<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 0-10018
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DSC COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1025763
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Coit Road, Plano, Texas 75075
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(214) 519-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class as of April 30, 1995
- ---------------------------- ----------------------------
Common Stock, $.01 Par Value 114,273,637
Page 1 of 18
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------- --------------
(Unaudited)
<S> <C> <C>
Assets
- ---------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents............................. $ 80,903 $ 52,942
Marketable securities................................. 197,605 218,380
Receivables........................................... 214,310 239,740
Inventories........................................... 213,940 180,674
Contract development costs............................ 17,177 14,202
Other current assets.................................. 37,117 32,516
------------- --------------
Total current assets............................. 761,052 738,454
------------- --------------
PROPERTY AND EQUIPMENT, at cost......................... 556,839 526,248
Less accumulated depreciation
and amortization..................................... (256,481) (243,285)
------------- --------------
300,358 282,963
------------- --------------
LONG-TERM RECEIVABLES................................... 31,691 25,691
CAPITALIZED SOFTWARE DEVELOPMENT COSTS.................. 40,714 38,583
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET.............................. 150,297 152,396
OTHER................................................... 32,199 30,449
------------- --------------
Total assets................................. $ 1,316,311 $ 1,268,536
============= ==============
Liabilities and Shareholders' Equity
- ---------------------------------------------------------
CURRENT LIABILITIES
Notes payable......................................... $ -- $ 39,791
Accounts payable...................................... 100,475 91,054
Accrued liabilities................................... 171,978 153,274
Customer advances..................................... 36,336 21,834
Income taxes payable.................................. 14,347 22,219
Current portion of long-term debt..................... 16,406 17,248
------------- --------------
Total current liabilities........................ 339,542 345,420
------------- --------------
LONG-TERM DEBT, net of current portion.................. 21,595 25,330
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES.................................. 49,598 46,686
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, issued -
119,222 in 1995 and 118,514 in 1994;
outstanding - 114,233 in 1995 and
113,525 in 1994...................................... 1,192 1,185
Additional capital.................................... 635,439 631,729
Unrealized losses on securities,
net of income taxes.................................. (902) (3,764)
Accumulated translation adjustment ................... 5,981 --
Retained earnings .................................... 306,977 265,061
------------- --------------
948,687 894,211
Treasury stock, at cost, 4,989 shares................. (43,111) (43,111)
------------- --------------
Total shareholders' equity......................... 905,576 851,100
------------- --------------
Total liabilities and
shareholders' equity....................... $ 1,316,311 $ 1,268,536
============= ==============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 2 of 18
<PAGE> 3
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Revenue................................................ $ 317,997 $ 200,874
Cost of revenue........................................ 159,327 103,859
--------------- ---------------
Gross profit......................................... 158,670 97,015
--------------- ---------------
Operating costs and expenses:
Research and product development..................... 46,939 24,703
Selling, general and administrative.................. 46,101 30,598
Other operating costs................................ 2,155 2,478
--------------- ---------------
Total operating costs and expenses................. 95,195 57,779
--------------- ---------------
Operating income .................................... 63,475 39,236
Interest income........................................ 3,919 3,486
Interest expense....................................... (1,031) (230)
Other expense, net..................................... (1,877) (1,379)
--------------- ---------------
Income before income taxes......................... 64,486 41,113
Income taxes........................................... 22,570 11,512
--------------- ---------------
Net income ........................................ $ 41,916 $ 29,601
=============== ===============
Income per share....................................... $ 0.36 $ 0.25
=============== ===============
Average shares used in per share computation........... 117,684 116,155
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 18
<PAGE> 4
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 41,916 $ 29,601
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............... 17,942 12,227
Amortization of capitalized software
development costs........................ 4,061 5,227
Decrease in current and long-term receivables... 23,610 10,876
Increase in inventories......................... (30,787) (18,029)
Increase in customer advances................... 14,233 2,068
Other, including changes in current
payables and other current assets............. 2,546 (930)
Increase in noncurrent income taxes
and other liabilities......................... 10,366 8,400
---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES.................... 83,887 49,440
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities.............. (19,804) (221,084)
Proceeds from sales and maturities of marketable
securities.................................... 42,637 184,389
Purchases of property and equipment............. (30,866) (32,760)
Additions to capitalized software
development costs............................. (6,192) (6,210)
Purchase of long-term investment security....... -- (12,500)
Other........................................... (2,313) (517)
---------- ----------
NET CASH USED FOR
INVESTING ACTIVITIES.................... (16,538) (88,682)
---------- ----------
</TABLE>
(Continued)
Page 4 of 18
<PAGE> 5
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable....................... (39,791) --
Payments of long-term borrowings................ (5,598) (3,610)
Proceeds from the sale of common stock
under stock programs.......................... 3,787 1,895
Other........................................... 864 (1,425)
--------- ----------
NET CASH USED FOR
FINANCING ACTIVITIES.................... (40,738) (3,140)
--------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS......................... 1,350 --
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 27,961 (42,382)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.. 52,942 154,888
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 80,903 $ 112,506
========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................... $ 594 $ 600
========= ==========
Income taxes paid............................... $ 20,721 $ 3,754
========= ==========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 5 of 18
<PAGE> 6
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1995 and 1994 and December 31, 1994
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements reflect,
in the opinion of management, all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows. Such
adjustments are of a recurring nature unless otherwise disclosed herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations promulgated by
the Securities and Exchange Commission. However, the Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading. Quarterly consolidated financial results may not be indicative of
annual consolidated financial results.
The Company has not paid or declared a cash dividend on its common stock since
its organization.
These unaudited financial statements should be read in conjunction with the
audited financial statements and accompanying notes included in the Company's
1994 Annual Report to Shareholders for the year ended December 31, 1994.
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Raw Materials . . . . . . . . . . . . . . . . . . . . . . $ 75,399 $ 66,466
Work in Process . . . . . . . . . . . . . . . . . . . . . 24,180 18,618
Finished Goods . . . . . . . . . . . . . . . . . . . . . . 114,361 95,590
-------- -----------
$213,940 $ 180,674
======== ===========
</TABLE>
Page 6 of 18
<PAGE> 7
CREDIT AGREEMENT
The Company has an uncollateralized revolving credit facility, which expires on
February 24, 1998, with two banks providing for borrowings up to $50 million.
The maximum borrowings available are reduced by the value of outstanding
letters of credit issued by the banks on behalf of the Company up to $25
million. Borrowings under the facility bear interest at the prime rate or at
0.75% to 1.50% above the LIBOR rate. A commitment fee of 0.35% on the daily
average unused portion of the facility is also assessed. The agreement
contains various financial covenants. There have been no borrowings under the
credit facility during the three months ended March 31, 1995. Letters of
credit issued by the banks under this agreement on behalf of the Company were
approximately $7.8 million at March 31, 1995.
INCOME TAX EXPENSE
The Company's income tax expense includes federal, foreign, and state
(including Puerto Rico) income taxes. The estimated effective income tax rate
is based upon estimates for the full year for a number of variables including,
among other things, forecasted income in the United States and foreign
jurisdictions. The effective tax rate could change as estimates of these and
other variables change throughout the year.
The estimated effective income tax rate is higher in 1995 than in 1994
primarily due to limited availability in 1995 of net operating loss and tax
credit carryforwards and increased foreign taxes.
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company has guarantees of $31.0 million outstanding at March 31, 1995
supporting Company and third-party performance bonds to customers and others,
of which $7.8 million were collateralized by letters of credit issued under the
Company's credit facility. The Company believes it has adequate reserves for
any ultimate losses associated with these contingencies.
The Company, in management of its exposure to fluctuations in foreign currency
exchange rates, enters into forward foreign exchange contracts for both firm
commitments and anticipated transactions of sales and purchases which are
denominated in foreign currencies. At March 31, 1995, the Company had forward
foreign exchange contracts of $111.8 million outstanding.
For information regarding litigation, refer to Part II - Other Information,
Item 1. "Legal Proceedings".
Page 7 of 18
<PAGE> 8
SUBSEQUENT EVENTS
On April 21, 1995, the Company borrowed $225 million under a long-term,
unsecured loan agreement with several insurance companies. The loan is payable
in eight equal annual payments beginning in the second quarter of 1996 and
bears interest at a rate of 9%, payable semi-annually. The loan contains
various financial covenants including, among other things, limitations on
additional debt and minimum levels of net worth.
In April 1995, the Company made an unscheduled payment of $9.4 million to pay
off the outstanding balance of a 9.5% note.
At the April 26, 1995 Annual Shareholders' Meeting, the shareholders approved
both an increase in the number of authorized shares of common stock from 250
million to 500 million and an increase of 1 million shares of common stock
authorized for issuance under the Company's 1990 Employee Stock Purchase Plan.
Page 8 of 18
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
For the three months ended March 31, 1995, the Company reported revenue of
$318.0 million and net income of $41.9 million, or $0.36 per share, compared to
revenue of $200.9 million and net income of $29.6 million, or $0.25 per share,
for the three months ended March 31, 1994.
Revenue for the 1995 first quarter increased 58% compared to the same period in
1994. The growth in revenue was primarily the result of continued strong
demand for a variety of the Company's products, including wireless switching
products and access products. The revenue increase was also due to the
inclusion of revenue from DSC Communications A/S (formerly NKT Elektronik A/S)
acquired in November 1994. Gross profit as a percentage of revenue was 49.9%
for the 1995 first quarter compared to 48.3% in the same period of 1994. This
improvement was due primarily to increased business volumes and cost reduction
activities. The Company's gross margin percentage can vary significantly from
period to period due to changes in the relative mix of product deliveries,
including software enhancements.
Research and product development expenses increased to $46.9 million, or 15% of
revenue, for the three month period ended March 31, 1995 compared to $24.7
million, or 12% of revenue, for the three month period ended March 31, 1994.
Selling, general and administrative expenses increased $15.5 million in the
first three months of 1995 to $46.1 million but declined as a percentage of
revenue to 14% for the three months ended March 31, 1995 from 15% for the same
period in 1994. These operating expense increases reflect the inclusion of
operating expenses of DSC Communications A/S in the first quarter of 1995.
Additionally, the growth in research and development expenses reflects increased
costs related to the development of several new products, certain of which are
scheduled for completion later in 1995. Selling, general, and administrative
expense growth also includes higher international selling activities as the
Company expands its international business presence.
As discussed in the Notes to Condensed Consolidated Financial Statements, the
Company entered into a long-term debt agreement on April 21, 1995 under which
the Company borrowed $225 million. Interest expense and interest income are
both expected to increase in the near-term as proceeds from the loan will be
invested in marketable securities until required for future business purposes.
The loan will bear interest at a 9% rate which is higher than the rate expected
to
Page 9 of 18
<PAGE> 10
be earned on the investment of the proceeds from the loan in marketable
securities.
The Company's estimated effective income tax rate was 35% for the three month
period ended March 31, 1995 compared to 28% for the same period in 1994. This
increase in the effective income tax rate is due primarily to limited net
operating loss and tax credit carryforwards available to reduce taxable
earnings in 1995 compared to 1994 and increased foreign taxes.
The Company has certain forward exchange contracts which are based on
anticipated future business transactions in various foreign countries,
primarily the United Kingdom and Germany, which totaled approximately $13.2
million at March 31, 1995. Future earnings could be affected since forward
contracts related to anticipated transactions are marked-to-market each period.
The Company's future quarterly and annual operating results may be affected by
a number of factors, including the timing and ultimate receipt of orders from
certain customers which continue to constitute a large portion of the Company's
revenue; the successful enhancement of existing products; introduction and
market acceptance of new products on a timely basis; mix of products sold;
product costs; manufacturing lead times; significant fluctuations in foreign
currency exchange rates; and changes in general worldwide economic conditions,
any of which could have an adverse impact on operations.
Financial Condition and Liquidity
The Company's cash and cash equivalents at March 31, 1995 were $80.9 million
compared to $52.9 million at December 31, 1994 while marketable securities were
$197.6 million at March 31, 1995 compared to $218.4 million at December 31,
1994.
Cash of $83.9 million was generated from operating activities. This was
primarily the result of strong earnings, improved collections of receivables
and an increase in non-debt liabilities, partially offset by an increase in
inventories to support existing customer backlog and additional customer
requirements for 1995.
Investing activities during the three months ended March 31, 1995 included
additions to property and equipment of $30.9 million. It is anticipated that
the Company will begin construction on a new facility in Copenhagen, Denmark
during the next several months. This new facility is expected to cost
approximately $50 million and will consolidate the operations of DSC
Communications A/S which are currently located in several leased facilities.
The Company's rapid business expansion and expected future domestic and
international
Page 10 of 18
<PAGE> 11
growth have and will continue to increase capital requirements including
facilities and manufacturing and development equipment. The timing and extent
of additional capital expenditures are dependent upon future business growth;
however, it is anticipated that 1995 capital requirements could range from $180
million to $200 million.
During the first quarter of 1995, the remaining $39.8 of short-term borrowings
obtained to fund a portion of the DSC Communications A/S acquisition was repaid
by the Company. Financing activities during the three months ended March 31,
1995 also included proceeds of $3.8 million from the issuance of the Company's
common stock under stock programs. Additionally, the Company made $5.6 million
of scheduled payments on long-term borrowings during the three months ended
March 31, 1995.
The Company has an unsecured revolving credit facility, which expires on
February 24, 1998, providing for borrowings up to $50.0 million. The maximum
available borrowings are reduced by the value of outstanding letters of credit
issued on behalf of the Company up to $25.0 million. The agreement contains
various financial covenants. There have been no borrowings under the credit
facility during the three months ended March 31, 1995. At March 31, 1995, the
Company could borrow up to $42.2 million under the credit agreement, net of
outstanding letters of credit. See "Credit Agreement" in Notes to Condensed
Consolidated Financial Statements for further information.
In April 1995, the Company made an unscheduled payment of $9.4 million to pay
off a 9.5% note.
As discussed previously, on April 21, 1995, the Company borrowed $225 million
under an unsecured, long-term loan agreement bearing interest at 9%. Interest
payments will be made semi-annually, and principal payments will be made in
eight equal annual installments beginning in the second quarter of 1996. The
loan contains various financial covenants and will be an unsecured obligation
of the Company. The proceeds from the loan are expected to be used for general
corporate purposes, including capital expenditures.
The Company believes that its existing cash and marketable securities and
available credit facilities will be adequate to support the Company's short and
long-term financial resource needs, including working capital requirements,
capital expenditures, operating lease obligations, and debt payments.
Page 11 of 18
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Litigation
On January 26, 1994, C. L. Grimes, a shareholder of the Company, filed
a derivative suit in Delaware Chancery Court (the "Court"), purportedly on
behalf of the Company as the real party in interest and as a shareholder of the
Company, seeking a declaration that the Employment Agreement of James L.
Donald, his Executive Income Continuation Plan, and the 1990 Long-Term
Incentive Compensation Plan, as it applies to Mr. Donald, as well as other
employment benefits of Mr. Donald, including previously granted Company stock
options, are null and void. The defendants in the suit are Mr. Donald, all
current non-employee directors, and two former directors of the Company. The
Company itself is a nominal defendant. The plaintiff contends that Mr.
Donald's employment contract contains an improper delegation of the Board of
Directors' authority to Mr. Donald and excess payments. The suit also contends
that the salary and benefits established for Mr. Donald pursuant to the Donald
agreements referred to above and approved by the Company's Board of Directors
are excessive and constitute a diversion and waste of corporate assets. The
suit seeks an injunction restraining Mr. Donald from exercising any stock
options, taking any action to implement any of the Donald agreements, or
declaring a constructive termination of his employment, and also seeks
unspecified damages against the defendants and Grimes' legal fees. On June 1,
1994, the plaintiff filed an amended complaint in which he restated his
existing claims and added a new claim contending that the Company's 1994 proxy
statement was misleading in its description of the 1994 Long-Term Incentive
Compensation Plan (the "1994 Plan"). On this new claim, the plaintiff seeks a
decree that the 1994 proxy statement insofar as it relates to the 1994 Plan and
the actions taken pursuant to the proxy statement with respect to the 1994 Plan
are null and void, and seeks to enjoin the Company from implementing the 1994
Plan.
On June 15, 1994, all defendants filed motions to dismiss all of the
plaintiff's claims, with the exception of the claim relating to the Company's
1994 proxy statement. On January 11, 1995, the Delaware Chancery Court granted
the defendants' motions to dismiss. The plaintiff later filed a motion seeking
entry of a final judgment of dismissal so that he would be free to pursue an
immediate appeal of the court's decision. In response, the court directed
entry of a final judgment and certified the dismissed claim for appellate
review. On March 6, 1995, the plaintiff filed an appeal of the dismissed
claims to the Delaware Supreme Court.
Page 12 of 18
<PAGE> 13
On July 20, 1993, the Company filed suit against Advanced Fibre
Communications ("AFC"), a California corporation; Quadrium Corporation
("Quadrium"), a California corporation; Alan E. Negrin ("Negrin"); and Henri
Sulzer ("Sulzer") in the United States District Court for the Eastern District
of Texas, Marshall Division. The Company seeks a declaratory judgment that
Negrin and Sulzer are not entitled to any stock options or cash payments under
the Company's 1990 Stock Option and Cash Payment Plan because of these
defendants' alleged breaches of certain employment-related agreements entered
into with the Company. The Company further seeks a declaration that AFC's
products, including the UMC 1000 Digital Loop Carrier, are the proprietary
property of the Company under the terms of certain Proprietary Information
Agreements or certain Consulting Agreements with Quadrium. The Company also
seeks unspecified damages for breaches of contract, civil conspiracy, and
tortious interference. The individual defendants have both filed counterclaims
whereby they claim entitlement to certain stock options and cash payments under
several of the Company's stock option plans. AFC has also filed a counterclaim
alleging that the Company has violated the Sherman Antitrust Act and a
California statutory antitrust act known as the Cartwright Act. AFC further
claims that the Company has (1) tortiously interfered with existing and
prospective contractual relationships, (2) committed industrial espionage and
misappropriation, (3) trespassed on AFC's business premises, (4) converted
certain property of AFC, and (5) committed unfair competition. AFC also seeks
a declaratory judgment that it owns all rights to its product, the UMC Digital
Loop Carrier. AFC asks the court award unspecified actual damages, treble
damages under the antitrust statutes, punitive damages, injunctive relief, and
attorneys' fees. During 1994, AFC amended its counterclaim to include an
additional claim under the Racketeering Influenced Corrupt Organization Act
against the Company. On December 1, 1994, AFC filed a motion to dismiss the
case for lack of diversity jurisdiction and, in the alternative, to transfer
the case to the Northern District of California in San Francisco, California.
In anticipation of a dismissal of the Texas case, AFC also filed on December 2,
1994, a new action in the United States District Court for the Northern
District of California, Oakland Division, in which AFC, as plaintiff, repeated
all of the issues in the counterclaim in the Texas case. On April 28, 1995,
the Court in the California action entered an Order of final judgement
dismissing the California case with prejudice. The judge in the Texas case
recently denied AFC's Motion to Transfer Venue. Discovery in the Texas case
has closed, and the parties are currently preparing for trial. The Company
believes that it has valid and substantial claims against all of the
defendants. The Company also intends to vigorously defend all of the
defendants' counterclaims, and further believes its has valid defenses to all
of the counterclaims. The Company recently filed Motions for Partial Summary
Judgment on all of AFC's counterclaims except its request for declaratory
judgment.
Page 13 of 18
<PAGE> 14
On May 25, 1994, the Company filed suit against DGI Technologies, Inc.
("DGI"), a Texas corporation, in the United States District Court for the
Northern District of Texas, Dallas Division. The Company alleged that DGI has
engaged in unfair competition under the Lanham Act and the common law by
trading on the Company's reputation, and by misleading customers about DGI's
research and development efforts. The Company further alleged that DGI has
misappropriated the Company's trade secrets regarding digital trunk interface
cards and microprocessor cards. More recently, the Company has supplemented
its Complaint and alleged that DGI has infringed the Company's copyrights on
its operating system software. The Company seeks damages for DGI's prior
actions and permanent injunctive relief. DGI has brought counterclaims for
alleged violations of federal antitrust statutes, tortious interference,
industrial espionage, misappropriation of trade secrets, trespass, conversion
and unfair competition. DGI's antitrust counterclaims are based upon
allegations that the Company's claims constitute "sham" litigation, that the
Company's statements to customers about the impact of their use of DGI products
on the Company's warranties are unlawful attempts to exclude competition and
that the Company has unlawfully tied the sale of its microprocessors to the
sale of other products. The balance of DGI's counterclaims are based upon
certain investigative procedures employed by the Company in connection with
this controversy. DGI asks the Court to award unspecified actual damages,
treble damages under antitrust statutes, punitive damages, injunctive relief
and attorneys' fees. Finally, DGI seeks declaratory relief that DGI's sales of
microprocessors do not violate any proprietary rights of the Company or any
applicable law. Although the outcome of litigation is inherently uncertain,
the Company believes that it has valid and substantial claims against DGI and
valid defenses to DGI's counterclaims. The case is still in discovery, and the
Company intends to vigorously prosecute its claims and to defend all of DGI's
counterclaims. The case is set for trial on August 7, 1995.
On April 10, 1995, the Company filed suit in Texas State Court in
Sherman, Texas against Next Level Communications, Inc. ("Next Level"), a
California corporation, Thomas R. Eames, Peter W. Keeler, and other former
Company employees now working for Next Level. The suit alleges that the
defendants wrongfully misappropriated the Company's trade secrets and
proprietary information for the purpose of competing with the Company with a
product which rightfully belongs to the Company. The suit alleges several
causes of action, including, breach of employment contract, tortious
interference with contractual relations, breach of fiduciary duty, usurpation
of corporate opportunity, theft of trade secrets, civil conspiracy, unfair
competition and injunctive relief. At the time of filing suit, the Company
also requested and was granted by Texas State court a temporary restraining
order against defendants. Defendants' first response was to have the action
removed from Texas State court to United States District Court for the Eastern
District of Texas, Sherman Division. Defendants next filed a motion to dismiss
the case for lack of personal jurisdiction. This issue having been addressed
to the Court by way of evidence and argument,
Page 14 of 18
<PAGE> 15
remains under submission by the Court.
On April 25, 1995, Next Level filed a complaint against the Company
and two of the Company's employees in California State Superior Court in Santa
Rosa, California. This complaint asserts causes of action for unfair
competition, anticompetitive conduct, interference with contractual relations
and interference with perspective economic advantage. The Company anticipates
that the action by the Company against Next Level and the action by Next Level
against the Company will be joined into one action.
The Company believes it has valid and substantial claims as asserted
against Next Level and the individual defendants. The Company also intends to
vigorously defend all of the Defendants' counter suits and further believes it
has valid defenses to all such counter suits.
The Company does not believe that the ultimate resolution of any of
these suits will have a material adverse effect on its consolidated financial
position.
The Company is also a party to other legal proceedings which, in the
opinion of management, are not expected to have a material adverse effect on
the Company's consolidated financial position.
Page 15 of 18
<PAGE> 16
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1995 Annual Meeting of Stockholders was held on April 26, 1995.
The following matters were voted on by the stockholders:
1. ELECTION OF THREE DIRECTORS. Clement M. Brown, Jr., Sir John Fairclough,
and Gerald F. Montry were elected to the Board of Directors as Class II
Directors for terms extending through the 1998 Annual Meeting of Stockholders.
2. APPROVAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM 250,000,000 TO
500,000,000. The Company's Restated Certificate of Incorporation provided for
authorized capital consisting of 250,000,000 shares of the Company's Common
Stock, par value of $.01 per share. The amendment to the Restated Certificate
of Incorporation increased the authorized capital to 500,000,000 shares of
Common Stock. At the 1995 Annual Meeting of Stockholders, the Company's
stockholders approved the increase in the authorized shares. The vote was
92,337,899 shares in favor, 8,730,172 shares against, 153,321 shares abstaining
and 577,138 broker non-votes.
3. APPROVAL OF AN INCREASE OF 1,000,000 SHARES OF COMMON STOCK TO THE DSC
COMMUNICATIONS CORPORATION 1990 EMPLOYEE STOCK PURCHASE PLAN. Subject to
stockholder approval, the Company's Board of Directors approved an increase of
1,000,000 shares (the "Additional Shares") of Common Stock to the DSC
Communications Corporation 1990 Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan is set forth in its entirety in Exhibit A to the
Company's Definitive Proxy Statements previously filed in connection with the
1990 Annual Meeting of Stockholders. The Purchase Plan, as amended, provides
for the issuance of up to 4,728,517 shares of the Company's Common Stock
(subject to certain antidilution provisions more fully set forth in the
Purchase Plan) to participants in the Purchase Plan pursuant to offerings which
may be made from time to time. At the 1995 Annual Meeting of Stockholders, the
Company's stockholders approved the Additional Shares. The vote was 99,332,399
shares in favor, 1,669,342 shares against, 219,651 shares abstaining and
577,138 broker non-votes.
Page 16 of 18
<PAGE> 17
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
10. Note Purchase Agreement Dated April 15, 1995.
11. Computation of Income Per Share.
27. Financial Data Schedule (for EDGAR filing purposes only).
B. Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months ended
March 31, 1995.
Page 17 of 18
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
Dated: May 15, 1995 By: /s/ Kenneth R. Vines
--------------------
Kenneth R. Vines
Vice President, Finance,
duly authorized officer
and principal accounting
officer
Page 18 of 18
<PAGE> 19
EXHIBIT INDEX
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10 Note Purchase Agreement Dated April 15, 1995.
11 Computation of Income Per Share.
27 Financial Data Schedule (for EDGAR filing purposes only).
</TABLE>
<PAGE> 1
EXHIBIT 10
================================================================================
DSC COMMUNICATIONS CORPORATION
DSC TECHNOLOGIES CORPORATION
DSC MARKETING SERVICES, INC.
DSC FINANCE CORPORATION
DSC INTERNATIONAL CORPORATION
DSC OF PUERTO RICO, INC.
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
DATED AS OF APRIL 15, 1995
$225,000,000 9.02% SENIOR NOTES DUE APRIL 21, 2003
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
1.2 Authorization of Notes; Sale of Notes . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Purchase for Investment; Source of Funds . . . . . . . . 2
1.5 Expenses, etc . . . . . . . . . . . . . . . . . . . . . 5
2. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 6
2.1 Opinions of Counsel. . . . . . . . . . . . . . . . . . . 6
2.2 Warranties and Representations True; Compliance with
this Agreement. . . . . . . . . . . . . . . . . . . . 6
2.3 Officers' Certificates. . . . . . . . . . . . . . . . . 7
2.4 Legality. . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Private Placement Numbers. . . . . . . . . . . . . . . . 7
2.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Other Purchasers. . . . . . . . . . . . . . . . . . . . 7
2.8 Proceedings Satisfactory . . . . . . . . . . . . . . . . 7
3. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS . . . . . . . . . 8
3.1 Organization; Power and Authority . . . . . . . . . . . 8
3.2 Authorization, etc. . . . . . . . . . . . . . . . . . . 8
3.3 Financial Statements . . . . . . . . . . . . . . . . . . 8
3.4 Full Disclosure . . . . . . . . . . . . . . . . . . . . 9
3.5 Organization and Ownership of Shares of Subsidiaries;
Affiliates . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Material Adverse Change . . . . . . . . . . . . . . . . 10
3.7 Compliance with Laws, Other Instruments, etc. . . . . . 10
3.8 Governmental Authorizations, etc. . . . . . . . . . . . 10
3.9 Litigation; Observance of Agreements, Statutes and
Order . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Title to Property; Leases . . . . . . . . . . . . . . . 11
3.12 Licenses, Permits, etc . . . . . . . . . . . . . . . . . 12
3.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Private Offering by the Obligors . . . . . . . . . . . . 13
3.15 Use of Proceeds; Margin Regulations . . . . . . . . . . 13
3.16 Debt; Future Liens . . . . . . . . . . . . . . . . . . . 13
3.17 Foreign Assets Control Regulations, etc. . . . . . . . . 14
3.18 Status under Certain Statutes . . . . . . . . . . . . . 14
3.19 Environmental Matters . . . . . . . . . . . . . . . . . 14
3.20 No Defaults. . . . . . . . . . . . . . . . . . . . . . . 15
3.21 Solvency. . . . . . . . . . . . . . . . . . . . . . . . 15
3.22 Labor Matters. . . . . . . . . . . . . . . . . . . . . . 15
3.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . 16
3.24 Material Agreements . . . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
4. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . 16
4.1 Interest Payments; Required Prepayments . . . . . 16
4.2 Optional Prepayments with Make-Whole Amount . . . 17
4.3 Offer to Prepay upon Change in Control. . . . . . 20
4.4 Allocation of Prepayments . . . . . . . . . . . . 21
4.5 No Other Prepayments. . . . . . . . . . . . . . . 22
4.6 Notation of Notes on Prepayment. . . . . . . . . . 22
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . 22
5.1 Registration of Notes . . . . . . . . . . . . . . 22
5.2 Transfer and Exchange of Notes . . . . . . . . . . 22
5.3 Replacement of Notes . . . . . . . . . . . . . . . 23
5.4 Power of Attorney . . . . . . . . . . . . . . . . 23
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Payment of Taxes and Claims . . . . . . . . . . . 24
6.2 Maintenance of Properties . . . . . . . . . . . . 24
6.3 Corporate Existence, etc. . . . . . . . . . . . . 24
6.4 Insurance . . . . . . . . . . . . . . . . . . . . 25
6.5 Books and Records . . . . . . . . . . . . . . . . 25
6.6 Compliance with Law . . . . . . . . . . . . . . . 25
6.7 Payments of Note; Maintenance of Office. . . . . . 25
6.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Pari Passu Obligations . . . . . . . . . . . . . . 27
6.10 Line of Business. . . . . . . . . . . . . . . . . 27
6.11 Transactions with Affiliates . . . . . . . . . . . 27
6.12 Private Offering. . . . . . . . . . . . . . . . . 27
6.13 Limitations on Debt . . . . . . . . . . . . . . . 27
6.14 Fixed Charge Coverage. . . . . . . . . . . . . . . 28
6.15 Consolidated Net Worth. . . . . . . . . . . . . . 28
6.16 Restricted Payments and Restricted Investments . . 28
6.17 Liens. . . . . . . . . . . . . . . . . . . . . . . 29
6.18 Mergers and Consolidation. . . . . . . . . . . . . 32
6.19 Transfers of Property; Subsidiary Stock and
Indebtedness . . . . . . . . . . . . . . . . . . . 33
6.20 Guaranties . . . . . . . . . . . . . . . . . . . . 35
6.21 Changes in Subsidiary Obligors . . . . . . . . . . 35
6.22 Designation of Subsidiaries . . . . . . . . . . . 37
7. INFORMATION AS TO THE OBLIGORS . . . . . . . . . . . . . . 38
7.1 Financial and Business Information . . . . . . . . 38
7.2 Officer's Certificate . . . . . . . . . . . . . . 41
7.3 Inspection . . . . . . . . . . . . . . . . . . . . 42
7.4 Confidentiality . . . . . . . . . . . . . . . . . 43
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 44
8.1 Nature of Events . . . . . . . . . . . . . . . . . 44
8.2 Remedies on Default . . . . . . . . . . . . . . . 47
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
9. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 49
9.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . 70
11. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.2 Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . 71
11.3 Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . . 71
11.4 Notes held by the Obligors, etc. . . . . . . . . . . . . . . . . . 72
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.2 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . 73
12.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 73
12.4 Payments on Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.6 Section Headings and Table of Contents. . . . . . . . . . . . . . . . 75
12.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ANNEX 1 -- INFORMATION RELATING TO PURCHASERS
ANNEX 2 -- PAYMENT INFORMATION
ANNEX 3 -- INFORMATION AS TO OBLIGORS AND SUBSIDIARIES
Part 3.1 -- Jurisdictions of Foreign Qualification of Obligors
Part 3.3 -- Financial Statements
Part 3.4 -- Disclosure Materials
Part 3.5 -- Organization and Ownership of Subsidiaries; Affiliates
Part 3.9 -- Pending Litigation
Part 3.12 -- Licenses, Permits, etc.
Part 3.13 -- ERISA; Pension Plans
Part 3.15 -- Use of Proceeds
Part 3.16 -- Existing Debt and Liens; Future Liens
Part 3.22 -- Labor Matters
Part 6.22 -- Designation of Unrestricted Subsidiaries
EXHIBIT A -- Form of 9.02% Senior Note due April 21, 2003
EXHIBIT B1 -- Form of Opinion of Special Counsel for the Obligors
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C> <C>
EXHIBIT B2 -- Form of Opinion of Special Counsel
for the Purchasers
EXHIBIT C -- Form of Officers' Certificate
EXHIBIT D -- Form of [Assistant] Secretary's Certificate
EXHIBIT E -- Form of Allonge
EXHIBIT F -- Form of Joinder Agreement
EXHIBIT G -- Form of Opinion of Special Counsel to Additional
Subsidiary Obligor
</TABLE>
v
<PAGE> 6
DSC COMMUNICATIONS CORPORATION
DSC TECHNOLOGIES CORPORATION
DSC MARKETING SERVICES, INC.
DSC FINANCE CORPORATION
DSC INTERNATIONAL CORPORATION
DSC OF PUERTO RICO, INC.
1000 Coit Road
Plano, Texas 75075-5813
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
9.02% Senior Notes due April 21, 2003
Dated as of April 15, 1995
[ADDRESSED SEPARATELY TO
EACH PURCHASER]
Ladies and Gentlemen:
Each of DSC COMMUNICATIONS CORPORATION, a Delaware corporation, DSC
TECHNOLOGIES CORPORATION, a Delaware corporation, DSC MARKETING SERVICES, INC.,
a Delaware corporation, DSC FINANCE CORPORATION, a Delaware corporation, DSC
INTERNATIONAL CORPORATION, a Delaware corporation, and DSC OF PUERTO RICO,
INC., a Delaware corporation, hereby agrees with you as follows:
1. PURCHASE AND SALE OF NOTES.
1.1 DEFINED TERMS.
Capitalized terms used in this Agreement are defined in Section 9;
unless otherwise specified, references to Sections are to Sections of this
Agreement and references to an "Annex" or an "Exhibit" are to an Annex or an
Exhibit attached to this Agreement. The words "herein," "hereof," "hereunder"
and "hereto" refer to this Agreement as a whole and not to any particular
Section or subdivision.
1.2 AUTHORIZATION OF NOTES; SALE OF NOTES.
(a) AUTHORIZATION OF NOTES. Each of the Obligors shall
have, as of the Closing Date, authorized the issuance of Two Hundred
Twenty-Five Million Dollars ($225,000,000) in aggregate principal
amount of their Nine and two one-hundredths percent (9.02%) Senior
Notes
1
<PAGE> 7
due April 21, 2003 (as may be amended, restated or otherwise modified
from time to time, the "NOTES"). Each Obligor is an issuer of each
Note, and the Obligors will be jointly and severally liable, as
co-makers, on the Notes. The Notes shall be in the form of Exhibit A
and shall have the terms as herein and therein provided.
(b) SALE AND PURCHASE OF NOTES. Subject to the terms and
conditions of this Agreement, the Obligors will issue and sell to you
and you will purchase from the Obligors, at the Closing provided for
in Section 1.3, Notes in the principal amount specified below your
name in Annex 1 at the purchase price of 100% of the principal amount
thereof. Contemporaneously with entering into this Agreement, the
Obligors are entering into separate Note Purchase Agreements (the
"OTHER AGREEMENTS") identical with this Agreement with each of the
other purchasers named in Annex 1 (the "OTHER PURCHASERS"), providing
for the sale at such Closing to each of the Other Purchasers of Notes
in the principal amount specified below its name in Annex 1. The
sales of the Notes to you and to each Other Purchaser are to be
separate sales.
1.3 CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Hebb & Gitlin, Professional
Corporation, One State Street, Hartford, CT 06103, at 10:00 a.m., local time,
at a closing (the "CLOSING") on April 21, 1995 (the "CLOSING DATE") or on such
other Business Day thereafter on or prior to April 24, 1995 as may be agreed
upon by the Obligors and you and the Other Purchasers. At the Closing the
Obligors will deliver to you one or more Notes to be purchased by you (as
indicated below your name on Annex 1 and in the denominations specified in
Annex 1) in the aggregate principal amount of your purchase of Notes, dated the
date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Obligors or their order of immediately
available funds in the amount of the purchase price therefor by wire transfer
of immediately available funds as directed by the Obligors in Annex 2 hereto.
If at the Closing the Obligors shall fail to tender such Notes to you as
provided above in this Section 1.3, or any of the conditions specified in
Section 2 shall not have been fulfilled to your satisfaction and provided you
are not in default under the provisions hereof, you shall, at your election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.
1.4 PURCHASE FOR INVESTMENT; SOURCE OF FUNDS.
(a) PURCHASE FOR INVESTMENT. You represent to the
Obligors that you are purchasing the Notes listed on Annex 1 below
your name for your own account or for the account of one or more
separate accounts maintained by you for investment and with no
present intention of distributing the Notes or any part thereof, but
without prejudice to your right at all times to:
(i) sell or otherwise dispose of all or any part
of the Notes in compliance with the Securities Act or the
rules and regulations thereunder; and
(ii) have control over the disposition of all of
your assets to the fullest extent permitted or required by
any applicable law.
2
<PAGE> 8
(b) SOURCE OF FUNDS. You represent to the Obligors, in
connection with your purchase of the Notes listed on Annex 1 below
your name and solely for purposes of determining whether such
purchase is a "prohibited transaction" (as provided for in section
406 of ERISA or section 4975 of the Code), that:
(i) you are acquiring such Notes for your own
account with funds from your general account assets, or from
assets of one or more segments of such general account, and
that
(A) such acquisition would be exempt
under the provisions of the proposed prohibited
transaction class exemption published by the DOL in
the Federal Register on August 22, 1994 (59 FR 43134,
August 22, 1994) should such proposed exemption
become final in its current form; it is understood
that, if you are making the representation set out in
this clause (b)(i)(A), you are relying on the
representations set forth in the second paragraph of
Section 3.13(a) in determining (1) whether there is
any "employee pension benefit plan" (as defined in
section 3(2) of ERISA and with respect to which any
Obligor or any ERISA Affiliate (that is either a
Domestic Subsidiary or a Subsidiary Obligor) is a
"party-in-interest" (as such term is defined in
section 3(14) of ERISA) or with respect to which the
Notes could constitute an "employer security" (as
such term is defined in section 407(d) of ERISA))
that has an interest in your "insurance company
general account" (as defined in such proposed
exemption) and in respect of which there exists
general account reserves (as determined under Section
807(d) of the Code) for the contract or contracts
held by or on behalf of such employee pension benefit
plan, and (2) whether such reserves, when aggregated
with the amount of the reserves (as determined under
Section 807(d) of the Code) for the contracts held by
or on behalf of any other employee benefit pension
plans maintained by the same employer (as defined in
section 3(5) of ERISA) in respect of such employee
pension benefit plan or "affiliates" thereof (as such
term is defined in section V(a)(1) of the proposed
exemption) or by the same employee organization (as
defined in section 3(4) of ERISA) in respect of such
employee benefit pension plan, exceed ten percent
(10%) of the total of all liabilities of such
insurance company general account (it being
understood that, in making such determination, you
have relied upon the assumption that the total of all
such liabilities referred to in such proposed
exemption shall mean your liabilities backed by the
assets of your insurance company general account), or
(B) no part of such assets constitutes
assets of an employee pension benefit plan with
respect to which any Obligor or any ERISA Affiliate
(that is either a Domestic Subsidiary or a Subsidiary
Obligor) is a "party-in-interest" (as such term is
defined in section 3(14) of ERISA) or with respect to
which the Notes could constitute an "employer
security" (as such term is defined in section 407(d)
of ERISA) (it is understood that, if you are making
the representation set out in this clause (b)(i)(B),
you are relying on the representations set forth in
the second paragraph of Section 3.13(a) and the
3
<PAGE> 9
present and continuing validity and applicability of
DOL Interpretive Bulletin 29 C.F.R. Section 2509.75-
2(b)); or
(ii) if any part of the funds being used by you
to purchase the Notes shall come from assets of an "employee
benefit pension plan" (as defined in section 3(2) of ERISA)
or a "plan" (as defined in section 4975(e)(1) of the Code)
(such "employee benefit pension plan" and such "plan" being
referred to, collectively, in this Section 1.4(b) as a
"plan"):
(A) if such funds are attributable to a
"separate account" (as defined in section 3(17) of
ERISA), then (1) all requirements for an exemption
under DOL Prohibited Transaction Class Exemption
90-1, issued January 29, 1990 are met with respect to
the use of such funds to purchase the Notes, or (2)
you have identified in a writing delivered by you to
the Obligors prior to the Closing Date each of the
aforesaid plans whose total assets invested in such
separate account (together with the assets of any
other plans maintained by the same "employer" (as
such term is used for purposes of such Exemption) in
the separate account) exceed ten percent (10%) of all
assets of such separate account and all requirements
of such Exemption as respect all other plans are met
in connection with the use of such funds to purchase
the Notes; or
(B) if such funds are attributable to a
"separate account" (as defined in section 3(17) of
ERISA) that is maintained solely in connection with
fixed contractual obligations of an insurance
company, such funds do not constitute assets of a
plan under DOL Regulation Section 2510.3-101 because
any amounts payable, or credited, to any plan having
an interest in such account and to any participant or
beneficiary of such plan (including an annuitant) are
not affected in any manner by the investment
performance of the separate account; or
(C) if such funds are attributable to an
"investment fund" managed by a "qualified
professional asset manager" (as such terms are
defined in Part V of DOL Prohibited Transaction Class
Exemption 84-14 issued March 13, 1984, as amended
from time to time), the terms of the purchase of the
Notes with such fund have been negotiated by, or
under the authority and general direction of, the
qualified professional asset manager, the qualified
professional asset manager made the decision to
purchase the Notes, all other requirements for an
exemption under such Exemption are met with respect
to the use of such funds to purchase the Notes and
you have notified the Obligors in a writing delivered
by you to the Obligors prior to your purchase of the
Notes that you are relying on this Exemption; or
(D) such plan is excluded from the
provisions of sections 406 and 407 of ERISA by virtue
of section 4(b) of ERISA or is excluded from the
provisions of section 4975 of the Code by virtue of
section 4975(g) thereof; or
(iii) you are acquiring the Notes with assets of a
separate investment account that is not subject to ERISA and
no funds of which come from assets of a plan
4
<PAGE> 10
or any other entity that is deemed to hold assets of a plan,
as referred to in clause (ii) above.
1.5 EXPENSES, ETC.
(a) TRANSACTION EXPENSES. Whether or not the
transactions contemplated hereby are consummated, the Obligors will
pay promptly (and in any event within thirty (30) days of receiving
any statement or invoice therefor) all reasonable out-of-pocket costs
and expenses incurred by you and each Other Purchaser or holder of a
Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement
or the Notes (whether or not such amendment, waiver or consent
becomes effective), including, without limitation:
(i) the cost of reproducing this Agreement and
the Other Agreements;
(ii) the reasonable fees and the disbursements of
Hebb & Gitlin, or such firm's successor as special counsel to
you and the Other Purchasers (the "Special Counsel");
(iii) the out-of-pocket cost of delivering to your
home office or custodian bank, insured to your satisfaction,
the Notes purchased by you at the Closing;
(iv) the fees and expenses and out-of-pocket
costs incurred in complying with each of the conditions to
closing set forth in Section 2;
(v) the fees and expenses payable to the
National Association of Insurance Commissioners, in
accordance with its rules and regulations, in connection with
the registration and qualification of the transactions
contemplated by this Agreement; and
(vi) the costs and expenses, including without
limitation reasonable fees and the disbursements of attorneys
and financial advisors, incurred in connection with any
work-out or restructuring (a "RESTRUCTURING") of the
transactions contemplated hereby and by the Notes (whether or
not in connection with a bankruptcy, reorganization or other
similar proceeding of an Obligor); provided, however, that
the Obligors shall not be required to pay the costs of more
than one law firm and one firm of financial advisors
representing you and the Other Purchasers.
In connection with the reimbursement of any out-of-pocket costs or
expenses to be paid by the Obligors pursuant to this Section 1.5, you
shall, and shall cause your Special Counsel to, submit to the
Obligors an itemized statement of your and/or your Special Counsel's
out-of-pocket costs or expenses. Each Obligor will pay, and will
save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses, if any, of brokers and
finders (other than those retained by you).
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(b) SPECIAL COUNSEL. Without limiting the generality of
the foregoing, it is agreed and understood that the Obligors will
pay, at the Closing, the statement for the reasonable fees and the
disbursements of your Special Counsel presented at the Closing and
the Obligors will also pay upon receipt of any statement thereof,
each additional statement for the reasonable fees and the
disbursements of your special counsel rendered after the Closing in
connection with the issuance of the Notes or the matters referred to
in Section 1.5(a).
(c) SURVIVAL. The obligations of the Obligors under this
Section 1.5 will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement
or the Notes, and the termination of this Agreement.
2. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you
at the Closing is subject to the fulfillment to your satisfaction, prior to or
at the Closing, of the following conditions:
2.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Baker & McKenzie, counsel for the Obligors, and
(b) Hebb & Gitlin, a Professional Corporation, your
special counsel,
closing opinions, each dated as of the Closing Date, and substantially in the
respective forms set forth in Exhibit B1 and Exhibit B2, and as to such other
matters as you may reasonably request. This Section 2.1 shall constitute
direction by the Obligors to counsel named in the foregoing clause (a) to
deliver such closing opinion to you.
2.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE WITH THIS
AGREEMENT.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties
and representations contained in Section 3 shall be true on the
Closing Date with the same effect as though made on and as of that
date.
(b) COMPLIANCE WITH THIS AGREEMENT. Each of the Obligors
shall have performed and complied in all material respects with all
agreements and conditions contained herein that are required to be
performed or complied with by the Obligors, as the case may be, on or
prior to the Closing Date, and such performance and compliance shall
remain in effect on the Closing Date.
2.3 OFFICERS' CERTIFICATES.
You shall have received from each Obligor
(a) a certificate dated the Closing Date and signed on
behalf of such Obligor by the President or a Vice-President and the
Treasurer or an Assistant Treasurer of such Obligor, substantially in
the form of Exhibit C hereto, with respect to the matters therein set
forth, and
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(b) a certificate dated the Closing Date and signed on
behalf of such Obligor by the Secretary or an Assistant Secretary of
such Obligor, substantially in the form of Exhibit D hereto, with
respect to the matters therein set forth.
2.4 LEGALITY.
On the Closing Date, the Notes shall qualify as a legal investment
for you under applicable insurance law (without regard to any "basket" or
"leeway" provisions such as Section 1405(a)(8) of the New York Insurance Law)
and you shall have received such evidence as you may reasonably request to
establish compliance with this condition.
2.5 PRIVATE PLACEMENT NUMBERS.
The Obligors shall have obtained or caused to be obtained a private
placement number for the Notes from the CUSIP Service Bureau of Standard &
Poor's, a division of McGraw-Hill, Inc. and you shall have been informed of
such private placement number.
2.6 EXPENSES.
All fees and disbursements required to be paid pursuant to Section
1.5(b) shall have been paid in full.
2.7 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to execute and deliver
its respective Other Agreement or to accept delivery of or make payment for the
Notes to be purchased by it on the Closing Date.
2.8 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Notes and all documents and papers relating thereto shall be satisfactory to
you and your special counsel. You and your special counsel shall have received
copies of such documents and papers as you or they may reasonably request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance satisfactory to you and your special
counsel.
3. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.
Each of the Obligors represents and warrants to you that:
3.1 ORGANIZATION; POWER AND AUTHORITY.
Each of the Obligors is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction (each of which jurisdictions is listed in PART
3.1 OF ANNEX 3) in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect. Each of the Obligors has the corporate power and authority, and all
licenses, certificates, permits, franchises and
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other governmental authorizations necessary, to own or hold under lease the
Properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver this Agreement, the
Other Agreements and the Notes and to perform the provisions hereof and
thereof, except where the failure to obtain such authorizations would not,
individually or in the aggregate, have a Material Adverse Effect.
3.2 AUTHORIZATION, ETC.
Each of the issuance, sale and delivery of the Notes, the execution
and delivery of this Agreement and the Other Agreements and the performance by
the Obligors of all of the provisions of this Agreement, the Other Agreements
and the Notes is within the corporate powers of the Obligors, have been duly
authorized by all necessary corporate action on the part of the Obligors, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Obligors
enforceable against each of the Obligors in accordance with its terms, except
as such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3 FINANCIAL STATEMENTS.
The Obligors have delivered to you and each Other Purchaser copies of
the consolidated financial statements of the Obligors and the Group
Subsidiaries listed on PART 3.3 OF ANNEX 3. All of said financial statements
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Obligors and the
Group Subsidiaries as of the respective dates specified in such PART 3.3 OF
ANNEX 3 and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
3.4 FULL DISCLOSURE.
The Obligors, through their agents, NationsBanc Capital Markets, Inc.
and Legg Mason Wood Walker, Inc., have delivered to you and each Other
Purchaser a copy of a Private Placement Memorandum, dated January, 1995 (the
"PLACEMENT MEMORANDUM"), relating to the transactions contemplated hereby. The
Placement Memorandum fairly describes, in all material respects, the general
nature of the business and principal Properties of the Obligors and the Group
Subsidiaries. Except as disclosed in PART 3.4 OF ANNEX 3, neither this
Agreement, the Placement Memorandum, the consolidated financial statements
described in Section 3.3 nor the written and presentation materials prepared by
or on behalf of the Obligors delivered to you during your due diligence meeting
with the Obligors (as more particularly set forth in PART 3.4 OF ANNEX 3),
taken as a whole, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made. There is no fact
known to any of the Obligors that would have a Material Adverse Effect that has
not been set forth herein or in the Placement Memorandum or in the other
documents listed in PART 3.4 OF ANNEX 3.
All forecasts and projections included in the Placement Memorandum or
described in PART 3.4 OF ANNEX 3 have been prepared in good faith upon
assumptions that have been disclosed as a part of
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such forecasts and projections or otherwise disclosed in the Placement
Memorandum. No material facts have occurred since the preparation of such
forecasts and projections that would cause the Obligors to materially revise
any of the same. Notwithstanding anything to the contrary in this Section 3.4,
the Obligors do not warrant the ability of the Obligors to achieve the results
presented in such forecasts and projections.
3.5 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.
(a) PART 3.5 OF ANNEX 3 contains (except as noted therein)
complete and correct lists of (i) the Subsidiary Obligors and the
Group Subsidiaries, showing, as to each such Person, the correct name
thereof, the jurisdiction of its organization, and the percentage of
shares of each class of its capital stock or similar equity interests
outstanding owned by the Obligors and each Group Subsidiary, (ii) the
Affiliates and (iii) the directors and senior officers of each
Obligor.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary Obligor and each Group
Subsidiary shown in PART 3.5 OF ANNEX 3 as being owned by the
Obligors and the Group Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by such Obligors or such
Group Subsidiaries free and clear of any Lien (except as otherwise
disclosed in PART 3.5 OF ANNEX 3).
(c) Each Restricted Subsidiary identified in PART 3.5 OF
ANNEX 3 is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each
jurisdiction (each of which jurisdictions is listed in PART 3.5 OF
ANNEX 3) in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in
good standing would not, individually or in the aggregate, have a
Material Adverse Effect. Each Group Subsidiary has the corporate or
other power and authority, and all licenses, certificates, permits,
franchises and other governmental authorizations necessary, to own or
hold under lease the Properties it purports to own or hold under
lease and to transact the business it transacts and proposes to
transact.
(d) No Subsidiary Obligor or Group Subsidiary is a party
to, or otherwise subject to any legal restriction or any agreement
(other than this Agreement, the Other Agreements, the agreements
listed on PART 3.5 OF ANNEX 3 and customary limitations imposed by
corporate law statutes) restricting the ability of such Person to
pay dividends out of profits or make any other similar distributions
of profits to its shareholders.
3.6 MATERIAL ADVERSE CHANGE.
Since December 31, 1994, there has been no change in the condition
(financial or otherwise), operations, business, Properties or prospects of any
Obligor or any Group Subsidiary except changes that, individually or in the
aggregate, would not have a Material Adverse Effect.
3.7 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Obligors of this
Agreement and the Notes will not
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(a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of
any Property of any Obligor or any Group Subsidiary under, any
indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which any Obligor or any Group Subsidiary
is bound or by which any Obligor or any Group Subsidiary or any of
their respective Properties may be bound or affected, except for such
contraventions, breaches, defaults and creations of Liens as would
not, individually or in the aggregate, have a Material Adverse
Effect,
(b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable
to any Obligor or any Group Subsidiary, except for such conflicts or
breaches which would not, individually or in the aggregate, have a
Material Adverse Effect, or
(c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to any Obligor or
any Group Subsidiary.
3.8 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Obligors of this Agreement or the
Notes.
3.9 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as described in PART 3.9 OF ANNEX 3, there
are no actions, suits or proceedings pending or, to the knowledge of
any Obligor, threatened against or affecting any Obligor or any Group
Subsidiary or any Property of any Obligor or any Group Subsidiary in
any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, would
have a Material Adverse Effect.
(b) None of the Obligors nor any Group Subsidiary is in
(i) default under any term of any charter instrument or bylaw, any
other agreement or instrument to which it is a party or by which it
or its Property is bound, or under any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority or (ii)
violation of any applicable law, ordinance, rule or regulation
(including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or
in the aggregate, would have a Material Adverse Effect.
3.10 TAXES.
The Obligors and the Group Subsidiaries have filed in a timely manner
all tax returns that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns and all other
taxes and assessments levied upon them or their Properties, assets, income or
franchises, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (a) the nonpayment of which, individually or in the aggregate,
would not have a Material Adverse Effect or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which an Obligor or a Group Subsidiary, as the
case may be, has established adequate reserves in accordance with GAAP. The
Obligors know of no basis for any other tax or assessment that,
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individually or in the aggregate, would have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Obligors and the Group
Subsidiaries in respect of Federal, state or other taxes for all fiscal periods
are adequate. The Federal income tax liabilities of the Obligors and the Group
Subsidiaries have been examined by the Internal Revenue Service and paid for
all fiscal years up to and including the fiscal year ended 1985.
3.11 TITLE TO PROPERTY; LEASES.
Each Obligor and each Group Subsidiary has good and defensible title
to its real Property and good and defensible title to all of its other Property
and assets that are materially necessary for the operation of its business,
including all such Property reflected in the most recent audited balance sheet
referred to in Section 3.3 or purported to have been acquired by any Obligor or
any Group Subsidiary after said date (except as sold or otherwise disposed of
in the ordinary course of business), in each case free and clear of Liens not
permitted by Section 6.17. All leases of real Property, and all other material
leases necessary for the conduct of the respective businesses of the Obligors
and the Group Subsidiaries are valid and subsisting and are in full force and
effect.
3.12 LICENSES, PERMITS, ETC.
(a) The Obligors and the Group Subsidiaries own or
possess all licenses, permits, franchises, authorizations, patents,
patent applications, copyrights, service marks, mask works,
trademarks, trademark applications and trade names, or rights
thereto, necessary for the ownership, maintenance and operation of
their respective businesses as currently conducted, without known
conflict with the rights of others, except for any failure to own or
possess any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Except as described in PART 3.12 OF ANNEX 3 hereto,
there are no existing, and to the best of the knowledge of the
Obligors threatened, claims of any Person for any infringement by the
Obligors or the Group Subsidiaries on any license, permit, franchise,
authorization, patent, patent application, copyright, service mark,
mask work, trademark, trademark application and trade name or other
right owned by any such Person, except those claims which would not,
individually or in the aggregate, have a Material Adverse Effect.
3.13 ERISA; FOREIGN PENSION PLANS.
(a) ERISA. Except as referred to in PART 3.13 OF ANNEX 3
hereto, no accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Pension Plan. There is no "amount of unfunded
benefit liabilities," as defined in section 4001(a)(18) of ERISA,
under any Pension Plan which would, individually or in the aggregate,
have a Material Adverse Effect. No liability to the PBGC has been
incurred by any of the Obligors or any of the ERISA Affiliates with
respect to any Pension Plan that, individually or in the aggregate,
has or would have a Material Adverse Effect (other than obligations
to pay premiums to the PBGC under Title IV of ERISA, all of which
premium obligations that are due and payable have been paid). With
respect to all other provisions of ERISA applicable to the Obligors
or any of the ERISA Affiliates, each such Person is in material
compliance therewith. Neither the Obligors nor any ERISA Affiliate
contribute to, maintain, or have any liability or obligation in
respect of, a Multiemployer Plan. The execution and delivery of this
Agreement and the Other Agreements and the issuance and sale of the
Notes do not,
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as of the Closing Date, involve any transaction (i) that is subject
to the prohibitions of section 406 of ERISA and that is not otherwise
exempt under a statutory or administrative exemption or (ii) in
connection with which a tax would be imposed pursuant to section 4975
of the Code or section 502 of ERISA, which transaction (or any
liability arising therefrom) or tax, in the case of either clause (i)
or clause (ii) above, individually or in the aggregate, would have a
Material Adverse Effect. The representation by the Obligors in the
immediately preceding sentence is made in reliance upon and subject
to your representations set forth in Section 1.4(b).
PART 3.13 OF ANNEX 3 hereto lists all ERISA Affiliates that
are either Domestic Subsidiaries or Subsidiary Obligors. Part 3.13
of Annex 3 also lists all "employee pension benefit plans" (as such
term is hereinafter defined) which are covered under section 4(a) of
ERISA (and not exempt from ERISA pursuant to section 4(b) thereof)
with respect to which any Obligor or any "affiliate" (as such term is
hereinafter defined) is a "party-in-interest" (as such term is
hereinafter defined) or in respect of which the Notes could
constitute an "employer security" (as such term is hereinafter
defined). The terms "employee pension benefit plan," and
"party-in-interest" have the meanings specified in section 3 of ERISA
and "affiliate" and "employer security" has the meaning specified in
section 407(d) of ERISA.
(b) FOREIGN PENSION PLANS. All Foreign Pension Plans
have been established, operated, administered and maintained in
material compliance with all laws, regulations and orders applicable
thereto, except where any failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
Except where it would not, individually or in the aggregate, have a
Material Adverse Effect, all premiums, contributions and any other
amounts required to be paid pursuant to applicable Foreign Pension
Plan documents or applicable laws governing such Foreign Pension
Plans have been paid or accrued as required.
3.14 PRIVATE OFFERING BY THE OBLIGORS.
Neither the Obligors nor anyone acting on their behalf has offered
the Notes or any similar Securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than you, the Other Purchasers and not more than
one-hundred and twenty-five (125) other Institutional Investors, each of which
has been offered the Notes at a private sale for investment. Neither the
Obligors nor anyone acting on their behalf has taken, or will take, any action
that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act.
3.15 USE OF PROCEEDS; MARGIN REGULATIONS.
The proceeds of the sale of the Notes will be used in the manner
specified in PART 3.15 OF ANNEX 3. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" as defined in Regulation
G (12 C.F.R. Part 207) of the Board of Governors of the Federal Reserve System
of the United States of America ("MARGIN STOCK") or for the purpose of
maintaining, reducing or retiring any Debt that was originally incurred to
purchase or carry any stock that is currently a Margin Stock or for any other
purpose that might constitute this transaction a "purpose credit" within the
meaning of such Regulation G. None of the Obligors nor any agent acting on
behalf of any of them has taken any action that might cause this Agreement or
any of the transactions contemplated hereby to violate Regulation G, Regulation
T,
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Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System of the United States of America or to violate the Exchange Act.
3.16 DEBT; FUTURE LIENS.
(a) Except as described therein, PART 3.16 OF ANNEX 3 sets
forth a complete and correct list of all outstanding Debt of the
Obligors and the Group Subsidiaries as of December 31, 1994, since
which date there has been no material change in the amounts, interest
rates, sinking funds, installment payments or maturities of such
Debt. None of the Obligors nor any Group Subsidiary is in default
and no waiver of default is currently in effect, in the payment of
any principal or interest on any Debt of such Obligor or Group
Subsidiary and no event or condition exists with respect to any Debt
of any Obligor or any Group Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Debt to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
(b) Except as disclosed in PART 3.16 OF ANNEX 3, none of
the Obligors nor any Group Subsidiary has agreed or consented to
cause or permit in the future (upon the happening of a contingency or
otherwise) any of its Property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by Section 6.17.
3.17 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Obligors hereunder nor their use
of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
3.18 STATUS UNDER CERTAIN STATUTES.
None of the Obligors nor any Group Subsidiary is (a) an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, (b) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended, (c) a "public utility" as such term is defined in the Federal Power
Act, as amended, (d) a "rail carrier or a person controlled by or affiliated
with a rail carrier" within the meaning of title 49, U.S.C., or (e) a "carrier"
to which 49 U.S.C. Section 11301(b)(1) is applicable.
3.19 ENVIRONMENTAL MATTERS.
None of the Obligors nor any Group Subsidiary has knowledge of any
claim or has received any notice of any claim, and no proceeding has been
instituted raising any claim against any Obligor or any Group Subsidiary or any
of their respective real Properties now or formerly owned, leased or operated
by any of them or other assets, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as,
individually or in the aggregate, would not result in a Material Adverse
Effect. Except as otherwise disclosed to you in writing,
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(a) none of the Obligors nor any Group Subsidiary has
knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to
real Properties now or formerly owned, leased or operated by any of
them or to other assets or their use, except, in each case, such as,
individually or in the aggregate, would not result in a Material
Adverse Effect;
(b) none of the Obligors nor any Group Subsidiary has
stored any Hazardous Materials on real Properties now or formerly
owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that, individually or in the aggregate, would
result in a Material Adverse Effect; and
(c) all buildings on all real Properties now owned,
leased or operated by an Obligor or any Group Subsidiary are in
compliance with applicable Environmental Laws, except as to such
failures to comply that, individually or in the aggregate, would not
result in a Material Adverse Effect.
3.20 NO DEFAULTS.
No event has occurred and no condition exists that, upon the issuance
of the Notes and the execution and delivery of this Agreement, would constitute
a Default or an Event of Default.
3.21 SOLVENCY.
No Obligor is entering into the transactions contemplated by this
Agreement, or intends to incur any obligations hereunder or otherwise make any
transfers in connection herewith, with actual intent to hinder, delay or
defraud either present or future creditors. After giving effect to the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the issuance of the Notes,
(a) (i) the present fair salable value on a going
concern basis of the aggregate assets of all Obligors will not be
less than the amount that will be required to pay their probable
liability on their existing aggregate debts as they become absolute
and matured, and (ii) all Obligors, taken as a whole, will be able to
pay their debts as they mature, and
(b) (i) the aggregate assets of the Obligors at a fair
valuation thereof on a going concern basis, will not be less than
their probable liability on their aggregate debts, and (ii) all
Obligors, taken as a whole, will be able to pay their debts as they
become due.
The term "debt" for purposes of clause (a) above means any legal liability,
whether matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent. The term "debt" for purposes of clause (b) above means any
liability on a claim, and "claim" means (A) any right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured, or (B) any right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such right to
an equitable remedy is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured.
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3.22 LABOR MATTERS.
PART 3.22 OF ANNEX 3 sets forth a complete and correct list of all
labor union contracts to which any Obligor or any Restricted Subsidiary is a
party, specifying the Persons who are a party to each such contract and the
expiration date of each such contract. None of the Obligors nor any Restricted
Subsidiary is a party to any pending or threatened labor dispute and there are
no pending or threatened strikes or walkouts relating to any of such labor
union contracts.
3.23 INSURANCE.
Each of the Obligors and each of the Group Subsidiaries, has in
effect, with financially sound and reputable insurers, insurance with respect
to its respective Properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts as is customary
in the case of entities of established reputations engaged in the same or a
similar business and similarly situated except for medical claims of employees
and their dependents for which the Obligors are self-insured and except for
such failures to maintain insurance in effect which, individually or in the
aggregate, would not have a Material Adverse Effect.
3.24 MATERIAL AGREEMENTS.
None of the Obligors nor any Group Subsidiary is a party to any
contract or agreement that materially and adversely affects the business,
Properties or condition (financial or otherwise) or the ability of the
Obligors, taken as a whole, to perform their respective obligations as set
forth in this Agreement or under the Notes.
4. PREPAYMENT OF THE NOTES.
4.1 INTEREST PAYMENTS; REQUIRED PREPAYMENTS; PAYMENT AT MATURITY.
(a) INTEREST PAYMENTS. Interest shall accrue on the
unpaid principal balance of the Notes on the basis of a 360-day year
of twelve 30-day months at the rate of nine and two one-hundredths
percent (9.02%) per annum and shall be payable, in arrears,
semi-annually on the twenty-first (21st) day of each April and
October in each year, commencing on October 21, 1995, until the
principal amount of the Notes in respect of which such interest shall
have accrued shall become due and payable, and interest shall accrue
(and be payable on demand) on any such overdue principal (including
any overdue prepayment of principal) and Make-Whole Amount, if any,
and (to the extent permitted by applicable law) on any overdue
installment of interest (the due date of any such principal amount,
Make-Whole Amount or installment of interest to be determined without
giving effect to any grace period), at a rate equal to the lesser of
(i) the highest rate allowed under the laws of the State of New York
and the State of Texas, as the case may be, or (ii) eleven and two
one-hundredths percent (11.02%) per annum.
(b) REQUIRED PREPAYMENTS. On April 21, 1996 and on each
April 21 thereafter to and including April 21, 2002, the Obligors
shall prepay, and there shall become due and payable, Twenty-Eight
Million One Hundred Twenty-Five Thousand Dollars ($28,125,000) in
principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par, together with interest accrued
thereon to the date of payment, provided that, upon any partial
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prepayment of, or prepayment of less than all of, the Notes pursuant
to Section 4.2(a), Section 4.2(b) or Section 4.3, as the case may be,
the principal amount of each required prepayment of the Notes
becoming due under this Section 4.1(b) on and after the date of such
prepayment shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Notes is reduced as a result of such
prepayment.
(c) MATURITY. The principal amount of the Notes remaining
outstanding, together with accrued interest thereon, shall be due and
payable on April 21, 2003.
4.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
(a) OPTIONAL PREPAYMENTS. The Obligors may, upon notice
as provided in Section 4.2(c), prepay the Notes at any time in whole,
or from time to time in part in a principal amount of at least Ten
Million Dollars ($10,000,000) or in any integral multiple of One
Million Dollars in excess thereof (or, if the aggregate outstanding
principal amount of the Notes is less than Ten Million Dollars
($10,000,000) at such time, then such principal amount), together
with
(i) interest on such principal amount then being
prepaid accrued to the prepayment date, and
(ii) an amount equal to the Make-Whole Amount
with respect to the principal amount of the Notes being so
prepaid.
(b) SPECIAL PREPAYMENTS. If the Obligors request (a
"SPECIAL REQUEST") the holders of the Notes to consent to an
amendment or waiver (with respect to any Special Request, the
"PROPOSED AMENDMENT") of any one or more of the provisions of this
Agreement and the Other Agreements or the Notes (other than any
provision described in clause (i), clause (ii) and clause (iv) of
Section 11.1(b)) and the required percentage of holders do not,
within fifteen (15) Business Days after the date on which such
Special Request shall have been sent to each of the holders of Notes
by the Obligors, deliver written affirmative consents to such
Proposed Amendment, the Obligors may, as provided below, prepay in
full, but not in part, the Notes of those holders which shall have
failed to so deliver written affirmative consents to such Proposed
Amendment within said 15-Business Day period, together with the
Make-Whole Amount applicable in respect of such Notes, and together
with interest (accrued to the date of prepayment) on the principal
amount of such Notes, provided that all of the following additional
conditions are met:
(i) the Obligors shall have sent such Special
Request to each holder of Notes by facsimile transmission
(confirmed by delivery of a copy thereof by overnight courier
of national reputation, sent on the date that such facsimile
transmission is made) and, simultaneously with the
transmission of such written notice, shall have given
telephonic advice of such Special Request to an investment
officer or other similar representative or agent of each such
holder specified on Annex 1 to this Agreement at the
telephone number specified thereon, or to such other Person
at such other telephone number as any holder of a Note may
specify to the Obligors in writing;
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(ii) the Obligors shall have conspicuously stated
in such Special Request that the failure to affirmatively
consent to such request by any holder of Notes could result
in the Notes of such holder being prepaid pursuant to this
Section 4.2(b);
(iii) if the Obligors shall not have received a
written response to such Special Request from any holder of
Notes within ten (10) Business Days after the date of the
sending of such Special Request to such holder, the Obligors
shall have immediately sent a second written notice via an
overnight courier of national reputation to such holder of
Notes; and
(iv) the Obligors shall have sent, not more than (5)
days after the expiration of the aforesaid 15- Business Day
period, the notice provided for in Section 4.2(c) to each
holder of Notes which shall have failed to deliver a written
affirmative consent in respect of the Proposed Amendment for
such Special Request.
Any prepayment of Notes to be made under this Section 4.2(b) with
respect to any Proposed Amendment shall be made on the date on which
such Proposed Amendment is consummated and becomes effective. If the
Obligors determine that such Proposed Amendment will, for any reason,
not be consummated and become effective, the Obligors shall promptly
inform, in writing, each holder of a Note that is to be prepaid in
connection with such Proposed Amendment of such determination and the
annulment and cancellation of the right of such holder to receive
prepayment of its Note under this Section 4.2(b) in respect of such
Proposed Amendment, and, upon the delivery of such notice to such
holder, such holder's right to receive prepayment of its Notes under
this Section 4.2(b) in respect of such Proposed Amendment shall be
annulled and cancelled, provided, however, that the Obligors may,
pursuant to this sentence, effect an annulment and cancellation of
the rights of holders of Notes to receive prepayment thereof only two
(2) times during the period in which any of the Notes are
outstanding; thereafter, the Obligors shall be obligated to effect a
prepayment of each Note of a holder that is to be prepaid in
connection with a Proposed Amendment under this Section 4.2(b)
notwithstanding whether such Proposed Amendment is consummated and
becomes effective; in any such case, such prepayment shall be made
not later than the sixtieth (60th) day after the expiration of the
aforesaid 15-Business Day period related to such Proposed Amendment;
provided, further, however, that, in connection with any Proposed
Amendment that is not consummated, any holder of Notes that is to be
prepaid under this Section 4.2(b) with respect to such Proposed
Amendment may, by giving written notice to the Obligors at least two
(2) Business Days prior to the date such prepayment is due, annul and
cancel the right and obligation of the Obligors under this Section
4.2(b) to prepay the Notes held by such holder in respect of such
Proposed Amendment, and upon receipt of such written notice such
right and obligation to prepay such Notes shall be annulled and
cancelled.
In connection with any Proposed Amendment and the sending of
the prepayment notice under clause (iv) above to holders of Notes
which shall have failed to deliver a written affirmative consent with
respect thereto, the Obligors shall also, contemporaneously with the
sending of such prepayment notice, (1) notify (in writing) each
holder of Notes which shall have delivered a written affirmative
consent to such Proposed Amendment (with respect to any Proposed
Amendment, an "initial affirmative holder of Notes") that the
Obligors have elected to consummate such Proposed Amendment and will
prepay the nonconsenting holders of Notes in accordance with this
Section 4.2(b) in order to effect such consummation and (2)
irrevocably
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offer to each such initial affirmative holder of Notes in such
written notification to prepay in full, but not in part, its Notes
under this Section 4.2(b) as if it had not delivered an affirmative
consent in respect of such Proposed Amendment. Any initial
affirmative holder of Notes may accept such offer by delivering to
any Obligor a written notice of such acceptance on or prior to the
seventh (7th) Business Day after the delivery of the aforesaid
written notification to such initial affirmative holder of Notes.
The prepayment of the Notes of the initial affirmative holders of
Notes accepting such offer shall be made contemporaneously with, and
on the same terms as, the Notes of the aforesaid nonconsenting
holders. A failure by an initial affirmative holder of Notes to
respond to such offer on or prior to such seventh (7th) Business Day
shall be deemed to constitute a rejection of such offer by such
holder.
(c) NOTICE OF OPTIONAL OR SPECIAL PREPAYMENTS. The Obligors
shall (i) give notice of any optional prepayment of the Notes
pursuant to Section 4.2(a) to each holder of Notes not less than
thirty (30) days nor more than sixty (60) days before the date fixed
for prepayment thereof and (ii) give notice of any special prepayment
of the Notes pursuant to Section 4.2(b) to each holder of Notes
specified in Section 4.2(b)(iv) on or before the date specified
therein and, in either case, such notice shall specify:
(i) the date fixed for such optional or special
prepayment, as the case may be;
(ii) the Section hereof under which the right to
effect such optional or special prepayment originates;
(iii) the principal amount of each Note held by
such holder to be prepaid on such date;
(iv) the interest to be paid on each such Note to
be prepaid, accrued to the date fixed for prepayment; and
(v) a reasonably detailed calculation of the
Make-Whole Amount (calculated as if the date of such notice
were the date of the prepayment), if any, due in connection
with such prepayment.
Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with the
Make-Whole Amount, if any, and accrued interest thereon shall become
due and payable on the specified prepayment date. Two (2) Business
Days prior to such prepayment, the Parent shall deliver to each
holder of Notes being prepaid a certificate of a Senior Financial
Officer of the Parent specifying the calculation of such Make-Whole
Amount as of such date. Each such certificate shall be accompanied
by a copy of any applicable documentation utilized by the Parent in
respect of such calculation.
Promptly after any prepayment under Section 4.2(b) (and, in
any event, within thirty (30) days thereof), the Obligors shall
deliver to each holder of Notes a certificate signed by a Senior
Financial Officer of the Parent containing a list of the then current
holders of Notes (together with their addresses) and setting forth as
to each such holder the outstanding principal amount of Notes held by
such holder at such time.
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4.3 OFFER TO PREPAY UPON CHANGE IN CONTROL.
(a) NOTICE AND OFFER. In the event of either:
(i) a Change in Control, or
(ii) a Control Event,
the Obligors will, within five (5) Business Days of the occurrence of
either of such events, give written notice of such Change in Control
or Control Event to each holder of Notes by facsimile transmission
(confirmed by delivery of a copy thereof by overnight courier of
national reputation, sent on the date that such facsimile
transmission is made) and, simultaneously with the transmission of
such written notice, give telephonic advice of such Change in Control
or Control Event to an investment officer or other similar
representative or agent of each such holder specified on Annex 1 to
this Agreement at the telephone number specified thereon, or to such
other Person at such other telephone number as any holder of a Note
may specify to the Parent in writing. In the event of a Change in
Control, such written notice shall contain, and such written notice
shall constitute, an offer of the Obligors to prepay all, but not
less than all, of the Notes held by such holder on a date specified
in such notice (the "CONTROL PREPAYMENT DATE") that is not less than
forty-five (45) days and not more than sixty (60) days after the date
of such notice, and such offer shall be irrevocable except that such
offer shall be null and void and without effect if, on or prior to
5:00 p.m. (Central time) on the thirtieth (30th) day after the date
of the facsimile transmission of the written notice in respect of
such offer, holders of less than fifty-one percent (51%) of the
aggregate principal amount of Notes then outstanding (excluding
therefrom Notes held by any Obligor, any Restricted Subsidiary or any
Affiliate) shall have elected to accept such offer, as provided for
in Section 4.3(b). If such offer shall have become null and void and
without effect, a Senior Financial Officer of any Obligor shall
certify the same and give prompt written notice thereof to each
holder of Notes in the same manner as provided above with respect to
a written notice of a Change in Control. If such offer shall not
have become null and void and without effect and if the Control
Prepayment Date shall not have been specified in the written notice
in respect thereof, the Control Prepayment Date shall be the
forty-fifth (45th) day after the date such written notice was sent to
such holder.
With respect to any written notice given by the Obligors in
respect of a Change in Control, if the Obligors shall not have
received a written response to such written notice from any holder of
Notes within ten (10) Business Days after the date of the facsimile
transmission of such notice to such holder, the Obligors shall
immediately send a second written notice via an overnight courier of
national reputation to such holder of Notes.
(b) ACCEPTANCE AND PAYMENT; REJECTION.
(i) ACCEPTANCE AND PAYMENT. To accept or reject
such offered prepayment, a holder of Notes shall cause a
notice of such acceptance or rejection to be delivered to any
Obligor not later than fifteen (15) days prior to the Control
Prepayment Date. If so accepted, such offered prepayment in
respect of such principal amount of such Notes shall be due
and payable on the Control Prepayment Date. Such offered
prepayment shall be made at one hundred percent (100%) of the
principal amount of the Notes held by holders having accepted
such offer, together with interest
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<PAGE> 25
on the Notes then being prepaid accrued to the Control
Prepayment Date and without payment of any Make-Whole Amount.
(ii) REJECTION. A failure by any holder of Notes
to respond in writing to all written offers of prepayment
referred to in Section 4.3(a) shall be deemed to constitute a
rejection of such offer by such holder.
(c) OFFICER'S CERTIFICATE. Each offer to prepay the
Notes pursuant to Section 4.3(a) shall be accompanied by a
certificate, executed by a Senior Financial Officer of the Parent and
dated the date of such offer, specifying:
(i) the Control Prepayment Date;
(ii) the principal amount of each Note offered to
be prepaid;
(iii) the interest that would be due on each Note
offered to be prepaid, accrued to the date fixed for
prepayment; and
(iv) in reasonable detail, the nature and date
or proposed date of the Change in Control.
(d) NOTICE CONCERNING STATUS OF HOLDERS OF NOTES.
Promptly after each Control Prepayment Date and the making of all
prepayments contemplated on such Control Prepayment Date under this
Section 4.3 (and, in any event, within thirty (30) days thereof), the
Obligors shall deliver to each holder of Notes a certificate signed
by a Senior Financial Officer of the Parent containing a list of the
then current holders of Notes (together with their addresses) and
setting forth as to each such holder the outstanding principal amount
of Notes held by such holder at such time.
4.4 ALLOCATION OF PREPAYMENTS.
In the case of each required prepayment of the Notes pursuant to
Section 4.1(b) and each partial prepayment pursuant to Section 4.2(a), the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof then outstanding.
4.5 NO OTHER PREPAYMENTS.
Except as provided in Section 4.1(b), Section 4.2(a), Section 4.2(b)
and Section 4.3, the Obligors may not make any other prepayment (whether,
directly or indirectly, by purchase, other acquisition or otherwise) in respect
of the Notes and will not, and will not permit any Restricted Subsidiary or
Affiliate to, acquire or make any offer to acquire any of the Notes.
4.6 NOTATION OF NOTES ON PREPAYMENT.
Upon any partial prepayment of a Note, such Note may, at the option
of the holder thereof, be
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(a) surrendered to the Obligors pursuant to Section 5.2
in exchange for a new Note in a principal amount equal to the
principal amount remaining unpaid on the surrendered Note,
(b) made available to the Obligors for notation thereon
of the portion of the principal so prepaid, or
(c) marked by such holder with a notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Note is prepaid, such Note shall be
surrendered to the Obligors for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the prepaid principal amount of any Note.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
5.1 REGISTRATION OF NOTES.
The Obligors shall keep at the principal executive office of the
Parent a register for the registration and registration of transfers of Notes.
The name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes hereof, and the
Obligors shall not be affected by any notice or knowledge to the contrary.
5.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Parent for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof and the written
statement of each such transferee referred to in the last sentence of this
Section 5.2), the Obligors shall execute and deliver, at the Obligors' expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit A. Each such new Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Obligors may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than Five
Hundred Thousand Dollars ($500,000), provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than Five Hundred Thousand Dollars ($500,000).
In connection with any transfer of Notes, each transferee thereof shall deliver
to the Parent a written statement in which such transferee selects and makes
one of the representations set forth in Section 1.4(b), and each of the
Obligors agrees to promptly update the information set forth in the second
paragraph of Section 3.13(a) for purposes of facilitating the delivery of such
written statement by such transferee.
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5.3 REPLACEMENT OF NOTES.
Upon receipt by the Parent, on behalf of all Obligors, of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Parent (provided that if the
holder of such Note is, or is a nominee for, an Institutional
Investor, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Obligors, at their expense, shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest shall have
been paid thereon.
5.4 POWER OF ATTORNEY.
Each of the Subsidiary Obligors hereby irrevocably constitutes and
appoints the Parent as its agent and attorney-in-fact for the limited purpose
of (a) maintaining the register of Notes and effecting the registration of
transfer of Notes, as provided in Section 5.1, (b) effecting the exchange
and/or replacement of Notes, as provided in Section 5.2 and Section 5.3, (c)
executing any new Notes in the name, place and stead of such Subsidiary Obligor
pursuant to Section 5.2 or Section 5.3 or (d) making notation on the Notes as
provided in Section 4.6(b). Each Subsidiary Obligor hereby ratifies and
confirms all actions that the Parent may undertake in the exercise of the
aforesaid powers and acknowledges and agrees that each holder of Notes shall be
entitled to rely on such actions and the authority of the Parent under this
Section 5.4 in effecting the same. The aforesaid power shall remain in effect
for so long as any Note shall remain outstanding.
6. COVENANTS.
The Obligors covenant that on and after the Closing Date so long as
any of the Notes are outstanding:
6.1 PAYMENT OF TAXES AND CLAIMS.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, file all tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes shown to be due and payable on such returns
and all other taxes, assessments, governmental charges, or levies imposed on
them or any of their Properties, assets, income or franchises, to the extent
such taxes and assessments have become due and payable and before they have
become delinquent and all claims (including, without limitation, claims for
labor, services, materials and supplies) for which sums have become due and
payable that have or might become a Lien on Properties or assets of any of the
Obligors or any Restricted Subsidiary, provided that neither the Obligors nor
the Restricted Subsidiaries need pay any such tax, assessment or claim if (a)
the amount, applicability or validity thereof is contested by such
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<PAGE> 28
Obligor or such Restricted Subsidiary on a timely basis in good faith and in
appropriate proceedings, such Obligor or such Restricted Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
such Obligor or such Restricted Subsidiary and any other requirements in
respect of any Lien securing the same under Section 6.17(a)(i) and Section
6.17(a)(ii) have been satisfied or (b) the nonpayment of all such taxes,
assessments and claims in the aggregate would not have a Material Adverse
Effect. For purposes of this Section 6.1 and Section 6.17(a), if the amount of
all such taxes, assessments and claims referred to in clause (b) above, in the
aggregate at any one time, is less than Five Million Dollars ($5,000,000), then
the nonpayment thereof shall be deemed not to have a Material Adverse Effect
nor materially impair the value or materially interfere with the use of the
Property subject to such tax, assessment or claim or the operation of the usual
business of the Obligors and the Restricted Subsidiaries.
6.2 MAINTENANCE OF PROPERTIES.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, maintain and keep, or cause to be maintained and kept, their
respective Properties in good repair, working order and condition (other than
ordinary wear and tear), and make all appropriate renewals, replacements,
additions, betterments and improvements thereto except where the failure to do
so would not have a Material Adverse Effect.
6.3 CORPORATE EXISTENCE, ETC.
Each of the Obligors shall at all times preserve and keep in full
force and effect its corporate existence and its corporate rights, privileges
and franchises, subject to Section 6.18 and Section 6.19. Each of the Obligors
shall cause the Restricted Subsidiaries to preserve and keep in full force and
effect their respective corporate existence, rights, privileges and franchises,
subject to Section 6.18 and Section 6.19, unless, in the good faith judgment of
the Parent, the termination of or failure to preserve and keep in full force
and effect any of the foregoing, individually or in the aggregate, would not
have a Material Adverse Effect.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, at all times maintain (free from all restrictions other than
as permitted under Section 6.17(a)) all Intellectual Property that is necessary
for the ownership, maintenance and operation of its or their respective
businesses, except where the failure so to maintain (or to maintain free from
all restrictions) would not, individually or in the aggregate, have a Material
Adverse Effect.
6.4 INSURANCE.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective Properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
6.5 BOOKS AND RECORDS.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, keep true books and records and accounts in which full and
correct entries shall be made of all of its or their
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business transactions and which will permit the provision of accurate and
complete consolidated financial statements in accordance with GAAP.
6.6 COMPLIANCE WITH LAW.
Each of the Obligors shall, and shall cause each of the Restricted
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and shall obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective Properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure
that non-compliance with such laws, ordinances or governmental rules or
regulations or the failure to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations,
individually or in the aggregate, would not have a Material Adverse Effect,
provided that the Obligors shall have the right to contest in good faith and
through appropriate proceedings any law, ordinance or governmental rule or
regulation.
6.7 PAYMENTS OF NOTE; MAINTENANCE OF OFFICE.
Each of the Obligors shall punctually pay, or cause to be paid, the
principal of and interest (and Make-Whole Amount, if any) on, the Notes, as and
when the same shall become due according to the terms hereof and of the Notes,
and each such Obligor shall maintain an office at its respective address set
forth in Section 12.1 where notices, presentations and demands in respect
hereof and of the Notes may be made upon it. Such office shall be maintained
at such address until such time as such Obligor notifies each of the holders of
the Notes of any change of location of such office, which will in any event be
located within the United States of America (or any State or other political
subdivision thereof). Each of the Obligors is a co-issuer of the Notes and is
jointly and severally liable with the other Obligors hereunder and under the
Notes.
6.8 ERISA.
(a) COMPLIANCE. Each of the Obligors shall, and shall
cause each ERISA Affiliate to, at all times with respect to each
Pension Plan, make timely payment of contributions required to meet
the minimum funding standard set forth in ERISA or the Code with
respect thereto, and comply in all material respects with all other
applicable provisions of ERISA.
(b) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN
ASSETS. The Obligors shall not at any time permit the present value
of vested accrued benefits under each Pension Plan to exceed, in any
material amount, the fair market value of assets of such Pension Plan
allocable to such vested accrued benefits at such time, in each case
determined pursuant to Section 6.8(c).
(c) VALUATIONS. All assumptions and methods used to
determine the actuarial valuation of vested accrued benefits under
Pension Plans and the fair market value of assets of Pension Plans
will be reasonable in the good faith judgment of the Obligors and
will comply with all requirements of law.
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(d) PROHIBITED ACTIONS; OTHER ACTIONS. The Obligors
shall not, and shall not permit any ERISA Affiliate to take or permit
to exist any of the following if the effect thereof, individually or
in the aggregate, would have a Material Adverse Effect:
(i) engage in any "prohibited transaction" (as
such term is defined in section 406 of ERISA or section 4975
of the Code) that would result in the imposition of a
material tax or penalty on an Obligor or an ERISA Affiliate;
(ii) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as such term is defined in
section 302 of ERISA), whether or not waived;
(iii) terminate any Pension Plan in a manner that
could result in
(A) the imposition of a lien on the
Property of any Obligor or any Restricted Subsidiary
pursuant to section 4068 of ERISA or
(B) the creation of any liability under
section 4062 of ERISA; or
(iv) fail to make any payment required by section
515 of ERISA.
(e) MULTIEMPLOYER PLANS. The Obligors shall not, and
shall not permit any ERISA Affiliate to, incur withdrawal liability
in respect of a Multiemployer Plan if such liability, together with
the aggregate amount of all other withdrawal liability incurred by
any Obligor or any Restricted Subsidiary under any one or more
Multiemployer Plans, would have a Material Adverse Effect.
(f) FOREIGN PENSION PLANS. The Obligors shall, and shall
cause each Restricted Subsidiary to, make all required payments in
respect of funding any Foreign Pension Plan applicable to such Person
and otherwise comply in all material respects with all applicable
laws, statutes, rules and regulations governing such Foreign Pension
Plan if the failure to make such payments or so comply, individually
or in the aggregate, would have a Material Adverse Effect.
6.9 PARI PASSU OBLIGATIONS.
Each of the Obligors undertakes that its obligations hereunder and
under the Notes do and will, in terms of preference and priority, rank at least
pari passu with all of such Obligor's present and future unsecured Senior Debt.
6.10 LINE OF BUSINESS.
The Obligors shall not make any material change in the nature of
their business as carried on at the Closing Date.
6.11 TRANSACTIONS WITH AFFILIATES.
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Each Obligor shall not, and shall not permit any Restricted
Subsidiary to, enter into directly or indirectly any transaction or group of
related transactions (including without limitation the purchase, lease, sale or
exchange of Properties of any kind or the rendering of any service) with any
Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of such Obligor's or such Restricted Subsidiary's business and
upon fair and reasonable terms no less favorable to such Obligor or such
Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate; provided, however, that nothing in
this Section 6.11 shall prohibit any Transfer of inventory, equipment or any
other asset related thereto by any Obligor or Restricted Subsidiary to an
Unrestricted Subsidiary in good faith and in the ordinary course of business,
provided that immediately prior to the consummation of such Transfer, and
immediately after giving effect thereto, no Default or Event of Default exists
or would exist, as the case may be.
6.12 PRIVATE OFFERING.
Each Obligor shall not, and shall not permit any Person acting on its
behalf to, offer the Notes or any part thereof or any similar Securities for
issue or sale to, or solicit any offer to acquire any of the same from, any
Person so as to bring the issuance and sale of the Notes within the provisions
of section 5 of the Securities Act.
6.13 LIMITATIONS ON DEBT.
(a) LEVERAGE TESTS. The Obligors shall not, as at the
last day of each fiscal quarter of the Parent, permit:
(i) Consolidated Senior Debt, determined as of
such day, to exceed thirty-five percent (35%) of Consolidated
Capitalization, determined as of such day; or
(ii) Consolidated Debt, determined as of such
day, to exceed forty-five percent (45%) of Consolidated
Capitalization, determined as of such day.
(b) LIMITATION ON RESTRICTED SUBSIDIARY DEBT. The Obligors
shall not, as at the last day of each fiscal quarter of the Parent,
permit the sum (without duplication) of
(i) Total Adjusted Restricted Subsidiary Unsecured
Debt, determined at such time, plus
(ii) Total Adjusted Parent Intellectual Property
Secured Debt, determined at such time, plus
(iii) Total Adjusted Subsidiary Secured Debt,
determined at such time,
to exceed twenty percent (20%) of Consolidated Capitalization,
determined at such time.
6.14 FIXED CHARGE COVERAGE.
The Obligors shall not permit the Fixed Charge Coverage Ratio,
determined at the last day of each fiscal quarter of the Parent, to be less
than 2.0 to 1.
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6.15 CONSOLIDATED NET WORTH.
The Obligors shall not permit Consolidated Net Worth, determined as
at the last day of each fiscal quarter of the Parent, to be less than the sum
of
(a) Six Hundred Million Dollars ($600,000,000), plus
(b) the sum of the Fiscal Period Net Worth Increase
Amounts for all Fiscal Periods ended subsequent to December 31, 1994
and on or prior to such day.
6.16 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
Each Obligor shall not, and shall not permit any Restricted
Subsidiary to, declare or make any Restricted Payment or make any Restricted
Investment unless immediately after, and after giving effect to, the declaring
or making, as the case may be, of such Restricted Payment or Restricted
Investment,
(a) (i) the aggregate amount of all Restricted
Investments (valued immediately after such transaction as
provided for in the definition thereof), plus
(ii) the aggregate amount of all Restricted
Payments made after the Closing Date,
would not exceed the sum of
(A) Ten Million Dollars ($10,000,000),
plus (or minus in the case of a deficit)
(B) fifty percent (50%) of Consolidated
Net Income (one hundred percent (100%) in the case of
a deficit) determined in respect of the single period
commencing on January 1, 1995 and ending on the date
such Restricted Payment or Restricted Investment is
made, plus
(C) the aggregate amount of cash
proceeds received by the Obligors and the Restricted
Subsidiaries from the sale or issuance of common
stock (or the sale or issuance of other Securities
subsequently converted into common stock) of any of
the Obligors to Persons other than another Obligor or
a Restricted Subsidiary after the Closing Date, net,
in each case, of all transaction costs and expenses
incurred in connection with such sale or issuance,
and
(b) no Default or Event of Default would exist.
Each Subsidiary Obligor which becomes a party to this Agreement pursuant to
Section 6.21 and each Restricted Subsidiary designated as such under Section
6.22 will be deemed to have made all Restricted Investments held (i) in the
case of such Subsidiary Obligor, immediately after such Subsidiary Obligor
shall have become a party hereto and (ii) in the case of such Restricted
Subsidiary, immediately after such Restricted Subsidiary is designated a
Restricted Subsidiary. No Obligor or Restricted Subsidiary
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shall authorize a Restricted Payment, which would give rise to a claim under
applicable law by the proposed recipients thereof, that is not payable within
sixty (60) days of such authorization.
6.17 LIENS.
(a) NEGATIVE PLEDGE. Each Obligor shall not, and shall
not permit any Restricted Subsidiary to, cause or permit to exist at
any time, or agree or consent to cause or permit to exist in the
future (upon the happening of a contingency or otherwise), any of
their respective Property, whether now owned or hereafter acquired,
to be subject to a Lien except:
(i) Liens imposed by law, carriers',
warehousemen's or mechanics' Liens, and Liens to secure
claims for labor, material or supplies arising, in each case,
in the ordinary course of business, but only to the extent
that payment thereof shall not at such time be due or is
being contested in good faith by appropriate proceedings
diligently conducted and with respect to which appropriate
reserves have been set aside in accordance with GAAP, and so
long as the enforcement thereof has been stayed and such
Liens do not individually or in the aggregate materially
impair the value or materially interfere with the use of the
Property subject thereto or the operation of the usual
business of the Obligors and the Restricted Subsidiaries;
(ii) (A) Liens which relate to taxes,
assessments, levies or other governmental charges which in
the aggregate do not exceed Five Million Dollars
($5,000,000), whether contested or otherwise, or (B) Liens
which relate to taxes, assessments, levies or other
governmental charges which in the aggregate are greater than
Five Million Dollars ($5,000,000), provided that such taxes,
assessments, levies or charges shall either (I) not yet be
due or (II) be the subject of a pending contest made in good
faith by appropriate proceedings diligently conducted and
with respect to which appropriate reserves have been set
aside in accordance with GAAP and the enforcement of the
Liens with respect to the contested amounts has been stayed
and such Liens do not individually or in the aggregate
materially impair the operation of the usual business of the
Obligors and the Restricted Subsidiaries;
(iii) Liens incurred or deposits made in the
ordinary course of business
(A) to enable the Obligors or any
Restricted Subsidiary to exercise any privilege or
license,
(B) in connection with, or to secure
payment of, worker's compensation, unemployment
insurance, old age pensions or other social security,
(C) with respect to banker's liens or
bank offset rights in respect of cash held by, or
deposit accounts with, commercial banks or trust
companies, which liens or rights arise from common
law or pursuant to depository transactions entered
into in the ordinary course of business,
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(D) to secure the performance of bids,
tenders, contracts or leases not incurred in
connection with the borrowing of money, the obtaining
of advances or the payment of the deferred purchase
price of Property, or
(E) to secure statutory obligations or
surety and performance bonds (of a type other than
set forth in Section 6.17(a)(iv)) and other similar
obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the
payment of the deferred purchase price of Property;
(iv) Liens
(A) arising from judicial attachments,
judgments or other awards,
(B) securing appeal bonds or
supersede as bonds, or
(C) arising in connection with court
proceedings or other contests (including, without
limitation, surety bonds and letters of credit or any
other instrument serving a similar purpose),
provided that the execution or other enforcement of
any of such Liens is effectively stayed and the
claims secured thereby are being actively contested
in good faith and by appropriate proceedings, and
provided further that the aggregate amount so secured
shall not at any time exceed Five Million Dollars
($5,000,000);
(v) Liens on Property of an Obligor or a
Restricted Subsidiary, provided that such Liens secure only
obligations owing to another Obligor or another Restricted
Subsidiary;
(vi) Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real Property,
provided that such exceptions and encumbrances do not render
title to such Property unmarketable or materially adversely
affect the use of such Property for its then present
purposes;
(vii) Liens in existence on the Closing Date
securing Debt of an Obligor or Restricted Subsidiary and
listed in PART 3.16 OF ANNEX 3 hereto, and Liens securing
renewals, extensions (as to time) and refinancings of such
Debt, provided that the amount of Debt secured by each such
Lien is not increased in excess of the amount of Debt
outstanding on the date of such renewal, extension or
refinancing, and each such Lien is not extended to include
any additional Property of any Obligor or Restricted
Subsidiary;
(viii) Liens on Property acquired or constructed by
any Obligor or any Restricted Subsidiary after the Closing
Date to secure Debt of such Obligor or such Restricted
Subsidiary incurred in connection with such acquisition or
construction, and Liens existing on such Property at the time
of acquisition thereof (but not created in contemplation of
such acquisition), provided that
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(A) no such Lien shall extend to or
cover any Property other than the Property being so
acquired or constructed (and the proceeds thereof),
(B) the amount of Debt secured by such
Lien shall not exceed ninety percent (90%) of the
purchase or construction price of the Property being
so acquired or constructed,
(C) such Property is to be used in the
business of such Obligor or such Restricted
Subsidiary,
(D) such Debt is permitted to be
incurred hereunder and is incurred solely for the
purpose of financing Capital Expenditures, and
(E) such Lien shall be created
concurrently with or within three hundred and sixty
(360) days after such acquisition or the substantial
completion of such construction (any Lien of a Person
which becomes a Subsidiary Obligor or a Restricted
Subsidiary after the Closing Date will be deemed to
have been granted on the date such Person becomes a
Subsidiary Obligor or Restricted Subsidiary);
(ix) Liens granted by an Obligor or a
Restricted Subsidiary upon a customer's obligation (a
"RECEIVABLE") payable to such Obligor or such Restricted
Subsidiary (together with any collateral securing such
obligation), including, without limitation, any chattel
paper, document, instrument, account, or general intangible
arising therefrom or necessary or related thereto, and all
products and proceeds thereof, which Receivable arose from
the sale or lease of any item of goods, materials, equipment,
supplies, merchandise or other personal Property of such
Obligor or such Restricted Subsidiary through any type of
conditional sales contract, note and security agreement,
operating or financing lease, or other form of chattel paper,
provided that such Liens secure Debt of an Obligor or
Restricted Subsidiary permitted to be outstanding hereunder;
and
(x) Liens on Intellectual Property, provided
that (A) such Liens secure only Debt of an Obligor or a
Restricted Subsidiary permitted to be outstanding hereunder
and (B) each such Lien shall provide (absent the enforcement
thereof) for such Obligor and such Restricted Subsidiary to
continue to have the full right to use such Intellectual
Property.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any
Property shall be subjected to a Lien in violation of Section 6.17(a)
the Obligors will forthwith make or cause to be made, to the fullest
extent permitted by applicable law, provision whereby the Notes will
be secured equally and ratably with all other obligations secured
thereby pursuant to such agreements and instruments as shall be
approved by the Required Holders, and in any such case the Notes
shall have the benefit, to the full extent that, and with such
priority as, the holders of Notes may be entitled under applicable
law, of an equitable Lien on such Property securing the Notes. Such
violation of Section 6.17(a) will constitute an Event of Default
hereunder, whether or not any such provision is made pursuant to this
Section 6.17(b).
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(C) FINANCING STATEMENTS. Each Obligor shall not, and
shall not permit any Restricted Subsidiary to, sign or file a
financing statement under the Uniform Commercial Code of any
jurisdiction that names it or any other Obligor or any Restricted
Subsidiary as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement,
except, in any such case, a financing statement filed or to be filed
to perfect or protect a security interest that such Obligor or such
other Restricted Subsidiary is entitled to create, assume or incur,
or permit to exist, under the foregoing provisions of Section 6.17(a)
or to evidence for informational purposes a lessor's interest in
Property leased to such Obligor or such Restricted Subsidiary.
6.18 MERGERS AND CONSOLIDATION.
Each Obligor shall not, and shall not permit any Restricted
Subsidiary to, merge or consolidate with or into, any other Person or permit
any other Person to merge or consolidate with or into it, provided that the
foregoing restrictions shall not apply to the merger or consolidation of an
Obligor or a Restricted Subsidiary if:
(a) with respect to a merger or consolidation of the
Parent with any other corporation (including a Subsidiary Obligor or
a Restricted Subsidiary),
(i) the corporation which results from such
merger or consolidation is the Parent and
(ii) immediately after the consummation of the
transaction, and after giving effect thereto, no Default or
Event of Default would exist;
(b) with respect to a merger or consolidation involving a
Subsidiary Obligor with any other corporation (including another
Subsidiary Obligor or a Restricted Subsidiary but, in any case,
excluding from this clause (b) any merger or consolidation involving
a Subsidiary Obligor with the Parent the conditions for which are set
forth in clause (a) above):
(i) the corporation which results from such
merger or consolidation is such Subsidiary Obligor or another
Subsidiary Obligor and
(ii) immediately after the consummation of the
transaction, and after giving effect thereto, no Default or
Event of Default would exist; and
(c) with respect to a merger or consolidation involving a
Restricted Subsidiary with any other corporation (including another
Restricted Subsidiary but, in any case, excluding from this clause
(c) any merger or consolidation involving a Restricted Subsidiary
with the Parent or a Subsidiary Obligor the conditions for which are
set forth in clause (a) or clause (b) above, as the case may be):
(i) the corporation which results from such
merger or consolidation is such Restricted Subsidiary or
another Restricted Subsidiary and
(ii) immediately after the consummation of the
transaction, and after giving effect thereto, no Default or
Event of Default would exist.
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6.19 TRANSFERS OF PROPERTY; SUBSIDIARY STOCK AND INDEBTEDNESS.
(a) TRANSFERS OF PROPERTY. Each Obligor shall not, and
shall not permit any Restricted Subsidiary to, sell, lease as lessor,
transfer, or otherwise dispose of (individually, a "TRANSFER", and
collectively "TRANSFERS;" "to Transfer" and its other verbal forms
shall refer to the action of effecting a Transfer) any of such
Person's Property (excluding therefrom Subsidiary Stock or Subsidiary
Indebtedness owned by such Person, the Transfer of which shall be
subject to the requirements of Section 6.19(b)), except:
(i) Transfers of obsolete or worn out Property
in the ordinary course of business of such Obligor or such
Restricted Subsidiary;
(ii) Transfers of inventory in the ordinary
course of business of such Obligor or such Restricted
Subsidiary;
(iii) Transfers of Receivables;
(iv) Transfers from an Obligor to another Obligor;
(v) Transfers from a Restricted Subsidiary to an
Obligor or a Wholly-Owned Restricted Subsidiary;
(vi) Transfers in respect of any merger or
consolidation in respect of any Obligor or Restricted
Subsidiary permitted under Section 6.18; and
(vii) any other Transfer of Property covered by
this Section 6.19(a), provided that such Transfer, (A) is in
the best interests of the Person effecting such Transfer and
is for Acceptable Consideration, (B) does not constitute a
Substantial Part of Consolidated Total Assets, as determined
at the time of such Transfer and after giving effect thereto,
and (C) immediately before and after the consummation of such
Transfer, and after giving effect thereto, no Default or
Event of Default would exist.
(b) TRANSFERS OF SUBSIDIARY STOCK AND SUBSIDIARY
INDEBTEDNESS. Each Obligor shall not, and shall not permit any
Restricted Subsidiary to, Transfer any shares of the stock (or any
warrants, rights or options to purchase stock or other Securities
exchangeable for or convertible into stock) of a Subsidiary Obligor
or of a Restricted Subsidiary (such stock, warrants, rights, options
and other Securities are herein called "SUBSIDIARY STOCK") or any
Indebtedness of a Subsidiary Obligor or Restricted Subsidiary (such
Indebtedness herein called "SUBSIDIARY INDEBTEDNESS") and the
Subsidiary Obligors shall not and the Obligors shall not permit any
Restricted Subsidiary to, issue, sell or otherwise dispose of any
shares of its own Subsidiary Stock, provided that the foregoing
restrictions do not apply to:
(i) the issuance by a Subsidiary Obligor or a
Restricted Subsidiary of directors' qualifying shares;
(ii) the issuance by a Subsidiary Obligor or a
Restricted Subsidiary of shares of its own Subsidiary Stock
to any one or more of the Parent, any Wholly-Owned Subsidiary
Obligor and any Wholly-Owned Restricted Subsidiary;
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(iii) the Transfer by a Subsidiary Obligor or a
Restricted Subsidiary of shares of Subsidiary Stock or
Subsidiary Indebtedness of another Restricted Subsidiary to
any one or more of the Parent, any Wholly-Owned Subsidiary
Obligor and any Wholly-Owned Restricted Subsidiary;
(iv) the Transfer of any Subsidiary Stock in
respect of any merger or consolidation in respect of any
Subsidiary Obligor or Restricted Subsidiary permitted under
Section 6.18; and
(v) the Transfer of all of the Subsidiary Stock
and all Subsidiary Indebtedness of a Restricted Subsidiary
owned by any one or more of the Obligors and the other
Restricted Subsidiaries if:
(A) such Transfer (1) is in the best
interests of the Persons effecting the same and is
for Acceptable Consideration and (2) does not
constitute a Substantial Part of Consolidated Total
Assets, as determined at the time of such Transfer
and after giving effect thereto;
(B) in connection with such Transfer,
the entire Investment (whether represented by stock,
Indebtedness, claims or otherwise) of the Obligors
and the other Restricted Subsidiaries in such
Restricted Subsidiary is Transferred to a Person
other than an Obligor or a Restricted Subsidiary not
being simultaneously disposed of;
(C) the Restricted Subsidiary being
disposed of has no continuing Investment in any other
Restricted Subsidiary not being simultaneously
disposed of or in an Obligor; and
(D) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default would
exist.
6.20 GUARANTIES.
Each Obligor shall not, and shall not permit any Restricted
Subsidiary to, become liable in any manner in respect of any Guaranty of any
Person except that an Obligor or a Restricted Subsidiary may become liable in
respect of a Guaranty of Debt of
(a) another Obligor or Restricted Subsidiary (including,
without limitation, the purchase of a performance or indemnity bond
to secure the performance of another Obligor or Restricted
Subsidiary) or
(b) any other Person so long as the amount of any such
Guaranty is, by its terms, expressly limited to a fixed dollar amount
and such dollar amount shall (without duplication) be included as
Debt of such Obligor or such Restricted Subsidiary in the computation
of the financial covenants set forth in Section 6.13 (as provided for
by such covenants and the defined terms used therein and after giving
effect to any adjustments in respect thereof required under GAAP
pursuant to principles of consolidation),
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and provided that in the case of the issuance of a Guaranty of Debt of an
Obligor by a Restricted Subsidiary that is also a Domestic Subsidiary, such
Restricted Subsidiary shall have satisfied the requirements of Section 6.21.
6.21 CHANGES IN SUBSIDIARY OBLIGORS.
(A) ADDING DOMESTIC SUBSIDIARIES AS SUBSIDIARY OBLIGORS.
In the event that a Domestic Subsidiary shall become liable in any
manner in respect of any Guaranty of any Debt of any Obligor, the
Obligors shall, contemporaneously with the occurrence of such event,
cause such Domestic Subsidiary to deliver to each holder of a Note
(i) an allonge for such Note, substantially in
the form of Exhibit E, executed by such Domestic Subsidiary,
pursuant to which such Domestic Subsidiary (i) becomes
jointly and severally liable for the due and punctual payment
of the principal of and Make-Whole Amount, if any, and
interest on such Note and (ii) authorizes such holder to
attach such allonge to such Note,
(ii) an agreement, substantially in the form of
Exhibit F, executed by such Domestic Subsidiary, pursuant to
which such Domestic Subsidiary becomes jointly and severally
liable for the due and punctual performance and observance of
all the covenants in the Notes, this Agreement and the Other
Agreements to be performed or observed by the Obligors,
(iii) an opinion of independent counsel to the
Domestic Subsidiary, substantially in the form of Exhibit G,
(iv) a copy of the resolutions of the Board of
Directors of such Domestic Subsidiary, certified by its
secretary or assistant secretary, authorizing the execution,
delivery and performance of the allonge and the aforesaid
agreement and such other documents as are required, and
(v) such other agreements and instruments as
shall be reasonably required and approved by the Required
Holders.
Upon the delivery of the foregoing documents such Domestic Subsidiary
shall be, for all purposes hereunder, a Subsidiary Obligor.
(B) REMOVING DOMESTIC SUBSIDIARIES AS SUBSIDIARY
OBLIGORS. In the event that a Domestic Subsidiary is made a
Subsidiary Obligor after the Closing Date pursuant to clause (a)
above (for purposes of this clause (b), an "added Subsidiary
Obligor"), such added Subsidiary Obligor may be removed as a
Subsidiary Obligor hereunder and relieved of all of its obligations
under this Agreement, the Other Agreements and the Notes if each of
the following conditions in respect thereof shall have been
satisfied:
(i) the Parent shall have delivered a written
request to each holder of Notes requesting such removal in
respect of such added Subsidiary Obligor,
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(ii) the Parent shall have certified in such
request that there are no outstanding Guaranties issued by
such added Subsidiary Obligor with respect to the Debt of any
Obligor, that there exists no Default or Event of Default and
that, after giving effect to the removal of such added
Subsidiary Obligor, no Default or Event of Default would
exist,
(iii) within sixty (60) days of the delivery of
the aforesaid request, the Required Holders shall have
consented in writing to such request,
(iv) all agreements and instruments necessary to
effectuate such removal shall be satisfactory to the Required
Holders and all fees and costs (including, without
limitation, reasonable attorney's fees and disbursements) of
the holders of Notes shall have been paid by the Obligors,
and
(v) at the time of the consummation of such
removal the certifications of the Parent set forth in clause
(ii) above shall be true and correct.
6.22 DESIGNATION OF SUBSIDIARIES.
(a) RIGHT OF DESIGNATION. Subject to the satisfaction of
the requirements of Section 6.22(c), the Parent shall have the right
to designate any newly acquired or formed Subsidiary as an
Unrestricted Subsidiary by delivering to each holder of Notes a
writing, signed by the President or a Vice President of the Parent,
so designating such Subsidiary within thirty (30) days of the
acquisition or formation of such Subsidiary by the Parent, any
Subsidiary Obligor or any Restricted Subsidiary. Any such Subsidiary
so designated within such thirty (30) day period shall be deemed to
have been an Unrestricted Subsidiary as of the date of such
acquisition or formation and any such Subsidiary not so designated
within such thirty (30) day period shall be deemed to have been a
Restricted Subsidiary as of the date of such acquisition or
formation. For all purposes of this Agreement, each Subsidiary
designated as an Unrestricted Subsidiary in PART 6.22 OF ANNEX 3
shall, subject to Section 6.22(b), be an Unrestricted Subsidiary and
all other Subsidiaries (including, without limitation, NKT) listed in
PART 3.5 OF ANNEX 3 shall be Restricted Subsidiaries.
(b) RIGHT OF REDESIGNATION. The Parent may at any time
redesignate an Unrestricted Subsidiary as a Restricted Subsidiary if
(i) such Unrestricted Subsidiary had not, prior
to such time, previously been designated as a Restricted
Subsidiary pursuant to this Section 6.22(b) and
(ii) immediately before and after, and after
giving effect to such redesignation, no Default or Event of
Default exists or would exist.
Subject to the satisfaction of the requirements of Section 6.22(c),
the Parent may at any time redesignate any Restricted Subsidiary as
an Unrestricted Subsidiary if such Restricted Subsidiary had not,
prior to such time, been designated as an Unrestricted Subsidiary
pursuant to this Section 6.22(b); provided, however, the Parent may
not designate NKT as an Unrestricted Subsidiary. Any redesignation
shall become effective under this Section 6.22(b) as provided in
Section 6.22(d).
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(c) DESIGNATION CRITERIA.
No newly formed or acquired Subsidiary under Section
6.22(a) and no Restricted Subsidiary under Section 6.22(b)
shall be designated or redesignated, as the case may be, as
an Unrestricted Subsidiary unless:
(i) immediately before and after, and
after giving effect to such designation, no Default
or Event of Default exists or would exist; and
(ii) such Subsidiary does not own,
directly or indirectly, any Debt or capital stock of
any Subsidiary Obligor or Restricted Subsidiary.
(d) EFFECTIVENESS. Any redesignation under Section
6.22(b) that satisfies all of the conditions set forth therein shall
become effective, for purposes of this Agreement, on the day that
notice thereof (signed by the President or a Vice President of the
Parent) shall have been mailed (postage prepaid, by registered or
certified mail, return receipt requested) by the Parent to each
holder of Notes at the addresses as provided in Section 12.1.
7. INFORMATION AS TO THE OBLIGORS.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Obligors shall deliver to each holder of Notes:
(a) QUARTERLY STATEMENTS -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the
Parent (other than the last fiscal quarter of each such fiscal year),
and in any event within forty-five (45) days thereafter, duplicate
copies of,
(i) (A) a consolidated balance sheet of the
Parent, the Subsidiary Obligors and the Restricted
Subsidiaries as at the end of such quarter and (B) a
consolidated balance sheet of the Parent and all consolidated
subsidiaries as at the end of such quarter, and
(ii) (A) consolidated statements of income and
changes in shareholders' equity of the Parent, the Subsidiary
Obligors and the Restricted Subsidiaries for such quarter and
(in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter and
year-to-date consolidated statements of cash flows of the
Parent, the Subsidiary Obligors and the Restricted
Subsidiaries, and (B) consolidated statements of income and
changes in shareholders' equity of the Parent and all
consolidated subsidiaries, for such quarter and (in the case
of the second and third quarters) for the portion of the
fiscal year ending with such quarter and year-to-date
consolidated statements of cash flows of the Parent and all
consolidated subsidiaries,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer of the Parent as fairly presenting, in all material respects,
the financial position of the companies being
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reported on and their results of operations and cash flows, subject
to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the
Parent's Quarterly Report on Form 10-Q prepared in compliance with
the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of Section
7.1(a)(i)(B) and Section 7.1(a)(ii)(B), provided, further, however,
that if the Obligors at any time prepare consolidated cash flow
statements on a quarterly basis for delivery to the Securities and
Exchange Commission or any other holder of Debt of any Obligor, the
Obligors shall be required hereunder to also deliver such quarterly
consolidated cash flow statements to the holders of Notes;
(b) ANNUAL STATEMENTS -- as soon as practicable after the
end of each fiscal year of the Parent, and in any event within ninety
(90) days thereafter, duplicate copies of,
(i) (A) a consolidated balance sheet of the
Parent, the Subsidiary Obligors and the Restricted
Subsidiaries as at the end of such year and (B) a
consolidated balance sheet of the Parent and all consolidated
subsidiaries as at the end of such year, and
(ii) (A) consolidated statements of income,
changes in shareholders' equity and cash flows of the Parent,
the Subsidiary Obligors and the Restricted Subsidiaries for
such year, and (B) consolidated statements of income, changes
in shareholders' equity and cash flows of the Parent and all
consolidated subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by
(1) an opinion thereon of independent certified
public accountants of recognized national standing, which
opinion shall state, without any Impermissible Qualification,
that (x) such financial statements required by Section
7.1(b)(i)(B) and Section 7.1(b)(ii)(B) and (y) if Total
Restricted Subsidiary Assets constitute less than eighty
percent (80%) of Total Consolidated Subsidiary Assets, such
financial statements required by Section 7.1(b)(i)(A) and
Section 7.1(b)(ii)(A) present fairly, in all material
respects, the financial position of the companies being
reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such
financial statements has been made in accordance with
generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and
(2) in the case of the annual financial
statements prepared in accordance with Section 7.1(b)(i)(A)
and Section 7.1(b)(ii)(A), a certificate of such accountants
stating that they have reviewed this Agreement and stating
further whether, in making their audit, they have become
aware of any condition or event that then constitutes a
Default or an Event of Default, and, if they are aware that
any such condition or event then exists, specifying the
nature and period of the existence thereof,
provided, that the delivery within the time period specified above of
the Parent's Annual Report on Form 10-K for such fiscal year
(together with the Parent's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with
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the requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
clause (1) above, shall be deemed to satisfy the requirements of
Section 7.1(b)(i)(B) and Section 7.1(b)(ii)(B);
(c) MANAGEMENT REPORTS AND LETTERS -- promptly upon
receipt thereof, a copy of each management report or letter submitted
to the Obligors or any Restricted Subsidiary by independent
accountants in connection with any annual audit (for the purpose of
avoidance of doubt, management reports and letters shall not include
any reports in respect of any interim audit or special audit);
(d) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report
(including, without limitation, each Quarterly Report on Form 10-Q,
each Annual Report on Form 10-K and each Current Report on Form 8-K),
notice or proxy statement sent by the Parent or any Subsidiary
Obligor or Restricted Subsidiary to stockholders generally, and (ii)
each regular or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and each
prospectus and all amendments thereto filed by the Parent, any
Subsidiary Obligor or any Restricted Subsidiary with the Securities
and Exchange Commission and of all press releases and other
statements made available generally by the Parent, any Subsidiary
Obligor or any Restricted Subsidiary to the public or to any class of
creditors concerning material developments;
(e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- immediately
upon any Responsible Officer of any Obligor becoming aware of the
existence of any Default or Event of Default (including, without
limitation, any Event of Default affecting a holder of Notes in a
discriminatory manner as provided for in Section 8.2(a)(iv)) or that
any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or
taken any action with respect to a claimed default of the type
referred to in Section 8.1(f), a written notice specifying the nature
and period of existence thereof and what action the Obligors are
taking or propose to take with respect thereto;
(f) ERISA MATTERS -- immediately upon a Responsible
Officer of any Obligor becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if
any, that the Obligors propose to take with respect thereto:
(i) with respect to any Plan, any reportable
event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date
hereof;
(ii) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the institution
of, proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Pension Plan, or the receipt by any Obligor
or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event or transaction that could result
in the incurrence of any liability by any Obligor or any
ERISA Affiliate pursuant to ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the
Properties or assets of any Obligor or any ERISA Affiliate
pursuant to
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ERISA or such penalty or excise tax provisions, if such
liability or Lien, taken together with any other such
liabilities or Liens then existing, would have a Material
Adverse Effect;
(g) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and
in any event within fifteen (15) days of receipt thereof, copies of
any notice to any Obligor or any Restricted Subsidiary from any
Federal or state Governmental Authority relating to any order, ruling,
statute or other law or regulation that, individually or in the
aggregate, would have a Material Adverse Effect;
(h) ACTIONS, PROCEEDINGS -- promptly after the
commencement thereof, and in any event within fifteen (15) days of
the commencement thereof, notice of any action or proceeding relating
to any Obligor or any Restricted Subsidiary in any court or before
any Governmental Authority or arbitration board or tribunal as to
which there is a reasonable possibility of an adverse determination
and that, if adversely determined, individually or in the aggregate
for all such actions or proceedings, would have a Material Adverse
Effect;
(i) MATERIAL ADVERSE EFFECT -- promptly, and in any event
within five (5) days of a Responsible Officer of any Obligor becoming
aware of any event or condition (which event or condition is not
otherwise covered by clause (f) through clause (h), inclusive, above)
which would have a Material Adverse Effect, a notice specifying the
nature of such event or condition and the period of existence thereof
and what action the Obligors are taking or propose to take with
respect thereto;
(j) CONSOLIDATING INFORMATION -- each set of financial
statements of the Parent, the Subsidiary Obligors and the Restricted
Subsidiaries delivered to a holder of Notes pursuant to Section
7.1(a) or Section 7.1(b) shall be accompanied by a consolidating
balance sheet and a consolidating statement of income in respect
thereof, together with a certificate from a Senior Financial Officer
of the Parent stating that such consolidating statements agree with
their respective books and records in all material respects; and
(k) REQUESTED INFORMATION -- with reasonable promptness,
such other data and information relating to the business, operations,
affairs, financial condition, assets or Properties of the Obligors or
any of the Restricted Subsidiaries or relating to the ability of the
Obligors, or any of them, to perform their respective obligations
hereunder and under the Notes as from time to time may be reasonably
requested by any holder of Notes, including, without limitation,
information required by 17 C.F.R. Section 230.144A, as amended from
time to time.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements of the Parent, the Subsidiary
Obligors and the Restricted Subsidiaries delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer of the Parent setting forth:
(a) COVENANT COMPLIANCE -- the information (including
detailed calculations) required in order to establish whether the
Obligors were in compliance with the requirements of Section 6.13
through Section 6.17, inclusive, and Section 6.19 during the
quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio
or
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percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then
in existence); and
(b) EVENT OF DEFAULT -- a statement that such Senior
Financial Officer has reviewed the relevant terms hereof and has
made, or caused to be made, under his or her supervision, a review of
the transactions and conditions of the Obligors and the Restricted
Subsidiaries from the beginning of the quarterly or annual period
covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the
existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such
condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Obligors shall have
taken or propose to take with respect thereto.
7.3 INSPECTION.
Each Obligor shall permit the representatives of any one or more of
the holders of Notes:
(a) NO DEFAULT -- upon reasonable prior notice to such
Obligor, to visit the principal executive office of such Obligor, to
discuss the affairs, finances and accounts of such Obligor, the
Parent, the other Subsidiary Obligors and the Restricted Subsidiaries
with such Obligor's officers, and (with the consent of such Obligor,
which consent shall not be unreasonably withheld) its independent
certified public accountants, and (with the consent of such Obligor,
which consent shall not be unreasonably withheld) to visit the other
offices and Properties of such Obligor, the Parent, the other
Subsidiary Obligors and the Restricted Subsidiaries, all at such
reasonable times and as often as may be reasonably requested in
writing;
(b) DEFAULT -- if a Default or an Event of Default then
exists, or a Restructuring shall have been initiated, to visit and
inspect any of the offices or Properties of such Obligor, the Parent,
any of the other Subsidiary Obligors or any Subsidiary, to examine
all of its or their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss
its or their respective affairs, finances and accounts with their
respective officers and independent certified public accountants (and
by this provision such Obligor authorizes said accountants to discuss
the affairs, finances and accounts of it, the Parent, the other
Subsidiary Obligors and the Subsidiaries), all at such times and as
often as may be requested; and
in each case, during such visits and inspections, such representatives will
comply with the Obligors' normal safety and security procedures.
All costs and expenses incurred in connection with the exercise of
any of the rights set forth above shall
(i) be for the account of the Obligors if, at the time of
the exercise of the rights set forth above, an Event of Default shall
exist or a Default in respect of any payment hereunder or under any
of the Notes shall exist, provided that the Obligors shall not be
obligated to pay the costs and expenses for any inspection and/or
audit of books of account, records, reports and other papers under
this Section 7.3 with respect to any occurrence of an Event of
Default or payment Default of more than two (2) auditing firms and/or
internal auditing teams of the holders of Notes and
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(ii) be for the account of the holder or holders of Notes
exercising such rights in all other cases.
The holders of Notes agree that the Required Holders shall determine the
auditing firms or teams (including, without limitation, the composition
thereof) under the proviso in subclause (i) above.
7.4 CONFIDENTIALITY.
You shall maintain the confidentiality, in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, of any information delivered to you by or on behalf
of any Obligor in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of such Obligor or otherwise known to you to be
confidential information, provided that
(a) the following information shall not be subject to the
confidentiality requirements of this Section 7.4:
(i) information that was publicly known prior to
the time of such disclosure,
(ii) information that subsequently becomes
publicly known through no act or omission by you or any
Person acting on your behalf,
(iii) information that constitutes financial
statements delivered to you under Section 7.1 that are
otherwise publicly available; and
(b) you may deliver or disclose, in any case, any
information subject to the confidentiality requirements of this
Section 7.4
(i) to your directors, officers, employees,
agents, attorneys and affiliates who would ordinarily have
access to such information in the normal course of the
performance of their respective duties or in administering
the investment represented by your Notes,
(ii) to your financial advisors and other
professional advisors (if such Person has agreed in writing
to be bound by the provisions of this Section 7.4),
(iii) to any other holder of a Note,
(iv) to any Institutional Investor to which you
sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing
prior to its receipt of such information to be bound by the
provisions of this Section 7.4),
(v) to any federal, state or local regulatory
authority having jurisdiction over you,
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(vi) to the National Association of Insurance
Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information
about your investment portfolio or
(vii) to any other Person to which such delivery
or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable
to you, (x) in response to any subpoena or other legal
process, notice of discovery or similar notice or any
informal governmental investigative demand, (y) in connection
with any litigation with the Obligors or any affiliate or
agent of the Obligors to which you are a party and/or which
arises out of or is in connection with, the transactions
contemplated hereunder, or (z) if an Event of Default has
occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the
rights and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 7.4 as
though it were a party to this Agreement. On reasonable request by the
Obligors in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this Section 7.4.
8. EVENTS OF DEFAULT.
8.1 NATURE OF EVENTS.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and is continuing:
(a) PRINCIPAL OR MAKE-WHOLE AMOUNT -- default shall be
made in the due and punctual payment of any principal of, or
Make-Whole Amount (if any) on, any Note, whether at stated maturity,
by notice of prepayment or otherwise, and such default shall continue
for two (2) Business Days after the date such payment is due;
(b) INTEREST PAYMENTS -- default shall be made in the due
and punctual payment of any interest on any Note or any payment of
any other amount on any Note or otherwise under this Agreement or
under any Other Agreement, other than amounts referred to in Section
8.1(a) above, and such default shall continue for five (5) Business
Days after the date such payment is due;
(c) COVENANT DEFAULTS -- any Obligor shall fail to
perform, observe or comply with any covenant, agreement or provision
contained in Section 6.13 through Section 6.17, inclusive, and such
failure shall continue for five (5) Business Days after the date such
failure first becomes known to any Responsible Officer of any
Obligor; provided, however, that the failure by any Obligor to
perform, observe or comply with any of the aforesaid covenants,
agreements or provisions shall not be an Event of Default under this
clause (c) if it occurs solely as a result of such Obligor's
compliance with a mandatory change in GAAP;
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(d) OTHER DEFAULTS -- any Obligor shall fail to perform,
observe or comply with any covenant, agreement or provision of this
Agreement (other than the covenants specified in clause (a), clause
(b) and clause (c) of this Section 8.1) and such failure continues
for more than forty-five (45) days after the date such failure first
becomes known to any Responsible Officer of any Obligor; provided,
however, that the failure by any Obligor to perform, observe or
comply with any of the aforesaid covenants, agreements or provisions
shall not be an Event of Default under this clause (d) if it occurs
solely as a result of such Obligor's compliance with a mandatory
change in GAAP;
(e) WARRANTIES OR REPRESENTATIONS -- (i) any warranty,
representation or other statement by any of the Obligors contained
herein, or in any instrument delivered by any Obligor on the Closing
Date, shall have been false or misleading in any material respect
when made; or (ii) any warranty, representation or other statement by
any of the Obligors contained in any instrument furnished in
compliance herewith after the Closing Date shall have been false or
misleading in any material respect and such representation, warranty
or statement shall remain untrue for more than thirty (30) days after
the earlier of (i) the date such false or misleading warranty,
representation or statement shall become known to any Responsible
Officer or (ii) the date notice of such false or misleading warranty,
representation or statement is given to the Obligors, provided that
(A) the correction of any such false or misleading warranty,
representation or statement in such instrument during such 30-day
period shall not alleviate or be deemed to cure any Default or Event
of Default that formed the basis of, or was the subject of, such
false or misleading warranty, representation or statement and which
continues to exist hereunder and (B) if such false or misleading
warranty, representation or statement cannot be corrected by the
delivery of an accurate and correct warranty, representation or
statement within said 30-day period, then said 30-day period shall
not apply to such false warranty, representation or statement;
(f) DEFAULT ON OTHER INDEBTEDNESS --
(i) any Obligor or any Restricted Subsidiary
shall fail (after the expiration of any applicable grace
period) to make any payment on, or otherwise redeem, when
due, any of its Indebtedness (other than the Notes) having an
outstanding balance in excess of Ten Million Dollars
($10,000,000); or
(ii) any event shall occur or any condition
shall exist in respect of any Indebtedness (other than the
Notes) of any Obligor or any Restricted Subsidiary, or under
any agreement securing or relating to such Indebtedness, that
has resulted in Indebtedness aggregating in excess of Ten
Million Dollars ($10,000,000), either (A) becoming due prior
to its stated maturity or prior to its regularly scheduled
date or dates of payment, or (B) being required to be
repurchased by such Obligor or such Restricted Subsidiary
prior to such maturity or scheduled date or dates, and, in
either case, the acceleration or requirement of repurchasing
of such Indebtedness has not been rescinded or annulled by
the holders thereof;
(g) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(i) a receiver, liquidator, custodian or trustee
of any Obligor or any Restricted Subsidiary, or of all or any
of the Property of any Obligor or any Restricted
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Subsidiary, shall be appointed by court order and such order
remains in effect for more than sixty (60) days; or an order
for relief shall be entered with respect to any Obligor or
any Restricted Subsidiary in any bankruptcy proceeding; or
any Obligor or any Restricted Subsidiary shall be adjudicated
a bankrupt or insolvent;
(ii) any material Property of any Obligor or any
Restricted Subsidiary shall be sequestered by court order and
such order remains in effect for more than sixty (60) days;
or
(iii) a petition shall be filed against any
Obligor or any Restricted Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and shall not be
dismissed within sixty (60) days after such filing;
(h) VOLUNTARY PETITIONS -- any Obligor or any Restricted
Subsidiary shall file a petition in voluntary bankruptcy or seeking
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or shall consent to the filing of any petition against it
under any such law;
(i) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- any
Obligor or any Restricted Subsidiary shall make an assignment for the
benefit of its creditors, or admit in writing its inability, or fail,
to pay its debts generally as they become due, or shall consent to
the appointment of a receiver, liquidator or trustee of it or of all
or any part of its Property of any of such Persons; or
(j) UNDISCHARGED FINAL JUDGMENTS -- a final judgment or
final judgments for the payment of money aggregating in excess of
Five Million Dollars ($5,000,000) (net of any actual insurance
coverage if the Required Holders shall have received evidence
satisfactory to them that such coverage exists and is applicable
thereto) is or are outstanding against one or more of the Obligors or
the Restricted Subsidiaries and any one of such judgments shall have
been outstanding for more than thirty (30) consecutive calendar days
from the date of its entry and shall not have been discharged in full
or stayed.
8.2 REMEDIES ON DEFAULT.
(a) ACCELERATION.
(i) If an Event of Default with respect to any
Obligor described in clause (g), clause (h) or clause (i) of
Section 8.1 has occurred and is continuing, all the Notes
then outstanding shall automatically become immediately due
and payable.
(ii) If any Event of Default described in clause
(a) or clause (b) of Section 8.1 has occurred and is
continuing, the Required Holders may at any time at their
option, by notice or notices to the Obligors, declare all
the Notes then outstanding to be immediately due and payable.
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(iii) If any Event of Default not covered by the
foregoing clause (i) and clause (ii) of this Section 8.2(a)
has occurred and is continuing, any holder or holders of at
least sixty-six and two-thirds percent (66 2/3%) in principal
amount of the Notes at the time outstanding (excluding any
Notes held by any Obligor, any Restricted Subsidiary or any
Affiliate) may at any time at its or their option, by notice
or notices to the Obligors, declare all the Notes then
outstanding to be immediately due and payable.
(iv) If any Event of Default described in
clause (a) or clause (b) of Section 8.1 has occurred and is
continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default in a
discriminatory manner (as hereinafter defined) may at any
time, at its or their option, by notice or notices to the
Obligors, declare all the Notes held by it or them to be
immediately due and payable. A holder of Notes will be
affected by an Event of Default described in clause (a) or
clause (b) of Section 8.1 in a "discriminatory manner" if
(A) such holder shall receive no
payments in respect of the payment obligations
referred to in the aforesaid clause (a) or clause (b)
while other holder or holders of Notes are receiving
all or part of such payments from the Obligors or
(B) such holder shall receive payments
in respect of the payment obligations referred to in
the aforesaid clause (a) or clause (b) from the
Obligors that are proportionately (based upon the
ratio of the aggregate principal amount of the Notes
of such holder then outstanding to the aggregate
principal amount of all of the Notes then
outstanding) less than the payment or payments being
made by the Obligors in respect of such payment
obligations to one or more of the other holders of
Notes; no payment shall be deemed proportionately
lower than any other payment solely as a result of
the rounding upward or downward to the nearest One
Dollar ($1.00) of such payment or such other payment.
Upon any Notes becoming due and payable under this Section
8.2(a), whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such
Notes, plus (A) all accrued and unpaid interest thereon and (B) the
Make-Whole Amount determined in respect of such principal amount (to
the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are
hereby waived. The Obligors acknowledge and agree that each holder
of a Note has the right to maintain its investment in the Notes free
from repayment by the Obligors (except as herein specifically
provided for) and that the provision for payment of a Make-Whole
Amount by the Obligors in the event that the Notes are accelerated as
a result of an Event of Default, is intended to provide compensation
for the deprivation of such right under such circumstances.
(b) OTHER REMEDIES.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have
been declared immediately due and payable under
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Section 8.2(a), the holder of any Note at the time outstanding may
proceed to protect and enforce the rights of such holder by an action
at law or other appropriate similar proceeding.
(c) RESCISSION.
At any time after any Notes have been declared due and
payable pursuant to clause (ii) or clause (iii) of Section 8.2(a),
(i) the holder or holders of at least sixty-six
and two-thirds percent (66 2/3%) in principal amount of
the Notes at the time outstanding (excluding any Notes held
by any Obligor, any Restricted Subsidiary or any Affiliate),
in the case of an Event of Default referred to in such clause
(ii) or
(ii) the holder or holders of at least
seventy-five percent (75%) in principal amount of the Notes
at the time outstanding (excluding any Notes held by any
Obligor, any Restricted Subsidiary or any Affiliate), in the
case of an Event of Default referred to in such clause (iii),
may, by written notice to the Obligors, rescind and annul any such
declaration and its consequences if (A) the Obligors have paid all
arrears of interest and all other amounts payable hereunder and under
the Notes (except any principal of, or interest or Make-Whole Amount
on, the Notes which shall have become due and payable solely by
reason of such declaration), (B) all Events of Default and Defaults,
other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived
pursuant to Section 11, and (C) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 8.2(c) will
extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
(d) NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder
of any Note in exercising any right, power or remedy shall operate as
a waiver thereof or otherwise prejudice such holder's rights, powers
or remedies. No right, power or remedy conferred by this Agreement,
any Other Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Obligors under
Section 1.5, the Obligors shall pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all
reasonable out-of-pocket costs and expenses of such holder incurred
in any enforcement or collection under this Section 8.2, including,
without limitation, reasonable attorneys' fees, expenses and
disbursements, and the obligations of the Obligors under this
sentence will survive the payment in full of the Notes and the
termination of this Agreement.
9. INTERPRETATION OF THIS AGREEMENT.
9.1 TERMS DEFINED.
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As used herein, the following terms have the respective meanings set
forth below or set forth in the Section specified therein:
ACCEPTABLE CONSIDERATION means with respect to any Transfer of
Property by any Obligor or Restricted Subsidiary, consideration in cash,
Securities or other Property, the aggregate value of which is deemed, in the
good faith opinion of the executive committee of the Board of Directors of the
Parent or, if such Transfer is by a Subsidiary Obligor or Restricted
Subsidiary, the chairman of the board, the president or general manager of such
Subsidiary Obligor or Restricted Subsidiary, to be adequate and satisfactory.
AFFILIATE means, at any time, a Person (other than an Obligor or a
Restricted Subsidiary)
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, any Obligor,
(b) that beneficially owns or holds ten percent (10%) or
more of any class of the Voting Stock of any Obligor, or
(c) ten percent (10%) or more of the Voting Stock (or in
the case of a Person that is not a corporation, ten percent (10%) or
more of the equity interest) of which is beneficially owned or held,
directly or indirectly, by any Obligor,
at such time. As used in this definition,
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, provided that no Person shall
be deemed to be in control of another Person solely by virtue of the
ownership of Notes.
AGREEMENT, THIS means this agreement, as it may be amended and
restated from time to time.
BOARD OF DIRECTORS means, at any time and with respect to any Person,
the board of directors of such Person or any committee thereof which, in the
instance, shall have the lawful power to exercise the power and authority of
such board of directors.
BUSINESS DAY means (a) when used in the definition of Make-Whole
Amount, any day other than a Saturday, a Sunday or a day on which commercial
banks in New York City, New York are required or authorized to be closed, and
(b) when used in any other provision of this Agreement, any day other than a
Saturday, a Sunday or a day on which commercial banks in Dallas, Texas or
Chicago, Illinois are required or authorized to be closed.
CAPITAL EXPENDITURE means an expenditure by the Obligors or their
Restricted Subsidiaries to acquire or construct fixed assets, plants and
equipment and includes, without limitation, renewals, improvements and
replacements in respect thereof.
CAPITAL LEASE means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
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CHANGE IN CONTROL means, at any time,
(a) the acquisition by a "person" or group of persons
within the meaning of section 13(d) or section 14(d) of the
Exchange Act, directly or indirectly, of the beneficial or record
ownership of more than fifty percent (50%) of the total voting
power of the then outstanding Voting Stock of the Parent, or
(b) a sale, assignment, transfer or other disposition of
Voting Stock of any Subsidiary Obligor such that
(i) such Subsidiary Obligor shall thereafter
fail to qualify as a Subsidiary of the Parent hereunder, or
(ii) immediately after the consummation of such
sale, assignment, transfer or other disposition, the Parent,directly
or indirectly, has less than
(A) in the case of a Subsidiary Obligor
in existence on the Closing Date, eighty percent (80%)
of the legal and beneficial ownership of, and the
right to exercise or cause the exercise of all voting
rights in respect of each class of the Voting Stock
of such Subsidiary Obligor at such time as compared
to such Voting Stock that was held by the Parent on
the Closing Date, or
(B) in the case of a Subsidiary Obligor
added pursuant to Section 6.21(a), eighty percent
(80%) of the legal and beneficial ownership of, and
the right to exercise or cause the exercise of all
voting rights in respect of each class of the Voting
Stock of such Subsidiary Obligor at such time as
compared to such Voting Stock that was held the
Parent on the date such Subsidiary Obligor became a
Subsidiary Obligor pursuant to Section 6.21,
in each case, at such time.
CLOSING is defined in Section 1.3.
CLOSING DATE is defined in Section 1.3.
CODE means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
CONSOLIDATED CAPITALIZATION means, at any time, the sum of
(a) Consolidated Debt, plus
(b) Consolidated Net Worth,
in each case determined at such time.
CONSOLIDATED DEBT means, at any time, the aggregate amount of Debt of
the Obligors and the Restricted Subsidiaries determined on a consolidated basis
in accordance with GAAP at such time.
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CONSOLIDATED FIXED CHARGES means, for any period, the sum of
(a) Consolidated Rental Expense, plus
(b) Consolidated Interest Expense,
in each case for such period.
CONSOLIDATED INTEREST EXPENSE means, for any period, the amount of
interest expense, calculated in accordance with GAAP for such period on, or
with respect to, Consolidated Debt, including, without limitation, amortization
of debt discount, imputed interest in respect of Capital Leases and
commissions, discounts and other fees and charges owed with respect to letters
of credit, banker's acceptances and net costs under interest rate protection
agreements (to the extent that such letters of credit, banker's acceptances and
interest rate protection agreements would qualify as Debt of the Obligors
and/or Restricted Subsidiaries). The aforesaid determination of "Consolidated
Interest Expense" shall (without duplication)
(a) include interest expense, as set forth in the
immediately preceding sentence, that was capitalized during such
period and
(b) exclude interest expense, as set forth in the
immediately preceding sentence, to the extent that such interest
expense
(i) was accrued in respect of (A) a Person
acquired by any Obligor or any Restricted Subsidiary during
such period through purchase, merger, consolidation or
otherwise or (B) assets acquired during such period by any
Obligor or any Restricted Subsidiary and
(ii) relates to a period of time during such period
that precedes the consummation of such acquisition of such
Person or such assets.
CONSOLIDATED NET INCOME means for any period, net earnings (or loss)
after income taxes of the Obligors and the Restricted Subsidiaries for such
period, determined on a consolidated basis, but not including in such net
earnings (or loss) the following:
(a) any extraordinary gain or loss arising from the sale
of capital assets;
(b) any extraordinary gain or loss arising from any
write-up or write-down of assets;
(c) net earnings of any Person (other than a Restricted
Subsidiary) in which any Obligor or any Restricted Subsidiary shall
have an ownership interest unless such net earnings (or any portion
thereof) shall have actually been received by such Obligor or such
Restricted Subsidiary in the form of cash distributions;
(d) earnings or losses of any Subsidiary Obligor or
Restricted Subsidiary accrued prior to the date it became a
Subsidiary Obligor or Restricted Subsidiary;
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(e) any portion of the net earnings of any Subsidiary
Obligor or Restricted Subsidiary that by reason of any contract or
charter restriction or applicable law or regulation (or in the good
faith judgment of the Board of Directors of the Parent for any
reason) is unavailable for payment of dividends to any of the
Obligors or any Restricted Subsidiary;
(f) the earnings or losses of any Person acquired by any
Obligor or any Restricted Subsidiary through purchase, merger,
consolidation or otherwise, or the earnings or losses of any Person
substantially all of whose assets have been acquired by any Obligor
or any Restricted Subsidiary, for any period prior to the date of
such acquisition;
(g) any gain arising from the acquisition of any
Securities of any Obligor or any Restricted Subsidiary; and
(h) any other extraordinary gains or losses or any other
gain or loss arising from an event or transaction that is unusual in
nature and infrequent in occurrence (but which otherwise does not
constitute an extraordinary item under GAAP) and which GAAP requires
to be reported as a separate component of revenues and expenses from
continuing operations.
The above determination of net earnings (or loss) shall be made
without giving effect to any allocation thereof to any minority interest in
respect of any Subsidiary Obligor or Restricted Subsidiary.
CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES means, for any
period, the sum of
(a) Consolidated Net Income for such period plus
(b) the aggregate amounts of Consolidated Rental Expense,
income taxes and Consolidated Interest Expense for such period (to
the extent, but only to the extent, such aggregate amounts were taken
into account in the determination of such Consolidated Net Income for
such period), determined on a consolidated basis.
CONSOLIDATED NET WORTH means, at any time, the sum (without
duplication) of (a) the shareholders' equity of the Obligors and the Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP at
such time, plus (b) all minority interests in the Subsidiary Obligors and
Restricted Subsidiaries, determined on a consolidated basis in accordance with
GAAP at such time, provided, however, that (i) unrealized gains or losses from
translation adjustments required under GAAP and (ii) unrealized gains or losses
in connection with the determination of the fair value (as required by GAAP) of
Securities owned by the Obligors and the Restricted Subsidiaries shall be
excluded from the determination of Consolidated Net Worth.
CONSOLIDATED RENTAL EXPENSE means, for any period, the amount of
Operating Rentals of the Obligors and the Restricted Subsidiaries, determined
on a consolidated basis in accordance with GAAP for such period. The aforesaid
determination of "Consolidated Rental Expense" shall (without duplication)
exclude Operating Rentals, as set forth in the immediately preceding sentence,
to that extent that such Operating Rentals (a) were accrued in respect of (i) a
Person acquired by any Obligor or any Restricted Subsidiary during such period
through purchase, merger, consolidation or otherwise or (ii) assets acquired
during such period by any Obligor or any Restricted Subsidiary and (b) relate
to a period of time during such period that precedes the consummation of such
acquisition of such Person or such assets.
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CONSOLIDATED SENIOR DEBT means, at any time, the aggregate amount of
Senior Debt of the Obligors and the Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP at such time.
CONSOLIDATED SUBORDINATED DEBT means, at any time, the aggregate
amount of Subordinated Debt of the Obligors and the Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP at such time.
CONSOLIDATED TOTAL ASSETS means, at any time, all assets of the
Obligors and the Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP at such time.
CONTROL EVENT means the execution and delivery of any agreement or
agreements by, or pursuant to the instructions of, the Board of Directors of
the Parent, the consummation of which, directly or with the passage of time or
the exercise of any option or similar right, would result in a Change in
Control.
CONTROL PREPAYMENT DATE is defined in Section 4.3(a).
DEBT means, at any time, with respect to any Person, without
duplication:
(a) its liabilities for borrowed money (whether or not
evidenced by a promissory note, a Security or otherwise), including,
without limitation, liabilities for borrowed money in respect of
banker's acceptances;
(b) any liabilities for borrowed money secured by any
Lien existing on Property owned by such Person (whether or not such
liabilities shall have been assumed by such Person, or there shall
exist recourse to such Person in respect of such liabilities);
(c) any obligations in respect of any Capital Lease of
such Person;
(d) the present value of all payments due under any
arrangement for retention of title, any conditional sale agreement or
any deferred purchase price of Property or services (other than a
Capital Lease) discounted at the implicit rate, if known, with
respect thereto or, if unknown, at eight percent (8%) per annum;
(e) any Recourse Obligations of such Person;
(f) any other obligations of such Person that would be
deemed to be borrowed money liabilities of such Person, determined in
accordance with customary financial practices; and
(g) (i) any Guaranty of such Person for any obligation or
liability of another Person of a type described in any of clause (a)
through clause (f), inclusive, of this definition or (ii) any
obligation of such Person in respect of interest rate protection
agreements for any obligation or liability of such Person of a type
described in any of clause (a) through clause (f), inclusive, of this
definition.
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DEFAULT means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DOL means the Department of Labor of the United States of America and
any successor agency.
DOLLARS OR $ means United States of America dollars.
DOMESTIC SUBSIDIARY means, at any time, a Subsidiary of the Parent
(other than a Subsidiary Obligor),
(a) that is organized under the laws of the United States
of America or a jurisdiction thereof (including, without limitation,
Puerto Rico), and
(b) that conducts substantially all of its business and
has substantially all of its Property within the United States of
America or any jurisdiction thereof (including, without limitation,
Puerto Rico).
ENVIRONMENTAL LAWS means any federal, state, county, regional or
local law, statute, or regulation enacted in connection with or relating to the
protection or regulation of the environment, including, without limitation,
those laws, statutes, and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing, or
transporting of Hazardous Material, and any regulations, issued or promulgated
in connection with such statutes by any Governmental Authority and any orders,
decrees or judgments issued by any court of competent jurisdiction in
connection with any of the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA AFFILIATE means all corporations, trades or business (whether
or not incorporated) and other Persons which, together with any Obligor, are
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
or Section 4001(a)(14) or Section 4001(b)(1) of ERISA. ERISA Affiliate shall
include any Group Subsidiary.
EVENT OF DEFAULT is defined in Section 8.1.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
FISCAL PERIOD means any fiscal quarter of any fiscal year of the
Parent.
FISCAL PERIOD NET WORTH INCREASE AMOUNTS means, in respect of any
Fiscal Period, fifty percent (50%) of Consolidated Net Income for such Fiscal
Period unless Consolidated Net Income for such Fiscal Period shall be a loss,
in which event the amount determined pursuant to this definition for such
Fiscal Period shall be zero (0).
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FIXED CHARGE COVERAGE RATIO means, at any time, the ratio of
(a) Consolidated Net Income Available for Fixed Charges
for the period of four consecutive fiscal quarters of the Parent
ended at such time to
(b) Consolidated Fixed Charges for such period.
FOREIGN PENSION PLAN means any plan, fund or other similar program
(a) established or maintained outside of the United States of America by any
one or more of the Obligors or any Restricted Subsidiary primarily for the
benefit of the employees (substantially all of whom are individuals not
residing in the United States of America) of one or more of the Obligors or the
Restricted Subsidiaries which plan, fund or other similar program provides for
retirement income for such employees or results in a deferral of income for
such employees in contemplation of retirement and (b) not otherwise subject to
ERISA.
GAAP means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
GOVERNMENT SECURITIES is defined in the definition of "Restricted
Investments" in this Section 9.1.
GOVERNMENTAL AUTHORITY means
(a) the government of
(i) the United States of America or any State
or other political subdivision thereof, or
(ii) any jurisdiction in which any of the
Obligors or any Restricted Subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any
Properties of (A) the Obligors or (B) any Group Subsidiary or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining
to, any such government.
GROUP SUBSIDIARY means any Subsidiary of the Parent other than the
Subsidiary Obligors.
GUARANTY means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
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(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of such other Person or otherwise to advance or
make available funds for the purchase or payment of such indebtedness
or obligation;
(c) to lease Properties or to purchase Properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of such other Person to
make payment of such indebtedness or obligation;
(d) to reimburse the issuer of a letter of credit in
respect of any draws thereunder used to pay such indebtedness or
obligation; or
(e) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
HAZARDOUS MATERIAL means any pollutants, contaminants, toxic or
hazardous materials or substances, wastes, petroleum or petroleum products,
flammable, explosive or radioactive materials or other substances or materials
listed, designated, defined or regulated under any Environmental Law.
IMPERMISSIBLE QUALIFICATION means, with respect to the opinion by
independent certified public accountants to be rendered pursuant to Section
7.1(b)(1), any qualification or exception to such opinion:
(a) which is of a so-called "going concern" or a similar
nature;
(b) which relates to the limited scope of examination of
matters relevant to any financial statement to which such opinion
applies (other than scope limitations included in the standard form
of opinion utilized by such accountants but including any inability
to obtain sufficient competent evidential matter in respect of any
financial statement to which such opinion applies); or
(c) which relates to the treatment or classification of
any item in any financial statement to which such opinion applies
(including, without limitation, any such treatment or classification
that represents a departure from GAAP) and which, as a condition to
its removal, would require an adjustment to such item the effect of
which would be to cause any Obligor to be in default of any of its
obligations under Section 6.13 through Section 6.17, inclusive.
Any adverse opinion or disclaimer of opinion, as such terms are defined under
generally accepted auditing standards, shall be deemed to be Impermissible
Qualifications. Any qualification in respect of a failure of the financial
statements to disclose information required by GAAP to be disclosed or to
include financial statements required by GAAP to be included in such financial
statements shall be deemed to be an "Impermissible Qualification."
INDEBTEDNESS means, with respect to any Person, all of its
liabilities, as determined under GAAP, including, without limitation, all of
its Debt. "Indebtedness" shall not include any Debt if (a) upon
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or prior to the maturity thereof, the Person liable thereunder shall have
irrevocably deposited with an independent commercial depositary, in trust,
money (or fixed payment marketable Government Securities with specified
maturities) in an amount sufficient for, and dedicated exclusively to, the
payment, redemption or satisfaction of such Debt and all interest in respect
thereof (whether then due or payable or to become due and payable in the
future), (b) such Debt shall, under GAAP, be treated as having been in-
substance defeased and (c) the moneys and/or Securities placed in such
depositary are sufficient to pay in full all amounts that become due in respect
of such Debt.
INSTITUTIONAL INVESTOR means any bank, trust company, savings and
loan association, any pension plan, any investment company, any insurance
company, or any other similar financial institution or entity, regardless of
legal form.
INTELLECTUAL PROPERTY means any patent, patent application,
copyright, trademark, trademark application, trade name, service mark, mask
work, license, permit and other rights in respect of the foregoing of any
Obligor or Restricted Subsidiary.
INVESTMENTS has the meaning ascribed thereto in the definition of
Restricted Investments in this Section 9.1.
LIEN means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any Property or asset of such Person. The term "Lien" includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. The term "Lien" also includes any liens in respect of any
judgment or in connection with any attachment, execution, distraint or other
similar enforcement proceeding (whether pre- or post-judgment) and any other
involuntary lien arising pursuant to or under any applicable law, statute, rule
or regulation. For the purposes of this Agreement, each of the Obligors and
the Group Subsidiaries shall be deemed to be the owner of any Property that it
shall have acquired or holds subject to a conditional sale or other title
retention agreement, Capital Lease or other similar financing arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for security purposes, and such retention or vesting shall be
deemed a Lien.
MAKE-WHOLE AMOUNT means, with respect to any Calculation Date and any
principal amount of Notes required for any reason to be paid prior to the
regularly scheduled payment date or maturity thereof:
(a) if the Make-Whole Discount Rate, determined for such
principal amount and such Calculation Date, equals or exceeds nine
and two one-hundredths percent (9.02%), then Zero Dollars ($0); or
(b) if the Make-Whole Discount Rate, determined for such
principal amount and such Calculation Date, is less than nine and two
one-hundredths percent (9.02%), then
(i) the sum of the present values of each of the
then remaining scheduled payments of principal and interest
that would be payable on such principal amount of Notes but
for such prepayment (other than the amount of interest
accrued on such
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principal amount since the scheduled interest payment date
immediately preceding such Calculation Date), minus
(ii) such principal amount of the Notes being so
paid prior to the regularly scheduled payment date or
maturity thereof.
Such present values shall be determined in accordance with generally accepted
financial practice and shall be discounted using a discount rate equal to the
Make-Whole Discount Rate divided by two (2), and a discount period of six (6)
months of thirty (30) days each.
Any determination of the Make-Whole Amount made by the Parent or any
other Obligor under the terms of this Agreement shall not be binding on the
holders of Notes if such determination shall be erroneous (including, without
limitation, any calculating error or error in the application of the terms and
principles of this definition) and no such determination shall be, or shall be
deemed to be, binding upon any holder of Notes by virtue of the acceptance by
such holder of any amounts paid by the Obligors in respect of such Make-Whole
Amount. The Obligors hereby acknowledge that any holder of Notes may contest
any determination by any Obligor of the Make-Whole Amount and may recover such
additional amounts in respect thereof as shall be lawfully owing by the
Obligors to such holder in respect of such Make-Whole Amount.
As used in this definition:
Calculation Date -- means, (a) with respect to any prepayment
of any Notes hereunder, the date that is the second (2nd) Business
Day prior to the date of such prepayment or, (b) with respect to any
acceleration of any Notes, the date of the payment of such
accelerated amount and (c) with respect to any notice required under
Section 4.2(c)(v), the date of such notice.
MAKE-WHOLE DISCOUNT RATE means, with respect to any Calculation Date
and any principal amount of Notes required for any reason to be paid prior to
the regularly scheduled payment date or maturity thereof on such date, the sum
of
(a) the Treasury Rate determined on the Calculation Date
with respect to such principal amount of Notes, plus
(b) fifty one-hundredths percent (0.50%) per annum.
As used in this definition:
Treasury Rate -- means, with respect to the calculation of a
Make-Whole Amount in respect of any date and any principal amount of
Notes,
(a) the yield reported as of 10:00 a.m., New
York City time, on the day on which such calculation is being
made, as the yield, based on the "bid" price, on the display
designated as "Page 500" on the Telerate Service (or such
other display as may replace Page 500 on the Telerate
Service) providing the most current yields for actively
traded United States Treasury securities with maturities
corresponding to the remaining Weighted Average Life to
Maturity of such principal amount of Notes (such Weighted
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Average Life to Maturity being determined as of the date of
such calculation and rounded to the nearest month), or
(b) if and only if such Telerate Service ceases
to exist or fails to report such yield, such yield as
reported on a reasonably comparable electronic service as may
be designated by the Required Holders, or
(c) if and only if such Telerate Service ceases
to exist or fails to report such yield and the Required
Holders shall fail to agree upon a comparable electronic
service pursuant to clause (b) of this definition or such
comparable electronic service ceases to exist or fails to
report such yield, such yield reported under the heading
"This Week" and under the caption "Treasury Constant
Maturities" of the maturity corresponding to the remaining
Weighted Average Life to Maturity of such principal amount of
the Notes (such Weighted Average Life to Maturity being
determined as of the date of such calculation and rounded to
the nearest month) as most recently published and made
available to the public in the statistical release designated
"H.15(519)" or any successor publication that is published
weekly by the Federal Reserve System and that establishes
yields in respect of actively traded United States Treasury
securities or, if no such successor publication is available,
then any other source of current information in respect of
interest rates on the securities of the United States of
America that is generally available and, in the judgment of
the Required Holders, provides information reasonably
comparable to the H.15(519) statistical release.
If no maturity exactly corresponds to such rounded Weighted Average
Life to Maturity, yields for the two (2) most closely corresponding
published and actively traded/treasury constant maturities next above
and below the rounded Weighted Average Life to Maturity of such
principal of the Notes shall be calculated pursuant to the
immediately preceding sentence and the Treasury Rate shall be
interpolated from such yields on a straight-line basis, rounding with
respect to each such relevant period to the nearest month.
Remaining Dollar-Years -- means, with respect to any date and
any principal amount of Notes, the result obtained by
(a) multiplying, in the case of each scheduled
payment of principal (including payment at maturity) that
would be payable in respect of such principal amount of Notes
but for a prepayment of such principal amount on such date,
(i) an amount equal to such scheduled
payment of principal, by
(ii) the number of years that will elapse
between such date and the date such scheduled
principal payment would be due if such prepayment had
not occurred, and
(b) calculating the sum, with respect to each of
such scheduled payments of principal, of each of the products
obtained in the preceding subsection (a).
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Weighted Average Life to Maturity -- means, with respect to
any date and any principal amount of Notes, the number of years
obtained by dividing the Remaining Dollar-Years on such date of such
principal amount by such principal amount.
MARGIN STOCK is defined in Section 3.15.
MATERIAL ADVERSE EFFECT means, with respect to any event or
circumstance (either individually or in the aggregate with all other events and
circumstances), an effect caused thereby or resulting therefrom that would be
materially adverse (a) as to, or in respect of, the business, operations,
affairs, profits, Properties or condition (financial or otherwise) of the
Obligors and the Restricted Subsidiaries, taken as a whole, (b) to the ability
of the Obligors, taken as a whole, to perform their respective obligations set
forth herein or under the Notes or (c) as to, or in respect of, the validity or
enforceability of this Agreement or the Notes.
MULTIEMPLOYER PLAN means any employee pension benefit plan that is a
multiemployer plan (as such term is defined in section 4001(a)(3) of ERISA) to
which any Obligor or any ERISA Affiliate has a liability or an obligation to
make contributions.
NKT means DSC Communications A/S, formerly known as NKT Electronic
A/S, an entity organized under the laws of Denmark.
NOTES is defined in Section 1.2(a).
NOTE PURCHASE AGREEMENT means, collectively, this Agreement and the
Other Agreements.
OBLIGORS means each of the Parent and the Subsidiary Obligors.
OTHER AGREEMENTS is defined in Section 1.2(b).
OTHER PURCHASERS is defined in Section 1.2(b).
OPERATING RENTALS means, at any time, all fixed payments which the
lessee is required to make by the terms of any lease (other than a Capital
Lease).
PBGC means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
PARENT means DSC Communications Corporation, a Delaware corporation,
and its successors and assigns.
PERSON means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
PENSION PLAN means an employee pension benefit plan (as defined in
section 3(2) of ERISA) that is covered by Title IV of ERISA or is subject to
the minimum funding standards under Section 412 of the Code and with respect to
which any Obligor or any ERISA Affiliate has a liability or an obligation to
make contributions.
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PLACEMENT MEMORANDUM is defined in Section 3.4.
PROPERTY means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.
PROPOSED AMENDMENT is defined in Section 4.2(b).
RECEIVABLE is defined in Section 6.17(a)(ix).
RECOURSE OBLIGATION means, at any time and with respect to any Person
which shall have effected a sale, transfer or other disposition (whether by way
of factoring, discounting, securitizing or otherwise) of accounts receivable,
general intangibles, leases, chattel paper or any other obligations of its
customers arising from its sale or leasing of goods or provision of services in
the ordinary course of its business (collectively, for purposes of this
definition, "receivables"), the aggregate amount of the obligations of such
Person (whether contingent or actual), as determined by GAAP, arising from the
contractual rights of the transferees thereof to require such Person to
reacquire, or otherwise make a payment to such transferees in respect of, such
receivables as a result of (a) the failure of the obligors under such
receivables to perform any obligations evidenced or embodied by such
receivables or (b) the failure of such receivables to satisfy the eligibility
or other requirements thereof agreed upon by such Person and such transferees
in order for such receivables to be sold, transferred or otherwise disposed of
to such transferees.
REQUIRED HOLDERS means, at any time, the holders of at least
fifty-one percent (51%) in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by any Obligor, any Restricted
Subsidiary or any Affiliate).
RESPONSIBLE OFFICER means, with respect to any corporation, any
Senior Financial Officer and any other officer of such corporation with
responsibility for the administration of the relevant portion of this
Agreement.
RESTRICTED INVESTMENTS means, at any time, all investments, made in
cash or by delivery of Property, by any Obligor or any Restricted Subsidiary
(x) in any Person, whether by acquisition of capital stock, indebtedness or
other obligation or Security, or by loan, Guaranty, advance or capital
contribution, or otherwise, or (y) in any Property (items (x) and (y) herein
called "INVESTMENTS"), except the following:
(a) Investments by an Obligor or a Restricted Subsidiary
in an Obligor or in a Restricted Subsidiary or any corporation that
concurrently with such Investment becomes a Subsidiary Obligor or a
Restricted Subsidiary;
(b) Investments in Property to be used in the ordinary
course of business of the Obligors and the Restricted Subsidiaries;
(c) Investments in assets arising from the sale of goods
and services in the ordinary course of business of the Obligors and
the Restricted Subsidiaries;
(d) Investments in readily marketable direct obligations
of, or obligations fully guarantied by, the United States of America
or any agency controlled or supervised by or acting as an
instrumentality of the United States of America, which obligations or
the guaranty thereof,
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as the case may be, carry the full faith and credit of the United
States of America (such obligations are herein referred to,
collectively, as "GOVERNMENT SECURITIES");
(e) Investments in repurchase agreements having a term of
not more than one (1) year collateralized by, and solely in respect
of, Government Securities, provided that (i) any repurchase agreement
collateralized by, and solely in respect of, Government Securities
that was entered into for the exclusive purpose of maintaining or
preserving the tax benefited status under Section 936 of the Code of
Puerto Rican net income earned by one or more of the Obligors (and
which repurchase agreement provides substantially comparable tax
benefits to the Obligors as that certain six-year repurchase
agreement currently outstanding as of the Closing Date in respect of
certain Puerto Rican net earnings of DSC of Puerto Rico, Inc.) shall
qualify as an Investment under this clause (e) notwithstanding that
it has a term in excess of one (1) year and (ii) in lieu of any
Puerto Rican repurchase agreement referred to in subclause (i) above,
an Investment in readily marketable direct obligations of, or
obligations fully guarantied by, the Commonwealth of Puerto Rico that
are rated at all times either Baa2 or better by Moody's Investor
Service, Inc., BBB or better by Standard & Poor's Corporation or an
equivalent rating by any other nationally recognized credit rating
agency of similar standing shall qualify as an investment under
subclause (i) of this clause (e) if, but only if, the exclusive
purpose of such Investment was the maintaining or preserving the tax
benefited status under Section 936 of the Code of Puerto Rican net
income earned by one or more of the Obligors (and which Investment
provides substantially comparable tax benefits to the Obligors as
that certain six-year repurchase agreement currently outstanding as
of the Closing Date in respect of certain Puerto Rican net earnings
of DSC of Puerto Rico, Inc.).
(f) Investments in commercial paper given the rating, at
the time of the acquisition thereof, of A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investor Service, Inc. or an equivalent
rating by another nationally recognized credit rating agency of
similar standing;
(g) Investments by the Obligors, or by the Restricted
Subsidiaries, in any corporation, partnership or other business
entity that is not either a Subsidiary Obligor or a Restricted
Subsidiary, provided that the business of such Person is
substantially similar to that of the Obligors and the Restricted
Subsidiaries as described in Section 6.10 and provided that after
giving effect to the acquisition of such Investment the aggregate
value of all then outstanding Investments made by the Obligors and
the Restricted Subsidiaries pursuant to this clause (g) shall not
exceed thirty percent (30%) of Consolidated Net Worth as at the end
of the last day of the fiscal quarter of the Parent ended immediately
preceding such acquisition;
(h) Investments in shares of the Merrill Lynch
Institutional Fund or the Goldman Sachs ILA/POP Fund or in any other
domestic mutual fund that has investment objectives substantially
equivalent to, and that invests substantially in Investments of the
type of, the foregoing mutual funds;
(i) Investments existing as of the Closing Date and still
outstanding as of any applicable date of determination;
(j) Investment in any Security if, at the time of the
acquisition thereof,
(i) such Security satisfies each of the following
criteria:
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(A) such Security is rated not lower
than Baa2 by Moody's Investor Service, Inc., BBB by
Standard & Poor's Corporation or an equivalent rating
by any other nationally recognized credit rating
agency of similar standing;
(B) such Security is not rated higher
than Aa1 by Moody's Investor Service, Inc., AA+ by
Standard & Poor's Corporation or an equivalent rating
by any other nationally recognized credit rating
agency of similar standing;
(C) such Security has a definite
maturity date and a remaining term not in excess of
three (3) years, provided that, for so long as any
such Security has and maintains a rating of at least
Baa1 by Moody's Investor Service, Inc., BBB+ by
Standard & Poor's Corporation or an equivalent rating
by any other nationally recognized credit rating
agency of similar standing, such Security shall be
deemed to have satisfied the maturity and term
requirements of this subclause (C) if its remaining
term does not exceed five (5) years; and
(D) after giving effect to the
acquisition of such Security, the aggregate value of
all then outstanding Securities held by the Obligors
and the Restricted Subsidiaries pursuant to this
clause (j)(i) shall not exceed twenty-five percent
(25%) of the aggregate value of all Investments of
the Obligors and the Restricted Subsidiaries made
pursuant to clause (a) through clause (l), inclusive,
hereof at such time, or
(ii) such Security is rated Aaa by Moody's
Investor Service, Inc., AAA by Standard & Poor's Corporation
or an equivalent rating by any other nationally recognized
credit rating agency of similar standing.
(k) Investments not otherwise included in the foregoing
clause (a) through clause (j), inclusive, above or clause (l) below,
provided that the aggregate amount of all such Investments shall not
at any time exceed ten percent (10%) of Consolidated Net Worth
determined as at the last day of the fiscal quarter of the Parent
ended immediately preceding such acquisition;
(l) the earnings or gains, realized or unrealized, on any
of the Investments in the foregoing clause (a) through clause (k) and
the subsequent reinvestment thereof in an Investment otherwise listed
in clause (a) through clause (k), inclusive, above;
(m) stock or securities received (i) in the settlement of
debts created in the ordinary course of business and pursuant to an
arm's-length business transaction or (ii) as a premium from a
customer in the ordinary course of business and pursuant to an
arm's-length business transaction;
(n) travel advances to officers and employees made in the
ordinary course of business not exceeding Two Million Dollars
($2,000,000) at any one time outstanding for all such advances made
by all Obligors;
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(o) loans made by the Obligors in the ordinary course of
business to officers and employees not exceeding One Million Dollars
($1,000,000) at any one time outstanding for all such loans made by
all Obligors; and
(p) loans made to expatriate officers and employees to
compensate or reimburse such Persons for foreign tax obligations
(which loans shall not be included for purposes of calculating the
amount of loans under clause (o) above) not exceeding Two Million
($2,000,000) at any one time outstanding for all such loans made by
all Obligors.
Investments shall be valued at cost less any net positive return of capital
through the sale or liquidation thereof or other return of capital thereon.
RESTRICTED PAYMENT means
(a) any dividend or other distribution, direct or
indirect, on account of any shares of capital stock of the Obligors
or any Restricted Subsidiary (other than on account of capital stock
of another Subsidiary Obligor or Restricted Subsidiary owned legally
and beneficially by an Obligor or a Restricted Subsidiary) now or
hereafter outstanding, whether in cash or other Property, except a
dividend or other distribution payable solely in shares of common
stock of such Person, and
(b) any redemption, retirement or purchase or other
acquisition, direct or indirect, of any shares of capital stock of
any Obligor or any Restricted Subsidiary (other than on account of
capital stock of a Subsidiary Obligor or a Restricted Subsidiary
owned legally and beneficially by another Obligor or Restricted
Subsidiary) now or hereafter outstanding, or of any warrants, rights,
or options to acquire any shares of such capital stock.
RESTRICTED SUBSIDIARY means, at any time, any Subsidiary of the
Parent (other than a Subsidiary Obligor) that is not, at such time, an
Unrestricted Subsidiary.
RESTRUCTURING is defined in Section 1.5(a).
SECURITIES ACT means the Securities Act of 1933, as amended from time
to time.
SECURITY means the "security" as defined in section 2(1) of the
Securities Act.
SENIOR DEBT means any Debt of any Person that is not Subordinated
Debt of such Person.
SENIOR FINANCIAL OFFICER means, with respect to a corporation, the
chief financial officer, principal accounting officer, treasurer or controller
of such corporation.
SPECIAL COUNSEL is defined in Section 1.5.
SPECIAL REQUEST is defined in Section 4.2(b).
SUBORDINATED DEBT means any Debt of any Person that is subordinate
and junior in right of payment to any other Debt of such Person.
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SUBSIDIARY means, as to any Person, any corporation, partnership or
other business entity a majority of
(a) the total combined voting power of all classes of
Voting Stock of which, or
(b) if such partnership or other business entity shall
not have Voting Stock, the outstanding equity interest of which,
is, at the time as of which any determination is being made, owned by such
Person directly or through one or more Subsidiaries.
SUBSIDIARY INDEBTEDNESS is defined in Section 6.19(b).
SUBSIDIARY OBLIGOR means each of DSC Technologies Corporation, a
Delaware corporation, DSC Marketing Services, Inc., a Delaware corporation, DSC
Finance Corporation, a Delaware corporation, DSC International Corporation, a
Delaware corporation, DSC of Puerto Rico, Inc., a Delaware corporation, and the
other Domestic Subsidiaries which shall have joined this Agreement as
co-issuers of the Notes pursuant to Section 6.21, and their respective
successors and assigns.
SUBSIDIARY STOCK is defined in Section 6.19(b).
SUBSTANTIAL PART OF CONSOLIDATED TOTAL ASSETS means, with respect to
any fiscal year of the Parent and in connection with any Transfer of Property
of an Obligor or a Restricted Subsidiary under Section 6.19(a)(vii) or any
Transfer of any Subsidiary Stock or Subsidiary Indebtedness by an Obligor or a
Restricted Subsidiary under Section 6.19(b)(v) made during such fiscal year,
that the sum of
(a) the book value of such Property or such Subsidiary
Stock and Subsidiary Indebtedness, as the case may be, being
transferred plus
(b) the aggregate book value of all other Property
(including Subsidiary Stock and Subsidiary Indebtedness) Transferred
by an Obligor or a Restricted Subsidiary during such fiscal year
pursuant to Section 6.19(a)(vii) and Section 6.19(b)(v)
exceeds ten percent (10%) of Consolidated Total Assets, determined as of the
last day of the fiscal year of the Parent immediately preceding such Transfer.
If, in connection with any such Transfer, the aforesaid sum exceeds ten percent
(10%) of Consolidated Total Assets, such Transfer shall be deemed to constitute
a Substantial Part of Consolidated Total Assets for purposes of Section
6.19(a)(vii) and Section 6.19(b)(v), respectively.
For purposes of determining the book value of any Transferred
Property under clause (a) and clause (b) above, (i) the book value of such
Transferred Property shall be its book value as determined on the date of the
consummation of such Transfer and (ii) any Transfer of Property which would
otherwise be included in such calculation shall be excluded therefrom if the
entire proceeds of such Transfer, net of any proceeds used to repay Debt
secured by the Property so Transferred or used to pay the costs, taxes and
expenses incurred in connection with such Transfer, are applied by the Obligors
or the Restricted Subsidiaries, as the case may be, within one year after the
consummation of such Transfer, to:
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(A) the acquisition of assets for use in the business of
the Obligors and the Restricted Subsidiaries (as provided in Section
6.10); and/or
(B) the prepayment of the Notes, as provided in Section
4.2(a).
TOTAL ADJUSTED PARENT INTELLECTUAL PROPERTY SECURED DEBT means, at
any time, an amount equal to the aggregate amount of Debt of the Parent
outstanding at such time that is secured by a Lien permitted to exist pursuant
to Section 6.17(a)(x) other than any such Debt owing to a Subsidiary Obligor or
a Restricted Subsidiary.
TOTAL ADJUSTED RESTRICTED SUBSIDIARY UNSECURED DEBT means, at any
time, the aggregate amount of unsecured Debt of the Restricted Subsidiaries
outstanding at such time, but, in any case, excluding therefrom any Debt of any
Restricted Subsidiary that is owing to any Obligor or any other Restricted
Subsidiary.
TOTAL ADJUSTED SUBSIDIARY SECURED DEBT means, at any time, an amount
equal to the aggregate amount of secured Debt of the Subsidiary Obligors and
the Restricted Subsidiaries outstanding at such time, but, in any case,
excluding therefrom (a) any Debt of any Subsidiary Obligor or any Restricted
Subsidiary that is owing to any Obligor or any Restricted Subsidiary and (b)
any Debt of any Subsidiary Obligor or any Restricted Subsidiary that is secured
solely by a Lien permitted to exist pursuant to Section 6.17(a)(vii), Section
6.17(a)(viii) and/or Section 6.17(a)(ix).
TOTAL CONSOLIDATED SUBSIDIARY ASSETS means, at any time, the
aggregate amount of all assets of the Restricted Subsidiaries and the
Unrestricted Subsidiaries, determined on a consolidated basis in accordance
with GAAP, at such time.
TOTAL RESTRICTED SUBSIDIARY ASSETS means, at any time, the aggregate
of all assets of the Restricted Subsidiaries, determined on a consolidated
basis in accordance with GAAP, at such time.
TRANSFER is defined in Section 6.19(a).
UNRESTRICTED SUBSIDIARY means at any time, any Subsidiary of the
Parent (other than a Subsidiary Obligor) which, pursuant to a designation by
the Parent made in accordance with Section 6.22 is, at such time, an
Unrestricted Subsidiary.
VOTING STOCK means any share of stock or other equity ownership
interest of a Person having general voting power under ordinary circumstances
to elect directors to the Board of Directors or other governing body of such
Person (irrespective of whether at the time stock or equity ownership interests
of any other class or classes shall have or might have voting power by reason
of the happening of any contingency).
WHOLLY-OWNED RESTRICTED SUBSIDIARY means any Restricted Subsidiary
one hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and Voting Stock of which are owned by any one or more of
the Obligors and the other Wholly-Owned Restricted Subsidiaries.
WHOLLY-OWNED SUBSIDIARY OBLIGOR means any Subsidiary Obligor one
hundred percent (100%) of all of the equity interests and Voting Stock (except
directors' qualifying shares) of which are owned by any one or more of the
Parent and the other Wholly-Owned Subsidiary Obligors.
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9.2 GAAP.
(a) GAAP. Where the character or amount of any asset or
liability or item of income or expense, or any consolidation or other
accounting computation is required to be made for any purpose
hereunder, it shall, unless otherwise specified, be done in
accordance with GAAP, provided, that if any term defined herein
includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term were defined with
reference solely to GAAP, such term will be deemed to include or
exclude such amounts, items or concepts as set forth herein.
(b) CHANGES. If at any time the Parent shall, in its
reasonable judgment and after consulting with its independent
certified accountants, determine that a significant change in GAAP
shall have occurred and that such significant change is not mandatory
but will have a material adverse impact on the ability of the
Obligors to comply with their financial covenants under this
Agreement, each holder of Notes will, upon the written request of the
Parent, negotiate in good faith with the Parent, and the Parent will
negotiate in good faith with each holder of Notes to attempt to reach
agreement within a reasonable period of time as to the terms of one
or more mutually agreeable amendments or waivers, in accordance with
Section 11.1, with respect to such covenants (or the definitions
utilized therein) such that the material adverse impact of such
significant change in GAAP on ability of the Obligors to comply with
such covenants is fairly and equitably adjusted for, taking into
account the nature of such significant change and the purpose of such
covenants (or the definitions utilized therein). Each written
request by the Parent pursuant to the first sentence of this Section
9(b) shall be accompanied by (i) a statement from the independent
certified public accountants of the Obligors describing the
applicable significant change in GAAP and demonstrating, on a pro
forma basis and in reasonable detail, the effect that such change
would have in respect of the computations or statements, as the case
may be, required by the applicable financial covenants herein if such
change had been effective throughout the fiscal year of the Parent
then most recently ended and (ii) a statement of one or more specific
amendment or waiver provisions then proposed by the Obligors in
connection with such change in GAAP. Unless and until such mutually
agreeable amendments or waivers shall have become effective in
accordance with Section 11.1, such covenants (and the definitions
used therein) shall remain unchanged and in full force and effect.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of any Obligor pursuant to this Agreement
shall be deemed representations and warranties of the Obligors under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Obligors and
supersede all prior agreements and understandings relating to the subject
matter hereof.
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11. AMENDMENT AND WAIVER.
11.1 REQUIREMENTS.
This Agreement, the Other Agreements and the Notes may be amended,
and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of
the Obligors and the Required Holders, except that
(a) no amendment or waiver of any of the provisions of
Section 1 through Section 3, inclusive, or any defined term (as it is
used therein), will be effective as to you unless consented to by you
in writing, and
(b) no such amendment or waiver may, without the written
consent of the holder of each Note at the time outstanding affected
thereby,
(i) (A) change any obligor in respect of any
payment obligation hereunder or under the Notes (except as
provided in Section 6.21), (B) subject to the provisions of
Section 8.2 relating to acceleration or rescission, change
the amount or time of any prepayment or payment of principal
of, or change the rate or the time of payment or method of
computation of interest or of the Make-Whole Amount on, the
Notes or (C) change any obligation hereunder to pay costs,
expenses, fees and disbursements,
(ii) change the percentage of the principal amount
of the Notes the holders of which are required to consent to
any such amendment or waiver,
(iii) amend any of Section 6.21, Section 8.1(a),
Section 8.1(b) or Section 8.2, or
(iv) amend this Section 11.
11.2 SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Obligors shall provide each holder
of the Notes (irrespective of the amount of Notes then owned by it)
with reasonably sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an
informed and considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Obligors shall deliver executed or true
and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 11 to each holder of
outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) PAYMENT. The Obligors shall not directly or
indirectly pay or cause to be paid any remuneration, whether by way
of supplemental or additional interest, fee or otherwise, or grant
any security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any waiver
or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or
amendment.
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11.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 11
shall apply equally to all holders of Notes and shall be binding upon them and
upon each future holder of any Note and upon the Obligors without regard to
whether such Note has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon. No course of dealing between the Obligors
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of any
Note.
Anything contained herein to the contrary notwithstanding, any
consent given pursuant to Section 11.1 by a holder of a Note which has
transferred or agreed to transfer all or a portion of its Notes to any Obligor
or any Affiliate and has conditioned the giving of such consent upon the
effecting of such transfer shall be valid and binding only upon such holder.
Any amendment or waiver which becomes effective only with such consent (and the
consents of all other holders of the Notes which were acquired under the same
or similar conditions) shall be valid and binding only upon such holder.
11.4 NOTES HELD BY THE OBLIGORS, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by any Obligor, Restricted
Subsidiary or any Affiliate shall be deemed not to be outstanding.
12. MISCELLANEOUS.
12.1 NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent, except as otherwise specifically provided for herein, (a) by
telecopy if the sender on the same day sends a confirming copy of such notice
by a recognized national overnight delivery service (charges prepaid), or (b)
by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized national overnight delivery service (with
charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Annex 1, or at such
other address as you or it shall have specified to the Parent in
writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Parent
in writing, or
(iii) if to the Obligors, to the attention of the Parent as
follows:
DSC Communications Corporation
1000 Coit Road
Plano, Texas 75075-5813
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Attention: Christian J. Ornes
Treasurer
Telephone: (214) 519-4343
Telecopy: (214) 519-2321
or at such other address as the Parent or the other Obligors shall
have specified to the holder of each Note in writing.
Notices under this Section 12.1 will be deemed given only when actually
received.
12.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation,
(a) consents, waivers and modifications that may
hereafter be executed,
(b) documents received by you at the Closing (except the
Notes themselves) and
(c) financial statements, certificates and other
information previously or hereafter furnished to you,
may be reproduced by you by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and you may destroy
any original document so reproduced. The Obligors agree and stipulate that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 12.2 shall not prohibit the
Obligors or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
12.3 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not. Nothing in this
Section 12.3 or otherwise in this Agreement, the Other Agreements or the Notes
shall authorize or permit the delegation or assignment by any of the Obligors
of their obligations and undertakings hereunder or thereunder without the prior
written consent of each holder of Notes.
12.4 PAYMENTS ON NOTES.
(a) MANNER OF PAYMENT. The Obligors shall pay all
amounts payable with respect to each Note (without any presentment of
such Notes and without any notation of such payment being made
thereon) by crediting, by federal funds bank wire transfer, the
account of the holder thereof in any bank in the United States of
America as may be designated in writing by such holder, or in such
other manner as may be reasonably directed or to such other address
in the United States of America as may be reasonably designated in
writing by such holder. Annex
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1 shall be deemed to constitute notice, direction or designation (as
appropriate) to the Obligors with respect to payments as aforesaid.
In the absence of such written direction, all amounts payable with
respect to each Note shall be paid by check mailed and addressed to
the registered holder of such Note at the address shown in the
register maintained by the Parent pursuant to Section 5.1. The
Obligors may effect payments hereunder directly or by the use of a
paying agent retained by, and as an agent of, the Obligors. Payments
made by the Obligors through their paying agent shall be subject to
all of the requirements of this Section 12.4, including, without
limitation, the requirement that all payments to each holder of Notes
be made as provided in this clause (a) and be deemed received as
provided in Section 12.4(c).
(b) PAYMENTS DUE ON HOLIDAYS. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of
principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed
in the computation of the interest payable on such next succeeding
Business Day.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to
the holders of Notes hereunder or under the Notes shall be deemed to
have been made on the Business Day such payment actually becomes
available to such holder at such holder's bank prior to 11:00 a.m.
(local time of such bank).
12.5 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
12.6 SECTION HEADINGS AND TABLE OF CONTENTS.
The titles of the Sections of this Agreement and the Table of
Contents of this Agreement appear as a matter of convenience only, do not
constitute a part hereof and shall not affect the construction hereof.
12.7 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
69
<PAGE> 75
12.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
12.9 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
[Remainder of Page Intentionally Blank. Next page is signature page.]
70
<PAGE> 76
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Obligors, whereupon the foregoing shall become a binding agreement between
you and the Obligors.
<TABLE>
<S> <C>
Very truly yours,
DSC COMMUNICATIONS CORPORATION
By
-------------------------------------------
[Title]
DSC TECHNOLOGIES CORPORATION
By
-------------------------------------------
[Title]
DSC MARKETING SERVICES, INC.
By
-------------------------------------------
[Title]
DSC FINANCE CORPORATION
By
-------------------------------------------
[Title]
DSC INTERNATIONAL CORPORATION
By
-------------------------------------------
[Title]
</TABLE>
[SIGNATURE PAGE to the NOTE PURCHASE AGREEMENT dated as of April 15, 1995, in
connection with the 9.02% Senior Notes Due April 21, 2003 of DSC COMMUNICATIONS
CORPORATION and certain of its SUBSIDIARIES]
<PAGE> 77
DSC OF PUERTO RICO, INC.
By
------------------------------------
[Title]
The foregoing is hereby
agreed to as of the
date thereof.
[ADD PURCHASER SIGNATURE BLOCKS]
[SIGNATURE PAGE to the NOTE PURCHASE AGREEMENT dated as of April 15, 1995, in
connection with the 9.02% Senior Notes Due April 21, 2003 of DSC COMMUNICATIONS
CORPORATION and certain of its SUBSIDIARIES]
<PAGE> 78
EXHIBIT A
[FORM OF NOTE]
DSC COMMUNICATIONS CORPORATION
DSC TECHNOLOGIES CORPORATION
DSC MARKETING SERVICES, INC.
DSC FINANCE CORPORATION
DSC INTERNATIONAL CORPORATION
DSC OF PUERTO RICO, INC.
9.02% SENIOR NOTE DUE APRIL 21, 2003
No. R-____ April 21, 1995
$_____________ PPN: 23335@AA 4
FOR VALUE RECEIVED, the undersigned, DSC COMMUNICATIONS CORPORATION, a
Delaware corporation, DSC TECHNOLOGIES CORPORATION, a Delaware corporation, DSC
MARKETING SERVICES, INC., a Delaware corporation, DSC FINANCE CORPORATION, a
Delaware corporation, DSC INTERNATIONAL CORPORATION, a Delaware corporation,
and DSC OF PUERTO RICO, INC., a Delaware corporation (collectively, the
"OBLIGORS"), hereby jointly and severally promise to pay to _______________ or
registered assigns the principal sum of _____________________________ DOLLARS
($_________) on April 21, 2003, and to pay interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid principal balance hereof
from the date of this Note at the rate of nine and two one-hundredths percent
(9.02%) per annum, semi-annually, in arrears, on the last day of each April and
October in each year, commencing on the later of October 21, 1995 or the
payment date next succeeding the date hereof, until the principal amount hereof
shall become due and payable; and to pay on demand interest on any overdue
principal (including any overdue prepayment of principal) and Make-Whole Amount
(defined below), if any, and (to the extent permitted by applicable law) on any
overdue installment of interest (the due date of such payments to be determined
without giving effect to any grace period), at a rate per annum equal to the
lesser of (a) the highest rate allowed by the laws of the State of Texas and
the State of New York, as the case may be, or (b) eleven and two one-hundredths
percent (11.02%).
Payments of principal, Make-Whole Amount, if any, and interest shall
be made in such coin or currency of the United States of America as at the time
of payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by DSC
Communications Corporation for such purpose, in the manner provided in the Note
Purchase Agreement (defined below).
Exhibit A - 1
<PAGE> 79
This Note is one of an issue of joint and several Notes of the
Obligors issued in an aggregate principal amount limited to Two Hundred
Twenty-Five Million Dollars ($225,000,000) pursuant to the Obligors' separate
Note Purchase Agreements (collectively, as amended from time to time, the "Note
Purchase Agreement"), each dated as of April 15, 1995, with the purchasers
listed on Annex 1 thereto. This Note is entitled to the benefits thereof and
the terms thereof are incorporated herein by reference. Capitalized terms used
herein and not defined herein have the meanings specified in the Note Purchase
Agreement. As provided in the Note Purchase Agreement, this Note is subject to
prepayment, in whole or in part, in certain cases without a Make-Whole Amount
and in other cases with a Make-Whole Amount. The Obligors jointly and
severally agree to make all required prepayments on account of this Note in
accordance with the provisions of the Note Purchase Agreement.
This Note is a registered Note and is transferable only by surrender
thereof at the principal office of DSC Communications Corporation as specified
in the Note Purchase Agreement, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of this Note or
its attorney duly authorized in writing and accompanied by the written
statement of the transferee hereof with respect to such transferee's ERISA
representations required by Section 5.2 of the Note Purchase Agreement. Under
certain circumstances, as specified in the Note Purchase Agreement, the
principal of this Note (together with any applicable Make-Whole Amount) may be
declared due and payable in the manner and with the effect provided in the Note
Purchase Agreement.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE.
DSC COMMUNICATIONS CORPORATION
By ________________________________________
[Title]
DSC TECHNOLOGIES CORPORATION
By ________________________________________
[Title]
Exhibit A - 2
<PAGE> 80
DSC MARKETING SERVICES, INC.
By ________________________________________
[Title]
DSC FINANCE CORPORATION
By ________________________________________
[Title]
DSC INTERNATIONAL CORPORATION
By ________________________________________
[Title]
DSC OF PUERTO RICO, INC.
By ________________________________________
[Title]
[ADDITIONAL SUBSIDIARY OF OBLIGORS
ADDED PURSUANT TO SECTION 6.21 OF THE
NOTE PURCHASE AGREEMENT
By ________________________________________
[Title]
Exhibit A - 3
<PAGE> 81
This Note Purchase Agreement and 9.02% Senior Notes due April 21, 2003
(Exhibit A to Note Purchase Agreement) were entered into with each of
the following purchasers for the amounts noted by each.
Principal Mutual Life Insurance Company
$45,000,000
Connecticut General Life Insurance Company
$34,000,000
Life Insurance Company of North America
$3,000,000
Metropolitian Life Insurance Company
$28,000,000
Metropolitian Insurance and Annuity Company
$5,000,000
Massachusetts Mutual Life Insurance Company
$17,000,000
Nationwide Life Insurance Company
$13,000,000
Nationwide Life and Annuity Insurance Company
$2,000,000
West Coast Life Insurance Company
$2,000,000
The Mutual Life Insurance Company of New York
$9,000,000
MONY Life Insurance Company of America
$5,000,000
Protective Life Insurance Company
$8,000,000
Sun Life Assurance Company of Canada (U.S.)
$5,000,000
Sun Life Assurance Company of Canada
$2,000,000
<PAGE> 82
Sun Life Insurance and Annuity Company of New York
$1,000,000
Aid Association for Lutherans
$7,500,000
Keyport Life Insurance Company
$7,500,000
Great-West Life & Annuity Insurance Company
$7,000,000
Provident Life and Accident Insurance Company
$7,000,000
American United Life Insurance Company
$5,500,000
The State Life Insurance Company
$500,000
The Ohio National Life Insurance Company
$5,000,000
The Ohio Casualty Insurance Company
$3,000,000
Canada Life Insurance Company of America
$2,000,000
The Canada Life Assurance Company
$500,000
Canada Life Insurance Company of New York
$500,000
<PAGE> 1
Exhibit 11
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Computation of Income per Share
(In thousands)
(Unaudited)
The following table sets forth the computation of shares used in the
calculation of income per share for the three months ended March 31, 1995 and
1994.
Average Shares Used in Income per Share Calculation:
- ----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Weighted average
shares outstanding
during the period........................................... 113,884 110,868
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable..................................... 5,397 6,886
Assumed purchase of
treasury shares........................................... (1,597) (1,599)
-------- --------
Weighted average shares
used in calculation......................................... 117,684 116,155
======== ========
</TABLE>
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three months ended March 31, 1995 and 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 80,903
<SECURITIES> 197,605
<RECEIVABLES> 214,310
<ALLOWANCES> 0
<INVENTORY> 213,940
<CURRENT-ASSETS> 761,052
<PP&E> 556,839
<DEPRECIATION> (256,481)
<TOTAL-ASSETS> 1,316,311
<CURRENT-LIABILITIES> 339,542
<BONDS> 0
<COMMON> 1,192
0
0
<OTHER-SE> 904,384
<TOTAL-LIABILITY-AND-EQUITY> 1,316,311
<SALES> 317,997
<TOTAL-REVENUES> 317,997
<CGS> 159,327
<TOTAL-COSTS> 159,327
<OTHER-EXPENSES> 95,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,031
<INCOME-PRETAX> 64,486
<INCOME-TAX> 22,570
<INCOME-CONTINUING> 41,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,916
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
</TABLE>
