary also produces 10 military
newspapers (most of which are weekly) under agreements where editorial material
is supplied by local military bases; these newspapers had a combined 1998
circulation of over 110,000 copies.
The Gazette Newspapers have approximately 90 editors, reporters and
photographers on their combined staffs.
The Gazette Newspapers, Inc. also operates a commercial printing
business which it acquired in 1996.
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TELEVISION BROADCASTING
Through subsidiaries the Company owns six VHF television stations
located in Detroit, Michigan; Houston, Texas; Miami, Florida; Orlando, Florida;
San Antonio, Texas; and Jacksonville, Florida; which are respectively the 9th,
11th, 16th, 22nd, 37th and 52nd largest broadcasting markets in the United
States. Each of the Company's stations is affiliated with a national network.
Although network affiliation agreements generally have limited terms, each of
the Company's television stations has maintained a network affiliation
continuously for at least 20 years.
The Company's 1998 net operating revenues from national and local
television advertising and network compensation were as follows:
<TABLE>
<S> <C>
National............................ $ 133,891,000
Local............................... 186,921,000
Network............................. 30,560,000
-------------
Total.......................... $ 351,372,000
</TABLE>
The following table sets forth certain information with respect to each
of the Company's television stations:
<TABLE>
<CAPTION>
TOTAL COMMERCIAL
STATION LOCATION EXPIRATION EXPIRATION STATIONS IN DMA(b)
AND NATIONAL DATE OF DATE OF ------------------
YEAR COMMERCIAL MARKET NETWORK FCC NETWORK
OPERATION COMMENCED RANKING(a) AFFILIATION LICENSE AGREEMENT ALLOCATED OPERATING
- ------------------- ---------- ----------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
WDIV
Detroit, Mich. Oct. 1, June 30, VHF-4 VHF-4
1947 9th NBC 2005 2004 UHF-6 UHF-5
KPRC
Houston, Tx. Aug. 1, June 30, VHF-3 VHF-3
1949 11th NBC 2006 2004 UHF-11 UHF-10
WPLG
Miami, Fla. Feb. 1, Dec. 31, VHF-5 VHF-5
1961 16th ABC 2005 2004 UHF-8 UHF-8
WKMG
Orlando, Fla. Feb. 1, Apr. 6, VHF-3 VHF-3
1954 22nd CBS 2005 2005 UHF-11 UHF-9
KSAT
San Antonio, Tx. Aug. 1, Dec. 31, VHF-4 VHF-4
1957 37th ABC 2006 2004 UHF-6 UHF-5
WJXT
Jacksonville, Fla. Feb. 1, July 10, VHF-2 VHF-2
1947 52nd CBS 2005 2001 UHF-6 UHF-4
</TABLE>
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(a) Source: 1998/99 DMA Market Rankings, Nielsen Media Research, Fall
1998, based on television homes in DMA (see note (b) below).
(b) Designated Market Area ("DMA") is a market designation of A.C.
Nielsen which defines each television market exclusive of another, based on
measured viewing patterns.
The Company acquired the assets of WKMG on September 4, 1997, in
exchange for the assets of VHF television station WFSB, a CBS affiliate in
Hartford, Connecticut which had been owned by the Company for many years, plus a
cash payment.
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REGULATION OF BROADCASTING AND RELATED MATTERS
The Company's television broadcasting operations are subject to the
jurisdiction of the Federal Communications Commission under the Communications
Act of 1934, as amended. Under authority of such Act the FCC, among other
things, assigns frequency bands for broadcast and other uses; issues, revokes,
modifies and renews broadcasting licenses for particular frequencies; determines
the location and power of stations and establishes areas to be served; regulates
equipment used by stations; and adopts and implements regulations and policies
which directly or indirectly affect the ownership, operations and profitability
of broadcasting stations.
Each of the Company's television stations holds an FCC license which is
renewable upon application for an eight-year period.
After proceedings that extended over many years, in December 1996 the
FCC formally approved technical standards for digital advanced television
("DTV"). DTV is a flexible system that will permit broadcasters to utilize a
single digital channel in various ways, including providing one channel of
high-definition television programming with greatly enhanced image and sound
quality or several channels of lower-definition television programming
("multicasting"), and is capable of accommodating subscription video and data
services. Broadcasters may offer a combination of services, so long as they
transmit at least one stream of free video programming on the DTV channel. The
FCC has assigned to each existing full power television station (including each
station owned by the Company) a second channel to implement DTV while present
television operations are continued on that station's existing channel. Although
in some cases a station's DTV channel may only permit operation over a smaller
geographic service area than that available using its existing channel, the
FCC's stated goal in assigning channels was to provide stations with DTV service
areas that will be generally consistent with their existing service areas. The
FCC's DTV rules also permit stations to request modifications to their assigned
DTV facilities, allowing them to expand their DTV service areas if certain
interference criteria are met. Under FCC rules and the Balanced Budget Act of
1997, station owners will be required to surrender one channel in 2006 and
thereafter provide service solely in the DTV format. The deadlines that have
been established for each of the Company's stations to construct DTV facilities
range from May 1999 to May 2002, depending upon the size of the market in which
the station is licensed.
Through two rounds of reconsideration ending on December 18, 1998, the
FCC refined its DTV rules and DTV channel assignments. The FCC's DTV decisions
now are subject to judicial review in a consolidated appeal before the U.S.
Court of Appeals for the District of Columbia Circuit. In November 1998 the FCC
issued a decision to implement the requirement of the Telecommunications Act of
1996 that it charge broadcasters a fee for offering subscription services on the
DTV channel. The FCC's decision to impose a fee of 5% of the gross revenues
generated by such services currently is subject to petitions for reconsideration
before the FCC. The FCC also is considering whether and how to extend cable
systems' obligations for mandatory carriage of certain broadcast television
signals to the DTV channel. Deliberations on this issue include the question of
whether cable systems should be required to transmit DTV signals in the same
definition in which originally broadcast. Finally, the Clinton Administration's
advisory committee considering whether to recommend the imposition of additional
public interest obligations on broadcasters' digital operations issued its
report in December 1998. That report recommended mandatory minimum public
interest requirements in a number of areas, including closed-captioning, public
service announcements and public affairs programming, but primarily endorsed
voluntary efforts by the broadcasting industry to meet the public interest needs
of its viewers, including the voluntary provision of free time for political
candidates. The report currently is under review by the FCC, which has announced
its intention to commence a rulemaking proceeding concerning the public interest
obligations of broadcasters.
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The Company anticipates that the conversion to DTV broadcasting will
require significant capital expenditures but cannot otherwise predict what
effects the DTV conversion eventually will have upon its television broadcast
operations.
The FCC also is conducting proceedings dealing with such matters as
multiple ownership restrictions, regulations pertaining to cable television
(discussed below under "Cable Television Division - Regulation of Cable
Television and Related Matters"), and various proposals to further the
development of alternative video delivery systems that would compete in varying
degrees with both cable television and television broadcasting operations. The
multiple ownership rules were relaxed by amendments to the Communications Act
enacted in 1996 and broadcast companies are now permitted to own an unlimited
number of television stations as long as the combined service areas of such
stations do not include more than 35% of the U.S. population. The Company is
unable to determine what impact the various proceedings and other matters
described in this paragraph may ultimately have on the Company's television
broadcast operations.
CABLE TELEVISION DIVISION
As of the end of 1998 the Company (through subsidiaries) provided basic
cable service to approximately 733,000 subscribers (representing about 73% of
the 1,000,800 homes passed by the systems) and had in force more than 417,000
subscriptions to premium program services.
During 1998 the Company both acquired and disposed of cable television
systems. These transactions included the purchase in March of a system serving
7,500 subscribers in Grenada and Bruce, Mississippi, the purchase in June of a
system serving 36,000 subscribers in Anniston, Alabama, and the purchase in July
of systems serving an aggregate of 72,000 subscribers in Mississippi, Oklahoma
and Texas. Also in July the Company sold 14 of its smallest systems which
together served about 29,000 subscribers.
The Company's cable systems are located in 18 Midwestern, Southern and
Western states and typically serve smaller communities: thus 21 of the Company's
current systems pass fewer than 10,000 dwelling units, 15 pass 10,000-25,000
dwelling units, and 17 pass more than 25,000 dwelling units, of which the two
largest are in Modesto and Santa Rosa, California, each serving more than 50,000
subscribers.
REGULATION OF CABLE TELEVISION AND RELATED MATTERS
The Company's cable operations are subject to various requirements
imposed by local, state and federal governmental authorities. The franchises
granted by local governmental authorities are typically nonexclusive and limited
in time and generally contain various conditions and limitations relating to
payment of fees to the local authority, determined generally as a percentage of
revenues. Additionally, franchises often regulate the conditions of service and
technical performance, and contain various types of restrictions on
transferability. Failure to comply with such conditions and limitations may give
rise to rights of termination by the franchising authority.
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act"), requires or authorizes the imposition of a wide range of
regulations on cable television operations. The three major areas of regulation
are (i) the rates charged for certain cable television services, (ii) required
carriage ("must carry") of some local broadcast stations, and (iii)
retransmission consent rights for commercial broadcast stations.
Among other things, the Telecommunications Act of 1996 altered the
preexisting regulatory environment by expanding the definition of "effective
competition" (a condition that precludes
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regulation of the rates charged by a cable system for basic and optional tiers
of service), relaxing cost-of-service rules, raising the threshold for FCC
investigations of rate complaints, and terminating rate regulation for some
small cable systems. For cable systems that do not fall within the
effective-competition or small-system exemptions (including all of the cable
systems owned by the Company), monthly subscription rates for the basic tier of
cable service may be regulated by municipalities, subject to procedures and
criteria established by the FCC, and the FCC may regulate the rates charged for
optional tiers of service. Rates charged by cable television systems for
pay-per-view service, for per-channel premium program services and for
advertising are all exempt from regulation. Cable television systems may also
add channels to an unregulated new product tier, but the channels must be new to
the system as of October 1, 1994. The FCC's authority to regulate the rates
charged for optional tiers of service currently is scheduled to expire on March
31, 1999.
In April 1993 the FCC adopted a "freeze" on rate increases for
regulated services (i.e., the basic and optional tiers). Later that year the FCC
promulgated benchmarks for determining the reasonableness of rates for such
services. The benchmarks provided for a percentage reduction in the rates that
were in effect when the benchmarks were announced. Under the FCC's approach
cable operators may exceed the benchmarks if they can show in a cost-of-service
proceeding that higher rates are needed to earn a reasonable return on
investment, which the Commission established in March 1994 to be 11.25%. Also,
the FCC has adopted so-called "going forward" rules which permit cable operators
to increase their benchmarked rates for regulated services when new channels are
added and to offset the effects of inflation, equipment upgrades, and higher
programming, franchising and regulatory fees.
Pursuant to the "must-carry" rules a commercial television broadcast
station may, under certain circumstances, insist on carriage of its signal on
cable systems located within the station's market area, while a noncommercial
public station may insist on carriage of its signal on cable systems located
within either the station's predicted Grade B contour or 50 miles of the
station's transmitter. As a result of these obligations (the constitutionality
of which has been upheld by the U.S. Supreme Court) certain of the Company's
cable systems have had to carry broadcast stations that they might not otherwise
have elected to carry, and the freedom the Company's systems would otherwise
have to drop signals previously carried has been reduced.
At three-year intervals beginning in October 1993 commercial
broadcasters have had the right to forego must-carry rights and insist instead
that their signals not be carried without their prior consent. Before October
1993 some of the broadcast stations carried by the Company's cable television
systems opted for retransmission consent and initially took the position that
they would not grant consent without commitments by the Company's systems to
make cash payments. As a result of case-by-case negotiations, the Company's
cable systems were able to continue carrying virtually all of the stations
insisting on retransmission consent without having to agree to pay any stations
for the privilege of carrying their signals. However some commitments were made
to carry other program services offered by a station or an affiliated company,
to provide advertising availabilities on cable for sale by a station and to
distribute promotional announcements with respect to a station. Many of these
agreements between broadcast stations and the Company's cable systems expired at
the end of 1996 and the expired agreements were replaced by new agreements
having comparable terms.
The FCC will soon be considering the extent to which the must-carry and
retransmission consent requirements described above will apply to broadcasters'
DTV operations. Such an extension of must-carry requirements could result in the
Company's cable systems being required to delete some existing programming to
make room for broadcasters' DTV channels.
Various other provisions in current Federal law may significantly
affect the costs or profits of cable television systems. These matters include a
prohibition on exclusive franchises, restrictions on the ownership of competing
video delivery services, restrictions on transfers of cable television
ownership,
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consumer protection measures, and various regulations intended to facilitate the
development of competing video delivery services. Other provisions benefit the
owners of cable systems by restricting regulation of cable television in many
significant respects, requiring that franchises be granted for reasonable
periods of time, providing various remedies and safeguards to protect cable
operators against arbitrary refusals to renew franchises, and limiting franchise
fees to 5% of revenues.
Apart from its authority under the 1992 Cable Act and the
Telecommunications Act of 1996, the FCC regulates various other aspects of cable
television operations. Since 1990 cable systems have been required to black out
from the distant broadcast stations they carry syndicated programs for which
local stations have purchased exclusive rights and requested exclusivity. Other
long-standing FCC rules require cable systems to delete under certain
circumstances duplicative network programs broadcast by distant stations. The
FCC also imposes certain technical standards on cable television operators,
exercises the power to license various microwave and other radio facilities
frequently used in cable television operations, regulates the assignment and
transfer of control of such licenses, and oversees compliance with certain
affirmative action and equal employment opportunity obligations applicable to
cable systems. In addition, pursuant to the Pole Attachment Act, the FCC
exercises authority to disapprove unreasonable rates charged to cable operators
by telephone and power utilities for utilizing space on utility poles or in
underground conduits.
The Copyright Act of 1976 grants to cable television systems, under
certain terms and conditions, the right to retransmit the signals of television
stations pursuant to a compulsory copyright license. Those terms and conditions
include the payment of certain license fees set forth in the statute or
established by subsequent administrative regulations. The compulsory license
fees have been increased on several occasions since this Act went into effect.
In 1994 the availability of the compulsory copyright license was extended to
"wireless cable" and direct broadcast satellite operators, although in the
latter case the license right is currently limited to independent and
network-affiliated stations whose over-the-air signal (or a signal carrying the
same network's programming) is not available at the subscriber's location. Some
pending legislative proposals would modify or eliminate the compulsory copyright
licensing scheme, and the FCC and others have urged that the compulsory license
be phased out for local or distant broadcast signals or both.
The general prohibition on telephone companies operating cable systems
in areas where they provide local telephone service was eliminated by the
Telecommunications Act of 1996. Telephone companies now can provide video
services in their telephone service areas under four different regulatory plans.
First, they can provide traditional cable television service and be subject to
the same regulations as the Company's cable television systems (including
compliance with local franchise and any other local or state regulatory
requirements). Second, they can provide "wireless cable" service, which is
described below, and not be subject to either cable regulations or franchise
requirements. Third, they can provide video services on a common-carrier basis,
under which they would not be required to obtain local franchises but would be
subject to common-carrier regulation (including a prohibition against exercising
control over programming content). Finally, they can operate so-called "open
video systems" without local franchises and be subject to reduced regulatory
burdens. The Act contains detailed requirements governing the operation of open
video systems, including the nondiscriminatory offering of capacity to third
parties and limiting to one-third of total system capacity the number of
channels the operator can program when demand exceeds available capacity. In
addition, the rates charged by an open video system operator to a third party
for the carriage of video programming must be just and reasonable as determined
in accordance with standards to be established by the FCC. (Cable operators and
others not affiliated with a telephone company may also become operators of open
video systems.) The Act also generally prohibits telephone companies from
acquiring or owning an interest in existing cable systems operating in their
service areas.
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The Telecommunications Act of 1996 balances this grant of video
authority to telephone companies by removing regulatory barriers to the offering
of telephone services by cable companies and others. The Act preempts state and
local laws that have barred local telephone competition in some states. In
addition, the Act requires local telephone companies to permit cable companies
and other competitors to connect with the telephone network and requires
telephone companies to give competitors access to the essential features and
functionalities of the local telephone network (such as switching capability,
signal carriage from the subscriber's residence to the switching center and
directory assistance) on an unbundled basis. As an alternative method of
providing local telephone service, the Act permits cable companies and others to
purchase telephone service on a wholesale basis and then resell it to their
subscribers.
During the past several years, the FCC has adopted various rule changes
intended to facilitate the development of so-called "wireless cable," a video
service that is capable of distributing approximately 30 television channels in
a local area by over-the-air microwave transmission using analog technology and
is capable of providing a greater number of channels using digital compression
technologies. Moreover, in late 1998 the FCC began issuing licenses for a new
digital wireless cable service which will utilize up to 1,300 megahertz of
spectrum in the 28 and 31 gigahertz bands and is intended to provide large
numbers of video channels as well as voice and data transmission services.
Wireless cable services are not required to obtain franchises from local
governmental authorities and generally operate under fewer regulatory
requirements than conventional cable television systems.
Litigation is pending in various courts in which prohibitions on cable
television operations without a franchise and various franchise requirements are
being challenged as unlawful under the First Amendment, the antitrust laws and
on other grounds. If successful, such litigation could facilitate the
development of duplicative cable facilities that would compete with existing
cable systems.
The regulation of certain cable television rates pursuant to the
authority granted to the FCC has negatively impacted the revenues of the
Company's cable systems. The Company is unable to predict what effect the other
matters discussed above may ultimately have on its cable television business.
MAGAZINE PUBLISHING
NEWSWEEK
Newsweek is a weekly news magazine published both domestically and
internationally by Newsweek, Inc., a subsidiary of the Company. In gathering,
reporting and writing news and other material for publication, Newsweek
maintains news bureaus in 9 U.S. and 13 foreign cities.
The domestic edition of Newsweek is comprised of over 100 different
geographic or demographic editions which carry substantially identical news and
feature material but enable advertisers to direct messages to specific market
areas or demographic groups. Domestically, Newsweek ranks second in circulation
among the three leading weekly news magazines (Newsweek, Time and U.S. News &
World Report). For each of the last five years Newsweek's average weekly
domestic circulation rate base has been 3,100,000 copies and its percentage of
the total weekly domestic circulation rate base of the three leading weekly news
magazines has been 33.5%.
Newsweek is sold on newsstands and through subscription mail order
sales derived from a number of sources, principally direct mail promotion. The
basic one-year subscription price is $41.08. Most subscriptions are sold at a
discount from the basic price. Since January 1992 Newsweek's newsstand price has
been $2.95 per copy.
The total number of Newsweek's domestic advertising pages and gross
domestic advertising revenues as reported by Publishers' Information Bureau,
Inc., together with Newsweek's percentages of
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the total number of advertising pages and total advertising revenues of the
three leading weekly news magazines, for the past five years have been as
follows:
<TABLE>
<CAPTION>
NEWSWEEK
NEWSWEEK PERCENTAGE OF GROSS PERCENTAGE OF
ADVERTISING THREE LEADING ADVERTISING THREE LEADING
PAGES* NEWS MAGAZINES REVENUES* NEWS MAGAZINES
-------- ---------------- ------------- ----------------
<C> <C> <C> <C> <C>
1994....................... 2,057 32.1% $ 276,074,000 32.4%
1995....................... 2,279 34.1% 328,886,000 34.9%
1996....................... 2,520 36.6% 381,621,000 37.0%
1997....................... 2,633 35.4% 406,324,000 35.1%
1998....................... 2,472 34.4% 393,168,000 33.8%
</TABLE>
- ------------
* Advertising pages and gross advertising revenues are those reported
by Publishers' Information Bureau, Inc. PIB computes gross advertising
revenues from basic one-time rates and the number of advertising pages
carried. PIB figures therefore materially exceed actual gross advertising
revenues, which reflect lower rates for multiple insertions. Net revenues
as reported in the Company's Consolidated Statements of Income also exclude
agency fees and cash discounts, which are included in the gross advertising
revenues shown above. Page and revenue figures exclude affiliated
advertising.
Newsweek's advertising rates are based on its average weekly
circulation rate base and are competitive with the other weekly news magazines.
Effective with the January 12, 1998 issue, national advertising rates were
increased by an average of 4.0%. Beginning with the issue dated January 11,
1999, national advertising rates were increased again, also by an average of
4.0%.
Newsweek Business Plus, which is published 39 times a year, is a
demographic edition of Newsweek distributed to high-income professional and
managerial subscribers and subscribers in zip-code-defined areas. Advertising
rates for this edition were increased an average of 4.0% in January 1998 and by
an additional 8.0% in January 1999. The circulation rate base for this edition
was increased from 1,000,000 to 1,200,000 copies at the beginning of 1999.
Newsweek's other demographic edition, Newsweek Woman, which was
published 13 times during 1998, is distributed to selected female subscribers.
At the beginning of 1998 advertising rates for this edition were increased by an
average of 4.0%. Early in 1999 advertising rates were increased by an additional
14.3% and the circulation rate base was increased from 700,000 to 800,000
copies.
Internationally, Newsweek is published in an Atlantic edition covering
the British Isles, Europe, the Middle East and Africa, an Asian edition covering
Japan, Korea and Southeast Asia, and a Latin America edition, all of which are
in the English language. Editorial copy solely of domestic interest is
eliminated in the international editions and is replaced by other international,
business or national coverage primarily of interest abroad.
Since 1984 a section of Newsweek articles has been included in The
Bulletin, an Australian weekly news magazine which also circulates in New
Zealand. In 1986 a Japanese-language edition of Newsweek, Newsweek Nihon Ban,
began publication in Tokyo pursuant to an arrangement with a Japanese publishing
company which translates editorial copy, sells advertising in Japan and prints
and distributes the edition. Newsweek Hankuk Pan, a Korean-language edition of
Newsweek, began publication in 1991 pursuant to a similar arrangement with a
Korean publishing company. Since 1996 Newsweek en Espanol, a Spanish-language
edition of Newsweek distributed in Latin America, has been published under an
agreement with a Miami-based publishing company which translates editorial copy,
prints and distributes the edition and jointly sells advertising with Newsweek.
Also, a Russian-language newsweekly modeled after Newsweek began publication in
1996 pursuant to licensing and advisory
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<PAGE> 11
agreements entered into by Newsweek with a Russian publishing and broadcasting
company. This magazine includes selected stories translated from Newsweek's
various U.S. and foreign editions and is called Itogi (which means "summing-up"
in Russian).
The average weekly circulation rate base, advertising pages and gross
advertising revenues of Newsweek's international editions (not including The
Bulletin insertions or the foreign-language editions of Newsweek) for the past
five years have been as follows:
<TABLE>
<CAPTION>
AVERAGE WEEKLY GROSS
CIRCULATION ADVERTISING ADVERTISING
RATE BASE PAGES* REVENUES*
------------- -------- -------------
<C> <C> <C> <C>
1994....................... 638,000 2,351 $ 79,900,000
1995....................... 640,000 2,502 90,968,000
1996....................... 642,000 2,446 92,638,000
1997....................... 657,000 2,287 89,330,000
1998....................... 660,000 2,120 83,051,000
</TABLE>
- -------------
* Advertising pages and gross advertising revenues are those reported
by LNA International. LNA computes gross advertising revenues from basic
one-time rates and the number of advertising pages carried. LNA figures
therefore materially exceed actual gross advertising revenues, which
reflect lower rates for multiple insertions. Net revenues as reported in
the Company's Consolidated Statements of Income also exclude agency fees
and cash discounts, which are included in the gross advertising revenues
shown above. Page and revenue figures exclude affiliated advertising.
For 1999 the average weekly circulation rate base for Newsweek's
English-language international editions (not including The Bulletin insertions)
will be 660,000 copies. Newsweek's rate card estimates the average weekly
circulation in 1999 for The Bulletin insertions will be 85,000 copies and for
the Japanese-, Korean-, Russian- and Spanish-language editions will be 130,000,
90,000, 85,000 and 50,000 copies, respectively.
Since 1994 Newsweek has produced a weekly news magazine for online
distribution which most recently had been available on the America Online
service. In October 1998 Newsweek.com, an Internet version of Newsweek, made its
debut on the World Wide Web at www.newsweek.com. This magazine supplements
Newsweek's print edition with daily news updates and other features, and is
being produced by Washingtonpost.Newsweek Interactive Company, another
subsidiary of the Company.
In August 1996 the United States Food and Drug Administration issued
final rules designed to restrict the marketing of tobacco products to minors.
These rules, which among other things would have limited advertising for tobacco
products in print publications whose youth readership exceeds certain levels to
black and white, text-only "tombstone" ads, were scheduled to go into effect on
August 28, 1997. Shortly before the effective date a U.S. District Court in
North Carolina held that the FDA's proposed advertising rules exceeded its
authority and stayed the application of those rules. In August 1998 the U.S.
Court of Appeals for the Fourth Circuit ruled more broadly that the FDA has no
jurisdiction over tobacco product advertising and subsequently denied the FDA's
request for a rehearing. The FDA has filed a petition for certiorari with the
United States Supreme Court. Also during 1998 Congress considered a range of
legislative proposals related to the marketing of tobacco products which
included voluntary advertising restrictions on tobacco advertising and the
possible loss by the tobacco industry of tax deductibility for advertising
expenditures. The Company cannot now predict whether the FDA rules described
above will ultimately go into effect or what other actions may eventually be
taken to restrict tobacco advertising. However such advertising accounts for
only about 1% of Newsweek's operating revenues and negligible revenues at The
Washington Post and the Company's other
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<PAGE> 12
publications. Moreover, Federal law has prohibited the carrying of
advertisements for cigarettes and smokeless tobacco by commercial radio and
television stations for many years. Thus the Company believes that any
restrictions on tobacco advertising which may eventually be put into effect
would not have a material adverse effect on Newsweek or on any of the Company's
other business operations.
POST-NEWSWEEK BUSINESS INFORMATION
The Company's Post-Newsweek Business Information, Inc. subsidiary
publishes controlled-circulation trade periodicals and produces trade shows for
the information technology industry.
For several years PNBI has published Washington Technology, a biweekly
tabloid newspaper for government information technology systems integrators.
During 1998 PNBI integrated Washington Technology with other publishing assets
acquired from Reed Elsevier in December 1997 to form its Government Group.
PNBI's Government Group also includes Government Computer News, a tabloid
newspaper published 32 times per year serving government managers who buy
information technology products and services, GCN State & Local, a monthly
tabloid newspaper for state and local information technology buyers, GCN
Shopper, a tabloid newspaper published six times per year providing information
technology product reviews and other buying information for government managers,
and government WINDOWS NT, a quarterly magazine covering government's use of the
Windows NT platform which was launched in the fall of 1998. Washington
Technology, Computer Government News, GCN State & Local, GCN Shopper and
government WINDOWS NT have circulations of about 40,000, 87,000, 55,000, 120,000
and 70,000 copies, respectively. Also part of PNBI's Government Group are the
FOSE and FEDimaging trade shows, held together each spring in Washington, D.C.
for information technology decision makers in government and industry.
PNBI's Technology Finance Group publishes TechCapital, a magazine which
reaches about 50,000 technology entrepreneurs and technology industry financiers
and investors nine times per year, and the IT Almanac, an annual directory of
technology industry executives. The Technology Finance Group also sponsors the
annual Greater Washington High Technology Awards Banquet, which is held each May
in Washington, D.C. for over 1,200 technology executives.
PNBI also operates Newsbytes News Network, a newswire service that
electronically distributes about 80 news stories per day about the information
technology, personal computer, telecommunications and related industries to
newspapers, magazines, online services and other subscribers around the world.
During 1998 PNBI ceased publication of Reseller Management magazine,
acquired together with other assets from Reed Elsevier in 1997, and also sold
the assets of one of its other publications, Integration Management.
OTHER ACTIVITIES
KAPLAN EDUCATIONAL CENTERS
Kaplan Educational Centers, Inc., a subsidiary of the Company, prepares
students through its Test Preparation and Admissions Division for a broad range
of admissions and licensing examinations including the SAT's, LSAT's, GMAT's,
MCAT's, GRE's, and nursing and medical boards. This business can be subdivided
into four categories: Pre-college (serving primarily high school students
preparing for the SAT's and ACT's); Graduate (serving college students and
professionals, primarily with preparation for admissions tests to graduate,
medical and law schools); Licensure (serving medical and accounting
professionals preparing for licensing exams); and English Language Training
(serving foreign students and professionals wishing to study or work in the
U.S.). In 1998 this division of Kaplan enrolled over 135,000 students and
provided courses at 150 permanent centers located throughout the United States,
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<PAGE> 13
Canada, Puerto Rico and London. In addition, Kaplan licenses material for
certain of these courses to third parties who during 1998 offered such courses
at 27 centers located in 18 countries.
Through its Score Learning Division, Kaplan offers computer-based
learning and individualized tutoring to students in elementary school through
high school. Score's services are provided in facilities separate from Kaplan's
test preparation centers due to differing configuration and equipment
requirements. During 1998 Score served over 20,000 students in 68 centers in
California, Massachusetts, Connecticut, New York, Maryland, Virginia, New
Jersey, Illinois and Colorado, up from 13,000 students and 37 centers in 1997.
Kaplan's Learning Services Division, which commenced operations in
1996, provides customized assessment and supplemental educational programs to
secondary schools and colleges. In 1998 this division served over 10,000
students in California, Florida, Pennsylvania, New York, South Carolina and
Tennessee.
Kaplan's Professional Division offers recruitment and training services
for corporations and individuals seeking to advance their careers. Kaplan
Professional consists of Kaplan Professional Career Services, the largest
provider of career fairs in North America, which served nearly 300,000 job
candidates at over 300 events in 1998; Dearborn Publishing Group, a provider of
pre-license training and continuing education for securities, insurance and real
estate professionals; and Perfect Access, a provider of information technology
training and consulting to corporations and law firms. Many of the businesses
that comprise the Kaplan Professional Division were acquired in 1998.
Through its Books and Software Division, Kaplan currently co-publishes
95 book titles in the areas of test preparation, admissions, career guidance and
life skills, most of which are printed and distributed through an agreement with
a major publisher. This division also creates educational software and sold 10
titles in 1998 pursuant to an arrangement with a third party which is
responsible for production and distribution.
In September 1998 Kaplan launched Concord University School of Law, the
nation's first school offering a juris doctor degree earned wholly online. At
the end of 1998 Concord enrolled its first class of students. Concord has
received temporary operating approval from the California Bureau of Private
Postsecondary and Vocational Education and is registered with the Committee of
Bar Examiners of the State of California. Graduates will, therefore, be allowed
to sit for the California bar examination.
WASHINGTONPOST.NEWSWEEK INTERACTIVE
Washingtonpost.Newsweek Interactive Company (formerly named Digital Ink
Co.) develops news and information products for electronic distribution. Since
July 1996 this subsidiary of the Company has operated washingtonpost.com, a
World Wide Web site that features the full editorial text of The Washington Post
and most of The Post's classified advertising as well as original content
created by WPNI's staff and content obtained from other sources. The
washingtonpost.com site also features a comprehensive city guide focusing on the
Washington, D.C. area, including an arts and entertainment section, a community
section and an online yellow pages directory. This site is currently generating
more than 65 million page views per month and the Company believes (based on
data from Media Metrix) is among the top five national news sites on the
Internet. The Company (either directly or through WPNI) also holds minority
equity interests in Classified Ventures, Inc. and CareerPath.com LLC, entities
formed to compete in the business of providing nationwide classified advertising
databases on the Internet. Classified Ventures covers the product categories of
automobiles, apartment rentals and real estate, while CareerPath covers the area
of recruitment advertising. Listings for these services come from various
sources, including (in most cases) direct sales and classified listings from the
newspapers of participating companies. Links to the Classified Ventures and
CareerPath services are included in the washingtonpost.com site.
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<PAGE> 14
WPNI also produces the newsweek.com Web site which was launched in
October 1998 and contains editorial content from the print edition of Newsweek
as well as daily news updates and analysis, photo galleries, Web guides and
other features.
LEGI-SLATE
The Company's Legi-Slate, Inc. subsidiary provides its customers with
access to a computerized database containing detailed information on the
legislative and regulatory activities of the United States government. The
Legi-Slate database contains both abstracts and the full text of every bill and
resolution introduced in Congress, the entire Congressional Record and every
document published in the Federal Register. Content compiled by Legi-Slate
includes detailed legislative histories, complete voting records and the Daily
CFR(TM) service, a daily update of the Code of Federal Regulations. The database
also includes relevant editorial material which is both licensed from third
parties and produced by Legi-Slate's own editorial staff. Legi-Slate also
provides customers with custom legislative and regulatory monitoring services.
INTERNATIONAL HERALD TRIBUNE
The Company beneficially owns 50% of the outstanding common stock of
the International Herald Tribune, S.A.S., a French company which publishes the
International Herald Tribune in Paris, France. This English-language newspaper
has an average daily paid circulation of almost 223,000 copies and is
distributed in over 180 countries.
COWLES MEDIA COMPANY
On March 20, 1998, Cowles Media Company ("Cowles") and McClatchy
Newspapers, Inc. ("McClatchy") completed a series of transactions resulting in
the merger of Cowles and McClatchy. In the merger each share of Cowles common
stock was converted (based upon elections of Cowles stockholders) into shares of
McClatchy stock or a combination of cash and McClatchy stock. At the date of
this merger a wholly-owned subsidiary of the Company owned approximately 28% of
the outstanding common stock of Cowles, most of which was acquired in 1985. As a
result of this transaction the Company's subsidiary received $330.5 million in
cash and shares of McClatchy Class A common stock with a fair market value of
approximately $21.6 million.
MOFFET, LARSON & JOHNSON
In July 1998 the Company disposed of its 80% interest in Moffet, Larson
& Johnson, Inc., a telecommunications engineering firm.
PRODUCTION AND RAW MATERIALS
Early in 1999 the Company completed a $230 million capital investment
program consisting of the expansion of The Washington Post's printing plant in
Fairfax County, Virginia, the construction of a new printing plant in Prince
George's County, Maryland, and the replacement of all the newspaper's printing
presses. The eight new presses which have been installed permit a significantly
greater use of color and enhance The Post's ability to zone editorial content
and advertising. Production operations at the newspaper's two printing
facilities in Washington, D.C. have been discontinued.
All editions of The Herald and The Enterprise Newspapers are produced
at The Daily Herald Company's plant in Everett, Washington. The Gazette
Newspapers are printed at the commercial printing facility owned by The Gazette
Newspapers, Inc.
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<PAGE> 15
Newsweek's domestic edition is produced by three independent contract
printers at five separate plants in the United States; advertising inserts and
photo-offset films for the domestic edition are also produced by independent
contractors. The international editions of Newsweek are printed in England, Hong
Kong, Singapore, Switzerland, the Netherlands, South Africa and Hollywood,
Florida; insertions for The Bulletin are printed in Australia. In September 1997
Newsweek and a subsidiary of Time Warner Inc. formed a jointly owned company
which is based in England and provides production and distribution services for
the Atlantic editions of both Newsweek and Time.
All Post-Newsweek Business Information publications are produced by
independent contract printers.
In 1998 The Washington Post consumed about 250,000* tons of newsprint
purchased from a number of suppliers, including Bowater Incorporated, which
supplied approximately 30% of The Post's 1998 newsprint requirements. About 27%
of the newsprint The Post purchases from Bowater Incorporated is provided by
Bowater Mersey Paper Company Limited, 49% of the common stock of which is owned
by the Company (the majority interest being held by a subsidiary of Bowater
Incorporated). Bowater Mersey owns and operates a newsprint mill near Halifax,
Nova Scotia, and owns extensive woodlands that provide part of the mill's wood
requirements. In 1998 Bowater Mersey produced about 260,000 tons of newsprint.
The announced price of newsprint (excluding discounts) was
approximately $750 per ton throughout 1998. Discounts from the announced price
of newsprint can be substantial and prevailing discounts decreased during the
year. The Post believes it has adequate newsprint available through contracts
with its various suppliers. Over 90% of the newsprint used by The Post includes
some recycled content. The Company owns 80% of the stock of Capitol Fiber Inc.,
which handles and sells to recycling industries old newspapers and other paper
collected in Washington, D.C., Maryland and northern Virginia.
In 1998 the operations of The Daily Herald Company and The Gazette
Newspapers, Inc. consumed approximately 9,200 and 13,800 tons of newsprint,
respectively, which was obtained in each case from various suppliers.
Approximately 70% of the newsprint used by The Daily Herald Company and 25% of
the newsprint used by The Gazette Newspapers, Inc. includes some recycled
content.
The domestic edition of Newsweek consumed about 34,300 tons of paper in
1998, the bulk of which was purchased from eight major suppliers. The current
cost of body paper (the principal paper component of the magazine) is
approximately $990 per ton.
Over 90% of the aggregate domestic circulation of Newsweek is delivered
by second-class mail, most Newsweek subscriptions are solicited by either first-
or third-class mail, and all Post-Newsweek Business Information publications are
delivered by second-class mail. Thus substantial increases in postal rates for
these classes of mail could have a significant negative impact on the operating
income of these business units. Effective January 10, 1999, rate increases of 3%
for first-class mail and approximately 4% for second- and third-class mail went
into effect. These changes in postal rates will increase the annual postage
costs of Newsweek, Inc. and PNBI by an aggregate of about $1.5 million.
COMPETITION
The Washington Post competes in the Washington, D.C. metropolitan area
with The Washington Times, a newspaper which has published weekday editions
since 1982 and Saturday and Sunday editions
- --------------
* All references in this report to newsprint tonnage and prices refer to
short tons (2,000) and not to metric tons (2,204.6 pounds) which are often used
in newsprint price quotations.
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since 1991. The Post also encounters competition in varying degrees from
newspapers published in suburban and outlying areas, other nationally
circulated newspapers, and from television, radio, magazines and other
advertising media, including direct mail advertising. In February 1997 The New
York Times launched a Washington Edition which is printed locally and includes
television channel listings and weather for the Washington, D.C. area. The New
York Times has been available in retail outlets and by home delivery in the
Washington, D.C. area for many years, during which time the papers were printed
at The Time's New York-area plant and trucked to local distributors.
The Herald circulates principally in Snohomish County, Washington; its
chief competitors are the Seattle Times and the Seattle Post-Intelligencer,
which are daily and Sunday newspapers published in Seattle and whose Snohomish
County circulation is principally in the southwest portion of the county. Since
1983 the two Seattle newspapers have consolidated their business and production
operations and combined their Sunday editions pursuant to a joint operating
agreement, although they continue to publish separate daily newspapers. The
Enterprise Newspapers are distributed in south Snohomish and north King Counties
where their principal competitors are the Seattle Times and The Journal
Newspapers, a group of weekly controlled-circulation newspapers. Numerous other
weekly and semi-weekly newspapers and shoppers are distributed in The Herald's
and The Enterprise Newspapers' principal circulation areas.
The circulation of The Gazette Newspapers is limited to Montgomery and
Frederick Counties and parts of Prince George's and Carroll Counties, Maryland
(areas where The Washington Post also circulates). The Gazette Newspapers
compete in varying degrees with many advertising vehicles available in their
service areas, including The Potomac and Bethesda/Chevy Chase Almanacs and The
Western Montgomery Bulletin, weekly controlled-circulation community newspapers,
The Montgomery Sentinel, a weekly paid-circulation community newspaper, The
Prince George's Sentinel, a weekly controlled-circulation community newspaper
(which also has a weekly paid-circulation edition), The Montgomery and Prince
George's Journals, daily paid-circulation community newspapers, and The
Frederick News-Post, a daily paid-circulation community newspaper.
The Company's television stations compete for audiences and advertising
revenues with television and radio stations and cable television systems serving
the same or nearby areas, with direct broadcast satellite services and to a
lesser degree with other media such as newspapers and magazines. Both
independent stations and stations affiliated with the Fox Network, the United
Paramount Network and the Warner Brothers Network are becoming increasingly
competitive, and Paxson Communications Corp. launched a new broadcast network in
August 1998 which reaches more than 80% of U.S. television households. Cable
television systems operate in substantial portions of the Company's broadcast
markets where they compete for television viewing by importing out-of-market
television signals and by distributing pay-cable, advertiser-supported and other
programming that is originated for cable systems. In addition, direct broadcast
satellite or "DBS" services provide nationwide distribution of television
programming (including in some cases pay-per-view programming and programming
packages unique to DBS) using small receiving dishes and digital transmission
technologies. Because they lack a compulsory copyright license that would permit
such distributions, DBS operators are effectively prohibited from distributing
the signals of any network affiliated television station except in areas where
the over-the-air signal of the same network's local affiliate is not available.
Several lawsuits were filed in late 1996 which allege that certain DBS operators
have not been complying with this restriction; plaintiffs in one or more of
these lawsuits include the CBS and Fox television networks and various network
affiliated television stations (including one of the Company's Florida
stations). In the Florida litigation, a district court entered injunctions that
were projected to result in the termination of distant CBS and Fox network
service to more than 2 million satellite subscribers who can receive
over-the-air signals from network affiliates. In March 1999, DirecTV, the DBS
carrier serving the majority of these subscribers, entered into a settlement
with ABC, CBS, NBC and Fox and their
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<PAGE> 17
respective affiliate associations. Under this settlement (which has not yet been
approved by the court), the terminations will be delayed several months, but
will be extended to ABC and NBC distant network signals as well as those of the
CBS and Fox networks. In November 1998 broadcasters also filed a similar suit
against DBS carrier Echostar, which also carries distant network signals.
Legislation to change the standards for reception of distant network signals is
currently pending before Congress. Also, since January 1998 Echostar has been
offering a service that at the present time delivers the signals of local
network affiliated stations to unserved households in approximately 20 U.S.
markets. Echostar is seeking changes in existing laws to permit it to offer this
service to all subscribers in these markets. A new venture by Capitol
Broadcasting also is seeking legislation to permit transmission of local
television signals by satellite but intends to carry the signals of all full
power television stations in approximately 70 markets. The transmission of local
television signals by DBS services may be advantageous for the local stations
included in such offerings but could increase the competition faced by local
stations that are not included. The Company's television stations may also
become subject to increased competition from low power television stations,
wireless cable services, satellite master antenna systems (which can carry
pay-cable and similar program material) and prerecorded video programming.
Further, the deployment of high definition and other improved television
technologies may enhance the ability of some of these other video providers to
compete more effectively for viewers with the local television broadcasting
stations owned by the Company.
Cable television systems operate in a highly competitive environment.
In addition to competing with the direct reception of television broadcast
signals by the viewer's own antenna, such systems (like existing television
stations) are subject to competition from various other forms of television
program delivery. In particular, DBS services (which are discussed in more
detail in the preceding paragraph) have been growing rapidly and are now a
significant competitive factor. The Company's cable television systems also
compete with wireless cable services in a number of their markets and may face
additional competition from such services in the future. Moreover, the
Telecommunications Act of 1996 permits telephone companies to own and operate
cable television systems in the same areas where they provide telephone services
and thus may lead to the provision of competing program delivery services by
local telephone companies.
According to figures compiled by Publishers' Information Bureau, Inc.,
of the 232 magazines reported on by the Bureau, Newsweek ranked sixth in total
advertising revenues in 1998, when it received approximately 2.9% of all
advertising revenues of the magazines included in the report. The magazine
industry is highly competitive both within itself and with other advertising
media which compete for audience and advertising revenue.
The publications and trade shows of Post-Newsweek Business Information
compete with many other advertising vehicles and sources of similar information.
In particular, Government Computer News faces competition from Federal Computer
Week, a publication of IDG Communications.
Kaplan Educational Centers competes in each of its test preparation
product lines with a variety of regional and national test preparation
businesses, as well as with individual tutors and in-school preparation for
standardized tests. Kaplan's Score Learning Division competes with other
regional and national learning centers, individual tutors and other after-school
learning activities, while its Learning Services Division competes with other
contract education providers. Kaplan's Professional Division competes with other
companies which provide alternative or similar services in the areas of
recruitment, technical training and publishing. Kaplan's Books and Software
Division competes with other publishers of similar titles.
Washingtonpost.Newsweek Interactive faces competition from many other
Internet services as well as from alternative methods of delivering news and
information. In addition, Internet-based services are carrying increasing
amounts of advertising and over time such services could adversely
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affect the Company's print publications and television broadcasting operations,
all of which rely on advertising for the majority of their revenues. Several
companies are offering online services containing information and advertising
tailored for specific metropolitan areas, including the Washington, D.C.
metropolitan area. Digital Cities (an 80%-owned subsidiary of America Online)
produces Digital-City Washington, which can be accessed through the Internet and
is part of AOL's nationwide network of local online sites. Many other popular
Internet sites, such as those of Yahoo!, Netscape Netcenter and Microsoft
Network, offer their own version of a local, DC-area guide. Microsoft in
particular has devoted significant marketing resources in the last several
months to promoting its city guide together with a yellow pages directory. In
addition, since 1997 Bell Atlantic has offered a yellow pages service on the
Internet which includes information of local interest as well as a nationwide
residential white pages directory and Big Yellow, an electronic directory of 16
million businesses across the United States.
The Company's publications and television broadcasting and cable
operations also compete for readers' and viewers' time with various other
leisure-time activities.
The future of the Company's various business activities depends on a
number of factors, including the general strength of the economy, population
growth and the level of economic activity in the particular geographic and other
markets it serves, the impact of technological innovations on entertainment,
news and information dissemination systems, overall advertising revenues, the
relative efficiency of publishing and broadcasting compared to other forms of
advertising and, particularly in the case of television broadcasting and cable
operations, the extent and nature of government regulations.
EXECUTIVE OFFICERS
The executive officers of the Company, each of whom is elected for a
one-year term at the meeting of the Board of Directors immediately following the
Annual Meeting of Stockholders held in May of each year, are as follows:
Donald E. Graham, age 53, has been Chairman of the Board of the Company
since September 1993 and Chief Executive Officer of the Company since May 1991.
Mr. Graham served as President of the Company from May 1991 until September 1993
and prior to that had been a Vice President of the Company for more than five
years. Mr. Graham also is Publisher of The Washington Post, having occupied that
position since 1979.
Alan G. Spoon, age 47, is President and Chief Operating Officer of the
Company. Mr. Spoon served as Executive Vice President and Chief Operating
Officer of the Company from May 1991 until September 1993 and had previously
been a Vice President of the Company since July 1987. Mr. Spoon also served as
the Company's Vice President-Finance from July 1987 until November 1989, and as
President of Newsweek, Inc. from September 1989 until May 1991.
Katharine Graham, age 81, is Chairman of the Executive Committee of the
Company's Board of Directors. Mrs. Graham previously served as Chairman of the
Board of the Company from 1973 until September 1993 and as the Company's Chief
Executive Officer from 1973 until May 1991.
Diana M. Daniels, age 49, has been Vice President and General Counsel
of the Company since November 1988 and Secretary of the Company since September
1991. Ms. Daniels served as General Counsel of the Company from January 1988 to
November 1988 and prior to that had been Vice President and General Counsel of
Newsweek, Inc. since 1979.
Beverly R. Keil, age 52, has been a Vice President of the Company
since 1986; from 1982 through 1985 she was the Company's Director of Human
Resources.
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ITEM 2. PROPERTIES.
The Company owns the principal offices of The Washington Post in
downtown Washington, D.C., including both a seven-story building in use since
1950 and a connected nine-story office building on contiguous property completed
in 1972 in which are located the Company's principal executive offices.
Additionally, the Company owns land on the corner of 15th and L Streets, N.W.,
in Washington, D.C., adjacent to The Washington Post office building. This land
is leased on a long-term basis to the owner of a multi-story office building
which was constructed on the site in 1982. The Company rents a number of floors
in this building. The Company also owns and occupies a small office building on
L Street which is next to The Post's downtown office building.
In 1980 the Company built a printing plant on 13 acres of land owned by
the Company in Fairfax County, Virginia, and in 1998 completed an expansion of
that facility. Also in 1998 the Company completed construction of a new printing
plant and distribution facility for The Post on a 17-acre tract of land in
Prince George's County, Maryland which was purchased by the Company in 1996. In
addition, the Company owns a printing plant in Southeast Washington, D.C. which
was used as one of the production locations for The Post until the end of 1998,
as well as undeveloped land near Dulles Airport in Fairfax County, Virginia (39
acres) and in Prince George's County, Maryland (34 acres).
The Herald owns its plant and office building in Everett, Washington;
it also owns two warehouses adjacent to its plant and a small office building in
Lynnwood, Washington, that is currently leased to a third party.
The Gazette Newspapers, Inc. owns a two-story brick building that
serves as headquarters for The Gazette Newspapers and a separate two-story brick
building that houses its commercial printing business. It also owns a one-story
brick building that formerly served as its headquarters and is currently leased
to a third party. All of these properties are located in Gaithersburg, Maryland.
Satellite editorial and sales offices for The Gazette Newspapers are located in
leased premises.
The principal offices of Newsweek are located at 251 West 57th Street
in New York City, where Newsweek rents space on nine floors. The lease on this
space will expire in 2009 but is renewable for a 15-year period at Newsweek's
option at rentals to be negotiated or arbitrated. In May 1997, Newsweek sold its
Mountain Lakes, N.J. facility to a third party and leased back a portion of this
building to house its accounting, production and distribution departments. The
lease on this space will expire in 2007 but is renewable for two 5-year periods
at Newsweek's option.
The headquarters offices of the Company's broadcasting operations are
located in Hartford, Connecticut, where they occupy premises under a lease which
expires in 2002. The facilities that house the operations of each of the
Company's television stations are all owned by subsidiaries of the Company, as
are the related tower sites (except in Houston, Orlando and Jacksonville where
the tower sites are 50% owned).
The headquarters offices of the Cable Television Division are located
in a three-story office building in Phoenix, Arizona which was purchased by the
Division in 1998. The majority of the offices and head-end facilities of the
Division's individual cable systems are located in buildings owned by the
Division. Substantially all the tower sites used by the Division are leased.
Robinson Terminal Warehouse Corporation owns two wharves and several
warehouses in Alexandria, Virginia. These facilities are adjacent to the
business district and occupy approximately seven acres of land. Robinson also
owns two partially developed tracts of land in Fairfax County, Virginia,
aggregating about 22 acres. These tracts are near The Washington Post's Virginia
printing plant and include several warehouses. In 1992 Robinson purchased
approximately 23 acres of
19
<PAGE> 20
undeveloped land on the Potomac River in Charles County, Maryland, for the
possible construction of additional warehouse capacity.
Kaplan Educational Centers, Inc. owns a six-story building located at
131 West 56th Street in New York City, which serves as an educational center
primarily for foreign students, and a one-story building in Brooklyn, New York,
which currently is for sale. Kaplan's principal educational center in New York
City for other than international students is located at 16 Cooper Square, where
Kaplan rents two floors under a lease expiring in 2013. Kaplan's distribution
facilities have been consolidated in a 97,000 square foot warehouse in Aurora,
Illinois which has been rented under a lease which expires in 2008. Kaplan's
headquarters offices are located at 888 Seventh Avenue in New York City, where
Kaplan rents space on three floors under a lease which expires in 2007. All
Kaplan facilities outside of Manhattan (including administrative offices and
instructional locations) occupy leased premises.
The offices of Legi-Slate are located in Washington, D.C. and the
offices of Washingtonpost.Newsweek Interactive are located in Arlington,
Virginia. Post-Newsweek Business Information has its headquarters office in
Vienna, Virginia and also maintains office space in Silver Spring, Maryland and
Waltham, Massachusetts. The office space for each of these units is leased.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are parties to various civil lawsuits
that have arisen in the ordinary course of their businesses, including actions
for libel and invasion of privacy. Management does not believe that any
litigation pending against the Company will have a material adverse effect on
its business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Class B Common Stock is traded on the New York Stock
Exchange under the symbol "WPO." The Company's Class A Common Stock is not
publicly traded.
The high and low sales prices of the Company's Class B Common Stock
during the last two years were:
<TABLE>
<CAPTION>
1998 1997
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
January - March..................... $ 540 $ 462 $ 361 $ 325
April - June........................ 576 514 413 335
July - September.................... 606 493 448 400
October - December.................. 578 481 491 426
</TABLE>
During 1998 the Company repurchased 41,033 shares of its Class B Common
Stock in unsolicited transactions at prices no higher than the last sale price
on the New York Stock Exchange. All of the repurchased shares were included in
trading volume reported on that year's consolidated tape and accounted
for about 1.3% of such volume.
At February 19, 1999, there were 23 holders of record of the Company's
Class A Common Stock and 1,234 holders of record of the Company's Class B Common
Stock.
20
<PAGE> 21
Both classes of the Company's Common Stock participate equally as to
dividends. Quarterly dividends were paid at the rate of $1.25 per share during
1998 and $1.20 per share during 1997.
ITEM 6. SELECTED FINANCIAL DATA.
See the information for the years 1994 through 1998 contained in the
table titled "Ten-Year Summary of Selected Historic Financial Data" which is
included in this Annual Report on Form 10-K and listed in the index to financial
information on page 25 hereof (with only the information for such years to be
deemed filed as part of this Annual Report on Form 10-K).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See the information contained under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition" which
is included in this Annual Report on Form 10-K and listed in the index to
financial information on page 25 hereof.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As discussed in Note C to the Company's Consolidated Financial
Statements at January 3, 1999, and for the periods then ended, the Company owns
common stock in several publicly traded companies. These investments are subject
to market price volatility. The Company classifies these investments as
available for sale and records them on the balance sheet at fair value with
unrealized gains or losses, net of tax effects, reported in separate components
of shareholders' equity and comprehensive income.
At January 3, 1999, the fair value of the Company's common stock
investments was $256,116,000. The following table presents the hypothetical fair
value of the Company's common stock investments at such date assuming
hypothetical changes of plus or minus 10%, 20% and 30% in the market price of
each stock included therein:
<TABLE>
<CAPTION>
Value of Common Stock Investments Value of Common Stock Investments
Assuming Indicated Decrease in Assuming Indicated Increase in
Each Stock's Price Each Stock's Price
------------------------------------------------------ ----------------------------------------------------
-30% -20% -10% +10% +20% +30%
---------------- ---------------- ---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$179,281,000 $204,893,000 $230,504,000 $281,728,000 $307,339,000 $332,951,000
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Company's Consolidated Financial Statements at January 3, 1999,
and for the periods then ended, together with the report of
PricewaterhouseCoopers LLP thereon and the information contained in Note N to
said Consolidated Financial Statements titled "Summary of Quarterly Operating
Results and Comprehensive Income (Unaudited)," which are included in this Annual
Report on Form 10-K and listed in the index to financial information on page 25
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Executive Officers" in
Item 1 hereof and the information contained under the headings "Nominees for
Election by Class A Stockholders," "Nominees for Election by Class B
Stockholders" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the definitive Proxy Statement for the Company's 1999 Annual Meeting of
Stockholders is incorporated herein by reference thereto.
21
<PAGE> 22
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the headings "Compensation of
Directors," "Executive Compensation," "Retirement Plans," "Compensation
Committee Report on Executive Compensation," "Compensation Committee Interlocks
and Insider Participation," and "Performance Graph" in the definitive Proxy
Statement for the Company's 1999 Annual Meeting of Stockholders is incorporated
herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Stock Holdings of Certain
Beneficial Owners and Management" in the definitive Proxy Statement for the
Company's 1999 Annual Meeting of Stockholders is incorporated herein by
reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Certain Transactions" in
the definitive Proxy Statement for the Company's 1999 Annual Meeting of
Stockholders is incorporated herein by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(i) Financial Statements and Financial Statement Schedules
As listed in the index to financial information on page 25
hereof.
(ii) Exhibits
As listed in the index to exhibits on page 54 hereof.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON MARCH 25, 1999.
THE WASHINGTON POST COMPANY
(Registrant)
By John B. Morse, Jr.
------------------------
John B. Morse, Jr.
Vice President-Finance
22
<PAGE> 23
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 25, 1999:
<TABLE>
<S> <C>
Donald E. Graham Chairman of the Board and Chief Executive
Office (Principal Executive Officer) and
Director
Alan G. Spoon President, Chief Operating Officer and
Director
Katharine Graham Chairman of the Executive Committee of
the Board and Director
John B. Morse, Jr. Vice President-Finance (Principal
Financial and Accounting Officer)
Warren E. Buffett Director
Daniel B. Burke Director
James E. Burke Director
Martin Cohen Director
George J. Gillespie, III Director
Ralph E. Gomory Director
Donald R. Keough Director
Barbara Scott Preiskel Director
William J. Ruane Director
Richard D. Simmons Director
George W. Wilson Director
</TABLE>
By John B. Morse, Jr.
-----------------------
John B. Morse, Jr.
Attorney-in-Fact
An original power of attorney authorizing Donald E. Graham, Alan G.
Spoon, Katharine Graham and John B. Morse, Jr., and each of them, to sign all
reports required to be filed by the Registrant pursuant to the Securities
Exchange Act of 1934 on behalf of the above-named directors and officers has
been filed with the Securities and Exchange Commission.
23
<PAGE> 24
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
24
<PAGE> 25
INDEX TO FINANCIAL INFORMATION
--------------
THE WASHINGTON POST COMPANY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements and Schedules:
Report of Independent Accountants ................................................................... 26
Consolidated Statements of Income for the Three Fiscal Years
Ended January 3, 1999 .......................................................................... 27
Consolidated Statements of Comprehensive Income for the Three
Fiscal Years Ended January 3, 1999 ............................................................. 27
Consolidated Balance Sheets at January 3, 1999 and December 28, 1997 ................................ 28
Consolidated Statements of Cash Flows for the Three Fiscal Years
Ended January 3, 1999 .......................................................................... 30
Consolidated Statements of Changes in Common Shareholders' Equity for the Three
Fiscal Years Ended January 3, 1999 ............................................................. 31
Notes to Consolidated Financial Statements .......................................................... 32
Financial Statement Schedules for the Three Fiscal Years Ended January 3, 1999:
II - Valuation and Qualifying Accounts .................................................... 44
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Unaudited) ............................................................................... 45
Ten-Year Summary of Selected Historical Financial Data (Unaudited) ............................................. 52
</TABLE>
All other schedules have been omitted either because they are not
applicable or because the required information is included in the consolidated
financial statements or the notes thereto referred to above.
25
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
The Washington Post Company
In our opinion, the consolidated financial statements, including the financial
statement schedule, referred to under Item 14(a)(i) on page 22 and listed in the
index on page 25 present fairly, in all material respects, the financial
position of The Washington Post Company and its subsidiaries at January 3, 1999
and December 28, 1997, and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 3, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Washington, D.C.
February 22, 1999
26
<PAGE> 27
Consolidated Statements of Income
<TABLE>
<CAPTION>
Fiscal year ended
--------------------------------------------------------------
January 3, December 28, December 29,
(in thousands, except share amounts) 1999 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Advertising $1,297,621 $1,236,877 $1,172,706
Circulation and subscriber 547,450 519,620 490,973
Other 265,289 199,756 189,766
-----------------------------------------------------------
2,110,360 1,956,253 1,853,445
-----------------------------------------------------------
OPERATING COSTS AND EXPENSES
Operating 1,139,177 1,019,869 1,007,057
Selling, general and administrative 453,149 449,996 414,280
Depreciation of property, plant and equipment 89,248 71,478 65,103
Amortization of goodwill and other intangibles 49,889 33,559 29,836
-----------------------------------------------------------
1,731,463 1,574,902 1,516,276
-----------------------------------------------------------
INCOME FROM OPERATIONS 378,897 381,351 337,169
Equity in (losses) earnings of affiliates (5,140) 9,955 19,702
Interest income 1,137 3,471 5,359
Interest expense (11,538) (1,252) (1,514)
Other income (expense), net 304,703 69,549 (499)
-----------------------------------------------------------
INCOME BEFORE INCOME TAXES 668,059 463,074 360,217
PROVISION FOR INCOME TAXES 250,800 181,500 139,400
-----------------------------------------------------------
NET INCOME 417,259 281,574 220,817
REDEEMABLE PREFERRED STOCK DIVIDENDS (956) (956) (680)
-----------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON SHARES $ 416,303 $ 280,618 $ 220,137
===========================================================
BASIC EARNINGS PER COMMON SHARE $ 41.27 $ 26.23 $ 20.08
===========================================================
DILUTED EARNINGS PER COMMON SHARE $ 41.10 $ 26.15 $ 20.05
===========================================================
</TABLE>
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Fiscal year ended
-------------------------------------------------------------
January 3, December 28, December 29,
(in thousands) 1999 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $417,259 $281,574 $220,817
---------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments (1,136) (5,127) (874)
Change in unrealized gain on available-for-sale
securities 68,768 (5,121) (113)
---------------------------------------------------------
67,632 (10,248) (987)
Income tax (expense) benefit related to other
comprehensive income (loss) (26,819) 1,997 44
---------------------------------------------------------
40,813 (8,251) (943)
---------------------------------------------------------
COMPREHENSIVE INCOME $458,072 $273,323 $219,874
=========================================================
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
27
<PAGE> 28
Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 3, December 28,
(in thousands, except share amounts) 1999 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,190 $ 21,117
Investments in marketable equity securities 71,676 3,366
Accounts receivable, net 236,514 244,203
Federal and state income taxes 35,395 --
Inventories 20,154 19,213
Other current assets 25,949 23,959
-----------------------------------------
404,878 311,858
PROPERTY, PLANT AND EQUIPMENT
Buildings 248,764 188,836
Machinery, equipment and fixtures 977,710 800,435
Leasehold improvements 50,556 39,017
-----------------------------------------
1,277,030 1,028,288
Less accumulated depreciation (566,616) (577,445)
-----------------------------------------
710,414 450,843
Land 41,191 33,953
Construction in progress 89,457 168,954
-----------------------------------------
841,062 653,750
INVESTMENTS IN MARKETABLE EQUITY SECURITIES 184,440 --
INVESTMENTS IN AFFILIATES 68,530 154,791
GOODWILL AND OTHER INTANGIBLES, less accumulated amortization
of $286,135 and $241,308 883,232 679,714
PREPAID PENSION COST 256,134 194,137
DEFERRED CHARGES AND OTHER ASSETS 91,385 83,067
-----------------------------------------
$2,729,661 $2,077,317
=========================================
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
28
<PAGE> 29
<TABLE>
<CAPTION>
January 3, December 28,
(in thousands, except share amounts) 1999 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 245,068 $ 213,824
Federal and state income taxes -- 18,352
Deferred subscription revenue 85,649 80,186
Short-term borrowings 58,362 296,394
-----------------------------------------
389,079 608,756
OTHER LIABILITIES 261,896 241,234
DEFERRED INCOME TAXES 83,710 31,306
LONG-TERM DEBT 395,000 --
-----------------------------------------
1,129,685 881,296
-----------------------------------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK, Series A, $1 par value, with a
redemption and liquidation value of $1,000 per share;
23,000 shares authorized; 11,873 and 11,947 shares
issued and outstanding 11,873 11,947
-----------------------------------------
PREFERRED STOCK, $1 par value; 977,000 shares authorized,
none issued -- --
-----------------------------------------
COMMON SHAREHOLDERS' EQUITY
Common stock
Class A common stock, $1 par value; 7,000,000 shares
authorized; 1,739,250 shares issued and outstanding 1,739 1,739
Class B common stock, $1 par value; 40,000,000 shares
authorized; 18,260,750 shares issued; 8,353,994 and
8,349,962 shares outstanding 18,261 18,261
Capital in excess of par value 46,199 33,415
Retained earnings 2,597,217 2,231,341
Accumulated other comprehensive income (loss), net of taxes
Cumulative foreign currency translation adjustment (1,600) (464)
Unrealized gain on available-for-sale securities 41,980 31
Cost of 9,906,756 and 9,910,788 shares of Class B common
stock held in treasury (1,115,693) (1,100,249)
-----------------------------------------
1,588,103 1,184,074
-----------------------------------------
$2,729,661 $2,077,317
=========================================
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
29
<PAGE> 30
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Fiscal year ended
---------------------------------------------------------------
January 3, December 28, December 29,
(in thousands) 1999 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 417,259 $ 281,574 $ 220,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of property, plant and equipment 89,248 71,478 65,103
Amortization of goodwill and other intangibles 49,889 33,559 29,836
Net pension benefit (61,997) (30,227) (23,269)
Gain from disposition of businesses, net (314,400) (44,560) (3,112)
Equity in losses (earnings) of affiliates, net of
distributions 9,145 (6,996) (11,099)
Provision for deferred income taxes 26,987 3,089 (4,273)
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net 22,041 (8,438) (31,444)
(Increase) decrease in inventories (941) 5,214 2,339
Increase in accounts payable and accrued liabilities 13,949 19,638 26,923
(Decrease) increase in income taxes payable (53,747) (13,709) 1,887
Decrease in other assets and other liabilities, net 6,778 2,690 3,634
Other 18,902 4,985 8,073
------------------------------------------------------------
Net cash provided by operating activities 223,113 318,297 285,415
------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of businesses 376,442 120,208 3,517
Purchases of property, plant and equipment (244,219) (214,573) (79,981)
Purchases of marketable equity securities (164,955) -- --
Sales and maturities of marketable securities 38,246 -- 12,821
Investments in certain businesses (320,597) (178,943) (147,471)
Other (5,960) (3,187) 784
------------------------------------------------------------
Net cash used in investing activities (321,043) (276,495) (210,330)
------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (296,394) -- (50,209)
Issuance of debt 453,362 296,394 --
Issuance of redeemable preferred stock -- -- 11,947
Redemption of redeemable preferred stock (74) -- --
Dividends paid (51,383) (52,592) (51,164)
Common shares repurchased (20,512) (368,565) (32,302)
Proceeds from exercise of stock options 7,004 1,800 2,020
------------------------------------------------------------
Net cash provided by (used in) financing activities 92,003 (122,963) (119,708)
------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,927) (81,161) (44,623)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 21,117 102,278 146,901
------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 15,190 $ 21,117 $ 102,278
============================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 280,000 $ 164,000 $ 142,000
Interest, net of amounts capitalized $ 8,700 $ 350 $ 5,115
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
30
<PAGE> 31
Consolidated Statements of Changes
in Common Shareholders' Equity
<TABLE>
<CAPTION>
Cumulative Unrealized
Foreign Gain on
Class A Class B Capital in Currency Available-
Common Common Excess of Retained Translation for-Sale Treasury
(in thousands, except share amounts) Stock Stock Par Value Earnings Adjustment Securities Stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $1,804 $18,196 $24,941 $1,832,706 $ 5,537 $ 3,224 $ (702,204)
Net income for the year 220,817
Dividends paid on common stock --
$4.60 per share (50,484)
Dividends paid on redeemable preferred stock (680)
Repurchase of 103,642 shares of
Class B common stock (32,302)
Issuance of 8,644 shares of Class B common
stock, net of restricted stock award
forfeitures 1,173 677
Change in foreign currency translation
adjustment (net of taxes) (874)
Change in unrealized gain on available-for-sale
securities (net of taxes) (69)
Conversion of Class A common stock to
Class B common stock (25) 25
Other 341
-----------------------------------------------------------------------------
Balance, December 29, 1996 1,779 18,221 26,455 2,002,359 4,663 3,155 (733,829)
Net income for the year 281,574
Dividends paid on common stock --
$4.80 per share (51,636)
Dividends paid on redeemable preferred stock (956)
Repurchase of 846,290 shares of
Class B common stock (368,565)
Issuance of 24,962 shares of Class B common
stock, net of restricted stock award
forfeitures 6,025 2,145
Change in foreign currency translation
adjustment (net of taxes) (5,127)
Change in unrealized gain on available-for-sale
securities (net of taxes) (3,124)
Conversion of Class A common stock to
Class B common stock (40) 40
Other 935
-----------------------------------------------------------------------------
Balance, December 28, 1997 1,739 18,261 33,415 2,231,341 (464) 31 (1,100,249)
Net income for the year 417,259
Dividends paid on common stock --
$5.00 per share (50,427)
Dividends paid on redeemable preferred stock (956)
Repurchase of 41,033 shares of
Class B common stock (20,512)
Issuance of 45,065 shares of Class B common
stock, net of restricted stock award
forfeitures 9,772 5,068
Change in foreign currency translation
adjustment (net of taxes) (1,136)
Change in unrealized gain on available-for-sale
securities (net of taxes) 41,949
Other 3,012
-----------------------------------------------------------------------------
Balance, January 3, 1999 $1,739 $18,261 $46,199 $2,597,217 $(1,600) $41,980 $(1,115,693)
=============================================================================
</TABLE>
The information on pages 32 through 43 is an integral part of the financial
statements.
31
<PAGE> 32
Notes to Consolidated Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Washington Post Company (the "Company") is a diversified media organization
whose principal operations consist of newspaper publishing (primarily The
Washington Post newspaper), television broadcasting (through the ownership and
operation of six network-affiliated television stations), the ownership and
operation of cable television systems, and magazine publishing (primarily
Newsweek magazine). The Company also produces news and other information
products and services for electronic distribution and provides test preparation
and related services.
FISCAL YEAR. The Company reports on a 52-53 week fiscal year ending on the
Sunday nearest December 31. The fiscal year 1998, which ended on January 3,
1999, included 53 weeks, while 1997 and 1996 each included 52 weeks. With the
exception of the newspaper publishing operations, subsidiaries of the Company
report on a calendar-year basis.
PRINCIPLES OF CONSOLIDATION. The accompanying financial statements include the
accounts of the Company and its subsidiaries; significant intercompany
transactions have been eliminated.
PRESENTATION. Certain amounts in previously issued financial statements have
been reclassified to conform to the 1998 presentation.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements.
Actual results could differ from those estimates.
CASH EQUIVALENTS. Short-term investments with original maturities of 90 days or
less are considered cash equivalents.
INVESTMENTS IN MARKETABLE EQUITY SECURITIES. The Company's investments in
marketable equity securities are classified as available-for-sale and therefore
are recorded at fair value in the Consolidated Balance Sheets, with the change
in fair value during the period excluded from earnings and recorded net of tax
as a separate component of equity and comprehensive income.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost of
newsprint is determined by the first-in, first-out method, and cost of magazine
paper is determined by the specific-cost method.
INVESTMENTS IN AFFILIATES. The Company uses the equity method of accounting for
its investments in and earnings or losses of affiliates.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is recorded at cost
and includes interest capitalized in connection with major long-term
construction projects. Replacements and major improvements are capitalized;
maintenance and repairs are charged to operations as incurred.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the property, plant and equipment: 3 to 20 years for
machinery and equipment, and 20 to 50 years for buildings. The costs of
leasehold improvements are amortized over the lesser of the useful lives or the
terms of the respective leases.
GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles represent the
unamortized excess of the cost of acquiring subsidiary companies over the fair
values of such companies' net tangible assets at the dates of acquisition.
Goodwill and other intangibles are being amortized by use of the straight-line
method over periods ranging from 15 to 40 years (with the majority being
amortized over 15 to 20 years).
LONG-LIVED ASSETS. The recoverability of long-lived assets, including goodwill
and other intangibles, is assessed annually or whenever adverse events and
changes in circumstances indicate that previously anticipated undiscounted cash
flows warrant assessment.
PROGRAM RIGHTS. The broadcast subsidiaries are parties to agreements that
entitle them to show syndicated and other programs on television. The cost of
such program rights is recorded when the programs are available for broadcasting
and such costs are charged to operations as the programming is aired.
DEFERRED SUBSCRIPTION REVENUE AND MAGAZINE SUBSCRIPTION PROCUREMENT COSTS.
Deferred subscription revenue, which primarily represents amounts received from
customers in advance of magazine and newspaper deliveries, is included in
revenues over the related subscription term.
Deferred subscription revenue to be earned after one year is included in
"Other liabilities" in the Consolidated Balance Sheets. Magazine subscription
procurement costs are charged to operations as incurred.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company provides certain health
care and life insurance benefits for retired employees. The expected cost of
providing these postretirement benefits is accrued over the years that employees
render services.
INCOME TAXES. The provision for income taxes is determined using the asset and
liability approach. Under this approach,
32
<PAGE> 33
deferred income taxes represent the expected future tax consequences of
temporary differences between the carrying amounts and tax bases of assets and
liabilities.
FOREIGN CURRENCY TRANSLATION. Gains and losses on foreign currency transactions
and the translation of the accounts of the Company's foreign operations where
the U.S. dollar is the functional currency are recognized currently in the
Consolidated Statements of Income. Gains and losses on translation of the
accounts of the Company's foreign operations where the local currency is the
functional currency and the Company's equity investments in its foreign
affiliates are accumulated and reported as a separate component of equity and
comprehensive income.
STOCK-BASED COMPENSATION. The Company accounts for stock-based compensation
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Pro forma
disclosures of net income and earnings per share as if the fair-value based
method prescribed by Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" had been applied in measuring
compensation expense are provided in Note H.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amount of the Company's cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities, and short-term borrowings approximates fair value because of the
short maturity of those instruments. The carrying amount of the Company's
long-term debt approximates fair value as such borrowings represent commercial
paper borrowings with short-term maturities. These borrowings have been
classified as long-term at January 3, 1999 based upon the Company's ability and
intent to refinance such amounts under a long-term borrowing arrangement
completed in February 1999.
NEW ACCOUNTING STANDARDS. In 1998, the Company implemented SFAS No. 130,
"Reporting Comprehensive Income," which requires the presentation of
comprehensive income. Comprehensive income equals the change in the equity of a
business enterprise during a period from transactions and other events arising
from non-owner sources. The implementation of this accounting standard resulted
in the addition of the "Consolidated Statement of Comprehensive Income" to the
Company's consolidated financial statements.
In December 1998, the Company implemented SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which requires
companies to report certain information about their operating segments. Upon
implementing this new accounting standard, the Company changed the manner in
which it reports operating segment results to reflect its corporate office
expenses in the "other businesses and corporate office" segment. Previously, the
Company had allocated its corporate office expenses to each of its operating
segments. Prior period operating segment results have been adjusted to reflect
this reporting change. The Company's operating segment disclosures, reflecting
the implementation of this new accounting standard, are included in Note M.
Also in December 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which revises
employers' disclosures about pension and other postretirement benefit plans. The
Company's revised disclosures resulting from the implementation of this
accounting standard are included in Note I.
B. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts receivable at January 3, 1999, and December 28, 1997, consist of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable, less estimated
returns, doubtful accounts
and allowances of $55,050
and $49,706 $216,500 $229,782
Other 20,014 14,421
-------------------------
$236,514 $244,203
=========================
</TABLE>
Accounts payable and accrued liabilities at January 3, 1999, and December 28,
1997, consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable and accrued
expenses $170,018 $136,368
Accrued payroll and related benefits 55,133 48,115
Deferred tuition revenue 13,166 20,988
Due to affiliates (newsprint) 6,751 8,353
-------------------------
$245,068 $213,824
=========================
</TABLE>
C. INVESTMENTS IN MARKETABLE EQUITY SECURITIES
Investments in marketable equity securities at January 3, 1999 and December 28,
1997, consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Total cost $187,297 $3,315
Gross unrealized gains 68,819 51
-------------------------
Total fair value $256,116 $3,366
=========================
</TABLE>
33
<PAGE> 34
At January 3, 1999, the Company's ownership of 747,100 shares of General
Re Corporation ("General Re") common stock and 20 shares of Berkshire Hathaway,
Inc. ("Berkshire") Class A common stock account for approximately 72 percent of
the total fair value of the Company's investments in marketable equity
securities. The investment in General Re and Berkshire common stock was acquired
by the Company throughout the third and fourth quarters of 1998 from the open
market for a total cost of $164,955,000. The gross unrealized gain on the
General Re and Berkshire common stock totaled $19,485,000 at January 3, 1999.
On December 21, 1998, General Re and Berkshire announced the completion
of their previously announced merger. Under the terms of the merger agreement,
General Re shareholders are entitled to receive at their election either 0.0035
shares of Berkshire Class A Common Stock or 0.105 shares of Berkshire B Common
Stock for each share of General Re common stock owned at December 21, 1998. On
January 26, 1999, the Company converted its 747,100 shares of General Re common
stock into 2,614 shares of Berkshire Class A Common Stock and 25 shares of
Berkshire Class B Common Stock. The fair value of the Berkshire common stock
received at the date of conversion totaled $173,240,000.
Berkshire is a holding company owning subsidiaries engaged in a number of
diverse business activities; the most significant of which consist of property
and casualty insurance business conducted on both a direct and reinsurance
basis. Berkshire also owns approximately 17 percent of the common stock of the
Company. The chairman, chief executive officer and largest shareholder of
Berkshire, Mr. Warren Buffett, is a member of the Company's Board of Directors.
Neither Berkshire nor Mr. Buffett participated in the Company's evaluation,
approval or execution of its decision to invest in General Re common stock. The
Company's investment in Berkshire common stock (after conversion) is less than 1
percent of the consolidated equity of Berkshire. At present, the Company intends
to hold the Berkshire common stock investment long-term; thus this investment
has been classified as a non-current asset in the Consolidated Balance Sheets.
The remaining investments in marketable equity securities at January 3,
1999 consist of common stock investments in various publicly traded companies,
most of which have concentrations in Internet business activities. In most
cases, the Company obtained ownership of these common stocks as a result of
merger or acquisition transactions in which these companies merged or acquired
various small Internet related companies in which the Company held minor
investments.
During 1998, proceeds from sales of marketable equity securities were
$38,246,000 and gross realized gains on such sales were $2,168,000. There were
no sales of marketable equity securities during 1997 or 1996. Gross realized
gains or losses upon the sale of marketable equity securities are included in
"Other income (expense), net" in the Consolidated Statements of Income. For
purposes of computing realized gains and losses, the cost basis of securities
sold is determined by specific identification.
At February 22, 1999, the fair value of the Company's investments in
marketable equity securities approximated $253,168,000, representing a
$2,948,000 decline in the fair value since January 3, 1999. There were no
significant acquisitions or dispositions of marketable equity securities from
January 3, 1999 through February 22, 1999.
D. INVESTMENTS IN AFFILIATES
The Company's investments in affiliates at January 3, 1999 and December 28, 1997
include the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Bowater Mersey Paper Company
Limited $40,121 $ 39,995
Cowles Media Company -- 91,904
Other 28,409 22,892
------------------------
$68,530 $154,791
========================
</TABLE>
At January 3, 1999, and December 28, 1997, the Company's investments in
affiliates include a 49 percent interest in the common stock of Bowater Mersey
Paper Company Limited, which owns and operates a newsprint mill in Nova Scotia,
a 50 percent common stock interest in the International Herald Tribune
Newspaper, published near Paris, France, and a 50 percent common stock interest
in the Los Angeles Times-Washington Post News Service, Inc.
At December 28, 1997, the Company's investment in affiliates also
included a 28 percent interest in the stock of Cowles Media Company (Cowles),
which at that time owned and operated the Minneapolis Star Tribune and several
other smaller properties. As further described in Note K, in March 1998, the
Company disposed of its 28 percent interest in Cowles in connection with the
merger of Cowles and McClatchy Newspaper, Inc.
Operating costs and expenses of the Company include newsprint supplied by
Bowater, Inc. (parent to Bowater Mersey Paper Company Limited), the cost of
which was approximately $39,800,000 in 1998, $40,100,000 in 1997 and $41,500,000
in 1996. Prior to 1998, the Company owned a 35 percent interest in Bear Island
Paper Company (see Note K for discussion of disposition in December 1997) which
supplied the Company with newsprint at a cost of $23,700,000 in 1997 and
$25,700,000 in 1996.
34
<PAGE> 35
The following table summarizes the status and results of the Company's
investments in affiliates (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C>
Beginning investment $154,791 $199,278
Additional investment 15,187 --
Equity in (losses) earnings (5,140) 9,955
Dividends and distributions
received (1,587) (2,959)
Foreign currency translation (1,134) (5,128)
Sale of interest in Cowles (93,587) --
Sale of interest in Bear Island -- (46,355)
-------------------------
Ending investment $ 68,530 $154,791
=========================
</TABLE>
At January 3, 1999, the unamortized excess of the Company's investments
over its equity in the underlying net assets of its affiliates at the dates of
acquisition was approximately $13,100,000. Amortization included in "Equity in
(losses) earnings of affiliates" in the Consolidated Statements of Income was
approximately $777,000 for the year ended January 3, 1999, $2,500,000 for the
year ended December 28, 1997, and $2,600,000 for the year ended December 29,
1996.
E. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Current Deferred
- ----------------------------------------------------------------------------------
<S> <C> <C>
1998
U.S. Federal $200,898 $ 20,446
Foreign 1,233 255
State and local 21,682 6,286
-------------------------
$223,813 $ 26,987
=========================
1997
U.S. Federal $149,003 $ 2,210
Foreign 915 (165)
State and local 28,493 1,044
-------------------------
$178,411 $ 3,089
=========================
1996
U.S. Federal $120,612 $ (3,575)
Foreign 718 598
State and local 22,343 (1,296)
-------------------------
$143,673 $ (4,273)
=========================
</TABLE>
The provision for income taxes exceeds the amount of income tax
determined by applying the U.S. Federal statutory rate of 35 percent to income
before taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal statutory
taxes $233,821 $162,076 $126,076
State and local taxes,
net of U.S. Federal
income tax benefit 18,179 19,199 13,681
Amortization of goodwill
not deductible for
income tax purposes 5,644 2,492 2,336
IRS approved accounting
change (3,550) -- --
Other, net (3,294) (2,267) (2,693)
---------------------------------------
Provision for income taxes $250,800 $181,500 $139,400
=======================================
</TABLE>
Deferred income taxes at January 3, 1999, December 28, 1997 and December 29,
1996, consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Accrued postretirement
benefits $ 52,971 $ 51,076 $ 49,363
Other benefit
obligations 37,450 34,358 26,634
Accounts receivable 13,695 9,127 8,399
Other 9,656 8,319 12,373
--------------------------------------
Deferred tax asset 113,772 102,880 96,769
--------------------------------------
Property, plant and
equipment 60,793 40,498 39,248
Prepaid pension cost 101,884 79,978 65,300
Affiliate operations 4,797 7,645 14,977
Investment tax credit 713 813 1,589
Unrealized gain on available-
for-sale securities 26,839 20 2,017
Other 2,456 5,232 3,785
--------------------------------------
Deferred tax liability 197,482 134,186 126,916
--------------------------------------
Deferred income taxes $ 83,710 $ 31,306 $ 30,147
======================================
</TABLE>
F. DEBT
In March 1998, the Company replaced its existing $300,000,000 revolving credit
facility with a five-year $500,000,000 revolving credit facility to support the
issuance of commercial paper. Under the terms of the revolving credit facility,
interest on borrowings are at floating rates, and the Company is required to pay
a facility fee of 0.055 percent and 0.15 percent on unused and used portions of
the facility, respectively. The credit facility also contains certain covenants,
including a financial covenant that
35
<PAGE> 36
requires the Company to maintain at least $850,000,000 of consolidated
shareholders' equity.
At January 3, 1999 and December 28, 1997, the Company had $453,362,000
and $296,394,000, respectively, in short-term commercial paper borrowings
outstanding at average interest rates of 5.4 percent and 5.8 percent,
respectively. The Company incurred interest costs of $13,800,000 during 1998 on
its short-term commercial paper borrowings of which $5,600,000 was capitalized
in connection with the construction and upgrade of qualifying assets. The
Company incurred $552,000 in interest expense on borrowings during 1997 and no
interest expense in 1996.
On February 15, 1999, the Company completed the issuance of $400,000,000,
5.5 percent unsecured Notes due February 15, 2009. The Company is required to
pay interest related to these notes on February 15 and August 15, of each year.
The first interest payment of approximately $11,000,000 is due on August 15,
1999.
The Company intends to use the net proceeds (approximately $395,000,000)
resulting from the issuance of its 5.5 percent, 10-year Notes to repay an equal
amount of commercial paper borrowings outstanding. Given the Company's ability
and intent to refinance $395,000,000 of its short-term commercial paper
borrowings outstanding at January 3, 1999, this amount has been classified as
long-term debt in the Consolidated Balance Sheets.
G. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of a cable television system during the first
quarter of 1996, the Company issued 11,947 shares of its Series A Preferred
Stock and agreed to issue an additional 1,282 shares of such stock on February
23, 2000 (which additional number of shares is subject to reduction in the event
of any breach of the representations and warranties made by the seller in the
acquisition agreement). During 1998, the Company redeemed 74 shares of the
Series A Preferred Stock at the request of a Series A Preferred Stockholder.
The Series A Preferred Stock has a par value of $1.00 per share and a
liquidation preference of $1,000 per share; it is redeemable by the Company at
any time on or after October 1, 2015 at a redemption price of $1,000 per share.
In addition, the holders of such stock have a right to require the Company to
purchase their shares at the redemption price during an annual 60-day election
period, with the first such period beginning on February 23, 2001. Dividends on
the Series A Preferred Stock are payable four times a year at the annual rate of
$80.00 per share and in preference to any dividends on the Company's common
stock. The Series A Preferred Stock is not convertible into any other security
of the Company, and the holders thereof have no voting rights except with
respect to any proposed changes in the preferences and special rights of such
stock.
H. CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS
CAPITAL STOCK. Each share of Class A common stock and Class B common stock
participates equally in dividends. The Class B stock has limited voting rights
and as a class has the right to elect 30 percent of the Board of Directors; the
Class A stock has unlimited voting rights including the right to elect a
majority of the Board of Directors.
During 1998, 1997 and 1996, the Company purchased a total of 41,033,
846,290 and 103,642 shares, respectively, of its Class B common stock at a cost
of approximately $20,512,000, $368,565,000 and $32,302,000.
STOCK AWARDS. In 1982, the Company adopted a long-term incentive compensation
plan that, among other provisions, authorizes the awarding of Class B common
stock to key employees. Stock awards made under this incentive compensation plan
are subject to the general restriction that stock awarded to a participant will
be forfeited and revert to Company ownership if the participant's employment
terminates before the end of a specified period of service to the Company. At
January 3, 1999, there were 92,245 shares reserved for issuance under the
incentive compensation plan. Of this number, 30,730 shares were subject to
awards outstanding, and 61,515 shares were available for future awards. Activity
related to stock awards under the long-term incentive compensation plan for the
years ended January 3, 1999, December 28, 1997 and December 29, 1996, was as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------
Number Average Number Average Number Average
of Award of Award of Award
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Awards Outstanding
Beginning of year 32,331 $281.19 30,490 $237.83 31,378 $237.85
Awarded 14,120 522.56 18,285 351.68 64 313.88
Vested (15,075) 244.10 (13,521) 228.96 -- --
Forfeited (646) 293.83 (2,923) 285.35 (952) 243.61
---------------------------------------------------------
End of year 30,730 $405.40 32,331 $281.19 30,490 $237.83
=========================================================
</TABLE>
In addition to stock awards granted under the long-term incentive
compensation plan, the Company also made stock awards of 938 shares in 1998 and
2,000 shares in 1997.
For the share awards outstanding at January 3, 1999, the aforementioned
restriction will lapse in January 2001 for 18,030 shares, January 2002 for 938
shares, January 2003 for 13,700 shares, and January 2004 for 1,000 shares.
Stock-based compensation costs resulting from stock awards reduced net income by
$3.2 million ($0.32 per share, basic and diluted), $1.2 million ($0.11 per
share, basic and diluted), and $1.1 million ($0.10 per share, basic and diluted)
in 1998, 1997 and 1996, respectively.
STOCK OPTIONS. The Company's employee stock option plan, which was adopted in
1971 and amended in 1993, reserves
36
<PAGE> 37
1,900,000 shares of the Company's Class B common stock for options to be granted
under the plan. The purchase price of the shares covered by an option cannot be
less than the fair value on the granting date. At January 3, 1999, there were
611,825 shares reserved for issuance under the stock option plan, of which
246,072 shares were subject to options outstanding and 365,753 shares were
available for future grants.
Changes in options outstanding for the years ended January 3, 1999, December 28,
1997 and December 29, 1996, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------
Number Average Number Average Number Average
of Option of Option of Option
Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 251,225 $371.35 178,625 $270.21 168,525 $258.59
Granted 25,500 519.32 80,200 583.62 19,500 343.94
Exercised (30,653) 228.53 (7,600) 234.20 (9,400) 214.89
----------------------------------------------------------
End of year 246,072 $404.48 251,225 $371.35 178,625 $270.21
==========================================================
</TABLE>
Of the shares covered by options outstanding at the end of 1998, 124,672
are now exercisable, 74,800 will become exercisable in 1999, 22,550 will become
exercisable in 2000, 17,675 will become exercisable in 2001, and 6,375 will
become exercisable in 2002.
Information related to stock options outstanding at January 3, 1999 is as
follows:
<TABLE>
<CAPTION>
Weighted
average Weighted Weighted
Number remaining average Number average
Range of outstanding contractual exercise exercisable exercise
exercise prices at 1/3/99 life (yrs.) price at 1/3/99 price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$173-200 6,000 3.0 $173.00 6,000 $173.00
205-319 115,872 3.5 276.86 63,625 243.36
343-350 20,000 8.1 344.37 9,125 344.18
472 43,700 9.0 472.00 10,925 472.00
517-570 25,500 10.0 519.32 -- --
733 35,000 9.0 733.00 35,000 733.00
</TABLE>
All options were granted at an exercise price equal to or greater than
the fair market value of the Company's common stock at the date of grant. The
weighted-average fair value at the date of grant for options granted during
1998, 1997 and 1996 was $126.57, $87.94 and $96.53, respectively. The fair value
of options at date of grant was estimated using the Black-Scholes method
utilizing the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 7 7 7
Interest rate 4.68% 5.84% 6.26%
Volatility 14.6% 14.2% 14.6%
Dividend yield 1.2% 1.5% 1.5%
</TABLE>
Had the fair values of options granted in 1998, 1997 and 1996 been
recognized as compensation expense, net income would have been reduced by $2.0
million ($.19 per share, basic and diluted), $1.6 million ($.15 per share, basic
and diluted) and $0.4 million ($.04 per share, basic and diluted) in 1998, 1997
and 1996 respectively.
AVERAGE NUMBER OF SHARES OUTSTANDING. Basic earnings per share are based on the
weighted average number of shares of common stock outstanding during each year.
Diluted earnings per common share are based upon the weighted average number of
shares of common stock outstanding each year, adjusted for the dilutive effect
of shares issuable under outstanding stock options. Basic and diluted weighted
average share information for 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Basic Dilutive Diluted
Weighted Effect of Weighted
Average Stock Average
Shares Options Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 10,086,786 42,170 10,128,956
1997 10,699,713 33,278 10,732,991
1996 10,963,761 16,036 10,979,797
</TABLE>
I. PENSIONS AND OTHER POSTRETIREMENT PLANS
The Company maintains various pension and incentive savings plans and
contributes to several multi-employer plans on behalf of certain union
represented employee groups. Substantially all of the Company's employees are
covered by these plans.
The Company also provides health care and life insurance benefits to
certain retired employees. These employees become eligible for benefits after
meeting age and service requirements.
The following table sets forth obligation, asset and funding information
for the Company's defined benefit pension and postretirement plans at January 3,
1999 and December 28, 1997 (in thousands):
<TABLE>
<CAPTION>
Pension Plans Postretirement Benefits
-----------------------------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 284,278 $ 261,266 $ 101,255 $ 95,096
Service cost 11,335 10,567 3,764 3,511
Interest cost 21,344 19,433 7,417 6,973
Amendments 4,690 -- -- --
Actuarial loss 26,871 4,871 155 31
Benefits paid (10,473) (11,859) (4,812) (4,356)
-----------------------------------------------
Benefit obligation at end of year $ 338,045 $ 284,278 $ 107,779 $ 101,255
-----------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of assets at beginning of year $1,014,531 $ 731,999 -- --
Actual return on plan assets 304,360 294,212 -- --
Employer contributions -- 179 $ 4,812$ 4,356
Benefits paid (10,473) (11,859) (4,812) (4,356)
-----------------------------------------------
Fair value of assets at end of year $1,308,418 $1,014,531 -- --
-----------------------------------------------
Funded status $ 970,373 $ 730,253 $(107,779) $(101,255)
Unrecognized transition asset (30,606) (38,271) (3,366) (3,744)
Unrecognized prior service cost 17,835 14,824 (11,433) (12,968)
Unrecognized actuarial gain (701,468) (512,669) -- --
-----------------------------------------------
Net prepaid (accrued) cost $ 256,134 $ 194,137 $(122,578) $(117,967)
===============================================
</TABLE>
37
<PAGE> 38
The total (income) cost arising from the Company's defined benefit
pension and postretirement plans for the years ended January 3, 1999, December
28, 1997 and December 29, 1996, consists of the following components (in
thousands):
<TABLE>
<CAPTION>
Pension Plans Postretirement Plans
-----------------------------------------------------------
1998 1997 1996 1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 11,335 $ 10,567 $ 10,373 $ 3,764 $ 3,511 $ 2,940
Interest cost 21,344 19,433 17,741 7,417 6,973 6,546
Expected return
on assets (71,814) (51,842) (43,571) -- -- --
Amortization of
transition asset (7,665) (7,665) (7,665) -- -- --
Amortization of prior
service cost 1,679 1,512 1,370 (378) (378) (290)
Recognized actuarial
gain (16,876) (2,232) (1,517) (1,379) (1,576) (1,286)
----------------------------------------------------------
Total (benefit)
cost for the year $(61,997) $(30,227) $(23,269) $ 9,424 $ 8,530 $ 7,910
==========================================================
</TABLE>
The cost for the Company's defined benefit pension and postretirement
plans are actuarially determined. Key assumptions utilized at January 3, 1999,
December 28, 1997 and December 29, 1996 include the following:
<TABLE>
<CAPTION>
Pension Plans Postretirement Plans
---------------------------------------------------------
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.0% 7.5% 7.5% 7.0% 7.5% 7.5%
Expected return on
plan assets 9.0% 9.0% 9.0% -- -- --
Rate of compensation
increase 4.0% 4.0% 4.0% -- -- --
</TABLE>
The assumed health care cost trend rate used in measuring the
postretirement benefit obligation at January 3, 1999 was 9.8 percent for pre-age
65 benefits (9.3 percent for post-age 65 benefits) decreasing to 5.0 percent in
the year 2015 and thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage point change in the
assumed health care cost trend rates would have the following effects (in
thousands):
<TABLE>
<CAPTION>
1% 1%
Increase Decrease
- ----------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligation at end of year $14,267 $(14,029)
Service cost plus interest cost 1,637 (1,615)
</TABLE>
Contributions to multi-employer pension plans, which are generally based
on hours worked, amounted to $2,300,000 in 1998, $2,000,000 in 1997 and
$1,700,000 in 1996.
The Company recorded expense associated with retirement benefits provided
under incentive savings plans (primarily 401k plans) of $13,300,000 in 1998,
$12,400,000 in 1997 and $12,000,000 in 1996.
J. LEASE AND OTHER COMMITMENTS
The Company leases primarily real property under operating agreements. Many of
the leases contain renewal options and escalation clauses that require payments
of additional rent to the extent of increases in the related operating costs.
At January 3, 1999, future minimum rental payments under noncancelable
operating leases approximate the following (in thousands):
<TABLE>
<S> <C>
1999 $ 29,800
2000 26,700
2001 23,400
2002 19,500
2003 15,800
Thereafter 50,700
--------
$165,900
========
</TABLE>
Minimum payments have not been reduced by minimum sublease rentals of
$2,200,000 due in the future under noncancelable subleases.
Rent expense under operating leases included in operating costs and
expenses was approximately $31,800,000, $27,800,000 and $24,900,000 in 1998,
1997 and 1996, respectively. Sublease income was approximately $500,000,
$400,000 and $800,000 in 1998, 1997 and 1996, respectively.
The Company's broadcast subsidiaries are parties to certain agreements
that commit them to purchase programming to be produced in future years. At
January 3, 1999, such commitments amounted to approximately $38,400,000. If such
programs are not produced, the Company's commitment would expire without
obligation.
K. ACQUISITIONS, EXCHANGES AND DISPOSITIONS
ACQUISITIONS. The Company completed acquisitions totaling approximately
$320,600,000 in 1998, $118,900,000 in 1997 and $147,500,000 in 1996. All of
these acquisitions were accounted for using the purchase method and,
accordingly, the assets and liabilities of the companies acquired have been
recorded at their estimated fair values at the date of acquisition.
Acquisitions in 1998 included an educational services company that
provides English language study programs (in January 1998 for $16,100,000); a
36,000 subscriber cable system serving Anniston, Alabama (in June 1998 for
$66,500,000); cable systems serving 72,000 subscribers in Mississippi,
Louisiana, Texas and Oklahoma (in July 1998 for $130,100,000); and a publisher
and provider of licensing training for securities, insurance and real estate
professionals (in July 1998 for $35,200,000). In addition,
38
<PAGE> 39
the Company acquired various other smaller businesses throughout 1998 for
$72,700,000 (principally consisting of educational and career service companies
and small cable systems).
In 1997, the Company acquired cable systems serving approximately 16,000
subscribers in Cleveland, Mississippi (in February 1997 for $23,900,000), the
publishing rights to two computer service industry trade periodicals and the
rights to conduct two computer industry trade shows (in December 1997 for
$84,500,000), and various other smaller businesses throughout 1997 for
$10,500,000.
In 1996, the Company acquired cable systems serving approximately 39,700
subscribers in Texarkana and Columbus, Missouri (in January and February 1996
for $83,000,000), a cable system serving approximately 26,300 subscribers in
Prescott, Arizona (in August 1996 for $46,000,000), and various other smaller
businesses throughout 1996 for $18,500,000.
The results of operations for each of the businesses acquired are
included in the Consolidated Statements of Income from their respective dates of
acquisition. Pro forma results of operations for 1998, 1997 and 1996, assuming
the acquisitions occurred at the beginning of 1996, are not materially different
from reported results of operations.
EXCHANGES. In June 1997, the Company exchanged the assets of certain cable
systems with Tele-Communications, Inc. This trade resulted in an increase of
about 21,000 subscribers for the Company.
In September 1997, the Company completed a transaction with Meredith
Corporation whereby the Company exchanged the assets of WFSB-TV, the CBS
affiliate in Hartford, Connecticut, and approximately $60,000,000 for the assets
of WCPX-TV, the CBS affiliate in Orlando, Florida.
The assets obtained in these transactions were recorded at the carrying
value of the assets exchanged plus cash consideration. No gain or loss resulted
from these exchange transactions.
DISPOSITIONS. In March 1998, Cowles Media Company ("Cowles") and McClatchy
Newspapers, Inc. ("McClatchy") completed a series of transactions resulting in
the merger of Cowles and McClatchy. In the merger, each share of Cowles common
stock was converted (based upon elections of Cowles stockholders) into shares of
McClatchy stock or a combination of cash and McClatchy stock. As of the date of
the Cowles and McClatchy merger transaction, a wholly-owned subsidiary of the
Company owned 3,893,796 (equal to about 28 percent) of the outstanding common
stock of Cowles, most of which was acquired in 1985. As a result of the
transaction, the Company's subsidiary received $330,500,000 in cash from
McClatchy and 730,525 shares of McClatchy Class A common stock. The market value
of the McClatchy stock received approximated $21,600,000. The gain resulting
from this transaction, which is included in 1998 "Other income (expense), net"
in the Consolidated Statements of Income, increased net income by approximately
$162,800,000 and basic and diluted earnings per share by $16.14 and $16.07
respectively.
In July 1998, the Company completed the sale of its 80 percent interest
in Moffet, Larson and Johnson ("MLJ"), a telecommunications consulting firm; no
significant gain or loss was realized as a result of this transaction.
In July 1998, the Company completed the sale of 14 small cable systems in
Texas, Missouri and Kansas serving approximately 29,000 subscribers for
approximately $41,900,000. The gain resulting from this transaction, which is
included in 1998 "Other income (expense), net" in the Consolidated Statements of
Income, increased net income by approximately $17,300,000 and basic and diluted
earnings per share by $1.71.
In August 1998, Junglee Corporation ("Junglee") merged with a wholly
owned subsidiary of Amazon.com Inc. ("Amazon.com"). As a result, each share of
Junglee common and preferred stock was converted into shares of Amazon.com. On
the date of the merger, a wholly-owned subsidiary of the Company owned 750,000
common shares and 750,000 preferred shares of Junglee. As a result of the
merger, the Company's subsidiary received 202,961 shares of Amazon.com common
stock. The market value of the Amazon.com stock received approximated
$25,200,000 on the date of the merger. The gain resulting from this transaction,
which is included in 1998 "Other income (expense), net" in the Consolidated
Statements of Income, increased net income by approximately $14,300,000 and
basic and diluted earnings per share by $1.42 and $1.41, respectively.
In September 1997, the Company sold the assets of its PASS regional
sports network for approximately $27,400,000. In December 1997, the Company sold
its 35 percent limited partnership interest in both Bear Island Paper Company
and Bear Island Timberlands Company for approximately $92,800,000. The gains
resulting from these dispositions, which are included in "Other income
(expense), net" in the Consolidated Statements of Income, increased 1997 net
income by approximately $44,500,000 and basic and diluted earnings per share by
$4.16 and $4.15, respectively.
L. CONTINGENCIES
The Company and its subsidiaries are parties to various civil lawsuits that have
arisen in the ordinary course of their businesses, including actions for libel
and invasion of privacy. Management does not believe that any litigation pending
against the Company will have a material adverse effect on its business or
financial condition.
39
<PAGE> 40
M. BUSINESS SEGMENTS
The Company operates principally in four areas of the media business: newspaper
publishing, television broadcasting, magazine publishing, and cable television.
The Company also produces news and other information products and services for
electronic distribution and provides test preparation and related services.
Newspaper operations involve the publication of newspapers in the
Washington, D.C. area and Everett, Washington, and newsprint warehousing and
recycling facilities.
Broadcast operations are conducted primarily through six VHF television
stations. All stations are network-affiliated, with revenues derived primarily
from sales of advertising time.
Magazine operations consist of the publication of a weekly news magazine,
Newsweek, which has one domestic and three international editions, and beginning
in 1997, the publication of business periodicals for the computer services
industry and the Washington-area technology community. Revenues from both
newspaper and magazine publishing operations are derived from advertising and,
to a lesser extent, from circulation.
Cable television operations consist of over 53 cable systems offering
basic cable and pay television services to approximately 733,000 subscribers in
midwestern, western, and southern states. The principal source of revenues is
monthly subscription fees charged for services.
Other businesses and corporate office include the operations of
educational centers engaged in preparing students for admissions tests and
licensing examinations and offering academic enrichment programs, a publisher
and provider of professional licensing programs, an engineering firm which
provides services to the telecommunications industry (sold in July 1998, see
Note K), a regional sports cable system (sold in September 1997, see Note K), an
online information service devoted to federal and state legislation and
regulations, a digital media and electronic information services provider and
the Company's corporate office.
Income from operations is the excess of operating revenues over operating
expenses. In computing income from operations by segment, the effects of equity
in earnings of affiliates, interest income, interest expense, other income and
expense items, and income taxes are not included. Income from operations
includes actuarially determined net pension benefits, which are significant to
the magazine publishing division. These non-cash pension benefits totaled $36.6
million in 1998, $22.0 million in 1997 and $16.4 million in 1996.
Identifiable assets by segment are those assets used in the Company's
operations in each business segment. Investments in marketable equity securities
and investments in affiliates are discussed in Notes C and D, respectively.
40
<PAGE> 41
<TABLE>
<CAPTION>
Other
Businesses
Newspaper Magazine Cable and Corporate
(in thousands) Publishing Broadcasting Publishing Television Office Consolidated
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998
Operating revenues $846,836 $357,616 $399,483 $297,980 $208,445 $2,110,360
Income (loss) from operations $165,099 $171,194 $ 44,524 $ 65,022 $(66,942) $ 378,897
Equity in losses of affiliates (5,140)
Interest expense, net (10,401)
Other income, net 304,703
--------------------------------------------------------------------------------
Income before income taxes $ 668,059
================================================================================
Identifiable assets $634,882 $437,506 $355,176 $710,641 $266,810 $2,405,015
Investments in marketable equity securities 256,116
Investments in affiliates 68,530
--------------------------------------------------------------------------------
Total assets $2,729,661
================================================================================
Depreciation of property, plant and
equipment $ 26,715 $ 11,378 $ 4,888 $ 37,271 $ 8,996 $ 89,248
Amortization of goodwill and other
intangibles $ 1,372 $ 14,368 $ 5,912 $ 24,178 $ 4,059 $ 49,889
Capital expenditures $117,742 $ 14,492 $ 3,666 $ 80,795 $ 27,524 $ 244,219
1997
Operating revenues $812,896 $338,373 $389,853 $257,732 $157,399 $1,956,253
Income (loss) from operations $172,566 $163,703 $ 42,719 $ 54,659 $(52,296) $ 381,351
Equity in earnings of affiliates 9,955
Interest income, net 2,219
Other income, net 69,549
--------------------------------------------------------------------------------
Income before income taxes $ 463,074
================================================================================
Identifiable assets $515,745 $436,760 $323,573 $502,642 $140,440 $1,919,160
Investments in marketable equity securities 3,366
Investments in affiliates 154,791
--------------------------------------------------------------------------------
Total assets $2,077,317
================================================================================
Depreciation of property, plant and
equipment $ 19,104 $ 11,011 $ 4,484 $ 30,672 $ 6,207 $ 71,478
Amortization of goodwill and other
intangibles $ 874 $ 12,213 $ 136 $ 19,371 $ 965 $ 33,559
Capital expenditures $110,070 $ 11,651 $ 3,022 $ 73,156 $ 16,674 $ 214,573
1996
Operating revenues $763,935 $335,156 $377,063 $229,695 $147,596 $1,853,445
Income (loss) from operations $124,464 $158,390 $ 26,606 $ 58,328 $(30,619) $ 337,169
Equity in earnings of affiliates 19,702
Interest income, net 3,845
Other expense, net (499)
--------------------------------------------------------------------------------
Income before income taxes $ 360,217
================================================================================
Identifiable assets $420,601 $377,799 $226,411 $452,525 $185,310 $1,662,646
Investments in marketable equity securities 8,487
Investments in affiliates 199,278
--------------------------------------------------------------------------------
Total assets $1,870,411
================================================================================
Depreciation of property, plant and
equipment $ 20,386 $ 10,482 $ 4,610 $ 25,075 $ 4,550 $ 65,103
Amortization of goodwill and other
intangibles $ 830 $ 11,252 $ 16,785 $ 969 $ 29,836
Capital expenditures $ 19,441 $ 10,923 $ 4,798 $ 37,362 $ 7,457 $ 79,981
</TABLE>
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<PAGE> 42
N. SUMMARY OF QUARTERLY OPERATING RESULTS AND COMPREHENSIVE INCOME (UNAUDITED)
Quarterly results of operations and comprehensive income for the years ended
January 3, 1999 and December 28, 1997, are as follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 QUARTERLY OPERATING RESULTS
Operating revenues
Advertising $292,685 $342,247 $293,277 $369,412
Circulation and subscriber 130,341 133,365 138,783 144,961
Other 60,929 50,145 77,221 76,993
-------------------------------------------------
483,955 525,757 509,281 591,366
-------------------------------------------------
Operating costs and expenses
Operating 267,587 276,399 278,241 316,950
Selling, general and administrative 109,930 111,005 107,533 124,681
Depreciation of property, plant and equipment 20,378 20,733 22,058 26,079
Amortization of goodwill and other intangibles 10,743 11,127 13,853 14,166
-------------------------------------------------
408,638 419,264 421,685 481,876
-------------------------------------------------
Income from operations 75,317 106,493 87,596 109,490
Equity in earnings (losses) of affiliates 988 (71) (4,060) (1,996)
Interest income 207 384 217 328
Interest expense (2,244) (330) (2,246) (6,717)
Other income (expense), net 258,106 (1,594) 50,241 (2,050)
-------------------------------------------------
Income before income taxes 332,374 104,882 131,748 99,055
Provision for income taxes 124,500 41,100 49,900 35,300
-------------------------------------------------
Net income 207,874 63,782 81,848 63,755
Redeemable preferred stock dividends (478) (239) (239) --
-------------------------------------------------
Net income available for common shares $207,396 $ 63,543 $ 81,609 $ 63,755
=================================================
Basic earnings per common share $ 20.57 $ 6.30 $ 8.09 $ 6.32
=================================================
Diluted earnings per common share $ 20.47 $ 6.27 $ 8.05 $ 6.30
=================================================
Basic average number of common shares outstanding 10,084 10,088 10,093 10,082
Diluted average number of common shares outstanding 10,131 10,136 10,139 10,124
1998 QUARTERLY COMPREHENSIVE INCOME $207,814 $ 64,253 $ 74,503 $111,502
=================================================
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 QUARTERLY OPERATING RESULTS
Operating revenues
Advertising $278,528 $327,949 $286,074 $344,326
Circulation and subscriber 123,674 128,901 134,238 132,807
Other 51,899 44,525 58,063 45,269
-----------------------------------------------------
454,101 501,375 478,375 522,402
-----------------------------------------------------
Operating costs and expenses
Operating 243,504 246,478 253,565 276,322
Selling, general and administrative 106,886 118,875 107,186 117,049
Depreciation of property, plant and equipment 17,790 17,871 18,007 17,810
Amortization of goodwill and other intangibles 7,953 8,214 8,382 9,010
-----------------------------------------------------
376,133 391,438 387,140 420,191
-----------------------------------------------------
Income from operations 77,968 109,937 91,235 102,211
Equity in earnings of affiliates 125 3,331 4,712 1,787
Interest income 1,112 1,079 725 554
Interest expense (165) (158) (182) (747)
Other income (expense), net (846) 1,668 23,471 45,257
-----------------------------------------------------
Income before income taxes 78,194 115,857 119,961 149,062
Provision for income taxes 30,500 44,500 48,410 58,090
-----------------------------------------------------
Net income 47,694 71,357 71,551 90,972
Redeemable preferred stock dividends (478) (239) (239) --
-----------------------------------------------------
Net income available for common shares $ 47,216 $ 71,118 $ 71,312 $ 90,972
=====================================================
Basic earnings per common share $ 4.35 $ 6.62 $ 6.66 $ 8.66
=====================================================
Diluted earnings per common share $ 4.35 $ 6.60 $ 6.64 $ 8.63
=====================================================
Basic average number of common shares outstanding 10,844 10,744 10,708 10,502
Diluted average number of common shares outstanding 10,866 10,772 10,743 10,544
1997 QUARTERLY COMPREHENSIVE INCOME $ 44,067 $ 69,099 $ 71,093 $ 89,064
=====================================================
</TABLE>
The sum of the four quarters may not necessarily be equal to the annual amounts
reported in the Consolidated Statements of Income due to rounding.
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<PAGE> 44
SCHEDULE II
THE WASHINGTON POST COMPANY
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS -
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 29, 1996
Allowance for doubtful accounts and returns............. $36,075,000 $52,658,000 $49,072,000 $39,661,000
Allowance for advertising rate adjustments and discounts 5,889,000 8,995,000 6,157,000 8,727,000
----------- ----------- ----------- -----------
$41,964,000 $61,653,000 $55,229,000 $48,388,000
=========== =========== =========== ===========
Year Ended December 28, 1997
Allowance for doubtful accounts and returns............. $39,661,000 $54,163,000 $53,990,000 $39,834,000
Allowance for advertising rate adjustments and discounts 8,727,000 11,095,000 9,950,000 9,872,000
----------- ----------- ----------- -----------
$48,388,000 $65,258,000 $63,940,000 $49,706,000
=========== =========== =========== ===========
Year Ended January 3, 1999
Allowance for doubtful accounts and returns............. $39,834,000 $58,100,000 $51,242,000 $46,692,000
Allowance for advertising rate adjustments and discounts 9,872,000 9,792,000 11,306,000 8,358,000
----------- ----------- ----------- -----------
$49,706,000 $67,892,000 $62,548,000 $55,050,000
=========== =========== =========== ===========
</TABLE>
44
<PAGE> 45
Management's Discussion and Analysis of Results of Operations and Financial
Condition
This analysis should be read in conjunction with the consolidated financial
statements and the notes thereto.
RESULTS OF OPERATIONS--1998 COMPARED TO 1997
Net income in 1998 was $417.3 million, an increase of 48 percent over net income
of $281.6 million in 1997. Basic and diluted earnings per share both rose 57
percent to $41.27 and $41.10, respectively, in 1998. The Company's 1998 net
income includes $194.4 million from the disposition of the Company's 28 percent
interest in Cowles Media Company, the sale of 14 small cable systems and the
disposition of the Company's investment interest in Junglee, a facilitator of
Internet commerce. The Company's 1997 net income includes $44.5 million from the
sale of the Company's investment in Bear Island Paper Company, L.P., and Bear
Island Timberlands Company, L.P., and the sale of the assets of its PASS
regional cable sports network. Excluding these non-recurring gains, net income
decreased 6 percent in 1998 and basic and diluted earnings per share remained
essentially unchanged with fewer average shares outstanding.
Revenues for 1998 totaled $2,110.4 million, an increase of 8 percent from
$1,956.3 million in 1997. Advertising revenues increased 5 percent in 1998, and
circulation and subscriber revenues increased 5 percent. Other revenues
increased 33 percent over 1997. The newspaper and broadcast divisions generated
most of the increase in advertising revenues. The increase in circulation and
subscriber revenues is primarily due to a 15 percent increase in subscriber
revenues at the cable division (arising mostly from cable system acquisitions in
1998 and 1997). Revenue growth at Kaplan Educational Centers (about two-thirds
of which was from acquisitions) accounted for the increase in other revenues.
Operating costs and expenses for the year increased 10 percent to
$1,731.5 million, from $1,574.9 million in 1997. The cost and expense increase
is primarily due to companies acquired in 1998 and 1997, increased spending for
new media activities, a 10 percent increase in newsprint expense, and expenses
arising from the expansion of the printing facilities of The Washington Post.
These expense increases were partially offset by an increase in the Company's
pension credit.
Operating income decreased 1 percent to $378.9 million in 1998, from
$381.4 million in 1997.
DIVISION RESULTS. In December 1998, the Company implemented Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which requires companies to report certain
information about their operating segments. Upon implementing this new
accounting standard, the Company changed the manner in which it reports
operating segment results to reflect its corporate office expenses in the "other
businesses and corporate office" segment. Previously, the Company had allocated
its corporate office expenses to each of its operating segments. Prior period
operating segment results have been adjusted to reflect this reporting change.
NEWSPAPER DIVISION. At the newspaper division, 1998 included 53 weeks as
compared to 52 weeks in 1997. Newspaper division revenues increased 4 percent to
$846.8 million, from $812.9 million in 1997. Advertising revenues at the
newspaper division rose 5 percent over the previous year. At The Washington
Post, advertising revenues increased 4 percent as a result of higher rates and a
slight increase in volume. Classified advertising revenues at The Washington
Post increased 5 percent primarily due to higher rates and higher recruitment
volume. Retail advertising revenues at The Post declined 3 percent primarily as
a result of a 7.5 percent decline in inches. Other advertising revenues
(including general and preprint) at The Post increased 11 percent; general
advertising volume was essentially unchanged for 1998; however, preprint volume
increased 6 percent.
Circulation revenues for the newspaper division remained essentially
unchanged from 1997, with the extra week in 1998 offsetting the effects of a 1.3
percent decline in daily and Sunday circulation at The Washington Post
Newspaper division operating margin in 1998 decreased to 19 percent, from
21 percent in 1997. The decrease in 1998 operating margin is primarily
attributable to increased costs arising from the expansion of the printing
facilities of The Washington Post and a 10 percent increase in newsprint costs.
The 10 percent increase in newsprint costs is comprised of a 4 percent increase
in newsprint consumed (driven primarily by expanded suburban community coverage
at The Washington Post) and a 6 percent increase in newsprint prices.
BROADCAST DIVISION. Revenues at the broadcast division rose 6 percent to $357.6
million in 1998, compared to $338.4 million in 1997. The increase in revenues is
primarily attributable to 1998 political advertising and increased local
advertising revenues.
Competitive market position remained strong for the Company's television
stations. In the November 1998 Nielsen ratings book, WDIV (NBC affiliate in
Detroit), WJXT (CBS affiliate in Jacksonville) and KSAT (ABC affiliate in San
Antonio) continued to rank number one in audience share sign-on to sign-off,
while
45
<PAGE> 46
WPLG (ABC affiliate in Miami) tied for first place among English-language
stations in the Miami market. KPRC (NBC affiliate in Houston), although still
ranked third in the market, has narrowed the gap significantly and now
challenges its closest competitors by as little as two audience share points.
WKMG (CBS affiliate in Orlando), which the broadcast division took over in
September 1997, has remained in third place in Orlando while moving aggressively
to build a strong news franchise.
The operating margin at the broadcast division was 48 percent in 1998 and
1997. Excluding amortization of goodwill and intangibles, the operating margin
was 52 percent in 1998 and 1997.
MAGAZINE DIVISION. Magazine division revenues, which beginning in 1997 also
included the Company's business information unit, rose 2 percent to $399.5
million, from $389.9 million in 1997. The increase in revenue is attributable to
revenue contributed by the business information trade periodicals acquired in
December 1997, offset partially by a decline in revenue at Newsweek. Advertising
revenues at Newsweek declined 7 percent primarily as the result of two fewer
Newsweek domestic special issues in 1998 versus 1997 and softness in advertising
at the international editions of Newsweek (particularly the Asian and Latin
American editions). Total circulation revenue for the magazine division
decreased 6 percent in 1998 due predominantly to the newsstand sales of two
Newsweek domestic edition special issues in 1997, which were not recurring in
1998, as well as currency deflation at most of the international editions of
Newsweek.
Operating margin at the magazine division was 11 percent in both 1998 and
1997. The 2 percent increase in 1998 revenues combined with an increase in the
pension credit at Newsweek were offset by normal expense growth and the
amortization expense arising from the December 1997 acquisition of the business
unit trade periodicals.
CABLE DIVISION. Revenues at the cable division increased 16 percent to $298.0
million in 1998, from $257.7 million in 1997. Basic, tier, pay and advertising
revenue categories showed improvement over 1997. Increased subscribers in 1998,
primarily from acquisitions, and higher rates accounted for most of the 15
percent increase in subscriber revenues. The number of basic subscribers at the
end of the year increased to 733,000, from 637,300 at the end of 1997. During
1998, the cable division acquired cable systems serving approximately 115,400
subscribers and sold cable systems serving approximately 29,000 subscribers.
Operating margin at the cable division was 22 percent in 1998, compared
to 21 percent in 1997. Cable operating cash flow increased 21 percent to $126.5
million, from $104.7 million in 1997. Approximately 40 percent of the 1998
improvement in operating cash flow is attributable to the results of cable
systems acquired in 1998 and 1997.
OTHER BUSINESSES AND CORPORATE OFFICE. In 1998, revenues from other businesses,
including Kaplan Educational Centers, Washingtonpost.Newsweek Interactive, MLJ
(sold in July 1998), Legi-Slate and PASS Sports (nine months of 1997), increased
32 percent to $208.4 million, from $157.4 million in 1997. The majority of the
increase is attributable to continued growth at Kaplan Educational Centers.
Kaplan's revenues increased 66 percent in 1998 (with acquisitions accounting for
approximately two-thirds of the increase).
Other businesses and the corporate office recorded an operating loss in
1998 of $66.9 million, compared to a loss of $52.3 million in 1997. The increase
in operating loss is principally attributable to the Company's electronic media
initiatives and, to a lesser extent, the start up costs associated with Kaplan's
expansion of its Score elementary education business. Offsetting these losses
were improved and continued profitability from Kaplan's core test preparation
business, as well as operating income contributed by the various businesses
acquired by Kaplan in 1998 and 1997.
EQUITY IN (LOSSES) EARNINGS OF AFFILIATES. The Company's equity in losses of
affiliates in 1998 was $5.1 million, compared with income of $10.0 million in
1997. The $15.1 million decline in affiliate earnings resulted from increased
spending at new media joint ventures (principally Classified Ventures and
CareerPath.com) and the absence of affiliate earnings that were provided in the
prior year from the Company's investment interest in the Bear Island
Partnerships (sold in November 1997) and Cowles Media Company (disposed of in
March 1998).
NON-OPERATING ITEMS. In 1998, the Company incurred net interest expense of $10.4
million, compared to $2.2 million of net interest income in 1997. The average
short-term borrowings outstanding in 1998 was $231.8 million, as compared to
$10.7 million in average borrowings outstanding in 1997.
Other income (expense), net, in 1998 was $304.7 million, compared to
$69.5 million in 1997. For 1998, other income (expense), net, includes $309.7
million arising from the disposition of the Company's 28 percent interest in
Cowles Media Company, the sale of 14 small cable systems and the disposition of
the Company's interest in Junglee, a facilitator of Internet commerce. For 1997,
other income (expense), net, includes $74.8 million in gains arising from the
sale of the Bear Island partnerships and the sale of the assets of the Company's
PASS regional cable sports network.
INCOME TAXES. The effective tax rate in 1998 was 37.5 percent, as compared to 39
percent in 1997. The decrease in the effective income tax rate is principally
the result of the disposition of Cowles Media Company being subject to state
income tax in jurisdictions with lower tax rates, and to a lesser extent, from a
favorable IRS-approved income tax change in the fourth quarter of 1998.
46
<PAGE> 47
RESULTS OF OPERATIONS--1997 COMPARED TO 1996
Net income in 1997 was $281.6 million, an increase of 28 percent over net income
of $220.8 million in 1996. Basic and diluted earnings per share rose 31 and 30
percent to $26.23 and $26.15, respectively, in 1997. The Company's 1997 net
income includes $28.5 million from the sale of the Company's investment in Bear
Island Paper Company, L.P., and Bear Island Timberlands Company, L.P., as well
as $16.0 million relating to the sale of the assets of its PASS regional cable
sports network. Excluding these non-recurring gains, net income increased 7
percent in 1997 and basic and diluted earnings per share each increased 10
percent.
Revenues for 1997 totaled $1,956.3 million, an increase of 6 percent from
$1,853.4 million in 1996. Advertising revenues increased 5 percent in 1997, and
circulation and subscriber revenues increased 6 percent. Other revenues
increased 5 percent. Substantially all of the increase in advertising revenues
was generated by the newspaper and magazine divisions. The increase in
circulation and subscriber revenues is due to growth at the cable division and
the increase in other revenues is attributable to higher tuition revenues at
Kaplan partially offset by reduced fees for engineering services at MLJ.
Costs and expenses for the year increased 4 percent to $1,574.9 million,
from $1,516.3 million in 1996. In addition to the normal growth in the costs of
operations, the cost and expense increase is attributable to companies acquired
in 1997, expansion of Kaplan's business offerings, increased spending for new
media activities offset partially by decreased newsprint and magazine paper
costs, and other favorable cost experience at Newsweek.
Operating income increased 13 percent to $381.4 million in 1997.
NEWSPAPER DIVISION. Newspaper division revenues increased 6 percent to $812.9
million, from $763.9 million in 1996. Advertising revenues at the newspaper
division rose 8 percent over the previous year. At The Washington Post,
advertising revenues increased 8 percent as a result of strong volume increases
and, to a lesser extent, higher rates. Classified revenues at The Washington
Post increased 12 percent due to higher recruitment volume and associated rates.
The Washington Post's retail revenues rose 4 percent due to higher rates and a 1
percent increase in volume. Other advertising revenues (including general and
preprint) at The Washington Post increased 8 percent. General advertising and
preprint volume each increased 8 percent over 1996.
Circulation revenues for the newspaper division increased 1 percent in
1997 resulting mostly from rate increases enacted in the beginning of 1997 at
The Washington Post. Average daily circulation at The Washington Post fell 1.5
percent, while Sunday circulation declined 1.3 percent.
Newspaper division operating margin in 1997 increased to 21 percent from
16 percent in 1996. The increase in 1997 operating margin is primarily
attributable to increased advertising revenues and lower newsprint expense (down
9 percent). Average newsprint prices paid by the newspaper division in 1997
declined about 14 percent from 1996, the positive effects of which were
partially offset by a 4 percent increase in newsprint consumed.
BROADCAST DIVISION. Revenues at the broadcast division rose 1 percent to $338.4
million over last year. An increase in advertising from a number of industry
categories, including restaurants, utilities, banks and finance, as well as an
overall revenue share increase, allowed the broadcast division to offset the
approximate $30.0 million in non-recurring advertising revenues generated in
1996 from political and Olympics-related advertising. Network revenues were down
slightly from 1996.
Competitive market position remained strong for the television stations.
Four stations were ranked number one in the latest ratings period, sign-on to
sign-off, in their markets; one station was ranked a strong number two; one
station was ranked number three.
The operating margin at the broadcast division increased to 48 percent,
from 47 percent in 1996. Excluding amortization of goodwill and intangibles,
operating margins for 1997 and 1996 were 52 percent and 51 percent,
respectively. The improvement in the 1997 operating margin is due to increased
advertising revenues and benefits derived from 1997 expense control initiatives
which, in total, outpaced higher expenses associated with the new station, WCPX
(renamed WKMG).
MAGAZINE DIVISION. Magazine division revenues, which beginning in 1997 also
included the Company's business information unit, rose 3 percent to $389.9
million due primarily to increased advertising revenues at the Newsweek domestic
edition. The Newsweek domestic advertising revenues increase over the prior year
resulted from a 6 percent increase in domestic advertising pages sold in 1997
versus 1996. Total circulation revenues for the magazine division increased 1
percent in 1997.
Operating margin of the magazine division increased to 11 percent in
1997, from 7 percent in 1996. The increase in operating margin is primarily
attributable to the operating results of Newsweek, including the higher sales of
domestic advertising pages, reduced magazine paper costs, realized savings from
prior year outsourcing initiatives, and other favorable cost experience.
CABLE DIVISION. Revenues at the cable division increased 12 percent to $257.7
million in 1997. Basic and tier, pay, and advertising revenue categories showed
improvement over 1996. Increased subscribers in 1997 accounted for the majority
of the total increase in revenues. The number of basic subscribers
47
<PAGE> 48
increased 7 percent to 637,300. About 37,000 subscribers were added in 1997 as a
result of cable system acquisitions and exchanges and the remainder by internal
growth.
Cable operating cash flow increased 4 percent to $104.7 million, from
$100.2 million in 1996. Operating margin at the cable division was 21 percent in
1997 compared to 25 percent in 1996, reflecting the effects of increased
depreciation and amortization in 1997 from recent cable system acquisitions and
capital improvements.
OTHER BUSINESSES AND CORPORATE OFFICE. In 1997, revenues from other businesses,
including Kaplan, MLJ, Legi-Slate, Washingtonpost.Newsweek Interactive, and PASS
Sports (nine months of 1997), increased 7 percent over the prior year to $157.4
million. The majority of the increase in other businesses revenues is
attributable to Kaplan, where revenues increased 21 percent. Student enrollments
at Kaplan increased 3 percent in 1997. Partially offsetting the revenue increase
generated by Kaplan was a decrease in engineering consulting revenues at MLJ.
Other businesses and the corporate office recorded an operating loss in
1997 of $52.3 million, compared to a loss of $30.6 million in 1996. The 1997
operating loss increase is directly attributable to the Company's spending on
electronic media initiatives, the 1997 decline in MLJ's revenues, and, to a
lesser extent, the start-up costs associated with Kaplan's significant expansion
of its Score elementary education business. Offsetting these losses was improved
and continued profitability from Kaplan's core test preparation business.
EQUITY IN EARNINGS OF AFFILIATES. The Company's equity in earnings of affiliates
for 1997 declined to $10.0 million, from $19.7 million in 1996, reflecting the
effect of lower earnings at the Company's affiliated newsprint mills for the
majority of 1997 compared to 1996. The decline in earnings at the affiliated
newsprint mills is due to lower average newsprint prices charged by the mills in
1997 versus 1996.
NON-OPERATING ITEMS. Interest income, net of interest expense, was $2.2 million,
compared to $3.8 million in 1996. Increased spending in 1997 for acquisitions,
capital expenditures, and stock repurchases resulted in less invested cash in
1997 versus 1996, causing a decline in interest income. Other income (expense),
net in 1997 was $69.5 million, compared with an expense of $0.5 million in 1996.
The increase in other income is attributable to the 1997 gains arising from the
Company's sale of its investment in Bear Island Paper Company, L.P., and Bear
Island Timberlands Company, L.P., as well as the sale of the assets of the
Company's PASS regional cable sports network.
INCOME TAXES. The effective tax rate in both 1997 and 1996 was approximately 39
percent.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
ACQUISITIONS. During 1998, the Company acquired various businesses for about
$320.6 million, which included, among others, $209.0 million for cable systems
serving approximately 115,400 subscribers and $100.4 million for various
educational, training and career services companies to expand Kaplan's business
offerings.
During 1997, the Company acquired various businesses for about $118.9
million. These acquisitions included, among others, $23.9 million for cable
systems serving approximately 16,000 subscribers and $84.5 million for the
publishing rights to two computer services industry periodicals and the rights
to conduct two computer industry trade shows.
In 1996, the Company spent approximately $147.5 million on business
acquisitions. The 1996 acquisitions included, among others, $129.0 million
(including $11.9 million of the Company's Series A redeemable preferred stock)
for cable systems serving about 66,000 subscribers.
EXCHANGES. During 1997, the Company exchanged the assets of certain cable
systems with Tele-Communications, Inc., resulting in an increase of about 21,000
subscribers for the Company. The Company also completed, in 1997, a transaction
with Meredith Corporation whereby the Company exchanged the assets of WFSB-TV,
the CBS affiliate in Hartford, Connecticut, and $60.0 million in cash for the
assets of WCPX-TV (renamed WKMG), the CBS affiliate in Orlando, Florida.
DISPOSITIONS. In March 1998, the Company received $330.5 million in cash and
730,525 shares of McClatchy Newspapers, Inc. Class A common stock as a result of
the merger of Cowles and McClatchy. The market value of the McClatchy stock
received was $21.6 million, based upon publicly quoted market prices. During the
last three quarters of 1998, the Company sold 464,700 shares of the McClatchy
stock (64 percent of the total shares received) for $15.4 million.
In July 1998, the Company completed the sale of 14 small cable systems in
Texas, Missouri and Kansas serving approximately 29,000 subscribers for $41.9
million. In August 1998, the Company received 202,961 shares of Amazon.com
common stock as a result of the merger of Amazon.com and Junglee Corporation. At
the time of the merger transaction, the Company owned a minority investment
interest in Junglee Corporation, a facilitator of Internet commerce. The market
value of the Amazon.com stock received was $25.2 million. In the fourth quarter
of 1998, the Company sold 178,459 shares of the Amazon.com common stock (88
percent of the total shares received) for $22.8 million.
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<PAGE> 49
In November 1997, the Company sold its 35 percent interest in Bear Island
Paper Company, L.P., and Bear Island Timberlands Company, L.P., for
approximately $92.8 million. In September 1997, the Company sold the assets of
its PASS regional cable sports network for $27.4 million.
CAPITAL EXPENDITURES. During 1998, the Company's capital expenditures totaled
$244.2 million, the majority of which related to the replacement of the printing
facilities at The Washington Post and plant upgrades at the Company's cable
subsidiary. The Company estimates that in 1999 it will spend approximately
$150.0 million for property and equipment, primarily for various projects at the
newspaper and cable divisions.
INVESTMENTS IN MARKETABLE EQUITY SECURITIES. During the third and fourth
quarters of 1998, the Company acquired 747,100 shares of General Re Corporation
("General Re") common stock and 20 shares of Class A Berkshire Hathaway, Inc.
("Berkshire") common stock from the open market for an aggregate purchase price
of $165.0 million. On January 26, 1999, the 747,100 shares of General Re common
stock converted to 2,614 and 25 shares of Berkshire Class A and Class B common
stock, respectively, pursuant to the terms of a merger agreement between
Berkshire and General Re. It is the Company's present intention to hold the
Berkshire common stock long-term.
The Company's investment in marketable equity securities at January 3,
1999 also includes common stock investments in various publicly traded
companies, including shares of Amazon.com, America Online, and
Ticketmaster-Citysearch Online. The Company obtained its ownership of these
common stock investments as a result of merger or acquisition transactions in
which these companies merged or acquired various small Internet related
companies in which the Company held minor investments.
At January 3, 1999, the fair value of the Company's investments in
marketable equity securities was $256.1 million, of which $184.4 million
consists of the Company's Berkshire/General Re common stock investment.
COMMON STOCK REPURCHASES AND DIVIDEND RATE. During 1998, 1997 and 1996, the
Company repurchased 41,033, 846,290 and 103,642 shares, respectively, of its
Class B common stock at a cost of $20.5 million, $368.6 million and $32.3
million, respectively. The annual dividend rate for 1999 was increased to $5.20
per share, from $5.00 per share in 1998, $4.80 per share in 1997 and $4.60 per
share in 1996.
LIQUIDITY. At January 3, 1999, the Company had $15.2 million in cash and cash
equivalents. In March 1998, the Company replaced its $300.0 million revolving
credit facility with a $500.0 million revolving credit facility to provide for
general corporate purposes and support the issuance of commercial paper. At
January 3, 1999, the Company had $453.4 million in commercial paper borrowings
outstanding at an average interest rate of 5.4 percent. On February 15, 1999,
the Company issued $400.0 million of 5.5 percent, 10-year notes, netting
approximately $395.0 million in proceeds after discount and fees. The Company
intends to utilize the $395.0 million in proceeds to repay an equal amount of
commercial paper borrowings outstanding.
The Company expects to fund its estimated capital needs primarily through
internally generated funds, and, to a lesser extent, commercial paper
borrowings. In management's opinion, the Company will have ample liquidity to
meet its various cash needs in 1999.
YEAR 2000. The Company's assessment, remediation, testing and contingency
planning efforts surrounding Year 2000 readiness are proceeding as planned with
completion of all project phases projected for late Fall of 1999. To date, the
assessment of internal systems and equipment has been completed and the Company
has made substantial progress in completing the remediation, testing and
contingency planning phases of its Year 2000 readiness project.
Most of the Company's significant internal systems and equipment,
including equipment with embedded controls, have been determined to be Year 2000
compliant. Certain critical internal systems, however, have been identified as
incapable of processing transactions beyond the Year 2000 the most significant
of which include some of the revenue related business systems at The Washington
Post and Newsweek. At Newsweek, the non-compliant systems have since been
repaired and testing of such remediation is currently underway. For the
non-compliant systems at The Washington Post, which principally include the
advertising and circulation billing systems, the remediation efforts are
continuing and are presently expected to be completed and tested by late Fall of
1999. The Company believes it has the ability to perform these functions
manually should the remediation efforts not be completed according to plan. The
majority of the non-compliant internal systems currently being replaced were
scheduled to be replaced prior to Year 2000 for operating efficiency reasons.
For critical internal systems and equipment determined to be compliant
during the assessment phase of the project, and for non-compliant equipment that
has been repaired or replaced, the Company has devised and commenced a testing
plan to provide additional compliance assurance. To date, the results of the
Company's Year 2000 compliance testing program have not revealed any new
problems, or ineffective remediation. The Year 2000 testing phase for internal
systems and equipment is believed to be approximately 60 percent complete as of
the end of January 1999.
49
<PAGE> 50
The Company's Year 2000 readiness project also includes procedures
designed to identify and assess Year 2000 business interruption which may occur
as a result of the Company's dependency on third parties. Vendors, suppliers,
service providers, customers and governmental entities that are believed to be
critical to the Company's business operations after January 1, 2000 ("key
business partners") have been identified and significant progress has been made
in ascertaining their stage of Year 2000 readiness. These efforts include, among
others, circularization of Year 2000 compliance confirmations and conducting
interviews and on-site reviews.
The Company could potentially experience disruptions as a result of
non-compliant systems utilized by some of its key business partners or unrelated
third party governmental and business entities. Contingency plans are under
development to mitigate these potential disruptions to business operations.
These contingency plans include, but are not limited to, identification of
alternative suppliers, vendors and service providers and planned accumulation of
inventory to ensure production capability. The Company is also developing
contingency plans for its internal critical business systems. These contingency
planning activities are intended to reduce risk, but cannot eliminate the
potential for business disruption caused by third party failures.
The Company estimates that its total Year 2000 compliance costs will
approximate $25 million. Approximately $15 million of the estimated costs are
attributable to assessment, repair and testing activities and will be expensed
as incurred (approximately $7 million expensed in 1998 and $8 million expected
to be expensed in 1999). The remaining $10 million represents the estimated cost
to replace non-compliant systems and will be capitalized and amortized over a
period ranging between five and ten years. The Company anticipates that the
funds needed to complete the Year 2000 compliance efforts and referenced system
replacements will be provided primarily from the Company's operating cash flows.
Based upon the activities described above, the Company does not believe
that the Year 2000 problem is likely to have a material adverse effect on the
Company's business or results of operations.
The above discussion contains forward-looking statements that reflect the
Company's current expectations or beliefs concerning future results and events.
These statements are made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Readers are cautioned that
forward-looking statements contained in the Year 2000 discussion should be read
in conjunction with the following disclosures of the Company.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Forward-looking statements, which the Company believes to be reasonable and are
made in good faith, are subject to certain risks and uncertainties that could
cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
Taking into account the foregoing, the following are identified as
important risk factors that could cause actual results to differ from those
expressed in any forward-looking statement made by, or on behalf of, the
Company:
The dates on which the Company believes its Year 2000 readiness project
will be completed are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. Unanticipated failures by critical vendors, as well as a failure by the
Company to execute successfully its own remediation efforts, however, could have
a material adverse effect on the costs associated with the Year 2000 readiness
project and on its completion. Some important factors that might cause
differences between the estimates and actual results include, but are not
limited to, the availability and cost of personnel trained in these areas, the
ability to locate and correct all relevant computer code, the timely and
accurate responses to and correction by third-parties and suppliers, the ability
to implement interfaces between new systems and the systems not being replaced
and similar uncertainties. Due to the general uncertainty inherent in the Year
2000 problem, the Company cannot ensure its ability to timely and
cost-effectively resolve problems associated with the Year 2000 issue that may
affect its operations and business or expose it to third-party liability.
50
<PAGE> 51
[THIS PAGE INTENTIONALLY LEFT BLANK]
51
<PAGE> 52
Ten-Year Summary of Selected Historical Financial Data
See Notes to Consolidated Financial Statements for the summary of significant
accounting policies and additional information relative to the years 1996-1998.
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Operating revenues $2,110,360 $1,956,253 $1,853,445
Income from operations $ 378,897 $ 381,351 $ 337,169
Income before cumulative effect of changes in accounting principle $ 417,259 $ 281,574 $ 220,817
Cumulative effect of change in method of accounting for income taxes -- -- --
Cumulative effect of change in method of accounting
for postretirement benefits other than pensions -- -- --
------------------------------------------
Net income $ 417,259 $ 281,574 $ 220,817
==========================================
PER SHARE AMOUNTS
Basic earnings per common share
Income before cumulative effect of changes in accounting principles $ 41.27 $ 26.23 $ 20.08
Cumulative effect of changes in accounting principles -- -- --
------------------------------------------
Net income $ 41.27 $ 26.23 $ 20.08
==========================================
Basic average shares outstanding 10,087 10,700 10,964
Diluted earnings per share
Income before cumulative effect of changes in accounting principles $ 41.10 $ 26.15 $ 20.05
Cumulative effect of changes in accounting principles -- -- --
------------------------------------------
Net income $ 41.10 $ 26.15 $ 20.05
==========================================
Diluted average shares outstanding 10,129 10,733 10,980
Cash dividends $ 5.00 $ 4.80 $ 4.60
Common shareholders' equity $ 157.34 $ 117.36 $ 121.24
FINANCIAL POSITION
Current assets $ 404,878 $ 308,492 $ 382,631
Working capital 15,799 (300,264) 100,995
Property, plant and equipment 841,062 653,750 511,363
Total assets 2,729,661 2,077,317 1,870,411
Long-term debt 395,000 -- --
Common shareholders' equity 1,588,103 1,184,074 1,322,803
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,719,449 $1,613,978 $1,498,191 $1,450,867 $1,380,261 $1,438,640 $1,444,094
$ 271,018 $ 274,875 $ 238,980 232,112 $ 192,866 $ 281,768 $ 313,691
$ 190,096 $ 169,672 $ 153,817 127,796 $ 118,721 $ 174,576 $ 197,893
-- -- 11,600 -- -- -- --
-- -- -- -- (47,897) -- --
- ------------------------------------------------------------------------------------------------
$ 190,096 $ 169,672 $ 165,417 $ 127,796 $ 70,824 $ 174,576 $ 197,893
================================================================================================
$ 17.16 $ 14.66 $ 13.10 $ 10.81 $ 10.00 $ 14.46 $ 15.51
-- -- 0.98 -- (4.04) -- --
- ------------------------------------------------------------------------------------------------
$ 17.16 $ 14.66 $ 14.08 $ 10.81 $ 5.96 $ 14.46 $ 15.51
================================================================================================
11,075 11,577 11,746 11,827 11,874 12,073 12,755
$ 17.15 $ 14.65 $ 13.10 $ 10.80 $ 10.00 $ 14.45 $ 15.50
-- -- 0.98 -- (4.04) -- --
- ------------------------------------------------------------------------------------------------
$ 17.15 $ 14.65 $ 14.08 $ 10.80 $ 5.96 $ 14.45 $ 15.50
================================================================================================
11,086 11,582 11,750 11,830 11,876 12,081 12,768
$ 4.40 $ 4.20 $ 4.20 $ 4.20 $ 4.20 $ 4.00 $ 1.84
$ 107.60 $ 99.32 $ 92.84 $ 84.17 $ 78.12 $ 76.31 $ 75.40
$ 406,570 $375,879 $ 625,574 $ 524,975 $ 472,219 $ 471,669 $ 553,188
98,393 102,806 367,041 242,627 183,959 175,807 283,118
457,359 411,396 363,718 390,804 390,313 394,979 370,597
1,732,893 1,696,868 1,622,504 1,568,121 1,487,661 1,496,509 1,532,211
-- 50,297 51,768 51,842 51,915 126,988 152,061
1,184,204 1,126,933 1,087,419 993,005 924,285 905,112 941,522
</TABLE>
53
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 --- Certificate of Incorporation of the Company as amended
through May 12, 1988, and the Certificate of Designation for
the Company's Series A Preferred Stock filed January 22,
1996 (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
3.2 --- By-Laws of the Company as amended through September 9, 1993
(incorporated by reference to Exhibit 3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended October
3, 1993).
4.1 --- Credit Agreement dated as of March 17, 1998, among the
Company, Citibank, N.A., Wachovia Bank of Georgia, N.A., and
the other Lenders named therein (incorporated by reference
to Exhibit 4.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1997).
4.2 --- Form of the Company's 5.50% Notes due February 15, 2009,
issued under the Indenture dated as of February 17, 1999,
between the Company and The First National Bank of Chicago,
as Trustee.
4.3 --- Indenture dated as of February 17, 1999, between the Company
and The First National Bank of Chicago, as Trustee.
10.1 --- The Washington Post Company Annual Incentive Compensation
Plan as amended and restated effective June 30, 1995
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996).*
10.2 --- The Washington Post Company Long-Term Incentive Compensation
Plan as amended and restated effective June 30, 1995
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996).*
10.3 --- The Washington Post Company Stock Option Plan as amended and
restated through March 12, 1998 (incorporated by reference
to Exhibit 10.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1997).*
10.4 --- The Washington Post Company Supplemental Executive
Retirement Plan as amended and restated effective December
31, 1993 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 2, 1994).*
10.5 --- The Washington Post Company Deferred Compensation Plan
effective November 15, 1996 (incorporated by reference to
Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 29, 1996.)*
[Index Continued on Next Page]
</TABLE>
- -------------
* A management contract or compensatory plan or arrangement required
to be included as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
54
<PAGE> 55
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
11 --- Calculation of earnings per share of common stock.
21 --- List of subsidiaries of the Company.
23 --- Consent of independent accountants.
24 --- Power of attorney dated March 13, 1997 (incorporated by
reference to Exhibit 24 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 1997).
27 --- Financial Data Schedule.
</TABLE>
55
<PAGE> 1
EXHIBIT 4.2
THE WASHINGTON POST COMPANY
5.50% Note Due February 15, 2009
No.: CUSIP No.: 939640AC2
$
THE WASHINGTON POST COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to or registered
assigns, the principal sum of ($ ), at the office or agency of the Company in
the Borough of Manhattan, The City and State of New York, on February 15, 2009,
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and
to pay interest, semi-annually on February 15 and August 15 of each year, on
said principal sum at said office or agency, in like coin or currency, at the
rate of 5.50% per annum, from the February 15 or the August 15, as the case may
be, next preceding the date of this Note to which interest has been paid, unless
the date hereof is a date to which interest has been paid, in which case from
the date of this Note, or unless no interest has been paid on the Notes (as
defined on the reverse hereof), in which case from February 15, 1999 until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after February 1 or August
1, as the case may be, and before the following February 15 or August 15, this
Note shall bear interest from such February 15 or August 15, provided, however,
that if the Company shall default in the payment of interest due on such
February 15 or August 15, then this Note shall bear interest from the next
preceding February 15 or August 15 to which interest has been paid, or, if no
interest has been paid on the Notes, from February 15, 1999. The interest so
payable on any February 15 or August 15 will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid to the
person in whose name this Note is registered at the close of business on such
February 1 or August 1, as the case may be, next preceding such February 15 or
August 15, unless the Company shall default in the payment of interest due on
such interest payment date, in which case such defaulted interest, at the option
of the Company, may be paid to the person in whose name this Note is registered
at the close of business on a special record date for the payment of such
defaulted interest established by notice to the registered holders of Notes not
less than ten days preceding such special record date or may be paid in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed. Payment of interest may, at the
option of the Company, be made by check mailed to the registered address of the
person entitled thereto.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee under
the Indenture referred to on the reverse hereof.
<PAGE> 2
2
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: THE WASHINGTON POST COMPANY
by
---------------------------
Name:
Title:
[SEAL]
Attest:
- --------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities of the
Series designated herein issued under the
within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
by
- -----------------------------
Authorized Signatory
<PAGE> 3
3
REVERSE OF NOTE
THE WASHINGTON POST COMPANY
5.50% Note Due February 15, 2009
This Note is one of a duly authorized issue of unsecured debentures, notes
or other evidences of indebtedness of the Company (hereinafter called the
"Securities"), of the series hereinafter specified, all issued or to be issued
under an indenture dated as of February 17, 1999 (hereinafter called the
"Indenture"), duly executed and delivered by the Company to The First National
Bank of Chicago, a national banking association, as trustee (hereinafter called
the "Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the respective rights and duties
thereunder of the Trustee, the Company and the holders of the Securities. The
Securities may be issued in one or more series, which different series may be
issued in various aggregate principal amounts, may mature at different times,
may bear interest at different rates, may have different conversion prices (if
any), may be subject to different redemption provisions, may be subject to
different sinking, purchase or analogous funds, may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided. This Note is one of a series designated as the 5.50% Notes due
February 15, 2009 of the Company (hereinafter called the "Notes") issued under
the Indenture.
In case an Event of Default with respect to the Notes, as defined in the
Indenture, shall have occurred and be continuing, the principal hereof together
with interest accrued thereon, if any, may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Securities at the time outstanding of all series to be
affected (acting as one class) to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Securities of such series to be affected; provided,
however, that no such supplemental indenture shall, among other things, (i)
change the fixed maturity of the principal of, or any installment of principal
of or interest on, any Security; (ii) reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption thereof;
(iii) impair the right to institute suit for the enforcement of any such
payment on or after the fixed maturity thereof (or, in the case of redemption,
on or after the redemption date); (iv) 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 the Indenture or certain defaults thereunder and their consequences)
provided for in the Indenture; (v) change any obligation of the Company, with
respect to outstanding Securities of a series, to maintain an office or agency
in the places and for the purposes specified in the Indenture for such series;
or (vi) modify any of the foregoing provisions or the provisions for the waiver
of certain covenants and defaults, except to increase any applicable percentage
of the aggregate principal amount of outstanding Securities the consent of the
holders of which is required or to provide with respect to any particular
series the right to condition the effectiveness of any supplemental indenture
as to that
<PAGE> 4
4
series on the consent of the holders of a specified percentage of the aggregate
principal amount of outstanding Securities of such series or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the holder of each outstanding Security affected thereby. It is
also provided in the Indenture that the holders of a majority in aggregate
principal amount of the Securities of a series at the time outstanding may on
behalf of the holders of all the Securities of such series waive any past
default under the Indenture with respect to such series and its consequences,
except a default in the payment of the principal of, premium, if any, or
interest, if any, on any Security of such series or in respect of a covenant or
provision which cannot be modified without the consent of the Holder of each
outstanding Security of the series affected. Any such consent or waiver by the
holder of this Note shall be conclusive and binding upon such holder and upon
all future holders and owners of this Note and any Notes which may be issued in
exchange or substitution herefor, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the place, at the respective times, at the rate and in
the coin or currency herein prescribed.
The Indenture permits the Company to Discharge its obligations with respect
to the Notes on the 91st day following the satisfaction of the conditions set
forth in the Indenture, which include the deposit with the Trustee of money or
U.S. Government Obligations or a combination thereof sufficient to pay and
discharge each installment of principal of (including premium, if any, on) and
interest, if any, on the outstanding Notes.
If the Company shall, in accordance with Section 901 of the Indenture,
consolidate with or merge into any other corporation or convey or transfer all
or substantially all its properties and assets as an entirety to any Person, the
successor shall succeed to, and be substituted for, the Person named as the
"Company" on the face of this Note, all on the terms set forth in the Indenture.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and any integral multiple thereof. In the manner and subject to the
limitations provided in the Indenture, but without the payment of any service
charge, Notes may be exchanged for an equal aggregate principal amount of Notes
of other authorized denominations at the office or agency of the Company
maintained for such purpose in the Borough of Manhattan, the City and State of
New York.
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by the Quotation Agent,
the sum of the present values of the remaining scheduled payments of principal
and interest thereon (not including any portion of such payments of interest
accrued as of the date of redemption) discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Adjusted Treasury Rate, plus 15 basis points, plus, in each case, accrued
interest thereon to the date of redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a
<PAGE> 5
5
percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the Notes that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, the
average of the Reference Treasury Dealer Quotations for such redemption date.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) Goldman, Sachs & Co. or its
successor; provided, however, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer;
and (ii) any other Primary Treasury Dealer selected by the Trustee after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company for such registration in the Borough of
Manhattan, the City and State of New York, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange herefor, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee and any agent of the Company or the Trustee may deem and
treat the registered holder hereof as the absolute owner of this Note (whether
or not this Note shall be overdue) for the purpose of receiving payment of the
principal of, premium, if any, and interest on this Note, as herein provided,
and for all other purposes, and neither the Company nor the Trustee nor any
agent of the Company or the Trustee shall be affected by any notice to the
contrary. All payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, effectually satisfy and discharge
liability for moneys payable on this Note.
<PAGE> 6
6
No recourse for the payment of the principal of, premium, if any, or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
Unless otherwise defined in this Note, all terms used in this Note which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
<PAGE> 1
EXHIBIT 4.3
[Conformed Copy]
================================================================================
THE WASHINGTON POST COMPANY
and
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
-------------------
Indenture
Dated as of February 17, 1999
-------------------
Providing for the Issuance of
Debt Securities in Series
================================================================================
<PAGE> 2
THE WASHINGTON POST COMPANY
Reconciliation and Tie Between Trust Indenture Act of 1939 and Indenture
Provisions*/
TRUST INDENTURE
ACT Section INDENTURE SECTION
Section 310(a)(1) 709
(a)(2) 709
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 708
710
Section 311(a) 713(a)
713(c)
(b) 713(b)
(b)(2) 803(a)(2)
803(b)
Section 312(a) 801
802(a)
(b) 802(b)
(c) 802(c)
Section 313(a) 803(a)
(b) 803(b)
(c) 803(d)
(d) 803(c)
Section 314(a) 804
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
- --------
*/ This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 3
2
TRUST INDENTURE
ACT Section INDENTURE SECTION
Section 315(a) 701(a)
(b) 702
803(a)(6)
(c) 701(b)
(d) 701(c)
(d)(1) 701(a)
(d)(2) 701(c)(2)
(d)(3) 701(c)(3)
(e) 614
Section 316(a) 101
(a)(1)(A) 602
612
(a)(1)(B) 613
(a)(2) Not Applicable
(b) 608
Section 317(a)(1) 603
(a)(2) 604
(b) 1103
Section 318(a) 107
<PAGE> 4
Contents, P. 1
TABLE OF CONTENTS 1/
ARTICLE ONE
Definitions and Other Provisions of General Application
PAGE
Section 101. Definitions 1
Section 102. Compliance Certificates and Opinions 11
Section 103. Form of Documents Delivered to Trustee 11
Section 104. Acts of Holders 12
Section 105. Notices, etc., to Trustee and Company 14
Section 106. Notice to Holders; Waiver 14
Section 107. Conflict with Trust Indenture Act 15
Section 108. Effect of Headings and Table of Contents 15
Section 109. Successors and Assigns 15
Section 110. Separability Clause 15
Section 111. Benefits of Indenture 15
Section 112. Governing Law 15
Section 113. Legal Holidays 15
Section 114. Moneys of Different Currencies To Be Segregated 15
Section 115. Payment To Be in Property Currency 16
Section 116. Language of Notices, etc 16
Section 117. Changes in Exhibits 16
ARTICLE TWO
Issuance of Securities
Section 201. Creation of Securities in Amount Unlimited 16
Section 202. Documents Required for Issuance of Each Series of
Securities Other than Medium-Term Debt Securities 16
ARTICLE THREE
Issuance of Medium-Term Debt Securities
Section 301. Documents Required for Issuance of Each Series of
Medium-Term Debt Securities 20
Section 302. Form of Medium-Term Debt Securities 24
- --------
1/ This table of contents shall not, for any purpose, be deemed to be part of
the Indenture.
<PAGE> 5
Contents, P. 2
ARTICLE FOUR
The Securities
Section 401. Form and Denomination 24
Section 402. Execution, Delivery, Dating and Authentication 24
Section 403. Temporary Securities 26
Section 404. Registration, Registration of Transfer and Exchange 28
Section 405. Mutilated, Destroyed, Lost and Stolen Securities 30
Section 406. Payment of Interest; Interest Rights Preserved 31
Section 407. Persons Deemed Owners 32
Section 408. Cancelation 32
Section 409. Computation of Interest 32
Section 410. Currency and Manner of Payment in Respect of Securities 33
Section 411. Securities in Global Form 37
ARTICLE FIVE
Satisfaction and Discharge
Section 501. Satisfaction and Discharge of Indenture in Respect of
Any Series of Securities 38
Section 502. Application of Trust Money 39
Section 503. Satisfaction, Discharge and Defeasance of Securities of
Any Series 39
Section 504. Reinstatement 40
Section 505. Definitions 41
ARTICLE SIX
Remedies
Section 601. Events of Default 42
Section 602. Acceleration of Maturity; Rescission and Annulment 43
Section 603. Collection of Indebtedness and Suits for Enforcement by
Trustee 43
Section 604. Trustee May File Proofs of Claim 44
Section 605. Trustee May Enforce Claims Without Possession of
Securities 45
Section 606. Application of Money Collected 45
Section 607. Limitation on Suits 45
<PAGE> 6
Contents, P. 3
Section 608. Unconditional Right of Holders To Receive Principal,
Premium and Interest 46
Section 609. Restoration of Rights and Remedies 46
Section 610. Rights and Remedies Cumulative 46
Section 611. Delay or Omission Not Waiver 46
Section 612. Control by Holders 46
Section 613. Waiver of Past Defaults 47
Section 614. Undertaking for Costs 47
Section 615. Waiver of Stay or Extension Laws 47
ARTICLE SEVEN
The Trustee
Section 701. Certain Duties and Responsibilities 48
Section 702. Notice of Defaults 48
Section 703. Certain Rights of Trustee 49
Section 704. Not Responsible for Recitals or Issuance of Securities 50
Section 705. May Hold Securities 50
Section 706. Money Held in Trust 50
Section 707. Compensation and Reimbursement 50
Section 708. Disqualification; Conflicting Interests 51
Section 709. Corporate Trustee Required; Eligibility 51
Section 710. Resignation and Removal; Appointment of Successor 51
Section 711. Acceptance of Appointment by Successor 53
Section 712. Merger, Conversion, Consolidation or Succession to
Business 53
Section 713. Preferential Collection of Claims Against Company 54
Section 714. Judgment Currency 57
Section 715. Appointment of Authenticating Agent 57
ARTICLE EIGHT
Holders' Lists and Reports by Trustee and Company
Section 801. Company To Furnish Trustee Names and Addresses of
Holders 59
Section 802. Preservation of Information; Communications to Holders 60
Section 803. Reports by Trustee 60
Section 804. Reports by Company 62
<PAGE> 7
Contents, P. 4
ARTICLE NINE
Consolidation, Merger, Conveyance or Transfer
Section 901. Company May Consolidate, etc., Only on Certain Terms 62
Section 902. Successor Corporation Substituted 63
ARTICLE TEN
Supplemental Indentures
Section 1001. Supplemental Indentures Without Consent of Holders 63
Section 1002. Supplemental Indentures with Consent of Holders 64
Section 1003. Execution of Supplemental Indentures 65
Section 1004. Effect of Supplemental Indentures 65
Section 1005. Conformity with Trust Indenture Act 65
Section 1006. Reference in Securities to Supplemental Indentures 66
ARTICLE ELEVEN
Covenants
Section 1101. Payment of Principal, Premium and Interest 66
Section 1102. Maintenance of Office or Agency 66
Section 1103. Money for Securities Payments To Be Held in Trust 67
Section 1104. Limitation on Secured Indebtedness 68
Section 1105. Limitation on Sale and Leaseback Transactions 68
Section 1106. Statement by Officers as to Default 69
Section 1107. Waiver of Certain Covenants 69
Section 1108. Additional Amounts 69
ARTICLE TWELVE
Redemption of Securities
Section 1201. Applicability of Article 70
Section 1202. Election To Redeem; Notice to Trustee 70
Section 1203. Selection by Trustee of Securities To Be Redeemed 70
Section 1204. Notice of Redemption 71
Section 1205. Deposit of Redemption Price 71
Section 1206. Securities Payable on Redemption Date 71
Section 1207. Securities Redeemed in Part 72
<PAGE> 8
Contents, P. 5
ARTICLE THIRTEEN
Sinking Funds
Section 1301. Applicability of Article 72
Section 1302. Satisfaction of Sinking Fund Payments with Securities 73
Section 1303. Redemption of Securities for Sinking Fund 73
ARTICLE FOURTEEN
Meetings of Holders of Securities
Section 1401. Purposes for Which Meetings May Be Called 73
Section 1402. Call, Notice and Place of Meetings 73
Section 1403. Persons Entitled To Vote at Meetings 74
Section 1404. Quorum; Action 74
Section 1405. Determination of Voting Rights; Conduct and
Adjournment of Meetings 74
Section 1406. Counting Votes and Recording Action of Meetings 75
EXHIBIT A Form of Debt Securities
EXHIBIT B.1 Form of Certificate to be given by Person entitled to
receive Bearer Security
EXHIBIT B.2 Form of Certificate to be given by Euro-clear and CEDEL
S.A. in connection with the Exchange of a portion of
Temporary Global Security
EXHIBIT B.3 Form of Certificate to be given by Euro-clear and CEDEL
S.A. to obtain Interest prior to an Exchange Date
EXHIBIT B.4 Form of Certificate to be given by Beneficial Owners to
obtain Interest prior to an Exchange Date
EXHIBIT B.5 Form of Confirmation to be sent to Purchasers of Bearer
Securities
<PAGE> 9
INDENTURE dated as of February 17, 1999, between THE
WASHINGTON POST COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the
"Company"), having its principal office at 1150 15th Street, N.W.,
Washington, D.C. 20071, and THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee (herein called the "Trustee"), the office of the Trustee
at which at the date hereof this Indenture is principally
administered being 153 W. 51st Street, New York, NY 10019.
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 covenanted and 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 in the United States of America at the date of such
computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally within an Article of this Indenture, may be
defined in that Article.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such
<PAGE> 10
2
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.
"Attributable Debt" means, as of the date of its determination, the present
value (discounted semiannually at the Attributable Interest Rate) of the
obligation of a lessee for rental payments pursuant to any Sale and Leaseback
Transaction (reduced by the amount of the rental obligations of any sublessee of
all or part of the same property) during the remaining term of such Sale and
Leaseback Transaction (including any period for which the lease relating thereto
has been extended), such rental payments not to include amounts payable by the
lessee for maintenance and repairs, insurance, taxes, assessments and similar
charges and for contingent rents (such as those based on sales). In the case of
any Sale and Leaseback Transaction in which the lease is terminable by the
lessee upon the payment of a penalty, such rental payments shall be considered
for purposes of this definition to be the lesser of (a) the rental payments to
be paid under such Sale and Leaseback Transaction until the first date (after
the date of such determination) upon which it may be so terminated plus the then
applicable penalty upon such termination and (b) the rental payments required to
be paid during the remaining term of such Sale and Leaseback Transaction
(assuming such termination provision is not exercised).
"Attributable Interest Rate" means, as of the date of its determination,
the weighted average of the interest rates (or the effective rate in the case of
Original Issue Discount Securities or discount securities) of all Outstanding
Securities.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 715 to act on behalf of the Trustee to authenticate Securities of one
or more series.
"Authorized Newspaper" means a newspaper of general circulation in the
place of publication, printed in the official language of the country of
publication and customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays. Whenever successive weekly
publications in an Authorized Newspaper are authorized or required hereunder,
they may be made (unless otherwise expressly provided herein) on the same or
different days of the week and in the same or different Authorized Newspapers.
"Bearer Security" means any Security which is not registered in the
Security Register as to both principal and interest (including without
limitation any Security in temporary or definitive global bearer form).
"Board of Directors" means either the board of directors of the Company,
any executive officer of the Company duly authorized to act in the name of or on
behalf of that board or any committee consisting of two or more persons who need
not be directors duly authorized to act in the name of or on behalf 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.
"Business Day", when used with respect to any Place of Payment or place of
publication, means each day on which commercial banks and foreign exchange
markets settle payments in the Place of Payment or place of publication, or as
specified for a series of Securities pursuant to Section 202 or Section 301, as
the case may be. Unless otherwise specified pursuant to Section 202 or Section
301, as the case may be, when used with respect to Securities bearing interest
at a rate or rates determined by reference to London interbank offered rates for
deposits in U.S. Dollars, "Business Day" shall exclude any day
<PAGE> 11
3
on which commercial banks and foreign exchange markets do not settle payments
in London.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Depositary" has the meaning specified in Section 403.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request", "Request of the Company", "Company Order" or "Order of
the Company" means a written request or order signed in the name of the Company
by its Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Controller, an Assistant Controller, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Component Currency" has the meaning specified in Section 410(i).
"Consolidated Net Worth" means, at the date of any determination, the
consolidated stockholders' or owners' equity of the Company and its
subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied.
"Conversion Date" has the meaning specified in Section 410(e).
"Conversion Rate" has the meaning specified in Section 714.
"Corporate Trust Office" means the office of the Trustee in New York, New
York, at which at any particular time its corporate trust business shall be
administered, which office at the date hereof is 153 W. 51st Street, New York,
NY 10019, except that with respect to the presentation of Securities (or
Coupons, if any, representing an installment of interest) for payment or for
registration of transfer and exchange, such term shall mean the office or the
agency of the Trustee in said city at which at any particular time its corporate
agency business shall be conducted.
"corporation" includes corporations, associations, companies and business
trusts.
"Coupon" or "coupon" means any interest coupon appertaining to a Bearer
Security.
"Defaulted Interest" has the meaning specified in Section 406.
"Discharged" has the meaning specified in Section 505.
"Dollar" means the coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private debts.
"Dollar Equivalent of the Currency Unit" has the meaning specified in
Section 410(h).
"Dollar Equivalent of the Foreign Currency" has the meaning specified in
Section 410(g).
<PAGE> 12
4
"ECU" means the European Currency Unit as defined and revised from time to
time by the Council of the European Communities.
"Euro-clear" means the operator of the Euro-clear System.
"European Communities" means the European Economic Community, the European
Coal and Steel Community and the European Atomic Energy Community.
"Event of Default" has the meaning specified in Section 601.
"Exchange Rate Agent" means the entity appointed by the Company pursuant to
Section 104(g). Unless otherwise specified as contemplated by Section 202 or
Section 301, as the case may be, the Luxembourg Stock Exchange shall act as
Exchange Rate Agent for purposes of Section 410 in the case of each series of
Securities listed on the Luxembourg Stock Exchange.
"Exchange Rate Officers' Certificate" means a telecopy or tested telex or a
certificate setting forth (i) the applicable Official Currency Unit Exchange
Rate and (ii) the Dollar or Foreign Currency or currency unit amounts of
principal, premium, if any, and interest, if any, respectively (on an aggregate
basis and on the basis of a Security having a principal amount of 1,000 units in
the relevant currency or currency unit), payable on the basis of such Official
Currency Unit Exchange Rate, sent (in the case of a telecopy or telex) or
executed (in the case of a certificate) by the Controller or any Assistant
Controller or by the Treasurer or any Assistant Treasurer of the Company and
delivered to the Trustee; such telecopy, tested telex or certificate need not
comply with Section 102.
"Foreign Currency" means a currency issued by the government of any country
other than the United States of America.
"Foreign Government Securities" has the meaning specified in Section 505.
"Funded Debt" means any Indebtedness maturing by its terms more than one
year from the date of the issuance thereof, including any Indebtedness renewable
or extendible at the option of the obligor to a date later than one year from
the date of the original issuance thereof.
"Holder" or "holder" means, with respect to a Registered Security, the
Person in whose name at the time a particular Registered Security is registered
in the Security Register and, with respect to a Bearer Security and/or a Coupon,
the bearer thereof.
"Indebtedness" of any corporation means all indebtedness representing money
borrowed which is created, assumed, incurred or guaranteed in any manner by such
corporation or for which such corporation is otherwise responsible or liable
(whether by agreement to purchase indebtedness of, or to supply funds to or
invest in, others).
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as contemplated
by Section 202 and Section 301, as the case may be.
"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.
<PAGE> 13
5
"Lien" means any mortgage, pledge, security interest, lien, charge or other
encumbrance, but does not include any of the foregoing types of encumbrances
that are incidental to the conduct of the business of the Company or any
Restricted Subsidiary or the ownership of the property and assets of any of them
and that were not incurred in connection with the incurrence of any
Indebtedness. Such incidental encumbrances that are to be excluded from the term
"Liens" include without limitation: pledges or deposits made to secure
obligations of the Company or a Restricted Subsidiary under workmen's
compensation laws or similar legislation; liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's, vendors', repairmen's or other
like liens incurred in the ordinary course of business; governmental (Federal,
state or municipal) liens arising out of contracts for the purchase of products
of the Company or a Restricted Subsidiary, and deposits or pledges to obtain the
release of any of the foregoing liens; liens created by or resulting from any
litigation or legal proceeding that is currently being contested in good faith
by appropriate proceedings; leases made or existing on Principal Property
entered into in the ordinary course of business by the Company or a Restricted
Subsidiary; landlords' liens under leases of Principal Property to which the
Company or a Restricted Subsidiary is a party; zoning restrictions, easements,
licenses or restrictions on the use of Principal Property or minor
irregularities in the title thereto; deposits in connection with bids, tenders
or contracts (other than for the payment of money) to which the Company or any
Restricted Subsidiary is a party; deposits to secure public or statutory
obligations of the Company or any Restricted Subsidiary; deposits in connection
with obtaining or maintaining self-insurance or to obtain the benefits of any
law, regulation or arrangement pertaining to unemployment insurance, old age
pensions, social security or similar matters; deposits of cash or obligations of
the United States of America to secure surety, appeal or customs bonds to which
the Company or any Restricted Subsidiary is a party; and liens for taxes or
assessments or governmental charges or levies not yet due or delinquent, or
which can thereafter be paid without penalty, or which are being contested in
good faith by appropriate proceedings.
"Market Exchange Rate" has the meaning specified in Section 410(i).
"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.
"Medium-Term Debt Securities" has the meaning specified in Section 301.
"Medium-Term Debt Securities Certificate" shall mean a certificate signed
by the Chairman of the Board, the President, any Vice President, the Treasurer,
the Controller, any Secretary or Assistant Treasurer, Assistant Controller or
Assistant Secretary of the Company, or any other employee of the Company
designated by a Board Resolution as having the authority to deliver a
Medium-Term Debt Securities Certificate hereunder.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or any Vice President, and by the Treasurer, the
Controller, the Secretary or any Assistant Treasurer, Assistant Controller or
Assistant Secretary, of the Company, and delivered to the Trustee. Each such
Officers' Certificate shall contain the statements provided in Section 102 if
and to the extent required by the provisions of such Section.
"Official Currency Unit Exchange Rate" means, with respect to any payment
to be made hereunder, the exchange rate between the relevant currency unit and
the currency or currency unit of payment calculated by the Exchange Rate Agent
for the Securities of the relevant series (in the case of ECU, reported by the
Commission of the European Communities and on the date hereof based on the rates
in effect at 2:30 p.m., Brussels time, on the exchange markets of the Component
Currencies of ECU), on the Business
<PAGE> 14
6
Day (in the city in which such Exchange Rate Agent has its principal office)
immediately preceding delivery of any Exchange Rate Officers' Certificate.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for or an employee of the Company. Each Opinion of Counsel shall contain the
statements provided in Section 102 if and to the extent required by the
provisions of such Section.
"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 602.
"Outstanding" or "outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities theretofore authenticated
and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered or
deemed delivered to the Trustee for cancelation;
(ii) Securities for whose payment or redemption money in the necessary
amount and in the required currency or currency unit 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; and
(iii) Securities which have been paid pursuant to Section 405 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or whether a
quorum is present at a meeting of Holders of Outstanding Securities or the
number of votes entitled to be cast by each Holder of a Security in respect of
such Security at any such meeting, (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding for such purposes shall
be the amount of the principal thereof that would be due and payable as of the
date of such determination upon a declaration of acceleration of the Maturity
thereof pursuant to Section 602, (ii) the principal amount of a Security
denominated in a Foreign Currency or currency unit shall be the Dollar
equivalent obtained by converting the specified Foreign Currency or currency
unit into Dollars at the Market Exchange Rate on the date of such determination
(or, in the case of a Security denominated in a currency unit for which there is
no Market Exchange Rate, the Dollar equivalent obtained by adding together the
results obtained by converting the Specified Amount of each Component Currency
into Dollars at the Market Exchange Rate for each such Component Currency on the
date of such determination) of the principal amount (or, in the case of an
Original Issue Discount Security, of the amount determined as provided in (i)
above) of such Security, and (iii) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
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
<PAGE> 15
7
any other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means the Trustee or any other Person authorized by the
Company to pay the principal of (and premium, if any) or interest, if any, on
any Securities on behalf of the Company.
"Person" or "person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, 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 premium, if any) and
interest, if any, on the Securities of that series are payable as specified in
accordance with Section 202 or Section 301, as the case may be.
"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 405 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.
"Principal Property" means all land, land improvements, buildings,
machinery and equipment constituting a manufacturing facility, a printing
facility, a warehouse facility, a distribution facility, a television broadcast
facility, a cable television facility or an office facility (including any
portion thereof) which facility (a) is owned by or leased to the Company or any
Restricted Subsidiary, (b) is located within the United States, and (c) has an
acquisition cost plus capitalized improvements in excess of 1% Consolidated Net
Worth as of the date of such determination, other than (i) any such facility, or
portion thereof, which has been financed by obligations issued by or on behalf
of a state, a Territory or a possession of the United States, or any political
subdivision of any of the foregoing, or the District of Columbia, the interest
on which is, or at the time of issuance of such obligations was determined by
counsel to be, excludable from the gross income of the holders thereof (other
than a "substantial user" of such facility or a "related person" as those terms
were used in Section 147 of the Internal Revenue Code of 1986 (the "Code"))
pursuant to the provisions of Section 103 and related Section s of the Code (or
any similar provisions hereafter enacted) as in effect at the time of issuance
of such obligations, (ii) any such facility which the Board of Directors may by
Board Resolution declare is not of material importance to the Company and the
Restricted Subsidiaries taken as a whole, and (iii) any such facility, or
portion thereof, owned or leased jointly or in common with one or more Persons
other than the Company and any Subsidiary and in which the interest of the
Company and all Subsidiaries does not exceed 50%.
"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, in the currency or currency unit in which such Security is
payable, at which it is to be redeemed pursuant to this Indenture.
"Registered Security" means any Security registered in the Security
Register (including without limitation any Security in temporary or definitive
global registered form).
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Registered Securities of any series means the date specified for that
purpose as
<PAGE> 16
8
contemplated by Section 202 or Section 301, as the case may be, which date shall
be, unless otherwise specified pursuant to Section 202 or Section 301, as the
case may be, the fifteenth day preceding such Interest Payment Date, whether or
not such day shall be a Business Day.
"Required Currency" has the meaning specified in Section 115.
"Responsible Trust Officer", when used with respect to the Trustee, means
the chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the 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.
"Restricted Securities" means any shares of the capital stock or
Indebtedness of any Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary (a) which has substantially
all its property and transacts substantially all its business within the United
States of America, and (b) which owns or is a lessee of any Principal Property;
provided, however, that the term "Restricted Subsidiary" shall not include any
Subsidiary (i) which is acquired or organized after February 17, 1999 for the
purpose of acquiring the stock, business or assets of any Person other than the
Company or any Restricted Subsidiary (whether such acquisition is effected by
merger, consolidation, acquisition of stock or assets, or any other transaction
analogous in purpose and effect), and (ii) which has (together with its
consolidated subsidiaries and after intercompany eliminations) consolidated
total assets of not more than 10% of the consolidated total assets of the
Company and its subsidiaries (including such Subsidiary), all as determined in
accordance with generally accepted accounting principles and, at the Company's
election, as of the date of such acquisition of stock, business or assets (and
after giving effect thereto) or within 30 days after such date.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of any
Principal Property (whether such Principal Property is now owned or hereafter
acquired) that has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person, other than (a) temporary leases for a
term, including renewals at the option of the lessee, of not more than three
years; (b) leases between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries; and (c) leases of Principal Property executed by the
time of, or within 180 days after the latest of, the acquisition, the completion
of construction or improvement (including any improvements on property which
will result in such property becoming Principal Property), or the commencement
of commercial operation of such Principal Property.
"Secured Indebtedness" means (a) Indebtedness of the Company or a
Restricted Subsidiary which is secured by any Lien upon any Principal Property
or Restricted Securities and (b) Indebtedness of the Company or a Restricted
Subsidiary in respect of any conditional sale or other title retention agreement
covering Principal Property or Restricted Securities; but "Secured Indebtedness"
shall not include any of the following:
(i) Indebtedness of the Company and the Restricted Subsidiaries
outstanding on February 17, 1999 secured by then existing Liens upon, or
incurred in connection with conditional sales agreements or other title
retention agreements with respect to, Principal Property or Restricted
Securities;
<PAGE> 17
9
(ii) Indebtedness which is secured by (A) purchase money Liens upon
Principal Property or Restricted Securities acquired after February 17,
1999, or (B) Liens placed on Principal Property after February 17, 1999,
during construction or improvement thereof (including any improvements on
property which resulted or will result in such property becoming Principal
Property) or placed thereon within 180 days after the later of acquisition,
completion of construction or improvement or the commencement of commercial
operation of such Principal Property or improvement, or placed on
Restricted Securities acquired after February 17, 1999, or (C) conditional
sale agreements or other title retention agreements with respect to any
Principal Property or Restricted Securities acquired after February 17,
1999, if (in each case referred to in this subparagraph (ii)) (x) such Lien
or agreement secures all or any part of the Indebtedness incurred for the
purpose of financing all or any part of the purchase price or cost of
construction of such Principal Property or improvement or Restricted
Securities and (y) such Lien or agreement does not extend to any Principal
Property or Restricted Securities other than the Principal Property or
Restricted Securities so acquired or the Principal Property, or portion
thereof, on which the property so constructed, or such improvement, is
located; PROVIDED, HOWEVER, that the amount by which the aggregate
principal amount of Indebtedness secured by any such Lien or agreement
exceeds the cost to the Company or such Restricted Subsidiary of the
related acquisition, construction or improvement shall be considered to be
"Secured Indebtedness";
(iii) Indebtedness which is secured by Liens on Principal Property or
Restricted Securities, which Liens exist at the time of acquisition (by any
manner whatsoever) of such Principal Property or Restricted Securities by
the Company or a Restricted Subsidiary;
(iv) Indebtedness, whether secured by any Lien or not, of Restricted
Subsidiaries owing to the Company or any other Restricted Subsidiary and
Indebtedness of the Company owing to any Restricted Subsidiary;
(v) in the case of any corporation which shall have become or becomes
(by any manner whatsoever), as the case may be, a Restricted Subsidiary
after February 17, 1999, Indebtedness which is secured by Liens upon, or
conditional sale agreements or other title retention agreements with
respect to, its property which constitutes Principal Property or Restricted
Securities, which Liens shall have existed or exist, as the case may be, at
the time such corporation shall have become or becomes, as the case may be,
a Restricted Subsidiary;
(vi) guarantees by the Company of Secured Indebtedness and
Attributable Debt of any Restricted Subsidiaries and guarantees by a
Restricted Subsidiary of Secured Indebtedness and Attributable Debt of the
Company and any other Restricted Subsidiaries;
(vii) Indebtedness arising from any Sale and Leaseback Transaction;
(viii) Indebtedness secured by Liens on property of the Company or a
Restricted Subsidiary in favor of the United States of America, any state,
Territory or possession thereof, or in the District of Columbia, or any
department, agency or instrumentality or political subdivision of the
United States of America or any state, Territory or possession thereof, or
the District of Columbia, or in favor of any other country or any political
subdivision thereof, if such Indebtedness was incurred for the purpose of
financing all or any part of the purchase price or the cost of construction
of the property subject to such Liens; PROVIDED, HOWEVER, that the amount
by which the aggregate principal amount of Indebtedness secured by any such
Lien exceeds the cost to the Company or such Restricted Subsidiary of the
related acquisition or construction shall be considered to be "Secured
Indebtedness"; and
<PAGE> 18
10
(ix) the replacement, extension or renewal (or successive replacements,
extensions or renewals) of any Indebtedness (in whole or in part) excluded
from the definition of "Secured Indebtedness" by subparagraphs (i) through
(viii) above; PROVIDED, HOWEVER, that no Lien securing, or conditional sale
or title retention agreement with respect to, such Indebtedness shall
extend to or cover any Principal Property or any Restricted Securities,
other than such property which secured the Indebtedness so replaced,
extended or renewed (plus improvements on or to any such Principal
Property); PROVIDED FURTHER, HOWEVER, that to the extent that such
replacement, extension or renewal increased or increases the principal
amount of Indebtedness plus any accrued and unpaid interest or capitalized
interest payable thereon secured by such Lien or was or is in a principal
amount in excess of the principal amount of Indebtedness plus any accrued
and unpaid interest or capitalized interest payable thereon excluded from
the definition of "Secured Indebtedness" by subparagraphs (i) through
(viii) above, the amount of such increase or excess shall be considered to
be "Secured Indebtedness".
In no event shall the foregoing provisions be interpreted to mean or their
operation to cause the same Indebtedness to be included more than once in the
calculation of "Secured Indebtedness" as that term is used in this Indenture.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities (including Medium-Term Debt
Securities) authenticated and delivered under this Indenture and, in the case of
any Bearer Security, shall include where appropriate any Coupons appertaining
thereto.
"Security Register" has the meaning specified in Section 404.
"Security Registrar" means the Person appointed as the initial Security
Registrar in Section 404 or any Person appointed by the Company as a successor
or replacement Security Registrar.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 406.
"Specified Amount" has the meaning specified in Section 410(i).
"Stated Maturity", when used with respect to any Security (or Coupon, if
any, representing an installment of interest) or any installment of principal
thereof or interest thereon, means the date specified in such Security (or
Coupon) as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.
"Subsidiary" means any corporation a majority of the Voting Shares of which
are at the time owned or controlled, directly or indirectly, by the Company or
by one or more Subsidiaries, or by the Company and one or more Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to the Securities
of any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990, and as in force at the date as of which
this instrument was executed, except as provided in Section 1005.
<PAGE> 19
11
"United States" means the United States of America (including the states
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Government Obligations" has the meaning specified in Section 505.
"Valuation Date" has the meaning specified in Section 410(e).
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voting Shares" means, as to shares of a particular corporation,
outstanding shares of stock of any class of such corporation entitled to vote in
the election of directors, excluding shares entitled so to vote only upon the
happening of some contingency.
Section 102. Compliance Certificates and Opinions. Upon any application or
request by the Company to the Trustee to take any action under any provision of
this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Unless expressly otherwise specified with respect to any certificate or
opinion provided for in this Indenture, every certificate or opinion with
respect to compliance with a condition or covenant provided for in this
Indenture (other than annual certificates provided pursuant to Section 1106)
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 or not, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his
<PAGE> 20
12
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. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of Securities of any series may be embodied in and
evidenced by (i) one or more instruments of substantially similar tenor signed
by such Holders in person or by proxies duly appointed in writing, (ii) the
record of such Holders voting in favor thereof, either in person or by proxies
duly appointed in writing, at any meeting of Holders of Securities of such
series duly called and held in accordance with the provisions of Article
Fourteen, or (iii) a combination of any such record and one or more instruments
of substantially similar tenor signed by such Holders in person or by proxies
duly appointed in writing. Except as herein otherwise expressly provided, such
action shall become effective when such record and/or instrument or instruments
are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such record or 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
or so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such proxy shall be sufficient for any purpose of
this Indenture and (subject to Section 701) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section . The record of
any meeting of Holders of Securities shall be proved in the manner provided in
Section 1406.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The principal amount and serial numbers of Bearer Securities held by
any Person, and the date of holding the same, may be proved by the production of
such Bearer Securities or by a certificate executed by any trust company, bank,
banker or other depository, wherever situated, showing that at the date therein
mentioned such Person had on deposit with such depository, or exhibited to it,
the Bearer Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if such
certificate or affidavit is deemed by the Trustee to be satisfactory. The
Trustee and the Company may assume that such ownership of any Bearer Security
continues until (1) another certificate or affidavit bearing a later date issued
in respect of the same Bearer Security is produced, (2) such Bearer Security is
produced to the Trustee by some other Person, (3) such Bearer Security is
surrendered in exchange for a Registered Security, or (4) such Bearer Security
is no longer Outstanding.
(d) The fact and date of execution of any such instrument or writing
pursuant to clause (c) above, the authority of the Person executing the same and
the principal amount and serial numbers of Bearer Securities held by the Person
so executing such instrument or writing and the date of holding the same may
also be proved in any other manner which
<PAGE> 21
13
the Trustee deems sufficient; and the Trustee may in any instance require
further proof with respect to any of the matters referred to in this clause.
(e) The principal amount and serial numbers of Registered Securities held
by any Person and the date of holding the same shall be proved by the Security
Register.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of a Holder shall bind every future Holder of the same Security
and/or Coupon and the Holder of every Security and/or Coupon 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 and/or Coupon.
(g) Whenever any Act is to be taken hereunder by the Holders of two or more
series of Securities denominated in different currencies (or currency units),
then, for the purpose of determining the principal amount of Securities held by
such Holders, the aggregate principal amount of the Securities denominated in a
Foreign Currency (or any currency unit) shall be deemed to be that amount
determined by the Company or by an authorized Exchange Rate Agent and evidenced
to the Trustee by an Officers' Certificate as of the date the taking of such Act
by the Holders of the requisite percentage in principal amount of the Securities
is evidenced to the Trustee to be equal to the Dollar equivalent obtained by
converting the specified Foreign Currency or currency unit into Dollars at the
Market Exchange Rate on such date (or, in the case of a Security denominated in
a currency unit for which there is no Market Exchange Rate, the Dollar
equivalent obtained by adding together the results obtained by converting the
Specified Amount of each Component Currency into Dollars at the Market Exchange
Rate for each such Component Currency on such date) of the principal amount (or,
in the case of an Original Issue Discount Security, the principal amount thereof
that would be due and payable as of the declaration of acceleration of the
Maturity thereof pursuant to Section 602) of such Security. An Exchange Rate
Agent may be authorized in advance or from time to time by the Company. Any such
determination by the Company or by any such Exchange Rate Agent shall be
conclusive and binding on all Holders, the Company and the Trustee, and neither
the Company nor any such Exchange Rate Agent shall be liable therefor in the
absence of bad faith.
(h) If the Company shall solicit from the Holders of Registered Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.
<PAGE> 22
14
Section 105. Notices, etc., to Trustee and Company. Any request, demand,
authorization, direction, notice, consent, waiver or other 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 (unless otherwise herein expressly provided) if in
writing and delivered in person or by any other means to the Trustee at its
Corporate Trust Office, 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 delivered in person, mailed, first-class postage prepaid, or
sent by overnight courier or, until such time as the Company shall have
notified the Trustee in writing that it shall no longer accept delivery of
notice by telecopy or telex, given by telecopy or by telex (with answerback
received) 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, or
at its telecopy or telex number from time to time furnished in writing to
the Trustee expressly for purposes of this Indenture, Attention: Secretary.
Section 106. Notice to Holders; Waiver. (a) Where this Indenture provides
for notice to Holders of any event:
(i) if any of the Securities affected by such event are Registered
Securities, such notice shall be sufficiently given (unless otherwise
herein expressly provided or unless otherwise specified in such Securities)
if in writing and delivered in person, mailed, first-class postage prepaid
or sent by overnight courier, to each Holder affected by such event, at his
address as it appears in the Security Register, within the time prescribed
for the giving of such notice, and
(ii) if any of the Securities affected by such event are Bearer
Securities, such notice shall be sufficiently given (unless otherwise
herein expressly provided or unless otherwise specified in such Securities)
if (A) published once in an Authorized Newspaper in New York City and
London and, if applicable, in Luxembourg or such other place of publication
as may be required pursuant to the rules and regulations of any securities
exchange on which such Securities are listed, and (B) delivered in person,
mailed, first-class postage prepaid or sent by overnight courier to such
Persons whose names were previously filed with the Trustee, within the time
prescribed for the giving of such notice.
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 to Holders of
Registered Securities in the manner specified above, then such notification as
shall be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder. In case by reason of the suspension of
publication of any Authorized Newspaper or Authorized Newspapers or by reason of
any other cause it shall be impracticable to publish any notice to Holders of
Bearer Securities as provided above, then such notification to Holders of Bearer
Securities as shall be given with the approval of the Trustee shall constitute
sufficient notice to such Holders for every purpose hereunder.
(b) In any case where notice to a Holder of Registered Securities is given
in any manner specified in paragraph (a) above, such notice shall be
conclusively presumed to have been duly given, whether or not such Holder
receives such notice. In any case where notice to Holders of Registered
Securities is given in any manner specified in paragraph (a) above, neither the
failure to deliver, mail or send such notice, nor any defect in any
<PAGE> 23
15
notice so mailed or sent, to any particular Holder of a Registered Security
shall affect the sufficiency of such notice with respect to other Holders of
Registered Securities or the sufficiency of any notice to Holders of Bearer
Securities given as provided herein. Neither the failure to give notice by
publication to Holders of Bearer Securities as provided in paragraph (a) above,
nor any defect in any notice so published, shall affect the sufficiency of any
notice to Holders of Registered Securities given as provided herein.
(c) 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 of Securities 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.
Section 107. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with the duties imposed by any of Section s 310
to 317, inclusive, of the Trust Indenture Act through operation of Section
318(c) thereof, such imposed duties shall control.
Section 108. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 109. Successors and Assigns. All covenants and agreements in this
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
Section 110. Separability Clause. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 111. Benefits of Indenture. Nothing in this Indenture or in the
Securities or Coupons, express or implied, shall give to any Person, other than
the parties hereto and
their successors hereunder and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 112. Governing Law. THIS INDENTURE AND THE SECURITIES
AND COUPONS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 113. Legal Holidays. Except as otherwise specified as contemplated
by Section 202 or Section 301, as the case may be, in any case where any
Interest Payment Date, Redemption Date or Stated Maturity of any Security or
Coupon shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of such Security or
Coupon) 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, as
the case may be, provided that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be, to the next succeeding Business Day at such Place of Payment.
Section 114. Moneys of Different Currencies To Be Segregated. The Trustee
shall segregate moneys, funds and accounts held by the Trustee hereunder in one
currency (or currency unit) from any moneys, funds or accounts in any other
currencies (or currency units), notwithstanding any provision herein which would
otherwise permit the Trustee to commingle such amounts.
<PAGE> 24
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Section 115. Payment To Be in Proper Currency. In the case of any Security
denominated in any particular currency or currency unit (the "Required
Currency"), subject to applicable law and except as otherwise provided herein,
therein or in or pursuant to the related Board Resolution, Medium-Term Debt
Securities Certificate or supplemental indenture, the obligation of the Company
to make any payment of principal, premium or interest thereon shall not be
discharged or satisfied by any tender by the Company, or recovery by the
Trustee, in any currency or currency unit other than the Required Currency,
except to the extent that such tender or recovery shall result in the Trustee's
timely holding the full amount of the Required Currency then due and payable. If
any such tender or recovery is made in other than the Required Currency, the
Trustee may take such actions as it considers appropriate to exchange such other
currency or currency unit for the Required Currency. The costs and risks of any
such exchange, including without limitation the risks of delay and exchange rate
fluctuation, shall be borne by the Company, the Company shall be liable for any
shortfall or delinquency in the full amount of the Required Currency then due
and payable, and in no circumstances shall the Trustee be liable therefor. The
Company hereby waives any defense of payment based upon any such tender or
recovery which is not in the Required Currency, or which, when exchanged for the
Required Currency by the Trustee, is less than the full amount of the Required
Currency then due and payable
Section 116. Language of Notices, etc. Any request, demand, authorization,
direction, notice, consent or waiver required or permitted under this Indenture
shall be in the English language, except that any published notice may be in an
official language of the country of publication.
Section 117. Changes in Exhibits. At any time and from time to time, the
Company may substitute a new form, or add new forms, of the Exhibits hereto.
Such substitution shall be effective upon receipt by the Trustee of such new
form of Exhibit and a Board Resolution or Officers' Certificate adopting such
new form of Exhibit, and thereafter all references in this Indenture to such
Exhibit shall be deemed to refer to such new form of Exhibit.
ARTICLE TWO
Issuance of Securities
Section 201. Creation of Securities in Amount Unlimited. An unlimited
aggregate principal amount of Securities may be issued pursuant to this Article
Two and, in the case of Medium-Term Debt Securities, pursuant to Article Three.
The Securities (including Medium-Term Debt Securities) may be authenticated and
delivered, as authorized by the Board of Directors, in an unlimited number of
series.
Section 202. Documents Required for Issuance of Each Series of Securities
Other than Medium-Term Debt Securities. At any time and from time to time,
Securities of each series created pursuant to the provisions of this Article Two
may be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and shall be authenticated by the Trustee and
delivered to, or upon the order of, the Company upon receipt by the Trustee of
the following:
(a) A Board Resolution or Board Resolutions authorizing the execution,
authentication and delivery of the Securities of the series, and
specifying:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Article Two (except
<PAGE> 25
17
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 403, 404, 405, 1006 or 1207 and except for
any Securities which, pursuant to Section 402, are deemed never to have
been authenticated and delivered hereunder);
(3) the date or dates on which the principal (and premium, if any)
of any of the Securities of the series are payable or the method of
determination thereof;
(4) the rate or rates, or the method of determination thereof, at
which any of the Securities of the series shall bear interest, if any,
the date or dates from which such interest shall accrue, the Interest
Payment Dates on which such interest shall be payable and the Regular
Record Date for the interest payable on any Registered Securities on
any Interest Payment Date;
(5) the place or places where the principal of (and premium, if
any) and interest, if any, on any of the Securities and Coupons, if
any, of the series shall be payable and the office or agency for the
Securities of the series maintained by the Company pursuant to Section
1102;
(6) the period or periods within which, the price or prices at
which and the terms and conditions upon which any of the Securities of
the series may be redeemed, in whole or in part, at the option of the
Company;
(7) the terms of any sinking fund and the obligation, if any, of
the Company to redeem or purchase Securities of the series pursuant to
any sinking fund or analogous provisions or at the option of a Holder
thereof and the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series
shall be redeemed or purchased, in whole or in part;
(8) the terms of the obligation of the Company, if any, to permit
the conversion of the Securities of the series into stock or other
securities of the Company or of any other corporation;
(9) the terms, if any, for the attachment to Securities of the
series of warrants, options or other rights to purchase or sell stock
or other securities of the Company;
(10) if other than denominations of $1,000 and in any integral
multiple thereof, if Registered Securities, and $5,000, if Bearer
Securities, for Securities denominated in Dollars, the denominations in
which the Securities of the series shall be issuable;
(11) if other than the principal amount thereof, the portion of
the principal amount of any of the Securities of the series which shall
be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 602;
(12) the application, if any, of Section 503, or such other means
of satisfaction and discharge as may be specified for the Securities
and Coupons, if any, for a series;
(13) any deletions or modifications of or additions to the Events
of Default set forth in Section 601 or covenants of the Company set
forth in Article Nine or Eleven pertaining to the Securities of the
series (including without limitation whether the provisions of Section
1104 or Section 1105 shall not be applicable to the Securities of the
series);
<PAGE> 26
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(14) the forms of the Securities and Coupons, if any, of the
series;
(15) if other than Dollars, the currency or currencies, or
currency unit or units, in which the Securities of such series will be
denominated and/or in which payment of the principal of (and premium,
if any) and interest, if any, on any of the Securities of the series
shall be payable and the Exchange Rate Agent, if any, for such series;
(16) if the principal of (and premium, if any) or interest, if
any, on any of the Securities of the series are to be payable at the
election of the Company or a Holder thereof, or under some or all
other circumstances, in a currency or currencies, or currency unit or
units, other than that in which the Securities are denominated, the
period or periods within which, and the terms and conditions upon
which, such election may be made, or the other circumstances under
which any of the Securities are to be so payable, including without
limitation the application of Section 410(b) and any deletions to,
modifications of or additions to the provisions thereof, and any
provision requiring the Holder to bear currency exchange costs by
deduction from such payments;
(17) if the amount of payments of principal of (and premium, if
any) or interest, if any, on any of the Securities of the series may
be determined with reference to an index based on (i) a currency or
currencies or currency unit or units other than that in which such
Securities are stated to be payable or (ii) any method, not
inconsistent with the provisions of this Indenture, specified in or
pursuant to such Board Resolution, then in each case (i) and (ii) the
manner in which such amounts shall be determined;
(18) whether the Securities of the series are to be issued as
Registered Securities or Bearer Securities (with or without Coupons), or
any combination thereof, whether Bearer Securities may be exchanged for
Registered Securities of the series and whether Registered Securities
may be exchanged for Bearer Securities of the series (if permitted by
applicable laws and regulations) and the circumstances under which and
the place or places where any such exchanges, if permitted, may be made;
and whether any Securities of the series are to be issuable initially in
temporary global form and whether any Securities of the series are to be
issuable in definitive global form with or without Coupons and, if so,
whether beneficial owners of interests in any such definitive global
Security may exchange such interests for Securities of such series and
of like tenor of any authorized form and denomination and the
circumstances under which and the place or places where any such
exchanges may occur, if other than in the manner provided in Section
404;
(19) if the Securities and Coupons, if any, of the series are to
be issued upon the exercise of warrants, the time, manner and place for
such Securities and Coupons, if any, to be authenticated and delivered;
(20) whether and under what circumstances and with what procedures
and documentation the Company will pay additional amounts on any of the
Securities and Coupons, if any, of the series to any Holder who is not
a U.S. Person (including a definition of such term), in respect of any
tax assessment or governmental charge withheld or deducted and, if so,
whether the Company will have the option to redeem such Securities
rather than pay additional amounts (and the terms of any such option);
(21) the Person to whom any interest on any Registered 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
<PAGE> 27
19
Record Date for such interest, the manner in which, or the Person to
whom, any interest on any Bearer Security of the series shall be
payable, if otherwise than upon presentation and surrender of the
Coupons appertaining thereto as they severally mature and the extent
to which, or the manner in which, any interest payable on a temporary
global Security on an Interest Payment Date will be paid if other than
in the manner provided in Section 403; and
(22) any other terms of any of the Securities of the series (which
terms shall not be inconsistent with the provisions of this Indenture).
If any of the terms of the series are established by action taken
pursuant to a Board Resolution or Board Resolutions, an Officers'
Certificate certifying as to such action also shall be delivered to the
Trustee.
(b) In case the Securities of the series to be authenticated and
delivered are to be created pursuant to one or more supplemental
indentures, such supplemental indenture or indentures, accompanied by a
Board Resolution or Board Resolutions authorizing such supplemental
indenture or indentures and designating the new series to be created and
prescribing pursuant to paragraph (a) above, consistent with the applicable
provisions of this Indenture, the terms and provisions relating to the
Securities of the series.
(c) Either (i) a certificate or other official document evidencing the
due authorization, approval or consent of any governmental body or bodies,
at the time having jurisdiction in the premises, together with an Opinion
of Counsel that the Trustee is entitled to rely thereon and that the
authorization, approval or consent of no other governmental body is
required, or (ii) an Opinion of Counsel that no authorization, approval or
consent of any governmental body is required.
(d) An Opinion of Counsel that all instruments furnished the Trustee
conform to the requirements of this Indenture and constitute sufficient
authority hereunder for the Trustee to authenticate and deliver the
Securities and to deliver the Coupons, if any, of the series; that all
conditions precedent provided for in this Indenture relating to the
authentication and delivery of the Securities and delivery of the Coupons,
if any, of the series have been complied with and the Company is duly
entitled to the authentication and delivery of the Securities and Coupons,
if any, of the series in accordance with the provisions of this Indenture;
that all laws and requirements with respect to the form and execution by
the Company of the supplemental indenture, if any, and the execution and
delivery by the Company of the Securities and Coupons, if any, of the
series have been complied with; that the Company has corporate power to
execute and deliver the supplemental indenture, if any, and to issue the
Securities and Coupons, if any, of the series and has duly taken all
necessary corporate action for those purposes; and that the supplemental
indenture, if any, as executed and delivered and the Securities and
Coupons, if any, of the series, when issued, will be the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect, the enforceability
of the Company's obligations also being subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law)); that the Securities and Coupons, if any,
of the series, when issued, will be entitled to the benefits of this
Indenture, equally and ratably with all other Securities and Coupons, if
any, of such series theretofore issued and then outstanding hereunder; and
that the amount of Securities then outstanding under this Indenture,
including the Securities of the series, will not exceed the amount at the
time permitted by law or this Indenture.
<PAGE> 28
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(e) An Officers' Certificate stating that the Company is not in default
under this Indenture and that the issuance of the Securities and Coupons,
if any, of the series will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the Company's
certificate of incorporation or by-laws or any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party or
by which it is bound, or any order of any court or administrative agency
entered in any proceeding to which the Company is a party or by which it
may be bound or to which it may be subject; and that all conditions
precedent provided in this Indenture relating to the authentication and
delivery of the Securities and Coupons, if any, of the series have been
complied with.
(f) Such other documents as the Trustee may reasonably require.
ARTICLE THREE
Issuance of Medium-Term Debt Securities
Section 301. Documents Required for Issuance of Each Series of Medium-Term
Debt Securities. At any time, and from time to time, Securities (sometimes
referred to herein as "Medium-Term Debt Securities") of each series created
pursuant to the provisions of this Article Three may be executed by the Company
and delivered to the Trustee and shall be authenticated by the Trustee and
delivered to, or upon the order of, the Company upon receipt by the Trustee of
the following:
(a) A Board Resolution or Board Resolutions authorizing the execution,
authentication and delivery of Medium-Term Debt Securities up to a
specified aggregate principal amount, in such series and subject to such
terms as shall be established by officers of the Company authorized by such
resolutions to establish such series and terms.
(b) A Medium-Term Debt Securities Certificate requesting the Trustee to
authenticate and deliver Medium-Term Debt Securities of a series as
contemplated by Section 402, and specifying the following terms with
respect to the Medium-Term Debt Securities of the particular series,
authorized pursuant to the Board Resolution or Board Resolutions referred
to in paragraph (a) above:
(1) the title of the Medium-Term Debt Securities of the series
(which shall distinguish the Medium-Term Debt Securities of the series
from all other Securities);
(2) the date of the Medium-Term Debt Securities of the series;
(3) any limit upon the aggregate principal amount of the
Medium-Term Debt Securities of the series which may be authenticated
and delivered under this Article Three (except for Medium-Term Debt
Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Medium-Term Debt
Securities of the series pursuant to Section 403, 404, 405, 1006 or
1207 and except for any Medium-Term Debt Securities which, pursuant to
Section 402, are deemed never to have been authenticated and delivered
hereunder);
(4) the date or dates on which the principal (and premium, if any)
of any of the Medium-Term Debt Securities of the series are payable or
the method of determination thereof, which in any event may not be less
than nine months subsequent to the date of the first authentication of
Medium-Term Debt Securities of the series;
<PAGE> 29
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(5) the rate or rates, or the method of determination thereof, at
which any of the Medium-Term Debt Securities of the series shall bear
interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interest shall be
payable and the Regular Record Date for the interest payable on any
Medium-Term Debt Securities of the series that are Registered
Securities on any Interest Payment Date;
(6) the place or places where the principal of (and premium, if
any) and interest, if any, on any of the Medium-Term Debt Securities
and Coupons, if any, of the series shall be payable and the office or
agency for the Medium-Term Debt Securities of the series maintained by
the Company pursuant to Section 1102;
(7) the period or periods within which, the price or prices at
which and the terms and conditions upon which any of the Medium-Term
Debt Securities of the series may be redeemed, in whole or in part, at
the option of the Company;
(8) the terms of any sinking fund and the obligation, if any, of
the Company to redeem or purchase Medium-Term Debt Securities of the
series pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which
Medium-Term Debt Securities of the series shall be redeemed or
purchased, in whole or in part;
(9) the terms of the obligation of the Company, if any, to permit
the conversion of the Medium-Term Debt Securities of the series into
stock or other securities of the Company or of any other corporation;
(10) the terms, if any, for the attachment to Medium-Term Debt
Securities of the series of warrants, options or other rights to
purchase or sell stock or other securities of the Company;
(11) if other than denominations of $1,000 and in any integral
multiple thereof, if Registered Securities, and $5,000 if Bearer
Securities, for Medium-Term Debt Securities denominated in Dollars, the
denominations in which the Medium-Term Debt Securities of the series
shall be issuable;
(12) if other than the principal amount thereof, the portion of
the principal amount of any of the Medium-Term Debt Securities of the
series which shall be payable upon declaration of acceleration of the
Maturity thereof pursuant to Section 602;
(13) the application, if any, of Section 503, or such other means
of satisfaction and discharge as may be specified for the Medium-Term
Debt Securities and Coupons, if any, of the series;
(14) any deletions or modifications of or additions to the Events
of Default set forth in Section 601 or covenants of the Company set
forth in Article Nine or Eleven pertaining to the Medium-Term Debt
Securities of the series (including without limitation whether the
provisions of Section 1104 or Section 1105 shall not be applicable to
the Medium-Term Debt Securities of the series);
(15) if other than Dollars, the currency or currencies, or
currency unit or units, in which the Medium-Term Debt Securities of the
series will be denominated and/or in which payment of the principal of
(and premium, if any) and interest, if any, on any of the Medium-Term
Debt Securities of the series shall be payable and the Exchange Rate
Agent, if any, for such series;
<PAGE> 30
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(16) if the principal of (and premium, if any) or interest, if
any, on any of the Securities of the series are to be payable at the
election of the Company or Holder thereof, or under some or all other
circumstances, in a currency or currencies, or currency unit or units,
other than that in which the Medium-Term Debt Securities are stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, or the other
circumstances under which any of the Medium-Term Debt Securities are to
be so payable, including without limitation the application of Section
410(b) and any deletions to, modification of or additions to the
provisions thereof, and any provision requiring the Holder to bear
currency exchange costs by deduction from such payments;
(17) if the amount of payments of principal of (and premium, if
any) or interest, if any, on any of the Medium-Term Debt Securities of
the series may be determined with reference to an index based on (i) a
currency or currencies or currency unit or units other than that in
which such Securities are stated to be payable or (ii) any method, not
inconsistent with the provisions of this Indenture, specified in or
pursuant to such Board Resolution, then in each case (i) and (ii) the
manner in which such amounts shall be determined;
(18) whether the Medium-Term Debt Securities of the series are to
be issued as Registered Securities or Bearer Securities (with or
without Coupons), or any combination thereof, whether Bearer
Securities may be exchanged for Registered Securities of the series
and whether Registered Securities may be exchanged for Bearer
Securities of the series (if permitted by applicable laws and
regulations) and the circumstances under which and the place or places
where any such exchanges, if permitted, may be made; and whether any
Medium-Term Debt Securities of the series are to be issuable initially
in temporary global form and whether any Medium-Term Debt Securities
of the series are to be issuable in definitive global form with or
without Coupons and, if so, whether beneficial owners of interests in
any such definitive global Medium-Term Debt Security may exchange such
interests for Medium-Term Debt Securities of such series and of like
tenor of any authorized form and denomination and the circumstances
under which and the place or places where any such exchange may occur,
if other than in the manner provided in Section 404;
(19) if the Medium-Term Debt Securities and Coupons, if any, of
the series are to be issued upon the exercise of warrants, the time,
manner and place for such Medium-Term Debt Securities and Coupons, if
any, of the series to be authenticated and delivered;
(20) whether and under what circumstances and with what procedures
and documentation the Company will pay additional amounts on any of the
Medium-Term Debt Securities of the series to any Holder who is not a
U.S. Person (including a definition of such term), in respect of any
tax assessment or governmental charge withheld or deducted and, if so,
whether the Company will have the option to redeem such Medium-Term
Debt Securities rather than pay additional amounts (and the terms of
any such option);
(21) the Person to whom any interest on any Medium-Term Debt
Security of the series shall be payable, if other than the Person in
whose name that Medium-Term Debt Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular
Record Date for such interest, the manner in which, or the person to
whom, any interest on any Bearer Security of the series shall be
payable, if otherwise than upon presentation and surrender of the
Coupons appertaining thereto as they severally mature and the extent to
which, or the manner in which, any interest payable on a temporary
global Medium-Term
<PAGE> 31
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Debt Security on an Interest Payment Date will be paid if other than in
the manner provided in Section 403;
(22) if other than the forms set forth in Exhibit A hereto, the
forms of the Medium-Term Debt Securities and Coupons, if any, of the
series; and
(23) any other terms of any of the Medium-Term Debt Securities of
the series (which terms shall not be inconsistent with the provisions
of this Indenture).
Unless the Company shall be required to deliver an Officers' Certificate
pursuant to paragraph (d) below in connection with the authentication of the
Medium-Term Debt Securities of the series, the delivery of such Medium-Term
Debt Securities Certificate to the Trustee shall be deemed to be a
certification by the Company that all matters certified in the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (d)
below continue to be true and correct, as if such Officers' Certificate
related to the Medium-Term Debt Securities covered by such Medium-Term Debt
Securities Certificate, on and as of the date of such Medium-Term Debt
Securities Certificate. The delivery of such Medium-Term Debt Securities
Certificate also shall be deemed to be a certification that the Board
Resolution or Board Resolutions referred to in paragraph (a) above are in
full force and effect on and as of the date of such Medium-Term Debt
Securities Certificate and that the terms and form or forms of the
Medium-Term Debt Securities and Coupons, if any, of the series have been
established by an officer or officers of the Company authorized by such
Board Resolution or Board Resolutions in accordance with the provisions
thereof and hereof.
(c) If (i) the Company shall not have previously delivered to the
Trustee an Opinion of Counsel to the effect set forth in this paragraph (c)
with respect to the Medium-Term Debt Securities authorized pursuant to the
Board Resolution or Board Resolutions referred to in paragraph (a) above or
(ii) if the Medium-Term Debt Securities Certificate referred to in paragraph
(b) above specifies a means of satisfaction and discharge other than the
application of Section 503 with respect to the series of Medium-Term Debt
Securities to which such Medium-Term Debt Securities Certificate relates, an
Opinion of Counsel that the Medium-Term Debt Securities have been duly
authorized by resolutions of the Board of Directors of the Company, subject
to the establishment of certain terms of the Medium-Term Debt Securities and
Coupons, if any, of the series by officers of the Company authorized by such
resolutions to establish such terms, that when the terms of the Medium-Term
Debt Securities and Coupons, if any, of the series have been established as
provided in such resolutions and in this Indenture and the Medium-Term Debt
Securities and Coupons, if any, of the series have been executed,
authenticated and delivered in accordance with the provisions of this
Indenture, the Medium-Term Debt Securities and Coupons, if any, of the
series, assuming they do not violate any applicable law then binding on the
Company, will constitute legal, valid and binding obligations of the Company
entitled to the benefits of this Indenture, equally and ratably with all
other Securities and Coupons, if any, of such series theretofore issued and
then outstanding hereunder, and that the amount of Securities then
outstanding under this Indenture, including the Medium-Term Debt Securities
of the series, will not exceed the amount at the time permitted by law or
this Indenture.
(d) If the Company shall not have delivered an Officers' Certificate
pursuant to the provisions of this paragraph (d) to the Trustee during the
immediately preceding 12- month period, an Officers' Certificate stating
that the Company is not in default under this Indenture, that the issuance
of the Medium-Term Debt Securities and Coupons, if any, of the series will
not result in any breach of any of the terms, conditions or provisions of,
or constitute a default under, the Company's certificate of incorporation or
By-laws or any indenture, mortgage, deed of trust or other agreement
<PAGE> 32
24
or instrument to which the Company is a party or by which it is bound, or
any order of any court or administrative agency entered in any proceeding
to which the Company is a party or by which it may be bound or to which it
may be subject, that all laws and requirements with respect to the
execution and delivery by the Company of the Medium-Term Debt Securities
and Coupons, if any, of the series have been complied with and that all
conditions precedent provided in this Indenture relating to the
authentication and delivery of the Medium-Term Debt Securities and Coupons,
if any, of the series have been complied with.
(e) Such other documents as the Trustee shall reasonably request.
SECTION 302. Form of Medium-Term Debt Securities. The Medium-Term Debt
Securities and Coupons, if any, of each series shall be in such forms as shall
be specified as contemplated by Section 301. In the absence of any such
provisions with respect to the Medium-Term Debt Securities of any series, the
Medium-Term Debt Securities and Coupons, if any, of such series shall be
substantially in the applicable form or forms set forth in Exhibit A hereto,
except with such additions, changes and deletions thereto as may be required to
reflect the different provisions thereof as shall be specified as provided in
Section 301.
ARTICLE FOUR
The Securities
SECTION 401. Form and Denomination. All Securities of any one series and the
Coupons appertaining to any Bearer Securities of such series shall be
substantially identical except, in the case of Registered Securities, as to
denomination and except as may otherwise be provided in or pursuant to the Board
Resolution referred to in Section 202 or Section 301, as the case may be, and
(subject to Section 402) set forth in the Officers' Certificate or Medium-Term
Debt Securities Certificate referred to in Section 202 or Section 301, as the
case may be, or in any indenture supplemental hereto.
The Securities of each series shall be issuable in such denominations as
shall be specified as contemplated by Section 202 or Section 301, as the case
may be. In the absence of any such provisions with respect to the Securities of
any series, the Securities of such series denominated in Dollars shall be
issuable in denominations of $1,000 and in any integral multiple thereof, if
registered, and in denominations of $5,000 if bearer. Securities of each series
shall be numbered, lettered or otherwise distinguished in such manner or in
accordance with such plan as the officers of the Company executing the same may
determine with the approval of the Trustee. Each Security shall bear the
appropriate legends, if any, as required by U.S. Federal tax law and
regulations.
SECTION 402. Execution, Delivery, Dating and Authentication. The Securities
shall be executed on behalf of the Company by a manual or facsimile signature of
its Chairman, its President, any of its Vice Presidents, its Treasurer, any
Assistant Treasurer, its Secretary or any Assistant Secretary, under its
corporate seal reproduced thereon. Any Coupons shall be executed on behalf of
the Company by the manual or facsimile signature of any such officer of the
Company. In case any of the above referenced officers of the Company who shall
have signed any of the Securities or Coupons shall cease to be such officer
before the Securities so signed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Securities nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Securities and/or Coupons had not ceased to be such officer; and any Securities
or Coupons may be signed on behalf of the Company by such persons as, at the
actual date of the execution of such Security or Coupon, shall be such officers
of the Company, although at the date of the execution of this Indenture any such
person was not such officer.
<PAGE> 33
25
At any time and from time to time, the Company may deliver Securities of
any series, together with any Coupons appertaining thereto, executed by the
Company to the Trustee for authentication, together (except in the case of any
Medium-Term Debt Securities) with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Company
Order (or, in the case of Medium-Term Debt Securities of any series, upon
receipt of a Medium-Term Debt Securities Certificate and in accordance with the
terms thereof) shall authenticate and make available for delivery such
Securities; provided, however, that, unless otherwise specified in the Board
Resolution (or, in the case of any Bearer Securities that are Medium-Term Debt
Securities in the Medium-Term Debt Securities Certificate) with respect to an
Bearer Securities, in connection with its original issuance, no Bearer Security
(including any temporary Bearer Security issued pursuant to Section 403 which
is not in global form) shall be mailed or otherwise delivered to any location
in the United States; and provided further that, unless otherwise specified in
the Board Resolution (or, in the case of any Bearer Securities that are
Medium-Term Debt Securities, in the Medium-Term Debt Securities Certificate)
with respect to such Bearer Securities, such Bearer Security may be delivered
in connection with its original issuance only if the Person entitled to receive
such Bearer Security (including any temporary Bearer Security issued pursuant
to Section 403 which is not in global form) shall have furnished to the Company
or any agent, underwriter or selling group member a certificate substantially
in the form set forth in Exhibit B.1 to this Indenture, dated no earlier than
15 days prior to the earlier of the date on which such Bearer Security is
delivered and the date on which any temporary Security first becomes
exchangeable for such Bearer Security in accordance with the terms of such
temporary Security and this Indenture. In connection with the original issuance
of any Bearer Security and unless otherwise specified in the Board Resolution
(or, in the case of any Bearer Securities that are Medium-Term Debt Securities,
in the Medium-Term Debt Securities Certificate) with respect to such Bearer
Securities, a confirmation substantially in the form set forth in Exhibit B.5
to this Indenture shall be sent to each purchaser thereof. If any Security
shall be represented by a definitive global Bearer Security, then, for purposes
of this Section and Section 403, the notation of a beneficial owner's interest
therein upon original issuance of such Security or upon exchange of a portion
of a temporary global Security shall be deemed to be delivery in connection
with its original issuance of such beneficial owner's interest in such
definitive global Bearer Security. Except as permitted by Section 405, the
Trustee shall not authenticate and make available for delivery any Bearer
Security unless all appurtenant Coupons for interest then matured have been
detached and canceled.
The Trustee shall not be required to authenticate Securities of any series
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, or if the Trustee determines that such action may not lawfully be
taken.
Unless otherwise specified pursuant to Section 301(b)(2), each Registered
Security shall be dated the date of its authentication, and each Bearer Security
and any Bearer Security in global form shall be dated as of the date of original
issuance of the first Security of such series to be issued.
No Security or Coupon 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 below
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been duly authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancelation as provided in Section 408
together with a written statement (which need not comply with Section 102 and
need
<PAGE> 34
26
not be accompanied by an Opinion of Counsel) stating that such Security has
never been issued and sold by the Company, 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.
The Trustee's certificate of authentication shall be in substantially the
following form:
Dated:
This is one of the Securities of the series designated herein issued under
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By
---------------------------------
Authorized Signatory
SECTION 403. Temporary Securities. Pending the preparation of definitive
Securities of any series, the Company may execute, and upon Company Order (or,
in the case of Medium-Term Debt Securities, receipt of the Medium-Term Debt
Securities Certificate with respect to such Medium-Term Debt Securities) the
Trustee shall authenticate and make available for delivery, 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, in registered form or,
if authorized, in bearer form with one or more Coupons or without Coupons, and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as evidenced
conclusively by their execution of such Securities. Such temporary Securities
may be in global form.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with the provisions of the following paragraphs), 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 maintained pursuant to Section 1102 in a Place of Payment for such
series for the purpose of exchanges of Securities of such series, without charge
to the Holder. Upon surrender for cancelation of any one or more temporary
Securities of any series (accompanied by any unmatured Coupons) the Company
shall execute and the Trustee shall authenticate and make available for delivery
in exchange therefor a like aggregate principal amount of definitive Securities
of the same series and of like tenor or authorized denominations; provided,
however, that, unless otherwise specified as contemplated by Section 202 or
Section 301, as the case may be, no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; provided further that
a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 402.
If temporary Bearer Securities of any series are issued in global form, such
temporary global Bearer Securities shall, unless otherwise specified as
contemplated by Section 202 or Section 301, as the case may be, be delivered to
the London office of a depository or common depository (the "Common
Depositary"), for the benefit of Euro-clear and CEDEL S.A., for credit to the
respective accounts of the beneficial owners of interests in such Securities (or
to such other accounts as they may direct).
<PAGE> 35
27
Without unnecessary delay but in any event not later than the date specified
in, or determined pursuant to the terms of, any such temporary global Security
(the "Exchange Date"), the Company shall deliver to the Trustee definitive
Securities, in aggregate principal amount equal to the principal amount of such
temporary global Security, executed by the Company. On or after the Exchange
Date such temporary global Security shall be surrendered by the Common
Depositary to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge and the Trustee shall authenticate and make available for
delivery, in exchange for each portion of such temporary global Security, an
equal aggregate principal amount of definitive Securities of the same series of
authorized denominations and of like tenor as the portion of such temporary
global Security to be exchanged. The definitive Securities to be delivered in
exchange for any such temporary global Security shall be in bearer form,
registered form, definitive global form or any combination thereof, as specified
as contemplated by Section 202 or Section 301, as the case may be, and, if any
combination thereof is so specified, as requested by the beneficial owner
thereof; provided, however, that, unless otherwise specified as contemplated by
Section 202 or Section 301, as the case may be, upon such presentation by the
Common Depositary, such temporary global Security shall be accompanied by a
certificate dated the Exchange Date or a subsequent date and signed by
Euro-clear as to the portion of such temporary global Security held for its
account then to be exchanged and a certificate dated the Exchange Date or a
subsequent date and signed by CEDEL S.A. as to the portion of such temporary
global Security held for its account then to be exchanged, each in the form set
forth in Exhibit B.2 to this Indenture; provided further that definitive Bearer
Securities (including a definitive global Bearer Security) shall be delivered in
exchange for a portion of a temporary global Security only in compliance with
the requirements of Section 402.
Unless otherwise specified as contemplated by Section 202 or Section 301,
as the case may be, the interest of a beneficial owner of Securities of a series
in a temporary global Bearer Security shall be exchanged for definitive Bearer
Securities of the same series and of like tenor following the Exchange Date when
the beneficial owner instructs Euro-clear or CEDEL S.A., as the case may be, to
request such exchange on his behalf and delivers to Euro-clear or CEDEL S.A., as
the case may be, a certificate substantially in the form set forth in Exhibit
B.1 to this Indenture, dated no earlier than 15 days prior to the Exchange Date,
copies of which certificate shall be available from the offices of Euro-clear,
CEDEL S.A., the Trustee, any Authenticating Agent appointed for such series of
Securities and any Paying Agent appointed for such series of Securities. Unless
otherwise specified as contemplated by Section 202 or Section 301, as the case
may be, any such exchange shall be made free of charge to the beneficial owners
of such temporary global Security, except that a Person receiving definitive
Securities must bear the cost of insurance, postage, transportation and the like
in the event that such Person does not take delivery of such definitive
Securities in person at the offices of Euro-clear or CEDEL S.A. The definitive
Bearer Securities to be delivered in exchange for any portion of a temporary
global Security shall be delivered only outside the United States.
Until exchanged in full as provided above, the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 202 or Section 301, as the case may be, interest
payable on a temporary global Bearer Security on an Interest Payment Date for
Securities of such series occurring prior to the applicable Exchange Date shall
be payable to Euro-clear and CEDEL S.A. on such Interest Payment Date upon
delivery by Euro-clear and CEDEL S.A. to the Trustee of a certificate or
certificates substantially in the form set forth in Exhibit B.3 to this
Indenture, for credit without further interest on or after such Interest Payment
Date to the respective accounts of the Persons who are the beneficial owners of
such temporary global Security (or to such other accounts as they may direct) on
such Interest Payment Date and who have each delivered to Euro-clear or CEDEL
S.A., as the case may be, a certificate substantially in the form set forth in
Exhibit
<PAGE> 36
28
B.4 to this Indenture. Any interest so received by Euro-clear and CEDEL
S.A. and not paid as herein provided shall be returned to the Trustee
immediately prior to the expiration of two years after such Interest Payment
Date in order to be repaid to the Company in accordance with Section 1103.
SECTION 404. Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at an office or agency to be maintained by the
Company in accordance with Section 1102 a register (being the combined register
of the Security Registrar and all additional transfer agents designated pursuant
to Section 1102 for the purpose of registration of transfer of Securities and
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 Registered Securities and the registration of transfers
of Registered Securities. The First National Bank of Chicago is hereby appointed
the initial Security Registrar. At all reasonable times each register maintained
by the Security Registrar and any additional transfer agents shall be open for
inspection by the Trustee.
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained pursuant to Section
1102 for such purpose in a Place of Payment for such series, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee or transferees, one or more new Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor.
At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Securities to be exchanged at any such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, the Securities which
the Holder making the exchange is entitled to receive. Unless otherwise
specified as contemplated by Section 202 or Section 301, as the case may be,
Bearer Securities may not be issued in exchange for Registered Securities.
At the option of the Holder and unless otherwise specified as contemplated
by Section 202 or Section 301, as the case may be, Bearer Securities of any
series may be exchanged for Registered Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor,
upon surrender of the Bearer Securities to be exchanged at any such office or
agency, with all unmatured Coupons and all matured Coupons in default
appertaining thereto. If the Holder of a Bearer Security is unable to produce
any such unmatured Coupon or Coupons or matured Coupon or Coupons in default,
such exchange may be effected if the Bearer Securities are accompanied by
payment in funds acceptable to the Company in an amount equal to the face amount
of such missing Coupon or Coupons, or the surrender of such missing Coupon or
Coupons may be waived by the Company and the Trustee if there is furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to any Paying Agent any such missing Coupon in respect of which such a payment
shall have been made, such Holder shall be entitled to receive the amount of
such payment; provided, however, that, except as otherwise provided in Section
1102, interest represented by Coupons shall be payable only upon presentation
and surrender of those Coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in exchange for a Registered
Security of the same series and like tenor after the close of business at such
office or agency on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any Special Record Date and before the opening of business at such office or
agency on the related proposed date for payment of Defaulted Interest, such
Bearer Security shall be
<PAGE> 37
29
surrendered without the Coupon relating to such Interest Payment Date or
proposed date for payment, as the case may be, and interest or Defaulted
Interest, as the case may be, will not be payable on such Interest Payment Date
or proposed date for payment, as the case may be, in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the Holder of such Coupon when due in accordance with the provisions of this
Indenture.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, the
Securities which the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 202 or Section 301, as the case may be, any definitive
global Bearer Security shall be exchangeable only as provided in this
paragraph. If the beneficial owners of interests in a definitive global Bearer
Security are entitled to exchange such interests for Securities of such series
and of like tenor and principal amount of another authorized form and
denomination, as specified as contemplated by Section 202 or Section 301, as
the case may be, then without unnecessary delay but in any event not later than
the earliest date on which such interest may be so exchanged, the Company shall
deliver to the Trustee definitive Securities in an aggregate principal amount
equal to the principal amount of such definitive global Bearer Security,
executed by the Company. On or after the earliest date on which such interests
may be so exchanged, such definitive global Bearer Security shall be
surrendered by the Common Depositary or such other depositary or Common
Depositary) as shall be specified in the Company Order or Medium-Term Debt
Securities Certificate, as the case may be, with respect thereto to the
Trustee, as the Company's agent for such purpose, to be exchanged, in whole or
from time to time in part, for definitive Securities without charge and the
Trustee shall authenticate and make available for delivery, in exchange for
each portion of such definitive global Bearer Security, an equal aggregate
principal amount of definitive Securities of the same series of authorized
denominations and of like tenor as the portion of such definitive global Bearer
Security to be exchanged which, unless the Securities of the series are not
issuable both as Bearer Securities and as Registered Securities, as specified
as contemplated by Section 202 or Section 301, as the case may be, shall be in
the form of Bearer Securities or Registered Securities, or any combination
thereof, as shall be specified by the beneficial owner thereof; provided,
however, that no such exchanges may occur during a period beginning at the
opening of business 15 Business Days before any selection of Securities of that
series to be redeemed and ending on the relevant Redemption Date; provided
further that no Bearer Security delivered in exchange for a portion of a
definitive global Security shall be mailed or otherwise delivered to any
location in the United States. If a Registered Security is issued in exchange
for any portion of a definitive global Bearer Security after the close of
business at the office or agency where such exchange occurs on (i) any Regular
Record Date and before the opening of business at such office or agency on the
relevant Interest Payment Date, or (ii) any Special Record Date and before the
opening of business at such office or agency on the related proposed date for
payment of Defaulted Interest, interest or Defaulted Interest, as the case may
be, will not be payable on such Interest Payment Date or proposed date for
payment, as the case may be, in respect of such Registered Security, but will
be payable on such Interest Payment Date or proposed date for payment, as the
case may be, only to the Person to whom interest in respect of such portion of
such definitive global Bearer Security is payable in accordance with the
provisions of this Indenture.
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.
<PAGE> 38
30
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee or
any transfer agent) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar or
any transfer agent 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 403, 1006 or 1207 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 Business Days before any selection of Securities of that series to
be redeemed and ending at the close of business on (A) if Securities of the
series are issuable only as Registered Securities, the day of the mailing of the
relevant notice of redemption and (B) if Securities of the series are issuable
as Bearer Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as Registered
Securities and there is no publication, the day of mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Registered Security so selected for redemption, in whole or in part, except the
unredeemed portion of any Security being redeemed in part, or (iii) to exchange
any Bearer Security so selected for redemption except that such a Bearer
Security may be exchanged for a Registered Security of that series and like
tenor; provided that such Registered Security shall be simultaneously
surrendered for redemption.
SECTION 405. Mutilated, Destroyed, Lost and Stolen Securities. If any
mutilated Security or Security with a mutilated Coupon appertaining to it is
surrendered to the Trustee, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding with Coupons corresponding to the Coupons, if
any, appertaining to the surrendered Security, provided that if such new
Security is a Bearer Security, such Security shall be delivered only outside the
United States.
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 or
Coupon 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 or Coupon has been
acquired by a bona fide purchaser, the Company shall execute and the Trustee
shall authenticate and make available for delivery, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen Coupon appertains (upon surrender to the Trustee of
such Security with all appurtenant Coupons not destroyed, lost or stolen), a new
Security of the same series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding, with Coupons corresponding to the
Coupons, if any, appertaining to such destroyed, lost or stolen Security or to
the Security to which such destroyed, lost or stolen Coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or Coupon has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security or Coupon, pay such Security or Coupon;
provided, however, that principal of (and premium, if any) and any interest on
Bearer Securities shall, except as otherwise provided in Section 1102, be
payable only at an office or agency located outside the United States and,
unless otherwise specified as contemplated by Section 202
<PAGE> 39
31
or Section 301, as the case may be, any interest on Bearer Securities shall be
payable only upon presentation and surrender of the Coupons appertaining
thereto.
Upon the issuance of any new Security or Coupon 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 or Coupon of any series issued pursuant to this Section
in lieu of any mutilated, destroyed, lost or stolen Security or Coupon shall
constitute an original additional contractual obligation of the Company, whether
or not the mutilated, destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities or
Coupons 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 or Coupons.
SECTION 406. Payment of Interest; Interest Rights Preserved. Unless
otherwise provided as contemplated by Section 202 or Section 301, as the case
may be, with respect to any series of Securities, interest on any Registered
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. At the option of the Company,
interest on the Registered Securities of any series that bears interest may be
paid by mailing a check to the address of any Holder as such address shall
appear in the Security Register.
Any interest on any Registered 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 Registered 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
<PAGE> 40
32
Date therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Registered 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 and Section 404, 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 407. Persons Deemed Owners. Prior to due presentment of a Registered
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 Registered
Security is registered as the owner of such Registered Security for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Sections 404, 406 and 411 and unless otherwise specified as contemplated by
Section 202 or Section 301, as the case may be) interest on such Security and
for all other purposes whatsoever, whether or not such Security is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Title to any Bearer Security and any Coupons shall pass by delivery. The
Company, the Trustee and any agent of the Company or the Trustee may treat the
Holder of any Bearer Security and the Holder of any Coupon as the absolute owner
of such Security or Coupon for the purpose of receiving payment thereof or on
account thereof (unless otherwise specified as contemplated by Section 202 or
Section 301, as the case may be) and for all other purposes whatsoever, whether
or not such Security or Coupon 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 408. Cancelation. All Securities and Coupons 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. All Securities and Coupons so delivered
shall be promptly canceled by the Trustee. All Bearer Securities and unmatured
Coupons held by the Trustee pending such cancelation shall be deemed to be
delivered for cancelation for all purposes of this Indenture and the Securities.
The Company may at any time deliver to the Trustee for cancelation 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 cancelation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered to the Trustee shall be promptly canceled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section, except as expressly permitted
by this Indenture. All canceled Securities and Coupons held by the Trustee shall
be disposed of in a manner selected by the Trustee unless otherwise directed by
a Company Order; provided, however, that the Trustee may, but shall not be
required to, destroy such canceled Securities and Coupons.
SECTION 409. Computation of Interest. Except as otherwise specified as
contemplated by Section 202 or Section 301, as the case may be, for Securities
of any
<PAGE> 41
33
series, interest on the Securities of each series shall be computed on the basis
of a 360-day year of twelve 30-day months.
SECTION 410. Currency and Manner of Payment in Respect of Securities. The
provisions of this Section shall apply to the Securities of any series unless
otherwise provided as contemplated by Section 202 or Section 301, as the case
may be.
(a) The following payment provisions shall apply to any Registered
Security of any series denominated in a Foreign Currency or any currency
unit, including without limitation ECU, except as provided in paragraph (b)
below:
(1) Except as provided in subparagraph (a)(2) or in paragraph
(e) below, payment of principal of and premium, if any, on such
Registered Security will be made at the Place of Payment by delivery
of a check in the currency or currency unit in which the Security is
denominated on the payment date against surrender of such Registered
Security, and any interest on any Registered Security will be paid
at the Place of Payment by mailing a check in the currency or
currency unit in which such interest is payable (which shall be the
same as that in which the Security is denominated unless otherwise
provided) to the Person entitled thereto at the address of such
Person appearing on the Security Register.
(2) Payment of the principal of, premium, if any, and interest,
if any, on such Security may also, subject to applicable laws and
regulations, be made at such other place or places as may be
designated by the Company by any appropriate method.
(b) With respect to any Registered Security of any series denominated in
any currency unit, including without limitation ECU, if the following
provisions (or any substitute therefor, or addition thereto, not
inconsistent with this Indenture) are established pursuant to Section 202 or
Section 301, as the case may be, and if the Company has not, before the
delivery of the election referred to in clause (1) below, deposited funds or
securities in compliance with Section 501 or clause (a)(i) or (if specified
pursuant to Section 202 or Section 301, as the case may be) clause (a)(ii)
of Section 503, the following payment provisions shall apply to any payment
to be made prior to the giving of any notice to Holders of any election to
redeem pursuant to Section 1204, except as otherwise provided in paragraphs
(e) and (f) below:
(1) A Holder of Securities of a series shall have the option to
elect to receive payments of principal of, premium, if any, and
interest, if any, on such Securities in a currency or currency unit
(including Dollars), other than that in which the Security is
denominated, such election, as designated in the certificates for
such Securities (or as provided by Section 202 or Section 301, as
the case may be, or a supplemental indenture hereto with respect to
uncertificated securities), shall be made by delivering to the
Paying Agent a written election, to be in form and substance
satisfactory to the Paying Agent, not later than the close of
business in New York, New York, on the day 15 days prior to the
applicable payment date. Such election will remain in effect for
such Holder until changed by the Holder by written notice to the
Paying Agent (but any such written notice must be received by the
Paying Agent not later than the close of business on the day 15
days prior to the next payment date to be effective for the payment
to be made on such payment date and no such change may be made with
respect to payments to be made on any Security of such series with
respect to which notice of redemption has been given by the Company
pursuant to Article Twelve). Any Holder of any such Security who
shall not have delivered any such election to the Paying Agent in
accordance with this paragraph (b) will be paid the amount due on
the applicable payment date in the relevant currency unit as
provided in paragraph (a)
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34
of this Section. Payment of principal of and premium, if any,
shall be made on the payment date therefor against surrender of such
Security. Payment of principal, premium, if any, and interest, if
any, shall be made at the Place of Payment by mailing at such
location a check, in the applicable currency or currency unit, to
the Holder entitled thereto at the address of such Holder appearing
on the Security Register.
(2) Payment of the principal of, premium, if any, and interest,
if any, on such Security may also, subject to applicable laws and
regulations, be made at such other place or places as may be
designated by the Company by any appropriate method.
(c) Payment of the principal of and premium, if any, and interest,
if any, on any Bearer Security will be made, except as provided in
Section 403 with respect to temporary global Securities, unless
otherwise specified pursuant to Section 202 or Section 301, as the case
may be, and/or Section 1001(8), at such place or places outside the
United States as may be designated by the Company pursuant to any
applicable laws or regulations by any appropriate method in the currency
or currencies or currency unit or units in which the Security is payable
(except as provided in paragraph (e) below) on the payment date therefor
against surrender of the Bearer Security, in the case of payment of
principal and premium, if any, or the relevant Coupon, in the case of
payment of interest, if any, to a Paying Agent designated for such
series pursuant to Section 1102.
(d) Not later than 10 Business Days (with respect to any Place of
Payment) prior to each payment date, the Paying Agent shall deliver to
the Company a copy of its record of the respective aggregate amounts of
principal of, premium, if any, and interest, if any, on the Securities
to be made on such payment date, in the currency or currency unit in
which each of the Securities is payable, specifying the amounts so
payable in respect of Registered Securities and Bearer Securities and in
respect of the Registered Securities as to which the Holders of
Securities denominated in any currency unit shall have elected to be
paid in another currency or currency unit as provided in paragraph (b)
above. If the election referred to in paragraph (b) above has
been provided for pursuant to Section 202 or Section 301, as the case
may be, and if at least one Holder has made such election, then, not
later than the fifth Business Day (with respect to any Place of Payment)
prior to the applicable payment date the Company will deliver to the
Trustee an Exchange Rate Officers' Certificate in respect of the Dollar
or Foreign Currency or currency unit payments to be made on such payment
date. The Dollar or Foreign Currency or currency unit amount receivable
by Holders of Registered Securities denominated in a currency unit who
have elected payment in another currency or currency unit as provided in
paragraph (b) above shall be determined by the Company on the basis of
the applicable Official Currency Unit Exchange Rate set forth in the
applicable Exchange Rate Officers' Certificate.
(e) If a Foreign Currency in which any Security is denominated or
payable ceases to be recognized both by the government of the country
which issued such currency and for the settlement of transactions by
public institutions of or within the international banking community, or
if ECU ceases to be used within the European Monetary System, or if any
other currency unit in which a Security is denominated or payable ceases
to be used for the purposes for which it was established, in each case
as determined in good faith by the Company, then with respect to each
date for the payment of principal of, premium, if any, and interest, if
any, on the applicable Security denominated or payable in such Foreign
Currency, ECU or such other currency unit occurring after the last date
on which such Foreign Currency, ECU or such other currency unit was so
used (the "Conversion Date"), the Dollar shall become the currency of
payment for use on each such payment date (but ECU or the Foreign
Currency or the currency unit previously the currency of payment shall,
at the
<PAGE> 43
35
Company's election, resume being the currency of payment on the
first such payment date preceded by 15 Business Days during which the
circumstances which gave rise to the Dollar becoming such currency no
longer prevail, in each case as determined in good faith by the
Company). The Dollar amount to be paid by the Company to the Trustee and
by the Trustee or any Paying Agent to the Holder of such Security with
respect to such payment date shall be the Dollar Equivalent of the
Foreign Currency or, in the case of a currency unit, the Dollar
Equivalent of the currency unit, as determined by the Exchange Rate
Agent (which shall be delivered in writing to the Trustee not later than
the fifth Business Day prior to the applicable payment date) as of the
Conversion Date or, if later, the date most recently preceding the
payment date in question on which such determination is possible of
performance, but not more than 15 days before such payment date (such
Conversion Date or date preceding a payment date as aforesaid being
called the "Valuation Date") in the manner provided in paragraph (g) or
(h) below.
(f) If the Holder of a Registered Security denominated in a
currency unit elects payment in a specified Foreign Currency or
currency unit as provided for by paragraph (b) and such Foreign
Currency ceases to be used both by the government of the country which
issued such currency and for the settlement of transactions by public
institutions of or within the international banking community, or if
ECU ceases to be used within the European Monetary System, or if
another currency unit ceases to be used for the purposes for which it
is established, in each case as determined in good faith by the
Company, such Holder shall (subject to paragraph (e) above) receivable
payment in the currency unit in which the Security is denominated. Each
payment covered by an election pursuant to paragraph (b) above shall be
governed by the provisions of this paragraph (f) (but, subject to any
contravening valid election pursuant to paragraph (b) above, the
specified Foreign Currency or ECU or other currency unit shall, at the
Company's election, resume being the currency or currency unit, as
applicable, of payment with respect to Holders who have so elected, but
only with respect to payments on payment dates preceded by 15 Business
Days during which the circumstances which gave rise to such currency
unit becoming the currency unit of payment, no longer prevail, in each
case as determined in good faith by the Company).
(g) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Exchange Rate Agent as of each Valuation Date and
shall be obtained by converting the specified Foreign Currency into
Dollars at the Market Exchange Rate on the Valuation Date.
(h) The "Dollar Equivalent of the Currency Unit" shall be determined
by the Exchange Rate Agent as of each Valuation Date and shall be the
sum obtained by adding together the results obtained by converting the
Specified Amount of each Component Currency into Dollars at the Market
Exchange Rate on the Valuation Date for such Component Currency.
(i) For purposes of this Section 410 the following terms shall have
the following meanings:
A "Component Currency" shall mean any currency which, on the
Conversion Date, was a component currency of the relevant currency
unit, including without limitation ECU.
A "Specified Amount" of a Component Currency shall mean the
number of units (including decimals) which such Component Currency
represented in the relevant currency unit, on the Conversion Date
or, if ECU and such currency unit is being used for settlement of
transactions by public institutions of or within the European
Communities or was so used after the Conversion Date, the Valuation
<PAGE> 44
36
Date or the last date the currency unit was so used, whichever is
later. If after such date the official unit of any Component
Currency is altered by way of combination or subdivision, the
Specified Amount of such Component Currency shall be divided or
multiplied in the same proportion. If after such date two or more
Component Currencies are consolidated into a single currency, the
respective Specified Amounts of such Component Currencies shall be
replaced by an amount in such single currency equal to the sum of
the respective Specified Amounts of such consolidated Component
Currencies expressed in such single currency, and such amount shall
thereafter be a Specified Amount and such single currency shall
thereafter be a Component Currency. If after such date any
Component Currency shall be divided into two or more currencies,
the Specified Amount of such Component Currency shall be replaced
by specified amounts of such two or more currencies, the sum of
which, at the Market Exchange Rate of such two or more currencies
on the date of such replacement, shall be equal to the Specified
Amount of such former Component Currency and such amounts shall
thereafter be Specified Amounts and such currencies shall
thereafter be Component Currencies.
"Market Exchange Rate" shall mean, as of any date, for any
currency or currency unit the noon Dollar buying rate for that
currency or currency unit, as the case may be, for cable transfers
quoted in New York City on such date as certified for customs
purposes by the Federal Reserve Bank of New York or such other rate
as may be established pursuant to Section 202 or Section 301, as the
case may be. If such rates are not available for any reason with
respect to one or more currencies or currency units for which an
Exchange Rate is required, the Exchange Rate Agent shall use, in its
sole discretion and without liability on its part, such quotation of
the Federal Reserve Bank of New York as of the most recent available
date, or quotations from one or more major banks in New York City or
in the country of issue of the currency or currency unit in
question, or such other quotations as the Exchange Rate Agent shall
deem appropriate. Unless otherwise specified by the Exchange Rate
Agent, if there is more than one market for dealing in any currency
or currency unit by reason of foreign exchange regulations or
otherwise, the market to be used in respect of such currency or
currency unit shall be that upon which a nonresident issuer of
securities designated in such currency or currency unit would, as
determined in its sole discretion and without liability on the part
of the Exchange Rate Agent, purchase such currency or currency unit
in order to make payments in respect of such securities.
All decisions and determinations of the Exchange Rate Agent
regarding the Dollar Equivalent of the Foreign Currency, the Dollar
Equivalent of the Currency Unit and the Market Exchange Rate shall
be in its sole discretion and shall, in the absence of manifest
error, be conclusive for all purposes and irrevocably binding upon
the Company and all Holders of the Securities and Coupons
denominated or payable in the relevant currency or currency units.
In the event that a Foreign Currency ceases to be used both by the
government of the country which issued such currency and for the
settlement of transactions by public institutions of or within the
international banking community, the Company, after learning
thereof, will immediately give notice thereof to the Trustee (and
the Trustee will promptly thereafter give notice in the manner
provided in Section 106 to the Holders) specifying the Conversion
Date. In the event the ECU ceases to be used within the European
Monetary System, or any other currency unit in which Securities or
Coupons are denominated or payable, ceases to be used for the
purposes for which it was established, the Company, after learning
thereof, will immediately give notice thereof to the Trustee (and
the Trustee will promptly thereafter give notice in the manner
provided in Section 106 to the Holders) specifying the Conversion
Date. Any actions taken pursuant to the parentheticals at the end
of
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37
the first sentence of Section 410(e) and at the end of
Section 410(f) shall be promptly set forth in like notices from the
Company to the Trustee and then from the Trustee to the Holders
(which notice may be mailed with payment to the Holders).
Subject to the provisions of Sections 701 and 703, the Trustee
shall be fully justified and protected in relying and acting upon
information received by it from the Company and the Exchange Rate
Agent, and shall not otherwise have any duty or obligation to
determine such information independently.
SECTION 411. Securities in Global Form. If Securities of a series are
issuable in global form, as specified as contemplated by Section 202 or Section
301, as the case may be, then, notwithstanding clause (a)(8) of Section 202 or
clause (b)(9) of Section 301, as the case may be, and the provisions of Section
401, such Security shall represent such of the Outstanding Securities of such
series as shall be specified therein and may provide that it shall represent the
aggregate amount of Outstanding Securities from time to time endorsed thereon
and that the aggregate amount of Outstanding Securities represented thereby may
from time to time be reduced or increased to reflect exchanges. Any endorsement
of a Security in global form to reflect the amount, or any increase or decrease
in the amount, of Outstanding Securities represented thereby shall be made by
the Trustee in such manner and upon instructions given by such Person or Persons
as shall be specified therein or in the Company Order (or, in the case of
Medium-Term Debt Securities, the Medium-Term Debt Securities Certificate) to be
delivered to the Trustee pursuant to Section 402 or Section 403. Subject to the
provisions of Section 402 and, if applicable, Section 403, the Trustee shall
deliver and redeliver any Security in definitive global bearer form in the
manner and upon written instructions given by the Person or Persons specified
therein or in the applicable Company Order (or, in the case of Medium-Term Debt
Securities, the Medium-Term Debt Securities Certificate). If a Company Order
(or, in the case of Medium-Term Debt Securities, Medium-Term Debt Securities
Certificate) pursuant to Section 402 or 403 has been, or simultaneously is,
delivered, any instructions by the Company with respect to endorsement or
delivery or redelivery of a Security in global form shall be in writing but need
not comply with Section 102 and need not be accompanied by an Opinion of
Counsel.
The provisions of the last sentence of the fifth paragraph of Section 402
shall apply to any Security represented by a Security in global form if such
Security was never issued and sold by the Company and the Company delivers to
the Trustee the Security in global form together with written instructions
(which need not comply with Section 102 and need not be accompanied by an
Opinion of Counsel) with regard to the reduction in the principal amount of
Securities represented thereby, together with the written statement contemplated
by the last sentence of the fifth paragraph of Section 402.
Notwithstanding the provisions of Section 406, unless otherwise specified as
contemplated by Section 202 or Section 301, as the case may be, payment of
principal of and any premium and any interest on any Security in definitive
global form shall be made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 407 and except as provided in the
preceding paragraph, the Company, and any agent of the Company may, and the
Trustee and any agent of the Trustee, at the direction of the Company, may treat
a Person as the Holder of such principal amount of Outstanding Securities
represented by a definitive global Security as shall be specified in a written
statement of the Holder of such definitive global Security or, in the case of a
definitive global Security in bearer form, of Euro-clear or CEDEL S.A. which is
produced to the Trustee by such Person; provided, however, that none of the
Company, the Trustee, the Security Registrar or any Paying Agent shall have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Security in
global form or for
<PAGE> 46
38
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
ARTICLE FIVE
Satisfaction and Discharge
SECTION 501. Satisfaction and Discharge of Indenture in Respect of Any
Series of Securities. This Indenture shall upon Company Request cease to be of
further effect with respect to a series of Securities (except as to any
surviving rights of (as applicable) registration of transfer or exchange of
Securities and Coupons, if any, of such series herein expressly provided for),
and the Trustee, at the request and expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to such series, when
(1) either
(A) all Securities and Coupons, if any, of such series theretofore
authenticated and delivered (other than (i) Securities and Coupons of
such series which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 405 and (ii) Securities and
Coupons of such series 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 1103) have been delivered to the Trustee for
cancelation; or
(B) all such Securities and Coupons of such series not theretofore
delivered to the Trustee for cancelation
(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 an amount in the currency or currency unit in which such
Securities and Coupons of such series are payable sufficient to pay and
discharge the entire indebtedness on such Securities and Coupons of such
series not theretofore delivered to the Trustee for cancelation, for
principal (and premium, if any) and interest, if any, to the date of
such deposit (in the case of Securities and Coupons of such series 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 with respect to such series of Securities; and
(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 the Securities of
the series under this Indenture have been complied with.
<PAGE> 47
39
Notwithstanding the satisfaction and discharge of this Indenture with
respect to a series, the obligations of the Company to the Trustee under
Section 707, the obligations of the Trustee to any Authenticating Agent under
Section 715 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 502 and the last paragraph of Section 1103 shall survive.
SECTION 502. Application of Trust Money. Subject to the provisions of the
last paragraph of Section 1103, all money deposited with the Trustee pursuant to
Sections 501 and 503 (and all money received as payment in connection with U.S.
Government Obligations and Foreign Government Securities deposited pursuant to
Section 503) shall be held in trust and applied by it, in accordance with the
provisions of the Securities and Coupons, if any, and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest, if any,
for whose payment such money has been deposited with the Trustee.
SECTION 503. Satisfaction, Discharge and Defeasance of Securities of Any
Series. (a) If this Section is specified, as contemplated by Section 202 or
Section 301, as the case may be, to be applicable to Securities and Coupons, if
any, of any series, at the Company's option, either
(i) the Company will be deemed to have been Discharged (as defined
below) from its obligations with respect to Securities and Coupons, if any,
of such series or
(ii) the Company will cease to be under any obligation with respect to
such series to comply with any term, provision or condition set forth in (x)
Sections 901, 902, 1104 and 1105 or (y) the instrument or instruments
setting forth the terms, provisions or conditions of such series pursuant to
Section 202 or Section 301, as the case may be (provided, in the case of
this subclause (y), that such instrument or instruments specify which terms,
provisions or conditions, if any, are subject to this clause (a)(ii) and
that no such instrument may specify that the Company may cease to comply
with any obligations as to which it may not be Discharged pursuant to the
definition of "Discharged").
(b) A Discharge pursuant to clause (a)(i) above shall be effective with
respect to the Securities and Coupons, if any, of such series on the 91st day
after the applicable conditions set forth below in (i) and either (ii) or (iii)
have been satisfied, and the Company's release from its obligations to comply
with certain obligations with respect to such series pursuant to clause (a)(ii)
above shall be effective with respect to the Securities and Coupons, if any, of
such series on the first day after the applicable conditions set forth below in
(i) and either (ii) or (iii) have been satisfied:
(i) the Company has:
(A) paid or caused to be paid all other sums payable with respect to
the Outstanding Securities and Coupons, if any, of such series (in
addition to any required under clause (b)(ii) or (b)(iii)); and
(B) 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 the entire
indebtedness on all Outstanding Securities and Coupons, if any, of any
such series have been complied with;
(ii) (A) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as a trust fund specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Securities and Coupons, if any, of such
<PAGE> 48
40
series (1) money in an amount (in such currency, currencies or
currency unit or units in which any Outstanding Securities and Coupons, if
any, of such series are payable) or (2) in the case of Securities and
Coupons, if any, denominated in Dollars, U.S. Government Obligations (as
defined below) or, in the case of Securities and Coupons, if any,
denominated in a Foreign Currency, Foreign Government Securities (as defined
below), which through the payment of interest and principal in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment of principal (including any premium) and
interest, if any, under the Securities and Coupons, if any, of such series,
money in an amount or (3) a combination of (1) and (2), which in any case of
clauses (1), (2) and (3) is sufficient (in the opinion with respect to (2)
and (3) of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee) to
pay and discharge each installment of principal of (including premium, if
any, on), and interest, if any, on, the Outstanding Securities and Coupons,
if any, of such series on the dates such installments of interest or
principal are due, in the currency, currencies or currency unit or units, in
which such Securities and Coupons, if any, are payable;
(B)(1) no Event of Default or event (including such deposit) which with
notice or lapse of time would become an Event of Default shall have occurred
and be continuing on the date of such deposit, (2) no Event of Default as
defined in clause (5) or (6) of Section 601, or event which with notice or
lapse of time or both would become an Event of Default under either such
clause, shall have occurred within 90 days after the date of such deposit,
and (3) such deposit and the related intended consequence under clause
(a)(i) or (a)(ii) above will not result in any default or event of default
under any material indenture, agreement or other instrument binding upon the
Company or any Subsidiary or any of their properties;
(C) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that Holders of the Securities and Coupons, if any, of
such series will not recognize income, gain or loss for Federal income tax
purposes as a result of the Company's exercise of its option under this
Section 503 and will be subject to Federal income tax in the same amount, in
the same manner and at the same times as would have been the case if such
option had not been exercised; and
(D) if the Securities of such series are then listed on the New York
Stock Exchange, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that such Securities will not be delisted as the
result of the Company's exercise of its option under this Section 503;
(iii) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified, as contemplated by Section 202
or Section 301, as the case may be, to be applicable to the Securities and
Coupons, if any, of such series.
(c) Any deposits with the Trustee referred to in clause (b)(ii)(A) above
will be made under the terms of an escrow trust agreement in form and substance
satisfactory to the Trustee. If any Outstanding Securities and Coupons, if any,
of such series are to be redeemed prior to their Stated Maturity, whether
pursuant to any mandatory redemption provisions or in accordance with any
mandatory sinking fund requirement, the applicable escrow trust agreement will
provide therefor and the Company will make arrangements for the giving of notice
of redemption by the Trustee in the name, and at the expense, of the Company.
SECTION 504. Reinstatement. If the Trustee is unable to apply any money,
U.S. Government Obligations or Foreign Government Securities in accordance with
Section 501 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such
<PAGE> 49
41
application, the Company's obligations under this Indenture and the Securities
and Coupons, if any, of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 501 until such time as the Trustee is
permitted to apply all such money, U.S. Government Obligations or Foreign
Government Securities in accordance with Section 501; provided, however, that if
the Company has made any payment of interest on or principal of (and premium, if
any) on any Securities and Coupons, if any, of such series because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such series of Securities and Coupons, if any, to receive such
payment from the money, U.S. Government Obligations or Foreign Government
Securities held by the Trustee.
SECTION 505. Definitions. The following terms, as used in this Article,
shall have the following meanings:
"Discharged" means that the Company will be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under,
the Securities and Coupons, if any, of the series as to which this Section
is specified as applicable as aforesaid and to have satisfied all the
obligations under this Indenture relating to the Securities and Coupons, if
any, of such series (and the Trustee, at the request and expense of the
Company, will execute proper instruments acknowledging the same), except (A)
the rights of Holders thereof to receive, from the trust fund described in
Section 503(b)(ii)(A), payment of the principal of (and premium, if any) and
the interest, if any, on such Securities and Coupons, if any, when such
payments are due, (B) the Company's obligations with respect to such
Securities and Coupons, if any, under Sections 404 and 405 (insofar as
applicable to Securities of such series), 502, 1102 and 1103 (last paragraph
only) and the Company's obligations to the Trustee under Section 707, (C)
the rights of Holders of Securities of any series with respect to
the currency or currency units in which they are to receive payments of
principal, premium, if any, and interest, if any, and (D) the rights,
powers, trusts, duties and immunities of the Trustee hereunder, will survive
such discharge. The Company will reimburse the trust fund for any loss
suffered by it as a result of any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or Foreign Government
Securities, as the case may be, or any principal or interest paid on such
obligations, and, subject to the provisions of Section 707, will indemnify
the Trustee against any claims made against the Trustee in connection with
any such loss.
"Foreign Government Securities" means, with respect to Securities and
Coupons, if any, of any series that are denominated in a Foreign Currency,
securities that are (i) direct obligations of the government that issued or
caused to be issued such currency for the payment of which obligations its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of such
government the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by such government, which, in either case
under clause (i) or (ii), are not callable or redeemable at the option of
the issuer thereof.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally guaranteed
as a full faith and credit obligation of the United States of America,
which, in either case under clause (i) or (ii), are not callable or
redeemable at the option of the issuer thereof, and will also include a
depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a specific payment of
interest on or principal of any such U.S. Government Obligation held by such
custodian for the account of the holder of a
<PAGE> 50
42
depository receipt, 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 depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
ARTICLE SIX
Remedies
SECTION 601. Events of Default. "Event of Default" with respect to any
series of Securities means each one of the events specified below in this
Section 601, unless it is either inapplicable to a particular series or is
specifically deleted or modified in or pursuant to the supplemental indenture,
Board Resolution or Medium-Term Debt Securities Certificate establishing such
series of Securities:
(1) default in the payment of any installment of interest upon any of
the Securities of such series, as and when the same shall become 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 premium, if any, on
any of the Securities of such series, as and when the same shall become due
and payable (subject to clause (3) below) either at maturity, upon
redemption, by declaration or otherwise; or
(3) default in the making of any payment for a sinking, purchase or
analogous fund provided for in respect of such series of Securities, as and
when the same shall become due and payable, and continuance of such default
for a period of 30 days; or
(4) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in respect
of the Securities of such series, or in this Indenture contained with
respect to such series, for a period of 90 days after the date on which
written notice of such failure requiring the Company to remedy the same and
stating that such notice is a `Notice of Default' hereunder, 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 25% in aggregate
principal amount of the Securities of such series at the time Outstanding;
or
(5) entry of a decree or order for relief in respect of the Company by a
court having jurisdiction in the premises in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for
any substantial part of its property, or ordering the winding-up or
liquidation of its affairs and such decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or
(6) commencement by the Company of a voluntary case under any applicable
Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent by the Company to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or for any
substantial part of its property, or any general assignment by the Company
for the benefit of creditors, or failure by the Company generally to pay its
debts as they become due, or the taking by the Company of any corporate
action in furtherance of any of the foregoing; or
(7) any other Event of Default provided with respect to Securities of
that series.
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43
SECTION 602. Acceleration of Maturity; Rescission and Annulment. If an Event
of Default with respect to Securities of any series at the time Outstanding
occurs and is continuing, then in each and every such case, either the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series or, in the case of an Event of Default
specified in Clause (5) or (6) of Section 601, of all series (voting as a class)
with respect to which such Event of Default has occurred and is continuing, may
declare the principal amount (or, if the Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all of the Securities of that series,
together with accrued interest thereon, if any, 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), together with accrued interest thereon, if any, shall become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(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 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) in Dollars 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 nonpayment 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 613.
No such rescission shall affect any subsequent default or impair any right
consequent thereon,
SECTION 603. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1) default shall be made in the payment of any installment of interest
on any Security or Coupon as and when the same shall become due and payable,
and such default shall have continued for the period of grace provided for
with respect to such Security or Coupon, as the case may be,
(2) default shall be made in the payment of the principal of or premium,
if any, on any Security as and when the same shall have become due and
payable (subject to clause (3) below), whether at maturity of the Security
or upon redemption or by
<PAGE> 52
44
declaration or otherwise, and such default shall have continued for any
period of grace provided for with respect to such Security, or
(3) default shall be made in the payment for any sinking, purchase or
analogous fund provided for in respect of any Security as and when the same
shall become due and payable, and such default shall have continued for any
period of grace provided for with respect to such Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and Coupons, if any, the whole amount then due and
payable on such Securities and Coupons, if any, for principal (and premium, if
any) and interest, if any, and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal (and premium, if
any) and on any overdue installments of interest, if any, at the rate or rates
prescribed therefor in such Securities and Coupons, if any, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and Coupons, if
any, and collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any other obligor upon
such Securities and Coupons, if any, wherever situated.
If an Event of Default with respect to Securities and Coupons, if any, 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 and/or Coupons 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 604. Trustee May File Proofs of Claim. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) 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
<PAGE> 53
45
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 707.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
and/or Coupons or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 605. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities and
Coupons, if any, may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or Coupons, if any, 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 and Coupons, if any, in respect of which such judgment has been
recovered.
SECTION 606. 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 premium, if any) or interest, upon
presentation of the Securities and Coupons, if any, 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 707;
SECOND: to the payment of the amounts then due and unpaid for principal
of (and premium, if any) and interest on the Securities and Coupons, if any,
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 and/or Coupons for principal
(and premium, if any) and interest, if any, respectively; and
THIRD: the balance, if any, to the Person or Persons entitled thereto.
SECTION 607. Limitation on Suits. No Holder of Securities of any series
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(1) an Event of Default with respect to Securities of such series shall
have occurred and be continuing and such Holder has previously given written
notice to the Trustee of such continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series or, in the case of an Event of Default
specified in Clause (5) or (6) of Section 601, of all series (voting as a
class) with respect to which such Event of Default has occurred and is
continuing, shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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46
(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 or, in the
case of an Event of Default specified in Clause (5) or (6) of Section 601,
of all series (voting as a class) with respect to which such Event of
Default has occurred and is continuing;
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 (including without limitation the provisions of Section 612)
to affect, disturb or prejudice the rights of any other of such Holders, or to
obtain or to seek to obtain priority or preference over any other of such
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all such Holders.
SECTION 608. Unconditional Right of Holders To Receive Principal, Premium
and Interest. Notwithstanding any other provision in this Indenture, the Holder
of any Security or any Coupon shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 406) interest, if any, on such Security or Coupon on the
Stated Maturity or 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 609. 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 and 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 610. Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities and/or Coupons, if any, in the last paragraph of Section 405,
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 611. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder of any Securities and/or Coupons 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. Subject to the provisions of Section 607, 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 612. Control by Holders. The Holders of not less than a majority in
principal amount of the Outstanding Securities of any series shall have the
right to direct
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the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series; provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture.
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 701, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Trust Officer or Officers of the Trustee,
determine that the action so directed would involve the Trustee in personal
liability.
SECTION 613. 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 premium, if any) or
interest, if any, on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Ten cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist with respect to
such series, and any Event of Default with respect to such series 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 614. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of a Security and/or Coupon by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Company, to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities of
any series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest, if any, on any
Security or the payment of interest on any Coupon on or after the Stated
Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 615. Waiver of Stay or Extension Laws. The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein
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granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE SEVEN
The Trustee
SECTION 701. Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Trust Officer, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Holders of a majority in principal amount of the Outstanding Securities
of any series, given pursuant to Section 612, relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture with respect to the Securities of such series; and
(4) 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.
(d) 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 702. Notice of Defaults. Within 90 days after the occurrence of any
default hereunder with respect to the Securities of any series, the Trustee
shall transmit to the
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Holders of Securities of such series notice as provided in Section 106 of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal of (or premium, if any, on) or interest on any Security
of such series or in the payment of any sinking fund installment with respect to
Securities of such series, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors or Responsible Trust Officers of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders of Securities of such series; provided further that in the case of
any default of the character specified in Section 601(4) with respect to
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the occurrence of such default. 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 703. Certain Rights of Trustee. Subject to the provisions of
Section 701:
(a) 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, coupon, other evidence of
indebtedness or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) 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;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon, other evidence of indebtedness or other
paper or document;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
counsel, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or counsel appointed with due care
(and, in the case of any agent, with the prior written consent of the
Company; provided, however, that the Company's prior written consent shall
not be required in connection with the appointment of an agent as a result
of or in connection with a default or an Event of Default) by it
hereunder; and
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(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
SECTION 704. Not Responsible for Recitals or Issuance of Securities. The
recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 705. May Hold Securities. The Trustee, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities or warrants to
purchase Securities and, subject to Sections 708 and 713, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Paying Agent, Security Registrar or such other agent.
SECTION 706. Money Held in Trust. Except as provided in Section 114, money
held by the Trustee or any Paying Agent in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
or any Paying Agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 707. Compensation and Reimbursement. The Company agrees
(1) to pay to the Trustee from time to time in Dollars such
compensation as shall be agreed to in writing between the Company and the
Trustee 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 in Dollars upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation
and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee in Dollars for, and to hold it harmless
against, any and all loss, liability, damage, claim or expense, including
taxes (other than taxes based upon, or measured or determined by, the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of 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.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of, premium, if any, or interest, if any,
on particular Securities.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 601(5) and Section 601(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state
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bankruptcy, insolvency or other similar law. The provisions of this Section
shall survive the termination of this Indenture and the resignation or removal
of the Trustee.
SECTION 708. Disqualification; Conflicting Interests. If the Trustee has or
shall acquire any conflicting interest, as defined in Section 310(b) of the
Trust Indenture Act, with respect to the Securities of any series, it shall,
within 90 days after ascertaining that it has such conflicting interest, either
eliminate such conflicting interest or resign with respect to the Securities of
that series in the manner and with the effect provided by, and subject to the
provisions of, Section 310(b) of the Trust Indenture Act and this Indenture.
In the event that the Trustee shall fail to comply with the provisions of
the preceding sentence with respect to the Securities of any series, the Trustee
shall, within 10 days after the expiration of such 90-day period, transmit, in
the manner and to the extent provided in Section 106, to all Holders of
Securities of that series notice of such failure.
Nothing herein shall prevent the Trustee from filing with the Commission
the application referred to in the penultimate paragraph of Section 310(b) of
the Trust Indenture Act.
To the extent permitted by the Trust Indenture Act, the Trustee shall not
be deemed to have a conflicting interest with respect to the Securities of any
series by virtue of being Trustee with respect to the Securities of any
particular series of Securities other than that series.
SECTION 709. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee for each series of Securities hereunder which shall be either
(1) a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by Federal or State authority and having a corporate
trust office located in The City of New York or (2) a corporation or other
Person organized and doing business under the laws of a foreign government that
is permitted to act as Trustee pursuant to a rule, regulation or order of the
Commission, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by authority of such foreign
government or a political subdivision thereof substantially equivalent to
supervision or examination applicable to United States institutional trustees;
in either case having a combined capital and surplus of at least $50,000,000. If
such corporation or Person publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation or Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
Neither the Company nor any Person directly or indirectly controlling,
controlled by, or under common control with the Company shall serve as trustee
for the Securities of any series issued hereunder. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 710. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 711.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 711 shall
not have been delivered to the resigning Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee
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may petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 708 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security of a series as to which the Trustee has a conflicting
interest for at least six months, or
(2) the Trustee for a series shall cease to be eligible under Section
709 and shall fail to resign after written request therefor by the Company
or by any Holder of Securities of such series, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 614, any
Holder who has been a bona fide Holder of a Security for at least six months
(and, in the case of Clause (1) above, who is a holder of a Security of a series
as to which the Trustee has a conflicting interest) may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Securities and the
appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of the 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
of or all such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and such successor Trustee
or Trustees shall comply with the applicable requirements of Section 711. 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 accordance with the
applicable requirements of Section 711, 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 appointment in the manner required by Section 711, 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.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by giving
notice of such event to all Holders of Securities of such series as provided by
Section 106. Each notice shall include
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the name of the successor Trustee with respect to the Securities of such series
and the address of its Corporate Trust Office.
SECTION 711. Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees cotrustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture, the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 712. 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 that such
corporation shall be otherwise qualified and eligible under
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this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 713. Preferential Collection of Claims Against Company. (a) Subject
to Subsection (b) of this Section, if the Trustee shall be or shall become a
creditor, directly or indirectly, secured or unsecured, of the Company within
three months prior to a default, as defined in Subsection (c) of this Section,
or subsequent to such a default, then, unless and until such default shall be
cured, the Trustee shall set apart and hold in a special account for the benefit
of the Trustee individually, the Holders of the Securities and Coupons, if any,
and the holders of other indenture securities, as defined in Subsection (c) of
this Section:
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three-month period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three-month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of
any such claim by any Person (other than the Company) who is liable
thereon, and (ii) the proceeds of the bona fide sale of any such claim
by the Trustee to a third Person, and (iii) distributions made in cash,
securities or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable
State law;
(B) to realize, for its own account, upon any property held by it
as security for any such claim, if such property was so held prior to
the beginning of such three-month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security
for any such claim, if such claim was created after the beginning of
such three-month period and such property was received as security
therefor simultaneously with the creation thereof, and if the Trustee
shall sustain the burden of proving that at the time such property was
so received the Trustee had no reasonable cause to believe that a
default, as defined in Subsection (c) of this Section, would occur
within three months; or
(D) to receive payment on any claim referred to in paragraph (B)
or (C), against the release of any property held as security for such
claim as provided in paragraph (B) or (C), as the case may be, to the
extent of the fair value of such property.
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For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three-month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held
in such special account and the proceeds thereof shall be apportioned among the
Trustee, the Holders and the holders of other indenture securities in such
manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, the same percentage of their respective
claims, figured before crediting to the claim of the Trustee anything on account
of the receipt by it from the Company of the funds and property in such special
account and before crediting to the respective claims of the Trustee and the
Holders and the holders of other indenture securities dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
but after crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such dividends and
from the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership for
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash, securities or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion among the Trustee, the Holders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee and the Holders and the holders of
other indenture securities with respect to their respective claims, in which
event it shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as security for any
such claim, or to make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the beginning of such
three-month period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three-month period, it shall be
subject to the provisions of this Subsection if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such three-month period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
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(b) There shall be excluded from the operation of Subsection (a) of this
Section a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment in full of the
principal of (or premium, if any, on) or interest on any of the Securities
or upon the other indenture securities when and as such principal or
interest becomes due and payable;
(2) the term "other indenture securities" means securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
which a default exists at the time of the apportionment of the funds and
property held in such special account;
(3) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security; provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation;
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(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act or Title
11 of the United States Code.
SECTION 714. Judgment Currency. If, for the purpose of obtaining a judgment
in any court with respect to any obligation of the Company hereunder or under
any Security or Coupon, it shall become necessary to convert into any other
currency or currency unit any amount in the currency or currency unit due
hereunder or under such Security or Coupon, then such conversion shall be made
at the Conversion Rate (as defined below) as in effect on the date the Company
shall make payment to any Person in satisfaction of such judgment. If pursuant
to any such judgment, conversion shall be made on a date other than the date
payment is made and there shall occur a change between such Conversion Rate and
the Conversion Rate as in effect on the date of payment or distribution, the
Company agrees to pay such additional amounts (if any) as may be necessary to
ensure that the amount paid is the amount in such other currency or currency
unit which, when converted at the Conversion Rate as in effect on the date of
payment or distribution, is the amount then due hereunder or under such Security
or Coupon. Any amount due from the Company under this Section 714 shall be due
as a separate debt and is not to be affected by or merged into any judgment
being obtained for any other sums due hereunder or in respect of any Security or
Coupon so that in any event the Company's obligations hereunder or under such
Security or Coupon will be effectively maintained as obligations in such
currency or currency unit. In no event, however, shall the Company be required
to pay more in the currency or currency unit stated to be due hereunder or under
such Security or Coupon.
For purposes of this Section 714, "Conversion Rate" shall mean, as of any
date, for any currency or currency unit into which an amount due hereunder or
under any Security or Coupon is to be converted, the noon buying rate in the
other currency or currency unit for that currency or currency unit for cable
transfers quoted in New York City on such date as certified for customs purposes
by the Federal Reserve Bank of New York. If such rates are not available for any
reason with respect to one or more currencies or currency units for which a
Conversion Rate is required, the Exchange Rate Agent shall use, in its sole
discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York as of the most recent available date, or quotations
from one or more major banks in New York City or in the country of issue of the
currency in question, or such other quotations as the Exchange Rate Agent shall
deem appropriate. Unless otherwise specified by the Exchange Rate Agent, if
there is more than one market for dealing in a currency or currency unit by
reason of foreign exchange regulations or otherwise, the market to be used in
respect of such currency or currency unit shall be that upon which a nonresident
issuer of securities designated in such currency or currency unit would, as
determined in its sole discretion and without liability on the part of the
Exchange Rate Agent, purchase such currency or currency unit in order to make
payments in respect of such Securities. If there does not exist a quoted
exchange rate in any currency or currency unit (the "First Currency") for
another currency unit (the "Second Currency"), then the Conversion Rate for the
Second Currency shall be equal to equivalent amount in the First Currency
obtained by converting the Specified Amount of each Component Currency of the
Second Currency into the First Currency at the Conversion Rate (determined as
provided above) for each such Component Currency on such date (or, if the First
Currency is a currency unit for which there is no quoted exchange rate in any
Component Currency, by converting the Specified Amount of each Component
Currency of the Second Currency into the Specified Amount of each Component
Currency of the First Currency at the Conversion Rate (determined as provided
above) for each such Component Currency on such date).
SECTION 715. Appointment of Authenticating Agent. The Company may appoint
an Authenticating Agent or Agents with respect to one or more series of
Securities which
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shall be authorized to act on behalf of the Trustee to authenticate Securities
of such series issued upon original issue or upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 405, 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
Trustee and shall at all times be a corporation having a combined capital and
surplus of not less than the equivalent of $50,000,000 and subject to
supervision or examination by Federal, state or District of Columbia authority
or the equivalent foreign authority, in the case of an Authenticating Agent who
is not organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia. 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, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of such 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 such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Company may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Trustee. 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 Company may appoint a successor Authenticating
Agent which shall be acceptable to the Trustee and shall mail, or cause to be
mailed, written notice of such appointment by first-class mail, postage prepaid,
to all Holders of Registered Securities, if any, of the series with respect to
which such Authenticating Agent will serve, as their names and addresses appear
in the Security Register. 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 Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
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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 herein issued under
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
By
---------------------------------
As Authenticating Agent
By
---------------------------------
Authorized [Officer] [Signatory]
If all the Securities of a series may not be originally issued at one time,
and if the Trustee does not have an office capable of authenticating Securities
upon original issuance located in a Place of Payment or other place where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Company shall appoint in accordance with this Section an
Authenticating Agent (which may be an Affiliate of the Company if eligible to be
appointed as an Authenticating Agent hereunder) having an office in such Place
of Payment or other place designated by the Company with respect to such series
of Securities.
ARTICLE EIGHT
Holders' Lists and Reports by Trustee and Company
SECTION 801. Company To Furnish Trustee Names and Addresses of Holders. The
Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not later than January 15 and July 15 in each year, a
list in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of each series of Registered Securities as of the
preceding January 1 or July 1, as the case may be, and such information
concerning the Holders of Bearer Securities which is known to the Company
or any Paying Agent other than the Company; provided, however, that the
Company and such Paying Agents shall have no obligation to investigate any
matter relating to any Holder of a Bearer Security or a Coupon; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content, such list to be dated as of a date not more than
15 days prior to the time such list is furnished, and such information
concerning the Holders of Bearer Securities which is known to the Company
or any such Paying Agent; provided, however, that the Company and such
Paying Agents shall have no obligation to investigate any matter relating
to any Holder of a Bearer Security or a Coupon;
notwithstanding the foregoing subsections (a) and (b), at such times as the
Trustee is the Security Registrar and Paying Agent with respect to a particular
series of Securities, no such list shall be required to be furnished in respect
of such series.
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SECTION 802. Preservation of lnformation; Communications to Holders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders of each series contained in the most recent
list furnished to the Trustee as provided in Section 801 and the names and
addresses of Holders of each series received by the Trustee in any capacity as
Security Registrar or Paying Agent. The Trustee may destroy any list furnished
to it as provided in Section 801 upon receipt of a new list so furnished.
(b) If three or more Holders of Securities of any series (herein referred
to as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security of such series
for a period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with other
Holders of Securities of such series with respect to their rights under this
Indenture or under such Securities and is accompanied by a copy of the form of
proxy or other communication which such applicants propose to transmit, then the
Trustee shall, within five business days after the receipt of such application,
at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 802(a), or
(ii) inform such applicants as to the approximate number of Holders of
Securities of such series whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with Section
802(a), and as to the approximate cost of mailing to such Holders the form
of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of Securities of such series whose name and address appear
in the information preserved at the time by the Trustee in accordance with
Section 802(a) a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interest of the Holders of such series or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities or Coupons, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
Holders in accordance with Section 802(b), regardless of the source from which
such information was derived, and that the Trustee shall not be held accountable
by reason of mailing any material pursuant to a request made under Section
802(b).
SECTION 803. Reports by Trustee. (a) Within 60 days after September 15 of
each year commencing with the September 15 occurring after the initial issuance
of Securities
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hereunder, the Trustee shall transmit by mail to the Holders of
Securities, as provided in Subsection (d) of this Section, a brief report dated
as of such September 15 with respect to any of the following events which may
have occurred during the twelve months preceding the date of such report (but if
no such event has occurred within such period, no report need be transmitted):
(1) any change to its eligibility under Section 709 and its
qualifications under Section 708;
(2) the creation of or any material change to a relationship specified
in Section 310(b)(1) through Section 310(b)(10) of the Trust Indenture Act;
(3) the character and amount of any advances (and if the Trustee elects
so to state, the circumstances surrounding the making thereof) made by the
Trustee (as such) which remain unpaid on the date of such report, and for
the reimbursement of which it claims or may claim a lien or charge, prior
to that of the Securities, on any property or funds held or collected by it
as Trustee, except that the Trustee shall not be required (but may elect)
to report such advances if such advances so remaining unpaid aggregate not
more than 1/2 of 1% of the principal amount of the Securities Outstanding
on the date of such report;
(4) any change to the amount, interest rate and maturity date of all
other indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 713(b)(2), (3), (4)
or (6);
(5) any change to the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(6) any additional issue of Securities which the Trustee has not
previously reported; and
(7) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 702.
(b) The Trustee shall transmit by mail to all Holders, as provided in
Subsection (d) of this Section, a brief report with respect to the character and
amount of any advances (and if the Trustee elects so to state, the circumstances
surrounding the making thereof) made by the Trustee (as such) since the date of
the last report transmitted pursuant to Subsection (a) of this Section (or if no
such report has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Securities, on property or funds held or collected
by it as Trustee and which it has not previously reported pursuant to this
Subsection, except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate 10%
or less of the principal amount of the Securities Outstanding at such time, such
report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each United States stock exchange upon
which any Securities are listed, with the Commission and with the Company.
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(d) Reports pursuant to Section 803(a) and 803(b) shall be transmitted by
mail (i) to all Holders, as their names and addresses appear in the Security
Register, (ii) to all Holders as have, within two years preceding such
transmission, filed their names and addresses with the Trustee for such purpose,
and (iii) except in the case of reports pursuant to Section 803(b), to all
Holders whose names and addresses have been furnished or received by the Trustee
pursuant to Sections 801 and 802.
SECTION 804. Reports by Company. The Company shall:
(1) file with the Trustee, within 15 days after the Company is required
to file the same with the Commission, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time in such rules and regulations;
(3) transmit by mail to all Holders of Securities, in the manner and to
the extent provided in Section 803(d) with respect to reports to be
transmitted pursuant to Section 803(a), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraph (1) of
(2) of this Section as may be required by rules and regulations prescribed
from time to time by the Commission; and
(4) promptly notify the Trustee when any Securities are listed on any
stock exchange.
ARTICLE NINE
Consolidation, Merger, Conveyance or Transfer
SECTION 901. Company May Consolidate, etc., Only on Certain Terms. The
Company shall not consolidate with or merge into any other corporation or convey
or transfer all or substantially all its properties and assets as an entirety to
any Person, unless:
(1) the successor Person formed by such consolidation or into which the
company is merged or the Person which acquires by conveyance or transfer
all or substantially all the properties and assets of the Company as an
entirety shall be a corporation, partnership, limited liability company,
trust or other entity organized and existing under the laws of the United
States of America or any state or the District of Columbia, and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of, and premium, if any, and interest, if
any, on all the
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Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed; and
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing.
SECTION 902. Successor Corporation Substituted. Upon any consolidation or
merger, or any conveyance or transfer of all or substantially all the
properties and assets of the Company as an entirety in accordance with Section
901, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance or transfer 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
corporation had been named as the Company herein; and in the event of any such
conveyance or transfer, the Company (which term shall for this purpose mean the
Person named as the "Company" in the first paragraph of this instrument or any
successor corporation which shall have theretofore become such in the manner
prescribed in Section 901) shall be discharged from all liability under this
Indenture and in respect of the Securities and may be dissolved and liquidated.
ARTICLE TEN
Supplemental Indentures
SECTION 1001. Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders, the Company, when authorized by or pursuant to a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities;
(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;
(3) to add any additional Events of Default with respect to all or any
series of the Securities (and, if such Event of Default is applicable to
less than all series of Securities, specifying the series to which such
Event of Default is applicable);
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to facilitate the issuance of Securities in
bearer form, registrable or not registrable as to principal, and with or
without interest coupons; to change or eliminate any restrictions on the
payment of principal of or any premium or interest on Bearer Securities, to
permit Bearer Securities to be issued in exchange for Registered
Securities, to permit Bearer Securities to be issued in exchange for Bearer
Securities of other authorized denominations; provided that any such
addition or change shall not
adversely affect the interests of the Holders of Securities of any series
or any related Coupons in any material respect;
(5) to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental
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indenture which is adversely affected by such change in or elimination of
such provision;
(6) to establish the form or terms of Securities of any series as
permitted by Sections 202 and 301;
(7) 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
711(b);
(8) if allowed under applicable laws and regulations, to permit payment
in the United States of principal, premium or interest on Bearer Securities
or Coupons, if any;
(9) to provide for the issuance of uncertificated Securities of one or
more series in addition to or in place of certificated Securities;
(10) to cure any ambiguity or to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein; or
(11) to make any other provisions with respect to matters or questions
arising under this Indenture; provided such other provisions as may be made
shall not adversely affect the interests of the Holders of outstanding
Securities of any series in any material respect.
SECTION 1002. Supplemental Indentures with Consent of Holders. With the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of all series affected by such supplemental indenture
(acting as one class), by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by or pursuant to a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders of Securities of such series under this indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each outstanding Security affected thereby,
(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 that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
602, or change any Place of Payment where, or the currency, currencies or
currency unit or units in which, any Security or any premium or the
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 affect
adversely the terms, if any, of conversion of any Security into stock or
other securities of the Company or of any other corporation,
(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,
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(3) change any obligation of the Company, with respect to Outstanding
Securities of a series, to maintain an office or agency in the places and
for the purposes specified in Section 1102 for such series, or
(4) modify any of the provisions of this Section, Section 613 or
Section 1107, except to increase any such percentage or to provide with
respect to any particular series the right to condition the effectiveness
of any supplemental indenture as to that series on the consent of the
Holders of a specified percentage of the aggregate principal amount of
Outstanding Securities of such series (which provision may be made pursuant
to Section 202 or Section 301, as the case may be, without the consent of
any Holder) 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 1107, or the deletion of this proviso, in accordance
with the requirements of Section 711(b) and 1001(7).
For purposes of this Section 1002, if the Securities of any series are
issuable upon the exercise of warrants, each holder of an unexercised and
unexpired warrant with respect to such series shall be deemed to be a Holder of
Outstanding Securities of such series in the amount issuable upon the exercise
of such warrant. For such purposes, the ownership of any such warrant shall be
determined by the Company in a manner consistent with customary commercial
practices. The Trustee for such series shall be entitled to rely on an Officers'
Certificate as to the principal amount of Securities of such series in respect
of which consents shall have been executed by holders of such warrants.
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 1003. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive (in addition to the opinion
which the Trustee is entitled to receive pursuant to Section 202), and (subject
to Section 701) 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, immunities or liabilities under this Indenture or otherwise.
SECTION 1004. 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 1005. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
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SECTION 1006. 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 ELEVEN
Covenants
SECTION 1101. Payment of Principal, Premium and Interest. The Company
covenants and agrees for the benefit of each series of Securities and Coupons,
if any, that it will duly and punctually pay the principal of (and premium, if
any, on) and interest, if any, on the Securities and Coupons, if any, of that
series in accordance with the terms of the Securities and Coupons, if any, of
such series and this Indenture.
SECTION 1102. Maintenance of Office or Agency. If Securities of a series
are issuable only as Registered Securities, the Company will maintain in each
Place of Payment for such series an office or agency where Securities of that
series may be presented or surrendered for payment, 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 Securities of that
series and this Indenture may be served. If Securities of a series are issuable
as both Registered or Bearer Securities or only as Bearer Securities, the
Company will maintain (A) in the Borough of Manhattan, The City of New York, an
office or agency where any Registered Securities of that series may be
presented or surrendered for payment, where any Registered Securities of that
series may be surrendered for registration of transfer, where Securities of
that series may be surrendered for exchange, where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served and where Bearer Securities of that series and related Coupons
may be presented or surrendered for payment in the circumstances described in
the proviso contained in the last sentence of this first paragraph of Section
1102 (and not otherwise), (B) subject to any laws or regulations applicable
thereto, in a Place of Payment for that series which is located outside the
United States, an office or agency where Securities of that series and related
Coupons may be presented and surrendered for payment (including payment of any
additional amounts payable on Securities of that series pursuant to Section
1108); provided, however, that if the Securities of that series are listed on
any stock exchange located outside the United States and such stock exchange
shall so require, the Company will maintain a Paying Agent for the Securities
of that series in any required city located outside the United States, so long
as the Securities of that series are listed on such exchange, and (C) subject
to any laws or regulations applicable thereto, in a Place of Payment for that
series located outside the United States, an office or agency where any
Registered Securities of that series may be surrendered for registration of
transfer, where Securities of that series may be surrendered for exchange and
where notices and demands to or upon the Company in respect of the Securities
of that series and this Indenture may be served. The Company will give prompt
written notice to the Trustee and the Holders of the location, and any change
in the location, of any such office or agency. If at any time the Company shall
fail to maintain any such required office or agency in respect of any series of
Securities or shall fail to furnish the Trustee with the address thereof, such
presentations and surrenders of Securities of that series may be made and
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series and the related Coupons
may be presented and surrendered for payment (including payment of any
additional amounts payable on Bearer Securities of that series pursuant to
Section 1108) at the London office of the Trustee (or an agent with a London
office
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appointed by the Trustee and acceptable to the Company), and the Company hereby
appoints the same as its agent to receive such respective presentations,
surrenders, notices and demands. No payment of principal, premium or interest on
Bearer Securities shall be made at any office or agency of the Company in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States;
provided, however, that, if the Securities of a series are denominated and
payable in Dollars, payment of principal of and any premium and interest on any
Bearer Security (including any additional amounts payable on Securities of such
series pursuant to Section 1108) shall be made at the office of the Company's
Paying Agent in the Borough of Manhattan, The City of New York, if (but only if)
payment in Dollars of the full amount of such principal, premium, interest or
additional amounts, as the case may be, at all offices or agencies outside the
United States maintained for the purpose by the Company in accordance with this
Indenture is illegal or effectively precluded by exchange controls or other
similar restrictions.
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 accordance with the requirements set forth above for Securities of any series
for such purposes. The Company will give prompt written notice to the Trustee
and the Holders of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 1103. 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 (and
premium, if any, on) or interest, if any, on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum in the relevant currency (or a sufficient number of currency
units, as the case may be) sufficient to pay the principal (and premium, if any,
on) or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series
of Securities, it will, at or prior to the opening of business on each due date
of the principal of (and premium, if any, on) or interest, if any, on any
Securities of that series, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest, 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) hold all sums held by it for the payment of the principal of (and
premium, if any, on) or interest, if any, on Securities of that series in
trust for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities of that series) in making of any payment of
principal (and premium, if any, on) or interest, if any, on the Securities
of that series; and
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and charge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any,
on) or interest, if any, on any Security of any series and remaining unclaimed
for two years after such principal (and premium, if any) or interest has become
due and payable shall be paid to the Company, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security and
Coupons, if any, 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 and at the direction of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, notice that such money remains unclaimed and that, after a date
specified herein, 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. All moneys payable to the Company by the Trustee or any
Paying Agent as provided in the preceding sentence shall be paid to the Company
on May 31 of each year.
SECTION 1104. Limitation on Secured Indebtedness. Unless specified, as
contemplated by Section 202 or Section 301, as the case may be, not to be
applicable to Securities of any series, this Section shall be applicable to
Securities of each series for the benefit of the Securities of such series as
long as any Securities of such series are Outstanding (subject to clause (a)(ii)
of Section 503, as contemplated by subclause (x) thereof). The Company will not
create, assume, incur or guarantee, and will not permit any Restricted
Subsidiary to create, assume, incur or guarantee, any Secured Indebtedness
without making provision whereby all the Securities shall be secured equally and
ratable with (or prior to) such Secured Indebtedness (together with, if the
Company shall so determine, any other indebtedness of the Company or such
Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Securities) so long as such Secured Indebtedness shall be
outstanding unless such Secured Indebtedness, when added to (a) the aggregate
amount of all Secured Indebtedness then outstanding (not including in this
computation Secured Indebtedness if the Securities are secured equally and
ratably with (or prior to) such Secured Indebtedness and further not including
in this computation any Secured Indebtedness which is concurrently being
retired) and (b) the aggregate amount of all Attributable Debt then outstanding
pursuant to Sale and Leaseback Transactions entered into by the Company after
February 17, 1999, or, entered into by a Restricted Subsidiary after February
17, 1999, or, if later, the date on which it became a Restricted Subsidiary (not
including in this computation any Attributable Debt which is concurrently being
retired), would not exceed 15% of Consolidated Net Worth.
SECTION 1105. Limitation on Sale and Leaseback Transactions. Unless
specified, as contemplated by Section 202 or Section 301, as the case may be,
not to be applicable to Securities of any series, this Section shall be
applicable to Securities of each series for the benefit of the Securities of
such series as long as any Securities of such series are
<PAGE> 77
69
Outstanding (subject to clause (a)(ii) of Section 503, as contemplated by
subclause (x) thereof). The Company will not, and will not permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction unless (a) the sum
of (i) the Attributable Debt to be outstanding pursuant to such Sale and
Leaseback Transaction, (ii) all Attributable Debt then outstanding pursuant to
all other Sale and Leaseback Transactions entered into by the Company after
February 17, 1999, or entered into by a Restricted Subsidiary after February 17,
1999, or if later, the date on which it became a Restricted Subsidiary, and
(iii) the aggregate of all Secured Indebtedness then outstanding (not including
in this computation Secured Indebtedness if the Securities are secured equally
and ratably with (or prior to) such Secured Indebtedness) would not exceed 15%
of Consolidated Net Worth or (b) an amount equal to the greater of (i) the net
proceeds to the Company or the Restricted Subsidiary of the sale of the
Principal Property sold and leased back pursuant to such Sale and Leaseback
Transaction and (ii) the amount of Attributable Debt to be outstanding pursuant
to such Sale and Leaseback Transaction, is applied to the retirement of Funded
Debt of the Company or any Restricted Subsidiaries (other than Funded Debt which
is subordinated to the Securities or which is owing to the Company or any
Restricted Subsidiaries) within 180 days after the consummation of such Sale and
Leaseback Transaction.
SECTION 1106. Statement by Officers as to Default. The Company will deliver
to the Trustee, within 120 days after the end of each fiscal year, a written
certificate signed by the principal executive officer, the principal financial
officer or the principal accounting officer of the Company, stating that:
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under such officer's
supervision; and
(2) to such officer's knowledge, based on such review, the Company has
fulfilled all its obligations, and has complied with all conditions and
covenants, under this Indenture throughout such year, or, if there has been
a default in the fulfillment of any such obligation, condition or covenant,
specifying each such default known to him and the nature and status
thereof. For purposes of this Section 1106, compliance shall be determined
without regard to any grace period or requirement of notice provided
pursuant to the terms of this Indenture.
SECTION 1107. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any term, provision or condition set forth in
Section 1104 or Section 1105 if before the time for such compliance the Holders
of not less than a majority in principal amount of the Outstanding Securities of
all series affected thereby shall, by Act of such Holders (acting as one class),
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.
SECTION 1108. Additional Amounts. If the Securities of a series provide
for the payment of additional amounts, the Company will pay to the Holder of any
Security of such series or any related Coupon additional amounts as provided
therein. Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of or any premium or interest on, or in respect of, any
Security of any series or payment of any related Coupon or the net proceeds
received on the sale or exchange of any Security of any series, such mention
shall be deemed to include mention of the payment of additional amounts provided
for in this Section to the extent that, in such context, additional amounts are,
were or would be payable in respect thereof pursuant to the provisions of this
Section and express mention of the payment of additional amounts (if applicable)
in
<PAGE> 78
70
any provisions hereof shall not be construed as excluding additional amounts in
those provisions hereof where such express mention is not made.
If the Securities of a series provide for the payment of additional
amounts, at least 10 days prior to the first Interest Payment Date with respect
to that series of Securities (or if the Securities of that series will not bear
interest prior to Maturity, the first day on which a payment of principal and
any premium is made), and at least 10 days prior to each date of payment of
principal and any premium or interest if there has been any change with respect
to the matters set forth in the below-mentioned Officers' Certificate, the
Company will furnish the Trustee and the Company's Paying Agent or Paying
Agents, if other than the Trustee, with an Officers' Certificate instructing the
Trustee and such Paying Agent or Paying Agents whether such payment of principal
of and any premium or interest on the Securities of that series shall be made to
Holders of Securities of that series or any related Coupons who are United
States Aliens (as defined in such Securities) without withholding for or on
account of any tax, assessment or other governmental charge described in the
Securities of that series. If any such withholding shall be required, then such
Officers' Certificate shall specify by country the amount, if any, required to
be withheld on such Payments to such Holders of Securities or Coupons and the
Company will pay to the Trustee or such Paying Agent the additional amounts
required by this Section. The Company covenants to indemnify the Trustee and any
Paying Agent for, and to hold them harmless against, any loss, liability or
expense reasonably incurred without negligence or bad faith on their part
arising out of or in connection with actions taken or omitted by any of them in
reliance on any Officers' Certificate furnished pursuant to this Section.
ARTICLE TWELVE
Redemption of Securities
SECTION 1201. 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 202 or
Section 301, as the case may be, for Securities of any series) in accordance
with this Article.
SECTION 1202. Election To Redeem; Notice to Trustee. If the Company shall
desire to exercise the right to redeem all, or, as the case may be, any part of
the Securities of any series, 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), notifying the Trustee of such Redemption Date and
of the principal amount of Securities of such series to be redeemed. In the case
of any redemption of Securities prior to the expiration of any restriction on
such redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 1203. Selection by Trustee of Securities To Be Redeemed. If less
than all the Securities of any series are to be redeemed, 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
portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized denomination
for Securities of that series.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
<PAGE> 79
71
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 1204. Notice of Redemption. Notice of redemption shall be given not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of Securities to be redeemed, as provided in Section 106.
Each such notice of redemption shall specify the Redemption Date, the
Redemption Price, the Place or Places of Payment, that the Securities of such
series are being redeemed at the option of the Company pursuant to provisions
contained in the terms of the Securities of such series or in a supplemental
indenture establishing such series, if such be the case, together with a brief
statement of the facts permitting such redemption, that on the Redemption Date
the Redemption Price will become due and payable upon each Security redeemed,
that payment will be made upon presentation and surrender of the applicable
Securities, that all Coupons, if any, maturing subsequent to the date fixed for
redemption shall be void, that any interest accrued to the Redemption Date will
be paid as specified in said notice, that the redemption is pursuant to the
sinking fund, if such is the case, and that on and after said Redemption Date
any interest thereon or on the portions thereof to be redeemed will cease to
accrue. If less than all the Securities of any series are to be redeemed, the
notice of redemption shall specify the registration and, if any, CUSIP numbers
of the Securities of such series to be redeemed, and, if only Bearer Securities
of any series are to be redeemed, and if such Bearer Securities may be exchanged
for Registered Securities, the last date on which exchanges of Bearer Securities
for Registered Securities not subject to redemption may be made. In case any
Security of any series is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the Redemption Date, upon surrender of such Security and
any Coupons appertaining thereto, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof and with appropriate
Coupons will be issued, or, in the case of Registered Securities providing
appropriate space for such notation, at the option of the Holders, the Trustee,
in lieu of delivering a new Security or Securities as aforesaid, may make a
notation on such Security of the payment of the redeemed portion thereof.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1205. Deposit of Redemption Price. On or before the opening of
business on any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own paying Agent,
segregate and hold in trust as provided in Section 1103) an amount of money in
the relevant currency (or a sufficient number of currency units, as the case may
be) 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 1206. 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 and the Coupons for such interest appertaining to any
Bearer Securities so to be redeemed, except to the extent provided below, shall
be void. Upon surrender of any such Security for redemption in accordance with
said notice, together with all Coupons, if any, appertaining thereto maturing
after the Redemption Date, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided,
<PAGE> 80
72
however, that installments of interest on Bearer Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable only at an
office or agency located outside the United States (except otherwise provided
in Section 1102) and, unless otherwise specified as contemplated by Section 202
or Section 301, as the case may be, only upon presentation and surrender of
Coupons for such interest; provided further that, unless otherwise specified as
contemplated by Section 202 or Section 301, as the case may be, installments of
interest on Registered Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
406.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant Coupons maturing after the Redemption Date, such
Security may be paid after deducting from the Redemption Price an amount equal
to the face amount of all such missing Coupons, or the surrender of such missing
Coupon or Coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save each of
them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing Coupon in
respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided,
however, that interest represented by Coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided in
Section 1102) and, unless otherwise specified as contemplated by Section 202 or
Section 301, as the case may be, only upon presentation and surrender of those
coupons.
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 1207. 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 make available
for delivery to the Holder of such Security without service charge, a new
Security or Securities (with appropriate Coupons) of the same series and Stated
Maturity, 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 or, in the case of Registered
Securities providing appropriate space for such notation, at the option of the
Holder, the Trustee, in lieu of delivering a new Security or Securities as
aforesaid, may make a notation on such Security of the Payment of the redeemed
portion thereof.
ARTICLE THIRTEEN
Sinking Funds
SECTION 1301. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series, except as otherwise specified as contemplated by Section 202 or Section
301, as the case may be, for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series 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 Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may
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73
be subject to reduction as provided in Section 1302. Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of Securities of such series.
SECTION 1302. Satisfaction of Sinking Fund Payments with Securities. The
Company (1) may deliver Outstanding Securities (including all unmatured Coupons
appertaining thereto) 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 the Securities of
such series required to be made pursuant to the terms of such Securities as
provided for by the terms of such series; provided that such Securities have not
been previously so credited. Such Securities shall be received and the
outstanding principal amount thereof credited for such purpose by the Trustee at
the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 1303. Redemption of Securities for Sinking Fund. Not less than 60
days prior to each sinking fund payment date for any series of Securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for that series pursuant to the
terms of that series, 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 of that series pursuant to Section 1302 and
will also deliver to the Trustee any Securities (including all unmatured Coupons
appertaining thereto) to be so delivered. Not less than 30 days before 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 1203 and
cause notice of the redemption thereof to given in the name of and at the
expense of the Company in the manner provided in Section 1204. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Section 1206 and 1207.
ARTICLE FOURTEEN
Meetings of Holders of Securities
SECTION 1401. Purposes for Which Meetings May Be Called. A meeting of
Holders of Securities of any series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1402. Call, Notice and Place of Meetings. (a) The Trustee may at
any time call a meeting of Holders of Securities of any series for any purpose
specified in Section 1401, to be held at such time and at such place in the
Borough of Manhattan, The City of New York, or in London, as the Trustee shall
determine. Notice of every meeting of Holders of Securities of any series,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 106, not less than 20 nor more than 180 days prior to the
date fixed for the meeting.
(b) In case at any time the Company, by or pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding Securities
of any series shall have requested the Trustee to call a meeting of the Holders
of Securities of such series for any purpose specified in Section 1401, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not
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74
have made the first publication of the notice of such meeting within 20 days
after receipt of such request or shall not thereafter proceed to cause the
meeting to be held as provided herein, then the Company or the Holders of
Securities of such series in the amount above specified, as the case may be, may
determine the time and the place in the Borough of Manhattan, The City of New
York, or in London, for such meeting and may call such meeting for such purposes
by giving notice thereof as provided in subsection (a) of this Section.
SECTION 1403. Persons Entitled To Vote at Meetings. To be entitled to vote
at any meeting of Holders of Securities of any series, a Person shall be (1) a
Holder of one or more Outstanding Securities of such series or (2) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities of such series by such Holder or Holders. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 1404. Quorum; Action. The Persons entitled to vote a majority in
principal amount of the Outstanding Securities of a series shall constitute a
quorum for a meeting of Holders of Securities of such series. In the absence of
a quorum within 30 minutes of the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders of Securities of such
series, be dissolved. In any other case the meeting may be adjourned for a
period of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
of not less than 10 days as determined by the chairman of the meeting prior to
the adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 1402(a), except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened.
Except as limited by the proviso to Section 1002, and subject to the
provisions described in the next succeeding paragraph, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Securities of that series; provided,
however, that any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage, which is equal to or less than a majority, in principal amount of
the Outstanding Securities of a series may be adopted at a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as aforesaid
by the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Securities of any series duly held
in accordance with this Section shall be binding on all the Holders of
Securities of such series and the related Coupons, whether or not present or
represented at the meeting.
With respect to any consent, waiver or other action which this Indenture
expressly provides may be given by the Holders of a specified percentage of
Outstanding Securities of all series affected thereby (acting as one class),
only the principal amount of Outstanding Securities of any series represented at
a meeting or adjourned meeting duly reconvened at which a quorum is present,
held in accordance with this Section, and voting in favor of such action, shall
be counted for purposes of calculating the aggregate principal amount of
Outstanding Securities of all series affected thereby favoring such action.
SECTION 1405. Determination of Voting Rights; Conduct and Adjournment of
Meetings. (a) Notwithstanding any other provisions of this Indenture, the
Trustee may
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make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities of a series in regard to proof of the holding
of Securities of such series and of the appointment of proxies and in regard to
the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 104
and the appointment of any proxy shall be proved in the manner specified in
Section 104 or by having the signature of the person executing the proxy
witnessed or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holder of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face, may
be presumed valid and genuine without the proof specified in Section 104 or
other proof.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 1402(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy shall
be entitled to one vote for each $1,000 (or the equivalent thereof) principal
amount of the Outstanding Securities of such series held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called pursuant
to Section 1402 at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in principal amount of the Outstanding
Securities of such series represented at the meeting; and the meeting may be
held as so adjourned without further notice.
SECTION 1406. Counting Votes and Recording Action of Meetings. The vote
upon any resolution submitted to any meeting of Holders of Securities of any
series shall be by written ballots on which shall be subscribed the signatures
of the Holders of Securities of
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76
such series or of their representatives by proxy and the principal amounts and
serial numbers of the Outstanding Securities of such series held or represented
by them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
Securities of any series shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was given as provided in Section 1402 and, if
applicable, Section 1404. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
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.
THE WASHINGTON POST COMPANY,
by /s/ John B. Morse, Jr.
-------------------------------
Name: John B. Morse, Jr.
Title: Vice President-Finance
[SEAL]
Attest:
/s/ John F. Hockenberry
----------------------------
Name: John F. Hockenberry
Title: Assistant Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee,
by /s/ Michael D. Pinzon
-------------------------------
Name: Michael D. Pinzon
Title: Trust Officer
[SEAL]
Attest:
/s/ Aslyn Beckles
----------------------------
Name: Aslyn Beckles
Title: Trust Officer
<PAGE> 85
Exhibit A
(Form of Fixed Rate
(Form of Face of [Note]2/ ) Security with and without Optional
Redemption Provision)
[Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]3/
No.:
THE WASHINGTON POST COMPANY
% [Note] Due
CUSIP No.:
$
THE WASHINGTON POST COMPANY, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to or registered
assigns, the principal sum of Dollars, at the office or agency of the Company in
the Borough of Manhattan, The City and State of New York, on , in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payments of public and private debts, and to pay interest,
semi-annually on and of each year, on said principal sum at said office or
agency, in like coin or currency, at the rate of % per annum, from the or the,
as the case may be, next preceding the date of this [Note] to which interest has
been paid, unless the date hereof is a date to which interest has been paid, in
which case from the date of this [Note], or unless no interest has been paid on
the [Notes] due (as defined on the reverse hereof), in which case from until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after or as the case may
be, and before the following or , this [Note] shall bear interest from such or ,
provided, however, that if the Company shall default in the payment of interest
due on such or , then this [Note] shall bear interest from the next preceding or
to which interest has been paid, or, if no interest has been paid on the [Notes]
due , from . The interest so payable on any or will subject to certain
exceptions provided in the Indenture referred to on the reverse hereof, be paid
to the person in whose name this [Note] is registered at the close of business
on such or , as the case may be, next preceding such or , unless the Company
shall default in the payment of interest due on such interest payment date, in
which case such defaulted interest, at the option of the Company, may be paid to
the person in whose name this [Note] is registered at the close of business on a
special record date for the payment of such defaulted interest established by
notice to the registered holders of [Notes] not less than 10 days preceding such
special record date or may be paid in any other lawful
- --------
2/ Bracketed references to "Note" or "Notes" should be changed to reflect the
designation of the series of Securities being issued.
3/ The bracketed language is to be included if the Securities are included
within DTC's book-entry system.
<PAGE> 86
2
manner not inconsistent with the requirements of any securities exchange on
which the [Notes] due may be listed. Payment of interest may, at the option of
the Company, be made by check mailed to the registered address of the person
entitled thereto.
Reference is made to the further provisions of this [Note] set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This [Note] shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
under the Indenture referred to on the reverse hereof.
<PAGE> 87
3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: THE WASHINGTON POST
COMPANY
by
----------------------------
Name:
Title:
[SEAL]
Attest:
-------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities
of the series designated herein
issued under the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
by
----------------------------
Authorized Signatory
<PAGE> 88
4
(Form of Reverse of [Note])
This [Note] is one of a duly authorized issue of unsecured debentures,
notes or other evidences of indebtedness of the Company (hereinafter called the
"Securities"), of the series hereinafter specified, all issued or to be issued
under an indenture dated as of , 1998 (hereinafter called the
"Indenture"), duly executed and delivered by the Company to The First National
Bank of Chicago, a national banking association, as trustee (hereinafter called
the "Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the respective rights and duties
thereunder of the Trustee, the Company and the holders of the Securities. The
Securities may be issued in one or more series, which different series may be
issued in various aggregate principal amounts, may mature at different times,
may bear interest at different rates, may be subject to different redemption
provisions, may be subject to different sinking, purchase or analogous funds,
may be subject to different covenants and Events of Default and may otherwise
vary as in the Indenture provided. This [Note] is one of a series designated as
the % [Notes] due of the Company (hereinafter called the
"[Notes] due ") issued under the Indenture[, limited in aggregate
principal amount to $ ].
In case an Event of Default with respect to the [Notes] due , as
defined in the Indenture, shall have occurred and be continuing, the principal
hereof together with interest accrued thereon, if any, may be declared, and upon
such declaration shall become, due and payable, in the manner, with the effect
and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Securities at the time outstanding of all series to be
affected (acting as one class) to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Securities of such series to be affected; provided,
however, that no such supplemental indenture shall, among other things, (i)
change the fixed maturity of the principal of, or any installment of principal
of or interest on, any Security; (ii) reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption thereof;
(iii) impair the right to institute suit for the enforcement of any such payment
on or after the fixed maturity thereof (or, in the case of redemption, on or
after the redemption date); (iv) 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 the Indenture
or certain defaults thereunder and their consequences) provided for in the
Indenture; (v) change any obligation of the Company, with respect to outstanding
Securities of a series, to maintain an office or agency in the places and for
the purposes specified in the Indenture for such series; or (vi) modify any of
the foregoing provisions or the provisions for the waiver of certain covenants
and defaults, except to increase any applicable percentage of the aggregate
principal amount of outstanding Securities the consent of the holders of which
is required or to provide with respect to any particular series the right to
condition the effectiveness of any supplemental indenture as to that series on
the consent of the holders of a specified percentage of the aggregate principal
amount of outstanding Securities of such series or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each outstanding Security affected thereby. It is also provided in
the Indenture that the holders of a majority in aggregate principal amount of
the Securities of a series at the time outstanding may on behalf of the holders
of all the Securities of such series waive any past default under the Indenture
with respect to such series and its consequences, except a default in the
payment of the principal of, premium, if any, or interest, if any, on any
Security of such series or in respect of a covenant or provision which cannot be
modified without the consent of the
<PAGE> 89
5
Holder of each outstanding Security of the series affected. Any such consent or
waiver by the holder of this [Note] shall be conclusive and binding upon such
holder and upon all future holders and owners of the [Note] and any [Notes] due
which may be issued in exchange or substitution herefor, irrespective of whether
or not any notation thereof is made upon this [Note] or such other [Notes] due .
No reference herein to the Indenture and no provision of this [Note] or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this [Note] at the place, at the respective times, at the rate and
in the coin or currency herein prescribed.
The Indenture permits the Company to Discharge its obligations with
respect to the [Notes] due on the 91st day following the satisfaction of the
conditions set forth in the Indenture, which include the deposit with the
Trustee of money or U.S. Government Obligations or a combination thereof
sufficient to pay and discharge each installment of principal of (including
premium, if any, on) and interest, if any, on the outstanding [Notes] due .
If the Company shall, in accordance with Section 901 of the Indenture,
consolidate with or merge into any other corporation or convey or transfer all
or substantially all its properties and assets as an entirety to any Person, the
successor shall succeed to, and be substituted for, the Person named as the
"Company" on the face of this [Note], all on the terms set forth in the
Indenture.
The [Notes]due are issuable in registered form without coupons in
denominations of $1,000 or any integral multiple thereof. In the manner and
subject to the limitations provided in the Indenture, but without the payment of
any service charge, [Notes] due may be exchanged for an equal aggregate
principal amount of [Notes] due of other authorized denominations at the office
or agency of the Company maintained for such purpose in the Borough of
Manhattan, the City and State of New York.
[The [Notes] due may be redeemed as a whole, or from time to time
in part, at the option of the Company at any time upon mailing a notice of such
redemption not less than 30 nor more than 60 days prior to the date fixed for
redemption to the holders of the [Notes] due at their last registered
addresses, all as provided in the Indenture, at the following optional
redemption prices (expressed in percentages of the principal amount), together
in each case with accrued interest to the date fixed for redemption.
If redeemed during the twelve-month period beginning
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
]4/
</TABLE>
Upon due presentment for registration of transfer of this [Note] at the
office or agency of the Company for such registration in the Borough of
Manhattan, the City and State of New York, a new [Note] or [Notes] of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange herefor, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
- --------
4/ Bracketed language to be included in Securities redeemable at the option of
the Company.
<PAGE> 90
6
Prior to due presentment for registration of transfer of this [Note],
the Company, the Trustee and any agent of the Company or the Trustee may deem
and treat the registered holder hereof as the absolute owner of this [Note]
(whether or not this [Note] shall be overdue) for the purpose of receiving
payment of the principal of, premium, if any, and interest on this Note, as
herein provided, and for all other purposes, and neither the Company nor the
Trustee nor any agent of the Company or the Trustee shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, effectively
satisfy and discharge liability for moneys payable on this [Note].
No recourse for the payment of the principal of, premium, if any, or
interest on this [Note], or for any claim based hereon or otherwise in respect
hereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in the
Indenture or any indenture supplemental thereto or in any [Note], or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Unless otherwise defined in this [Note], all terms used in this [Note]
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
THIS [NOTE] SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
<PAGE> 91
EXHIBIT B
[FORMS OF CERTIFICATION]
EXHIBIT B.1
[FORM OF CERTIFICATE TO BE GIVEN BY
PERSON ENTITLED TO RECEIVE BEARER SECURITY]
CERTIFICATE
THE WASHINGTON POST COMPANY
[Insert title or sufficient description
of Securities to be delivered]
This is to certify that the above-captioned Securities are not being
acquired by or on behalf of a United States person, or for offer to resell or
for resale to a United States person or any person inside the United States, or,
if a beneficial interest in the Securities is being acquired by a United States
person, that such United States person is a financial institution as defined in
Section 1.165-12(c)(1)(v) of the United States Treasury Regulations, or is
acquiring through a financial institution, and that the Securities are held by a
financial institution that has agreed to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and
the regulations thereunder and that it is not purchasing for offer to resell or
for resale inside the United States.
As used herein, "United States person" means any citizen or resident of
the United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States, or any estate or trust the
income of which is subject to United States Federal income taxation regardless
of its source, and "United States" means the United States of America (including
the states and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
We undertake to advise you by telex if the above statement as to
beneficial ownership is not correct on the date of delivery of the
above-captioned Securities in bearer form as to all such Securities.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or
<PAGE> 92
2
threatened in connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate or a copy thereof to any
interested party in such proceedings.
Dated:___, 19_____
[To be dated on or after
_____________, 19____the date
determined as provided in the Indenture)]
[Name of Person Entitled to Receive Bearer
Security]
-------------------------------------------
(Authorized Signatory)
Name:
-----------------------------------
Title:
-----------------------------------
<PAGE> 93
EXHIBIT B.2
[FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR
AND CEDEL S.A.
IN CONNECTION WITH THE EXCHANGE OF A PORTION OF A
TEMPORARY GLOBAL SECURITY]
CERTIFICATE
THE WASHINGTON POST COMPANY
[Insert title or sufficient description
of Securities to be delivered]
This is to certify with respect to $ principal amount of the
above-captioned Securities (i) that we have received from each of the persons
appearing in our records as persons entitled to a portion of such principal
amount (our "Qualified Account Holders") a certificate with respect to such
portion substantially in the form attached hereto and (ii) that we are not
submitting herewith for exchange any portion of the temporary global Security
representing the above-captioned Securities excepted in such certificates.
We further certify that as of the (date hereof we have not received any
notification from any of our Qualified Account Holders to the effect that the
statements made by such Qualified Account Holders with respect to any portion of
the part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
Date:
-------------------------
[To be dated no earlier
than the Exchange Date]
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, BRUSSELS
OFFICE, as Operator of the Euro-clear
System]
[CEDEL S.A.]
By
-------------------------------
<PAGE> 94
EXHIBIT B.3
[FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR
AND CEDEL S.A. TO OBTAIN
INTEREST PRIOR TO AN EXCHANGE DATE]
CERTIFICATE
THE WASHINGTON POST COMPANY
[Insert title or sufficient
description of Securities]
We confirm that the interest payable on the Interest Payment Date on
[Insert Date] will be paid to each of the persons appearing in our records as
being entitled to interest payable on such date from whom we have received a
written certification, dated not earlier than such Interest Payment Date,
substantially in the form attached hereto. We undertake to retain certificates
received from our member organizations in connection herewith for four years
from the end of the calendar year in which such certificates are received.
We undertake that any interest received by us and not paid as provided
above shall be returned to the Trustee for the above Securities immediately
prior to the expiration of two years after such Interest Payment Date in order
to be repaid by such Trustee to the above issuer at the end of two years after
such Interest Payment Date.
Date: , 19
[To be dated on or after the
relevant Interest Payment Date]
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, BRUSSELS
OFFICE, as Operator of the Euro-clear
System]
[CEDEL S.A.]
By
----------------------------
<PAGE> 95
EXHIBIT B.4
[FORM OF CERTIFICATE TO BE GIVEN BY BENEFICIAL OWNERS
TO OBTAIN INTEREST PRIOR TO AN EXCHANGE DATE]
CERTIFICATE
THE WASHINGTON POST COMPANY
[Insert title or sufficient
description of Securities]
This is to certify that as of the Interest Payment Date on [Insert
Date] and except as provided in the third paragraph hereof, the above-captioned
Securities held by you for our account are not beneficially owned by a United
States person, and have not been acquired by or on behalf of a United States
person, or for offer to resell or for resale to a United States person or any
person inside the United States, or, if any of such Securities held by you for
our account are beneficially owned by a United States person, (i) such United
States person is a financial institution within the meaning of Section
1.165-12(c)(1)(v) of the United States Treasury Regulations purchasing for its
own account or has acquired such Securities through a financial institution and
(ii) such Securities are held by a financial institution that has agreed to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder and that it did
not purchase for offer to resell or for resale inside the United States.
As used herein, "United States person" means any citizen or resident of
the United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States or any estate or trust the
income of which is subject to United States Federal income taxation regardless
of its source, and "United States" means the United States of America (including
the states and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
This certificate excepts and does not relate to U.S. $ principal
amount of the above-captioned Securities appearing in your books as being held
for our account as to which we are not yet able to certify and as to which we
understand interest cannot be credited unless and until we are able to so
certify.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Date:____________, 19___
[To be dated on or after
the 15th day before the
relevant Interest Payment Date]
[Name of Person Entitled to Receive
Interest]
------------------------------------
(Authorized Signature)
Name:
-----------------------------
Title:
-----------------------------
<PAGE> 96
EXHIBIT B.5
[FORM OF CONFIRMATION TO BE SENT TO
PURCHASERS OF BEARER SECURITIES]
By your purchase of the securities referred to in the accompanying
continuation (the "Securities"):
You represent that you are not a United States person or, if you are a
United States person, you are a financial institution as that term is defined in
Section 1.165-12(c)(1)(v) of the United States Treasury Regulations, or are
acquiring through a financial institution, and that the Securities will be held
by a financial institution that agrees to comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of
1986, as amended, and the regulations thereunder and are not purchasing the
Securities on behalf of any United States person other than such a financial
institution or for offer to resell or for resale inside the United States.
If you are a dealer, (a) you also represent that you have not offered,
sold or delivered, and agree that you will not offer, sell, resell or deliver,
any of such Securities, directly or indirectly, in the United States or to any
United States person other than such a financial institution and (b) you agree
that you will deliver to all purchasers of such Securities from you a written
statement in this form.
As used herein, "United States" means the United States of America
(including the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction and "United States
person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States and an estate or trust the income of which is subject to United
States Federal income taxation regardless of its source.
<PAGE> 1
EXHIBIT 11
THE WASHINGTON POST COMPANY
AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE OF COMMON STOCK
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding
Class A Common
Class B Common (excluding shares 1,739 1,754 1,802
issuable upon exercise of
stock options - accounted
for below) 8,348 8,946 9,162
--------- --------- ---------
Shares used in computation of basic 10,087 10,700 10,964
earnings per share
Add - Shares assumed issuable upon
exercise of stock options 185 172 109
Deduct - Shares assumed to be
purchased for Treasury with proceeds
from exercise of stock options (143) (139) (93)
--------- --------- ---------
Shares used in computation of
diluted earnings per common share 10,129 10,733 10,980
========= ========= =========
Net income available for common shares $ 416,303 $ 280,618 $ 220,137
========= ========= =========
Basic earnings per common share $ 41.27 $ 26.23 $ 20.08
========= ========= =========
Diluted earnings per common share $ 41.10 $ 26.15 $ 20.05
========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting
Incorporation Stock
or Owned
Name of Subsidiary Organization by Company
------------------ ------------ ----------
<S> <C> <C>
Bowater Mersey Paper Company Limited ..................................... Nova Scotia 49%
Cable One, Inc. .......................................................... Delaware 100%
Capitol Fiber, Inc. ...................................................... Maryland 80%
The Daily Herald Company ................................................. Washington 100%
The Gazette Newspapers, Inc. ............................................. Maryland 100%
Greater Washington Publishing, Inc. ...................................... Delaware 100%
I.H.T. Corporation ....................................................... Delaware 50%
International Herald Tribune S.A.S. ........................... France 33-1/3%
International Herald Tribune S.A.S. ...................................... France 33-1/3%
Legi-Slate, Inc. ......................................................... Delaware 100%
Los Angeles Times-Washington Post News
Service, Inc. ...................................................... D.C. 50%
Newsprint, Inc. .......................................................... Virginia 100%
Newsweek, Inc. ........................................................... New York 100%
Newsweek Productions, Inc. .................................... Delaware 100%
Newsweek Services, Inc. ....................................... Delaware 100%
Newsweek Services (Canada), Inc. .............................. Delaware 100%
Post-Newsweek Business Information, Inc. ................................. Virginia 100%
Post-Newsweek Cable of North Dakota, Inc. ................................ Delaware 100%
Post-Newsweek Stations, Inc............................................... Delaware 100%
Post-Newsweek Stations, Florida, Inc. ......................... Florida 100%
Post-Newsweek Stations, Houston, Inc. ......................... Delaware 100%
Post-Newsweek Stations, Michigan, Inc. ........................ Delaware 100%
Post-Newsweek Stations, Orlando, Inc. ......................... Delaware 100%
Post-Newsweek Stations, San Antonio, Inc. ..................... Delaware 100%
Robinson Terminal Warehouse Corporation .................................. Delaware 100%
</TABLE>
<PAGE> 2
SUBSIDIARIES OF THE COMPANY
(Continued)
<TABLE>
<CAPTION>
Jurisdiction % of
of Voting
Incorporation Stock
or Owned
Name of Subsidiary Organization by Company
------------------ ------------ ----------
<S> <C> <C>
Kaplan Educational Centers, Inc. ............................................. Delaware 100%
Career Expo, Inc. ................................................. Ohio 100%
Dearborn Publishing Group, Inc. ................................... Delaware 100%
Dearborn Financial Institute, Inc. ...................... Illinois 100%
Anthony Schools Corporation ................... California 100%
LCP International Institute, Inc. ................................. California 100%
The Lendman Group, Inc. ........................................... Virginia 100%
Payne Lendman, Inc. ..................................... Virginia 100%
Score Learning Corporation ........................................ California 100%
Stanley H. Kaplan Educational Center of
Canada Ltd. .................................................. Ontario 100%
The CEO Group, Inc. ..................................... Ontario 100%
Stanley H. Kaplan Educational Center of
Puerto Rico, Inc. ............................................ Puerto Rico 100%
Washingtonpost.Newsweek Interactive Company .................................. Delaware 100%
The Photo Store LLC ............................................... Maryland 50%
</TABLE>
- ------------
As permitted by Item 601(b)(21) of Regulation S-K, the foregoing list
omits certain subsidiaries which, if considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary" as that term is
defined in Rule 1-02(v) of Regulation S-X.
2
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 2-42170) of The Washington Post Company,
and in the Prospectus constituting a part thereof, of our report dated February
22, 1999 appearing on page 26 of this Annual Report on Form 10-K, and to the
reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Washington, D.C.
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED JANUARY 3, 1999, AND THE
CONSOLIDATED BALANCE SHEET AS OF JANUARY 3, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JAN-03-1999
<CASH> 15,190
<SECURITIES> 256,116
<RECEIVABLES> 291,564
<ALLOWANCES> 55,050
<INVENTORY> 20,154
<CURRENT-ASSETS> 404,878
<PP&E> 1,407,678
<DEPRECIATION> 566,616
<TOTAL-ASSETS> 2,729,661
<CURRENT-LIABILITIES> 389,079
<BONDS> 395,000
11,873
0
<COMMON> 20,000
<OTHER-SE> 1,568,103
<TOTAL-LIABILITY-AND-EQUITY> 2,729,661
<SALES> 0
<TOTAL-REVENUES> 2,110,360
<CGS> 0
<TOTAL-COSTS> 1,139,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67,892
<INTEREST-EXPENSE> 11,538
<INCOME-PRETAX> 668,059
<INCOME-TAX> 250,800
<INCOME-CONTINUING> 417,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 417,259
<EPS-PRIMARY> 41.27<F1>
<EPS-DILUTED> 41.10
<FN>
<F1>The information reported above under "EPS-PRIMARY" represents basic earnings
per share for the year ended January 3, 1999.
</FN>
</TABLE>
