AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DYNCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4581 36-2408747
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
2000 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191-3436
(703) 264-0330
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT's PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID L. REICHARDT
SENIOR VICE PRESIDENT AND
GENERAL COUNSEL
DYNCORP
2000 EDMUND HALLEY DRIVE
RESTON, VIRGINIA 20191-3436
(703) 264-9106
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
ROBERT B. OTT, ESQ.
ARNOLD & PORTER
555 TWELFTH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 942-5008
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 1/2 Senior Subordinated Notes due
2007.................................. $100,000,000 $994.84 $99,484,000 $30,147
</TABLE>
(1) Estimated pursuant to Rule 457(f) of the Securities Act of 1933 solely for
the purpose of computing the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL , 1997
PROSPECTUS
OFFER TO EXCHANGE 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 OF
[DYNCORP LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1997 UNLESS EXTENDED.
DynCorp, a Delaware corporation (the "Company" or "DynCorp"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 9 1/2% Senior
Subordinated Notes due 2007 (the "Exchange Notes"), which exchange has been
registered under the Securities Act of 1933, as amended (the "securities Act"),
pursuant to a registration statement of which this Prospectus is a part (the
"Registration Statement"), for each $1,000 principal amount of its outstanding
9 1/2% Senior Subordinated Notes due 2007 (the "Original Notes"), of which
$100.0 million in aggregate principal amount are outstanding as of the date
hereof. The form and terms of the Exchange Notes are the same as the form and
terms of the Original Notes except that (i) the exchange will have been
registered under the Securities Act, and hence the Exchange Notes will not bear
legends restricting the transfer thereof, and (ii) holders of the Exchange Notes
will not be entitled to certain rights of holders of the Original Notes under
the Registration Rights Agreement (as defined herein), which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Original Notes (which they replace) and will be
entitled to the benefits of an indenture dated as of March 17, 1997 by and
between the Company and United States Trust Company of New York, as Trustee (the
"Trustee"), governing the Original Notes and the Exchange Notes (the
"Indenture"). The Original Notes and the Exchange Notes are sometimes referred
to herein collectively as the "senior Subordinated Note" or the "Notes." See
"The Exchange Offer" and "Description of Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Original Notes. Consequently, the Exchange Notes will bear interest at
the rate of 9 1/2% per annum and the interest will be payable semi-annually on
March 1 and September 1 of each year commencing on September 1, 1997. The
Exchange Notes will bear interest from and including the date of issuance of the
Original Notes (March 17, 1997) (the "Issue Date"). Holders whose Original Notes
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
The Notes are redeemable, in whole or in part, at the option of the Company,
on or after March 1, 2002 at the redemption prices set forth herein, plus
accrued interest to the date of redemption. In addition, on or prior to March 1,
2000 the Company, at its option, may redeem up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Public Equity Offerings (as defined) at the redemption price set forth herein,
plus accrued interest to the date of redemption; provided that at least 65% of
the original aggregate principal amount of the Notes remains outstanding after
any such redemption.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. At December 31, 1996 on a pro forma basis after giving
effect to the issuance of the Notes and the New Securitization Facility (as
defined), the aggregate outstanding amount of Senior Debt of the Company would
have been approximately $58.2 million (including issued but undrawn letters of
credit of $4.0 million and excluding unused commitments expected to be available
for borrowing of $71.0 million). The Notes will be effectively subordinated to
all secured indebtedness of the Company as well as existing and future
obligations of the Company's subsidiaries.
Upon a Change of Control (as defined), each holder of the Notes will have
the right to require the Company to repurchase such holder's Notes at a price
equal to 101% of their principal amount, plus accrued interest to the date of
repurchase. In addition, the Company will be obligated to offer to repurchase
the Notes at 100% of their principal amount, plus accrued interest to the date
of repurchase in the event of certain asset sales. See "Description of Notes."
------------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 13 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS WHICH HOLDERS OF ORIGINAL NOTES SHOULD CONSIDER IN
CONNECTION WITH THIS EXCHANGE OFFER.
The Company will accept for exchange any and all validly tendered Original
Notes not withdrawn prior to 5:00 p.m., New York City time, on 1997
unless extended by the Company, in its sole discretion (the "Expiration Date").
Tenders of Original Notes may be withdrawn at any time prior to the Expiration
Date. The Exchange Date is subject to certain customary conditions. See "The
Exchange Offer--Certain Conditions to the Exchange Offer." Original Notes may be
tendered only in integral multiples of $1,000.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for Original Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Exchange Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Original
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met.
Each broker-dealer that receives the Exchange Notes for its own account in
exchange for the Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Original Notes where such Original Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has indicated its intention to make this Prospectus (as
it may be amended or supplemented) available to any broker-dealer for use in
connection with any such resale for a period of 90 days after the Expiration
Date. See "Plan of Distribution." The Company believes that none of the
registered holders of the Original Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Although the Original Notes are eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market,
prior to this Exchange Offer, there has been no public market for the Original
Notes. The Company does not intend to list the Notes on any securities exchange
or to seek approval for quotations through any automated quotation system. There
can be no assurance that an active market for the Notes will develop. To the
extent that a market for the Notes does develop, the market value of the Notes
will depend on market conditions (such as yields on alternative investments),
general economic conditions, the Company's financial condition and other
conditions. Such conditions might cause the Senior Subordinated Notes, to the
extent that they are actively traded, to trade at a significant discount from
face value. See "Risk Factors--Absence of Public Market."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus
or the accompanying Letter of Transmittal, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus or the accompanying
Letter of Transmittal, nor any exchange made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Exchange Notes offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof.
The Company is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports and other information filed by the Company may be examined without
charge at, or copies obtained upon payment of prescribed fees from, the Public
Reference Section of the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and are also available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Electronic filings filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
system (EDGAR) are publicly available through the Commission's home page on the
Internet at http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will file with the Commission and furnish to the holders
of the Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K,
including for each, a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereof by the Company's independent public accountants and (ii)
all reports filed on Form 8-K. In addition, for so long as any of the Notes
remain outstanding, the Company has agreed to make available to any prospective
purchaser of the Notes or beneficial owner of the Notes in connection with any
sale thereof, the information required by Rule 144(d)(4) under the Securities
Act.
CERTAIN INFORMATION INCORPORATED BY REFERENCE
The following document filed with the Commission by the Company pursuant to
the Exchange Act is incorporated by reference into this Prospectus:
1. Annual Report of the Company on Form 10-K for the year ended
December 31, 1996.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM H.
MONTGOMERY HOUGEN, VICE PRESIDENT AND SECRETARY AND DEPUTY GENERAL COUNSEL,
DYNCORP, 2000 EDMUND HALLEY DRIVE, RESTON, VIRGINIA 22091-3436, (703) 264-9108.
IN ORDER TO ENSURE EARLY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY [INSERT DATE].
This Prospectus includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such statements are identified by the use of
forward-looking words or phrases including, but not limited to, "intended,"
"will be positioned," "expects," "expected," "anticipates," and "anticipated."
These forward-looking statements are based on the Company's current
expectations. All statements other than statements of historical facts included
in this Prospectus or incorporated by reference therein, including those
regarding the Company's financial position, business strategy, projected costs,
and plans and objectives of management for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Because
forward-looking statements involve risks and uncertainties, the Company's actual
results could differ materially. Important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed under "Risk Factors," and elsewhere in this
Prospectus or incorporated by reference therein including, without limitation,
in conjunction with the forward-looking statements included in this Prospectus.
These forward-looking statements represent the Company's judgment as of the date
of this
iii
<PAGE>
Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
expressly qualified in their entirety by the Cautionary Statements. The Company
disclaims, however, any intent or obligation to update its forward-looking
statements.
This Prospectus is accompanied by a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, without exhibits ("Annual
Report").
The Company was incorporated in Delaware in 1946. The address of the
Company's principal executive offices is 2000 Edmund Halley Drive, Reston,
Virginia 20191-3436, telephone (703) 264-0330.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
Available Information...................................................................................... iii
Certain Information Incorporated by Reference.............................................................. iii
Summary.................................................................................................... 1
Risk Factors............................................................................................... 13
The Transactions........................................................................................... 18
Use of Proceeds............................................................................................ 19
Capitalization............................................................................................. 19
Unaudited Pro Forma Financial Data......................................................................... 20
Selected Historical Financial Data......................................................................... 24
Employee Stock Ownership Plan.............................................................................. 25
Description of Certain Financing Arrangements.............................................................. 26
The Exchange Offer......................................................................................... 26
Description of Notes....................................................................................... 36
Book-Entry; Delivery and Form.............................................................................. 60
Certain Federal Income Tax Considerations.................................................................. 61
Plan of Distribution....................................................................................... 64
Independent Public Accountants............................................................................. 64
Legal Matters.............................................................................................. 64
</TABLE>
v
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere or incorporated
by reference in this Prospectus. As used in this Prospectus, all references to
the Company include, unless the context indicates otherwise, DynCorp and its
subsidiaries.
THE COMPANY
DynCorp is a leading provider of diversified management, technical, and
professional services to a wide range of government customers. The Company's
principal markets are information management services, software development, and
system integration and analysis; facilities management; and aviation maintenance
and specialized support services. With current customers including the
Department of Defense ("DoD"), the Department of Energy ("DoE"), the National
Aeronautics and Space Administration ("NASA"), the Department of State, the
Department of Justice ("DoJ"), and various other U.S. Government agencies, the
Company is one of the foremost providers of services to the U.S. Government. The
Company has over 250 contracts that employ approximately 14,250 employees
throughout the United States and in numerous other countries. The Company is
strategically positioned to benefit from the growth trends in government and
commercial markets for information technology and outsourcing of technical,
professional and support services. For the year ended December 31, 1996, the
Company's total revenues and adjusted EBITDA (as defined) were $1,021.5 million
and $39.0 million, respectively.
The Company has a substantial base of long-term contracts with U.S.
Government customers that has provided a stable, recurring stream of revenues.
DynCorp's strong reputation and historical relationship with these customers is
a result of a high level of customer satisfaction and strong performance on
existing contracts. For the year ended December 31, 1996, approximately
one-third of DynCorp's revenues were generated from contracts where the Company
has served for eight years or more. These established customer relationships not
only improve the Company's knowledge of customer requirements, but also enhance
its position to bid on and win new business opportunities with these customers.
The Company's base of existing business resulted in total backlog of $3.0
billion at December 31, 1996 (including the estimated value of option years),
which represents a 4.0% increase from the December 31, 1995 level. The Company
anticipates that approximately $987.0 million of this backlog will be recognized
as revenues during fiscal year 1997.
The Company has achieved 56.0% revenue growth from December 31, 1991
through the year ended December 31, 1996 by winning business with new customers,
expanding business with existing customers, and through strategic acquisitions.
The Company has a strong track record of winning business with new customers,
where no previous relationship existed, particularly in the rapidly growing
information technology sector. Business with information technology customers
has grown substantially and, for the year ended December 31, 1996, accounted for
26.6% of total revenues. Because much of the Company's growth has come from new
non-DoD customers, DoD customer prime contracts accounted for 50.0% of revenues
for the year ended December 31, 1996 compared to 79.8% of revenues for the year
ended December 31, 1991.
A key component of the Company's business strategy has been the use of
strategic acquisitions and a focused marketing and business development effort
to exploit new business opportunities. DynCorp is organized into three principal
businesses: Information and Engineering Technology ("I&ET"), Enterprise
Management ("EM"), and Aerospace Technology ("AT").
1
<PAGE>
The following table shows revenues for the year ended December 31, 1996
for, and describes services provided by, the three principal business divisions
of the Company:
[A chart showing total revenues of 1,021.5 million for DynCorp. The
chart also also shows (a) revenues of 271.5 million for I&ET (with
services provided of Systems Services, Consulting Services, Engineering
Solutions, Network Management, and National Security Programs); (b)
revenues of $366.7 million for EM (with services provided of Facilities
Management, Administrative and Security Support Services, and Marine
Services); and (c) revenues for AT of $383.3 million (with services
provided of Field Service Operations, Test and Evaluation, Engineering
Technology, and Aviation Services.)]
Information and Engineering Technology. The Company designs, develops,
supports and integrates software and systems to provide customers with
comprehensive solutions for information management and engineering needs. The
specific operations of this division include software development and
maintenance, computer center operations, data processing and analysis, database
administration, telecommunications support and operations, maintenance and
operation of integrated electronic systems, and integration of electronic
systems in local and wide area networks. This division's contracts include the
design and development of a personnel records management system, including
imaging, database and client server technology, for the entire U.S. Navy, and
the provision of basic computer, software, and networking support to all of the
DoE's operations. One of the Company's key business strategies is to continue to
expand this division's presence in the rapidly growing information technology
market. This division also provides services in support of nuclear safeguards
and security research and development. As a result of internal growth and
numerous strategic acquisitions, this division has experienced a 262% growth in
revenues from December 31, 1991 through the year ended December 31, 1996. For
the year ended December 31, 1996, this division accounted for 26.6% of total
revenues.
Enterprise Management. The Company provides full service, "turn-key"
solutions for the management, operation and maintenance of federal and
commercial facilities. The Company manages large-scale facilities, using
sophisticated computerized work management and scheduled maintenance systems to
perform roads and grounds maintenance, civil engineering and custodial services,
landfill recycling, disposal operations, and vehicle and heavy equipment
maintenance. Other activities of this division include testing and evaluation of
military hardware systems at government test ranges, collection and processing
of data, maintenance of targets, ranges and laboratory facilities, health
services, developmental testing of complex weapons systems, security systems
work, and technology transfer into commercial applications. Services under this
division's contracts include facilities and equipment maintenance and management
provided to the DoE complexes at Rocky Flats, Colorado, and Hanford, Washington
and the Strategic Petroleum Reserve. In addition, this division's contracts
include the support of the DoJ's and the Drug Enforcement Agency's ("DEA")
drug-related asset seizure program. The division expects to benefit from
continued government outsourcing for both maintenance of government facilities
and performance of various activities. This division's operations typically
require minimal investments in
2
<PAGE>
working capital and fixed assets on the part of the Company. For the year ended
December 31, 1996, this division accounted for 35.9% of total revenues.
Aerospace Technology. The Company has been a leading provider of global
aerospace and engineering services. This division has the unique capability to
mobilize a work force quickly anywhere in the world to provide technology based
solutions to its customers. The Company is the largest DoD maintenance
contractor supporting multi-mission and training programs for weapon systems.
Specific activities of this division include technical and evaluation services
at test and training ranges; engineering, manufacturing and installation of
aircraft system upgrades; corrosive repairs and structural modifications that
extend airframe life for the aging fleet of military aircraft; ground based
logistics support and staff augmentation; and engineering and technical services
for high-technology space and missile systems programs. In addition, under a
five-year contract awarded in January 1997, the Company will provide contingency
planning, operations, logistical and other services for the Army Materiel
Command in support of U.S. Army contingency operations worldwide. This division
is expected to benefit from strong demand in several markets, including support
of aging aircraft, contractor logistics support, and global peacekeeping. Like
Enterprise Management, this division's operations typically require minimal
investments in working capital and fixed assets. For the year ended December 31,
1996, this division accounted for 37.5% of total revenues.
3
<PAGE>
BUSINESS STRENGTHS
DynCorp's revenues have increased 56.0%, from $654.7 million in 1991 to
$1,021.5 million for the year ended December 31, 1996. The Company's revenue
growth and market leadership are attributable to a number of factors, including
the following:
o Substantial Contracts and Backlog. The Company's services are generally
performed through large, long-term contracts with the U.S. Government.
Under most of these contracts, the Company is entitled to reimbursement
for all allowable costs incurred in providing its services, as well as a
fee. The Company's services also typically require minimal investments in
working capital, fixed assets, and other fixed costs. The Company's
substantial backlog of such contracts can be counted on to generate
strong and dependable cash flows with relatively low levels of operating
and credit risk.
o Proven Track Record and Established Reputation. The Company believes it
has achieved its position as a leading provider of diversified
management, technical and professional services to the U.S. Government by
developing the ability to integrate services and Company-wide
technologies to deliver total system solutions for clients. In addition,
DynCorp has well established relationships with its customers in both
civilian and military agencies. The Company has been supporting military
aviation programs worldwide since 1951. In addition, the Company has
performed services at the White Sands Missile Range since 1949 and at the
U.S. Navy Warfare Assessment Division in Norco, California since 1964.
o Technological Expertise. The Company's technological expertise provides
it with a competitive advantage in its primary markets. An example of
this expertise is DynCorp's development of an emerging technology
solution using its Enterprize(Registered) product, which is a key imaging
technology-based component of document handling and database management
systems. Other core information technology competencies include network
engineering, technology outsourcing, and database management.
o Unique Network of Highly Skilled Personnel Worldwide. DynCorp has the
ability to respond to clients' needs quickly. Over the years, DynCorp has
developed methods to plan, recruit, staff, and then efficiently manage
projects from central locations, allowing the Company to meet unique
client requests and to manage a large number of contracts at multiple
sites around the world. The Company currently manages over 250 contracts
with approximately 14,250 employees throughout the United States and in
numerous other countries.
o Successful Acquisition Record. Acquisitions have been an integral part
of the Company's strategic growth plans. Since 1990, the Company has
acquired 13 businesses, the majority of which have been primarily engaged
in the delivery of information technology services and solutions. These
businesses were acquired either to expand existing business into new
markets or to take newly acquired technologies into existing markets. The
Company has a proven capability to integrate acquired companies quickly
and to realize marketing and operating efficiencies.
o Strong Management Team. The Company has a highly experienced management
team that has successfully grown the Company's businesses. The Company's
operations are decentralized, with the senior business unit managers
responsible for strategic operating decisions, excluding financing and
top level corporate strategy. The senior managers have substantial
breadth of experience in the industry and have been responsible for the
expansion and diversification of the Company into new markets.
o Employee Ownership. The Employee Stock Ownership Plan ("ESOP") and
management own approximately 85% of the Company's capital stock on a
fully diluted basis, following the Company's and the ESOP's recent
purchases of securities from Capricorn Investors L.P. ("Capricorn"). The
Company believes its substantial employee ownership encourages both
managers and employees to act as stakeholders, and has been a significant
factor in providing an incentive for its employees.
4
<PAGE>
BUSINESS STRATEGY
The Company's business strategy consists of the following five key
elements:
o Maintain and Augment Core Businesses. The Company's core businesses in
enterprise management and aerospace technology have large, stable and
long-term contracts with the U.S. Government. These contracts typically
require minimal investment by the Company and represent a strong and
reliable source of revenues. The Company intends to retain and enhance
these valuable businesses by its intensive focus on customer satisfaction
and cost competitiveness.
o Leverage Customer Relationships. The Company works closely with its
customers to develop and design new services jointly and to improve the
performance and lower the cost of existing services. Management believes
this strategy, together with solid performance under existing contracts,
has led to additional long-term business from key customers as well as
with new customers.
o Expand Presence in Growing Information Technology Market. The Company
has developed core information technology competencies, including network
imaging and engineering, software development, and database management.
The Company believes demand for information technology services is
growing rapidly in both government and commercial markets. DynCorp
intends to leverage its existing information technology expertise to
expand business opportunities in this growing market.
o Continue to Pursue Strategic Acquisitions. The Company intends to
continue to acquire complementary businesses that provide opportunities
to enhance the Company's core services, diversify into new markets, and
create operating efficiencies. In implementing this strategy, management
intends to build upon its successful experience in integrating nine
acquired companies from 1990 to 1996 into the Company's Information and
Engineering Technology division.
o Expand and Diversify into New Markets. The Company continually seeks new
business opportunities that are complementary to its current operations.
For example, the Company intends to expand into the growing state and
local government outsourcing market, as the federal government moves
block grants down to the state level. The Company has also increased its
marketing to commercial customers and believes its proven track record
and technological expertise make it well positioned to increase
penetration in this market.
5
<PAGE>
THE TRANSACTIONS
In addition to the proceeds provided by the sale of the Original Notes (the
"Offering"), the Company intends to replace its existing accounts receivable
securitization facility ("Existing Securitization Facility") with a new
securitization facility ("New Securitization Facility"), which the Company
believes will be in place by April 30, 1997. Both the Existing Securitization
Facility and the New Securitization Facility will be non-recourse to the
Company. The Company and its ESOP have recently purchased a substantial portion
of the Company's equity securities formerly held by Capricorn in exchange for
cash and notes ("Capricorn Transaction"). Capricorn, an investment fund,
provided substantial capital in connection with the Company's leveraged buyout
in 1988. See "The Transactions" and "Description of Certain Financing
Arrangements."
The sources and uses of funds to replace the Existing Securitization
Facility and to pay the notes issued in connection with the Capricorn
Transaction are set forth in the following table (dollars in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ------------------------------------------ ------------------------------------------
<S> <C> <C> <C>
Issuance of Notes......................... $ 99.5 Replace Existing Securitization
Facility................................ $100.0
New Securitization Facility............... 50.0(1) Repay notes issued in connection with the
Capricorn Transaction................... 28.2
General Corporate Purposes................ 16.3
Estimated Fees and Expenses............... 5.0
------ ------
Total Sources................... $149.5 Total Uses................................ $149.5
------ ------
------ ------
</TABLE>
- ------------------
(1) At the closing of the New Securitization Facility, the Company will borrow
$50.0 million of $110.0 million expected to be available for borrowing based
upon current levels of eligible collateral.
Until the closing of the New Securitization Facility, the Company will have
the ability to borrow up to $50.0 million under a line of credit with Citicorp
North America, Inc. (the "Revolving Credit Facility"). Upon such closing, the
Revolving Credit Facility will be reduced to $15.0 million. See "Description of
Certain Financing Arrangements."
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................ The Company is offering to exchange $1,000 principal amount of
Exchange Notes for each $1,000 principal amount of Original Notes
that are properly tendered and accepted. The Company will issue
Exchange Notes on or promptly after the Expiration Date. There is
$100.0 million aggregate principal amount of Original Notes
outstanding. See "The Exchange Offer."
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, the Company believes
that the Exchange Notes issued pursuant to this Exchange Offer in
exchange for Original Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than (i) a broker-
dealer who purchases such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemptions under
the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is
acquiring the Exchange Notes in the ordinary course of its business
and is not participating, and had no arrangement or understanding
with any person to participate, in the distribution of the Exchange
Notes. Each broker-dealer that receives the Exchange Notes for its
own account in exchange for the Original Notes, where such Notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Notes.
Registration Rights Agreement............. The Original Notes were sold by the Company on March 17, 1997 to BT
Securities Corporation and Citicorp Securities, Inc. (the "Initial
Purchasers") pursuant to a Purchase Agreement dated as of March 11,
1997 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers entered into a Registration Rights
Agreement dated as of March 17, 1997 (the "Registration Rights
Agreement") which grants the holders of the Original Notes certain
exchange and registration rights. See "The Exchange
Offer--Termination of Certain Rights." This Exchange Offer is
intended to satisfy such rights, which terminate upon the
consummation of the Exchange Offer. The holders of the Exchange Notes
are not entitled to any exchange or registration rights with respect
to the Exchange Notes.
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, unless the Exchange Offer is extended by the Company
in its sole discretion, in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is
extended.
Accrued Interest on the Exchange Notes and
Original Notes.......................... The Exchange Notes will bear interest from and including the Issue
Date. Holders whose Original Notes are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on
the Original Notes.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Original
Notes being tendered for exchange.
Procedures for Tendering Notes............ Each holder of Original Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Original Notes and
any other required documentation to United States Trust Company of
New York, as Exchange Agent, at the address set forth herein. By
executing the Letter of Transmittal, each holder will represent to
the Company that, among other things, (i) the Exchange Notes to be
acquired by the holder of the Original Note in connection with the
Exchange Offer are being acquired by the holder in the ordinary
course of business of the holder, (ii) the holder has no arrangement
or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing
the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Commission
set forth in no-action letters (see "The Exchange Offer--Resale of
the Exchange Notes"), (iv) the holder understands that a secondary
resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes
acquired by such holder directly from the Company should be covered
by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission, and (v) the holder
is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original
Notes that were acquired as a result of market-making activities or
other trading activities, the holder is required to acknowledge in
the Letter of Transmittal that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the holder will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. See "The Exchange Offer--Procedures for Tendering."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Special Procedures for Beneficial
Owners.................................. Any beneficial owner whose Original Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender such Original Notes in the Exchange Offer
should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"The Exchange Offer--Procedures for Tendering." If such beneficial
owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and
delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such
owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Procedures............ Holders of Original Notes who wish to tender their Original Notes and
whose Original Notes are not immediately available or who cannot
deliver their Original Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to United States
Trust Company of New York, as Exchange Agent, prior to the Expiration
Date, must tender their Original Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Original Notes and
Delivery of the Exchange Notes.......... Subject to the satisfaction or waiver of the conditions to the
Exchange Offer, the Company will accept for exchange any and all
Original Notes that are properly tendered in the Exchange Offer prior
to the Expiration Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights......................... Tenders of Original Notes may be withdrawn at any time prior to the
Expiration Date. See "The Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations.......................... For a discussion of certain federal income tax considerations
relating to the exchange of the Original Notes for the Exchange
Notes, see "Certain Federal Income Tax Considerations."
Exchange Agent............................ United States Trust Company of New York is serving as the exchange
agent (the "Exchange Agent") in connection with the Exchange Offer.
United States Trust Company of New York also serves as Trustee under
the Indenture.
Consequences of Failure to Exchange....... The Original Notes that are not exchanged pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Notes may
be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule
144 under the Securities Act or pursuant to some other exemption
under the Securities Act, (iii) outside the United States to a
foreign person pursuant to the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
</TABLE>
9
<PAGE>
THE NOTES
<TABLE>
<S> <C>
The Exchange Notes........................ The Exchange Offer applies to $100.0 million aggregate principal
amount of the Original Notes. The form and terms of the Exchange
Notes are the same as the form and terms of the Original Notes except
that (i) the exchange will have been registered under the Securities
Act and, therefore, the Exchange Notes will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii)
holders of the Exchange Notes will not be entitled to certain rights
of holders of the Original Notes under the Registration Rights
Agreement, which rights will terminate upon consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the
Original Notes (which they replace) and will be issued under, and be
entitled to the benefits of, the Indenture. See "Description of
Notes" for further information and for definitions of certain
capitalized terms used below.
Maturity Date............................. March 1, 2007.
Interest Rate and Payment Dates........... The Exchange Notes will bear interest at a rate of 9 1/2% per annum.
Interest on the Exchange Notes will accrue from the Issue Date and
will be payable semi-annually on March 1 and September 1 of each
year, commencing on September 1, 1997.
Subordination............................. The Exchange Notes will be general unsecured obligations of the
Company and will be subordinated in right of payment to all existing
and future Senior Debt (as defined) of the Company. The Exchange
Notes will rank pari passu with the Original Notes. At December 31,
1996 on a pro forma basis after giving effect to the Offering and the
New Securitization Facility (as defined), the aggregate outstanding
amount of Senior Debt of the Company would have been approximately
$58.2 million (including issued but undrawn letters of credit of $4.0
million and excluding unused commitments expected to be available for
borrowing of $71.0 million). The Notes will be effectively
subordinated to all secured indebtedness of the Company as well as
existing and future obligations of the Company's subsidiaries. See
"Description of Notes--Subordination."
Optional Redemption....................... Except as described below, the Company may not redeem the Exchange
Notes prior to March 1, 2002. On or after such date, the Company may
redeem the Notes, in whole or in part, at the redemption prices set
forth herein, plus accrued interest to the date of redemption. In
addition, at any time on or prior to March 1, 2000, the Company may
redeem up to 35% of the aggregate principal amount of the Notes
originally issued in the Offering with the net cash proceeds of one
or more Public Equity Offerings (as defined) at a redemption price
equal to 109.50% of the principal amount to be redeemed, plus accrued
interest to the date of redemption; provided that at least 65% of the
original aggregate principal amount of the Notes remains outstanding
after any such redemption. See "Description of Notes--Optional
Redemption."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Control......................... Upon a Change of Control (as defined), each holder of the Notes will
have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of their principal amount, plus
accrued interest to the date of repurchase. See "Description of
Notes--Change of Control."
Certain Covenants......................... The Indenture governing the Notes (the "Indenture") contains certain
covenants that limit the ability of the Company and certain of its
subsidiaries to, among other things, incur additional indebtedness,
pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates,
incur indebtedness that is subordinate in right of payment to any
Senior Debt and senior in right of payment to the Notes, incur liens,
impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company and certain of its
subsidiaries, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. See "Description of
Notes--Certain Covenants."
</TABLE>
For additional information regarding the Notes, see "Description of Notes."
RISK FACTORS
See "Risk Factors," which begins on page 13, for a discussion of certain
factors that should be considered in evaluating an investment in the Exchange
Notes.
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical and unaudited pro forma
consolidated financial information of the Company. The summary historical
consolidated financial information of the Company for the three years ended
December 31, 1996 has been derived from the Company's audited financial
statements. The pro forma and other data for the year ended December 31, 1996,
give effect to the Offering, the New Securitization Facility, and the Capricorn
Transaction (collectively, the "Transactions"), as if such Transactions had
occurred on January 1, 1996, and the pro forma balance sheet data gives effect
to the Transactions as if the Transactions had occurred on December 31, 1996.
The following information should be read in conjunction with the "Unaudited Pro
Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements of the Company
and the notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
-----------------------
YEAR ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------
1996 1996 1995 1994
----------------------- ---------- -------- --------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................... $ 1,021,453 $1,021,453 $908,725 $818,683
Cost of services....................................... 970,163 970,163 871,317 783,121
----------- ---------- -------- --------
Gross profit........................................... 51,290 51,290 37,408 35,562
Corporate selling and administrative expense........... 18,241 18,241 18,705 16,887
----------- ---------- -------- --------
Operating income....................................... 33,049 33,049 18,703 18,675
Interest expense....................................... 14,609 10,220 14,856 14,903
Interest income........................................ (1,752) (1,752) (3,804) (2,398)
Other expenses......................................... 5,474 5,474 10,212 7,628
Income tax provision (benefit)......................... 4,137 5,893 (9,090) (2,236)
Minority interest...................................... 1,265 1,265 1,255 1,130
----------- ---------- -------- --------
Earnings (loss) from continuing operations before
extraordinary item................................... $ 9,316 $ 11,949 $ 5,274 $ (352)
=========== ========== ======== ========
OTHER DATA:
Adjusted EBITDA(1)..................................... $ 38,997 $ 38,997 $ 29,722 $ 29,177
Total debt to Adjusted EBITDA.......................... 3.9x
Adjusted EBITDA to interest expense.................... 2.7x
Ratio of earnings to fixed charges..................... 1.6x
Depreciation and amortization(2)....................... $ 8,638 $ 8,638 $ 10,424 $ 15,669
Capital expenditures................................... $ 5,310 $ 5,310 $ 4,789 $ 3,742
<CAPTION>
UNAUDITED
PRO FORMA AT
BALANCE SHEET DATA: DEC. 31, 1996
-----------------------
<S> <C> <C> <C> <C>
Total assets........................................... $ 369,062
Total debt............................................. $ 153,667(3)
</TABLE>
- ------------------
(1) EBITDA represents the sum of earnings (loss) from continuing operations
before extraordinary items, income taxes, interest expense, interest income,
depreciation and amortization. EBITDA data is presented because such data is
used by certain investors to determine the Company's ability to meet debt
service requirements. The Company considers EBITDA to be an indicative
measure of the Company's operating performance. However, such information
should not be considered as an alternative to net income, operating profit,
cash flows from operations or any other operating or liquidity performance
measure prescribed by generally accepted accounting principles (GAAP).
Adjusted EBITDA is defined as EBITDA adjusted to eliminate (w) $3,299
accrual for supplemental pension and other fees payable to retiring officers
and a member of the Board of Directors in the year ended December 31, 1996
and pro forma year ended December 31, 1996; (x) loss related to the
Company's Mexican operations of $4,362 in the year ended December 31, 1995,
$926 in the year ended December 31, 1994 and $11 in the year ended December
31, 1993; (y) legal fees related to the defense of a lawsuit by a
subcontractor of a former electrical contracting subsidiary of $750 in the
year ended December 31, 1996, pro forma year ended December 31, 1996, $2,400
in the year ended December 31, 1995, and $2,665 in the year ended December
31, 1994, and (z) accruals for uninsured costs related to an inactive
subsidiary's alleged use of asbestos products of $5,300 in the year ended
December 31, 1995. The determination of the amounts referred to in clauses
(y) and (z) above are subject to numerous uncertainties and judgments which
are described in Note 21(a) and (b) to the Consolidated Financial Statements
dated December 31, 1996 included in the Annual Report and it is possible
that additional amounts will be required to be recorded in the future. See
"Risk Factors--Potential for Adverse Judgments in Legal Proceedings" and
Note 21 to the Consolidated Financial Statements dated December 31, 1996
included in the Annual Report.
(2) Excludes amortizaton of deferred debt expense and discount on the Notes that
are included in interest expense.
(3) Shown net of discount of $516.
12
<PAGE>
RISK FACTORS
Investors should carefully consider the following factors in addition to
the other information set forth or incorporated by reference in this Prospectus
before making an investment in the Exchange Notes offered hereby.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE AND REFINANCE DEBT
The Company is highly leveraged. As of December 31, 1996, after giving pro
forma effect to the Transactions, the Company's indebtedness would have been
approximately $157.7 million, net of discount of $0.5 million, (including issued
but undrawn letters of credit of $4.0 million and excluding unused commitments
available for borrowing of $71.0 million) and its Stockholders' Equity would
have been approximately negative $19.4 million. For the Company's deficiency of
earnings to fixed charges for the five years ended December 31, 1996, see
"selected Historical Financial Data." Subject to the restrictions in the
Existing Securitization Facility, the Revolving Credit Facility and the
Indenture and the restrictions that are anticipated to be in the New
Securitization Facility, the Company may incur additional indebtedness from time
to time to finance acquisitions, working capital, or capital expenditures or for
other purposes. See "Description of Certain Financing Arrangements" and
"Description of Notes--Certain Covenants."
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures or
acquisitions may be limited and, if additional borrowings can be made, they may
not be on terms favorable to the Company; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in the industry
and economic conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow together with the proceeds from the Offering and
borrowings under the New Securitization Facility and Revolving Credit Facility
will be sufficient to meet its operating expenses and to service its debt
obligations as they become due. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness, or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. If the Company is unable to repay its
debt as it becomes due, the purchasers of the Notes could lose some or all of
their investment.
SUBORDINATION OF THE NOTES
The payment of principal, premium (if any) and interest on, and any other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Debt. At December 31, 1996, on a pro
forma basis after giving effect to the Transactions (and certain related
assumptions), the aggregate outstanding amount of Senior Debt of the Company
would have been approximately $58.2 million (including issued but undrawn
letters of credit of $4.0 million and excluding unused commitments available for
borrowing of $71.0 million). In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding up of the Company, the assets of
the Company will be available to pay obligations on the Notes only after all
Senior Debt has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes. See "Description of
Notes--Subordination."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY's INDEBTEDNESS
The Indenture will restrict, among other things, the Company's ability to
incur additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments to the Company, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. See
"Description of Notes." In addition, the Existing Securitization Facility and
the Revolving Credit Facility contain, and the Company anticipates the New
Securitization Facility will contain, other restrictive covenants. See
"Description of Certain
13
<PAGE>
Financing Arrangements." A breach of any of these covenants could result in a
default under the Existing Securitization Facility, the Revolving Credit
Facility and the New Securitization Facility. Upon the occurrence of an event of
default under the Existing Securitization Facility or the Revolving Credit
Facility, and as anticipated under the New Securitization Facility, the lenders
could elect to declare all amounts outstanding, together with accrued interest,
to be immediately due and payable. If the Company were unable to repay those
amounts, such lenders could proceed against the collateral granted to them to
secure that indebtedness, which indebtedness currently is secured by
substantially all of the assets of the Company. If the lenders under the
Existing Securitization Facility, the Revolving Credit Facility, or the New
Securitization Facility accelerate the payment of such indebtedness, there can
be no assurance that the assets of the Company would be sufficient to repay in
full such indebtedness and the other indebtedness of the Company, including the
Notes.
Under the terms of the Existing Securitization Facility and under those
expected to be in the New Securitization Facility, if the interest coverage
ratio (as defined) falls below certain prescribed levels or if scheduled
principal payments on the Company's other indebtedness exceed prescribed levels
during periods preceding the scheduled maturity of the facilities, the Company's
ability to obtain funding through the facilities will be suspended. Further, if
the collateral value of the receivables and cash held by Dyn Funding Corporation
("DFC") falls below the amount of outstanding borrowings under the facilities,
and the Company fails to provide sufficient receivables or cash to increase the
collateral value to such amount, the Company's ability to obtain funding through
the facilities will be suspended or terminated and collections on receivables
will be used to repay all or part of amounts outstanding under the facilities.
The suspension or termination of the Company's ability to obtain funding through
the facilities and the use of collections to repay borrowings under the
facilities would result in additional demands on the Company's cash resources.
See "The Transactions" and "Description of Certain Financing Arrangements."
PAST NET LOSSES
The Company reported net earnings of $14.6 million and $2.4 million for the
years ended December 31, 1996 and 1995, respectively, and net losses for the
years ended December 31, 1994, 1993, and 1992, of $12.8 million, $13.4 million,
and $23.3 million, respectively. In the future, there can be no assurance that
profitable operations will be sustained.
DEPENDENCE ON AND RISKS INHERENT IN U.S. GOVERNMENT CONTRACTS
The Company derived 97.1% and 94.6% of its revenues for the years ended
December 31, 1996 and 1995, respectively, from contracts and sub-contracts with
the U.S. Government ("Government Contracts"). Contracts with the DoD represented
52.0% and 53.3% of the Company's revenues for the years ended December 31, 1996
and 1995, respectively. Continuation and renewal of the Company's existing
Government Contracts and the acquisition by the Company of additional Government
Contracts is contingent upon, among other things, the availability of adequate
funding for various U.S. Government agencies. A further significant decline in
U.S. military expenditures, particularly in the operations and maintenance
portion of the defense budget, or a reapportioning of such expenditures reducing
the operations and maintenance segment, might materially and adversely affect
the Company's revenues and earnings. The loss or significant curtailment of the
Company's material U.S. military contracts would materially and adversely affect
the Company's future revenues and earnings.
Typically, a Government Contract has an initial term of one year combined
with two, three, or four one-year renewal periods, exercisable at the discretion
of the Government. The Government is not obligated to exercise its option to
renew a Government Contract. At the time of completion of a Government Contract,
the contract in its entirety is "recompeted" against all eligible third-party
providers. Contracts between the U.S. Government and its prime contractors
usually contain standard provisions for termination at the convenience of the
Government or such prime contractors. There can be no assurance that
terminations will not occur, and such terminations could adversely affect the
Company's business and prospects.
The Company's Government Contract services are provided through three types
of contracts--fixed-price, time-and-materials, and cost-reimbursement. The
Company assumes financial risk on fixed-price contracts and time-and-materials
contracts, because the Company assumes the risk of performing those contracts at
the
14
<PAGE>
stipulated prices or negotiated hourly rates. The failure to accurately estimate
ultimate costs or to control costs during performance of the work could result
in losses or smaller than anticipated profits. With regard to cost-reimbursement
contracts, to the extent that the actual costs incurred are within the contract
ceiling and allowable under the terms of the contract and applicable
regulations, the Company is entitled to reimbursement of its costs plus a
stipulated profit.
Government Contract payments received by the Company for allowable direct
and indirect costs are subject to adjustment and repayment after audit by
Government auditors if the payments exceed allowable costs as defined in such
Government Contracts. Audits have been completed on the Company's incurred
contract costs through 1986 and are continuing for subsequent periods. The
Company has included an allowance for excess billings and contract losses in its
financial statements that it believes is adequate based on its interpretation of
contracting regulations and past experience. There can be no assurance, however,
that this allowance will be adequate.
As a U.S. Government contractor, the Company is subject to federal
regulations under which its right to receive future awards of new Government
Contracts, or extensions of existing Government Contracts, may be unilaterally
suspended or barred should the Company be convicted of a crime or be indicted
based on allegations of a violation of certain specific federal statutes or
other activities. The initiation of suspension or debarment hearings against the
Company or any of its affiliated entities could have a material adverse impact
upon the Company's business and prospects.
POTENTIAL FOR ADVERSE JUDGMENTS IN LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various claims and
lawsuits, including contract disputes and claims based on allegations of
negligence and other tortious conduct. The Company and its subsidiaries are also
potentially liable for certain environmental, personal injury, tax and other
issues related to prior operations of divested businesses. In addition, an
inactive subsidiary of the Company that was acquired in 1974 was, as of March 1,
1997, named as one of many defendants in 13,117 civil lawsuits which have been
filed in certain state courts (primarily Texas) beginning in 1986. The alleged
claims arise out of the subsidiary's installation and distribution of industrial
insulation products that allegedly contained asbestos.
COMPETITION
The markets which the Company services are highly competitive. In each of
its businesses, the Company's competition is quite fragmented, with no single
competitor holding a significant market position. The Company experiences
vigorous competition from industrial firms, university laboratories, nonprofit
institutions and U.S. Government agencies. Some of the Company's competitors are
large, diversified firms with substantially greater financial resources and
larger technical staffs than the Company has available to it. Government
agencies also compete with and are potential competitors of the Company because
they can utilize their internal resources to perform certain types of services
that might otherwise be performed by the Company. A majority of the Company's
revenues are derived from contracts with the U.S. Government and its prime
contractors, and such contracts are awarded on the basis of negotiations or
competitive bids where price is a significant factor.
COMPANY MAY BE OBLIGATED TO REPURCHASE SHARES OF CERTAIN ESOP PARTICIPANTS
In the event that an employee participating in the ESOP is terminated,
retires, dies or becomes disabled while employed by the Company, the ESOP, or
the Company under certain circumstances, is obligated to repurchase shares of
common stock distributed to such former employee under the ESOP, until such time
as the common stock becomes readily tradable stock. In addition, after ten years
of participation in the ESOP, a participant who is 55 years of age may receive a
distribution of up to 25% of shares from his or her account, increasing to 50%
after age 60, for diversification purposes. These shares are also subject to the
repurchase obligation. To the extent that the Company repurchases shares as
described above, its availability of cash will be adversely affected. DynCorp
has the right under both the ESOP and applicable law to defer indefinitely the
repurchase of any shares if payment to the shareholders would impair the capital
of the Company. See "Employee Stock Ownership Plan." The Company's future
obligations with respect to the ESOP are not restricted under the Indenture. See
"Description of Notes--Certain Covenants."
15
<PAGE>
ABSENCE OF PUBLIC MARKET
The Exchange Notes are being offered to Holders of the Original Notes. The
Original Notes were sold by the Company to a limited number of institutional
investors and are eligible for trading in the PORTAL Market. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Original Notes could be adversely affected.
The Original Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in the
Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek approval for quotation
through any automated quotation system. Accordingly, no assurance can be given
that an active public or other market will develop for the Exchange Notes or as
to the liquidity of the trading market for the Exchange Notes. If a trading
market does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a market for the Exchange Notes develops, any such market may be
discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from their
principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Notes as set forth in the legend thereon and in
the Offering Memorandum, dated March 11, 1997, because the Notes were issued
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom, or in a transaction not subject to the Securities Act and
applicable state securities laws. The Company does not intend to register the
Original Notes under the Securities Act and, after consummation of the Exchange
Offer, will not be obligated to do so except under limited circumstances. See
"The Exchange Offer--Purpose of the Exchange Offer." Based on an interpretation
by the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Original Notes may be offered for resale, resold
or otherwise transferred by holders thereof (other than any such holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes and neither such holders nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Notes. Any holder of
Original Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that received
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent the Original Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Original Notes could be adversely affected. See "The Exchange Offer."
16
<PAGE>
EXCHANGE OFFER PROCEDURES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of
Original Notes for exchange. Original Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Original Notes,
where such Original Notes were acquired by such broker-dealer as a result of
market-making activities or any other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Original Notes could be adversely affected. See "The
Exchange Offer."
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase. The source of funds for any such purchase
would be the Company's available cash or cash generated from other sources.
However, there can be no assurance that sufficient funds would be available at
the time of any Change of Control to make any required repurchases of Notes
tendered.
17
<PAGE>
THE TRANSACTIONS
The Company is in the process of retiring the funding provided by the
Existing Securitization Facility and replacing it with the New Securitization
Facility. Additionally, the Company and its ESOP have recently purchased equity
securities in the Capricorn Transaction.
THE SECURITIZATION FACILITY
The Company primarily funds its working capital requirements through an
accounts receivable securitization program that is managed by DFC. In 1992, DFC
issued $100.0 million aggregate principal amount of notes under the Existing
Securitization Facility to fund the accounts receivable securitization program.
See "Description of Certain Financing Arrangements." The Company reached an
agreement in principle with a large institutional investor to fund the New
Securitization Facility with a borrowing capacity of up to $140.0 million, of
which $110.0 million is expected to be available based on current levels of
eligible collateral. The Company expects the New Securitization Facility to be
in place by April 30, 1997 when the Existing Securitization Facility begins to
amortize. Both the Existing Securitization Facility and the New Securitization
Facility will be non-recourse to the Company.
THE CAPRICORN TRANSACTION
The Company and its ESOP recently entered into agreements with certain of
the investors in Capricorn, a limited partnership in which a company controlled
by H.S. Winokur, Jr., the Company's former Chairman and current Chairman of its
executive committee, serves as general partner. Under the terms of the
agreements, the ESOP purchased all of the Company's Class C Preferred Stock, and
the Company purchased a substantial portion of Common Stock and certain Common
Stock Warrants that were previously held by Capricorn. The total purchase price
for all of these securities was $56.4 million. The ESOP paid $18.6 million for
its securities, of which approximately $9.3 million was paid in cash and $9.3
million was paid in notes ("ESOP Capricorn Notes"). The Company paid $37.8
million for its securities, of which approximately $18.9 million was paid in
cash and $18.9 million was paid in notes (the "Company Capricorn Notes"). The
Company intends to use a portion of the proceeds from the Offering and
borrowings under the New Securitization Facility to repay the Company Capricorn
Notes and to make a loan to the ESOP for the purpose of permitting it to repay
the ESOP Capricorn Notes. Concurrently with the Capricorn Transaction, the ESOP
converted the Class C Preferred Stock and exercised the Common Stock Warrants
issuable upon such conversion, and the Company issued 949,692 shares of Common
Stock to the ESOP. Following the Company's and the ESOP's recent purchases of
securities from Capricorn, the ESOP and management own approximately 85% of the
Company's capital stock on a fully diluted basis.
The following table sets forth the sources and uses of funds to consummate
the Transactions (dollars in millions). The actual amounts of sources and uses
of funds on the date the Transactions are consummated may vary.
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Issuance of Notes........................... $ 99.5 Replace Existing Securitization $100.0
Facility..................................
New Securitization Facility................. 50.0(1) Repay notes issued in connection with the 28.2
Capricorn Transaction.....................
General Corporate Purposes.................. 16.3
Estimated Fees and Expenses................. 5.0
------ ------
Total Sources...................... $149.5 Total Uses.................................. $149.5
====== ======
</TABLE>
- ------------------
(1) At the closing of the New Securitization Facility, the Company will borrow
$50.0 million of $110.0 million expected to be available for borrowing based
upon current levels of eligible collateral.
18
<PAGE>
Until the closing of the New Securitization Facility, the Company will
continue to have the ability to borrow up to $50.0 million under the Revolving
Credit Facility. Upon such closing, the Revolving Credit Facility will be
reduced to $15.0 million. See "Description of Certain Financing Arrangements."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Original Notes in like principal amount, the terms of which are identical to the
Exchange Notes. The Original Notes surrendered in exchange for Exchange Notes
will be retired and cancelled and cannot be reissued. Accordingly, issuance of
the Exchange Notes will not result in any increase in the indebtedness of the
Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company on a pro
forma basis giving effect to the Transactions as if they had occurred on
December 31, 1996. This table should be read in conjunction with the 'selected
Historical Financial Data" and "Unaudited Pro Forma Financial Data" included
elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
ACTUAL AS ADJUSTED
------ -----------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C>
Revolving Credit Facility.............................................. $ -- $ --(1)
Existing Securitization Facility....................................... 100.0 --
New Securitization Facility............................................ -- 50.0(2)
Notes.................................................................. -- 99.5(5)
Other Debt............................................................. 4.2 4.2
------ -----------
Total Debt........................................................ $104.2 $ 153.7
Stockholders' Equity (Deficit)......................................... 36.8(3) (11.8)(4)
------ -----------
Total Capitalization................................................... $141.0 $ 141.9
====== ===========
</TABLE>
- ------------------
(1) Upon consummation of the Offering and the New Securitization Facility, $15.0
million will be committed under the Revolving Credit Facility, of which $4.0
million is currently utilized to support stand-by letters of credit.
(2) At the closing of the New Securitization Facility, the Company will borrow
$50.0 million of $110.0 million expected to be available for borrowing based
upon current levels of eligible collateral.
(3) Includes temporary and permanent stockholders' equity of $139.3 million and
negative $102.5 million, respectively.
(4) Includes temporary and permanent stockholders' equity of $147.9 million and
negative $159.7 million, respectively.
(5) Shown net of discount of $0.5 million.
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial information of the
Company is based on the historical consolidated financial statements of the
Company and have been prepared to illustrate the effects of the Transactions.
See "The Transactions."
The unaudited pro forma consolidated condensed statements of operations for
the year ended December 31, 1996 have been prepared as if the Transactions had
occurred on January 1, 1996 and the unaudited consolidated condensed balance
sheet as of December 31, 1996 has been prepared to give effect to the
Transactions as if the Transactions had occurred on December 31, 1996.
The unaudited pro forma consolidated condensed financial data is not
necessarily indicative of how the Company's balance sheet and results of
operations would have been presented had the Transactions actually been
consummated on December 31, 1996 and January 1, 1996, respectively. Moreover,
the pro forma financial data is not intended to be indicative of future results
of operations or presentation of the balance sheet. The unaudited pro forma
financial data should be read in conjunction with the historical consolidated
financial statements and related notes thereto included in the Annual Report
that accompanies this Prospectus.
20
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Revenues................................................................ $1,021,453 $ $1,021,453
Cost of services........................................................ 970,163 970,163
---------- ----------
Gross profit............................................................ 51,290 51,290
Corporate selling and administrative expense............................ 18,241 18,241
---------- ----------
Operating income........................................................ 33,049 33,049
Interest expense........................................................ 10,220 4,389(1) 14,609
Interest income......................................................... (1,752) (1,752)
Other expenses.......................................................... 5,474 5,474
Income tax provision (benefit).......................................... 5,893 (1,756)(2) 4,137
Minority interest....................................................... 1,265 1,265
---------- ----------- ----------
Earnings from continuing operations..................................... 11,949 (2,633) 9,316
Preferred Class C dividends not declared or recorded.................... (2,284) 2,284 --
---------- ----------- ----------
Common stockholders' share of earnings from continuing operations....... $ 9,665 $ (349) $ 9,316
========== =========== ==========
Earnings per share from continuing operations........................... $ 0.91
==========
</TABLE>
- ------------------
Notes to Unaudited Pro Forma Consolidated Condensed Statements of Operations.
<TABLE>
<CAPTION>
(1)
<S> <C> <C>
YEAR ENDED
DECEMBER 31,
1996
------------
$ 13,758 Interest expense and amortization of deferred debt expense related to the assumed interest
rates for the Notes (9 1/2%) and New Securitization Facility (7 1/3%).
$ (9,369) Eliminate interest expense and amortization of deferred debt expense related to the retirement
of the Existing Securitization Facility and Revolving Credit Facility.
------------
$ 4,389
============
</TABLE>
(2) Estimated effective income tax of pro forma adjustments.
(3) Elimination of Class C Preferred Stock dividends since the ESOP purchased
the Class C Preferred Stock and converted it to Common Stock.
21
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............................................. $ 25,877 $ (3,419)(1) $ 22,458
Accounts receivable and contracts in process........................... 187,679 187,679
Inventories and other current assets................................... 11,039 11,039
---------- ----------- ---------
Total current assets................................................ 224,595 (3,419) 221,176
Property and equipment, at cost less accumulated depreciation............ 19,084 19,084
Intangible assets........................................................ 48,927 48,927
Other assets............................................................. 76,146 3,729(2) 79,875
---------- ----------- ---------
Total assets........................................................ $ 368,752 $ 310 $369,062
========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current position of long-term debt................... $ 628 $ $ 628
Accounts payable and other current liabilities......................... 148,217 (508)(4) 147,709
---------- ----------- ---------
Total current liabilities......................................... 148,845 (508) 148,337
Long-term debt
Notes payable.......................................................... 103,555 (100,000)(3) 3,555
New securitization notes payable due 2002.............................. -- 50,000(3) 50,000
Senior subordinated notes payable due 2007, net of discount............ -- 99,484(11) 99,484
Other liabilities and deferred credits................................... 79,513 79,513
Temporary equity, redeemable common stock................................ 139,322 8,583(5) 147,905
Permanent stockholders' equity
Preferred stock, Class C............................................... 3,000 (3,000)(6) --
Common stock........................................................... 332 52(7) 384
Paid-in surplus........................................................ 148,234 (25,001)(9) 123,233
Deficit................................................................ (101,259) (763)(8) (102,022)
Common stock warrants.................................................. 11,139 (7,198)(9) 3,941
Other common stock equity accounts..................................... (163,929) (21,339)(10) (185,268)
---------- ----------- ---------
Total liabilities and stockholders' equity.......................... $ 368,752 $ 310 $369,062
========== =========== =========
</TABLE>
(Footnotes on following page)
22
<PAGE>
DYNCORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET--(CONTINUED)
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(Footnotes from previous page)
- ------------------
Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet.
<TABLE>
<C> <C> <S>
(1) $ 206 Reflects cash received from the ESOP on the exercise of warrants acquired from Capricorn
investors.
(3,625) Cash used by the Company to acquire warrants from Capricorn investors in excess of the proceeds
received from the Transactions.
--------
$ (3,419)
========
(2) $ 5,000 Reflects deferred debt expense related to the borrowings under the Notes and New Securitization
Facility.
(1,271) Write-off of deferred debt expense related to the Existing Securitization Facility and
Revolving Credit Facility being repaid.
--------
$ 3,729
========
(3) Reflects the retirement of the Existing Securitization Facility and the borrowings under the Notes and New
Securitization Facility.
(4) Income tax benefit of write-off of deferred debt expense related to Existing Securitization Facility and
Revolving Credit Facility being replaced.
(5) Reclassification of a portion of common stock acquired by the ESOP as part of the Capricorn Transaction.
(6) Reflects the conversion of Preferred Class C Stock and warrants to common stock.
(7) $ 95 Reflects the conversion of Preferred Class C Stock to common stock.
(43) Reclassification of a portion of the common stock purchased by the ESOP and allocated to the
participants of the ESOP to redeemable common stock.
--------
$ 52
========
(8) Write-off of deferred debt expense related to Existing Securitization Facility and Revolving Credit
Facility being repaid, net of income tax benefit.
(9) Reflects the exercise by the ESOP and retirement by the Company of warrants acquired from Capricorn
investors.
(10) $ (2,509) Represents common stock purchased as treasury stock.
(10,290) Represents the portion of the common stock acquired by the ESOP which has not been allocated to
the participants of the ESOP.
(8,540) Reclassification of a portion of the common stock purchased by the ESOP and allocated to the
participants of the ESOP to redeemable common stock.
--------
$(21,339)
========
(11) $100,000 Reflects the borrowings under the Notes.
(516) Reflects the discount on the Notes.
--------
$ 99,484
========
</TABLE>
23
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents summary selected historical financial data for
the Company. The selected historical financial data for the five years ended
December 31, 1996 were derived from the Consolidated Financial Statements of the
Company, which have been audited by Arthur Andersen LLP. During the periods
presented, the Company paid no cash dividends on its Common Stock. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related notes thereto, included in the Company's Annual
Report that accompanies this Prospectus and is incorporated by reference herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1996(2) 1995(3) 1994(1)(5) 1993(1)(6) 1992(1)(7)
---------- -------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. $1,021,453 $908,725 $ 818,683 $ 777,216 $ 728,244
Cost of services...................................... 970,163 871,317 783,121 742,460 707,803
---------- -------- ----------- ----------- -----------
Gross profit.......................................... 51,290 37,408 35,562 34,756 20,441
Corporate selling and administrative expense.......... 18,241 18,705 16,887 17,547 18,503
---------- -------- ----------- ----------- -----------
Operating income...................................... 33,049 18,703 18,675 17,209 1,938
Interest expense...................................... 10,220 14,856 14,903 14,777 14,629
Other expenses and income............................. 3,722 6,408 5,230 4,676 (1,059)
Income tax provision (benefit)........................ 5,893 (9,090) (2,236) 1,289 2,480
Minority interest..................................... 1,265 1,255 1,130 952 --
---------- -------- ----------- ----------- -----------
Earnings (loss) from continuing operations before
extraordinary item(4)............................... $ 11,949 $ 5,274 $ (352) $ (4,485) $ (14,112)
========== ======== =========== =========== ===========
Net earnings (loss)................................... $ 14,629 $ 2,368 $ (12,831) $ (13,414) $ (23,342)
========== ======== =========== =========== ===========
BALANCE SHEET DATA AT PERIOD END:
Total assets.......................................... $ 368,752 $375,490 $ 396,000 $ 360,103 $ 338,135
Long-term debt excluding current maturities........... $ 103,555 $104,112 $ 230,444 $ 215,939 $ 198,770
Redeemable common stock............................... $ 139,322 $135,894 $ 130,828 $ 100,630 $ 95,391
Earnings (loss) per share from continuing operations
before extraordinary item for common stockholders... $ 0.82 $ 0.29 $ (0.29) $ (1.13) $ (3.18)
Ratio of earnings to fixed charges(8)...................... 2.0x -- -- -- --
</TABLE>
- ------------------
(1) Restated for the discontinuance of the Commercial Aviation Business.
(2) 1996 includes $3,299 accrual for supplemental pension and other fees payable
to retiring officers and a member of the Board of Directors (See Note 13 to
the Consolidated Financial Statements dated December 31, 1996), $1,286
write-off of cost in excess of net assets acquired of an unconsolidated
subsidiary (See Note 13 to the Consolidated Financial Statements dated
December 31, 1996), $1,250 credit for a revised estimate of the ESOP Put
Premium (See Notes 7 and 13 to the Consolidated Financial Statements dated
December 31, 1996), and $4,067 reversal of income tax valuation allowance
(See Note 14 to the Consolidated Financial Statements dated December 31,
1996).
(3) 1995 includes $7,707 reversal of income tax valuation allowance (see Note 14
to the Consolidated Financial Statements dated December 31, 1996), $4,362
accrued for losses and reserves related to the Company's Mexican operation,
$2,400 accrual of legal fees related to the defense of a lawsuit filed by a
subcontractor of a former electrical contracting subsidiary (see Notes 13
and 21 to the Consolidated Financial Statements dated December 31, 1996) and
$5,300 accrued for uninsured costs related to claims against a former
subsidiary for alleged use of asbestos products (see Notes 13 and 21 to the
Consolidated Financial Statements dated December 31, 1996).
(4) The extraordinary loss in 1995 of $2,886 and in 1992 of $2,526 result from
the early extinguishment of debt.
(5) 1994 includes $3,250 write-off of investment in unconsolidated subsidiary
(see Note 13 to the Consolidated Financial Statements dated December 31,
1996), $2,665 accrual of legal fees related to the defense of a lawsuit
filed by a subcontractor of a former electrical contracting subsidiary (see
Notes 13 and 21 to the Consolidated Financial Statements dated December 31,
1996), $1,830 credit for reversal of legal costs associated with an acquired
business (see Note 13 to the Consolidated Financial Statements dated
December 31, 1996) and $4,069 reversal of income tax reserves (see Note 14
to the Consolidated Financial Statements dated December 31, 1996).
(6) 1993 includes $2,000 of legal and other expenses associated with an acquired
business and $988 accelerated amortization of costs in excess of net assets
of an acquired business, for assets that were subsequently determined to
have been overvalued at the time of acquisition).
(7) 1992 Cost of Services includes approximately $6,000 for settlement of claims
against the Company related to prior years.
(8) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) from continuing operations before income taxes,
extraordinary item and fixed charges. Fixed charges consist of the total (i)
interest expense; (ii) amortization of debt expense and discount relating to
any indebtedness; and (iii) that portion of rental expense considered to
represent interest cost (assumed to be one-third). Earnings for years ended
December 31, 1995, 1994, 1993 and 1992 were insufficient to cover fixed
charges by $4,462, $3,118, $3,662 and $13,944, respectively.
24
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
Since 1988, the Company has sponsored the ESOP as the Company's principal
retirement plan. The ESOP is a defined contribution employee stock ownership
plan, designed to be invested in the Company's common stock and intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
("Code").
The Company makes quarterly cash contributions to the ESOP as a percentage
of total compensation (as defined in applicable ERISA and Code provisions).
These contributions are included in Cost of Services in the Company's financial
statements. The ESOP then purchases shares of the Company's common stock either
from former participants, investors, the Company or on the Company's Internal
Stock Market. At February 20, 1997, the ESOP Trust held approximately 7,149,025
shares on behalf of participants.
Upon retirement, disability, death or termination, participants receive
their vested shares over a period of from one to ten years. In accordance with
the plan documents and ERISA regulations, the ESOP Trust or the Company is
obligated to repurchase shares from those inactive participants at the fair
value determined by the ESOP's independent financial advisor until such time as
the shares are "readily tradable" on an established securities market. In
addition, after ten years of participation in the plan, a participant who is 55
years of age may receive a distribution of up to 25% of shares from his account,
increasing to 50% after age 60, for diversification purposes. These shares are
also subject to the repurchase obligation. Historically, the amount of
contributions exceeded the repurchase obligation.
DynCorp's conditional obligation to honor the puts is subject to several
significant limitations. First, DynCorp has the right under both the ESOP Plan
and applicable law to defer indefinitely the repurchase of any shares if payment
to the shareholder would impair the capital of the Company. Second, DynCorp may
elect to list its shares for sale publicly on a national exchange at any time,
which would make them readily tradable on an established market. Under ERISA,
this would extinguish the put option as to ESOP shares which have not been
distributed by the Trust.
25
<PAGE>
DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS
EXISTING SECURITIZATION FACILITY AND THE NEW SECURITIZATION FACILITY
In 1992, the Company's special purpose finance subsidiary DFC issued in a
private placement $100.0 million of Contract Receivable Collateralized Notes
(the "CRC Notes") as part of the Existing Securitization Facility. The CRC Notes
are collateralized by the right to receive proceeds from substantially all of
the active Government Contracts and certain eligible accounts receivable of
commercial customers of the Company and its subsidiaries. Commencing on May 1,
1997, collections on these accounts receivable are required to be used to
amortize the principal balance of the CRC Notes, which are to be fully repaid by
October 31, 1997.
The Company has reached an agreement in principle with a large
institutional investor to fund the New Securitization Facility. Under the
agreement, it is anticipated that DFC will issue, under a new Master Indenture,
two contract accounts receivable collateralized notes: a term note for $50.0
million ("Term Note") and a grid note for $90.0 million ("Grid Note"). The
Company does not anticipate borrowing any amounts against the Grid Note at the
closing of the New Securitization Facility, which the Company expects will occur
on or before April 30, 1997. Otherwise, the terms and conditions of the Term
Note and Grid Note and their related financing agreements are expected to be
substantially identical to the terms and conditions of the CRC Notes and their
related financing agreements.
THE REVOLVING CREDIT FACILITY
The Company has available up to $50.0 million in financing under the
Revolving Credit Facility to provide funds for acquisitions, working capital and
capital expenditures. The Company currently has approximately $4.0 million
utilized to support stand-by letters of credit under the Revolving Credit
Facility. Upon the closing of the New Securitization Facility, the Revolving
Credit Facility will be reduced to $15.0 million.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on the Issue Date to the
Initial Purchasers pursuant to the Purchase Agreement. As a condition to the
sale of the Original Notes, the Company and the Initial Purchasers entered into
the Registration Rights Agreement on the Issue Date. Pursuant to the
Registration Rights Agreement, the Company agreed that, unless the Exchange
Offer is not permitted by applicable law or Commission policy, it would (i) file
with the Commission a Registration Statement under the Securities Act with
respect to the Exchange Notes within 60 days after the Issue Date, (ii) use its
best efforts to cause such Registration Statement to become effective under the
Securities Act within 150 days after such filing deadline and (iii) upon
effectiveness of the Registration Statement, commence the Exchange Offer, use
its best efforts to maintain the effectiveness of the Registration Statement for
at least 30 days (or a longer period if required by law) and deliver to the
Exchange Agent Exchange Notes in the same aggregate principal amount at maturity
as the Original Notes that were rendered by holders thereof pursuant to the
Exchange Offer. Under existing Commission interpretations, the Exchange Notes
would in general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act must
be delivered as required. The Company has agreed to make available a prospectus
meeting the requirements of the Securities Act to any broker-dealer for use in
connection with any resale of any such Exchange Notes acquired as described
below for such period as such broker-dealers must comply with such requirements.
A broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act, and will be bound by the Registration Rights Agreement
(including certain indemnification rights and obligations). A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement of
which this Prospectus is a part is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement and the Purchase Agreement.
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RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who exchanges the Original Notes for the Exchange
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement with any person to participate, in
the distribution of the Exchange Notes, will be allowed to resell the Exchange
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires the Exchange Notes in the Exchange Offer for the purposes of
distributing or participating in the distribution of the Exchange Notes or is a
broker-dealer, such holder cannot rely on the position of the staff of the
Commission enumerated in certain no-action letters issued to third parties and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired by such broker-dealer as a result of
market-making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company has agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to all persons subject to the
prospectus delivery requirements of the Securities Act for use in connection
with any resale for a period of 90 days after the Expiration Date. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Original
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Original Notes surrendered pursuant
to the Exchange Offer. Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the exchange will be registered under the
Securities Act and hence the Exchange Notes will not bear legends restricting
their transfer and (ii) holders of the Exchange Notes will not be entitled to
the certain rights of holders of Original Notes under the Registration Rights
Agreement, which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes
(which they replace) and will be issued under, and be entitled to the benefits
of, the Indenture, which also authorized the issuance of the Original Notes,
such that all outstanding Notes will be treated as a single class of debt
securities under the Indenture.
As of the date of this Prospectus, $100.0 million aggregate principal
amount of the Original Notes are outstanding and registered in the name of Cede
& Co., as nominee for the Depository Trust Company ("DTC"). Only a registered
holder of the Original Notes (or such holder's legal representative or
attorney-in-fact) as reflected on the records of the Trustee under the Indenture
may participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Original Notes entitled to participate in
the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenter's
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
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The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Original Notes for the purposes of receiving the Exchange Notes from
the Company.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997 unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) will mail to the
registered holders of Original Notes an announcement thereof, (iii) will issue a
press release or other public announcement which shall include disclosure of the
approximate number of Original Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make a public announcement of any delay, extension, amendment or termination of
the Exchange Offer, the Company shall have no obligation to publish, advertise
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, or (iii) if any
conditions set forth below under "--Certain Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer by giving oral or
written notice of such delay, extension or termination to the Exchange Agent.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders of Original Notes, and the Company will extend the
Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to such registered
holders, if the Exchange Offer would otherwise expire during such five to 10
business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes bear interest at a rate equal to 9 1/2% per annum.
Interest on the Exchange Notes is payable semiannually on each March 1 and
September 1, commencing on the first such date following their date of issuance.
Holders of Exchange Notes will receive interest on September 1, 1997 from the
date of initial issuance of the Original Notes. Holders of Original Notes that
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Notes, if such procedure is available, into
the Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
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The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner(s) of the Original Notes whose Original Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Notes in such owner's name (to the
extent permitted by the Indenture) or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Original Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled "special Delivery Instructions" or the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in the Depositary's system may utilize the Depositary's
Automated Tender Offer Program to tender Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Original Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Original Notes, neither the Company, the Exchange Agent
nor any other person shall incur
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any liability for failure to give such notification. Tenders of Original Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived.
While the Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Original Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Original Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the holder of the Original
Notes in connection with the Exchange Offer are being acquired by the holder in
the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the holder understands that a
secondary resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission, and (v) the holder is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, the holder is required to acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the holder
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
RETURN OF NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Original Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described below,
such Original Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depositary's systems may make book-entry delivery
of Original Notes by causing the Depositary to transfer such Original Notes into
the Exchange Agent's account at the Depositary in accordance with the
Depositary's procedures for transfer. However, although delivery of Original
Notes may be effected through book-entry transfer at DTC, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date or pursuant to the guaranteed delivery procedures
described below.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Original Notes and
the principal amount of Original Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof) together with the certificate(s) representing the
Original Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Original
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the
Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Original Notes), and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Original Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, whose
determination shall be final and binding on all parties. Any Original Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Original Notes so withdrawn are validly retendered. Properly withdrawn Notes
may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Original Notes not theretofore accepted for exchange, and may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Original
Notes, if any of the following conditions exist:
(a) the Exchange Offer violates applicable law or any applicable
interpretation of the staff of the SEC, (b) an action or proceeding shall
have been instituted or threatened in any court or by any governmental
agency which might materially impair the ability of the Company to
proceed with the Exchange Offer and any material adverse development shall
have occurred in any existing action or proceeding with respect to the
Company and (c) all governmental approvals have not been obtained, which
approvals the Company deems necessary for the consummation of the
Exchange Offer.
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If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Original Notes (see "--Withdrawal of Tenders"), or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Original Notes, and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to 10 business day period.
Holders may have certain rights and remedies against the Company under the
Registration Rights Agreement should the Company fail to consummate the Exchange
Offer, notwithstanding a failure of the conditions stated above. Such conditions
are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in the Company's sole discretion. The failure by the Company
at any time to exercise the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
PRIVATE EXCHANGE NOTES
If, prior to consummation of the Exchange Offer, any Initial Purchaser (as
defined in the Registration Rights Agreement) holds any Original Notes acquired
by it and having (or that are reasonably likely to be determined to have) the
status of an unsold allotment in the initial distribution, the Company upon the
request of any such Initial Purchaser shall, simultaneously with the delivery of
the Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser, in exchange for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Company that are identical in all
material respects to the Exchange Notes except for the existence of restrictions
on transfer thereof under the Securities Act and state securities laws (the
"Private Exchange Notes"). Interest on the Private Exchange Notes will accrue
from the last interest payment date on which interest was paid on the Original
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Original Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Original Note, the information required by Rule 144(d)(4) under the Securities
Act in order to permit resales of such Original Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of
transfer-restricted Notes by broker-dealers for a period of 90 days from the
date on which the Registration Statement is declared effective, and (iv) to
provide copies of the latest version of the Prospectus to all persons subject to
the prospectus delivery requirements of the Securities Act upon their request
for a period of 90 days from the date on which the Registration Statement is
declared effective.
LIQUIDATED DAMAGES
The following description of Section 4 of the Registration Rights Agreement
is qualified in its entirety by the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement of
which the Prospectus is a part. In the event of a failure to file, or to become
effective, one or more registration statements as provided by the Registration
Rights Agreement, the Company has agreed to pay, as
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liquidated damages, additional interest on Original Notes ("Additional
Interest") under the circumstances and to the extent set forth below (each of
which is given independent effect):
(i) if (A) neither the Registration Statement of which this Prospectus
is a part (the "Exchange Offer Registration Statement") nor Shelf
Registration Statement, as defined in the Registration Rights Agreement, is
filed with the Commission on or prior to the Filing Date or (B)
notwithstanding that the Company has consummated or will consummate an
Exchange Offer, the Company is required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or prior to
the date required by the Registration Rights Agreement, then commencing on
the day after either such required filing date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.50% per annum
for the first 90 days immediately following each such filing date, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 150 days after the applicable filing date or (B) notwithstanding
that the Company has consummated or will consummate an Exchange Offer, the
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the 60th day following the date such Shelf Registration Statement
was filed, then, commencing on the day after the 60th day following the
applicable filing date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following such date, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all
Original Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 45th day after the date on which the
Exchange Offer Registration Statement was declared effective or (B) if
applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of its effective date (other than after
such time as all Original Notes have been disposed of thereunder), then
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days commencing on (x) the 46th
day after such effective date, in the case of (A) above, or (y) the day
such Shelf Registration Statement ceases to be effective in the case of (B)
above, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period; provided, however,
that the Additional Interest rate on the Notes may not exceed in the
aggregate 1.0% per annum; provided, further, however, that (1) upon the
filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of
the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (ii) above), or (3) upon the exchange of Exchange
Notes for all Notes tendered (in the case of clause (iii) (A) above), or
upon the effectiveness of the Shelf Registration Statement which had ceased
to remain effective (in the case of clause (iii)(B) above), Additional
Interest on the Notes as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in accordance with the terms of the Registration
Rights Agreement.
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EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent of the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
Attention: Corporate Trust Attention: Corporate Trust
By Overnight Delivery: By Facsimile:
Attention: Corporate Trust Attention: Corporate Trust
Confirm by Telephone:
</TABLE>
FEES AND EXPENSES
All fees and expenses incident to compliance with the Registration Rights
Agreement regarding this Exchange Offer shall be borne by the Company whether or
not the Exchange Offer or a Shelf Registration becomes effective.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Original Notes which are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such Notes
may be resold only (i) to a person whom the seller reasonably believes is a
qualified institutional buyer (as defined in Rule 144A under the Securities Act)
in a transaction meeting the requirements of Rule 144A, (ii) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (iii) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act, (iv) in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Company so requests), (v) to the Company, or (vi)
pursuant to an effective registration statement and, in each case, in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
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ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
The Original Notes were issued, and the Exchange Notes are issuable, under
the Indenture, a copy of the form of which has been filed as an exhibit to the
Registration Statement. The form and terms of the Exchange Notes will be
identical in all material respects to the form and terms of the Original Notes,
except that the Exchange Notes will have been registered under the Securities
Act and, therefore, will not bear legends restricting transfer thereof. The
Exchange Notes and the Original Notes are deemed the same class of notes under
the Indenture and are both entitled to the benefits thereof. The following
summary of certain provisions of the Indenture is subject to, and is qualified
in its entirety by reference to, all the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended. Whenever particular Sections or
defined terms of the Indenture not otherwise defined herein are referred to,
such Sections or defined terms are incorporated herein by reference.
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DESCRIPTION OF NOTES
The Original Notes have been, and the Exchange Notes will be, issued under
the Indenture. The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to
all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from the Company or the Initial Purchasers. The definitions of certain
capitalized terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this section, references to the "Company"
include only the Company and not its Subsidiaries.
The Original Notes are, and the Exchange Notes will be, unsecured
obligations of the Company, ranking subordinate in right of payment to all
Senior Debt of the Company. The Notes will rank pari pasu with any future senior
subordinated indebtedness of the Company and will rank senior to all other
indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Notes that remain outstanding after
the completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150,000,000, of
which $100,000,000 is outstanding and will mature on March 1, 2007. Additional
amounts may be issued in one or more series from time to time, subject to the
limitations set forth under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness." Interest on the Notes will accrue at the rate of
9 1/2% per annum and will be payable semiannually in cash on each March 1 and
September 1 commencing on September 1, 1997, to the persons who are registered
Holders at the close of business on the February 15 and August 15 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on and after March 1, 2002, upon not less than 30
nor more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on March 1 of the year set forth below, plus, in each case,
accrued interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION PRICE
-----------------
<S> <C>
2002.................................................... 104.750%
2003.................................................... 103.167%
2004.................................................... 101.583%
2005 and thereafter..................................... 100.0%
</TABLE>
At any time, or from time to time, on or prior to March 1, 2000, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined below) to redeem up to 35% of the aggregate
principal amount of Notes originally issued at a redemption price equal to
109.50% of the principal amount thereof, plus accrued interest to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption. In
order to effect the
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<PAGE>
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of any such Public Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of DTC) unless such method is
otherwise prohibited. Notice of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be redeemed
in part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption as long as the Company has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180 days from the
date the payment on the Notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of
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<PAGE>
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
At December 31, 1996, on a pro forma basis after giving effect to the
Offering and the New Securitization Facility, the aggregate outstanding amount
of Senior Debt of the Company would have been approximately $58.2 million
(including issued but undrawn letters of credit of $4.0 million and excluding
unused commitments available for borrowing of $71.0 million).
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full all Indebtedness and terminate all
commitments under the Revolving Credit Facility and all other Senior Debt the
terms of which require repayment upon a Change of Control or offer to repay in
full and terminate all commitments under all Indebtedness under the Revolving
Credit Facility and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Revolving Credit Facility and all other Senior Debt to permit
the repurchase of the Notes as provided below. The Company shall first comply
with the covenant in the immediately preceding sentence before it shall be
required to repurchase Notes pursuant to the provisions described below. The
Company's failure to comply with the immediately preceding sentence shall
constitute an Event of Default described in clause (iii) and not in clause (ii)
under "Events of Default" below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
its property, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require redemption or repurchase of the Notes, and
there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries
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<PAGE>
by the management of the Company. While such restrictions cover a wide variety
of arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses (a),
(b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of
such Restricted Payment or immediately after giving effect thereto, (i) a
Default or an Event of Default shall have occurred and be continuing or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum of: (x) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company earned
subsequent to the Issue Date and on or prior to the date the Restricted Payment
occurs (the "Reference Date") (treating such period as a single accounting
period); plus (y) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; plus (z) without duplication of
any amounts included in clause (iii)(y) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(y) and (z), (i)
any net cash proceeds from a Public Equity Offering to the extent used to redeem
the Notes and (ii) cash proceeds from the issuance of Qualified Capital Stock
by, or any equity contribution from any Person, financed directly or indirectly
using funds borrowed from the Company or any Subsidiary of the Company until and
to the extent such borrowing is repaid).
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the
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<PAGE>
dividend would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) the repurchase by the Company of shares of its
Common Stock in connection with the repurchase provisions of the ESOP as in
effect on the Issue Date (subject to changes in the ESOP to reflect requirements
of ERISA or other applicable laws); and (5) payments by the Company in respect
of (A) the repurchase by the Company of Common Stock from former employees,
officers and directors of the Company, (B) the payment by the Company of up to
$2.5 million in withholding and or payroll taxes upon the lapse of deferrals of
deferred stock and stock equivalent accounts and (C) the Company's obligation to
repurchase 125,714 shares of Common Stock issued in connection with the
Company's acquisition of Technology Applications, Inc., in an aggregate amount
not to exceed $3.0 million in any calendar year (provided that if less than $3.0
million is used for payments pursuant to (A), (B) and (C) in any calendar year,
the difference may be carried forward and used in subsequent calendar years) and
(6) the repurchase by the Company within 30 days of the Issue Date of up to
389,724 shares of Common Stock and Common Stock Warrants which are beneficially
owned by Guaranty National Insurance Company and Security Insurance Company in
an aggregate amount not to exceed $7.9 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2), (4), and (5) shall be included in such
calculation; provided that amounts received by the Company from the sale by the
Company of Common Stock to the ESOP that constitute Disqualified Capital Stock
shall be credited against the amounts calculated pursuant to clause (4) above
for the purpose of such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 80% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition; and (iii) upon the consummation of an Asset
Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof
either (A) to prepay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued interest thereon to the
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<PAGE>
date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with any Asset Sale is converted into
or sold or otherwise disposed of for cash (other than interest received with
respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof shall be applied in accordance with this covenant. The Company may defer
the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required pursuant
to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 80% of the
consideration for such Asset Sale constitutes Replacement Assets and (ii) such
Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except (i) with respect to Restricted Subsidiaries which are Permitted
Joint Ventures for such restrictions described in clause (b) or (c) above which
require such Restricted Subsidiary to effect such payment, loan, advance or
transfer on terms that are no less favorable than those that might reasonably
have been obtained in a comparable transaction at such time on an arm's length
basis from a Person that is not an Affiliate of such Restricted Subsidiary and
(ii) except for such encumbrances or restrictions existing under or by reason
of: (1) applicable law; (2) the Indenture; (3) the New Securitization Facility
and the Revolving Credit Facility; (4) customary nonassignment provisions of any
contract or any lease governing a leasehold interest of any Restricted
Subsidiary of the Company; (5) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the properties or
assets of the Person so acquired; (6) agreements existing on the Issue Date to
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the extent and in the manner such agreements are in effect on the Issue Date;
(7) any instrument governing Indebtedness incurred by a Permitted Joint Venture
or any instrument or agreement governing a Permitted Joint Venture (but only to
the extent such instrument or agreement does not restrict payments of dividends
or other distributions made pursuant to clause (b) above out of earnings and
profits of such Permitted Joint Venture); or (8) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (3), (5) or (6) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (3), (5) or (6).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of its Restricted Subsidiaries whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (i) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the Notes, the Notes are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes are equally and ratably secured, except for (A)
Liens existing as of the Issue Date to the extent and in the manner such Liens
are in effect on the Issue Date; (B) Liens securing Senior Debt; (C) Liens
securing the Notes; (D) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Subsidiary of the Company; (E) Liens
securing Refinancing Indebtedness which is incurred to Refinance Indebtedness
which has been secured by a Lien permitted under the Indenture and which has
been incurred in accordance with the provisions of the Indenture; provided,
however, that such Liens (A) are no less favorable to the Holders and are not
more favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not incur or suffer to exist Indebtedness that is senior in right of payment to
the Notes and subordinate in right of payment to any other Indebtedness of the
Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and of
the Company's Restricted Subsidiaries substantially as an entirety (the
'surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every covenant of the Notes,
the Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to incur at least $1.00 of additional
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Indebtedness (other than Permitted Indebtedness) pursuant to the "-- Limitation
on Incurrence of Additional Indebtedness" covenant; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All Affiliate Transactions (and each series
of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market
value in excess of $250,000 shall be approved by the Board of Directors of
the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair
market value or payments to an Affiliate, as the case may be, of more than
$2.5 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to
the Company or the relevant Restricted Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii) transactions
exclusively between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by the Indenture;
(iii) transactions exclusively between or among the Company and any of its
Restricted Subsidiaries on the one hand and any Permitted Joint Venture on
the other hand, so long as no portion of the remaining interest in the
Permitted Joint Venture is owned by a Person who is an Affiliate of the
Company (other than another Restricted Subsidiary of the Company); (iv) any
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment
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or replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue
Date; (v) Restricted Payments permitted by the Indenture; and (vi)
transactions pursuant to the New Securitization Facility. In addition,
transactions between the Company and the ESOP or any other of the Company's
benefit plans shall not be considered Affiliate Transactions for purposes
of the Indenture.
Limitation of Guarantees by Restricted Subsidiaries. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, by way of the
pledge of any intercompany note or otherwise, to assume, guarantee or in any
other manner become liable with respect to any Indebtedness of the Company or
any other Restricted Subsidiary (other than (A) Indebtedness and other
obligations under the Revolving Credit Facility, (B) Permitted Indebtedness of a
Restricted Subsidiary, (C) Indebtedness under Currency Agreements in reliance on
clause (vi) of the definition of Permitted Indebtedness, or (D) Interest Swap
Obligations incurred in reliance on clause (v) of the definition of Permitted
Indebtedness), unless, in any such case (a) such Restricted Subsidiary executes
and delivers a supplemental indenture to the Indenture, providing a guarantee of
payment of the Notes by such Restricted Subsidiary (the "Guarantee") and (b) (x)
if any such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Senior Debt, the guarantee or other
instrument provided by such Restricted Subsidiary in respect of such Senior Debt
may be superior to the Guarantee pursuant to subordination provisions no less
favorable to the Holders of the Notes than those contained in the Indenture and
(y) if such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Indebtedness that is expressly subordinated
to the Notes, the guarantee or other instrument provided by such Restricted
Subsidiary in respect of such subordinated Indebtedness shall be subordinated to
the Guarantee pursuant to subordination provisions no less favorable to the
Holders of the Notes than those contained in the Indenture. Further, the Company
will cause any Restricted Subsidiary that incurs in excess of $1.0 million of
Restricted Subsidiary Indebtedness (a "Borrowing Restricted Subsidiary") to
become a Subsidiary Guarantor, unless at the time such Restricted Subsidiary
becomes a Borrowing Restricted Subsidiary the total investment of the Company
and the Restricted Subsidiaries in such Borrowing Restricted Subsidiary and in
all other Borrowing Restricted Subsidiaries that are not Subsidiary Guarantors,
computed in accordance with GAAP, is less than 10% of the Total Tangible Assets
of the Company. A Borrowing Restricted Subsidiary shall be released as a
Subsidiary Guarantor (i) at such time as it ceases to be a Borrowing Restricted
Subsidiary or (ii) upon the election of the Company, if after giving effect to
such election, the total investment of the Company and the Restricted
Subsidiaries in all Borrowing Restricted Subsidiaries that are not Subsidiary
Guarantors, computed in accordance with GAAP, is less than 10% of the Total
Tangible Assets of the Company.
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; provided that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
compliance with the terms of the Indenture and (b) such assumption, guarantee or
other liability of such Restricted Subsidiary has been released by the holders
of the other Indebtedness so guaranteed.
Reports to Holders. The Indenture provides that the Company will deliver
to the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of TIA Section 314(a).
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the Default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(iv) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated, aggregates $2.5 million or more at any time;
(v) one or more judgments in an aggregate amount in excess of $2.5
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable; or
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause (vi)
above with respect to the Company) shall occur and be continuing, the Trustee or
the Holders of at least 25% in principal amount of outstanding Notes may declare
the principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Revolving Credit Facility, shall
become immediately due and payable upon the first to occur of an acceleration
under the Revolving Credit Facility or 5 business days after receipt by the
Company and the Representative under the Revolving Credit Facility of such
Acceleration Notice. If an Event of Default specified in clause (vi) above
occurs and is continuing with respect to the Company, then all unpaid principal
of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
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The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders to receive payments in respect of
the principal of and interest on the Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance and Covenant Defeasance (as
defined below) provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
officers'
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certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the trust
funds will not be subject to any rights of holders of Senior Debt, including,
without limitation, those arising under the Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes 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) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the Indenture may be made with the consent of the Holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that, without the consent of each Holder affected thereby, no
amendment may: (i) reduce the amount of Notes whose Holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any Notes, or change the date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price therefor;
(iv) make any Notes payable in money other than that stated in the Notes; (v)
make any change in provisions of the Indenture protecting the right of each
Holder to receive payment of principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
Holders of a majority in principal amount of Notes to waive Defaults or Events
of Default; (vi) amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto; (vii) modify or change any provision of the
Indenture or the related definitions affecting the subordination or ranking of
the Notes in a manner which adversely affects the Holders; or (viii) amend,
modify, change or waive any of the above provisions.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction,
excluding any such transaction consummated within 180 days after the purchase of
assets sold if the proceeds of the transaction are used to pay all or a portion
of such transaction) to any Person other than the Company, a Wholly Owned
Restricted Subsidiary of the Company or any Permitted Joint Venture of (a) any
Capital Stock of any Restricted Subsidiary of the Company; or (b) any other
property or assets of the Company or any Restricted Subsidiary of the Company
other than in the ordinary course of business; provided, however, that Asset
Sales shall not include (i) a transaction or series of related transactions for
which the Company or its Restricted Subsidiaries receive aggregate consideration
of less than $250,000, (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under the "Merger, Consolidation and Sale of Assets" covenant, or (iii) the
sale, conveyance or other transfer of accounts receivable in connection with the
New Securitization Facility.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
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"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ('s&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
domestic and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America or any state thereof, the District of Columbia,
any foreign bank or their branches and agencies (fully protected against
currency fluctuations), having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than 180 days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than the Permitted Holder) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 40% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the Board
of Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less Consolidated Non-cash Income
for such period, all as determined on a consolidated basis for such Person and
its Restricted Subsidiaries in accordance with GAAP. When calculating
"Consolidated EBITDA" with respect to the Company, for purposes of this
definition only, the Securitization Entity shall be treated as a Restricted
Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any
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incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income") attributable to the assets which
are the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries and Permitted Joint
Ventures for such period determined on a consolidated basis in accordance with
GAAP, including without limitation, (a) any amortization of debt discount and
amortization or write-off of deferred financing costs, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries and Permitted Joint
Ventures during such period as determined on a consolidated basis in accordance
with GAAP; provided that amounts to be included in clauses (i) and (ii) above
with respect to Permitted Joint Ventures not constituting Restricted
Subsidiaries shall be the product of the amounts computed in accordance with
GAAP and the percentage of the total outstanding shares of Capital Stock of such
Permitted Joint Venture held by the Company or any Restricted Subsidiary of the
Company. When calculating "Consolidated Interest Expense" with respect to the
Company, for purposes of this definition only the Securitization Entity shall be
treated as a Restricted Subsidiary.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it
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becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any other
Person, other than a Restricted Subsidiary of the referent Person, (except in
the case of (d) and (e) to the extent of cash dividends or distributions paid to
the referent Person or to a Wholly Owned Restricted Subsidiary of the referent
Person by such Person), (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), and (h) in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets. When calculating "Consolidated Net Income" with
respect to the Company, for purposes of this definition only the Securitization
Entity shall be treated as a Restricted Subsidiary.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period). When
calculating "Consolidated Non-cash Charges" with respect to the Company, for
purposes of this definition only, the Securitization Entity shall be treated as
a Restricted Subsidiary.
"Consolidated Non-cash Income" means, with respect to any Person, for any
Period, the aggregate amount of revenue of such Person and its Restricted
Subsidiaries increasing the Consolidated Net Income of such Person and its
Restricted Subsidiaries that will not result in the future receipt of cash by
such Person and its Restricted Subsidiaries, determined on a consolidated basis
in accordance with GAAP (excluding any such revenue constituting an
extraordinary item). When calculating "Consolidated Non-cash Income" with
respect to the Company, for purposes of this definition only, the Securitization
Entity shall be treated as a Restricted Subsidiary.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Revolving Credit Facility and (ii) any other Indebtedness constituting Senior
Debt which, at the time of determination, has an aggregate principal amount of
at least $25.0 million and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes. So long as the Company's obligation to repurchase
common stock pursuant to the ESOP exists, common stock issued to the ESOP shall
be Disqualified Capital Stock.
"ESOP" means the Company's Employee Stock Ownership Plan effective as of
January 1, 1988, as amended.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under Currency Agreements and Interest Swap
Agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person (other than Disqualified Capital Stock owned by the ESOP or any other
benefit plan) with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the
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Company or such Restricted Subsidiary, as the case may be. For the purposes of
the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of. Investments shall not include
travel advances in the ordinary course of business.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"New Securitization Facility" means the securitization facility which the
Company and the Securitization Entity intend to enter into and anticipates will
be in place by April 30, 1997, as described in this Offering Memorandum, and any
replacement thereof.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holder" means (i) the ESOP and other benefit plans of the
Company, including, without limitation, the Company's 401(k) Plan and (ii) the
group composed of the parties to the New Stockholders Agreement dated as of
March 11, 1994.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Indenture in an aggregate
principal amount of $100 million;
(ii) Indebtedness incurred pursuant to the Revolving Credit Facility
in an aggregate principal amount at any time outstanding not to exceed $50
million until the closing of the New Securitization Facility, and
thereafter $15 million, in each case, reduced by any permanent repayments
(which are accompanied by a corresponding permanent commitment reduction)
thereunder;
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(iii) Indebtedness to be incurred pursuant to the New Securitization
Facility in an aggregate principal amount at any time outstanding not to
exceed 85% of the total accounts receivable of the Company and its
Subsidiaries on a consolidated basis plus, without duplication, accounts
receivable transferred in connection with the New Securitization Facility;
(iv) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that the
extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided that if as of any date any Person other
than the Company or a Wholly Owned Restricted Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien; provided that (a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument that
constitutes a daylight overdraft or is inadvertently drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two business days of
incurrence;
(x) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business,
and payment bonds, performance bonds or bid bonds obtained in the ordinary
course of business, or letters of credit obtained in order to provide
security therefor;
(xi) Refinancing Indebtedness; and
(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10 million at
any one time outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written
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agreement, to the Company's obligations under the Notes and the Indenture; (iii)
Investments in Permitted Joint Ventures; (iv) Investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1.5 million at any one time outstanding;
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Indenture; (vii) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with the "Limitation on Asset Sales" covenant; (ix) Investments in
the Securitization Entity; and (x) additional Investments not to exceed $15.0
million at any one time outstanding.
"Permitted Joint Venture" means any joint venture arrangement (which may be
structured as a corporation, partnership, trust, limited liability company or
any other Person) if (a) no Affiliate of the Company or a Restricted Subsidiary
(other than another Restricted Subsidiary of the Company) has an investment in
such Person, (b) such Person is engaged in the same or a similar line of
business as the Company and its Subsidiaries were engaged in on the date of the
Indenture (or any reasonable extensions or expansions thereof or any business
ancillary thereto or supportive thereof), (c) the Company and/or any of its
Restricted Subsidiaries at all times owns at least 25% of the total outstanding
shares of Capital Stock of such Person entitled to participate in distributions
in respect of the earnings, sale or liquidation of such Person, (d) immediately
after giving effect to such Investment on a pro forma basis (to give effect to
the contribution of any property or assets to such Person or Indebtedness
incurred to fund such Investment or otherwise), the Company could incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the "Limitation on Incurrence of Additional Indebtedness" covenant, and (e) no
default with respect to any Indebtedness of such Person or any Subsidiary of
such Person (including any right which the holders thereof may have to take
enforcement action against such Person) would permit (upon notice, lapse of time
or both) any holder of any Indebtedness of the Company or its Restricted
Subsidiaries to declare a default on such Indebtedness or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity. If,
at any time, a Permitted Joint Venture fails to comply with clauses (a) through
(e) above, such Permitted Joint Venture shall constitute an Investment and must
comply with the "Limitation on Restricted Payments" covenants (but only with
respect to the Company's percentage ownership in such Permitted Joint Venture).
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, and Liens securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
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(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company;
(xiv) Liens pursuant to the New Securitization Facility; and
(xv) Liens to secure Indebtedness incurred by Restricted Subsidiaries
of the Company and Permitted Joint Ventures (in each case, to the extent
such Indebtedness is permitted to be incurred by the Indenture).
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock of the Company pursuant to a registration statement filed with the
Commission in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
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"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iii), (v), (vi), (vii), (viii), (ix) or (xi) of the
definition of Permitted Indebtedness), in each case that does not (1) result in
an increase in the aggregate principal amount of Indebtedness of such Person as
of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness incurred by a
Restricted Subsidiary (other than a Subsidiary Guarantor) that is neither (a)
Acquired Indebtedness nor (b) Permitted Indebtedness as defined in clauses (i)
through (xi) of such defined term.
"Revolving Credit Facility" means the revolving credit facility dated as of
March 14, 1996, between the Company, the lenders party thereto in their
capacities as lenders thereunder and Citicorp North America, Inc., as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness" covenant) or adding Restricted Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property, excluding
any such transaction consummated within 180 days after the purchase of assets
sold if the proceeds of the transaction are used to pay all or a portion of such
transaction.
"Securitization Entity" means Dyn Funding Corporation, or any successor or
replacement entity which is the borrower under the New Securitization Facility
or any replacement thereof.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, 'senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
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applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations (including guarantees thereof) of every nature of the Company under
the Revolving Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, 'senior Debt"
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of
the Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary" has the meaning set forth in Rule 1.02 (w) of
Regulation S-X under the Securities Act but excluding in any case Fuller-Austin
Insulation Company.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Subsidiaries that
becomes a guarantor of the Notes by executing a supplemental indenture in which
such Subsidiary agrees to be bound by the terms of the Indenture; provided that
any person constituting a Subsidiary Guarantor as described above shall cease to
constitute a Subsidiary Guarantor when its respective Subsidiary Guaranty is
released in accordance with the terms thereof.
"Total Tangible Assets" means the Company's total consolidated assets minus
(i) all intangible assets and (ii) all accruals relating to amounts expected to
be recovered from insurance carriers for the payment of currently unsettled and
estimated future claims relating to the use of asbestos products by
Fuller-Austin Insulation Company.
"Unrestricted Subsidiary" of any Person means (i) the Securitization
Entity, (ii) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the Board of
Directors of such Person in the manner provided below and (iii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other Subsidiary
of the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that (x) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments" covenant and (y) each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries (provided that this clause (y)
shall not prevent the Company from guaranteeing Indebtedness of any Unrestricted
Subsidiary, to the extent the Company is permitted to undertake such guarantee
by the terms of the Indenture). The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the ExchangeNotes initially will
be represented by a single permanent global certificate in definitive, fully
registered form (the "Global Note"). The Global Note will be deposited promptly
after the Expiration Date with, or on behalf of, DTC, New York, New York and
registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to "foreign purchasers" or
accredited investors (as defined in Rule 501(a)(1), (2), (3), or (7) under the
Securities Act ("Accredited Investors")) who are not qualified institutional
investors (as defined in Rule 144A under the Securities Act ("QIBs")) or (ii)
held by QIBs who elect to take physical delivery of their certificates instead
of holding their interests through the Global Note (and which are thus
ineligible to trade through DTC) (collectively referred to herein as the
"Non-Global Purchasers") will be issued in registered form (the "Certificated
Security"). Upon the transfer to a QIB of any Certificated Security initially
issued to a Non-Global Purchaser, such Certificated Security will, unless the
transferee requests otherwise or the Global Note has previously been exchanged
in whole for Certificated Securities, be exchanged for an interest in the Global
Note.
The Global Note. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Note to the
respective accounts of persons who have accounts with such depository and (ii)
ownership of beneficial interests in the Global Note will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of Participants (as defined
herein)) and the records of Participants (with respect to interests of persons
other than Participants). Such accounts initially will be designated by or on
behalf of the Initial Purchasers and ownership of beneficial interests in the
Global Notes will be limited to persons who have accounts with DTC
("Participants") or persons who hold interests through Participants. QIBs may
hold their interests in the Global Note directly through DTC, if they are
participants in such system, or indirectly through organizations which are
Participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in the Global Note will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any), and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on the
Global Note, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Note as shown
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on the records of DTC or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in the Global Note held through
such Participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its Participants and
which will be legended as set forth under the heading "Transfer Restrictions."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Note.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the Exchange Offer and of the purchase, ownership and
disposition of Exchange Notes. Except as specifically noted otherwise, this
summary only addresses the tax consequences to a person that acquired Original
Notes on their original issue at their original offering price and that is,
except as noted below, (i) an individual citizen or resident of the United
States, (ii) a corporation, partnership, or other entity organized under the
laws of the United States or any state thereof or the District of Columbia,
(iii) an estate the income of which is subject to United States federal income
tax regardless of source, or (iv) a trust if (a) a United States court of law is
able to exercise primary supervision over the trust's administration and (b) one
or more United States fiduciaries have the authority to control all of the
trust's substantial decisions (a "United States Holder"). This summary does not
address all tax consequences that may be applicable to a United States Holder
that is a beneficial owner of Notes, nor does it address the tax consequences
to, except at noted below, (i) persons that are not United States Holders, (ii)
persons that may be subject to special treatment under United States federal
income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
investors and dealers in securities or currencies, (iii) persons that will hold
Notes as part of a position in a 'straddle" or as part of a
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"hedging," "conversion" or other integrated investment transaction for United
States federal income tax purposes, (iv) persons whose functional currency is
not the United States dollar, or (v) persons that do not hold the Notes as
capital assets. In addition, this summary does not include any description of
alternative minimum tax consequences or the tax laws of any state, local or
foreign government that may be applicable to a holder of the Notes.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could cause the tax consequences to vary substantially from the consequences
described below, possibly adversely affecting a beneficial owner of the Notes.
The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the United States federal
income tax treatment of the Exchange Offer or of the purchase, ownership and
disposition of Notes may differ from the treatment described below.
HOLDERS AND PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF THE
EXCHANGE OFFER AND OF ACQUIRING, OWNING AND DISPOSING OF THE NOTES AS WELL AS
THE APPLICATION OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
THE EXCHANGE
The exchange of the Original Notes for the Exchange Notes pursuant to the
Exchange Offer should not be a taxable event to the holder and thus the holder
should not recognize any taxable gain or loss as a result of the exchange. A
holder's adjusted tax basis in the Exchange Notes will be the same as his
adjusted tax basis in the Original Notes exchanged therefor, and his holding
period for the Original Notes will be included in his holding period for the
Exchange Notes. Although the exchange of the Original Notes for the Exchange
Notes will not create additional "market discount" or "amortizable bond premium"
(described below), to the extent that a holder acquired the Original Notes at a
market discount or with amortizable bond premium, such discount or premium will
generally carry over to the Exchange Notes received in exchange for the Original
Notes. Such holders should consult their tax advisers regarding the United
States federal income tax treatment of market discount or amortizable bond
premium.
UNITED STATES HOLDERS
Generally, interest paid on an Exchange Note will be taxable to a United
States Holder as ordinary interest income in accordance with such holder's
method of accounting for United States federal income tax purposes. Upon the
sale, exchange, redemption, retirement or other disposition of an Exchange Note,
a holder generally will recognize gain or loss equal to the difference between
the amount realized on the disposition and the holder's adjusted tax basis in
the Exchange Note. Subject to the market discount rules discussed below, gain or
loss recognized by a holder on the disposition of an Exchange Note will be
long-term capital gain or loss provided that the Exchange Note was a capital
asset in the hands of the holder and had been held for more than one year.
ORIGINAL ISSUE DISCOUNT
The amount payable upon maturity of the Notes exceeded the issue price of
the Original Notes by approximately $5.16 per $1,000 Original Notes, which
amount generally would be regarded as "original issue discount." However,
because such amount is less than a determined amount (as determined under the
Code), such original issue discount amount is treated as being equal to zero.
Consequently, United States Holders generally will not be required to include
any original issue discount as taxable income while holding the Exchange Notes.
BOND PREMIUM
If a subsequent holder purchases an Exchange Note at a cost that results in
amortizable bond premiums (as determined under the Code and applicable treasury
regulations), the holder may elect to deduct such amortizable bond premium (with
a corresponding reduction in the holder's tax basis) over the remaining term of
the Exchange Note. The election would apply to all taxable debt instruments held
by the holder at any time during the first taxable year to which
62
<PAGE>
the election applies and to any such debt instruments which are later acquired
by the holder. The election may not be revoked without the consent of the IRS.
MARKET DISCOUNT
If a subsequent holder purchases an Exchange Note for an amount that is
less than the stated redemption price at maturity of such Exchange Note, the
amount of the difference will be treated as market discount for U.S. federal
income tax purposes, unless such difference is less than a specified de minimis
amount. Under the market discount rules, a holder will be required to treat any
principal payment on, or any amount received on the sale, exchange, retirement
or other disposition of, an Exchange Note as ordinary income to the extent of
any market discount which has not previously been included in income and is
treated as having accrued on such Exchange Note by the time of such payment or
disposition. If a holder makes a gift of an Exchange Note, accrued market
discount, if any, will be recognized as if such holder had sold such Exchange
Note for a price equal to its fair market value. In addition, the holder may be
required to defer, until the maturity of the Exchange Note or its earlier
disposition in a taxable transaction, the deduction of a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Exchange Note.
A holder of an Exchange Note acquired at a market discount may elect to
include market discount in income as interest as it accrues, in which case the
foregoing rules would not apply. This election would apply to all bonds with
market discount acquired by the electing holder on or after the first day of the
first taxable year to which the election applies. The election may be revoked
only with the consent of the IRS.
FOREIGN HOLDERS
The following discussion applies to a holder who is not a United States
Holder (a "Foreign Holder").
Interest payments to a Foreign Holder of Exchange Notes will generally not
be subject to withholding of income tax, provided that (a) the beneficial owner
of the Exchange Notes does not (directly or indirectly, actually or
constructively) own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the beneficial owner of
the Exchange Notes is not a controlled foreign corporation that is related to
the Company through stock ownership, and (c) either (i) the beneficial owner of
the Exchange Notes certifies to the Company or its paying agent, under penalties
of perjury, that it is a Foreign Holder and provides its name and address, or
(ii) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
(a "Financial Institution"), and holds the Exchange Notes in such capacity,
certifies to the Company or its paying agent, under penalties of perjury, that
such a statement has been received from the beneficial owner by it or by another
Financial Institution between it and the beneficial owner in the chain of
ownership, and furnishes the Company or its paying agent with a copy thereof.
A Foreign Holder of Exchange Notes will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of Exchange Notes.
A Foreign Holder that holds Exchange Notes in connection with the active
conduct of a United States trade or business will be subject to income tax on
all income and gains recognized with respect to the Exchange Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, the Notes held by a noncorporate United
States Holder within the United States. In addition, payments made on, and
payments of the proceeds from the sale of, the Notes to or through the United
States office of a broker are subject to information reporting unless the holder
thereof certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding. Taxable income on
the Notes for a calendar year should be reported to United States Holders on
Forms 1099 by the following January 31st.
Payments made on, and proceeds from the sale of, the Notes may be subject
to a "backup" withholding tax of 31% unless the holder complies with certain
identification or exemption requirements. Any amounts so
63
<PAGE>
withheld will be allowed as a credit against the holder's income tax liability,
or refunded, provided certain required information is provided to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any person subject to the prospectus delivery
requirements of the Securities Act that requests such documents in the Letter of
Transmittal. The Company has agreed to pay all expenses incident to the Exchange
Offer, other than commissions and concessions of any brokers or dealers, and
will indemnify the holders of the Original Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and schedules of the Company
incorporated by reference in this Prospectus and elsewhere in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
LEGAL MATTERS
The validity of the issuance of securities offered hereby will be passed
upon for the Company by Arnold & Porter, Washington, D.C.
64
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NOTES
TO ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................. iii
Certain Information Incorporated by Reference..... iii
Summary........................................... 1
Risk Factors...................................... 13
The Transactions.................................. 18
Use of Proceeds................................... 19
Capitalization.................................... 19
Unaudited Pro Forma Financial Data................ 20
Selected Historical Financial Data................ 24
Employee Stock Ownership Plan..................... 25
Description of Certain Financing
Arrangements.................................... 26
The Exchange Offer................................ 26
Description of Notes.............................. 36
Book-Entry; Delivery and Form..................... 60
Certain Federal Income Tax Considerations......... 61
Plan of Distribution.............................. 64
Independent Public Accountants.................... 64
Legal Matters..................................... 64
</TABLE>
$100,000,000
-------------------
PROSPECTUS
-------------------
[DynCorp Logo]
OFFER TO EXCHANGE ITS
9 1/2% SENIOR SUBORDINATED NOTES
DUE 2007
FOR ANY AND ALL OF ITS 9 1/2%
SENIOR SUBORDINATED NOTES
DUE 2007
APRIL , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the General Corporation Law of the State of Delaware ("GCL")
allows a corporation to eliminate the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except in cases where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or a
knowing violation of law, authorized the unlawful payment of a dividend or
approved an unlawful stock redemption or repurchase or obtained an improper
personal benefit. The Registrant's Amended and Restated Certificate of
Incorporation, a copy of which is filed as an exhibit to this Registration
Statement, contains a provision which eliminates directors' personal liability
as set forth above.
The Amended and Restated Certificate of Incorporation of the Registrant and
the Bylaws of the Registrant provide in effect that the Registrant shall
indemnify its directors, officers and employees to the extent permitted by
Section 145 of the GCL. Section 145 of the GCL provides that a Delaware
corporation has the power to indemnify its officers and directors in certain
circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or its threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no cause to believe his or her
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred in connection with the
defense or settlement of such action or suit provided that such director or
officer acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such director
or officer shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action was brought
shall determine that despite the adjudication of liability such director or
officer is fairly and reasonably entitled to indemnify for such expenses which
the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising out of his
or her status as such whether or not the corporation would have the power to
indemnify him or her against such liabilities under Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
An index of exhibits appears at pages II-5 through II-6, which is
incorporated herein by reference.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs 1(a) and 1(b) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to section 13 or
section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX, COMMONWEALTH
OF VIRGINIA, ON , 1997.
DYNCORP
By: _________/s/ P.V. LOMBARDI________
P.V. Lombardi
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS DAVID L. REICHARDT, H. MONTGOMERY HOUGEN,
AND ROBERT B. OTT, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE, AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS TO THIS
REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND
PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE, AS
FULLY TO ALL AND INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR EITHER OF
THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<C> <S> <C>
/s/ P.V. LOMBARDI President and Director (Principal Executive April 17, 1997
- ------------------------------------------ Officer)
P.V. Lombardi
/s/ P.C. FITZPATRICK Senior Vice President--Chief Financial April 17, 1997
- ------------------------------------------ Officer (Principal Financial Officer)
P.C. FitzPatrick
/s/ D.L. REICHARDT Senior Vice President--General Counsel and April 17, 1997
- ------------------------------------------ Director
D.L. Reichardt
/s/ G.A. DUNN Vice President and Controller (Principal April 17, 1997
- ------------------------------------------ Accounting Officer)
G.A. Dunn
/s/ D.R. BANNISTER Director April 17, 1997
- ------------------------------------------
D.R. Bannister
Director
- ------------------------------------------
T.E. Blanchard
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
/s/ H.S. WINOKUR, JR. Director April 17, 1997
- ------------------------------------------
H.S. Winokur, Jr.
Director
- ------------------------------------------
D.C Mecum II
Director
- ------------------------------------------
R.E. Dougherty
</TABLE>
II-4
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------------------------------- ---------
<C> <C> <S> <C>
3.1 -- Certificate of Incorporation, as currently in effect, consisting of Restated Certification
of Incorporation (incorporated by reference to Registrant's Form 10-K/A for 1995, File No.
1-3879)
3.2 -- Registrant's By-laws as amended to date (incorporated by reference to Registrant's Form
10-K/A for 1995, File No. 1-3879)
4.1 -- Indenture for $100,000,000 of 8.54% Contract Receivables Collateralized Notes, Series
1992-1, Due 1997, dated as of January 1, 1992, between Dyn Funding Corporation (wholly
owned subsidiary of the Registrant) and Bankers Trust Company, as trustee (incorporated by
reference to Registrant's Form 8-K filed February 7, 1992, File No. 1-3879)
4.2 -- Specimen Common Stock Certificate (incorporated by reference to Registrant's Form 10-K for
1988, File No. 1-3879)
4.3 -- Statement Respecting Warrants and Lapse of Certain Restrictions (incorporated by reference
to Registrant's Form 10-K for 1988, File No. 1-3879)
4.4 -- Amendment (effective March 26, 1991) to Statement Respecting Warrants and Lapse of Certain
Restrictions (incorporated by reference to Registrant's Form 10-K for 1990, File No.
1-3879)
4.5 -- Article Fourth of the Amended and Restated Certificate of Incorporation (incorporated by
reference to Registrant's Form 10-K/A for 1995, File No. 1-3879)
4.6 -- Stockholders Agreement (incorporated by reference to Registrant's Form S-1 for 1995, File
No. 33-59279)
4.7 -- Amended and Restated Credit Agreement by and among Citicorp North America, Inc. and DynCorp
dated March 14, 1996 (incorporated by reference to Registrant's Form 10-K/A for 1995, File
No. 1-3879)
4.8 -- Registration Rights Agreement, dated as of March 17, 1997, among the Company, and BT
Securities Corporation and Citicorp Securities, Inc.
4.9 -- Indenture, dated March 17, 1997, among the Company and United States Trust Company of New
York relating to the 9 1/2% Senior Subordinated Notes due 2007
4.10 -- Form of Exchange Notes (included in Exhibit 4.9)
5.1 -- Opinion of Arnold & Porter as to the legality of the Exchange Notes*
8.1 -- Opinion of Arnold & Porter as to certain federal income tax matters*
10.1 -- Deferred Compensation Plan (incorporated by reference to Registrant's Form 10-K for 1987,
File No. 1-3879)
10.2 -- Management Incentive Plan (MIP) (incorporated by reference to Registrant's Form 10-K for
1996, File No. 1-3879)
10.3 -- DynCorp Executive Incentive Plan (EIP) (incorporated by reference to Registrant's Form 10-K
for 1996, File No. 1-3879)
10.4 -- Management Severance Agreements (incorporated by reference to Exhibits (c)(4) through
(c)(12) to Schedule 14D-9 filed by Registrant January 25, 1988)
10.5 -- Employment Agreement of Paul V. Lombardi, Vice President, Government Services Group
(incorporated by reference to Registrant's Form 10-K for 1993, File No. 1-3879)
10.6 -- Restricted Stock Plan (incorporated by reference to Registrant's Form 10-K/A for 1995, File
No. 1-3879)
10.7 -- 1995 Stock Option Plan (incorporated by reference to Registrant's Form 10-K/A for 1995,
File No. 1-3879)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------------------------------- ---------
10.8 -- Employment Agreement of Patrick C. FitzPatrick, Senior Vice President and Chief Financial
Officer (incorporated by reference to Registrant's Form 10-K for 1996, File No. 1-3879)
<C> <C> <S> <C>
11.1 -- Computations of Earnings Per Common Share for the Years Ended December 31, 1996, 1995 and
1994 (incorporated by reference to Registrant's Form 10-K for 1996, File No. 1-3879)
12.1 -- Ratio of Earnings to Fixed Charges
21.1 -- Subsidiaries of the Registrant (incorporated by reference to Registrant's Form 10-K for
1996, File No. 1-3879)
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Arnold & Porter (included as part of Exhibit 5.1 and Exhibit 8.1)*
24.1 -- Powers of Attorney (included as part of the signature page)
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of United States Trust Company of New York
99.1 -- Form of Letter of Transmittal*
99.2 -- Form of Notice of Guaranteed Delivery*
</TABLE>
- ------------------
* To be filed by amendment.
II-6
Exhibit 4.8
===============================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of March 17, 1997
By and Among
DYNCORP
and
BT SECURITIES CORPORATION and
CITICORP SECURITIES, INC.,
as Initial Purchasers
9 1/2% Senior Subordinated Notes due 2007
==============================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Definitions....................................... 2
2. Exchange Offer.................................... 6
3. Shelf Registration................................ 10
4. Additional Interest............................... 12
5. Registration Procedures........................... 15
6. Registration Expenses............................. 26
7. Indemnification................................... 27
8. Rules 144 and 144A................................ 32
9. Underwritten Registrations........................ 33
10. Miscellaneous..................................... 33
(a) No Inconsistent Agreements................... 33
(b) Adjustments Affecting Registrable
Notes...................................... 33
(c) Amendments and Waivers....................... 33
(d) Notices...................................... 34
(e) Successors and Assigns....................... 36
(f) Counterparts................................. 36
(g) Headings..................................... 36
(h) Governing Law................................ 36
(i) Severability................................. 36
(j) Securities Held by DynCorp or Its
Affiliates................................. 36
(k) Third Party Beneficiaries.................... 37
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
March 17, 1997, by and among DynCorp, a Delaware corporation (the "Company"),
and BT SECURITIES CORPORATION and CITICORP SECURITIES, INC. (the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of March 11, 1997, by and among the Company and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $100,000,000 aggregate principal amount of
its 9 1/2% Senior Subordinated Notes due 2007 (the "Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchasers and any subsequent holder or holders of the
Notes. The execution and delivery of this Agreement is a condition to the
Initial Purchasers's obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Company: See the introductory paragraphs hereto.
Effectiveness Date: With respect to (i) the Exchange Offer
Registration Statement, the 150th day after the Issue Date and (ii) any Shelf
Registration Statement, the 60th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a) hereof.
Filing Date: (A) If no Registration Statement has been filed by the
Company pursuant to this Agreement, the 60th day after the Issue Date; and (B)
in any other case (which may be applicable notwithstanding the consummation of
the Exchange Offer), the 45th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Initial Purchasers: See the introductory paragraphs hereto.
Inspectors: See Section 5(o) hereof.
Issue Date: March 17, 1997, the date of original issuance of the
Notes.
NASD: See Section 5(n) hereof.
Notes: See the introductory paragraphs hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership, joint stock
company, trust, unincorporated association, union, business association, firm or
other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
-2-
<PAGE>
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under federal securities
laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Company that
covers any of the Notes, the Exchange Notes or the Private Exchange Notes filed
with the SEC under the Securities Act, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any
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similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC
providing for offers and sales of securities made in compliance therewith
resulting in offers and sales by subsequent holders that are not affiliates of
the Company of such securities being free of the registration and prospectus
delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(a) hereof.
Shelf Registration Statement: Any Registration Statement relating to a
Shelf Registration.
Subsequent Shelf Registration: See Section 3(b) hereof.
Suspension: See Section 3(a).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) To the extent not prohibited by applicable law or applicable
interpretation of the staff of the Division of Corporation Finance of the SEC,
the Company shall file with the SEC, no later than the Filing Date, a
Registration Statement
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(the "Exchange Offer Registration Statement") on an appropriate registration
form with respect to a registered offer (the "Exchange Offer") to exchange any
and all of the Registrable Notes for a like aggregate principal amount of notes
(the "Exchange Notes") of the Company that are identical in all material
respects to the Notes except that the Exchange Notes shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all applicable
tender offer rules and regulations under the Exchange Act and other applicable
laws. The Company shall use its best efforts to (x) cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30
days (or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to 180 days following the Issue Date. If, after the Exchange Offer
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, the Exchange Offer Registration Statement shall be
deemed not to have become effective for purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be required
to represent that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, solely with
respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as
to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating
Broker-Dealers, and the Company shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in respect
of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to
Section 3 hereof. No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement.
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(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies in the
judgment of the Initial Purchasers, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit, to
the extent permitted by applicable policies and regulations of the SEC, the use
of the Prospectus by all Persons subject to the prospectus delivery requirements
of the Securities Act, including, to the extent permitted by applicable policies
and regulations of the SEC, all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Notes in compliance with the Securities Act.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 90 days after consummation
of the Exchange Offer (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, the Company, upon the request of the Initial Purchasers shall
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for such Notes held by any such Holder, a like principal amount of
notes (the "Private Exchange Notes") of the Company that are identical in all
material respects to the Exchange Notes (except that they may bear a customary
legend with respect to restrictions on transfer). The Private
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Exchange Notes shall be issued pursuant to the same indenture as the Exchange
Notes and bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date subsequent to the record date for
an interest payment date to occur on or after the date of such exchange and as
to which interest will be paid, the date of such interest payment or (B) if no
interest has been paid on the Notes, from the date of the original issuance of
the Notes.
In connection with the Exchange Offer, the Company shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer and the Private Exchange,
if any;
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(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company and
(iii) all governmental approvals shall have been obtained, which approvals the
Company deems necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
of the Issue Date, (iii) the Initial Purchasers so request in writing to the
Company at any time after the consummation of the Exchange Offer, or (iv) in the
case of any Holder that participates in the Exchange Offer, such Holder does not
receive Exchange Notes on the date of the exchange that may be sold without
restriction under federal securities laws (other than due solely to the status
of such Holder as an affiliate of the Company within the meaning of the
Securities Act) then the Company shall
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promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and shall file a Shelf Registration pursuant to Section 3
hereof.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration. The Company shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not permitted to be exchanged
in the Exchange Offer in accordance with the terms of this Agreement, Private
Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable
(the "Shelf Registration"). If the Company has not yet filed an Exchange Offer
Registration Statement, the Company shall use its best efforts to file with the
SEC the Shelf Registration on or before the applicable Filing Date. The Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall not permit any securities other than
the Registrable Notes to be included in the Shelf Registration or any Subsequent
Shelf Registration (as defined below).
The Company shall use its best efforts to cause the Shelf Registration
to be declared effective under the Securities Act on or prior to the
Effectiveness Date and to keep the Shelf Registration continuously effective
under the Securities Act until the date which is two years from the Issue Date,
subject to extension pursuant to the last paragraph of Section 5 hereof (the
"Effectiveness Period"), or such shorter period ending when all Registrable
Notes covered by the Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration; provided, however, that the
Company shall have the ability to suspend the availability of the Shelf
Registration during any consecutive 365-day period for up to two periods of up
to 45 consecutive days, but no more than an aggregate of 60 days during any
365-day period (a "Suspension"), provided that the Company notifies the Holders
of any such suspension as required by Section 5(c)(v).
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the
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Company in writing, within 15 business days after receipt of a request therefor,
such information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary prospectus
included therein and such holder agrees in writing to be bound by the provisions
of this Agreement applicable to such holder. No holder of Registrable Notes
shall be entitled to Additional Interest pursuant to Section 4 hereof unless and
until such holder shall have provided all such reasonably requested information
and agreement. Each holder of Registrable Notes as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make information
previously furnished to the Company by such Holder not materially misleading.
(b) Supplements and Amendments. The Company shall promptly supplement
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
(c) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Company
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
4. Additional Interest
(a) The Company and the Initial Purchasers agree that the Holders will
suffer damages if the Company fails to fulfill its obligations under Section 2
or Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Company agrees to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration has been filed on or prior to the Filing Date applicable
thereto or (B) notwithstanding that the Company has consummated or will
consummate the Exchange Offer, the Company is
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required to file a Shelf Registration and such Shelf Registration is not
filed on or prior to the Filing Date applicable thereto, then, commencing
on the day after any such Filing Date, Additional Interest shall accrue on
the principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following such applicable Filing Date, and such
Additional Interest rate shall increase by an additional 0.50% per annum at
the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date applicable thereto (i.e., 150 days after the Issue Date)
or (B) notwithstanding that the Company has consummated or will consummate
the Exchange Offer, the Company is required to file a Shelf Registration
and such Shelf Registration is not declared effective by the SEC on or
prior to the Effectiveness Date applicable to such Shelf Registration,
then, commencing on the day after such Effectiveness Date, Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.50% per annum for the first 90 days immediately following the day after
such Effectiveness Date, and such Additional Interest rate shall increase
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 45th day after the date on which the Exchange Offer
Registration Statement relating thereto was declared effective or (B) if
applicable, a Shelf Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue on the principal amount of
the Notes at a rate of 0.50% per annum for the first 90 days commencing on
the (x) 46th day after such effective date, in the case of (A) above, or
(y) the day such Shelf Registration ceases to be effective in the case of
(B) above, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each such subsequent 90-day
period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.0% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the
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applicable Shelf Registration as required hereunder (in the case of clause (i)
above of this Section 4), (2) upon the effectiveness of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
(b) the Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each and (to the holders of record on the and
immediately preceding such dates), commencing with the first such date occurring
after any such Additional Interest commences to accrue. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Registrable Notes, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date,
a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such
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filing is pursuant to Section 3 hereof or (2) a Prospectus contained in the
Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period
relating thereto, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Notes covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five business days prior to
such filing, or such later date as is reasonable under the circumstances).
The Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must be
afforded an opportunity to review prior to the filing of such document if
the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Registration Statement, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period or until consummation of the Exchange
Offer, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Company
shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Effective Period or the Applicable Period,
as the case may be, relating thereto if the Company voluntarily takes any
action that would result in
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selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless (i) such
action is required by applicable law or (ii) such action results from a
Suspension, or (iii) the Company complies with this Agreement, including
without limitation, the provisions of Section 5(k) or the last paragraph of
this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period relating thereto from whom the
Company has received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but
in any event within two business days), and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or
any post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference therein and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Notes or resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 5(m) hereof
cease to be true and correct in all material respects, (iv) of the receipt
by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the
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Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) a Suspension, (vi) of
the happening of any event, the existence of any condition or any
information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and (vii) of any of the Company's determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer, for sale in any jurisdiction,
and, if any such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly as practicable incorporate in a prospectus
supplement or post-effective
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amendment such information as the managing underwriter or underwriters (if
any), such Holders, any Participating Broker-Dealer or counsel for any of
them reasonably request to be included therein, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling Holder
of Registrable Notes and to each such Participating Broker-Dealer who so
requests and to counsel and each managing underwriter, if any, at the sole
expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all
documents incorporated or deemed to be incorporated therein by reference
and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling Holder
of Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their respective counsel, and the underwriters, if any, at the sole
expense of the Company, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered by,
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or the sale by Participating Broker-Dealers of the Exchange Notes pursuant
to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters reasonably request in writing; provided,
however, that where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten offering,
the Company agrees to cause its counsel to perform Blue Sky investigations
and file registrations and qualifications required to be filed pursuant to
this Section 5(h); keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with
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The Depository Trust Company; and enable such Registrable Notes to be in
such denominations and registered in such names as the managing underwriter
or underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to
enable the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Notes, except as may
be required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the sole expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
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(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes in form and substance reasonably satisfactory to the Company and take
all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes, and confirm
the same in writing if and when requested in form and substance reasonably
satisfactory to the Company; (ii) obtain the written opinions of counsel to
the Company, written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions reasonably requested in underwritten offerings and such other
matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) use its best efforts to obtain "cold comfort" letters
and updates thereof in form, scope and substance reasonably satisfactory to
the managing underwriter or underwriters from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to the underwriter,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
sellers and underwriters, if any, than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered
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by such Registration Statement and the managing underwriter or underwriters
or agents, if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Offer Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection
by any selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all relevant financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "Records") as is customary for similar due
diligence responsibilities, and cause the officers, directors and employees
of the Company and their subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration
Statement and Prospectus. Each Inspector shall agree in writing, in form
and substance reasonably satisfactory to the Company prior to delivery of
such Record, that it will keep the Records confidential and that it will
not disclose any of the Records unless (i) the disclosure of such Records
is necessary to avoid or correct a material misstatement or omission in
such Registration Statement or Prospectus, (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary or
advisable, in the opinion of counsel (a copy of which shall be delivered to
the Company), for any Inspector, in connection with any action, claim, suit
or proceeding, directly or indirectly, involving or potentially involving
such Inspector and arising out of, based upon, relating to, or involving
this Agreement or the Purchase Agreement, or any transactions contemplated
hereby or thereby or arising hereunder or thereunder, or (iv) the
information in such Records has been made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will
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be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer
will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company to undertake appropriate
action to prevent disclosure of the Records deemed confidential at the
Company's expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes
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by Holders to the Company (or to such other Person as directed by the
Company) in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be, the Company shall mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being cancelled in
exchange for the Exchange Notes or the Private Exchange Notes, as the case
may be; in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(s) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Exchange Notes and/or Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon actual
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus
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contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event that the Company shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer Registration Statement or any Shelf Registration Statement is
filed or becomes effective or the Exchange Offer is consummated, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, as the
case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and, in the case of a Shelf
Registration, reasonable fees and disbursements of one special counsel for all
of the sellers of Registrable Notes
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(exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company desires
such insurance, (vii) fees and expenses of all other Persons retained by the
Company, (viii) internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company performing
legal or accounting duties), (ix) the expense of any annual audit, (x) the fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary in order
to comply with this Agreement.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers, directors, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by, arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information relating to any
Participant furnished to the
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Company in writing by such Participant expressly for use therein; provided,
however, that the Company will not be liable if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the final Prospectus or any amendment or
supplement thereto and any such loss, liability, claim, or damage or expense
suffered or incurred by the Participants resulted from any action, claim or suit
by any Person who purchased Registrable Notes or Exchange Notes which are the
subject thereof from such Participant and it is established in the related
proceeding that such Participant failed to deliver or provide a copy of the
final Prospectus (as amended or supplemented) to such Person with or prior to
the confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its respective directors, its respective officers
who sign the Registration Statement and each Person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each Participant, but only with reference to information relating to such
Participant furnished to the Company in writing by such Participant expressly
for use in any Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The liability of any Participant under
this paragraph shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided,
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however, that the failure to so notify the Indemnifying Persons shall not
relieve any of them of any obligation or liability which any of them may have
hereunder or otherwise except to the extent it is materially prejudiced by such
failure. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Persons and
the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate thereof
and representation of both parties by the same counsel would be inappropriate
due to actual or potential conflicting interests between them. It is understood
that, unless there exists a conflict among Indemnified Persons, the Indemnifying
Persons shall not, in connection with such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly as
they are incurred. Any such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Company, its respective
directors, its respective officers and such control Persons of the Company shall
be designated in writing by the Company and shall be reasonably acceptable to
the Holders. The Indemnifying Persons shall not be liable for any settlement of
any proceeding effected without its prior written consent (which consent shall
not be unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more
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than 60 days after receipt by such Indemnifying Person of the aforesaid request
and (ii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request prior to the date of such settlement;
provided, however, that the Indemnifying Person shall not be liable for any
settlement effected without its consent pursuant to this sentence if the
Indemnifying Person is contesting, in good faith, the request for reimbursement.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Persons (which consent shall not be unreasonably withheld or
delayed), effect any settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, or indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement (A) includes an unconditional written release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in clauses (a) and (b) of this
Section 7 is for any reason unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Participants on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Notes received by the Company
bears to the total proceeds received by such Participant from the sale of
Registrable Notes or Exchange
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Notes, as the case may be, in each case as set forth in the table on the cover
page of the Offering Memorandum dated March 11, 1997 in respect of the sale of
the Notes. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder,
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the Company and its respective directors, officers, employees or agents or any
person controlling the Company, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Company covenants and agrees, so long as Registrable Notes remain
outstanding, it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time the Company is not
permitted to file such reports, the Company will, upon the request of any Holder
or beneficial owner of Registrable Notes, make publicly available annual reports
and such information, documents and other reports of the type specified in
Sections 13 and 15(d) of the Exchange Act. The Company further covenants for so
long as any Registrable Notes remain outstanding, to make available to any
Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such Holder
or beneficial owner the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of
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attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. As of the date hereof, the Company has
not entered and will not enter into any agreement with respect to any of its
securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of any of
the Company's other issued and outstanding securities. As of the date hereof,
the Company has not entered and will not enter into any agreement with respect
to any of its securities which will grant to any Person piggy-back registration
rights with respect to any Registration Statement required to be filed by the
Company pursuant to this Agreement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(c) may not be amended,
modified or supplemented without the prior written consent of each Holder and
each Participating Broker-Dealer (including any person who was a Holder or
Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of
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<PAGE>
Registrable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the Registrable
Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Securities Corporation,
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
(ii) if to the Initial Purchasers, at the address specified in Section
10(d)(1);
(iii) if to the Company, at the address as follows:
DynCorp
2000 Edmund Halley Drive
Reston, VA 22091-3436
Fascimile No.: (703) 264-9199
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<PAGE>
with a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004-1202
Fascimile No.: (202) 942-5999
Attention: Robert B. Oft, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and upon receiving
confirmation receipt by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers, provided that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Notes in violation of the terms of the Purchase Agreement or the
Indenture.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
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<PAGE>
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or any of their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DYNCORP
By: /s/ H. Montgomery Hougen
--------------------------------
Name: H. Montgomery Hougen
Title: Vice President and Secretary
BT SECURITIES CORPORATION,
as Initial Purchaser
By: /s/ Joseph E. Lipscomb
-------------------------------
Name: Joseph E. Lipscomb
Title: Vice President
CITICORP SECURITIES, INC.,
as Initial Purchaser
By: /s/ Timothy C. Shoyer
---------------------------------
Name: Timothy C. Shoyer
Title: Vice President
Exhibit 4.9
DYNCORP,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
--------------------
INDENTURE
Dated as of March 17, 1997
--------------------
9 1/2% Senior Subordinated Notes due 2007
and
Series B 9 1/2% Senior Subordinated Notes due 2007
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- --------
310(a)(1).......................................... 7.10
(a)(2).......................................... 7.10
(a)(3).......................................... N.A.
(a)(4).......................................... N.A.
(a)(5).......................................... 7.08; 7.10
(b)............................................. 7.08; 7.10;
11.02
(c)............................................. N.A.
311(a)............................................. 7.11
(b)............................................. 7.11
(c)............................................. N.A.
312(a)............................................. 2.05
(b)............................................. 11.03
(c)............................................. 11.03
313(a)............................................. 7.06
(b)(1).......................................... N.A.
(b)(2).......................................... 7.06
(c)............................................. 7.06; 11.02
(d)............................................. 7.06
314(a)............................................. 4.07; 4.08;
11.02
(b)............................................. N.A.
(c)(1).......................................... 11.04
(c)(2).......................................... 11.04
(c)(3).......................................... N.A.
(d)............................................. N.A.
(e)............................................. 11.05
(f)............................................. N.A.
315(a)............................................. 7.01(b)
(b)............................................. 7.05; 11.02
(c)............................................. 7.01(a)
(d)............................................. 7.01(c)
(e)............................................. 6.11
316(a)(last sentence).............................. 2.09
(a)(1)(A)....................................... 6.05
(a)(1)(B)....................................... 6.04
(a)(2).......................................... N.A.
(b)............................................. 6.07
(c)............................................. 9.05
317(a)(1).......................................... 6.08
(a)(2).......................................... 6.09
(b)............................................. 2.04
318(a)............................................. 11.01
(c)............................................. 11.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions........................................ 1
Section 1.02 Incorporation by Reference of TIA.................. 29
Section 1.03 Rules of Construction.............................. 29
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating.................................... 30
Section 2.02 Execution and Authentication;
Aggregate Principal Amount....................... 31
Section 2.03 Registrar and Paying Agent......................... 32
Section 2.04 Paying Agent To Hold Assets in
Trust............................................ 33
Section 2.05 Noteholder Lists................................... 33
Section 2.06 Transfer and Exchange.............................. 33
Section 2.07 Replacement Notes.................................. 34
Section 2.08 Outstanding Notes.................................. 35
Section 2.09 Treasury Notes..................................... 35
Section 2.10 Temporary Notes.................................... 36
Section 2.11 Cancellation....................................... 36
Section 2.12 Defaulted Interest................................. 36
Section 2.13 CUSIP Number....................................... 37
Section 2.14 Deposit of Moneys.................................. 37
Section 2.15 Restrictive Legends................................ 37
Section 2.16 Book-Entry Provisions for Global
Security........................................ 39
Section 2.17 Special Transfer Provisions........................ 41
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee................................. 43
Section 3.02 Selection of Notes To Be Redeemed.................. 43
Section 3.03 Notice of Redemption............................... 44
Section 3.04 Effect of Notice of Redemption..................... 45
Section 3.05 Deposit of Redemption Price........................ 45
Section 3.06 Notes Redeemed in Part............................. 46
<PAGE>
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes................................... 46
Section 4.02 Maintenance of Office or Agency.................... 47
Section 4.03 Corporate Existence................................ 47
Section 4.04 Payment of Taxes and Other Claims.................. 47
Section 4.05 Maintenance of Properties and
Insurance........................................ 48
Section 4.06 Compliance Certificate; Notice of
Default.......................................... 48
Section 4.07 Compliance with Laws............................... 49
Section 4.08 SEC Reports........................................ 50
Section 4.09 Waiver of Stay, Extension or Usury
Laws............................................. 50
Section 4.10 Limitation on Restricted Payments.................. 51
Section 4.11 Limitation on Transactions with
Affiliates....................................... 53
Section 4.12 Limitation on Incurrence of
Additional Indebtedness.......................... 54
Section 4.13 Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries..................................... 55
Section 4.14 Prohibition on Incurrence of Senior
Subordinated Debt................................ 56
Section 4.15 Change of Control.................................. 56
Section 4.16 Limitation on Asset Sales.......................... 58
Section 4.17 Limitation on Preferred Stock of
Subsidiaries..................................... 62
Section 4.18 Limitation on Liens................................ 62
Section 4.19 Limitation of Guarantees by
Restricted Subsidiaries.......................... 63
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of
Assets........................................... 65
Section 5.02 Successor Corporation Substituted.................. 66
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default.................................. 67
Section 6.02 Acceleration....................................... 68
Section 6.03 Other Remedies..................................... 69
Section 6.04 Waiver of Past Defaults............................ 70
<PAGE>
Section 6.05 Control by Majority................................ 70
Section 6.06 Limitation on Suits................................ 70
Section 6.07 Rights of Holders To Receive
Payment.......................................... 71
Section 6.08 Collection Suit by Trustee......................... 71
Section 6.09 Trustee May File Proofs of Claim................... 72
Section 6.10 Priorities......................................... 72
Section 6.11 Undertaking for Costs.............................. 73
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.................................. 73
Section 7.02 Rights of Trustee.................................. 75
Section 7.03 Individual Rights of Trustee....................... 76
Section 7.04 Trustee's Disclaimer............................... 76
Section 7.05 Notice of Default.................................. 76
Section 7.06 Reports by Trustee to Holders...................... 77
Section 7.07 Compensation and Indemnity......................... 77
Section 7.08 Replacement of Trustee............................. 78
Section 7.09 Successor Trustee by Merger, Etc................... 80
Section 7.10 Eligibility; Disqualification...................... 80
Section 7.11 Preferential Collection of Claims
Against Company.................................. 80
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of the Company's
Obligations..................................... 81
Section 8.02 Legal Defeasance and Covenant
Defeasance...................................... 82
Section 8.03 Conditions to Legal Defeasance or
Covenant Defeasance............................. 84
Section 8.04 Application of Trust Money......................... 86
Section 8.05 Repayment to the Company........................... 87
Section 8.06 Reinstatement...................................... 87
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders......................... 88
Section 9.02 With Consent of Holders............................ 89
Section 9.03 Effect on Senior Debt.............................. 90
Section 9.04 Compliance with TIA................................ 90
Section 9.05 Revocation and Effect of Consents.................. 90
<PAGE>
Section 9.06 Notation on or Exchange of Notes................... 91
Section 9.07 Trustee To Sign Amendments, Etc.................... 91
ARTICLE TEN
SUBORDINATION
Section 10.01 Notes Subordinated to Senior Debt.................. 92
Section 10.02 No Payment on Notes in Certain
Circumstances.................................... 92
Section 10.03 Payment Over of Proceeds upon
Dissolution, Etc................................. 94
Section 10.04 Payments May Be Paid Prior to
Dissolution...................................... 95
Section 10.05 Subrogation........................................ 96
Section 10.06 Obligations of the Company
Unconditional.................................... 96
Section 10.07 Notice to Trustee.................................. 96
Section 10.08 Reliance on Judicial Order or
Certificate of Liquidating Agent................. 97
Section 10.09 Trustee's Relation to Senior Debt.................. 98
Section 10.10 Subordination Rights Not Impaired
by Acts or Omissions of the
Company or Holders of Senior Debt................ 98
Section 10.11 Noteholders Authorize Trustee To
Effectuate Subordination of Notes................ 99
Section 10.12 This Article Ten Not To Prevent
Events of Default................................ 100
Section 10.13 Trustee's Compensation Not
Prejudiced....................................... 100
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 TIA Controls....................................... 100
Section 11.02 Notices............................................ 100
Section 11.03 Communications by Holders with
Other Holders.................................... 101
Section 11.04 Certificate and Opinion as to
Conditions Precedent............................. 101
Section 11.05 Statements Required in Certificate
or Opinion....................................... 102
Section 11.06 Rules by Trustee, Paying Agent,
Registrar........................................ 102
Section 11.07 Legal Holidays..................................... 103
Section 11.08 Governing Law...................................... 103
Section 11.09 No Adverse Interpretation of Other
Agreements....................................... 103
Section 11.10 No Recourse Against Others......................... 103
<PAGE>
Section 11.11 Successors......................................... 103
Section 11.12 Duplicate Originals................................ 104
Section 11.13 Severability....................................... 104
Signatures
Exhibit A - Form of Initial Note.................................... A-1
Exhibit B - Form of Exchange Note................................... B-1
Exhibit C - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors................................ C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulation S........................................ D-1
Note: This Table of Contents shall not, for any purpose,
be deemed to be part of the Indenture.
<PAGE>
INDENTURE, dated as of March 17, 1997, between DynCorp, a Delaware
corporation (the "Company"), and United States Trust Company of New York, a New
York banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 9 1/2%
Senior Subordinated Notes due 2007 (the "Initial Notes") and Series B 9 1/2%
Senior Subordinated Notes due 2007 (the "Exchange Notes," and together with the
Initial Notes, the "Notes") and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Notes, when duly issued and executed by the Company, and authenticated
and delivered hereunder, the valid obligations of the Company, and to make this
Indenture a valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acceleration Notice" has the meaning provided in Section 6.02(a).
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities,
<PAGE>
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in
Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction, excluding any such transaction consummated within 180 days, after
the purchase of assets sold if the proceeds of the transaction are used to pay
all or a portion of such transaction) to any Person other than the Company, a
Wholly Owned Restricted Subsidiary of the Company or any Permitted Joint Venture
of (a) any Capital Stock of any Restricted Subsidiary of the Company or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $250,000, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Section 5.01 or (iii) the sale, conveyance or other
transfer of accounts receivable in connection with the New Securitization
Facility.
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<PAGE>
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code, as amended from time to
time, or any similar Federal, state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
-3-
<PAGE>
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
domestic and Eurodollar certificates of deposit and time deposits, bankers'
acceptances and floating rate certificates of deposit maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America or any state thereof, the District of Columbia,
any foreign bank or their branches and agencies (fully protected against
currency fluctuations), having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase obligations
with a term of not more than 180 days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of this Indenture); (iii) any
Person or Group (other than the Permitted Holder) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 40% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company; or (iv) the replacement of a majority
of the Board of Directors of the Company over a two-year period from the
directors who constituted the Board of Directors of the Company, at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"Change of Control Date" has the meaning provided in Section 4.15.
-4-
<PAGE>
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less Consolidated
Non-Cash Income for such period, all as determined on a consolidated basis for
such Person and its Restricted Subsidiaries in accordance with GAAP. When
calculating "Consolidated EBITDA" with respect to the Company, for purposes of
this definition only, the Securitization Entity shall be treated as a Restricted
Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof),
-5-
<PAGE>
other than the incurrence or repayment of Indebtedness in the ordinary course of
business for working capital purposes pursuant to working capital facilities,
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and (ii)
any Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
-6-
<PAGE>
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries and Permitted
Joint Ventures for such period determined on a consolidated basis in accordance
with GAAP, including, without limitation, (a) any amortization of debt discount
and amortization or write-off of deferred financing costs, (b) the net costs
under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person and its Restricted Subsidiaries and Permitted
Joint Ventures during such period as determined on a consolidated basis in
accordance with GAAP; provided that amounts to be included in clauses (i) and
(ii) above with respect to Permitted Joint Ventures not constituting Restricted
Subsidiaries shall be the product of the amounts computed in accordance with
GAAP and the percentage of the total outstanding shares of Capital Stock of such
Permitted Joint Venture held by the Company or any Restricted Subsidiary of the
Company. When calculating "Consolidated Interest Expense" with respect to the
Company, for purposes of this definition only, the Securitization Entity shall
be treated as a Restricted Subsidiary.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
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similar distributions by that Restricted Subsidiary of that income is restricted
by contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person (except in the case of
(d) and (e) to the extent of cash dividends or distributions paid to the
referent Person or a Wholly Owned Restricted Subsidiary of the referent Person
by such Person), (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), and (h) in the case of a successor to the referent
Person by consolidation or merger or as a transferee of the referent Person's
assets, any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets. When calculating "Consolidated Net Income" with
respect to the Company, for purposes of this definition only, the Securitization
Entity shall be treated as a Restricted Subsidiary.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charge constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
When calculating "Consolidated Non-Cash Charges" with respect to the Company,
for purposes of this definition only, the Securitization Entity shall be treated
as a Restricted Subsidiary.
"Consolidated Non-Cash Income" means, with respect to any Person,
for any Period, the aggregate amount of revenue of such Person and its
Restricted Subsidiaries increasing the Consolidated Net Income of such Person
and its Restricted Subsidiaries that will not result in the future receipt of
cash by such Person and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP (excluding any such revenue
constituting an extraordinary item). When calculating "Consolidated Non-Cash
Income" with respect to the Company, for
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purposes of this definition only, the Securitization Entity shall be treated as
a Restricted Subsidiary.
"Covenant Defeasance" has the meaning provided in Section 8.02.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Notice" has the meaning provided in Section 10.02.
"Depository" means The Depository Trust Company, a New York limited
purpose trust company, its nominees and successors.
"Designated Senior Debt" means (i) Indebtedness under or in respect
of the Revolving Credit Facility and (ii) any other Indebtedness constituting
Senior Debt which, at the time of determination, has an aggregate principal
amount of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Debt as "Designated Senior Debt" by the
Company.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes. So long as the
Company's obligation to repurchase common stock pursuant to the ESOP exists,
common stock issued to the ESOP shall be Disqualified Capital Stock.
"ESOP" means the Company's Employee Stock Ownership Plan effective
as of January 1, 1988, as amended.
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"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" has the meaning provided in the preamble to this
Indenture.
"Exchange Offer" means the registration by the Company under the
Securities Act pursuant to a registration statement of the offer by the Company
to each Holder of the Initial Notes to exchange all the Initial Notes held by
such Holder for the Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Initial Notes held by such Holder, all in
accordance with the terms and conditions of the Registration Rights Agreement.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's- length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession of the United States, which are in effect as of the Issue
Date.
"Global Note" has the meaning provided in Section 2.01.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"incur" has the meaning provided in Section 4.12.
"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
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(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, the amount of such obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the obligation so secured, (viii) all Obligations under Currency Swap
Agreements and Interest Swap Agreements of such Person and (ix) all Disqualified
Capital Stock issued by such Person (other than Disqualified Capital Stock owned
by the ESOP or any other benefit plan) with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Notes" has the meaning provided in the preamble to this
Indenture.
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"Initial Purchasers" means BT Securities Corporation and Citicorp
Securities, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.10, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions in connection with such
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Investment or any other amounts received in respect of such Investment; provided
that no such payment of dividends or distributions or receipt of any such other
amounts shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of. Investments shall
not include travel advances in the ordinary course of business.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning provided in Section 8.02.
"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means March 1, 2007.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any
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Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post- employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.16.
"New Securitization Facility" means the securitiz- ation facility
which the Company and the Securitization Entity intend to enter into and
anticipates will be in place by April 30, 1997, as described in the Offering
Memorandum, and any replacement thereof.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the Initial Notes and the Exchange Notes treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated March 11,
1997, pursuant to which the Initial Notes were offered, and any supplement
thereto.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer
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and either an Assistant Treasurer or an Assistant Secretary of such Person and
otherwise complying with the requirements of Sections 11.04 and 11.05, as they
relate to the making of an Officers' Certificate.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Opinion of Counsel" means a written opinion from legal counsel, who
may be counsel for the Company, and who is reasonably acceptable to the Trustee
complying with the requirements of Sections 11.04 and 11.05, as they relate to
the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder" means (i) the ESOP and other benefit plans of the
Company, including, without limitation, the Company's 401(k) Plan and (ii) the
group composed of the parties to the New Stockholders Agreement dated as of
March 11, 1994.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes and this Indenture in an aggregate
principal amount of $100 million;
(ii) Indebtedness incurred pursuant to the Revolving Credit Facility
in an aggregate principal amount at any time outstanding not to exceed $50
million until the closing of the New Securitization Facility, and
thereafter $15 million, in each case, reduced by any permanent repayments
(which are accompanied by a corresponding permanent commitment reduction)
thereunder;
(iii) Indebtedness to be incurred pursuant to the New Securitization
Facility in an aggregate principal amount at any time outstanding not to
exceed 85% of the total accounts receivable of the Company and its
Subsidiaries on a consolidated basis plus, without duplication, accounts
receivable transferred in connection with the New Securitization Facility;
(iv) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
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(v) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that the
extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company; provided that if as of any date any
Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(viii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien; provided that (a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under this
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument that
constitutes a daylight overdraft or is
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inadvertently drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within
two business days of incurrence;
(x) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business, and payment bonds, performance bonds or bid bonds
obtained in the ordinary course of business, or letters of credit obtained
in order to provide security therefor;
(xi) Refinancing Indebtedness; and
(xii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10.0 million
at any one time outstanding.
"Permitted Investments" means: (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; provided that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Notes and this Indenture; (iii)
Investments in Permitted Joint Ventures; (iv) Investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1.5 million at any one time outstanding;
(vi) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with this Indenture; (vii) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.16; (ix) Investments in the Securitization Entity; and
(x) additional Investments not to exceed $15.0 million at any one time
outstanding.
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"Permitted Joint Venture" means any joint venture arrangement (which
may be structured as a corporation, partnership, trust, limited liability
company or any other Person) if (a) no Affiliate of the Company or a Restricted
Subsidiary (other than another Restricted Subsidiary of the Company) has an
investment in such Person, (b) such Person is engaged in the same or a similar
line of business as the Company and its Subsidiaries were engaged in on the date
of this Indenture (or any reasonable extensions or expansions thereof or any
business ancillary thereto or supportive thereof), (c) the Company and/or any of
its Restricted Subsidiaries at all times owns at least 25% of the total
outstanding shares of Capital Stock of such Person entitled to participate in
distributions in respect of the earnings, sale or liquidation of such Person,
(d) immediately after giving effect to such Investment on a pro forma basis (to
give effect to the contribution of any property or assets to such Person or
Indebtedness incurred to fund such Investment or otherwise), the Company could
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the provisions of Section 4.12, and (e) no default
with respect to any Indebtedness of such Person or any Subsidiary of such Person
(including any right which the holders thereof may have to take enforcement
action against such Person) would permit (upon notice, lapse of time or both)
any holder of any Indebtedness of the Company or its Restricted Subsidiaries to
declare a default on such Indebtedness or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity. If, at any time, a
Permitted Joint Venture fails to comply with clauses (a) through (e) above, such
Permitted Joint Venture shall constitute an Investment and must comply with
Section 4.10 (but only with respect to the Company's percentage ownership in
such Permitted Joint Venture).
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
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(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceedings
may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company
or any Restricted Subsidiary of the Company other than the property and
assets so acquired and (B) the Lien securing such Indebtedness shall be
created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber
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documents and other property relating to such letters of credit and
products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company;
(xiv) Liens pursuant to the New Securitization Facility; and
(xv) Liens to secure Indebtedness incurred by Restricted Subsidiaries
of the Company and Permitted Joint Ventures (in each case, to the extent
such Indebtedness is permitted to be incurred by this Indenture).
"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
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"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock of the Company pursuant to a registration statement
filed with the SEC in accordance with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes, whether
or not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"Reference Date" has the meaning provided in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
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"Refinancing Indebtedness" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clauses (ii), (iii), (v), (vi), (vii),
(viii), (ix) or (xi) of the definition of Permitted Indebtedness), in each case
that does not (1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by the Company in connection with such Refinancing) or (2) create Indebtedness
with (A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being Refinanced;
provided that (x) if such Indebtedness being Refinanced is Indebtedness of the
Company, then such Refinancing Indebtedness shall be Indebtedness solely of the
Company and (y) if such Indebtedness being Refinanced is subordinate or junior
to the Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated March 17, 1997 among the Company and the Initial Purchasers for
the benefit of themselves and the Holders, as the same may be amended or
modified from time to time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" has the meaning provided in Section 4.16.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Restricted Payment" has the meaning provided in Section 4.10.
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"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness incurred by
a Restricted Subsidiary (other than a Subsidiary Guarantor) that is neither (a)
Acquired Indebtedness nor (b) Permitted Indebtedness as defined in clauses (i)
through (xi) of such defined term.
"Revolving Credit Facility" means the revolving credit facility
dated as of March 14, 1996, between the Company, the lenders party thereto in
their capacities as lenders thereunder and Citicorp North America, Inc., as
agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by Section
4.12) or adding Restricted Subsidiaries of the Company as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor replacement agreement and whether by the same or any
other agent, lender or group of lenders.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Corporation and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property,
excluding any such transaction consummated within 180
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days after the purchase of assets sold if the proceeds of the transactions are
used to pay all or a portion of such transaction.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means, the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Securitization Entity" means Dyn Funding Corporation or any
successor or replacement entity which is the borrower under the New
Securitization Facility or any replacement thereof.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations (including guarantees thereof) of every nature of the Company under
the Revolving Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all Interest Swap Obligations and (z) all
obligations under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, Senior Debt
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of
the provisions set forth under Section 4.12,
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(vii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
the Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act but excluding in any case
Fuller-Austin Insulation Company.
"Subsidiary", with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Subsidiaries that
becomes a guarantor of the Notes by executing a supplemental indenture in which
such Subsidiary agrees to be bound by the terms of the Indenture; provided that
any person constituting a Subsidiary Guarantor as described above shall cease to
constitute a Subsidiary Guarantor when its respective Subsidiary Guaranty is
released in accordance with the terms thereof.
"Surviving Entity" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.04.
"Total Tangible Assets" means the Company's total consolidated
assets minus (i) all intangible assets and (ii) all accruals relating to amounts
expected to be recovered from insurance carriers for the payment of currently
unsettled and estimated future claims relating to the use of asbestos products
by Fuller-Austin Insulation Company.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
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"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" of any Person means (i) the Securitization
Entity, (ii) any Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsidiary by the Board of
Directors of such Person in the manner provided below and (iii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided that (x) the Company certifies to the Trustee that
such designation complies with Section 4.10 and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries (provided that this clause (y) shall not prevent the
Company from guaranteeing Indebtedness of any Unrestricted Subsidiary, to the
extent the Company is permitted, to undertake such guarantee by the terms of
this Indenture). The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12 and (y) immediately before and immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means 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.
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"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
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SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes shall be substantially in the form of Exhibit A
hereto. The Exchange Notes shall be substantially in the form of Exhibit B
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or depository rule or usage. The Company and the Trustee
shall approve the form of the Notes and any notation, legend or endorsement on
them. Each Note shall be dated the date of its issuance and shall show the date
of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Global Note may from time to
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time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Notes"). Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A
may be issued, in the form of permanent certificated Notes in registered form,
in substantially the form set forth in Exhibit A (the "U.S. Physical Notes").
The Offshore Physical Notes and the U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes." Physical Notes shall
initially be registered in the name of the Depository or the nominee of such
Depository and be delivered to the Trustee as custodian for such Depository.
Beneficial owners of Physical Notes, however, may request registration of such
Physical Notes in their names or the names of their nominees.
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
An Officer or an Assistant Secretary having been duly authorized by
all requisite corporation actions shall sign the Notes for the Company by manual
or facsimile signature. The Company's seal shall also be reproduced on the
Notes.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $150,000,000, and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes, in each case upon written orders of the Company in the form of
an Officers' Certificate. The Officers' Certificate shall specify the amount of
Notes to be authenticated, the date on which the Notes are to be authenticated
and the aggregate
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principal amount of Notes outstanding on the date of authentication, whether the
Notes are to be Initial Notes or Exchange Notes, and shall further specify the
amount of such Notes to be issued as the Global Note, Offshore Physical Notes or
U.S. Physical Notes. The aggregate principal amount of Notes outstanding at any
time may not exceed $150,000,000, except as provided in Section 2.07.
The Trustee shall not be required to authenticate Notes if the
issuance of such Notes pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Notes and this Indenture in a manner
which is not reasonably acceptable to the Trustee.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional Paying Agent. Neither the Company nor any Affiliate of the
Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee, in advance, of
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the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days notice to the Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Notes (whether such assets have
been distributed to it by the Company or any other obligor on the Notes), and
the Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.
SECTION 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.16 and 2.17, when Notes are
presented to the Registrar with a request to register the transfer of such Notes
or to exchange such Notes for an equal principal amount of Notes of other
authorized
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denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided, however,
that the Notes presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Section 2.10, 3.06, 4.15, 4.16 or 9.06, in which event the Company shall be
responsible for the payment of such taxes).
The Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article Three, except the unredeemed portion of any
Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder must provide an affidavit of lost certificate and an indemnity bond or
other indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel and the Trustee. Every replacement Note shall
constitute an additional obligation of the Company.
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SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives an Opinion of Counsel that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or any of its Affiliates shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Notes, of the aggregate
principal amount of such Notes so repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the
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form of definitive Notes but may have variations that the Company considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate upon receipt of a written order of
the Company pursuant to Section 2.02 definitive Notes in exchange for temporary
Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail or cause to be
mailed to each Holder, as of a recent date selected by the Company, with a copy
to the Trustee, a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that no representation is hereby deemed to
be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance
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may be placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment Date
and on the Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until March 17, 1999, unless otherwise agreed by the Company and
the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE
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TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE
OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. 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 SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON 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.
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TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. Book-Entry Provisions
for Global Security.
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository or its nominee may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall
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(if one or more Physical Notes are to be issued) reflect on its books and
records the date and a decrease in the principal amount of the Global Note in an
amount equal to the principal amount of the beneficial interest in the Global
Note to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after March 17,
1999 or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the Registrar a
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certificate substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depository's and the
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Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global
Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section
2.17 exist or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01
at least 60 days before the Redemption Date
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(unless a shorter notice period shall be satisfactory to the Trustee, as
evidenced in a writing signed on behalf of the Trustee), together with an
Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, selection of the
Notes to be redeemed will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or in such other fair and reasonable
manner chosen at the discretion of the Trustee; provided, however, that if a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee only on a pro rata basis or as nearly a pro rata basis as is practicable
(subject to DTC procedures), unless such method is otherwise prohibited. The
Trustee shall make the selection from the Notes outstanding and not previously
called for redemption and shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes in denominations
of $1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first
class mail, postage prepaid, to each Holder whose Notes are to be redeemed, at
its registered address, with a copy to the Trustee and any Paying Agent. At the
Company's written request (which shall include the information necessary to
provide a notice of redemption pursuant to this Section 3.03), the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense.
Each notice for redemption shall identify the Notes to be redeemed
and shall state:
(1) the Redemption Date;
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(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus accrued
interest, if any, upon surrender to the Paying Agent of the Notes
redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date), but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant record dates referred to in the Notes.
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SECTION 3.05. Deposit of Redemption Price.
On or before 11:00 a.m. New York City time on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Notes to be
redeemed on that date. The Paying Agent shall promptly return to the Company any
U.S. Legal Tender so deposited which is not required for that purpose, except
with respect to monies owed as obligations to the Trustee pursuant to Article
Seven.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (after
taking into account any applicable grace periods) from time to time on demand at
the rate borne by the Notes plus 2% per annum. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
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Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five and Section 4.16, the
Company shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate existence of each of its Restricted Subsidiaries in accordance
with the respective organizational documents of each such Restricted Subsidiary
and the material rights (charter and statutory) and franchises of the Company
and each such Restricted Subsidiary; provided, however, that the Company shall
not be required to preserve, with respect to itself, any material right or
franchise and, with respect to any of its Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Subsidiaries, taken as a
whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon the property of it or any of its Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose
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amount, applicability or validity is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted for which
adequate reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto to
actively conduct and carry on its business; provided, however, that nothing in
this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the good faith judgment of the Board
of Directors of the Company or the Restricted Subsidiary, as the case may be,
desirable in the conduct of their respective businesses and is not
disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself
and each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Board of Directors of the Company, are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
in a prudent manner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the good faith judgment of the Board of Directors of the Company, for companies
similarly situated in the industry.
SECTION 4.06. Compliance Certificate;
Notice of Default.
(a) The Company shall deliver to the Trustee, within 100 days after
the end of the Company's fiscal year, an Officers' Certificate signed by the
principal executive officer, principal financial officer or principal accounting
officer stating that a review of its activities and the activities of its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
that to the best of such Officer's knowledge the Company during such preceding
fiscal year has kept, observed, performed and
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fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section
4.08 shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that a Default or Event of Default
under this Indenture has occurred insofar as they relate to accounting matters
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 11.02 hereof,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action and the status thereof within five
Business Days of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Restricted Subsidiaries, taken
as a whole.
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SECTION 4.08. SEC Reports.
(a) So long as the Notes are outstanding, the Company (at its own
expense) shall file with the SEC and shall file with the Trustee within 15 days
after it files them with the SEC copies of the quarterly and annual reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) to be
filed pursuant to Section 13 or 15(d) of the Exchange Act (without regard to
whether the Company is subject to the requirements of such Section 13 or 15(d)
of the Exchange Act). Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a).
(b) At the Company's expense, the Company shall cause an annual
report if furnished by it to stockholders generally and each quarterly or other
financial report if furnished by it to stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar at the time of such mailing or
furnishing to stockholders.
(c) The Company shall provide to any Holder any information
reasonably requested by such Holder concerning the Company (including financial
statements) necessary in order to permit such Holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act.
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
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SECTION 4.10. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date") (treating such period as a
single accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company; plus (y) without
duplication of any amounts included in clause (iii)(x) above, 100% of the
aggregate net cash proceeds of any equity contribution received by the Company
from a holder of the Company's Capital Stock (excluding, in the case of clauses
(iii)(x) and (y), (i) any net cash proceeds from a Public Equity Offering to the
extent used to redeem the Notes and (ii) cash proceeds from the issuance of
Qualified Capital Stock by, or any equity contribution from any Person, financed
directly or indirectly using funds borrowed from the Company or any Subsidiary
of the Company until and to the extent such borrowing is repaid).
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Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or (B)
Refinancing Indebtedness; (4) the repurchase by the Company of shares of its
Common Stock in connection with the repurchase provisions of the ESOP as in
effect on the Issue Date (subject to changes in the ESOP to reflect requirements
of ERISA or other applicable laws); (5) payments by the Company in respect of
(A) the repurchase by the Company of Common Stock from former employees,
officers and directors of the Company, (B) the payment by the Company of up to
$2.5 million in withholding and or payroll taxes upon the lapse of deferrals of
deferred stock and stock equivalent accounts and (C) the Company's obligation to
repurchase 125,714 shares of Common Stock issued in connection with the
Company's acquisition of Technology Applications, Inc., in an aggregate amount
not to exceed $3.0 million in any calendar year (provided that if less than $3.0
million is used for payments pursuant to (A), (B) and (C) in any calendar year,
the difference may be carried forward and used in subsequent calendar years);
and (6) the repurchase by the Company within 30 days of the Issue Date of up to
389,724 shares of Common Stock and Common Stock Warrants which are beneficially
owned by Guaranty National Insurance Company and Security Insurance Company in
an aggregate amount not to exceed $7.9 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2), (4) and (5) shall be included in such calculation;
provided that amounts received by the Company from the sale by the Company of
Common Stock to the ESOP that constitute Disqualified Capital Stock shall be
credited against the amounts calculated pursuant to clause (4) above for the
purpose of such calculation.
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Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.11. Limitation on Transactions
with Affiliates.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are no less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $250,000 shall be approved by the Board of
Directors of the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value or
payments to an Affiliate, as the case may be, of more than $2.5 million, the
Company or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The foregoing restrictions shall not apply to (i) reasonable
fees, compensation and out-of-pocket expenses paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii)
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transactions between or among the Company and any of its Restricted Subsidiaries
or exclusively between or among such Restricted Subsidiaries, provided that such
transactions are not otherwise prohibited by this Indenture; (iii) transactions
exclusively between or among the Company and any of its Restricted Subsidiaries
on the one hand and any Permitted Joint Venture on the other hand, so long as no
portion of the remaining interest in the Permitted Joint Venture is owned by a
Person who is an Affiliate of the Company (other than another Restricted
Subsidiary of the Company); (iv) any agreement as in effect as of the Issue Date
or any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in effect on
the Issue Date; (v) Restricted Payments permitted by this Indenture; and (vi)
transactions pursuant to the New Securitization Facility. In addition,
transactions between the Company and the ESOP or any other of the Company's
benefit plans shall not be considered Affiliate Transactions for purposes of the
Indenture.
SECTION 4.12. Limitation on Incurrence
of Additional Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
its Restricted Subsidiaries may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.
SECTION 4.13. Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries.___
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital
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Stock; (b) make loans or advances or to pay any Indebtedness or other obligation
owed to the Company or any other Restricted Subsidiary of the Company; or (c)
transfer any of its property or assets to the Company or any other Restricted
Subsidiary of the Company, except (i) with respect to Restricted Subsidiaries
which are Permitted Joint Ventures for such restrictions described in clause (b)
or (c) above which require such Restricted Subsidiary to effect such payment,
loan, advance or transfer on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's length basis from a Person that is not an Affiliate of such Restricted
Subsidiary and (ii) except for such encumbrances or restrictions existing under
or by reason of: (1) applicable law; (2) this Indenture; (3) the New
Securitization Facility and the Revolving Credit Facility; (4) customary
non-assignment provisions of any contract or lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (5) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (6) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; (7) any instrument governing Indebtedness incurred
by a Permitted Joint Venture or any instrument or agreement governing a
Permitted Joint Venture (but only to the extent such instrument or agreement
does not restrict payments of dividends or other distributions made pursuant to
clause (b) above out of earnings and profits of such Permitted Joint Venture);
or (8) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (3), (5) or (6) above; provided, however, that the provisions
relating to such encumbrance or restriction contained in any such Indebtedness
are no less favorable to the Company in any material respect as determined by
the Board of Directors of the Company in their reasonable and good faith
judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (3), (5) or (6).
SECTION 4.14. Prohibition on Incurrence of
Senior Subordinated Debt.
The Company shall not incur or suffer to exist Indebtedness that is
senior in right of payment to the Notes and subordinate in right of payment to
any other Indebtedness of the Company.
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SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall
make an offer to purchase all outstanding Notes pursuant to the offer described
in paragraph (b) below (the "Change of Control Offer") at a purchase price equal
to 101% of the principal amount thereof plus accrued interest to the date of
purchase. Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control, the Company shall (i) repay in
full all Indebtedness and terminate all commitments under the Revolving Credit
Facility and all other Senior Debt the terms of which require repayment upon a
Change of Control or offer to repay in full and terminate all commitments under
all Indebtedness under the Revolving Credit Facility and all other such Senior
Debt and to repay the Indebtedness owed to each lender which has accepted such
offer or (ii) obtain the requisite consents under the Revolving Credit Facility
and all other Senior Debt to permit the repurchase of the Notes as provided
below. The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase Notes pursuant to
the provisions described in this Section 4.15. The Company's failure to comply
with the immediately preceding sentence shall constitute an Event of Default
under Section 6.01(3) and not under Section 6.01(2).
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date"), the Company shall send or cause
to be sent, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer. The
notice to the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Change of Control Offer.
Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to
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the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all Notes
so tendered and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any, and the Trustee shall promptly authenticate and mail to such Holders new
Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted shall be promptly mailed by the Company
to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act
as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
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The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors); (ii) at least 80% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and (iii) upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 365 days of receipt thereof either
(A) to prepay any Senior Debt and, in the case of any Senior Debt under any
revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto ("Replacement Assets"), or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clause (iii)(A), (iii)(B) or (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45
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days following the applicable Net Proceeds Offer Trigger Date, from all Holders
on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued interest thereon to the date of purchase; provided, however, that
if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0
million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.
Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries shall be permitted to consummate an
Asset Sale without complying with such paragraphs to the extent (i) at least 80%
of the consideration for such Asset Sale constitutes Replacement Assets and (ii)
such Asset Sale is for fair market value; provided that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
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Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 business days or such longer
period as may be required by law.
(b) Each notice of a Net Proceeds Offer pursuant to this Section
4.16 shall be mailed or caused to be mailed, by first class mail, by the Company
not more than 25 days after the Net Proceeds Offer Trigger Date to all Holders
at their last registered addresses as of a date within 15 days of the mailing of
such notice, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.16 and that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a Net
Proceeds Offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be 20 Business Days from the date of
mailing of notice of such Net Proceeds Offer, or such longer period as
required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;
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(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in an original principal amount of $1,000 or integral
multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(1) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Notes to be purchased and
(iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock
of Restricted Subsidiaries.
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the
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Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any
Person (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company) to own any Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Liens of any kind against or upon any of its property or assets of the
Company or any of its Restricted Subsidiaries whether owned on the Issue Date or
acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom unless (i) in the case
of Liens securing Indebtedness that is expressly subordinate or junior in right
of payment to the Notes, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (ii) in all
other cases, the Notes are equally and ratably secured, except for (A) Liens
existing as of the Issue Date to the extent and in the manner such Liens are in
effect as of the Issue Date; (B) Liens securing Senior Debt; (C) Liens securing
the Notes; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary of
the Company on assets of any Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance Indebtedness which has
been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; provided, however,
that such Liens (A) are no less favorable to the Holders and are no more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
SECTION 4.19. Limitation of Guarantees
by Restricted Subsidiaries.
The Company shall not permit any of its Restricted Subsidiaries,
directly or indirectly, by way of the pledge of any intercompany note or
otherwise, to assume, guarantee or in any other manner become liable with
respect to any Indebtedness of the Company or any other Restricted Subsidiary
(other than (A) Indebtedness and other obligations under the Revolving Credit
Facility, (B) Permitted Indebtedness of a Restricted Subsidiary, (C)
Indebtedness under Currency Agreements incurred in reliance on clause (vi) of
the definition of Permitted Indebtedness or (D) Interest Swap Obligations
incurred in reliance on clause (v) of the definition of Permitted
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Indebtedness), unless, in any such case (a) such Restricted Subsidiary executes
and delivers a supplemental indenture to this Indenture, providing a guarantee
of payment of the Notes by such Restricted Subsidiary (the "Guarantee") and (b)
(x) if any such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Senior Debt, the guarantee or other
instrument provided by such Restricted Subsidiary in respect of such Senior Debt
may be superior to the Guarantee pursuant to subordination provisions no less
favorable to the Holders of the Notes than those contained in this Indenture and
(y) if such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Indebtedness that is expressly subordinated
to the Notes, the guarantee or other instrument provided by such Restricted
Subsidiary in respect of such subordinated Indebtedness shall be subordinated to
the Guarantee pursuant to subordination provisions no less favorable to the
Holders of the Notes than those contained in this Indenture. Further, the
Company will cause any Restricted Subsidiary that incurs in excess of $1.0
million of Restricted Subsidiary Indebtedness (a "Borrowing Restricted
Subsidiary") to become a Subsidiary Guarantor, unless at the time such
Restricted Subsidiary becomes a Borrowing Restricted Subsidiary the total
investment of the Company and the Restricted Subsidiaries in such Borrowing
Restricted Subsidiary and in all other Borrowing Restricted Subsidiaries that
are not Subsidiary Guarantors, computed in accordance with GAAP, is less than
10% of the Total Tangible Assets of the Company. A Borrowing Restricted
Subsidiary shall be released as a Subsidiary Guarantor (i) at such time as it
ceases to be a Borrowing Restricted Subsidiary or (ii) upon the election of the
Company, if after giving effect to such election, the total investment of the
Company and the Restricted Subsidiaries in all Borrowing Restricted Subsidiaries
that are not Subsidiary Guarantors, computed in accordance with GAAP, is less
than 10% of the Total Tangible Assets of the Company.
Notwithstanding the foregoing, any such Guarantee of the Notes by a
Restricted Subsidiary of the Company shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company, of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; provided that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
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compliance with the terms of this Indenture and (b) such assumption, guarantee
or other liability of such Restricted Subsidiary has been released by the
holders of the other Indebtedness so guaranteed.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation
and Sale of Assets.
(a) The Company shall not, in a single transaction or a series of
related transactions, consolidate with or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary of the Company to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company's
assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) to any Person whether as an entirety or substantially as an
entirety unless:
(1) either (A) the Company shall be the surviving or continuing
corporation or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x)
shall be a corporation organized and validly existing under the laws of
the United States or any State thereof or the District of Columbia and (y)
shall expressly assume, by supplemental indenture (in form and substance
reasonably satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of and premium, if
any, and interest on all of the Notes and the performance of every
covenant of the Notes, this Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred in connection with or in respect of such transaction), the
Company or such Surviving Entity, as the case may be, (A) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth
of the Company
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immediately prior to such transaction and (B) shall be able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
in compliance with Section 4.12;
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default
or Event of Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to
such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Notes when the same
becomes due and payable and the Default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article Ten); or
(2) the Company fails to pay the principal on any Notes when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article Ten); or
(3) the Company defaults in the observance or performance of any
other covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a default
with respect to Section 5.01, which will constitute an Event of Default
with such notice requirement but without such passage of time
requirement); or
(4) the Company fails to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness for borrowed money of the Company or any
Restricted Subsidiary of the Company, or the acceleration of the final
stated maturity of any such Indebtedness if the aggregate principal amount
of such Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final stated
maturity or which has been accelerated, aggregates $2.5 million or more at
any time; or
(5) one or more judgments in an aggregate amount in excess of $2.5
million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a
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period of 60 days after such judgment or judgments become final and
non-appealable; or
(6) the Company or any Significant Subsidiary of the Company (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or
for substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(E) makes a general assignment for the benefit of its creditors, or (F)
takes any corporate action to authorize or effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Subsidiary
of the Company in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any such Significant Subsidiary, (B) appoint a Custodian of the
Company or any such Significant Subsidiary for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days.
SECTION 6.02. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, then the Trustee or the
Holders of at least 25% in principal amount of outstanding Notes may declare the
principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Revolving Credit Facility, shall
become immediately due and payable upon the first to occur of an acceleration
under the Revolving Credit Facility or 5 business days after receipt by the
Company and the Representative under the Revolving Credit Facility of such
Acceleration Notice but only if such Event of Default is then continuing. Upon
any such declaration, but subject to the immediately preceding sentence, such
amount shall be immediately due and payable.
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(b) If an Event of Default specified in Section 6.01(6) or (7)
occurs and is continuing with respect to the Company, all unpaid principal of
and premium, if any, and accrued and unpaid interest on all of the outstanding
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
(c) At any time after a declaration of acceleration with respect to
the Notes in accordance with Section 6.02(a), the Holders of a majority in
principal amount of the Notes may, on behalf of the Holders of all of the Notes,
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(6) or (7), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. The Holders of a
majority in principal amount of the Notes may waive any existing Default or
Event of Default under this Indenture, and its consequences, except a default in
the payment of the principal of or interest on any Notes.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
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SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority
in principal amount of the outstanding Notes by notice to the Trustee may waive
an existing Default or Event of Default and its consequences, except a Default
in the payment of principal of or interest on any Note as specified in clauses
(1) and (2) of Section 6.01. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that the Trustee reasonably believes conflicts
with any law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or that may involve the Trustee in
personal liability; provided that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction; and
provided further that this provision shall not affect the rights of the Trustee
set forth in Section 7.01(d).
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(1) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(2) Holders of at least 25% in principal amount of the outstanding
Notes make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity, satisfactory to the
Trustee in its sole and absolute discretion, against any loss, liability
or expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45 days
after receipt of the request and the offer of satisfactory indemnity; and
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(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest at the rate set forth in Section 4.01 and 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, consultants and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and 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, taxes,
disbursements and advances of the Trustee, its agents, consultants and counsel)
and the Holders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Notes, any of their respective creditors or any of
their respective property and shall be entitled and empowered to collect and
receive any monies or other securities or property payable or deliverable upon
the conversion or exchange of the Notes or upon any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee
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shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
taxes, disbursements and advances of the Trustee, its agents, consultants and
counsel, and any other amounts due the Trustee under Section 7.07. The Company's
payment obligations under this Section 6.09 shall be secured in accordance with
the provisions of Section 7.07 hereunder. 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 Notes 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 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the
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suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or
Holders of more than 10% in principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default or 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 its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture against the Trustee.
(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.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it
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is proved that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not herein expressly provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate, an Opinion of
Counsel or both, which shall conform to Sections 11.04 and 11.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either
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directly or indirectly or by or through agents or attorneys and the
Trustee shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable
notice to the Company, to examine the books, records, and premises of the
Company, personally or by agent or attorney and to consult with the
officers and representatives of the Company, including the Company's
accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity satisfactory to the Trustee in its sole discretion against
the costs, expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The recitals contained herein and in the Notes shall be taken as
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant
to a Net Proceeds Offer and, except in the case of a failure to comply with
Article Five hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA { 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such date that complies with TIA { 313(a). The Trustee also shall comply with
TIA {{ 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA { 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's
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compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable fees and expenses, including out-of-pocket expenses incurred or made
by it in connection with the performance of its duties under this Indenture.
Such expenses shall include the reasonable fees and expenses of the Trustee's
agents, consultants and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the administration of this trust including
the reasonable costs and expenses of enforcing this Indenture against the
Company (including this Section 7.07) and of defending themselves against any
claim (whether asserted by any Noteholder or the Company) or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense; provided that any settlement of a
claim shall be approved in writing by the Trustee. Alternatively, the Trustee
may at its option have separate counsel of its own choosing and the Company
shall pay the reasonable fees and expenses of such counsel; provided that the
Company will not be required to pay such fees and expenses which are accrued
from and after the date upon which it assumes the Trustee's defense if it
assumes the Trustee's defense if it assumes the Trustee's defense and there is
no conflict of interest between the Company and the Trustee in connection with
such defense as reasonably determined by the Trustee. The Company need not pay
for any settlement made without its written consent. The Company need not
reimburse any expenses or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes. The Trustee's
right to receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Notes may be subordinate to such other liability or indebtedness).
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When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee
by so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA {{ 310(a)(1), (2) and (5). The Trustee (or, in the case of a
corporation included in a bank holding company system, the related bank holding
company) shall have a combined capital and surplus of at least $50 million as
set forth in its most recent annual report of condition. In addition, if the
Trustee is a corporation included in a bank holding company system, the Trustee,
independently of such bank holding company, shall meet the capital requirements
of TIA { 310(a)(2). The Trustee shall comply with TIA { 310(b); provided,
however, that there shall be excluded from the operation of TIA { 310(b)(1) any
indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding,
if the requirements for such exclusion set forth in TIA { 310(b)(1) are met. The
provisions of TIA { 310 shall apply to the Company, as obligor of the Notes.
SECTION 7.11. Preferential Collection of
Claims Against Company.
The Trustee shall comply with TIA { 311(a), excluding any creditor
relationship listed in TIA { 311(b). A Trustee who has resigned or been removed
shall be subject to TIA { 311(a) to the extent indicated therein. The provisions
of TIA { 311 shall apply to the Company, as obligor on the Notes.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the
Company's Obligations.
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Notes have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, U.S. Legal Tender in such amount
as is sufficient without consideration of reinvestment of such interest,
to pay principal of, premium, if any, and interest on the outstanding
Notes to maturity or redemption; provided that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the Notes
and, provided, further, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this Indenture or
the Notes shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
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(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for or relating to the termination of the Company's
obligations under the Notes and this Indenture have been complied with.
Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under the Revolving Credit Facility
(if then in effect) or any other agreement or instrument then known to
such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding pursuant to the last paragraph
of Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. Legal Defeasance and
Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 and the other Sections of this Indenture referred
to in (i) and (ii) below, and to have satisfied all its other obligations under
such Notes and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the
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same), and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Debt under Article Ten or otherwise, except for the following
provisions, which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.04 hereof, and as more fully set forth in
such Section, payments in respect of the principal of and interest on such Notes
when such payments are due, (ii) the Company's obligations with respect to such
Notes under Article Two and Section 4.02, (iii) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (iv) this Article Eight. Subject to compliance with
this Article Eight, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be released from its
obligations under the covenants contained in Sections 4.10 through 4.19 and
Article Five with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
shall cease to be subject to any obligations to, or the rights of, any holder of
Senior Debt under Article Ten or otherwise. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event or Default under Section 6.01(3), but, except as specified above,
the remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), subject to the satisfaction of the conditions
set forth in Section 8.03, Sections 6.01(3), 6.01(4) and 6.01(5) shall not
constitute Events of Default.
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SECTION 8.03. Conditions to Legal Defeasance
or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, of such principal or installment of
principal of or interest on the Notes; provided that the Trustee shall
have received an irrevocable written order from the Company instructing
the Trustee to apply such U.S. Legal Tender or the proceeds of such U.S.
Government Obligations to said payments with respect to the Notes;
(b) in the case of an election under Section 8.02(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c), the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
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(d) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
incurrence of Indebtedness all or a portion of the proceeds of which will
be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.01(6) and 6.01(7) are
concerned, at any time in the period ending on the 91st day after the date
of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of any holders of Senior Debt of the Company other than the Notes,
and (ii) assuming no intervening bankruptcy or insolvency of the Company
between the date of deposit and the 91st day following the deposit and
that no Holder is an insider of the Company, after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable Bankruptcy Law.
SECTION 8.04. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of
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and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations except as it may agree
with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.05. Repayment to the Company.
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; provided that the
Trustee or such Paying Agent, before being required to make any payment, may at
the expense of the Company cause to be published once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein which shall be at least 30 days from the date of such publication or
mailing any unclaimed balance of such money then remaining will be repaid to the
Company. After payment to the Company, Holders entitled to such money must look
to the Company for payment as general creditors unless an applicable law
designates another Person.
SECTION 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by
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reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Article Eight until such time as
the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or
U.S. Government Obligations in accordance with Article Eight; provided that if
the Company has made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Notes without notice to
or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
(6) to provide for issuance of the Exchange Notes, which will have
terms substantially identical in all material respects to the Initial
Notes (except that the transfer restrictions contained in the Initial
Notes will be modified or eliminated, as appropriate), and which will be
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treated together with any outstanding Initial Notes, as a single issue of
securities; or
(7) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any
Holders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes, may amend or supplement this Indenture or the Notes, without notice to
any other Holders. Subject to Section 6.07, the Holder or Holders of a majority
in aggregate principal amount of the outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes without notice to
any other Holder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each Note
affected thereby:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any Notes, or change the date on which any Notes may
be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce
such payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default, other than ones with respect
to the payment of principal of or interest on the Notes;
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(6) amend, modify, change or waive any provision of this Section
9.02;
(7) amend, modify or change in any material respect the obligation
of the Company to make or consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer
in respect of any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto after a Change of
Control has occurred or the subject Asset Sale has been consummated; or
(8) modify Article Ten or the definitions used in Article Ten to
adversely affect the Holders of the Notes.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Effect on Senior Debt.
No amendment of this Indenture shall adversely affect the rights of
any holder of Senior Debt under Article Ten of this Indenture, without the
consent of such holder.
SECTION 9.04. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives
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an Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (8) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such notation
or exchange shall be made at the sole cost and expense of the Company.
SECTION 9.07. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
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Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.
The Company covenants and agrees, and each Holder of the Notes, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Senior Debt, whether outstanding
on the Issue Date or thereafter incurred; that the subordination is for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt,
and that each holder of Senior Debt whether now outstanding or hereafter
created, incurred, assumed or guaranteed shall be deemed to have acquired Senior
Debt in reliance upon the covenants and provisions contained in this Indenture
and the Notes.
SECTION 10.02. No Payment on Notes in
Certain Circumstances.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its or their behalf with respect to any Obligations on
the Notes, or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof
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and if the Representative for the respective issue of Designated Senior Debt
gives notice of the event of default to the Trustee (a "Default Notice"), then,
unless and until all events of default have been cured or waived or have ceased
to exist or the Trustee receives notice thereof from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on its behalf
shall (x) make any payment of any kind or character with respect to any
Obligations on the Notes or (y) acquire any of the Notes for cash or property or
otherwise. Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 180 days from the date the payment on the Notes
was due and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for the commencement of a second
Blockage Period by the Representative of such Designated Senior Debt whether or
not within a period of 360 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days (it
being acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representatives, as their respective interests may
appear. The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action
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to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue
any rights or remedies hereunder.
SECTION 10.03. Payment Over of Proceeds
upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior Debt (pro
rata to such holders on the basis of the respective amounts of Senior Debt held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been paid
in full in cash or Cash Equivalents after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Senior
Debt.
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment
or distribution is prohibited by this Section 10.03, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
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pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(c) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five and as long as permitted under the terms of the Senior Debt shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. Payments May Be Paid Prior
to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
10.02 and 10.03, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with the
Trustee any moneys for such payments, or (ii) in the absence of actual knowledge
by the Trustee that a given payment would be prohibited by Section 10.02 or
10.03, the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of, and interest on, the Notes to
the Holders entitled thereto unless at least two Business Days prior to the date
upon which such payment would otherwise become due and payable a Trust Officer
shall have actually received the written notice provided for in the second
sentence of Section 10.02(a) or in Section 10.07 (provided that, notwithstanding
the foregoing, such application shall otherwise be subject to the provisions of
the first sentence of Section 10.02(a) and Section 10.03). The Company shall
give prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the
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Notes shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Senior Debt by or on behalf of
the Company or by or on behalf of the Holders by virtue of this Article Ten
which otherwise would have been made to the Holders shall, as between the
Company and the Holders of the Notes, be deemed to be a payment by the Company
to or on account of the Senior Debt, it being understood that the provisions of
this Article Ten are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders of
the Senior Debt, on the other hand.
SECTION 10.06. Obligations of the Company
Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Debt, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Notes as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, of the holders of Senior Debt in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
SECTION 10.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be
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entitled to assume (in the absence of actual knowledge to the contrary) that no
such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article Ten, the Trustee, subject to the provisions of Article Seven,
and the Holders of the Notes shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any insolvency, bankruptcy,
receivership, dissolution, winding-up, liquidation, reorganization or similar
case or proceeding is pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, receiver, assignee for the benefit of
creditors, agent or other person making such payment or distribution, delivered
to the Trustee or the Holders of the Notes, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the holders of
the Senior Debt and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this
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Article Ten, and no implied covenants or obligations with respect to the holders
of Senior Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt.
Whenever a distribution is to be made or a notice given to holders
or owners of Senior Debt, the distribution may be made and the notice may be
given to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints
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the Trustee its attorney-in-fact for such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, receivership, reorganization or similar
proceedings or upon an assignment for the benefit of creditors or otherwise)
tending towards liquidation of the business and assets of the Company, the
filing of a claim for the unpaid balance of its Notes and accrued interest in
the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Senior Debt or their Representative to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To
Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation
Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be
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included in this Indenture by the TIA, the required provision shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by commercial courier service, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company:
DynCorp
2000 Edmund Halley Drive
Reston, Virginia 22019-3436
Facsimile No.: (703) 264-9199
Attn: Senior Vice President and
Chief Financial Officer
if to the Trustee:
United States Trust Company of New York
114 West 47th Street 25th Floor
New York, New York 10036
Facsimile No.: (212) 852-1626
Attention: Corporate Trust Department
Each of the Company and the Trustee by written notice to each other
may designate additional or different addresses for notices to any Person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if personally delivered; when
receipt is confirmed if delivered by commercial courier service; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is
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mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
SECTION 11.03. Communications by Holders
with Other Holders.
Holders may communicate pursuant to TIA { 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other Person shall have the protection of TIA {
312(c).
SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.__
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 11.05. Statements Required in
Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition and the definitions 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 such Person, he has made
such examination or investigation as is
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reasonably 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
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying
Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 11.09. No Adverse Interpretation
of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect
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of or by reason of, such obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. Such waiver and release are part
of the consideration for the issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
Issuer:
DYNCORP
By: /s/ H. Montgomery Hougen
------------------------------
Name: H. Montgomery Hougen
Title: Vice President and Secretary
Trustee:
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By: /s/ James Logan
------------------------------
Name: James Logan
Title: Vice President
<PAGE>
EXHIBIT A
CUSIP No.:
DYNCORP
9 1/2% SENIOR SUBORDINATED NOTE DUE 2007
No. $
DYNCORP, a Delaware corporation (the "Company," which term includes
any successor entity), for value received promises to pay to or registered
assigns, the principal sum of Dollars, on March 1, 2007.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
DYNCORP
By: __________________________
Name:
Title:
Dated: March 17, 1997
Certificate of Authentication
This is one of the 9 1/2% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
Dated: March 17, 1997 By: _______________________________
Authorized Signatory
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(REVERSE OF SECURITY)
9 1/2% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. DYNCORP, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from March 17,
1997. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing September 1, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (after
taking into account any applicable grace periods)from time to time on demand at
the rate borne by the Notes plus 2% per annum.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of March 17, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 9 1/2% Senior Subordinated Notes due 2007 (the "Initial
Notes"). The Notes are limited in aggregate principal amount to $150,000,000.
The Notes include the Initial Notes and the Exchange Notes, as defined below,
issued in exchange
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for the Initial Notes pursuant to the Indenture. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are unsecured obligations of the
Company.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Obligations on the Senior Debt of the
Company, whether outstanding on the Issue Date or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after March 1, 2002, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on March 1 of the
year set forth below, plus accrued and unpaid interest thereon, if any, to the
date of redemption:
Year Percentage
- ---- ----------
2002.................................. 104.750%
2003.................................. 103.167%
2004.................................. 101.583%
2005 and thereafter................... 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any time,
or from time to time, on or prior to March 1, 2000, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings (as
defined in the Indenture) to redeem up to 35% of the aggregate principal amount
of Notes originally issued at a redemption price equal to 109.50% of the
principal amount thereof plus accrued and
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unpaid interest to the date of redemption; provided that at least 65% of the
principal amount of Notes originally issued remains outstanding immediately
after any such redemption.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 120
days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued and unpaid interest, if
any, the Notes called for redemption will cease to bear interest from and after
such Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. Registration Rights. Pursuant to the Registration Rights
Agreement (as defined in the Indenture), the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's Series B 9 1/2% Senior
Subordinated Notes due 2007 (the "Exchange Notes"), which have been registered
under the Securities Act, in like principal amount and having terms identical in
all material respects to the Initial Notes. The Holders of the Initial Notes
shall be entitled to receive certain additional interest payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall
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register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Notes or portions thereof selected for redemption.
11. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Paying Agent U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
14. Amendment; Supplement; Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article Five of the Indenture or make any other change
that does not adversely affect in any material respect the rights of any Holder
of a Note.
15. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other
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Person, sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation. Such limitations
are subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest and failure to comply with Article V
of the Indenture) if it determines that withholding notice is in their interest.
18. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
20. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
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21. Governing Law. The Laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
22. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
24. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: DynCorp, 2000 Edmund Halley Drive,
Reston, Virginia 22019-3436, Attn: Senior Vice President and Chief Financial
Officer.
A-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: ___________________ Signed: ____________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) March 17, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
A-8
<PAGE>
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) __ pursuant to an effective registration statement under the Securities
Act; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
A-9
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: __________________ Signed: ____________________________
(Sign exactly as name
appears on the other side
of this Note)
Signature Guarantee: __________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
A-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_________________
Dated: ____________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ____________________________________
A-11
<PAGE>
EXHIBIT B
CUSIP No.:
DYNCORP
SERIES B 9 1/2% SENIOR SUBORDINATED NOTE DUE 2007
No. $
DYNCORP, a Delaware corporation (the "Company," which term includes
any successor entity), for value received promises to pay to or registered
assigns, the principal sum of Dollars, on March 1, 2007.
Interest Payment Dates: March 1 and September 1
Record Dates: February 15 and August 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
DYNCORP
By: _________________________
Name:
Title:
Dated:
Certificate of Authentication
This is one of the Series B 9 1/2% Senior Subordinated Notes due
2007 referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
Dated: By: ________________________________
Authorized Signatory
B-1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 9 1/2% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. DYNCORP, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from March 17,
1997. The Company will pay interest semi-annually in arrears on each Interest
Payment Date, commencing September 1, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (after
taking into account any applicable grace periods) from time to time on demand at
the rate borne by the Notes plus 2% per annum.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of March 17, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of a duly authorized issue of Exchange Notes of the Company
designated as its Series B 9 1/2% Senior Subordinated Notes due 2007 (the
"Exchange Notes"). The Notes are limited in aggregate principal amount to
$150,000,000. The Notes include the Initial Notes (the 9 1/2% Senior
Subordinated Notes due 2007) and
B-2
<PAGE>
the Exchange Notes, issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code {{ 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are unsecured obligations of the Company.
5. Subordination. The Notes are subordinated in right of payment, in
the manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Obligations on the Senior Debt of the
Company, whether outstanding on the Issue Date or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after March 1, 2002, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on March 1 of the
year set forth below, plus accrued interest to the date of redemption:
Year Percentage
- ---- ----------
2002....................................... 104.750%
2003....................................... 103.167%
2004....................................... 101.583%
2005 and thereafter........................ 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any time,
or from time to time, on or prior to March 1, 2000, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings (as
defined in the Indenture) to redeem up to 35% of the aggregate principal amount
of Notes originally issued at a redemption price equal
B-3
<PAGE>
to 109.50% of the principal amount thereof plus accrued and unpaid interest to
the date of redemption; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after any such
redemption.
In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 120
days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued and unpaid interest, if
any, the Notes called for redemption will cease to bear interest from and after
such Redemption Date and the only right of the Holders of such Notes will be to
receive payment of the Redemption Price plus accrued and unpaid interest, if
any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
B-4
<PAGE>
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Paying Agent U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article Five of the Indenture or make any other change
that does not adversely affect in any material respect the rights of any Holder
of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
B-15
<PAGE>
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest and failure to comply with Article V
of the Indenture) if it determines that withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The Laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification
B-6
<PAGE>
+
Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a
convenience to the Holders of the Notes. No representation is made as to the
accuracy of such numbers as printed on the Notes and reliance may be placed only
on the other identification numbers printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: DynCorp, 2000 Edmund Halley Drive,
Reston, VA 22019-3436, Attn: Senior Vice President and Chief Financial Officer.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: __________________ Signed: _________________________
(Sign exactly as name
appears on the other side
of this Note)
Signature Guarantee: ________________________________________________
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$__________________
Dated: ______________________ _____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ________________________
B-9
<PAGE>
Exhibit C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
____________, ____
United States Trust Company
of New York
114 West 44th Street
New York, New York 10038
Attention: Securities Processing
Window Level SC1
Re: DynCorp 9 1/2% Senior Subordinated Notes due 2007
Ladies and Gentlemen:
In connection with our proposed purchase of 9 1/2% Senior
Subordinated Notes due 2007 (the "Notes") of DynCorp (the "Company"), we confirm
that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated March 11, 1997 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages
(i)-(iii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes prior to the date which
is three years after the original issuance of the Notes, we will do so only (i)
to the Company or any
C-1
<PAGE>
of its subsidiaries, (ii) inside the United States in accordance with Rule 144A
under the Securities Act to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act), (iii) inside the United States to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee (as defined in the Indenture relating to the Notes), a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the Notes, (iv) outside the United States in accordance with Rule
904 of Regulation S under the Securities Act, (v) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(vi) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Notes from
us a notice advising such purchaser that resales of the Notes are restricted as
stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in the
section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By: _____________________________
Name:
Title:
C-3
<PAGE>
Exhibit D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, ____
United States Trust Company
of New York
114 West 44th Street
New York, New York 10036
Attention: Securities Processing
Window Level SC1
Re: DynCorp (the "Company") 9 1/2% Senior
Subordinated Notes due 2007(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
D-1
<PAGE>
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: __________________________
Authorized Signature
Exhibit 12.1
DynCorp and Subsidiaries
Computation of Ratios
(Dollars in Thousands)
(1) Ratio of earnings to fixed charges
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------
1996 1995 1994(a) 1993(a) 1992(a)
---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fixed Charges
Interest on debt $ 9,391 $14,113 $14,579 $ 14,449 $ 14,246
Amortization of debt discount
and expenses 829 743 324 328 383
Interest element of rentals 7,266 8,245 4,762 3,475 3,018
------- ------- ------- ------- --------
$17,486 $23,101 $19,665 $ 18,252 $ 17,647
======= ======= ======= ======= ========
Earnings
Earnings (loss) from continuing
operations before income taxes,
minority interest and
extraordinary items $19,107 $(2,561) $(1,458) $ (2,244) $(13,944)
Interest on debt 9,391 14,113 14,579 14,449 14,246
Amortization of debt discount
and expense 829 743 324 328 383
Interest element of rentals 7,266 8,245 4,762 3,475 3,018
Minority interest (pre-tax) (1,926) (1,901) (1,660) (1,418) -
-------- ------- ------- -------- --------
$34,667 $18,639 $16,547 $ 14,590 $ 3,703
======== ======= ======= ======== ========
Ratio of earnings to fixed charges 2.0 - - - -
======== ======= ======= ======== ========
Deficiency in earnings available
to cover fixed charges $ - $ 4,462 $ 3,118 $ 3,662 $ 13,944
======== ======= ======= ======== ========
</TABLE>
(a) Restated for the discontinued operations of the Commercial Aviation
businesses.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 21, 1997 included in DynCorp's Form 10-K for the year ended December
31, 1996 and to all references to our Firm included in this registration
statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
April 17, 1997
Exhibit 25.1
FORM T-1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
------------------
DynCorp
(Exact name of obligor as specified in its charter)
Delaware 36-2408747
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2000 Edmund Halley Drive
Reston, Virginia 22091-3436
(Address of principal executive offices) (Zip Code)
------------------
9-1/2% Senior Subordinated Notes Due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
DynCorp currently is not in default under any of its outstanding securities
for which United States Trust Company of New York is Trustee. Accordingly,
responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form
T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact business
as a Trust Company, is incorporated by reference to Exhibit
T-1.1 to Form T-1 filed on September 15, 1995 with the
Commission pursuant to the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990
(Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
- 2 -
<PAGE>
16. List of Exhibits
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York,
as amended, is incorporated by reference to Exhibit T-1.4
to Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of April 14, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 14th day
of April, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ James E. Logan
_________________________
James E. Logan
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<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
________________________
Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 75,754
Short-Term Investments 276,399
Securities, Available for Sale 925,886
Loans 1,638,516
Less: Allowance for Credit Losses 13,168
---------
Net Loans 1,625,348
Premises and Equipment 61,278
Other Assets 120,903
----------
Total Assets $3,085,568
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 645,424
Interest Bearing 1,694,581
----------
Total Deposits 2,340,005
Short-Term Credit Facilities 449,183
Accounts Payable and Accrued Liabilities 139,261
----------
Total Liabilities $2,928,449
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,926
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 804
----------
Total Stockholder's Equity 157,119
----------
Total Liabilities and
Stockholder's Equity $3,085,568
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
April 9, 1997
<PAGE>
SIGNATURES
